With little change in mortgage rates or application activity this week, a couple of other developments took center stage in mortgage-related news:
- President Obama describes his wish list for mortgage reform. The President's speech outlined a vision for mortgage reform that includes winding down Fannie Mae and Freddie Mac, a reduced role for the federal government in insuring mortgages, and the continued availability of 30-year mortgages. The difficulty will be in reducing the government's role in the mortgage market while making sure that products like 30-year mortgages remain widely available. The government's role has been instrumental in the wide availability of mortgages, especially with respect to products that are as inherently risky to lenders as a 30-year loan.
- Mortgage delinquency and foreclosure rates continue to drop. The Mortgage Banker's Association reported that mortgage delinquency and foreclosure rates declined in the second quarter, continuing a trend that has coincided with the strengthening of the economy and the rally in the housing market. There was one disturbing note, however. Foreclosure rates in New York state hit an all-time high during the second quarter, and in New York, New Jersey, and Connecticut, foreclosure rates are now among the highest in the nation. While the steady improvement of the housing market has been encouraging, having new trouble spots flare up -- especially in a region as influential as the tri-state area -- sounds a note of caution.
Proposals from the President and Congress to reform the mortgage system may still be years away from impacting ordinary Americans. The fact that new trouble spots are emerging even as mortgage defaults and foreclosures are generally declining is of more immediate concern. It shows that even as the housing market has rallied, some homeowners cannot meet the loan obligations they have taken on.
For homeowners who are struggling to make their payments, one of their first moves should be to consult a refinancing calculator and an amortization schedule. A refinancing calculator can point to whether they could save money either lowering their interest rates or lengthening out their remaining loan term, or both. An amortization schedule could provide insight as to whether there is a way to better match up payment obligations over the life of the loan with the borrower's anticipated cash flow.