The Lake Mary / Heathrow Florida Real Estate Blog

Fears of recession along with nationwide housing foreclosures have pushed some homeowners to take drastic and illegal measures. Looking to cash in on thier insurance policy rather than face foreclosure some folks have committed arson to avoid losing their home. 

“Desperate times cause good people to take desperate measures,” said Joe Toscano of The International Association of Arson Investigators. Toscano said the desperation from the subprime lending debacle and difficult financial times may lead to more suspicious fires. The situation right now is like the perfect storm with financially challenged homeowners facing bankruptcy, another option is to think about selling the home back to the insurance company and that’s arson for profit.

Hopefully you are not in this situation however, before you consider lighting the match do the necessary due diligence to explore your options or you could end up being a primary suspect in a arson investigation.

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Consumers shopping for a mortgage today may fine it a bit easier to qualify for a home loan.  Rate cuts take months to work their way through the economy but businesses and consumers could soon feel the effect from the Fed’s surprise move Tuesday to cut the federal funds rate to 3.5 percent.

The fed funds rate is what banks charge each other for overnight loans, which also permits baks to lower interest rates for their best customers however the Fed does not control mortgage rates but lenders often look to it for direction.

Thirty year fixed rate mortgages were already falling before the Fed’s rate cut mostly because they are closely tied to the 10 year treasury note which has been falling this year.  Taking this into consideration the effect has been very positive for mortgage rates, the current  thirty year fixed rate is now at the lowest level since June 2003!

For home buyers waiting for rates to fall before they consider purchasing, now is the opportune time to take advantage of the current levels and pull the trigger before the rates stabilize and start to move in the opposite direction.   ¼/p>

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The outlook for surging mortgage delinqunecies worsens in a market which has taken several crushing blows.

As the housing markets have deteriorated over the summer and a liquidity squeeze challenged credit markets, deleinquencies and defaults have jumped.  A forecast predicts that these numbers will climb even higher over the next six months.

In addition about $50 billion in adjustable rate mortgages are scheduled to reset this month, which will drive up interest rates fro many credit challenged borrowers. And despite efforts to increase awareness, it sure dosen’t appear like anyone is really prepared for what’s to come.

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Lower Fed Rate Means Opportunities on the Rise

For the first time in more than four years, the Federal Reserve cut its Fed Funds Rate, which directly impacts millions of American borrowers. And while this important decision has many implications, there’s still some debate among experts about what this means to the economy as a whole.

The Federal Reserve meets again in six weeks, and no one is certain how market volatility and inflation concerns will affect their future policy and decision-making. Bottom line: Take advantage of this opportunity while you still can.

• If you’re looking to capture a lower interest rate for refinancing or buying a home, this could be your best opportunity to do so.
• If you have an Adjustable Rate Mortgage, while this rate cut might help to improve your situation, now is the time to refinance into a fixed-rate loan.
• If you have a Home Equity Line of Credit (HELOC) or credit cards tied to the Prime Rate, the Fed’s cut in the Fed Funds Rate just put a little money in your pocket.

Borrowers waiting for a lower fixed-rate mortgage may be waiting for a long time. The chart below clearly shows how Fed Funds Rate cuts do not translate into cuts in fixed-rate mortgages. In January 2001, the Fed Funds Rate was at 6% and 30-year fixed rates averaged 7.03%. By December 2001, following 4.25% in cuts throughout the year, home loan rates were actually up to 7.07%.

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Downtown Orlando developer Cameron Kuhn, who built a portfolio worth more than $100 million said Thursday he expects another bubble before the market stalls and falls again. Speaking to gruop of small business operators and owners in a panel discussion Kuhn said this weeks rate cut by the Federal Reserve by half a percentage point will probably help reinflate home sales and prices in the short term.

“You will have another residential bubble,” Kuhn predicted, noting that the nation’s central bank is planning on injecting more capital and liquidity into the market to prevent a possible recession, a downturn some economists fear might be sparked by the slowdown in the housing markets nationwide.

“There is no way to offload the current housing inventory,” Kuhn said of additional homes and condos that will be built and sold as a result of an easing of lending and credit restrictions.

I strongly disagree with Mr Kuhn. Please Mr. Kuhn, explain to me how the recent rate cut will increase home values and reinflate home sales in the short term? The rate cut does not directly affect mortgage rates, however it will reflect lower rates for homes equity lines of credit and second mortgages which are tied to the prime rate. The mortgage rates have actually increased by a quarter of a point since the Fed’s cut this week!  What were you thinking Mr. Kuhn or maybe the question is were you thinking when you made those irrational statements?

Now, regarding the statement claiming the existing and new inventorty of homes will be sold off as a result of easing of lending and credit restrictions however that is not the case in the current lending environment. Fannie Mae and Freddie Mac the nations foremost purchaser of mortagages has STOPPED buying loans over the amount of $417,000 which is considered jumbo status therfore requiring the originating lender to portfolio their loans. Does this sound like the easing credit restrictions, certainly not Mr. Kuhn.

So, Mr. Kuhn, tell me when this next bubble will begin to form? I can’t wait to hear your response to this question!  With over a record 26,000 exiting homes for sale in the Orlando region and a challenging lending environment don’t expect another housing bubble anytime soon….and you can bet on that!

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California based lender Countrywide Financial has challenging times ahead amid the skyrocketing default rate in subprime mortgages.

The lender announced late last week it would eliminate up to 12,000 jobs nationwide or 20% of its work force in order to cut costs and deal with the mortgage industry turmoil. Last month the nationwide lender borrowed over 11.5 billion to sustain its lending operations.  In addition to tapping its line of credit Countrywide received a infusion of 2 billion in cash as equity investment from Bank of America and they continue to seek equity investment partners from competing financial institutions to releive to strain of current cash reserve issues in this unforgiving lending environment.

This uncertain territory has shocked Countrywides overall market capitalization with the stock hitting a 52 week lows several weeks ago.

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September 7, 2007.  The Federal Reserve in addition to banking regulators issued special guidelines urging loan servicing companies to work with borrowers currently in danger of defaulting on their home mortgages.

The new guidance which is not mandatory provides hope that companies that collect payments on mortgages would consider the Fed’s advice.

More and  more borrowers with subprime and alt A mortgage products are facing the very real possibility of losing their homes through foreclosure as their payments reset and become unaffordable.

An estimated 2 million adjustable rate mortgages are scheduled to reset by the end of 2008. These mortgages with initally low interest or “teaser” rates will adjust to much higher rates that will in some cases will double or even triple the monthly payment.

The joint statement also encouraged the mortgage servicing companies to consider referring borrowers in trouble to qualified homeownership counseling services which would help acheive the ultimate goal of keeping families in  their homes.

By Rick Arbutine, REALTOR/DIRECT MORTGAGE LENDER, Direct: 407-928-8113

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As  you know the banking industry is extremely unstable. It is making this business of selling a house very unsettling.

Countrywide Home loans announced on Wed. that they may be filing for Bankruptcy in the future.  Bank of America recently gave Countrywide a cash infusion.   First Magnus another extremely large sub prime lender is not in business as of August 16 ^th, 2007.

I have had in the past 6 months investors who were willing to purchase properties and now can not qualify due to the changes in the banking industry.

The consumer confidence and investor confidence in purchasing a home is extremely unstable now.  It is like the customers I have hear the news and just put on the breaks.

They do not want to continue to go out and shop and longer.   They are putting major purchasing plans on hold.  I can’t say I blame them!  Their fear is buying today and prices drop in months to come gives them negative equity.

This is making all realtors jobs a huge challenge.  Bear with me on the selling process.

Karen Arbutine

Realtor Remax Central Realty

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