This week’s issue of C.A.R. Mortgage Update contains information about how mortgage rates are set, how to find a reputable mortgage modification company, and foreclosure suspensions by Fannie Mae and Freddie Mac.
How Rates are Set
· Over the last few months, the Federal Reserve has reduced its key interest rate, the overnight LIBOR, to as low as 1 percent.However, mortgage rates have not declined as dramatically. One of the most commonly-followed indicators to determine where mortgage rates are headed is the yield on the 10-year United States Treasury note.During economic downturns, mortgage rates and yields on 10-year U.S. Treasury tend to decline.In recent months, the difference between the 10-year U.S. Treasury note and the 30-year, fixed-rate mortgage has been as high as 2.75 percentage points, largely due to lenders’ attempts to recoup previous losses by incorporating a larger profit margin into the interest rate.
· Due to the large number of foreclosures, many financial institutions have created mortgage modification programs to help homeowners in default modify their existing mortgage loans into fixed-rate, more affordable loans. Many banks are overwhelmed with borrowers applying for mortgage modifications, resulting in some private companies, real estate brokers, nonprofit organizations, and attorneys offering to serve as the liaison between the homeowner and the bank, sometimes for a fee.With the numerous options available to homeowners, it can be difficult to determine which consultants are reputable.Individuals and companies that charge a fee prior to providing the mortgage modification service must register with the California Dept. of Real Estate (DRE).Consumers can verify that a company’s contract has been approved by visiting www.dre.ca.gov or by calling (916) 227-0770.Individuals and companies that charge fees after the service is performed are not required to register with the DRE.
· Fannie Mae and Freddie Mac recently announced they will postpone foreclosure sales and evictions on occupied single-family residences that were scheduled to occur between Nov. 26, 2008 and Jan. 9, 2009.During this time, the companies will streamline their mortgage modification programs, scheduled to launch Dec. 15.Foreclosure attorneys and loan servicers will continue to contact borrowers who have defaulted on their mortgage loans owned or guaranteed by Fannie Mae or Freddie Mac, and continue to pursue workout options.
