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Loading ...Many foreclosure-troubled Americans felt a surge of hope when mortgage interest rates dropped to 4.89 percent on January 9, its lowest level in more than 50 years. They hoped that with loan refinancing at such a low rate, they could lessen their monthly payments, giving them some space to work out their finances shattered by the economic downturn.
According to the Mortgage Bankers Association, its refinancing index has reached its highest level since 2003. GMAC Mortgage, an MBA member, has received an increase of more than 75 percent in applications in January, compared to November 2008.
But borrowers facing foreclosure soon found out that most of them did not qualify for refinancing. Fannie Mae’s economist Doug Duncan said that only about one third of all mortgage loans across the U.S. qualify for refinancing and that almost 70 percent of homeowners would fail the screening. He said most borrowers do not have good credit and do not have adequate home equity.
According to California foreclosure tracking firm, the average negative home equity in the state is $180,000. On the other end of the record spectrum, those borrowers who have excellent credit are holding large mortgage loans, which can not be refinanced profitably because they do not qualify for Fannie Mae or Freddie Mac guarantees.
Fannie Mae announced in May 2008 that it intended to help refinance underwater loans to avert further foreclosures. But it backtracked after realizing it does not have enough funds to carry out such refinancing.
North Carolina-based BB&T Corp. said its pull-through rate has dropped from 61 percent in 2007 to 58 percent in 2008. Pull-through rate is the term lenders used to define the ratio of loan applications submitted to loan applications approved.
W.D. Acosta of Florida-based Seacost National Bank said the pull-through rate is only 25 percent in Florida, one the five U.S. states with the highest foreclosure rates.
Indeed, falling rates have not helped foreclosure-burdened homeowners.
