March 17, 2010
March 17, 2010 by admin
Continuing a hot streak that has now reached 7 days, the DOW has rallied past it’s high point for this year, proving that 2010 may officially be kicking into high gear for investors in stocks and equities. The rally in the market has been fueled by better than expected PPI and CPI numbers as well as another vote of confidence from the Federal Reserve.
Mortgage interest rates are proving to be extremely resilient to the positive move up in the stock market. Aided by a strong interest in the Ten Year treasury bond which dipped back below the 3.7% barrier on Wednesday, despite another jump with equities. Treasury bond yields have not changed over ten basis points in the last month despite a rally of over 5% in the stock market. The resiliency for yields on treasuries to remain unchanged has been great news for the real estate and housing sector as it further solidifies the potential for long term mortgage rates to remain around five percent for thirty year loans and lower for fifteen year loan terms.
Following the real estate crisis and specifically the difficulty that homeowner have had in restructuring their mortgage loans will likely be an ongoing media frenzy for the next few years. It is clear to almost everyone outside of the banks and loan servicers that the most prudent and equitable way to help fix the foreclosure crisis and keep people from walking away from their homes is to offer dramatic loan modifications that include principle balance reductions to the mortgage. Reducing the principal balance below the current appraised value provides for a lower house payment and a renewed reason for homeowners to avoid sending their keys back to the lender. The governments loan modification programs (Making Home Affordable, Hope for Homeowners) have both been a miserable failure and are at best delaying all but a small percentage of properties that eventually will be given back to the banks, who will then try to sell the property for losses of 40-60%.
Brett Arends with CBS Marketwatch wrote a great article today covering options for borrowers who are considering walking away from their properties. His advice of exploring a chapter 7 or 13 bankruptcy to eliminate the potential for a bank to try and retroactively seek payments down the road should be a wakeup call to more lenders that consumers need real solutions to the present mortgage crisis. Lenders and banks seem to be burying their heads in the sand and avoiding the reality that they were equally or more culpable for creating the housing bubble and playing casino with fictitious derivatives that caused the recession and caused Main Street America to lose much of their life savings and real estate equity.