With interest rates sliding to historic lows, mortgage applications have surged in recent weeks as homeowners try to take advantage of rates that could save them hundreds of dollars a month in payments.
Many local homeowners, however, are finding they don't qualify for new loans as home values have fallen and loan standards have gotten more strict, local mortgage brokers and loan officers said.
"The problem right now with the guidelines so conservative, a lot of people would like to refinance but just can't," said Ken Dolan, vice president for Bank of America Mortgage in Virginia Beach.
Dolan estimated that half the people who call wanting to refinance won't qualify. And some of those who apply will be turned down.
The biggest problem, he said, is falling home values in the region.
"Consumers being underwater is a big problem," he said. "It's almost like they're in a sense of denial for the value of their home."
A recent report by First American CoreLogic, a national mortgage tracker based in Santa Ana, Calif., stated that more than 33,000 homeowners in Hampton Roads owed more on their mortgages than their homes were worth at the end of 2008. That figure represents roughly 13 percent of all mortgages in the local market.
The Mortgage Bankers Association announced this week that mortgage applications spiked for the week that ended March 20, which was attributed to borrowers looking to refinance at lower rates. The trade group, based in Washington, D.C., said about 78.5 percent of applications came from borrowers seeking to refinance home loans at lower rates rather than purchase homes.
The average rate for traditional, 30-year fixed-rate mortgages dipped this week to 4.85 percent from 4.98 percent a week earlier, according to a survey by Freddie Mac. The rate is at its lowest point since the government-backed institution began surveying loan rates in 1971.
As interest rates have fallen, more homeowners are finding it financially beneficial to refinance, said Steve Rockefel-ler, vice president of SunTrust Mortgage's Virginia Beach office and past president of the Tidewater Mortgage Bankers Association.
"When rates dropped below 5 percent, it effectively opened the mortgage market for the entire U.S.," he said.
For homeowners having trouble refinancing, one spot of good news is that interest rates are likely to remain low through this year, Dolan said.
"Everybody needs to be patient," he said.
Interest rates have plunged since the Federal Reserve said in November it would buy up to $500 billion in mortgage-backed securities in an effort to put the housing market back on solid footing.
The Fed recently announced a $1.2 trillion effort to reduce rates on mortgages and other consumer debt in a bid to revive the economy. The effort includes buying up to $300 billion in long-term government bonds and $750 billion in mortgage-backed securities guaranteed by Fannie Ma e and Freddie Mac.
This report contains information from The Associated Press.
Josh Brown, (757) 446-2318, josh.brown@pilotonline.com
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For boblakeman
Nice to see someone around here sees the real deal.
If you look at current home
If you look at current home prices and compare it to income, you can still see they are way overvalued. There is a large stock of high end homes (always advertised as executive homes, or ideal for officers) that will likely never sell. Meanwhile other regions compete with us with better jobs and lower cost and more desirable homes. There is still plenty more losses to be seen in home prices, and that will create more people underwater. I'm surprised only 13% are underwater now. The few times I've peeked at stuff I know I'd never pay that kind of money, and go into that kind of debt, to own what I see in the local market. Meanwhile, there is some really nice stuff in other markets.
Basic Honesty
LTV or Loan to value is just being honest about the actual financial worth of a house. Anything else is just more smoke and mirrors.
Mark to market is the same thing. The banks are bankrupt. They hold mortgages on properties that are not worth as much as the loan value. Mark to market means getting honest and marking the value down to actual worth of the house.
If the mortgage folks had been honest to begin with, we wouldn't be having this discussion.
LTV ratios
Posted to complete comment: "A Surfer's Take: Who the mortgage bailout won't help and why that stinks for the economy" -- http://www.associatedcontent.com/article/1518722/a_surfers_take_who_the_mortgage_rescue.html?cat=3
LTV ratios
The number one obstacle to refinancing is lenders using "loan to value ratios" as a sudden death criterion. A person can have excellent credit, sufficient income and be a very good customer---yet because his home's value has plunged through no fault of his own, he cannot refinance. He cannot even refinance to pay the same amount or MORE, just in lower monthly payments!
While LTV ratios serve a purpose, at this point in time they are having the same negative effects on the market as "mark to market accounting" is having for financial institutions. Using LTV ratios to determine credit-worthiness these days is just dumb! Lenders can and should find other ways to evaluate credit-worthiness and develop products that meet the mortgage markets needs.
The first lender who offers a refi that is more like a restructuring---even just same balance due, but amortized over 40 years or whatever, could make a zillion! Until someone financially frees up the "Former Consumers," not much about the real economy is going to work. "A Surfer's Take: Who the mortgage bailout won't help and why that stinks for the economy" -- http://www.associatedcontent.com/article/1518722/a_surfers_take_w
Congress holds gun to head of mortgage loan officers!
Phil Gramm to Mortgage Bankers- Make this loan or else I'll blow your head off, you bunch of whiners!
Get the facts straight
"Both parties are to blame" Well no, it was the democrats (Barney Frank to know one) who got on t.v. and told the world Fannie Mae & Freddie Mac was safe and not to worry and then other democrats got their air time as well. President Clinton appointed Andrew Cuomo as HUD Secretary in 1993. He served until the end of Clinton's second term in 2001, Andrew Cuomo "gave birth to the mortgage crisis.
Bush administration's seizure of troubled mortgage giants Fannie Mae and Freddie Mac was a $200 billion bet that it will help reverse a prolonged housing and credit crisis.
The companies, which together own or guarantee about $5 trillion in home loans, about half the nation's total, have lost $14 billion in the last year and are likely to pile up billions more in losses until the housing market begins to recover. Now Obama need to learn a little history before he tells the American people he inherited this mess from Bush.
Fannie Mae’s main defenders in the House Rep. Barney Frank, a recipient of more than $40,000 in campaign donations from Fannie since 1989.
Mortgage Bankers!
The mortgage bankers would not have been able to process all those bad loans if congress had not relaxed regulations. Both parties should share the blame.
They are doing mortgages the way they should have before
The mortgage companies are now doing mortgages the way that they should have before. I can remember when I first bought my home in 1993 with 20 percent down and a record of paying my bills on time all of the times. They let the standards down the last 6-8 years and that is a good part of the reason that our economy has such a problem with subprime mortgages. They were giving mortgages to those who never be able to pay them back. Yes, they were part of the reason that things tanked the way they did, but now people are not happy because they are doing their jobs the way they were always supposed to.
Mortgage Bankers are liars
Who cares what they report? They are the ones that sold us down the river in the first place.
They used to qualify everybody, all you needed was a pulse as long as they had a way to collect their obscene fees.
Who are those local mortgage brokers and loan officers?
Did they contribute to the current financial meltdown? Banks are still offering plenty of credits but people with good credit scores do not want to borrow more. Please do not push the country into another financial meltdown.
Our credit standards are much lower than many other countries. In many countries people need to pay down 20% to buy the first house and 30% or more to buy the second house. We should not encourage house investment because house is necessity.