6. July 2012 13:04
A bright light has emerged upon the housing market in the form of sustained sales with an upwards price trajectory. Most of our neighborhoods have very low inventory, and combined with low, low interest rates, there is competition out there folks. Good news for sellers, and a call to action for buyers to be ready to place offers with proof of funds and a loan pre approval letter.
The middle market still needs the most support at this point. This segment of the marketplace has always helped fuel upper end sales, as buyers moved up in price and product. However, with jumbo loans in place (above $417,000) combined with homes not appraising at a minimum of 80% loan to value, there are no options to refinance without bringing large sums of cash to the table. Of course, the main purpose of the refinance is to lower the debt service, so cash to close is a non-starter. The option to modify the loan by lowering the interest rate, therefore removing the need for an appraisal as the basis of value, also is a non-starter because the premise of a modification is hardship on the part of the homeowner. This is no longer a story of financial hardship for most. The foreclosures and the distress sales of the recent past are effectively behind us in California.
So, if a borrower could refinance and effect a monthly savings of $300 to $600, those funds could potentially be reinvested into the economy by a simple interest rate reduction. Will it happen? Not without some governmental action requiring lenders or Fannie/Freddie to do so. In terms of ultimate benefit to the overall good, to the economy, action of this nature would be smart & successful at little cost to the loan originators and servicers.