March 4 (Bloomberg) -- More than 8.3 million U.S. mortgage holders owed more on their loans in the fourth quarter than their property was worth as the recession cut home values by $2.4 trillion last year, First American CoreLogic said.
Conventional 30-year mortgages fell out of favor last year as home buyers seeking to reduce their monthly payments opted for adjustable-rate and interest-only mortgages. During the second half of 2004, adjustable-rate and interest-only loans accounted for 63% of mortgage originations, according to the Mortgage Bankers Association.
Reverse mortgages allow people who are age 62 and older to borrow against their home equity, and then get paid in regular installments by the mortgage company. Now that higher limits have been authorized for reverse mortgages, this good retirement resource just got a whole lot better.
"The accelerating share of negative equity, combined with deteriorating economic conditions, means that mortgage risk will continue to increase until home prices and the economy begin to stabilize," says Mark Fleming, chief economist for First American CoreLogic.
Funny, but we don?t recall hearing about the sufferings of these same mortgage borrowers when their housing values were rocketing upwards.
The reason: Rates for 30-year mortgages are at a 14-month low. Last week, the average 30-year fixed-rate mortgage was 5.56%, the lowest since April 1, 2004, according to mortgage giant Freddie Mac. The decline has narrowed the difference between long- and short-term mortgage rates.
Declining home values and overall economic woes continue to drive up mortgage delinquencies. Consumer credit rating firm TransUnion reports 4.6% of mortgage holders were at least 60 days past due on their loans in the last quarter of 2008, up from 3% the same period a year earlier.
"We thought that the 8% interest loans would reset to about 12%," said Alan White, a law professor at Valparaiso University who has studied the lending industry's mortgage modification efforts, "but they only went to 9% or less.
Awareness about reverse mortgages has increased dramatically in recent times. The NRMLA (National Reverse Mortgage Lenders Association) predicts higher growth of HECMs in the coming months, because of new changes to the HECM program. These changes are higher loan limits, co-op eligibility, stricter consumer protections, and home purchase component.
The difficulty is that the mortgages have been sliced up and sold so many times, they are extremely hard to value. And investors are so worried about a continuing fall in housing prices, there's no market.
Stabilizing house prices will likely improve consumer confidence substantially. Increases in house prices relative to where they would have gone with higher mortgage rates would also provide a housing wealth effect--that is, higher annual increases in spending as consumers feel richer--on consumption of as much as $76 billion to $113 billion each year.
Insured by the Federal Housing Administration (FHA), these loans are often referred to as government mortgages. They require lower down payments and accept higher debt ratios than conventional mortgages, so they're good for those buyers who otherwise might not qualify.
More than a tenth of American households with home mortgages are overdue on payments or in foreclosure, according to a new survey.
Conventional 30-year mortgages fell out of favor last year as home buyers seeking to reduce their monthly payments opted for adjustable-rate and interest-only mortgages. During the second half of 2004, adjustable-rate and interest-only loans accounted for 63% of mortgage originations, according to the Mortgage Bankers Association.
Reverse mortgages allow people who are age 62 and older to borrow against their home equity, and then get paid in regular installments by the mortgage company. Now that higher limits have been authorized for reverse mortgages, this good retirement resource just got a whole lot better.
"The accelerating share of negative equity, combined with deteriorating economic conditions, means that mortgage risk will continue to increase until home prices and the economy begin to stabilize," says Mark Fleming, chief economist for First American CoreLogic.
Funny, but we don?t recall hearing about the sufferings of these same mortgage borrowers when their housing values were rocketing upwards.
The reason: Rates for 30-year mortgages are at a 14-month low. Last week, the average 30-year fixed-rate mortgage was 5.56%, the lowest since April 1, 2004, according to mortgage giant Freddie Mac. The decline has narrowed the difference between long- and short-term mortgage rates.
Declining home values and overall economic woes continue to drive up mortgage delinquencies. Consumer credit rating firm TransUnion reports 4.6% of mortgage holders were at least 60 days past due on their loans in the last quarter of 2008, up from 3% the same period a year earlier.
"We thought that the 8% interest loans would reset to about 12%," said Alan White, a law professor at Valparaiso University who has studied the lending industry's mortgage modification efforts, "but they only went to 9% or less.
Awareness about reverse mortgages has increased dramatically in recent times. The NRMLA (National Reverse Mortgage Lenders Association) predicts higher growth of HECMs in the coming months, because of new changes to the HECM program. These changes are higher loan limits, co-op eligibility, stricter consumer protections, and home purchase component.
The difficulty is that the mortgages have been sliced up and sold so many times, they are extremely hard to value. And investors are so worried about a continuing fall in housing prices, there's no market.
Stabilizing house prices will likely improve consumer confidence substantially. Increases in house prices relative to where they would have gone with higher mortgage rates would also provide a housing wealth effect--that is, higher annual increases in spending as consumers feel richer--on consumption of as much as $76 billion to $113 billion each year.
Insured by the Federal Housing Administration (FHA), these loans are often referred to as government mortgages. They require lower down payments and accept higher debt ratios than conventional mortgages, so they're good for those buyers who otherwise might not qualify.
More than a tenth of American households with home mortgages are overdue on payments or in foreclosure, according to a new survey.
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