| When mortgage rates drop, calls increase
John Johnson, general manager of Van Dyke Mortgage Corp. in Rockford, said although rates have fallen to attractive levels, not everyone should refinance. "If you owe less than $50,000 then it really doesn't make a lot of sense," Johnson said. "If you owe around $100,000 then it has to drop a full 1 percentage point to see a real benefit. If you owe more than $150,000 then you can benefit from a 3/4 percentage point drop. It really depends upon the individual circumstances." Johnson had as many as 13 employees when the housing market and refinance booms were at their hottest — and now, with the home sales market having cooled off significantly, just has two. He said the falling mortgage rates have had a positive effect. In 2007, real estate agents had sold the fewest number of homes and condominiums locally since 2001.
Savings and loan crisis cost taxpayers too much
Economic bubbles that burst get government bailouts. That's historically the way it's worked. The need to stabilize the farm banking system was given as the reason for the mid-80's farm aid. The savings and loan crisis cost taxpayers far more than deposit insurance could cover. Today, it's the Adjustable Rate Home Mortgage bubble that has burst and the Bush administration is attempting to cushion the blow with a plan to help borrowers refinance. 1.8 million ARMs reset to higher rates this year. The Bush administration worries that as many as 1.2 million of these are at risk of foreclosure without help. As was the case with the 1980's farm crisis, the government's plan doesn't bail out banks directly. The mortgage industry will lose $150-400 billion as a result of subprime mortgage losses.
Analysis: US mortgage refinancing offers hope of stability
Amid the steady drumbeat of bad news for the US housing market, there are hopes that a recent dramatic fall in mortgage rates could help struggling homeowners refinance into cheaper loans, offering the prospect of much needed stability. But contrary to earlier periods when low mortgage rates prompted waves of refinancing activity, analysts say the silver lining could be tarnished by today's stricter lending standards, virtually closed securitisation markets and still high rates for non-conventional mortgages. All this while the dark cloud of falling house prices casts a shadow over new buyers. “Financing costs may have come down for some, but it would take an extreme optimist to see any break in the price slide," says Alan Ruskin, strategist at RBS Greenwich Capital.
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