| Minorities in US hit hardest by housing crisis
In May, Alvin Clavon received a foreclosure notice on the simple, Spanish-style house in South Los Angeles that he shares with his wife and three boys. Clavon bought the place in 2003 with a fixed-rate loan. They painted the walls, fixed the yard and made friends with the neighbors, who let the Clavon boys pick their basil. In 2005, worked with a mortgage broker to refinance his home with another fixed-rate loan. But on the night before signing, the family was offered an interest-only, adjustable-rate mortgage. Clavon, a 35-year-old executive assistant at a bank, said he felt stuck. The ball was rolling, he trusted his broker and so the next day, he signed the loan. "Turned out to be the worst thing I could have done," said Clavon, who like so many others in danger of losing their home to the U.S.
Bad-news economy is good news for some homeowners
Can there be a silver lining in the economic downturn? Perhaps. Sharp interest-rate cuts by the Federal Reserve make this a good time for home-owners to consider refinancing their mortgages. Last week's cut of three quarters of a percentage point — with another cut of as much as a half point expected this week — has put interest rates at a two-year low and close to the lowest point they've been in this decade. Thirty-year mortgage rates are dropping below 5 percent. But does that mean this a good time to refinance? "If you have a 6.75, 7 or 7.5 percent rate, this could be a good time to refinance," according to John G. Gerlach, president and CEO of Pocono Community Bank. "Anytime you have a 100 basis point spread, it's a good time to take a look at refinancing," he said.
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.
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