| Fed's rate cuts ignite a rush to refinance
A positive note in the chorus of bad economic news sounds loudly, like a call to arms. Or, as happened after the Federal Reserve dropped short-term interest rates three-quarters of a percentage point Tuesday, a race to refinance. The refinancing frenzy began right after the Fed's announcement, local brokers and bankers reported. The 10-year Treasury bond rates on which fixed mortgages are based also fell, and interest rates for 30-year loans plunged as far as 5.125 percent, the lowest level since spring 2004. On Jan. 1, the 30-year fixed rate averaged 6.07 percent; it has ranged between 6 percent and 6.5 percent for two years. Though the number of refinancing applications will not be available until Wednesday from the Mortgage Bankers Association, newspaper and television accounts from Bangor, Maine, to Los Angeles described a boom in activity.
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.
Home loan refinance goes terribly wrong
Q: I have been frantically searching for help regarding my refinance five months ago. I specifically asked the loan company for a fixed-rate mortgage with no prepayment penalties, with payments between $1,300 and $1,500 a month. My loan officer said that it would be possible. A week later, I received documents from a bank for an interest-only loan with a prepayment penalty. I called the loan officer and he told me to disregard that because he was working on another loan that would be more to my liking. I ended up accepting an interest-only loan, because I was told that the loan I wanted would have insurance requirements. Before I signed the paperwork, I asked what I would be paying per month. The loan officer told me it would be $1,481. Great! About a month ago, I was looking at my payment receipts and saw a negative principal balance of almost $5,000.
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