Another rate cut would aid home owners

[CGowen]

10:00 PM PST on Monday, January 28, 2008

By JACK KATZANEK
The Press-Enterprise

The escape hatch for homeowners worried about losing their homes to foreclosure could open wider if the Federal Reserve votes today or Wednesday to further lower its key interest rate.

The nation's top economic policy makers ordered a surprise cut of three-quarters of a percentage point last week after an emergency meeting. Experts expect the Fed's governors, trying to alleviate the possibility the nation is falling into a recession, to lower the rate by as much as a half-point at this week's meeting.

If the federal funds rate falls another 0.50 percentage points it would lower banks' prime lending rate to 6 percent, cutting the rates for millions of borrowers, including some credit card holders and people seeking home equity lines of credit.


...

"For the Inland Empire, anything that makes mortgage costs go down makes it easier to refinance out of mortgages that are causing problems," Husing said. "The primary difficulty facing our economy is mortgages people can't afford."

There were more than 17,000 notices of default -- usually the first step toward foreclosure proceedings -- sent to Inland Southern California homeowners in the fourth quarter of 2007, according to DataQuick Information Systems.

...

http://www.pe.com/business/realestate/stories/PE_Biz_D_fed29.228131f.html
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It still sounds like everything would be fine with the economy if those people could pay their mortgages. Nobody is talking about the fact that selling them to everybody was a money making scheme and a way to keep the economy on life support for a bit longer.

[flashl]

1. Those who got the money has a solution ...

The struggle to hang onto 'American Dream' in mortgage crisis

CLEVELAND, United States (AFP) - The desperation of scores of Americans evicted from their homes and denied standard credit lines has given birth to a new market: developers who make a hefty profit reselling foreclosed homes to the poor.

Retiree Georgina Wilborn, 70, and her daughter Ola, a 45-year-old homemaker, agreed to pay 400 dollars a month for the next 15 years to buy their home back from the developer who snapped it up at auction.

...

Texas-based Econohomes bought it for 7,875 dollars in September, and resold it to the Wilborns for 34,000 dollars.

...

Blacklisted by the banks, and desperate to hang onto their American Dream, they were forced to turn to companies like Econohomes, which are buying abandoned houses by the handful in cities like Cleveland.

The midwestern city has become the poster child of the subprime crisis in a country where some 2.1 million borrowers are behind on their mortgage payments.

AFP

At this pace a company, private equity, or speculators can buy entire towns.

[Quakerfriend]

2. The real problem is that most of those who got into these mtgs

cannot re-finance because their homes are now worth less than what they owe. No bank wants that.

[dmallind]

3. Mtg rates have probably priced in the next rate cut already

but yes in principal it's good for buyers and those who can refinance. Money is still out there, but a bit more stringently available. Since I'm moving states I am buying right now and looking at a 5.25% 30 yr fixed. Compared to just a couple months ago this will save me a modest but noticeable sum in interest each month.

As long as you have SOME equity and didn't bugger up your credit completely it would be worth checking ariund if you have an ARM right now or if you, for some strange reason, are paying more than about 6.75%. Much less that that and closing costs kill the difference.