What Causes Interest Rate Movement

Here is a snippet of an article that covers some of the finer points that are involved with interest rate movements.

Consumers are often misled when it comes to the subject of the Federal Reserve and how it affects mortgage interest rates. Often the media is the culprit causing the confusion. In the last few years, the Fed has taken action that caused mortgage interest rates to move in a direction other than what consumers expected, because the media provided weak reporting on the subject.

The Federal Reserve affects short-term interest rate maturities, the Fed Funds rate, and the Overnight Lending rate. These factors have a direct impact on the Prime rate. If you took only this into consideration, you may mistakenly conclude that changes made by the Fed will cause a similar movement in mortgage interest rates. However, mortgage interest rates are dictated by the trading of mortgage-backed securities, which trade on a daily basis. The real dynamic at the heart of interest rate movement is the relationship between stocks and bonds.

To finish reading this article, check out the Real Estate Blog...

Mortgage Rate Reset

I was reading some articles over at Bloomberg.com and came across this piece...

This will be a brave new year for U.S. homeowners with adjustable-rate loans.

Terms will be tougher for the credit-challenged. Fewer bargain teaser rates will be offered. And for those facing higher resets on adjustable-rate mortgage payments, it's time to negotiate.

If your mortgage is ratcheting up to a monthly payment you can't afford, you may have some leverage in lowering the rate. Your lender may even welcome the move and allow you to do a low- cost loan modification.

To date, some $150 billion in adjustable loans have reset with $300 billion more in the pipeline, according to the Federal Deposit Insurance Corp. The greatest number of mortgage-rate increases is likely to hit borrowers this year.

In many cases, your lender may call you first to see if you want to modify your loan's terms. That's what happened to Dick Lepre, a loan officer for Residential Pacific Mortgage Corp. in San Francisco.

John makes some good points in the article, and had some good tips. Like he said in the article "It costs nothing to ask."

Here is the full article...

Reverse Mortgages: A Way Out of a Bind for Older Homeowners

I am sure that by now you have heard of Reverse Mortgages, but do you exactly understand what they are? If not, the following article should help you out...

Reverse mortgages used to be a way for homeowners to get extra cash during retirement. Now they're also being used for a more-pressing purpose: helping people who are struggling to meet payments on high-interest-rate loans to keep their homes.

The strategy, which is relatively novel but gaining popularity among legal-aid attorneys and housing advocates around the country, calls for persuading lenders to take the cash generated by a reverse mortgage in lieu of foreclosing on older homeowners.

With a reverse mortgage, the bank makes payments to the homeowner instead of the homeowner making payments to a bank. The loan is repaid, with interest, when the borrower sells the house, moves out permanently or dies. The products are complex and have high fees -- typically about 7% of the home's value -- and they make it difficult for homeowners to leave the property to their heirs. But they may be the best option for people who have built up equity in their home and would otherwise lose it.

Here is the link for the full article...