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Why Can Mortgage Rates Rise in a Down Market?
from:With all the hoopla about the overload of inventory in most states (due to foreclosures), and the dropping of interest rates by the Federal Reserve, you may be wondering why mortgage rates haven risen in the past year over all. The mortgage industry is not the same as the banking and the housing industry. They are connected to these two sectors of the market, but lending products are usually priced on their own merits and not just those of the economy.
The Lender’s Point of View
So, while the amount of inventory can affect home prices and spur competition amongst lenders, it can lower the rates if one lender is trying to grab a bit more business. On the other hand, the mortgage crisis has been so severe in some states that many lenders are wary of lending to unreliable borrowers. They have tightened their credit requirements and when you don’t meet those newer requirements, they may raise the rate to hedge their risk. So, even with a market rate of 6.00% on a 30-year fixed rate mortgage, you could still end up paying more if you don’t meet the new credit requirements of a FICO score of 720 or more, solid employment, and a sizable down payment.
The Market’s Point of View
Mortgage rates can also increase, even if the Federal Reserve decides to lower interest rates. This may spur banks to lend out more money and attract more customers. As the new customers start to flood the market, the demand increases. When the demand of any product goes up, so does the price. That’s why the mortgage rates can even increase when the Federal Reserve cuts rates.
Your Point of View
It is very difficult to time to buy a house at the bottom of mortgage rate drop cycles. Typically, you can do this better if you are refinancing than if you are buying because you are then comparing your new loan to whatever you had before. If it saves you money or drops by at least 1 to 2 points of your mortgage interest, then you are pretty confident that buying at that time is a good move. Otherwise, if you are new buyer and have nothing to compare it to, you still can be relatively comforted by the fact that despite rises and falls over the short-term, mortgage rates are at a historically low-point for now in comparison to years past. They may not drop more than 1 point more and should they do so, you can always refinance your mortgage rates later.
Mortgage Fraud Specific links
Mortgage Fraud News
Government steps up its mortgage fraud probe
The Justice Department has expanded its ongoing effort to uncover the mortgage fraud and abuse that helped precipitate the 2008 financial crisis, offering "substantial financial help" to corporate insiders willing to serve as whistleblowers. The department's Residential Mortgage-Backed Securities (RMBS) working group announced new resources Thursday in an ongoing effort ...
Read more...Residential Mortgage-Backed Securities (RMBS) Fraud Investigations Move Into Higher Gear
On May 24, 2012, the United States Department of Justice issued a press release: Residential Mortgage-Backed Securities (RMBS) Working Group Announces New Resources to Investigate RMBS Misconduct announcing the formation of The Residential Mortgage-Backed Securities (RMBS) Working Group and a website dedicated to facilitating the reporting of RMBS fraud at http://www.stopfraud.gov//rmbs.html.
Read more...Hayward man gets three years for mortgage fraud scheme
SAN FRANCISCO -- A Hayward man was sentenced Wednesday to three years in prison for his role in a $15 million mortgage fraud scheme that involved members of the Hell's Angels, a federal prosecutor said.
Read more...Psst…Seen Any Mortgage-Securities Fraud?
The Obama administration is looking for some tipsters to help root out criminal activity in the U.S. mortgage market.
Read more...Delco man charged in fraud
The U.S. attorney in Philadelphia charged Michael J. Smith, of Springfield, Delaware County, with participation in mortgage fraud that caused losses of $665,000 to lenders. Smith, a former mortgage broker, allegedly participated in a conspiracy with John C. Lucidi Jr. and Eric Maratea, both of whom are charged elsewhere, in a scheme to buy properties, mostly at the Jersey Shore, at inflated ...
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