Mortgage Refinancing Not So Easy

When mortgage rates drop, people with higher rates refinance, right? Maybe not. You still need someone willing to lend. Yesterday's Washington Post reports here that despite mortgage rates near historic lows some people are finding it difficult to refinance. The article explains that

[m]any borrowers who tried to refinance have found they're stuck because the value of their homes has tumbled and their equity has melted away. Others have been shut out because lenders tightened their requirements, demanding stellar credit and low debt. (emphasis added)  An effort by the Obama administration to overcome some of these challenges has fallen flat, frustrating many homeowners -- especially with mortgage rates expected to rise by year's end, if not sooner.

Should this really come as a huge surprise?  It is often said that the mortgage meltdown was caused, at least in part, by lenders pushing huge debts that they knew the borrowers could not afford. One way to deal with that is to tighten borrowing requirements -- requirements that may be self-imposed by lenders or demanded by the government.

Comments

[Credit Card Loans]

With the boom in mortgage financing hitting a peak in recent years, an increasing apprehension over the surge in home equity withdrawal has put consumers in a vulnerable financial position resulting in spending retrenchment. However, household assets and liabilities indicate consumers having used withdrawn funds in restructuring balance sheets and reducing debt service burden. Consequently households are in a more favorable position to spend in the future. Mortgage refinancing or re-pricing mortgages help homeowners to substantially reduce their monthly mortgage payments, leaving more cash for other needs.