Cash-Out Refinance and Further Lender Tightening
Just last week, it was announced that the Cash-Out cap for FHA refinance loans would be reduced to 85 percent of home appraised value (LTV). Now, it appears that many conventional loan programs are following suit and reducing Cash-Out amounts as low as 80 percent for some lenders, even for those with excellent credit.
The lowered cash-out limits may be a direct reflection of continued downward pressure on home prices across the nation, but may also reflect credit-tightening measures by lenders battling in a cash-flow conscious industry.
Mortgage rates are still at excellent levels, particularly for those refinancing less than 80 percent of the value of their home with good to excellent credit.
The bigger picture for future low mortgage refinance rates and higher LTV limits will be heavily dependent upon two crucial factors.
The first is home value. Until the housing market stabilizes, banks and investors will continue to be strict with their funds, limit LTV limits and charge a higher-than-normal premium on interest rates for risk associated with home value.
The second is lender liquidity. An agreed upon method for valuing toxic assets held by banks (namely mortgage related investments) has yet to be found. Private investors (backed by the US government) are willing to buy these risky assets, but their price is much lower than what the banks are willing to sell them for. This story has been playing out for months, and a resolution does not appear in the cards any time soon. If the banks ultimately end up unloading these pesky liquidity killers, their balance sheets will allow a much more robust dive into mortgage lending.
It’s almost like the chicken and the egg… which one needs to occur first? It’s tough to say, but if the banks are able to unload their toxic assets, offered home purchase programs could become much less restrictive than current, drive competition among lenders, and bring an influx of willing and able buyers to the home-purchase closing table. Home supplies will decrease to meet an increasing demand and home prices could stabilize.
Let’s hope that an agreed-upon valuation method for toxic assets occurs soon. It would be a huge help for home values and mortgage financing opportunities, especially for those that require high LTV refinancing or home purchase mortgages.
May the Mortgage Refinance Rates be with You!
Refinance Tool Box
The lowered cash-out limits may be a direct reflection of continued downward pressure on home prices across the nation, but may also reflect credit-tightening measures by lenders battling in a cash-flow conscious industry.
Mortgage rates are still at excellent levels, particularly for those refinancing less than 80 percent of the value of their home with good to excellent credit.
The bigger picture for future low mortgage refinance rates and higher LTV limits will be heavily dependent upon two crucial factors.
The first is home value. Until the housing market stabilizes, banks and investors will continue to be strict with their funds, limit LTV limits and charge a higher-than-normal premium on interest rates for risk associated with home value.
The second is lender liquidity. An agreed upon method for valuing toxic assets held by banks (namely mortgage related investments) has yet to be found. Private investors (backed by the US government) are willing to buy these risky assets, but their price is much lower than what the banks are willing to sell them for. This story has been playing out for months, and a resolution does not appear in the cards any time soon. If the banks ultimately end up unloading these pesky liquidity killers, their balance sheets will allow a much more robust dive into mortgage lending.
It’s almost like the chicken and the egg… which one needs to occur first? It’s tough to say, but if the banks are able to unload their toxic assets, offered home purchase programs could become much less restrictive than current, drive competition among lenders, and bring an influx of willing and able buyers to the home-purchase closing table. Home supplies will decrease to meet an increasing demand and home prices could stabilize.
Let’s hope that an agreed-upon valuation method for toxic assets occurs soon. It would be a huge help for home values and mortgage financing opportunities, especially for those that require high LTV refinancing or home purchase mortgages.
May the Mortgage Refinance Rates be with You!
Refinance Tool Box
Labels: business, credit scores, economy, fha refinance, finance, home loans, money, mortgage rates, refinance, refinance rates, refinancing
posted by Jim Bisnett at
10:05 AM
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