One of the most common reasons that people get a second home mortgage is for home remodeling. However, with banks pulling back on what they will offer in terms of home equity loans, and Americans in general worried about the economic slowdown, home remodeling is falling in popularity.

I think that the biggest reason is the fact that there is less home equity available. After all, with home prices (and values) heading down, negative equity is becoming more of a problem. There just isn’t enough equity to take out a second home mortgage for improvements. No wonder many mortgage lenders are worried.

Are American consumers finally “getting it”?

I’m a generally optimistic person, so I’m hoping that another reason that home equity loans are falling is because American consumers are starting to take a long, hard look at their finances. This would be a good thing, since an honest evaluation of where one’s finances are headed may result in substative changes in lifestyle.

This would also include the problem of using home equity loans for debt consolidation and to pay for frivolous things like vacations. It is very important that individuals figure out what they can do to start building savings, rather than be constantly spending themselves into debt.

In any case, this is a good thing. Hopefully it encourages home owners to think twice about what they “need” in terms of home equity loans. Quite honestly, this could be a chance for all of us to take a close look at where we could be improving in our personal financial lives.

Although it is worth noting that in some cases, home improvement loans are gaining in popularity. Amongst those with good credit, who are still able to obtain personal loans, remodeling may not be a lost cause.

Tags: home equity loans, home equity, home mortgage loan, home second mortgage,
second mortgage, debt consolidation, mortgage loan blog

It’s a pretty good day on the stock market for mortgage lenders — and for companies that have invested in them. JP Morgan (JPM) and Merrill Lynch (MER) are both up this morning on news from different quarters.

JP Morgan

JP Morgan is benefiting from the announcement that it plans to prepare ahead of time for possible losses. Despite turning a profit (albeit a much smaller one than usual), the company is setting aside billions in order to prepare for the future. Additionally, JPM is preparing to buy more weak stocks, perhaps spurred forward by the success of acquiring Bear Stearns. BloggingStocks reports on the reasoning behind JP Morgan’s merging mood:

JP Morgan’s likely desire to buy smaller financial firms may be a sign that stocks in banks and brokerages are bottoming. Dimon wants a piece of that.

Has the financial sector really bottomed out? Is it time for a turnaround?

Perhaps.

Merrill Lynch

Merrill Lynch is also seeing success this morning. But that probably has a lot to do with the fact that after posting yet another quarterly loss (mostly due to subprime writedowns) MER is announcing that it will cut 4,000 jobs.

Merrill Lynch is in damage control mode, but the moves made by the current CEO (as opposed to the old CEO, who led Merrill Lynch into risky — and ultimately stupid — investments) seem to bolstering some measure of confidence.

So, all in all, things seem to be turning around for some mortgage lenders and other financial sector companies. But how long will it last if they aren’t letting people borrow money to buy houses?

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss.

Tags: mortgage lenders, mortgage lender news, home mortgage loan, mortgage loan blog,
JPM, MER, financial sector

So far, we’ve been hearing a lot about how mortgage lenders are increasing their requirements for new home loans, and even for home equity loans. But one group has remained somewhat in the background. But now mortgage insurers are making the news as they continue to add real estate markets to their “watch lists.” Enterprise News reports on mortgage insurers:

The expanding lists reflect concerns among mortgage insurers, who help compensate lenders if a property is foreclosed, that many buyers were not setting aside a big enough down payment before they bought their homes.

What is private mortgage insurance?

The mortgage insurers in question are restricting private mortgage insurance (PMI). PMI is insurance that many mortgage lenders require for home buyers that put down less than 20 percent for a down payment. If the mortgage goes into default, then the insurance compensates the mortgage lenders for the loss.

Prior to the subprime lending crash, mortgage insurers were willing to insure mortgage with no down payments. Now, though, in certain real estate markets that have been especially hard hit, mortgage insurers are changing their requirements. The are requiring five or ten percent down in order to underwrite some policies.

Continuing difficulties for home buyers

This, of course, puts more of a burden on home buyers — especially first time home buyers — in certain real estate markets. It means that they have to come up with a larger down payment in many cases, and this can be difficult. Even those with good credit may find it difficult to get approved for a home mortgage loan without a substantial down payment.

On the other hand, perhaps this is what the economy needs in the long run. It it requires more effort to get a home mortgage loan, individuals may return to the “old-fashioned” principles of money management when it comes to preparing to buy a home. And it might ensure that those that do buy homes are less likely to default.

Tags: mortgage loan blog, mortgage insurers, home mortgage loan, mortgage lenders,
private mortgage insurance, first time home buyers, PMI