While the Senate considers whether or not to accept the rise in the conforming loan limit passed by the House, numbers are being released showing home foreclosures in 2007. It’s not a surprise that home foreclosures in 2007 were up. Rather dramatically.

Inman News reports on the staggering number of households that were in some state of foreclosure during 2007:

The number of households in foreclosure increased 79 percent in 2007, with about one of every 100 U.S. households at some stage of the foreclosure process, according to the latest numbers from data aggregator RealtyTrac.

However, it remains unclear whether or not any of the attempts to fix the mortgage crisis and the economy in 2008 will actually work. A mortgage rate freeze for resetting ARMs may stave off foreclosures for now, but unless those homeowners sell in the next five years, we will likely remain as we are.

The Center for Responsible Lending points out that the plan championed by the Treasury Department, HOPE NOW, will barely make a dent in the looming foreclosure crisis:

This analysis shows the Treasury plan, plus existing lender modifications, barely make a dent in the growing foreclosure crisis and will allow subprime damage to continue spreading through the entire economy.

The Treasury plan calls for mortgage lenders to volutarily change mortgage rates to fixed rates for at-risk borrowers. So far, it doesn’t look to be effective.

Other programs fall woefully short of making an impact in the now-estimated 3.5 million subprime ARMs due for reset through 2009.

However, the possible impact of the conforming loan limit has not been factored in. If the conforming loan limit rises to $625,000, and FHA expands its programs to include homes of more than $700,000, some foreclosures may be avoided since it will be easier for mortgagees to sell their homes.

Tags: fix mortgage crisis, mortgage lenders, home mortgage loan, mortgage loan blog,
foreclosures 2007, resetting ARMs, mortgage rate freeze

After the big news of the tax rebate, it is time to look at the other provisions in the economic stimulus plan presented by House leaders and the Bush Administration. One of those is a change in the conforming loan limit. The Seattle Times reports on this change to what is considered a conforming loan:

It would raise loan limits temporarily above $700,000 for the quasi-government entities Fannie Mae and Freddie Mac, which fund the bulk of the nation’s mortgages. Until now, these entities couldn’t buy and package mortgages larger than $417,000, the so-called conventional-loan limit.

While the Bush economic plan was announced Jan. 18 didn’t address the conforming loan limit, this new plan does. This is designed to make it possible to purchase homes, backed by the government, in higher-priced areas that include many major urban areas in the U.S., such as New York, Seattle, California and expensive locales like Hawaii.

It will probably help, providing the necessary funds to help borrowers achieve the lower interest rates that come with a conforming loan (as opposed to the rather rates associated with a “jumbo” loan). However, it is important that mortgage lenders carefully review the borrowers before giving out the loans. The home buyer still needs to be able to afford the home.

Tags: conforming loan limit, conforming loan limit rise, home mortgage loan, mortgage loan blog,
economic stimulus, Bush economic plan, tax rebate

The phrase of the week is “economic stimulus.” Several efforts are being made to save the economy and try to prevent a recession. On Tuesday there was an emergency Fed rate cut, designed to help inject confidence into the stock market and that will provide relief for those with ARMs. Additionally, this week it was announced that bond insurers will also likely get help in the form of a bailout. And the biggest of these measures is, of course, the tax rebate.

This tax rebate was announced yesterday. The Seattle Times reports on some of the details of the tax rebate:

Individuals with adjusted gross incomes of $3,000 to $75,000 would get rebates worth $300 to $600. Joint filers with annual incomes up to $150,000 would receive up to $1,200. Individuals and families that earn more than those limits would get rebates that decline as their incomes increase. Families also would get bonuses of $300 per child, except for families that earn more than $186,000.

But will this really help the economy? While the idea of “free money” seems appealing, the fact of the matter is that the money isn’t actually free. Someone has to pay for it. Last time this happened, the Bush Administration worked out a deal with Congress in which the money was “borrowed” from Social Security. We all know who ends up paying for that.

This time, details on where the money will come from have been murkier. But it will still have to be paid back. Which means that it will show up as a cost somewhere down the line.

Another issue to look at is the fact that this may not help the economy long term. The last “economic stimulus” tax rebate didn’t really change things. Look at us. We’re in the same place we were then. Why would this actually change things during this tax rebate?

And, as far personal finances are concerned, the tax rebate won’t be that much help. Most people don’t use tax refunds and rebates on things that would help their finances, like paying down debt and investing or saving. And the government is pushing Americans to spend that money in order to “stimulate the economy.” So while there may be a boost later in the year to the economy, the long-term effects likely won’t be that great.

Tags: home equity loan, home equity, home mortgage loan, home equity second mortgage,
second mortgage, debt consolidation home equity, home equity line of credit