MBA releases Delinquency Plan amidst Foreclosure Crisis
RateEmpire.com
Mortgage Bankers Association unveiled its delinquency survey for the third quarter of this year. The survey came hours before the government's announcement on the particulars of the administrative plans to help the house owners who are facing foreclosures.
MBA started keeping the records 21 years ago, since then the loan numbers in the foreclosure process and the loan numbers entering that process were at the maximum levels.
ARMs or Adjustable Rate Loans, specially the subprime ones have so far performed quite badly than their conventional and fixed rate foils. ARMs constitute 43 percent of loans entering the foreclosure process, although their share is 6.8 percent of 1-4 family loans. Loans given to credit worthy borrowers are called Prime ARMS. Those loans accounted for 18.7 percent of new foreclosure. A year ago, the number of delinquent borrowers was 4.67. It rose to 5.59 percent in 2007 (second quarter). Before getting into any legal process, many of the 30-60 days delinquencies are solved. Even with such problems, this is the highest delinquency since 1986.
Depressed market is creating problems in conventional fixed rate market also. The market is doing good business in general but some borrowers are feeling the heat while trying to sell off their homes. California is leading the way in foreclosures in the third quarter of 2007.
Treasury Secretary Henry Paulson announced the details of the foreclosure reduction plan in a press conference on Thursday December 6 2007. Paulson's earlier plan on the revival of the subprime market was confirmed by the government in the conference. The plan was supported by the likes of Daniel Mudd, Fannie Mae President; and insisted on freezing the mortgage rate for a period of 5 years.
Currently government is trying hard to pass mortgage related projects to reorganize the Federal Housing Administration. There are proposals pending for restructuring the tax code by removing the short-term penalties, and helping out the borrowers and first time house owners by the state and local government.
The plan was to start giving teaser loans to unqualified borrowers. Unqualified in the sense that their debt to income ratio or unverifiable income is low, still they come under the length of the teaser loans. The teaser rates will adjust the market rates a year or two later, which would eventually result in a much higher monthly mortgage rate of 30 percent of the borrower's original debt. News reports have confirmed that there has been a large number of participation from the lenders and the service providers.
Analysis suggests that the administration plan can help a meager portion of the borrowers who are in problem. It has been predicted that the number of potential beneficiary would at best reach only about one million house owners. There are some more drawbacks of the administration's proposal but at least the initiative to help a million families is there for the goal.
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