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Refinance News: More or Fewer Delinquencies--Which One Is It?

[Feb 19, 2010.]


This week was another busy week for news pertaining to home loan refinancing, with some contradictory evidence coming out. Two headlines dominated the refinance news marketplace:

1. Mortgage Delinquencies Set Another World Record?

Anyone who is looking to refinance a home loan is rightfully concerned about the continuing foreclosure problems that have been plaguing the nation. This week, disappointing news came out showing that 6.89 percent of all U.S. mortgages were delinquent by 60 days or more in the 4th quarter of 2009.

Why is this number troublesome not only for the individual homeowners unable to pay their mortgage, but also anyone looking to refinance? Simple: because the more foreclosures that happen, the lower that home prices fall. And the lower that home prices fall, the harder it is to refinance.

This problem is still worst in four states: Nevada, Florida, California, and Arizona. In Nevada, for example, fully 16.2 percent of mortgages were delinquent in the 4th quarter of 2009.

2. Fewer People Falling Behind on Their Home Loans?

Just a few days after the above headline hit, another headline hit--and offered seemingly completely contradictory data showing that mortgage delinquencies are actually declining. According to the Mortgage Bankers Association, 3.6 percent of all homeowners fell behind on mortgage payments in the 4th quarter of 2009, while 3.8 pecent fell behind in the 3rd quarter of 2009.

Although at first glance these two bits of refinance news appear as total opposites, they are in reality not. The key to understanding what's going on is that fewer people are falling behind, but the number of people who have already fallen behind in a serious way is higher than ever.

That is, fewer people are going into default on their mortgage, but more people are in default.

So, What's the Deal With Home Prices?

For homewoners looking to refinance, this is quite the conundrum. On the one hand, it seems like the media is adding fuel to the fire of lower home prices by reporting dire foreclosure statistics. On the other hand, people may be seeing a "silver lining" where there is none to really speak of.

For instance, with so many homeowners not paying their mortgages, banks are wary of flooding the market with low-priced bank-repossessed homes. If home values fall further, banks could lose out as more homewoners cannot refinance and decide to just walk away from their home and their mortgage.

Without a doubt, both homeowners and banks are watching the news, waiting for the home price picture to come clear, hoping that home prices recover enough for a refinance to become possible.


About Author:

Andrew Freiburghouse is a writer and businessman. He has worked as a magazine reporter, tax preparer, screenwriter, copywriter, and loan officer. He graduated from Santa Clara University in 1999 with a B.A. in English. Andrew was born and raised in the City of Los Angeles.

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