Mortgage rates are at an all time low but the standards to qualify have risen sharpely. Couple that with falling home prices those who would like to refinance just can’t.

Borrowers Miss Out on Billions in Savings

By NICK TIMIRAOS
The Federal Reserve has pushed mortgage rates to near half-century lows, but millions of U.S. homeowners haven’t benefited from that because they can’t—or won’t—refinance.

Falling home prices have left many owners with little or no equity, making it harder to qualify for refinancing. Moreover, stricter lending standards and higher fees by banks and mortgage giants Fannie Mae and Freddie Mac and declining incomes have made it tougher and less attractive for borrowers to seek new loans.

Around 37% of all borrowers with 30-year conforming fixed-rate mortgages—who collectively hold about $1.2 trillion of home loans—have mortgage rates of 6% or higher, according to investment bank Credit Suisse. Many could reduce their rates by a full percentage point if they refinanced at current rates, about 5%. More than half could lower their rates nearly three-quarters of a percentage point, according to Credit Suisse.

But new refinance applications in January stood near their lowest levels in the past year. Weekly data compiled by the Mortgage Bankers Association also show that refinance activity has been muted, considering that rates are so low.

Read entire article here.

By Dina ElBoghdady
Washington Post Staff Writer
Wednesday, December 2, 2009

The Federal Housing Administration is proposing to increase the up-front cash paid by borrowers as part of an effort to shore up the agency’s finances, which have been staggered by rising defaults in its flagship mortgage insurance program, according to FHA officials.

Read entire article here.

Banks still reluctant to lend

Fewer banks tightened lending standards in the past three months, but loans are still tough to come by. Banks said this won’t change until next year at the earliest.

NEW YORK (CNNMoney.com) — Loans for consumers and businesses remained tough to come by over the past three months, according to a report published Monday by the Federal Reserve.

In the central bank’s latest survey of senior loan officers, banks said they lent less from May through July, as demand for loans dwindled further and the creditworthiness of potential loan recipients worsened.

The only category of loans where banks reported greater demand was prime residential mortgages, home loans to borrowers with the highest credit quality. Mortgage rates fell during the May through July period, sparking a wave of applications for refinancing.

Still, nearly 90% of respondents reported that lending standards were currently tighter than average for both subprime and prime home loans.

Half of the banks surveyed said they lowered credit limits, and 35% reported tightening standards for credit card applicants. None said they loosened standards or raised limits for existing customers. About 20% of banks reported weaker demand for all types of consumer loans.

Though a smaller percentage of banks said they were tightening their standards when compared to earlier this year, bankers were still pessimistic about the future.

Most banks said they expected their lending standards would be tighter than average until at least the second half of next year. For subprime companies and consumers, the majority of lenders said those standards will be stricter than normal for the foreseeable future.

Banks’ willingness to lend money has become a focal point during the recession as the U.S. government has provided a massive amount of aid to financial firms in an effort to get credit flowing again.

Despite criticism from both lawmakers and taxpayers, industry executives maintain they are still making new loans and extending existing credit lines to both consumers and businesses.

In a separate survey released Monday, the Treasury Department said that the 22 largest recipients of government aid reported a 13% increase in loan originations in June from May.

The Treasury added that much of the increase was due to higher demand for mortgages as a result of new home purchases. Business lending continued to slump however. Banks surveyed by the Treasury indicated that demand for commercial and industrial loans as well as commercial real estate loans were “well below normal levels.”