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Rates Up! Consumers Too Confident! Loan Mod’s Aren’t Working

Rates continue to climb as the stock market improves. Several things appear to be panicking the bond market and pushing rates higher. First of all, there were rumors last week that the Fed intends to back off on their purchases of mortgage backed securities in order to allow yields to climb so as to attract some private sector buyers. Also, strong consumer confidence reports and signs that the recession may end later this year are moving money from bonds to stocks, further pushing rates up.

Loan Modifications do not appear to be working. This morning’s Wall Street Journal has an editorial regarding the rating agency, Fitch, reporting that up to 75% of modified loans end up back in default within twelve months of modification. It appears that borrowers do not wish to make payments on a loan against a property that is “under water” even if the terms of the loan are significantly improved. The editorials broader point was that the political efforts to encourage modifications as a way to stem the tide of foreclosures and therefore prop up the market are fruitless; there is not much the government can do to keep the market from hitting bottom.

It appears that we can expect more foreclosures and the current feeding frenzy to continue.

Call Jay Voorhees at (925) 855-4491

Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646