At a time when mortgage rates are still low and there has been a drop in demand for loan applications, the number of homeowners who have delinquent mortgages is dropping. According to TransUnion, one of the three major credit reporting agencies, the delinquency rate for mortgage payments has dropped to only 6.44 percent during the third quarter of this year. That number represents the biggest drop in mortgage delinquencies since the end of 2006.

The rate of delinquencies is measured by counting the ratio of borrowers who are at least 60 days past due on their mortgage payments. Many analysts are looking at these numbers as a sign of an improving real estate and mortgage market. One reason for the turnaround is the fact that home prices have stabilized during the earlier part of the year. But the historically low mortgage rates are also being credited with the dropping delinquency rate. Here are some other numbers reported by TransUnion concerning the mortgage delinquency rate:

* Nevada had the highest number of delinquency rates in the country during the third quarter of this year at 15.12 percent. Florida was next highest at 14.63 percent.

* The lowest mortgage delinquency rates in the country were in North Dakota at 1.52 percent followed by South Dakota at 2.24 percent and Nebraska at 2.61 percent.

* More than half (58 percent) of the metropolitan areas in the nation reported a decrease in mortgage delinquencies that were 60 or more days late since last quarter.

* Compared to last year, new mortgages across the country have dropped 23 percent. All 50 states showed a decline in new mortgage loans when compared to last year’s numbers.

* During the third quarter of this year, the District of Columbia had the highest amount of mortgage debt on average at about $368,255. California had the second highest average at $342,695. awHHawaii had the third highest amount of mortgage debt on average with $309,536. West Virginia had the lowest average at just about $100,000.

Hopefully this trend of declining mortgage delinquencies will continue for this quarter and future quarters. Before long, the mortgage industry may get back on track or, at the very least, begin to improve in the foreseeable future.

With the next Congress taking over in a matter of weeks, there are many questions brewing as to some of the changes that they will be making. Many of those changes are going to directly affect you – the average American citizen – but one decision may affect you more than the others.

The Republican leaders that are set to take over Congress plan to put an end to the bailouts and monies given to Freddie Mac and Fannie Mae. According to Tom Price, a representative from Georgia and the chairman of the Republican Study Committee, the Democrats and the Obama administration has used these two giant mortgage institutions to “manipulate the housing market,” which helped contribute to the debacle that has all but brought the market and parts of the economy to its knees.

Another representative – Republican Spencer Bachus from Alabama – said that his first priority as the potential incoming chairman is to end the federal assistance that the government has been giving to Freddie Mac and Fannie Mae. Since these two major companies either own or guarantee about half of the mortgages in the United States, refusing to give them any more federal financial help would have a major impact on them as well as the mortgage borrowers who have their mortgages through them.

However, Bachus said that the change won’t take place in a matter of days. According to him, subsidizing the mortgage market with money from the taxpayers is an “addiction” and addictions cannot be cured overnight. He said that the transition will take place over several years in order to minimize any problems that will occur as a result of the change.

Democrats have also accused Republicans of doing nothing to help the mortgage institutions in the past. The Republicans had control of the House of Representatives from 1995 to 2007.

In addition to stopping the federal funding to Freddie Mac and Fannie Mae, the Republicans want to have the government oversee the two institutions more closely. This includes the two institutions being more transparent with their accounting practices as well as creating a position for an independent inspector general.

What do you think this will do to the mortgage rates if these two mortgage giants lose their federal funding? Will it make the rates spike or will it help them go down even further? Let us know your thoughts below.

For home buyers who have been trying to get a loan and take advantage of today’s low mortgage rates, Fannie Mae has announced some new regulations that may make it easier for some buyers to secure a mortgage. Unfortunately, some of the new guidelines may make it more difficult for others to secure a mortgage loan. Here are some of the specifics you should know about Fannie Mae’s new guidelines.

* The new guidelines will take effect on December 13.

* Under the new guidelines, Fannie Mae will allow home buyers to use grant money and gift money from nonprofit organizations to use toward 5 percent down payment on their home.

* Mortgage loan borrowers will have to come up with another 5 percent to put down on their home purchase. This extra 5 percent can come from their own funds or from gifts.

* The rules regarding gift money applies to single-family primary residences. This can include condos, town homes and traditional homes.

* The limit of the loan balances will be determined by where you live. For instance, in New York City where costs are typically high, the limit on the loan balance will be $729,000. In other places across the country, the limit could be as low as $417,000.

* Regarding debt-to-income ratio, Fannie Mae is getting tough on buyers. Currently, some home buyers are approved for mortgage loans when they have a 55 percent debt-to-income ratio. Under the new guidelines, however, that ration can be no higher than 45 percent. That means that no more than 45 percent of your monthly income can go to pay debts if you are looking for a traditional mortgage loan.

* If you have missed a payment on your revolving debt in the past, Fannie Mae is going to be tougher on you when it comes to getting a mortgage. Now you will have 5 percent added to the ratio of your total debt-to-income balance if you missed a payment in the past. This could be the difference between be approved or denied for a mortgage loan through Fannie Mae.

* Student loan debt is going to be a major hindrance to getting a mortgage through Fannie Mae. Even if you have deferred your student loans, Fannie Mae could count that as missed payments.

* Those who have gone through a foreclosure used to be able to get another loan through Fannie Mae after four years. With the new guidelines, you will have to wait seven years after going through a foreclosure before you will be considered for another mortgage loan.

These are just a few of the new guidelines that Fannie Mae is implementing to protect itself against the problem that has recently happened in the mortgage industry. Keep these in mind if you plan on purchasing a home any time soon.

One of the hardest hit states in the nation when talking about home sales is California. For awhile, prices were so high that only few could afford to buy a home in the Golden State. In October of this year, however, the number of home sales in California dropped to the lowest level in about three years.

In the counties of Ventura, San Bernardino, Orange, Riverside and Los Angeles, about 16,750 homes were sold in October 2010. That’s a 7.4 percent decrease from the previous month in which 18,091 homes were sold in those counties. In October 2009, more than 22,000 homes were sold in these counties so last month’s figures reflect an almost 25 percent drop from a year ago. Last month’s sales figures were the lowest they have been since October 2007. During that month, 12,913 homes were sold. Other than 2007, home sales in those California counties have not been this low since 1988.

According to analysts, there are several factors contributing to these historically low home sales. Despite the unusually low mortgage rates, there are few potential home buyers. One reason is because home builders cannot build the homes at a cost low enough to entice buyers because of the large inventory of existing homes. Many of the existing homes that are for sale are either foreclosures or short sales. These are typically priced lower than other homes, even newly-built homes, which is one reason why many potential buyers choose these instead of new homes.

Another reason for the low rate of home sales is the credit qualifications. Even though homes have dropped drastically in price, credit is not as readily available as it once was which is creating a bottleneck between buyers and home sales. Even those who are qualified for a home purchase cannot get a mortgage loan unless they have high credit scores and an impeccable credit history.

Foreclosures in the southern California area have accounted for almost 35 percent of home sales in October 2010. Last year at this time, foreclosures in the region accounted for about 40 percent of home sales while in September 2010 they accounted for about 33.6 percent. Home prices have also dropped an average of 4.2 percent in the last year throughout the SoCal region. Flippers, or people who buy homes and then resell them, accounted for nearly 4 percent of the home sales last month, which is nearly a one percent increase over last year at this time.

If you are one of the many homeowners who tried to get a mortgage modification but were rejected, you may want to count yourself lucky. According to the Wall Street Journal, there are many troubled homeowners in the United States who have tried to at least mitigate their financial problems by applying and signing up for a mortgage modification. Unfortunately, their lenders did not live up to their part of the bargain and the homeowners came out of the situation worse than how they went into it.

One such story is that of William and Esperanza Casco. They purchased their home with a mortgage loan about 17 years ago. The couple was current on their payments, but JPMorgan Chase, their mortgage lender, offered them a trial modification. This would reduce their payments and put more cash back into their pockets each month. After several months of making the lowered payments faithfully and according to the new mortgage agreement, the bank decided the payments were not enough. The Cascos received a foreclosure notice on their home despite their adherence to the mortgage modification agreement.

Homeowners across America are experiencing similar occurrences despite the federal government’s money that was supposed to be used to help people reduce their mortgage payments. But according to the article in WSJ, only about 500,000 homeowners have been able to make their mortgage modifications permanent. That’s a low number when the program was designed to help about three times as many people as that.

A spokesperson for JPMorgan Chase said that the bank worked with the Cascos to help them qualify for a permanent mortgage modification. After several attempts, they were unable to make that happen so the bank had no choice but to foreclose on their property.

The WSJ article goes on to discuss how there are a number of federal lawsuits that have been filed in Boston. These lawsuits are contending that some of the major banks and mortgage lenders are not fulfilling their end of the contract under the Home Affordable Modification Program, or HAMP. The lawsuits go on to say that under this government program, the banks are supposed to give permanent mortgage modifications to troubled homeowners who make the payments during the trial period. Very often, this is not happening and homeowners are ending up in more trouble than they were originally in.

What’s worse is that many homeowners, according to attorney Shennan Alexandra Kavanagh, have lost their homes as a result of trying to modify their mortgages. The lowered payments that these homeowners paid as required in the agreement were applied to their original mortgage balance which the homeowners were unable to pay. Just in Massachusetts, Kavanagh believes there are tens of thousands of people who can get in on the class-action lawsuit.

Have you had any experience with a mortgage modification lately? If so, was it a good experience or a bad one? Did you come out ahead financially? Let us know your thoughts below.

With mortgage rates as low as they have ever been, many people are rushing into getting a mortgage and achieving their dream of owning a home. Unfortunately, that dream is becoming harder and harder with all of the regulations and guidelines that a borrower must meet before getting a loan. Now, many small banks across the country have made it tougher for borrowers to get a loan from them as they have tightened their standards for mortgage loans.

Earlier this year, small banks – or those that make less than $50 million each year – loosened their lending standards to help more buyers take advantage of the historically low mortgage rates. But here we are several months later and those banks have had to broaden their restrictions. This finding was reported this week after the Federal Reserve interviewed more than 75 of these small banks nationwide.

According to the report, less than half of the small banks that participated in the Fed’s survey reported making sub-prime loans to borrowers over the last three months. The more banks that follow this trend, the harder it is going to be for the economy to bounce back to what it was just a few years ago. However, the smaller banks are saying that the problem doesn’t necessarily lie with them. They cite the fact that there are fewer people looking for home loans these days with the uncertain job market and a resurgence of interest in paying off debts and spending money more responsibly. These banks are saying they are more than willing to loan money to mortgage borrowers but there simply are not as many of them as there used to be. And it’s not just mortgage loans that have suffered. Business loans, credit lines and more have suffered as a result.

Paul Ashworth, a senior U.S. economist with Capital Economics, says the drop in demand is “disturbing.” And with the government announcing another stimulus last week in the amount of $600 billion or more, Ashworth thinks it could be even worse. He says these “claims that quantitative easing will lead to a new boom in bank lending look well wide of the mark.” However, on the other hand, nearly every bank in the survey conducted by the federal government said that they have relaxed their guidelines and restrictions on industrial and commercial loans in the last few months. Many banks have evened loosened their standards for credit cards in order to compete with other banks in the country. Unfortunately, the small banks do not see any change in their mortgage lending practices in the near future.

What this means for you is that you probably have a better chance of getting a mortgage loan if you go through a larger bank, such as Bank of America, Chase, Wells Fargo or one of the other big names. Take advantage of these low mortgage rates while you can!

With all of the foreclosed homes on the market these days, buying one of these properties is awfully tempting. But if you have never purchased a foreclosed property, you may be surprised at the stages of the sale that you have to go through in order to purchase one. Here are three of the main steps in the process to purchasing a foreclosed home.

Short Sale Listing
The first step in a foreclosure sale is that the home gets listed as a short sale listing. This means that the mortgage lender has decided to take a loss on the property and list it at a price that is less than what is owed on it. Typically, a short sale occurs within about three months after the property goes into default. During this process, the homeowner typically negotiates with potential buyers rather than the buyers negotiating with the original lender. However, the mortgage borrower must have the lender’s permission to do this first. The drawbacks for the buyer during this phase include the chance that the homeowner comes up with the money owed and pays it to the lender in order to stay in the house. Also, a short sale often takes longer than a normal home sale.

Auction Phase
When a foreclosed property reaches the auction phase, the bank has not taken back possession of it just yet. However, the home is put up for auction in an effort for the bank to get as much of the money owed on it as possible. This is one of the best phases for the buyer because there is a good chance of getting the home at a great bargain. However, it is important to know about any other fees and charges associated with winning the bid. Depending on the amount of the winning bid, you could end up paying more when you buy a home at an auction than you would with a traditional home sale. The other drawback to purchasing a foreclosure at an auction is that you usually have to have the money upfront before you can buy a home.

REO Status
This is typically the last stage that a foreclosed home goes through. At this stage, you as the buyer can hire a home inspector to inspect the home and you can request a title search to ensure there are no outstanding liens or financial holds on the home. This is the stage where you will find out any problems the home has so you can decide if you still want to purchase it.