On The Other Hand, Refinancing As A Major Part Of Total Mortgage Activity Was Up To 41% From 44%

Category: Finance.

After passing through a tumbling situation in the recent past, which left the mortgage market shocked( as the short term mortgage rates shot higher) , the Federal Reserve has made it possible for them to get back on the normal track.

The decision to cut overnight federal funds rate from 25% to 75% was unanimous. The Federal Reserve slashed benchmark interest rates by half point in an aggressive move, thus tightening the credit conditions, providing potential to intensify the housing correction and preventing the economy from moving into recession. This is the lowest level since May 2006 and the first time the fed has cut interest rates since June 200It was the first � point cut since November 200The fed also lowered its discount rate it charges from banks for direct loans by the same percentage. Even the long- term rates had an unexpected change showing a healthy decline, according to the Mortgage Bankers Association and Primary Mortgage Market Survey. Short term mortgage rates, which had been rising, sometimes very sharply over the last few weeks fell a bit. However: - The short term 1 year ARM decreased to 34% from 52% with points remaining. unchanged at 9- There was a dramatic drop in the 30 year fixed rate mortgage( FRM) , from 42% with 09 points to 25% with 1 point. - The average contract interest rate for 15- year FRM had a decrease from 10% with 16 point to 9% also with 03 point. - The five- year Treasury indexed hybrid adjustable rate mortgage( ARM) had an average contract interest rate of 32% with 6 point with a modest change from a rate of 35% with 6 point. - One year Treasury indexed ARMS after jumping 24 basis points to 84% with 8 point, it settled down and gave back ten of those basis points, averaging 74% with 6 point. - Mortgage application volume that has increased to 5% on a seasonally adjusted basis was down to 17% . But, the market share of the ARMs continued to drop, representing 16% of total application compared to 12% before.

On the other hand, refinancing as a major part of total mortgage activity was up to 41% from 44% . The Federal Reserve Board s decision to cut the federal funds rate by 50 basis points proved good medicine for many ailing mortgage related stocks. California, Nevada and Arizona, Florida drove the rate of mortgage loans entering foreclosure nationwide to a new record. According to the other latest updates, nationwide foreclosure fillings jumped 36% led by sharp increase in Sunbelt states where inflated home prices are the driving factor. During the second quarter, loans entered the foreclosure process at a record rate of 65% compared with 58% during the previous quarter.