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Underwater Mortgages a New Low

The financial crisis saw many unfortunate homeowners go underwater with their mortgage loans. With the economy improving, though, and the Fed working to save these imperiled homes, negative equity is dropping across the country. According to RealtyTrac, as of the third quarter of 2014, the percentage of American homes with underwater mortgage loans dropped to fifteen percent.

These new figures represent the lowest result RealtyTrac has reported since it began tracking underwater mortgages in the beginning of 2012. At this time, underwater home loans in America were dancing dangerously close to the thirty percent range. The number peaked in the second quarter of 2012 with twenty-nine percent. Meanwhile, equity-rich homes are slowly rising as well, representing roughly twenty percent of all home loans. We can therefore see that significant progress has been made.

Unfortunately, we still have some way to go. Negative equity in this country still exceeds one trillion dollars. Further, RealtyTrac says that an additional sixteen percent of mortgages are in danger of falling underwater. The real estate market therefore looks to the future for further recovery.

Baby Boomers Ignoring Common Mortgage Wisdom

The importance of planning for your retirement in your real estate investments has been discussed at length in the past. As you grow old, it’s often a good idea to downsize to a smaller home in order to eliminate any remaining mortgage loans for the rest of your golden years. However, according to a survey from the Demand Institute, a surprising number of Baby Boomers are going against conventional wisdom.

The survey found that many retired people are content to stay put in the homes they spent their lives in, even if they are too big or ill equipped to fit their needs. A full sixty-three percent of Baby Boomers have no plans to move from their homes, most of them having lived in their current homes for more than the past ten years. Though some of these people need to stay in place due to financial hardship or other situations out of their control, eighty-five percent are choosing to remain where they are.

Meanwhile, of the Boomers who do plan to move, many are declining to downsize. About fifty-eight percent of the Boomer population surveyed said that they want to have at least as much home as they currently have, if not more. A full forty-six percent of people apparently intend to upsize their homes into something better when they move.

Unfortunately, this is all adding up to an increase in debt. Baby Boomers are more burdened by debt than previous generations at the same stage of life. Since 1992, the balance of their mortgage loans has risen 142%. Boomers are therefore advised to carefully consider their finances going into retirement, and just how much they need out of a home in their golden years.

Mortgage Rates Return to 2014 Lows

Mortgage rates have been edging slowly downward this month, enough to bring the average rate to one of the year’s lowest levels. As of December 10th, the most prevalently-quoted 30-year fixed-rate mortgage was down to 3.875. Aside from some fleeting instances of particularly low rates that were seen during the turbulent morning of October 15th, these are the lowest rates we have seen for over half a year.

The strength in the current mortgage market can be attributed to weak activity in oil and the stock market. Though neither of these are directly connected to the housing market, there does tend to be a correlation between low stock activity and low mortgage rates. Generally speaking, when the stock market lags, the bond market picks up a bit. The bond market then sees some improvement, which raises prices and pushes rates lower.

Extending Foreclosure Protection for the Military

During the Iraq war, many reservists and members of the National Guard were called into action, forcing them to walk away from full-time jobs in favor of their military commitments. Unfortunately, this would frequently mean taking a significant pay cut. By the time they were done with their duties abroad, they would often come home with severe financial hardships, frequently struggling to keep up payments on their mortgage loans.

In response to this problem, many people have been pushing to grant additional foreclosure protection to current and past members of the military. Currently, such homeowners are protected by the Servicemembers’ Civil Relief Act, which was incorporated in 2008. This legislation forbids banks from foreclosing on a military member for a period following his or her return from active duty, provided that the mortgage loan in question was issued before said duty. Originally, this period was nine months. In 2012 it was lengthened to a full year.

Since this act was scheduled to expire at the end of this year, there has recently been a movement in Congress to put an extension on this protection. On December 11th, the Senate passed this extension by a unanimous vote. The bill now moves to the House of Representatives, who have yet to act.