Interest rate fluctuations remain key factor in speed of recovery in residential market.Interest rate fluctuations remain key factor in speed of recovery in residential market All eyes are on interest rates as the key to housing sales and residential lending as the Gulf War closes. Two scenarios have emerged, said Earl Peattie, president of Mortgage News Co. of Santa Ana Santa Ana, city, El Salvador Santa Ana (sän'tä ä`nä), city (1993 pop. 129,873), W El Salvador. It is the second largest city in the country and the commercial and processing center for a sugarcane, coffee, and cattle region. . Under one scenario, with the war winding down, consumer confidence will increase and there will be increased spending which will benefit the economy and stimulate home sales. The only concern is that the federal reserve may not ease interest rates enough for that to happen. Since the end of the war there has been a .25 percent increase in interest rates, Peattie said, lending credence to those who hold that viewpoint. Under the other scenario, economists think that increased spending will not be enough to turn things around and that the economy, home values and home sales will remain depressed. Prior to the recent uptick Uptick A transaction occurring at price above its previous transaction. In order for an uptick to occur, a transaction price must be followed by an increased transaction price. , the interest rate charged for California mortgages had been falling for several months, with the rate for a 30-year fixed mortgage falling from 10.3 percent in October 1990 to 9.4 percent in February 1991, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Mortgage News Co. data. The rate for one-year adjustable rate mortgages This article is about the US mortgage type. For an international perspective, see Variable rate mortgage. An adjustable rate mortgage (ARM) is a mortgage loan where the interest rate on the note is periodically adjusted based on an index. has also fallen, from 8.6 percent in October to 7.5 percent in February. However, low interest rates have not stimulated sales, Peattie said, because of the high price of homes and because of the recession. "Even at lower interest rates, people aren't sure if they are buying things that may be worth less," Peattie said. Far hotter is the refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. market, where home and property owners have been seizing upon lower interest rates and pulling out equity before property values fall further. At Mid-Wilshire Los Angeles-based CalFed, for instance, refinance loans made up 43 percent of the S&Ls total business in 1990, compared to 30 percent in 1989, said William Jucha, senior vice president of real estate lending administration for California Federal Bank California Federal Bank, often abbreviated to "Cal Fed", was a savings and loan bank in California. It existed from 1926 until 2002, when its parent company Golden State Bancorp was acquired by Citigroup, resulting in the bank being merged into Citibank. . Unlike the commercial lending market, the single family and multifamily lending market is tight and there is no shortage of capital for those who desire loans, said Jerry Jordan, senior economist at downtown Los Angeles-based First Interstate Bancorp First Interstate Bancorp was a bank based in the United States that was taken over in 1996 by Wells Fargo. It was headquartered in Los Angeles. The name has continued to be used in the banking world by used after the merger by First Interstate Bank who had been using the . "For residential lending there has never been a credit crunch Credit Crunch An economic condition whereby investment capital is difficult to obtain. Banks and investors become weary of lending funds to corporations thereby driving up the price of debt products for borrowers. ," said Jordan. "Banks have picked up that business (as S&Ls have fallen or withdrawn) but demand is falling. They are enjoying a bigger share of a smaller market." Individual lenders said that there has been a shift toward refinancing Refinancing An extension and/or increase in amount of existing debt. and toward fixed products. "Over the last several months the percentage of our new business which is fixed rate has risen from 10 to 15 percent to 20 to 25 percent," said Sam Lyons, senior vice president of mortgage banking at Great Western Bank of Beverly Hills Beverly Hills, city (1990 pop. 31,971), Los Angeles co., S Calif., completely surrounded by the city of Los Angeles; inc. 1914. The largely residential city is home to many motion-picture and television personalities. . Peattie said that in general there has been a push to make sure S&Ls aren't extending credit loosely. Lenders are becoming more careful in complying with Fannie Mae Fannie Mae: see Federal National Mortgage Association. and Freddie Mac Freddie Mac: see Federal Home Loan Mortgage Corporation. guidelines, insuring a secondary market for their mortgages. "We want as much 30-year (mortgages) as possible and as liquid as possible," said Jucha. Easy-qualifier loans - loans with applications on which some statements are not verified - are no longer offered by many institutions, Peattie said. Most lenders are actively seeking to woo the home loan mortgage customers. Home Savings of America of Irwindale recently introduced a loan preapproval program that allows buyers to gauge what range of home they can afford. "Given the uncertain economic attitude, its taking longer to make decisions," said Mary Trigg, senior vice president at Home's parent, H.F. Ahmanson & Co. "This gives them more time and flexibility." S&L executives said that there have been few changes in terms for home loans in recent months. Steven McGough, senior vice president of real estate at Glendale Federal Bank of Glendale, said that the biggest change at his institution in the last nine months has been the eagerness of borrowers to take advantage of no-fee programs which offer borrowers no fees in exchange for higher interest rates. He said the demand reflects borrowers desire to have more money available for home improvements and relative confidence over the future value of the dollar. PHOTO : Homes: Sales sag |
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