Mortgage Applications Drop
According to the Mortgage Banker’s Association, their mortgage applications index has plunged by 23 percent, from 591.4 to 455.4 during the week that ended September 26.
With the collapse of Wall Street and subsequent chaos in the finance and banking industries, it has become more and more difficult for home buyers to get approved for mortgage loans. To make matters worse, the rising foreclosure rate has made lenders cautious and forced them to tighten their lending guidelines.
Last month, the government decided to take control over Fannie Mae and Freddie Mac in an effort to address the problems in the housing and mortgage industries. The said rescue plan involves injecting these institutions with about $100 billion each to make sure that they stay afloat in the midst of the credit crisis.
Still, the overall condition of the housing industry remains to be unstable. Refinance index also fell by 34.7 percent compared to the previous week while purchase index dropped by 10.9 percent. On the average, the interest rate for a 30-year fixed rate mortgage loan slipped slightly by 0.01 percent.
Nationwide, home prices continue to decline and inventory of homes – both new and existing – has grown considerably. Although the implementation of the $300 billion housing rescue program started last October 1, many analysts are not sure if it would be enough to save the millions of lenders and distressed homeowners who are struggling with bankruptcy and foreclosure.
Even buyers, who would have passed the strict lending guidelines, have decided to step away from the market until such time that they are sure that their money will be safe and that their decision to invest in real estate properties will be a sound one. Some of the buyers are checking out foreclosure homes for sale in order to minimize the risks since these repossessed properties are sold at a relatively-cheaper price.
For now, there is no indication whether the market will soon bottom out and if the government efforts will yield positive results. For certain, it will be a waiting game for everyone.