How will our Colorado mortgages be affected by the October 3, 2008 bailout bill? The ramifications for Denver home loans will not totally be known for months. Our market for home loans in Denver has been weathering the storm while some states, lenders, and homeowners have been in emergency mode and may see more dramatic immediate relief.
Supposedly, the United States government will begin buying undervalued assets, and if things go according to plan, these assets will eventually be sold at a profit. New capital will be pumped into the market, money that will be available for new Denver Colorado home loans with possible lower interest rates.
For now, we expect to see the expansion of mortgage-backed securities that sends a message to the market that the low ebb has already passed and the market can get back on track. By jumpstarting the real estate market, we could be seeing:
- Greater consumer confidence in the financial markets
- Modest interest rates continuing into the future
- Choices for buyers because of large inventories of real estate on the market
- Good prices for homes in the Denver area
- Homebuyers still needing to qualify for Denver Colorado home loans and to have down payments
With the U.S. government intervening, we are also likely to see lenders being pressured to stop foreclosures. Possibly, they will try to use legislation to mandate that lenders absorb losses and work with delinquent homebuyers. More likely, with all of the current publicity, lenders will absorb some loss and will take the initiative to work out better terms for delinquent loans. They could possibly lower payments by extending the number of years of the loan to say 40 years. Maybe they can reduce some of the interest. There are a number of ways to negotiate with homeowners to bring payments to levels that they can afford.
It could take the government time to help lenders and investors move illiquid home loans off of their books. One reason is that the value of the assets cannot be specifically determined. In the private sector, some are only bringing 20 cents on the dollar.
The good news is that over 75 percent of subprime mortgages are currently being paid on time. The Mortgage Bankers Association released figures on subprime mortgages saying that for every 100 subprime mortgages, 76 are on time and 24 are delinquent. If the U.S. government buys the “paper” and can work out deals with some of the 24 to halt foreclosures, then the value of those contracts will certainly be much greater than 20 cents on the dollar. The homeowner enjoys the home and maintains it saving the lender from adding to the overstocked home market. Sounds like a win/win.
For information about sound and creative financing for your Denver Colorado real estate purchase, contact Brad Wyatt of MAC5 Mortgage at (720) 407-6338.
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