The housing and economic stimulus act has created an environment which has resulted in the cheapest, real estate financing rates available in decades. In many areas across the country, prices are now offering bargain-basement prices. This is due in large part to the fact that lenders are permitted to write loan agreements based upon less stringent criteria than in previous years. The result is that there are more deals on the market that can be handled by qualified buyers. The influx of distressed property owners looking for affordable property loans has also created a very desirable market, as has the advent of non-traditional lenders who have entered the market in an effort to compete with the established institutions.
One aspect of the act that is both attractive to borrowers and lenders is the Home Affordable Modification Program (HAMP). The purpose of HAMP is to provide relief to homeowners who have suffered financial setbacks, which would otherwise preclude them from obtaining a loan modification from their lender. The program was implemented in June of 2021 and the entire nation was impacted in some way. Homeowners were able to obtain HAMP loans for a lower interest rate on most new homes, and those who were unable to obtain mortgage financing found that their existing loan could be modified under the terms of the program. As a result, thousands of people were able to keep their homes and the real estate market began to pick up.
Another area which has been greatly impacted by the act is the overall level of lending in the real estate industry. Lenders have been more reluctant to approve loans to buyers in recent months, causing many to foreclose on their homes and companies have been forced to downsize or cut staff. Foreclosures have risen dramatically, with many non-productive assets being sold to cover the mortgage of the foreclosing properties. Private commercial real estate lenders have also been forced to downsize in response to this trend. One of the largest barriers to refinancing efforts has been the difficulty of finding a lender willing to refinance real estate loans for less than they were previously required to.
Private lending institutions, such as commercial banks, were not immune from the housing market downturn. Homeowners refinancing in the last few years have been able to do so through these banks. While the current climate does not appear to be favorable for borrowers, this outlook may change in the near future as the economy begins to rebound. If and when lenders begin to approve these types of home refinance packages, they will be more accepting of make loans available to individuals.
As the foreclosure numbers rise and homeowners find themselves at risk of losing their homes, there are also efforts being made to get creative with the lending qualifications for borrowers. As the housing market and unemployment level rise again in the near future, more creative solutions are being implemented. For instance, real estate agents now are being asked to assist distressed borrowers in locating their perfect home and helping them negotiate a refinance deal. In the past, brokers were only consulted when a home was in danger of foreclosure. With the inclusion of the act in the Fair Housing and Equity Protection Act of 1994, these agents now have a more active role in the transaction process. This gives consumers an . . . . . . opportunity to benefit from lower interest rates and better loan terms by working with an experienced real estate agent who can guide them in the right direction.
Another way that the housing and economic stimulus has affected us is with the lowering of the mortgage rates. For those who own homes, this represents a major benefit and is likely to spur many people to refinance their homes or purchase other property. For those who are not currently homeowners, it will be important to act quickly in order to lock in the lowest rates possible before they fall any further. When refinancing plans become available again, it will be important to consider the pros and cons of each option so that we can determine which is best for our situation. Doing so now, before our options are reduced by higher interest rates, can save thousands of dollars when we finally take possession of our new home.