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Rising Foreclosed New Homes Due to Refinancing Difficulty



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By : John Cutts    99 or more times read
The next wave of foreclosed new homes is expected to include creditworthy homeowners who have home equity loans or second mortgages. According to industry experts, the deepening recession has caused many lenders to act abnormally.

They said that many banks refuse to provide refinancing to some creditworthy homeowners because they want borrowers to just pay off their loans and boost their bank balance sheets. This means that many homeowners will not find any relief from foreclosure despite their efforts to save their properties from foreclosures.

Industry experts said that the current trend is a threat to many financially-struggling homeowners. The country's major mortgage lenders, Federal Home Loan Mortgage Corp. and Federal National Mortgage Association have been urging banks to be flexible and support federal programs aimed at restoring and strengthening the housing market.

However, banks believed that if many homeowners will be able to pay up their mortgage loans, they can immediately clean their balance sheets. But industry experts believed otherwise, pointing out that what the banks are doing is a precursor to more foreclosed new homes.

Most often banks provide no reason why refinancing requests were denied. They claimed that each case is treated individually based on factors such as credit history.

Market data showed that about 40 percent of borrowers who were eligible for refinancing were not approved. Industry experts said that banks have money which they could lend to distressed borrowers but they are not responding to pressures from the U.S. Congress.

The House Financial Services Subcommittee has pressured several bank executives to boost and strengthen their compliance with federal programs designed to help financially-struggling homeowners.

Nationwide, thousands of borrowers have financed their properties through loan combinations. Some took out their properties using adjustable-rate mortgages (ARM). They took out second mortgages to use for financing 100 percent of their home values and to avoid paying the mortgage insurance.

ARMs are used by buyers to help them finance their first houses or to help them stay afloat during hard financial times. However, ARMs have already started adjusting to high interest rates. Industry experts said that interest rates could increase from 6 to 10 percent, pushing monthly mortgage payment to the roofs.

Industry experts said that a legal intervention is needed to force banks to listen to troubled borrowers and stave off another wave of foreclosed new homes.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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