Categorized | Finance and Mortgage

New Mortgage Loans Fall As Housing Market Struggles

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Recent reports indicate that the number of new mortgage loans has experienced heavy declines in the past year. The declines can be attributed to a number of factors, though tightening credit standards, weak market demand, and an overall glut of foreclosures are considered the primary factors.

The number of new mortgage loans has declined more than twelve percent in the past year. Declines have been most common in areas that have suffered the most from foreclosures. The majority of those areas have an exponentially higher proportion of subprime mortgages compared to areas that haven’t experienced as sharp of declines in mortgage lending.

The reports also indicated the many homeowners have been unable to take advantage of the record low rates on mortgage loans. Homeowners who are faced with underwater mortgages are not able to refinance their mortgages to take advantage of the low rates.

Some states have been hit harder than others when it comes to the ability to refinance. States such as Florida, Michigan, Nevada, California, and Arizona have experienced unprecedented declines in residential real estate prices. As such, homeowners in the five states have been unable to refinance on their homes.

While changes are in the works to loosen restrictions regarding refinancing eligibility, there has been no indication as to when the loosened restrictions would, if at all, be approved.

Furthermore, new mortgage loans are expected to continue their decline into the future despite record low mortgage rates. Potential first-time homebuyers are shying away from the residential real estate market, as job uncertainty is tremendously affecting their budgeting decisions.

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About Drew Wilson

Drew focuses on the Commercial and Mortgage/Finance categories.

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