5 Hot Year-End Home Mortgage Trends

Mortgage rates will remain low, getting a home loan will continue to take a long time and refinancers will be tempted by zero-closing cost mortgages.

When mortgage professionals were asked about where the housing market is headed as 2012 comes to a close, they made the following predictions:

Mortgage rates have dipped to modern record lows this fall. In the spring, economists had been warning that rates would be rising by now and the consensus was that rates would rise steadily through the end of this year. Instead, mortgage rates fell steadily through the summer and into the fall. Now, economists speculate the Fed might start buying Treasury securities to drive long-term interest rates even lower. The speculation seems to have put a cap on mortgage rates. The prediction now is that the rates will continue to be low for a long period ahead.

Although some of the nation’s biggest mortgage servicers have suspended foreclosure actions in states where courts oversee foreclosures due to flawed documents, mortgage lenders now say the issue would never have come to light if people hadn't signed foreclosure papers where the numbers were wrong. Some observers wondering about the long-term effects of so many unsellable houses and whether or not the legal paralysis will allow borrowers to remain in their foreclosed homes are now predicting that people will continue to sit and not pay and that there will be a huge foreclosure overhang for a while to come.

The next issue is that with rates at record lows, borrower frustration is at record highs because it takes so long to get a home loan, especially a refinance. Professional loan consultants are now saying people need to realize that if they have home equity lines of credit, that the subordination process can take up to 30 days or longer. The solution many consultants now suggest is to try to lock in a new loan rate for 75 days because the lenders are having trouble even trying to close the loans in 65 days.

Because mortgage rates have fallen so much since last year a lot of homeowners have applied for zero-cost refinances where the borrower accepts a higher rate in exchange for not having to pay fees out of pocket. This means the final rate might be a quarter of a percentage point or more than the rate given to a borrower who pays the fees out of pocket and the only way to know is to ask for a no-closing-cost mortgage rate so borrowers can comparison shop the same fees on several loans. The experts predict the no-cost mortgages are here to stay and will likely remain legal for several years.

When it comes to jumbo loans over $729,000, the rates are attractive at less than three-quarters of a percentage point higher than the rates on conforming 30-year fixed loans. The industry predicts that the rates on jumbo loans will continue to be higher because they pose more risk to the lenders, but that they will also likely stay relatively low for another year at the least.