A Memorial Video to remember the Life of my Dad "Sonny"

Having that Last cup of coffee with my Dad "Sonny"

RIP 10/27/13

Increased HELOC Problems; More to Come!

Dec 9 2013, 

Mortgage Monitor for October reports that 48 percent of outstanding second lien home equity lines of credit (HELOCs) were originated between 2004 and 2006 and the vast majority have draw periods of 10 years.  Therefore these loans are set to begin amortizing over the next several years and many borrowers may see monthly payments increase. Increases in new problem loans among the HELOCs originated prior to 2004 (that have already begun amortizing) indicate increased risk of more delinquencies ahead.

The aggregate, home equity market is experiencing lower delinquencies, However, among the HELOC population that has already begun amortizing, we are actually seeing an increase in new seriously delinquent loans. As of today, only 14 percent of second lien HELOCs have passed this 10-year mark, leaving a very large segment of the market at risk of payment increases over the coming years. Nearly half of all of these lines of credit were originated between 2004 and 2006, with the oldest set to begin amortizing next year. If this trend toward post-amortizing delinquencies carries over, we could be looking at significant risk to the home equity market over the coming years

In addition to the current risks posed by the home equity market the Monitor focuses on:

• Prepayment activity, mortgage origination's, and property sales
• Home prices and negative equity
• Judicial vs. non-judicial state disparities

The company reports that prepayments dropped again in October to around 4.3 percent of mortgages.  As recently as May of this year prepayments were running near 6.5 percent.  While the rate of repayments continues to drop, the decline slowed with retreating rates in October.

Home sales have also pulled back from recent peaks this past summer but the ratio of distressed sales to equity sales is improving.  Only 14.2 percent of sales in September were owned real estate (REO) or short sales, the lowest percentage since 2007.

Home prices are up about 9% year over year to an average of $232,000 but were up only 0.2 percent month-over-month as seasonal slowing continued.  Nationally prices are about halfway back from the $202,000 low point of January 2012.  Prices peaked in June 2006 at a national average of $270,000

Home price improvement is driving negative equity lower. estimates that about 11.6 percent of loans remain underwater compared to 18.8 percent at the beginning of the year. That negative equity estimates vary widely so it has a adopted a new methodology that accounts for not only the current combined loan-to-value (LTV) ratio of all mortgages but also the impact of distressed sale discounts on loans in serious delinquency or foreclosure.  As the negative equity situation improves, the volume of short sales has dropped from 56 percent of distressed sales in September 2012 to 44 percent this past September.  The discounts offered for short sales are declining as sales volumes decrease.

If you have any questions about Refinancing or maybe your thinking of selling please contact me and I will do my best to provide you a level of service that exceeds your expectation.

Happy Holidays from my Family to Yours

Robert Vaughan

Sr. Loan Advisor

American First Mortgage Company

"Saving the American Dream"

(657) 229-3314