Despite Low Mortgage Interest Rates, the Market Faces Difficulty

Foreclosed home
Both fixed and adjustable mortgage loan interest rates dropped at least 15 basis points this week, according to rate reports supplied by

During the week ending on Oct. 24, 2013, the 30-year fixed rate mortgage averaged 3.96 percent. This was a decrease from 4.11 percent reported last week. The 30-year rate has not dipped below four percent since the week ending on June 13, 2013.

The second mortgage loan interest rate, the 15-year FRM, decreased from 3.14 percent to 2.98 percent.

Finally, the 5/1 adjustable-rate mortgage dropped from 2.84 percent to 2.68 percent.

Mortgage loan interest rates have improved and lowered due to September’s lackluster employment report, according to Michael Kodsi, CEO of Choice Mortgage Bank.

Last month only added 148,000 jobs, the lowest rate seen since November 2008.

The low employment, coupled with the lagging uncertainty caused by the government shutdown, could create negative housing reports in the coming weeks, Kodsi said. Although he hopes he is wrong, mortgage default rates will likely rise.

The biggest concern from the shutdown is that when people are unemployed or furloughed, they focus mainly on the essentials. These bills include gas, cellphone payments, food and electricity. For many households without a consistent paycheck, the mortgage loan payment comes in second.

Kodsi said this exact trend occurred during the housing meltdown.

“If you don’t have a paycheck coming in, how do you make a mortgage payment?” he questioned.

Despite the lower rates this week, Jorge Newbery, CEO of American Homeowner Preservation, believes the housing market is still struggling.

He said during the summer, the market turned positive after “what had been a tough market for several years.” Unfortunately, this improvement has lessened in the past few months. Properties that would have received multiple offers during the summer are now remaining on the market with no offers.

“It’s something we are used to but it’s certainly a comedown from the highs of a few months ago,” Newbery said.

Impoverished neighborhoods in Chicago that dealt heavily with short-sales, foreclosures and underwater properties are still struggling. The national upswing this past spring and summer was not seen in these areas. Newbery’s company has loans on homes below $50,000 and $75,000 price ranges. The company even bought loans that have balances of $300,000 that are secured by homes valued at a dismal $10,000.

This occurred because of fraud or over-optimistic mortgage loan brokers. Newbery said the shady lending practices which occurred in the past remain today.

“There are a lot of challenges in the immediate and foreseeable future,” he said. “To say the housing crisis is over or the market is returning to normalcy, I think we are far from that.”