The Federal Housing Finance Agency has approved a plan mortgage finance companies have put forward to help thousands of homeowners get a cut from their mortgage balances.
According to MarketWatch, approximately 50,000 homeowners who owe mortgages more than their home's value, or in "underwater" mortgages, will benefit from the plan of Fannie Mae and Freddie Mac. The reprieve, which is expected to be announced in the next few weeks, would forgive principal only. Fannie Mae and Freddie Mac consider this as less expensive compared to other programs to prevent foreclosures.
While this is less than what many housing advocates are hoping for, the program would already be a big step towards helping homeowners cut their debt to a level that would help them keep up with their mortgage payments.
MarketWatch noted that this strategy was previously rejected by prior policy makers on the basis of moral hazards it can inflict because of forgiving underwater mortgages and not others.
Meanwhile, in another mortgage-related news, HousingWire reported that mortgage applications has seen another decline ahead of the spring buying season. Figures from the Mortgage Banker's Association's Weekly Mortgage Applications Survey for the week ending March 18 showed a 3.3 percent fall in mortgage applications compared to the previous week.
Refinance and purchase index dropped last week at 5 percent and 1 percent, respectively, per HousingWire report, with refinance share activity down to 53.9 percent from 55 percent a week earlier of total applications.
Average mortgage rate for a 30-year fixed loan with conforming loan balances of $417,000 or below saw a decline to 3.93 percent from last week's 3.94 percent, while those with jumbo balances of more than $417,000 dropped to 3.85 percent this week from 3,86 percent. Likewise, 15-year fixed mortgage loan interest rate dipped to 3.18 percent from 3.22 percent.
