Nov 26, 2008 7:54 pm US/Pacific
Mortgage Lenders Report Boom After Fed Rate Cut
NEW YORK (CBS) ―
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From left, Treasury Secretary Henry Paulson, Federal Reserve Bank Chairman Ben Bernanke and Federal Deposit Insurance Corporation Chairman Sheila Bair testify before the House Financial Services Committee on Capitol Hill Nov. 18, 2008, in Washington, D.C.
Chip Somodevilla/Getty Images
Wall Street rallied again Wednesday thanks, in part, to a new plan to boost mortgage lending.
With three new mouths to feed after the births of triplets Sophia, Christopher, and Peter, the Rosatos can't wait to refinance their mortgage to save money, reports CBS station WCBS-TV in New York.
"We were in a negative amortization loan, so as the years went by we were upside-down," Christopher Rosato said. "We had to get out of that as soon as possible."
The mortgage lender handling the Rosato's refinancing says business is suddenly booming.
On Tuesday, a new Federal Reserve program drove down the rate on a 30-year fixed mortgage, from an average of 6.8 percent to 5.5 percent.
The lower rate shaves $200 a month off the cost of a $200,000 mortgage.
"(Tuesday's) move had a dramatic effect, and a lot of people who were sitting on the fence want to jump into the game and take advantage of this," mortgage lender Louis Tesoriero said.
Unfortunately, a good number of homeowners and homebuyers tempted by the new low rates are going to find that they don't qualify.
The new Fed program requires applicants to have a verifiable income and manageable debt. Their credit score has to be decent – in the mid-600s or better – and if they're refinancing, they must have equity in their home.
"The loan terms are tougher, but this does help," Michael Darda, of equity research firm MKM Partners, said.
Darda says that lower mortgage rates will boost home-buying a bit, but huge challenges remain.
"The bigger forces are still there: falling net worth, declining jobs, falling income, and a lot of debt," Darda said. "So it's not gonna be a quick turnaround, but this is certainly better than the reverse."
Still, with rates low and prices down, it's becoming quite the buyer's market.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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