Homeowners Rush To Capitalize On Low Rates

Borrowers Scramble To Refinance As Interest Rates Hit Level In Over 50 Years

(CBS/AP)  Homeowners around the United States are scrambling to refinance their mortgages at the lowest rates since the early 1960s as the economy staggers through what's likely to be the worst recession in decades.

Mortgage brokers are already reporting a surge of calls from borrowers trying to take advantage of the Federal Reserve's extraordinary actions this week.

"The phones were ringing off the hook," Will Mullinix, a North Carolina mortgage broker, told CBS News Radio.

But amid such low interest rates, analysts say buying and refinancing long-term will depend on individual credit and employment, reports CBS News correspondent Steve Kathan.

Meanwhile, President-elect Barack Obama is laying the groundwork for a giant economic stimulus package, worth possibly $850 billion over two years, which Democratic congressional leaders say could be passed within two weeks of Obama taking office.

The latest jobs data from the government showed that new claims for unemployment benefits dropped last week but remain near a 26-year high. The Labor Department on Thursday said its tally of initial jobless benefit claims fell to a seasonally adjusted 554,000 from an upwardly revised figure of 575,000 the previous week. The new tally was slightly below economists' expectations of 558,000 claims.

Another slight improvement was seen in the number of people who continue to receive jobless benefits, which declined to 4.38 million from 4.43 million the previous week. Economists expected a slight increase to 4.45 million.

Last week, the government said claims jumped by almost 50,000 to 573,000, the highest level since 1982, though the labor force has grown by about half since then.

The Federal Reserve, aiming to free up lending and jolt the economy back to life, on Tuesday cut the federal funds rate from 1 percent to a target range of zero to 0.25 percent and pledged to keep funneling money into the market for mortgage investments.

On Wednesday, some mortgage brokers were quoting mortgage rates of close to 4.5 percent for people with strong credit and hefty down payments.

(Bankrate.com)

"This is beautiful, oh my gosh!" said Patti Mazzara, a mortgage broker in the Minneapolis suburb of Edina, who was surprised when she looked up rates and found them well below 5 percent, down at least three-quarters of a percentage point from earlier in the week. "This is a whole new game now. Hopefully it's going to give people some relief."

The national average rate on 30-year, fixed mortgages was 5.06 percent on Wednesday, according to financial publisher HSH Associates - the lowest since the 1960s and down from 5.3 percent Tuesday.

It was the best news in months for anyone looking to lock in a 30-year, fixed-rate mortgage. But it was not expected to be a cure-all, and borrowers already in danger of foreclosure probably won't be able to take advantage.

"It's a call to action for homeowners looking to get out of adjustable-rate mortgages," said Greg McBride, senior financial analyst at Bankrate.com. "Unfortunately, it's not an equal-opportunity party."

Analysts say the Fed's moves to buy up mortgage debt are designed to reduce the unusually large difference, or spread, between mortgage rates and yields on government debt.

In recent years, there has been about a 1.8 percentage point difference between the yield on a 10-year Treasury note and 30-year mortgage rates, but gap currently hovers around 3 percentage points.

Falling interest rates mean Americans could suddenly find extra dollars in their pockets at a time when consumers have sharply cut back on spending amid rising unemployment and declining household wealth. But many experts believe that the interest rate cuts alone won't be enough to jump-start the economy.

"It's a tall order to get (people) to go out and spend again," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank. "That's why you also need a stimulus."

Later in the morning, the New York-based Conference Board's index of leading economic indicators is expected to fall 0.5 percent, according to the consensus estimate of economists surveyed by Thomson Reuters. The index posted a 0.8 percent decline in October.

The index is designed to forecast economic activity in the next three to six months based on 10 economic components, including stock prices, building permits and initial claims for unemployment benefits. And Freddie Mac, the mortgage company, is also scheduled to release its weekly survey of mortgage rates Thursday.

Also Thursday, President-elect Barack Obama is set to name a veteran of the Securities and Exchange Commission to lead the agency as it faces growing criticism for its failure to protect investors and detect trouble on Wall Street.

Mary Schapiro, who currently heads a nongovernment regulatory group for securities firms, is also a former head of the Commodity Futures Trading Commission and former member of the SEC. She has been appointed to government posts by two Republican presidents and one Democratic chief executive.

[cricketbeers]

The very same people that are in default now, or will soon be are those people that cannot take advantage of these low rates. The interest rate drop will not help those that need it most. Their credit is already shot and likely they''ll lose their home anyway.

Again -- the rich get richer and the poor lose everything.

[nearl4511]

So,the income from this move for lenders is likely to go down.

This is nota good move. Gotta startabandoning these variable rate mortgages. Keep the fixed mortgages for those has have noproblem paying them. There is no right to re-negotiate a contract.

[whitemale08]

Suckers!

These people filing for ''loan modifications'' is not going to work because you will still lose your job and hyper-inflation is right around the corner which will crowd out whatever you expect to save with a new mortgage.

''Loan modifications'' are nothing more then a Dietech commercial so banks can suck more money out of the suckers.

PASS LAROUCHE''S HPBA BILL NOW

IT FREEZE''S HOME FORECLOSURES UNTIL WE SOLVE THIS CRISIS!!!!