Mortgage Predictions For 2011 – Trends To Watch

A group of mortgage professionals recently weighed-in on mortgage trends to watch as 2010 comes to a close. Most agreed that mortgage rates will remain low, home loan processing times will remain long and no-closing-cost refinancing will expand.

A few predictions for 2011

Mortgage rates were expected to rise steadily throughout 2010, due to the Federal Reserve’s buyout of $1.25 trillion mortgage-backed securities. Instead, mortgage rates fell steadily, up through Fall. Recently, the Federal Reserve announced it will purchase $600 billion in Treasury securities continuing through next year, causing mortgage experts to speculate that rates will remain low.

Mortgage processing times will remain long

While rates remain low, the amount of time it takes mortgages to get processed has increased, especially for refinancing. The foreclosure crisis has caused lenders to have huge backlogs of paperwork, and appraisers remain swamped with foreclosure appraisals as well. Some mortgage experts recommend locking in a mortgage rate for up to 75 days prior to closing, as loans are taking 60 days or more to close.

Zero cost refinancing grows

No-closing-cost or zero cost refinancing is a growing temptation for current homeowners. The term zero cost is a misnomer because there are always fees involved with refinancing. What a no-closing-cost refinance means, though, is that the new rate is higher by one quarter of a percentage point or more than it would be with a regular refinance in exchange for not paying out-of-pocket fees. It’s best to comparison shop when looking for a no-closing-cost refinance.

Foreclosure overhang

Another prediction the mortgage experts made was the continuation of a large number of homes in the foreclosure process with owners still living in them, a phenomenon called "foreclosure overhang". Bank of America’s decision to freeze foreclosures this fall due to legal issues could likely lead to foreclosure overhang, with a large number of unsellable homes on the horizon.