Mortgage applications down, home-equity credit delinquencies up

Surveys released today showed that fewer Americans applied for mortgages last week and more were missing payments on their home equity lines of credit.

The Mortgage Bankers Assn. said applications for new home loans fell 8.2% for the week ending last Friday, with a slight increase in interest rates for 30-year fixed mortgages reining in the breakneck refinance market. The refinance share of mortgage activity dropped from 82.9% to 79.8% of total applications, according to the MBA report this morning.

From the report:         

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.07% from 5.03% percent, with points decreasing to 1.16 from 1.24 (including the origination fee) for 80% loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.67% from 4.79% percent, with points decreasing to 1.16 from 1.26 (including the origination fee) for 80% LTV loans.

The average contract interest rate for one-year ARMs decreased to 5.90% from 6.15%, with points decreasing to 0.31 from 0.44 (including the origination fee) for 80% LTV loans.

Also this morning, the American Bankers Assn. said record numbers of borrowers had missed payments on home equity lines of credit during the third quarter.

The trade group's latest report on late payments for consumer loans said delinquencies on car loans that banks made indirectly through auto dealers also were at the highest levels it had ever recorded.

By contrast, consumers were missing fewer payments on credit cards, the ABA said. A quote from the trade group's economist James Chesen:

While some people are relying on credit cards to meet daily expenses like food and gas, many are being careful not to add new debt.

-- E. Scott Reckard

Photo: Lenders and HUD-certified counselors meet with homeowners at a foreclosure prevention counseling fair at Crenshaw Christian Center in Los Angeles on Dec. 6. Credit: David McNew / Getty Images

The high cost of interest-only initial payment loans

Mortgage giant Fannie Mae plans to raise a previous 1.25% fee charged to lenders to 3.25% -- and yes, that is passed on to the consumer -- on some types of mortgages it purchases. Saturday's Wall Street Journal had a short write-up on it.

For instance, for a 30-year fixed-rate mortgage to buy a condominium, allowing for initial payments of interest only and with a 20% down payment, a borrower with a credit score of 690 will pay fees totaling 3.25% of the loan amount for mortgages Fannie purchases after April 1. ...

A Fannie spokesman said the higher fees are targeted at some of the highest-risk loans, such as those allowing deferment of principal payments and those allowing borrowers to draw cash when they refinance.

The National Assn. of Realtors registered its displeasure in a letter to Fannie protesting the "major new costs" on buyers and people seeking to make their loans more affordable through refinancing.

Let's back up the truck here. The 20% down seems very respectable, but why, oh why, are they still offering interest-only "teasers"? What happens when the entire payment kicks in -- particularly if the property has dropped in value since the purchase? I'm not following the logic.

--Lauren Beale

Thoughts? Comments?

Spending habits: Do as I say, not as I do

Crushing mortgage payments, rising foreclosures and living off home equity lines of credit and plastic are all examples of how Americans have let their spending get out of hand, but most bad habits start small. An Associated Press story at latimes.com reports on one effort to start chipping away at this nation's overspending epidemic by forming better habits.

A new site from the National Endowment for Financial Education, a nonprofit that aims to help people learn about handling money, Spendster.org is intended to give people a place where they can admit their poor spending habits as a step toward developing better ones....

Spendster.org offers users a chance to calculate how much they spent on their own junk. But more importantly they can compare how much it would have cost if they put it on a credit card, versus how much they could have earned if the money was invested or put in a savings account.

The video confessions of people who wasted their hard-earned bucks (or ran up credit card balances) on multiple appliances, duplicate household items and unneeded you-name-it were depressing to say the least. It's not a big mindset leap from there to signing up for adjustable rate mortgages that reset into the stratosphere. But beyond a website designed to entertain and educate, perhaps what's happening in housing and the economy today will serve as a real-life experience to educate the next generation about more prudent spending habits. Maybe?

-- Lauren Beale

Your thoughts? Comments?

Credit: Matthew Staver / Bloomberg News