Monday, Feb. 1
Written 9 a.m. EST
WHAT'S UP, DOCS: Last week, I wrote a blog post explaining a change in the way mortgage modifications will be done. By June 1, mortgage servicers will have to gather some of your financial documentation before granting a trial modification.
Today we've expanded that blog post into a full-fledged article about the documents needed before a trial modification begins. The second page of the article has a box that describes what documents you'll need for various types of income -- salary and wages, tips, self-employment income, rentals and so on.
RATES: Mortgage rates generally improved Friday afternoon. If your lender wasn't quoting a lower rate, it probably was offering you more bang for the buck on discount points. I doubt this dip will last long because I don't understand why it happened in the first place. If your mortgage broker or loan officer is urging you to lock today, it would be prudent to follow the advice.
CAPTAIN OBVIOUS: The government's efforts to stimulate home sales could create another housing bubble, according to the TARP inspector general.
According to Marketwatch, inspector general Neil Barofsky worries that house prices might be artificially inflated as a result of the combination of two things: First, the Fed's policy of pushing down on interest rates in general and mortgage rates in particular. Second, the first-time homebuyer tax credit.
It's not a secret that these policies are designed to boost house prices. The home mortgage interest deduction exerts upward pressure on house prices, too (and it encourages people to borrow more than they otherwise would borrow). And a lot of cities and towns have zoning laws that "protect" house values, which is another way of saying that they artificially raise prices. In other words, boosting house prices is a venerable tradition among all levels of government, from federal to township. How have those policies turned out in the last couple of years?
Barofsky says we should consider whether the Fed's rate-depressing actions (due to expire in two months) are putting us in danger of another housing bubble that could pop. But the Case-Shiller home price index shows that house prices were still falling toward the end of 2009, albeit at a slower rate than before. How can we have a housing bubble if prices are falling?