The news isn’t good for U.S. mortgage carriers. The Federal Reserve just completed their annual report based on the U.S. Home Mortgage Disclosure Act. This act, passed in 1975, requires all financial institutions to provide information on home purchases, pre approval, home improvement and refinance apps. In 2004, this report was also modified so that lenders had to report the APR (annual percentage rate) they charged to borrowers with high-cost home loans.

The most recent study was conducted on about 14 million home loans made last year by almost 9,000 lenders, which is about 80% of our U.S. home mortgages. 

• The results of the study showed that the percentage of mortgages with high interest rates rose from 26% in 2005 to 29% in 2006. Studies have shown that this increase can be correlated to the alarming amount of loan payment delinquency/overdue payments. 
• The average rate for home loan denial also rose, by 2%, from 27% in 2005 to 29% in 2006.  A new development has started since 2006, where a considerable amount of loan denial is being made in regards to first-lien loans to second hand buyers/investors. Loans to the second hand buyers/investors is thought to be more of a potential hazard then to those buying for personal home use. 

Loans are generally more difficult to obtain based on the current market regarding the increase or decrease of home prices. Borrower credit is important, but if a person is unable to sell their home, they have more problems paying off their payment (something that has nothing to do with credit). Therefore, investors and second home purchasers are facing more difficulty to obtain loans as the lenders know that the investors are not in this for the long haul (to live in their homes), but to try to make a quick buck by doing quick sales for quick returns. However, if nothing is selling, then the investors/second homers are stuck with their purchases and loan default can be right around the corner.