Mortgage Foreclosure & Refinance Resource

Even as housing prices drop across the country, fewer people appear close to buying a home.

The Mortgage Bankers Association reports that the volume of mortgage applications fell last week to the lowest level in nearly eight years. Additionally, the group says applications are down 61 percent from this year’s peak in February.

The decline in new home construction is a major factor in the drop in activity, the association says. On top of that, fewer people are refinancing existing mortgages.

On Tuesday, the U.S. Department of Commerce said construction of new homes and apartments in July fell to the lowest level in more than 17 years. A the sametime, the fdic today announced plans to help thousands of IndyMac borrowers modify mortgage loans, in some cases at remarkably generous terms. “The regulators operating failed IndyMac Bank said Wednesday they would try to modify about 25,000 troubled mortgages by slashing interest rates to as low as 3% for five years, extending payments over 40 years and in some cases charging interest on only part of the loan balance.”

The New York Times reports the fdic’s modification plan is “a model it hoped other banks and collection companies would adopt to stem a wave of new foreclosures in the nation’s weakened housing market.”

Noting that the program is for borrowers who are behind in their mortgage payments, Calculated Risk observes, “This seems to provide an incentive for IndyMac borrowers to stop making their mortgage payments until they are ’seriously delinquent or in default’. Then the borrower — especially Alt-A borrowers who stated their income originally — would apply for a loan modification based on their actual income. The borrower could then receive an interest rate reduction and principal forbearance.”