According to an article in the Dallas Morning News President Barack Obama urged families to take advantage of low mortgage rates by refinancing their home loans.
The article quoted the President:
“The main message we want to send today is there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates,” Obama said in a photo opportunity in the Roosevelt Room. “That is money in their pocket.”
But isn’t it refinancing that has put many American homeowners into foreclosure? We don’t just refinance and get a lower rate, many of us refinance and treat our homes like an ATM. We take out equity and waste it on buying consumer goods we really don’t need. Because of refinancing for the wrong reasons foreclosures and mortgage loan defaults are in the millions.
Nearly 5.4 million American homeowners were facing foreclosure or delinquent on paying their mortgage during the last quarter of 2008. That’s 12 percent of all homeowners who have a mortgage. And nearly 50 percent of homeowners with an adjustable rate subprime mortgage were facing foreclosure or were delinquent on their mortgage during the last quarter of 2008.
We need to address this issue. We need to focus our resources and energy on saving homeowners who are facing foreclosure; the financial health of our country depends on it. If you are considering taking the President’s advice to refinance your mortgage, tread cautiously and make sure that you do not deplete your equity or end up putting yourself into a loan you cannot afford.