Time to Refinance? in Boca Raton, FL

Boca Raton Real Estate

Freddie Mac's third-quarter Refinance Review suggested that it takes less enticing than it did a year ago to compel home owners to refinance. The study showed that properties refinanced during the third quarter of 2002 had experienced a median house-price appreciation of 11 percent since the original loan was made. That figure is down from 18-percent growth for loans refinanced in the third quarter of 2001.

During the past five years, U.S. house prices grew at an average annual rate of 10 percent. Now analysts agree that the big run-up in residential values is waning.

In a cash-out refinancing, setting the home's value determines how much cash the borrower gets. That's an additional risk, says Frank Nothaft, Freddie Mac's chief economist.

When people buy a house, there are three different opinions that must converge as to the value of the home -- the buyer, the seller and the appraiser.

"You have three independent estimates of the value of the home. Now, in a refinancing, you've got one person's opinion. You don't have these two independent corroborative views about the value of the home."

Critics compare some home appraisers to Internet stock analysts; they say both boosted prices far above their true value by offering dubious opinions.

Don't want to pay private mortgage insurance, but you can't get an appraisal that puts you over thatline (equity that's 20 percent of the house's value, usually)? An accommodating Boca Raton Florida appraiser may be just another phone call away.

Combine an easy Boca Raton Florida appraiser with a bad broker, and you've got a toxic brew for an unknowing home owner.

Statistics show that the growth of mortgage fraud mirrored the growth of mortgage originations. Mortgages peaked at nearly $2.5 trillion in 2002, according to the Mortgage Bankers Association of America. Mortgage fraud came in at just above $50 million five years ago; for 2002 it might surpass the $300-million mark, according to the FBI.

Some worry that much of the fraud could be hidden in inflated home values.

"The danger would be realized in the event that unemployment were to start moving higher -- this would expose overvaluation in residential real estate," Lonski said.

"If real estate values fall, refinancings could make matters worse. You'll find yourself running the risk of having an outstanding mortgage that exceeds the market value of your home."
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