How does the recent rise in Mortgage Rates Affect Selling Prices?

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Bloomberg.com/Bankrate.com are reporting the latest average for 30-year fixed at 5.74, a whopping nearly 20 basis point increase just today (Wednesday 6/10).

I locked in last week just after the original Black Wednesday in May. I’m happy with the rate and payment.

Now my concern turns to the house prices. I’ve read that in this kind of market, if mortgage rates go up higher in the short term, prices will have to come down. Is this true? And if so, how does this affect the appraised value of the home? The reason I’m asking is that I have an approved VA loan and they are required to appraise the house and so the loan funds are limited to the appraised value. There’s a contingency in my contract that allows me to recover everything deposited should the value come in lower. If this happens, is it common for the buyer (if its a builder) to come down to the appraised value or for the seller to exercise their right to walk away and recover the deposited funds?

I live in Texas and have recently been informed my property tax will jump to approximately $ 20,000 due to 5 years of omitted property! The appraisal district has only been assessing the $ 17,000 land value of my property without including the $ 116,000 home sitting on it! I recently refinanced and I think it must have somehow alerted them to this omission.

Thing is, I’ve had to pay all kinds of fees for title insurance, tax certificates, escrow fees and so on… but never, in my 7 years of ownership, have I been alerted by Well’s Fargo concerning ANY tax discrepancies. I have a VA loan guaranty. Do you think they’ll be suspicious of Well’s Fargo’s risky practices, because my original and refinanced DEED doesn’t even list the correct legal description of my property!

Well’s Fargo insisted on an escrow account, which will be monumentally deficient in funds. Their terms state that I must pay the difference within 12 months, which would send me into bankruptcy and foreclosure. I have had a perfect payment record these 7 years and my credit is very good, though my credit cards are maxed out. My VA loan guaranty is for $ 35,000 and I am concerned Well’s Fargo might just cut their losses and get their money back through foreclosure. Do you think they would be compelled at all to work something out with me? I’m hoping they will work the taxes into my mortgage through a loan mod, but I’d love to maintain my current 4.75% interest rate if possible. Am I asking too much?

2 Comments
  1. Reply
    clay
    January 24, 2011 at 8:05 pm

    This is the reason why the bailout won’t work. You are right about the housing prices dropping. Any rise in additional expense of purchasing a home will hinder buyers from entering the market. The sale price of homes will fall to adjust to the higher expense. With the lower sale price, appraisers will need to use the lower prices to compare value of new sales. Thus reducing the number of new sales. Then the banks will suffer again and guess what ? We will bail them out again to restart the cycle.
    If the value comes in under the sale price you will need to renegotiate the contract.

  2. Reply
    godged
    January 24, 2011 at 8:54 pm

    Yes, you are asking too much. Obviously, there was a discrepancy at some point, which has now been disclosed. Highly unlikely that it is “risky practices” on Wells Fargo’s part, mistakes happen. Perhaps your property has two tax lots and you have only been taxed on one until this point, but who knows? You might bark up the tree of title insurance and such, but I doubt this was a title discrepancy, it is not an issue of clouded title, it is the amount that is escrowed for your taxes, which is not sufficient. When you took out the mortgage, I am confident you signed documents that stated that you would work with the bank if errors were discovered on anything, and guess what, here you are.

    I don’t know how you think you could “work this out” since you automatically shift into this deficiency would send you into bankruptcy and foreclosure. Do you want them to eat this amount every year? If not, what do you propose? There would have to be some repayment plan in place, but apparently you are not in a position to do this.

    I suggest you engage in a conversation with them ASAP and try to come to some amicable solution.

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