A Difficult Economy Discourages New Borrowers

First and foremost, the skepticism stems from the fact that mortgage rates are already at record lows. While this has encouraged some homeowners to pursue mortgage modifications such as refinancing, it has done little to boost new home sales thus far.

Namely, this is because credit standards are still extremely tight, making it difficult for potential borrowers to get approval for new loans. Also, consumers are not exceptionally interested at present in acquiring new mortgages or loans.

Experts believe that, in the long run, lower rates will do little to boost actual mortgage sales. The government cannot force banks to approve loans they are not comfortable making, nor can they make consumers pursue loans they do not wish to acquire. In an economy where so many individuals are struggling with unemployment, salary cuts, and credit card debt, it is difficult to make a mortgage sound appealing.

Mortgage Refinancing Not Available to those Most in Need

While lower rates may not entice new home buyers, they will bring in those hoping to refinance an existing mortgage. The Congressional Budget Office currently estimates that for every 1,000 homeowners who refinance, 38 fewer will default on their payments.

Yet, even this option is not available to those who need it most. Mortgage refinancing is only possible for homeowners with clear credit ratings and steady income, which leaves the 22 percent who are currently underwater with their mortgage payments, or those suffering from unemployment, out of luck.

Unfortunately, about a quarter of homeowners will not even be able to take advantage of the Federal Reserve’s new initiative. Experts hypothesize that of those who could possibly benefit, most have probably already pursued refinancing with the existing low rates.