The past year has been very interesting for just about everyone involved in the real estate industry. Yes, it is well known that sales and prices are down but foreclosures have hit record marks as well, resulting from a number of people who borrowed “exotic” mortgages during the boom from 2000 to 2005.

Since foreclosure news has begun to circulate nationally, more and more people are becoming aware of the potential disaster once their risky adjustable rate or interest only mortgage changes and demands monthly payments that were once half as expensive.

This awareness has resulted in many people taking action to prevent foreclosure, as explained in the article, “Mortgage Rate Decreases Spurring a Mini-Boom in Refinancing” written by Kenneth R. Harney on November 20, 2006 and published in Realty Times.

“It doesn't qualify as a boom quite yet, but it's shaping up to be at least a mini-boom: American homeowners applied to refinance their existing mortgages last week at a pace faster than at any time since February of 2005.”

The major reason for this activity stems from interest rates on 30-year fixed mortgages dropping to a 10-month low of 6.15 percent. Economists also expect refinancing to grow as mortgage rates are expected to continue to fall in the coming months.  

“One top Wall Street economist, James Glassman of JPMorgan Chase, says he would not be surprised to see 30-year rates slip as low as 5.75 percent in the near future -- especially if crude oil prices continue to decline and the rate of inflation as measured by the Consumer Price Index remains low.”

This is remarkable considering that earlier this year the Federal Reserve capped interest rates at 6.88 percent and the prospective was to shoot over 7.0 percent by the end of July. Now we are talking about rates breaking into the 5 percent barrier.

This is also important news for the mortgage industry considering the most recent status of the housing market. Although buyers are beginning to become more active, mortgage originations are down. This refinancing boom is greatly helping the industry sustain this lackluster market.

“Roughly one of every two new mortgage applications last week was to refinance an existing first mortgage, according to the Mortgage Bankers Association of America. Many of those refinance applicants are homeowners who want to bail out of payment-option and interest-only loans that face major rate ‘resets’ upward in the months immediately ahead.”

“Freddie Mac deputy chief economist Amy Crews Cutts estimated that about $500 billion worth of interest-only and payment-option mortgages face their first resets this year, and another $600-plus billion will reset during 2007.”

As previously mentioned, when these mortgages “reset” the new monthly payment is often 100 percent more than the original payment. This will continue to support the mortgage industry as refinancing will become imperative for those holding these ticking time bomb mortgages.

These low interest rates may be interpreted as their last chance to avoid the inevitable; foreclosure.