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As Housing Prices Plunge, Refinancing Gets Harder

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  • As Housing Prices Plunge, Refinancing Gets Harder

    By: Mark Koba, Senior Editor | 13 Feb 2009 | 01:03 PM ET

    With mortgage rates at 25-year lows, refinancing applications have reached record levels in the last two months. But homeowners who bought during the boom years are getting squeezed out of refinancing because the value of their home has plummeted.

    "I tried to refi but they won't give me a new mortgage because I bought at the peak of the market and my house has depreciated," says Connecticut homeowner James McCusker. "I don't have the 20 percent equity in the house I need. When they turned me down, they said to me to qualify for any government-related loan program, I need to lose my job."

    McCusker, a public relations executive, and his wife, a school teacher bought their home in July of 2005 for $462,500 with a 30 year fixed loan at 6.3 percent.

    But today, the home has a value today of $433,000. "We have good jobs, never missed a mortgage payment, "says McCusker. "But I can't get any help. There's something wrong with that."

    Industry experts see McCusker's problem as a continuing sign of the skidding real estate industry.

    Symptom of the Times

    "It's a symptom of the times and it's mushrooming," says Greg McBride, a senior analyst for Bankrate.com, of the difficulty people have refinancing. "It's a bigger problem now than three months ago, and it was growing problem then."

    The problem is particularly acute for people who bought a few years ago, when housing prices were skyrocketing.

    "People could buy a house with no money down," McBride says. "They were borrowing with the equity from home prices. But with foreclosures and a falling economy, home prices fell and the music stopped."


    Also see video of empty streets in one US suburb here...


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