This blog has recently discussed the importance of financial institutions investing in risk management software, especially as consumer confidence is beginning to return. The housing market has also been making a comeback, and more individuals are looking into becoming homeowners.
According to a contribution piece on DailyFinance, as rates on standard 30-year mortgages have increased, adjustable-rate mortgage rates have been staying the same.
“With the ongoing run up in fixed mortgage rates, adjustable-rate mortgages are becoming more popular among homeowners looking to refinance and for home purchasers,” Freddie Mac vice president and chief economist Frank Nothaft told the Washington Post last month. He added that in terms of total dollars, the share of mortgage applications for ARMs has jumped to 17 percent from 13 percent at the beginning of May.
The DailyFinance article advised, though, that the risk with an adjustable-rate mortgage is that an initial low interest rate can change after one year. Borrowers who are not careful can still get themselves into trouble if they do not pay attention to their finances.
Furthermore, the Mortgage Bankers Association announced earlier this week that mortgage applications decreased 4 percent from one week earlier while adjustable-rate mortgage activity rose to its highest level since July 2008.
With the right risk management software, banks can ensure that they are finding qualified borrowers. Even as the housing market continues to recover, and prospective homeowners become more confident, it is still essential that financial institutions lend to responsible parties. While consumers must debate over the type of mortgage and loan that is right for them, banks need to take the same amount of care when it comes to choosing borrowers.
