Home-loan demand soars

U.S. mortgage applications skyrocketed during the first week of 2007 as interest rates fell for the first time in five weeks, lending support to the view that the housing market is stabilizing, an industry trade group said Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, jumped 16.6 percent to 671.1 for the week ended Jan. 5.

However, the monthly average shows a decline in the volume of applications for home loans, with the four-week moving average down 2 percent.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.13 percent, down 0.09 percentage point from the previous week. Interest rates were above year-ago levels of 6.08 percent.

The MBA's seasonally adjusted purchase index, widely considered a timely gauge of U.S. home sales, soared 16.2 percent to 472.8, its highest since the week ended Jan. 20, 2006 when it reached 473.7. The index was also above its year-ago level of 457.4.

The group's seasonally adjusted index of refinancing applications surged 17.3 percent to 1,923.8. A year earlier the index stood at 1,497.5.

The refinance share of applications increased to 48.4 percent from 48.1 the previous week.

Fixed 15-year mortgage rates averaged 5.85 percent, down from 5.93 percent. Rates on one-year adjustable-rate mortgages (ARMs) decreased to 5.79 percent from 5.84 percent.

The ARM share of activity decreased to 20.1 percent from 20.4 percent the previous week, its lowest since July 2003.

The MBA's survey covers about 50 percent of all U.S. retail residential loans. Respondents include mortgage banks, commercial banks and thrifts.

Valuable Information About Liquidation

Liquidation is the process of taking a business real assets and turning them into cash, either to pay off debt or to reap a personal profit. Liquidation may be done either voluntarily by a company or individual, or in response to a declaration of bankruptcy as a way of repaying a portion of debtors.

Compulsory liquidation is ordered by a court, and the laws vary in different countries. Usually a court-appointed receiver takes over to analyze the company s assets and determine the best way to handle them. Originally, recovered cash from a compulsory liquidation was distributed evenly amongst debtors. Now certain debtors may take precedence over others, depending on the terms of the loans.

Voluntary liquidation may be done for a number of reasons. Some companies elect to undergo liquidation while their assets still outweigh their liabilities, if they believe their business will continue to degrade. By selling off assets early, these corporations may pay off debtors and still give a final dividend to shareholders.

A corporation with liabilities outweighing assets may also undergo voluntary liquidation, expecting a compulsory liquidation should they fail to pay off a significant portion of their debt. This type of voluntary liquidation is considered an appropriate response to an insolvent situation.