Posted by: brad miller in Sub Prime Lending, Short Sale, Refinance, Recession, Real Estate Investment, Real Estate Agents, Pre Foreclosure, Over Leveraged, Over Financed, Mortgage, Market Prediction, Market Bubble, Legislation, Investment, Foreclosure, Financing, Economy, Credit Report, Credit Cards, Bankruptcy, Bank Owned, ARMs on
Sep 23, 2008
For a while now, many can spectulate the trouble started at the tail end of 2006 with the mortgage industry busy, the American economy has been struggling, facing uncertain times. Many understand the historic significance of last week but the implications of a federal bailout has yet to hit home. With the annoucement that the Federal Reserve will aid the ailing AIG with an $85 billion rescue package, the details seem murkey as more politicians throw in his or her two cents of how this bailout will work and impact the economy. While the bailout does not favor AIG, the company must hand over 80 percent control of the organization's future business dealings, this new bailout and the status of future bailouts remains in the balance and hands of the federal government who stepped into save the mortgage giants Fannie Mae and Freddie Mac not too long ago with a $100 billion package. Where this differs and many fail to see a need to save AIG is that Fannie and Freddie were already government controlled and sponsored by federal dollars. Why should the federal government step in and save a stockholder owned company? What I am trying to say is that this bailout of finance giants has been a popular trend, starting with a $30 billion loan to Bear Stearns in February. It is a trend we will see more of and possibly a part of the Federal Reserve's strategy to save the American economy. I believe many who are struggling to make ends meet, living pay check to pay check, the working class and even the upper class, when push comes to shove and with a cold winter on the way, wish that the Federal Reserve would give the American people a loan. That $300 incentive check just did not cut it.
While AIG must pay the Federal government back or risk losing control of its interests, many are concerned with the level of government involvement and bascially, the bottom line, who really will be paying for the bailouts? Is Washington really to blame for this mess? What about corporate accountability and the management of these organizations? Something is rotten in Denmark as Shakespeare wrote in Hamlet. Really it does not add up. It is cause to worry of how this can be avoided in the future but also how this will impact the American people over the years to come. Many will argue that this has been a long time coming that part of the issue has been a faillure to tighten lending practices and that the subprime market has lead to the downfall of the whole market. Truly companies like Countrywide should have known better instead of living high on the hog. We could have avoided a lot of trouble today with bad loans.
So should the federal government step in and save companies riddled by bad behavior in the market place? This whole crisis begins and ends with the practice of predatory lending and we've known it since before the mortgage buble burst. As said above, not only Countrywide but other banks allowed their lending practices to be too flexible allowing many under qualified borrowers to purchase items like homes and cars. Many brokers pushed such products on people who otherwise should not have been buying in the first place. Many did not look at the full picture and mainly the issue of repayment. Now the market is suffering due to underperforming loans or bad loans. Still the bank is at fault, they should have never allowed such practices to continue but they were leveraging on the risk involved as long as the portfolio was performing well, the bank was making money on subprime products. Now the current situation prevents this demographic of people with blemished credit from establishing any credit and only the prime customers (A & B paper) will prevail. Many will have to learn to live without or forget about keeping up with the Jones because there will just not be any loans out there for these customers. It is unfortnate because this takes aways from sales people's commission salaries and many people of these professional will be out of work. Truly this is why so many people have never believed in the concept of credit in the first place. It creates a vicious cycle.
In a world where mortgage rates fluctuate from hour to hour, the economy is completely tanking and the average American is about as likely to be able to afford a loan as to be hit by a meteor. Homeowners and home seekers can breathe a sigh of relief, for despite our great nation's financial downturn, it is possible to buy or sell a home.
Over the past five weeks, mortgage rates have dropped about half a percentage point, according to a survey by mortgage research firm HSH associates - this comes after a May 23 confirmation that the average rate on a 30 year fixed-rate loan was 6.02 percent, a figure that jumped to 6.55 last week, while the bearer of an average jumbo loan suffered a crushing 7.12 percent rate. The typical 5/1 adjustable rate mortgage (ARM), a mixture of conforming and jumbo loans - also happened to jump half a percentage point.
Being presented with enough facts and figures to make even the savviest financial analyst feel a bit panicky is all well and good, but what does all of this stomach-churning monetary mumbo-jumbo actually mean?
Despite the tangled web of effects, the cause is fairly simple: our fear of inflation is driving the American rate increases. While we are not technically in a recession (read: yeah, we're kind of in a recession, even though Dubya might not want to admit it) due to the shred of life to which our economy is tenuously clinging, panic is still widespread. And to make matters worse, the Federal Reserve announced it would no longer slash interest rates - in fact, it may start raising them, due to the abundant fear of inflation. Fighting inflation with the threat of inflation? With that axe swinging over our fragile heads, what options are Americans left with?
Posted by: brad miller in Refinance, Credit Report on
Jun 25, 2008
Not only can your credit history be found in your report, but it also contains personal information that should remain confidential, like your SSN, full name, current address and tenure, and past addresses.
A credit report's main purpose is to list all of the financial activity for any one person, encompassing all or most of their lives. Any financial relationships, be it a credit card, mortgage on a house, HELOC, student loans, and car notes. It may even list any layaway accounts that are open.
For each of the credit accounts, the credit report also details information about outstanding balances and the high-water marks of previous balances. Payment history, which may be the most telling piece of information, is also provided to those organizations that are receiving this report. Those with exemplary credit payment history will be acknowledged in the report, as well as any blemishes like late payments and the circumstances pertaining to late payments. If the credit account is either current or behind schedule, the credit report will reflect its current status.
Posted by: brad miller in Sub Prime Lending, Refinance, Recession, Private Lender, Mortgage, Loan To Value, Financing, Economy, Credit Report, Credit Cards, ARMs on
Jun 13, 2008
Time is of the essence for those of you that have adjustable-rate mortgages (ARM)! The housing has taken a big hit in the aftermath of the mortgage crisis, for both home sellers and buyers. Lenders are being much more astringent in their lending practices, and some are even going out of business. All of this leads to a tight credit market.
For those that negotiated an ARM, the mortgage knife cuts in two ways: home values are plummeting while mortgage payments are jumping up. This could result in default when payments exceed the owner's ability to pay, but then the resale price is not sufficient to cover the original mortgage to begin with. So, that's how we got to where we are now.
Is there a way out of this mess? The easy answer is, maybe.
The current credit market is by no means as favorable as it was just a few years ago. Lenders were much more prone to making high-risk loans, which endangered not only their business but the borrowers as well. In those boom times, teaser rates were the hook used to entice borrowers into mortgages that appeared to be good in the short term. This was all put in the positive light of home values, which were believed to keep rising. Borrowers were betting on an uncertain future that seemed to be bright. Now that future is here, and it is proving to be more difficult than the borrowers or lenders could have ever imagined. So now those same borrowers are seeking ways to alleviate the mortgage crunch, but are finding few options. What they need to understand is that through some patience, determination, and the ability to reach out to those that can help.
Posted by: brad miller in Mortgage, Loan To Value on
Jun 13, 2008
Most people have heard of the Eight Wonders of the World: The Taj Mahal, Chichen Itza, Petra. All of these, besides being famous historical and archeological sites, were once prime real estate. What is also a wonder, in modern times, is the fluctuation of mortgage rates. Much like the history detectives that excavate and analyze, I will attempt to shed light on the long-held mysteries of mortgages. What I have found is a complex cavern of credit availability, inflation, Federal Reserve policy, and even consumer-driven influences.
Because of the many factors that play into mortgage rates, we first have to acknowledge that the consumer and his/her manipulation of these factors will ultimately determine the end result. One example that affects the credit availability is the flow of deposits into the bank. As bank customers make deposits and contribute to the various savings instruments, banks then have more capital with which to lend and invest in future gains. The influx of capital then acts on interest rates by generally making the cost of borrowing, lower. This is reflected in lower interest rates. Same goes for a transaction in the other direction: if you borrow money or charge items on a credit card, the interest rate will raise as a result of the lowered pot of available credit.
On a grander scale, the forces that make interest rates increase are demand-driven. Perhaps counter-intuitively, more credit is demanded in boom times, and less is demanded in slower economic time. Each one of these situations affects the interest rates for capital. When credit reaches an unbalanced state, then we witness the effects of inflation. Inflation is the result of counter-measures taken by banks to make more money from borrowed funds in an attempt to offset any losses or decreased revenue. Inflation is then tackled, in many instances by government agencies.
The Federal Reserve has a big tool box, but the one that gets the most coverage in the media is the adjustment of the Federal Reserve's Federal Funds Rate, or Fed Rate. While the Fed Rate isn't necessarily adjusted with mortgage rates in mind, it indirectly determines the rates available for potential home buyers. Likewise, its effects can be widespread and diverse; there is no one way to determine if mortgage rates are better off when the Fed Rate is stable. To show the indirect effects, the Fed Rate is the cost of borrowing money that one bank charges another bank for investments and credit. If the Fed Rate increases, the bank doing the borrowing is being charged more than usual for borrowed funds. It would then increase its consumer interest rates to make up the difference.
Posted by: brad miller in Refinance, Mortgage on
Jun 04, 2008
To answer this buzz question, there are possibilities for you to consider. As with any financial choice, you want to weigh the positive and negative aspects of each option and choose based upon your financial goals and credit worthiness, and each of the plans is listed below with its upsides and downsides. They appear in random order, not as a ranking
First, there is the 100% One Loan, the financing of 100% of the value of the loan, all under one set of terms. As you read on, you will see other options that aren't structured in this simple way.
Those of you that have good credit, often referred to as conforming borrowers, will reap the reward of receiving an interest rate comparable to a traditional mortgage, but sub-prime borrowers will not be so lucky. Also, its simple structure is free from terms not seen in other mortgages, but the modified interest rate acts as the counterbalance.
Because it allows the purchaser to obtain a property without any personal investment, the risk is then passed on to the buyer in the form of a higher interest rate. So, you get to own a house before your savings allow you to, but you end up making a larger portion of the payments to interest instead of equity. Even though conforming borrowers do get a better rate than sub-prime, they still have to contend with mortgage insurance, which can range from .55% to 1.94% of the loan amount. Luckily, this mortgage insurance can be repealed after 20% equity is established. Lastly, when it comes to closing costs, conforming borrowers can expect the seller to cover up to 3% of the purchase price, while sub-prime will receive a more generous package of up to 6%.
Posted by: brad miller in Refinance on
May 30, 2008
Refinancing is a means to save money and takes advantage of the low interest rates. Specifically, this is when you take out a new mortgage, and use the money to close out or pay off a current mortgage. If you refinance with a lower interest rate you'll reduce your monthly mortgage payment even if your new mortgage is for the same amount as your current mortgage. But before you take that big step, make sure you arm yourself and gather as much information concerning all aspects of the refinance and do it quickly.
With the interest rates so sensitive and volatile (they go up and down very easily), you must move quickly on locking into a low one with little up front costs. But you won't be the only interested party moving on these rates! So being informed on what is needed before hand can help facilitate the process for your application instead of having incomplete information that could cause your application to sit on some lenders desk.
Besides tapping into a rate while it is low, you also need to know that each time you apply for credit, your overall score is affected and you take a chance that it will drop. On top of the fact that Fannie Mae, one of the largest buyers on the secondary market of conventional mortgages, has placed burdensome high rates on loans to those borrowers with fair or less scores. Years ago, investors that were in the middle of a frenzy market, relaxed their guidelines which put these loans into high risk. Not anymore! Today, only those with exceptional credit scores, have access to good interest rates as well as to loans with reduced documentation, privileges that used to be available to almost everyone in the past.
