Posted by: Investors Lounge Online in Sub Prime Lending, Refinance, Recession, Real Estate Investment, Real Estate Agents, Pre Foreclosure, Mortgage, Market Prediction, Market Bubble, Loan To Value, Legislation, Investment, Foreclosure, Financing, Equity, Economy, Credit Report, Credit Cards, Commercial Real Estate, Bankruptcy, Bank Owned, ARMs, Appreciation on
Sep 28, 2008
This current talk of financial bailout suggests that as a result mortgage rates will fall allowing a surge in home buying especially for first time buyers. Still one must wonder how long this will last but also what are the long-term impacts for the housing market? Right now it feels like the lending industry is distressed but this may not be true for very long. The banks at risk of failing just need to time to recover and it will actually be consumer confidence that drive the economy back to being fruitful again.
There just seems to be a lot flux in the market, organizations don't know if they are coming or going. This is a period of acquisition and consolidation. Lehman Brother's is on the auction block, AIG's failure has brought the issue of bailout into the limelight and Bank of America, of course, will remain standing, buying up new pieces for their vast umbrella like Merrill Lynch. This week has been historic and shocking for the experts even to say, they don't know what should happen. That's tough. While so many people grasp this concept, many are putting their ducks in row and wonder if this is a right time to even think about buying a home or new car. I believe people are hesitant this week but this will change once there is direction and leadership toward resolution. This is what some experts have to say about the future of home buying:
How does the latest fallout from Wall Street influence mortgage lending rates? Well, let's take a look. We can only hope. In the interim rates will more than likely go down because there is a lot shuffling going as the dust settles and investors look for safety nets in this uncertain market. Upon many experts advise, this is a time to put our money in real estate investment or income property. As of last week the 10-year notes went down which means that the yield also decrease but this makes for new opportunities. Experts expect mortgage rates to follow this trend because historically they usually follow suit. Expect rates to drop further as more news brakes. Just within the last week Bankrate.com commented that the 30-year fixed rate was 5.78% down from 6.08% of the previous week. Just to compare, this rate was 6.5% in August.
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.
Posted by: John Burrows in Sub Prime Lending, Refinance, Recession, Real Estate Investment, Pre Foreclosure, Over Leveraged, Over Financed, Mortgage, Market Prediction, Market Bubble, Loan To Value, Investment, Foreclosure, Financing, Equity, Economy, Bank Owned on
Aug 13, 2008
The so-called days of the mortgage boom are over causing a certain amount if disbelief among industry professionals. Like a bad hangover from Saturday night wild party, those who gained from historic low interest rates and flexible lending products that spawned the real estate boom at the turn of the millennium, are now slowly waking to reality. The once profitable sub-prime market is now close to extinction as many institutions known as great powerhouses are no longer in the business to originate loans. While Wall Street may have had a say in rating these companies poorly, the ones who catered to a specific clientele should have seen a shift coming especially when the funding is no longer available. 
So what is the big deal anyway? All this hoopla has many asking, what is a subprime loan anyway? How does this influence the mortgage industry? So okay, a subprime mortgage is a real estate loan given to a consumer with less than perfect credit and little or no down payment available. One must keep in mind the majority of loans in a financial institution's portfolio does not consist of these types of loans but during the mortgage boom, many consumers took out these types of loans as a means of affording the American Dream of homeownership. These loans broke down the barriers to home ownership because of their flexible lending parameters. What this has now lead to be a marketplace upside down in loans not considered "A" paper but B, C, D and F translating into a high-risk venture? As home values have risen so has the risky nature of these loans still being unpaid or falling behind.
So how did the bubble burst so badly, one is also wondering? As subprime became a more popular loan product, so did the practice of selling it to the consumer become more flexible. More and more lenders approved borrowers with not only less than perfect credit (small blemishes) but also those with poor track records including larger debit issues like previous foreclosure and automobile repossessions. What further compounded the issue is the lenders sales device of enticing the poor credit customer by offering homeownership programs with minimum documentation needed known as "stated-income" or "no doc" loans.
News flash for all real estate investors looking for the ultimate bargain! Fannie Mae, the nation's largest home mortgage lender, is making it easier to take advantage of "short sales" on houses in risk of foreclosure or already in the proceedings of foreclosure. 
For those not familiar with "short sales", let me just say it has nothing to do with a drop in business. "Short" actually refers to the dollar amount at which a property is for sale is less than, or short of the actual value of the property or the outstanding debt on the property. In essence, the property is being sold "short" of the owner's financial goal. In fact, the difference is usually very short of the actual value, which creates the possibility for a very profitable turn for the right investor.
Fannie Mae is taking steps to shorten the process of ridding their portfolio of these types of loans, so a liquidation of the rock-bottom prices on these properties is imminent. This process, at present, is lengthy and can be very involved.
The new law or Hope for Homeowners Act of 2008, signed by President Bush is aimed at attempting to save 400,000 struggling homeowners from foreclosure and possibly losing their homes. The following expands upon exactly what the law entails and who will benefit the most from such legislation. There are many concerns that arise out of the current situation and the actions trying to remedy the problem. The paragraphs below aim to discuss these issues for the American public.
Many are wondering if this law is a little too late. What exactly will it do? Essentially the law allows those who qualify to abandon their existing mortgage but substitute the debt with a 30-year fixed rate loan for a maximum of 90 percent of the home's current value. The Federal Housing Association or FHA will step in and back the loan amounts up to $300 billion worth of bad mortgages. Still the final decision remains with the banks to underwrite the loans because the bottom line is the banks are losing money either way. They take the chance that the existing mortgage will be foreclosed upon, resulting in them owning the property or the other loss is the new mortgage not being as large the existing loan due to housing values dropping substantially over the years. It is a lose-lose situation for the bank but many of them will see this time period as a chance for their portfolios to recover.
This does not mean that every Tom, Dick or Harry and their cousins can qualify or be eligible for the program. There are strict guidelines that must be adhered to. The borrower must be spending more than 31 percent of their housing payment as of March 1, 2008. The existing but distressed loan needs to have been written no later than January 1, 2008, and the borrower must reside in the property. As with any loans, the borrower's income must be documented. Even though this country is facing a lot of economic problems and it is certain many troubled homeowners will be in the bandwagon, this program does not start until October 1st of this year. It will run until 2011. A word of warning however is that FHA, already a burdened government agency, may not be up to full running capacity until after New Year's, to handle this new legislation.
It is also important to consider the fact that your credit will be a deciding factor in this scenario. One option will be to consult your local bank to discuss if this program will even assist your needs or be a benefit to solving a huge problem. It is important that once you realize you are in trouble making mortgage payments, to discuss the matter with the existing mortgage provider. There may be other options and solutions. Ask the customer service representative to put you in touch with the Workout Department.
Posted by: Investors Lounge Online in Short Sale, Refinance, Recession, Pre Foreclosure, Mortgage, Market Prediction, Market Bubble, Loan To Value, Legislation, Investment, Homeowners Act, Foreclosure, Financing, Economy, Bankruptcy on
Jul 11, 2008
Like holding your breath underwater, homeowners facing foreclosure are desperate for air. While the solution of coming up and taking a breath seems simple, the work needed to get out of water can be a challenging journey. Many struggling homeowners face the journey of avoiding foreclosure and seek help to prevent it, thus beginning the quest loan workouts and restructuring.
When the pressure of foreclosure begins to mount, the goal becomes as clear as a ray of light on a cloudy day. Fix the loan. It is at this point where the journey becomes a cat-string game, the excitement of lenders dangling the string (loan details, interest rates) over the cats (borrowers) heads and the cat making desperate attempts to grab hold of the string and gain composure once again. Essentially, avoiding foreclosure comes down to numbers and the fact that what is best for the borrowers is often not in the best interest of the lenders. 
With that in mind if you are feeling the pressure of foreclosure mounting down on you, the first step you need to take is having a discussion with your lender, sit them down and talk numbers. While with your lender present your financial situation. Show the lender details about your income, where your money is being extended to, and what your family spends on food, clothing, car payments, credit card debt, and student loans. Homeowners also need to present copies of their pay stubs, bank statements, and utility bills to back up their claims. Homeowners will need to make some changes in order to stay in there homes, so say goodbye to premium cable packages and give up your expensive habits because it is time to buckle down.
If you drive down a street and see houses with boarded up windows, the first thing some people think is, uh-oh, how did I get in this neighborhood? But these days you don't have to worry that you've taken a wrong turn at Albuquerque. This sad occurence is happening and In the recent foreclosure crisis it seems no one is exempt.
Unless you've been living in a rose colored bubble you know that mortgage rates are off the hook, acquiring credit requires an sign from above; and despite what the D.C. fiction writers say, you know the economy is dismal at best, and the dreaded "R" word is looming, if not already here.
Across the U.S., some homeowners are not only bailing on mortgage payments that are three to twelve months in arrears, but leaving their homes behind completely. But it's not just blue collars who are throwing the towel, even some of the rich and famous like Michael Jackson, Victoria Hearst, Evander Holyfield, and poor old Ed McMahon are skating on their mortgage responsibilities.
Determining the period of time when house pricing will stabilize in the U.S. can be equated to playing a game of chance in Vegas, and placing $20,000 on Black at a roulette table. While the talking heads with their doctoral degrees may disagree as to when exactly housing markets will stabilize one thing is for sure, sometimes when you are told that the sun will shine, all your given is clouds and rain. This is the dilemma for buyers and sellers in the U.S. housing market. With a changing housing market the need to make informed decisions based on successes, not theories or hunches becomes critical.
Two examples best illustrate the different opinions of respected economists. Crusaders of optimism believe that a rebound of the housing market is within reach, while proponents of methodical thought believe that a recovery could take years to get started. The question for most buyers and sellers remaining is "which stream of thought best suits me, the path of optimism or the trail of history repeating itself?"
Despite the journey potential buyers and sellers may find themselves on, a predicted trend of the housing market and national economy is expected to be soft in the first half of the year with a notable improvement during the second half. However, others have predicted a lengthy period of restructuring and adjustment to housing markets.
Figuring out which school of theory is correct can be equated to picking the winner of a three game series between the Boston Red Sox and New York Yankees. While both teams look good on paper, determining a winner of the series can only be done by looking at the trends of the past and current performance in the year up to this point. The same can be said about housing markets. Both schools of theory can prove to be correct based on the notion that the national housing market is large enough to take into consideration a wide variety of trends in different locations and compare them against one and other.
While Congress has been talking recently about finally responding to the foreclosure crisis that is plaguing our economy, attorneys general have been busy helping troubled homeowners at the state level. Attorneys General are filing lawsuits, lobbying legislatures for tougher mortgage lender laws, and partnering with mortgage servicers and community development groups to help rescue homeowners from foreclosures. As the highest law enforcement officers start demanding action, mortgage servicers are going to have to start paying attention.
For instance, Illinois Attorney General Lisa Madigan is going after mortgage brokers and lenders who she claims used abusive lending practices. She filed suit in November against the Chicago-based mortgage broker One Source Mortgage, alleging the outfit drew in hundreds of clients by advertising low rates on option adjustable rate mortgages (ARMs) but failed to inform borrowers that those rates would adjust upward, often very quickly.
A loan officer told one borrower his interest rate of 0.95% would last the entire first year of the loan, but it jumped to 7.5% after the first month. In order to help the people who have been misled by their brokers, Madigan helped initiate a bill, now before the state legislature, requiring foreclosure notices to include an explanation of options that borrowers have to help them retain their houses. She has also used her influence with lenders and servicers to step up their foreclosure relief efforts and work closer with community groups offering counseling to at-risk borrowers.
It should come as no surprise that investors of all sorts are rushing to the real estate sector to cash in, especially since this sector is outperforming many other instruments.
In short order, profit can be realized by the reselling of a property or by long term leasing of a property. This is a great way to generate revenue as your equity on the property builds.
Despite the options, investment properties can still prove to be hard to find, but that does not mean it is impossible. Employing the right strategy for your market can still yield sizable revenue streams, even in depresses markets.
Generally, a 20 to 30 percent spread between your costs and resale price will yield a handsome profit. This would mitigate any sort of inflated values due to an industry bubble and added costs like closing fees and repairs.
The most favorable buying situation for a buyer involves a vested seller with little time on his or her hands to spend in the actual selling of a property. Because they have equity built in the house, and they are motivated to divest themselves of it, they are more likely to sell far below market value.
