Upside Down Mortgage

Archive for June, 2008

Mortgage Default Rates Statistics

Question: How could a mortgage company benefit from high rates of people possibly defaulting,.?

Could a company benefit somehow by making themselves look bad. Even going so far as to send out late payments to individuals that are not late. Would it serve a company to create a fake issue? Would it affect statistics in any way?

Answer: They would not benefit.

If a bank it would hurt their reserve ratio and put them at risk of a takeover by the feds. If not a bank it wouldn't matter.

Hope this helps
Jerry-the-bookkeeper

John Berlau on Obama's Mortgage Rescue Plan

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Loan Modification Central

According to the Federal Housing Finance Agency, foreclosures have increased an incredible 150% in the last two years. And with statistics showing that the majority of adjustable rate mortgages that were taken out during the height of the housing bubble will reach their next adjustment period in 2009, those foreclosure numbers may be increasing dramatically over the next year. Because of this, the FHFA has announced a new plan to try to halt the current foreclosure crisis by allowing the modification of loan payments for millions of borrowers.

The program will be implemented sometime in December, but not everybody facing foreclosure will be eligible. The be considered for the program, you must meet these requirements:

- A loan on your primary residence that was made before January 1, 2008

- Cooperate fully with loan servicers and provide all needed information

- At least 90 days behind on your payments

- Not have filed for bankruptcy

- You must prove a hardship that has affected your ability to pay, such as unemployment or medical bills

Obviously, this program is meant to help those most in need as soon as possible, but it won't be able to help everybody facing financial trouble. If you can't qualify, that doesn't mean you are out of options. Consider these before foreclosure:

- Before you do anything else, talk to a reputable credit counseling agency. Go to the Department of Housing and Urban Development website and look at their list of reputable, low-cost (or sometimes even free!) counselors. Also visit the website for the non-profit National Foundation for Credit Counseling. They can help you find someone in your area to help.

- Find out who currently owns your loan by asking your loan servicer. Then call them and talk to them. Many lenders will be willing to work out a deal that will help you get your bills paid. Be upfront and direct and ask them what options you have and what help they can provide. 

- If you haven't done so already, the answer may just be to tighten your belt. Cut back on luxuries and unnecessary expenses. Sell the car, borrow from relatives, get a second or third job, or consider renting out a room if your zoning laws allow it. The housing market will turn around and the value of your home will start going up again. Sometimes the best solution is to stick it out for a while until you're above water again.

- Think about a short sale, where you sell your home with the lender and in return they take less than the balance of your loan. Short sales are becoming more and more prevalent, but they can be a long and complicated process.

- If you and your lender can't come to an agreement and you can't possibly come up with the money for the mortgage, consider asking your lender about transferring your title in return for the cancellation of your debt. Known as "deed in lieu of foreclosure", this essentially means that you're giving your house to the lender voluntarily. The upside is that your credit won't take as much of a hit as it would if you went into foreclosure.

- If all else fails, the last resort is still open to you - bankruptcy. Remember that filing for bankruptcy will remain on your record for a decade and will kill your credit for years, but it will erase your debt and open up some other options. In some cases, you may actually be able to negotiate a payment plan that will allow you to keep your home. If you've tried every other avenue, this may be your last option but make sure you talk to a financial adviser before you proceed.

If you are finding yourself facing foreclosure, you are not alone. And most importantly, you are not out of options. There is help out there that you may be able to take advantage of. Talk to a professional, do your research, sit down and discuss things with your family and figure out whatever you need to do to get through this rough market.

About the Author:

Lee Cameron is a professional REALTOR® serving the Orlando real estate market. Lee has consistently proven his talent and knowledge in the real estate business and is known to his flair the business and the care with which he treats his clients. For more info on homes & properties in Orlando contact Lee today.

Article Source: ArticlesBase.com - Facing Foreclosure? You May Have Other Options

Awesome Central Florida Real Estate Company.

Cdo Subprime Crisis

The day after signing the $787 billion economic stimulus package, President Obama unveiled his housing plan which involves a hefty $75 billion to help prevent about nine million Americans from losing their homes. This is a sign that underscores the urgency of solving the economic crisis. The President made the announcement in Arizona, which is on of the states hardest hit by foreclosures. The housing problem is viewed by many as the source of the economic crisis. The President believes that housing crisis, the financial crisis and the broader economic crisis are interconnected and by solving the housing problem, the economy might recover.

Nearly 27% of the 52 million homeowners in the U.S. with a mortgage owe more on their mortgage than their homes are worth right now. The president's plan is aimed at helping borrowers in that predicament, and those who are in danger of foreclosure.

The main cause of the mortgage crisis is the subprime mortgage. According to Wikipedia "subprime lending is the practice of lending, mainly in the form of mortgages for the purchase of residences, to borrowers who do not meet the usual criteria for borrowing at the lowest prevailing market interest rate". The criteria can be the borrower's credit score, credit history and others. If the borrower becomes delinquent in making payments to the loan provider, the lender will take possession of the property. This process is called foreclosure.

The US mortgage market is estimated to be $10,000 billion. 13% of which is the subprime market. This is a huge amount and has a bearing on the economy the subprime market share of the United States GDP is 9%.

Why did financial institutions support giving subprime mortgages? Prior the crisis, government policies and competitive pressures had encouraged higher risk lending practices. Also in addition, loan incentives such as easy initial terms and the long-term trend of rising housing prices had encouraged borrowers to think that they can afford the loan. But that is not the case, sometime in 2006 to 2007, interest rates started to increase and housing prices started to drop. This made refinancing a mortgage difficult, resulting to an increase in defaults and foreclosures.

Lenders alone are normally responsible for the mortgages they issued. But it is possible for the lender to sell the right to receive the payments on the mortgages through securitization. These are called mortgage backed securities (MBS) and collateralized debt obligations (CDO). Those involved in MBS and CDOs can also insure against credit risk by buying credit defaults swaps (CDS) which guarantees that the bond principal and interest would be paid in full. Most of the mortgages have CDS, when the foreclosures started, the holders of mortgage backed bonds demanded to be compensated for their losses. The sellers of credit default swaps like AIC, Lehman Brothers, Merrill Lynch, and Wachovia did not have funds to realize these guarantees.

This is what brought down the US financial giants which cascaded through the banking, lending and the whole US economy and finally the world. The US mortgage crisis prompted governments worldwide to implement their own economic stimulus and their respective central banks to cut interest rates. These actions are designed to stimulate economic growth and inspire confidence in the global financial markets.

About the Author:

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Article Source: ArticlesBase.com - The Housing Crisis

A fairly tale look at the Subprime crisis by www.investmentyogi.com