Upside Down Mortgage

Archive for October, 2008

Fha Loss Mitigation Options

You know what a mortgage is, how it works, and what to watch. But when you ask for help mortgage, your lender about words to do as much sense as alien jokes. That's what makes the process of loan modification of confusion for many property owners and why many of them simply give up.

But you do not need to be a financial expert to make the right decisions. A knowledge of the loan modification and loan industry can help you better understand your situation, and know exactly what your lenders. Here is a list of terms you're likely to encounter in a loan modification, and what they mean for you.Here are Loan Modification loan modification glossary of terms.

Amortization: The repayment of a loan (typically a mortgage) through regular payments. Payments are determined by the duration of the loan, the remaining capital and interest rates.

Annual Percentage Rate (APR): The total cost of the loan, including interest, mortgage insurance, points, and other related costs.

Adjustable-Rate Mortgage (ARM): A type of mortgage loan whose interest rate varies depending on market conditions. This means that your payments in May to increase or decrease from month to month. Most weapons have a stopper that prevents the payment of the amount of the increase beyond certain levels.

Debt-to-income ratio (DTI): The relation between the amount you pay on the loan to your total income. Lenders use to determine whether or not you can easily pay the loan. According to the Federal Housing Administration (FHA) mortgage payments should not exceed 29% of your monthly income before taxes, and your total debt (including credit cards and other loans) should not go over 41% .

Deed-in-lieu : An act that goes into your property to your lender and the settlement of your debt. It does not allow you to keep your house, but it helps you to avoid foreclosure proceedings and the associated costs.

Equity: The amount of interest you have in your property. It is calculated by subtracting the amount you still have your house at fair market value.

Fair market value (FMV): A price for your home to discuss the current market conditions. FMV assumes that the buyer and seller acting freely and have all relevant information on the deal.

Fixed-rate mortgage: a type of mortgage that uses an interest rate fixed for the life of the loan. This gives you more stability as a borrower, as your payments remain the same irrespective of the numbers.

Foreclosure: A process that your property is sold and the proceeds to your lender, which allows them to recoup their losses if you default on the loan.

Forbearance: An agreement that your lender modifies your payment plan to help you progress and avoid foreclosure. This means reducing your monthly payments in May or suspend for a period of time. Contrary to the amendment of the loan, this is usually temporary and is often used as a loss mitigation option.

Good faith estimate (GFE): An estimate of the total cost of the loan, including all closing costs, lender fees and insurance costs. All lenders are required to give you a GFE within three days after your loan application.

About the Author:

Sarah Anderson is author of Direct Software.For more information about Loan Modification visit http://www.directcapitalsoftware.com

Article Source: ArticlesBase.com - Loan Modification Terminology, Dictionary of Loan Modification

Real Estate Conditions 2 - Mortgage & First Time Home Buyer Dec08 Seller to pay Closing Costs

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Housing Bubble Burst 2007

The fall of a Mighty Giant: American International Group Inc.

 

            In 2007, American International Group was on top of the corporate world. It boasted over a trillion dollars in assets, one hundred and ten billion dollars in revenue, six billion dollars in net income, and a ranking of number 6 on Forbes top 2000 companies. In June of 2007, AIG was trading at $72.14 per share on the Dow Jones Industrial Average.  Today you could get a share for a quarter and a dime. What happened to make this enormous institution fall so fast, so furiously?  Insuring toxic assets and developing shady financial transactions with the manipulation of its triple A rating caused a titan to collapse.

 

            The origin of AIG's failure goes back to the development of AIG Financial Products in 1987.  A brilliant man named Howard Sosin and two of his colleagues pitched a new financial plan for investing to the then CEO Hank Greenberg. Hank believed in their new innovative ideas and so AIG Financial Products was formed. With the backing of the Triple A credit rating (the highest possible credit rating only given out to a handful of the best most stable companies), Sosin and company were able to delve into financial transactions that were never done before. Financial Products netted on average one hundred and fifty million dollars a year in profits in its seven year run under Sosin's leadership. Increasing feuds with CEO Greenberg led to Sosin's replacement after a nice $150 million dollar settlement. Howard Sosin and his team engaged in many intricate and innovative investment strategies but they always made sure that the investments were done the safest way possible. Under new leadership AIG Financial Products created more profits, but engaged in more dangerous activities. This led to the greatest of AIG's problems, securing the collateralized mortgage obligation or CMO for short.

           

            When AIG management decided to secure dangerous CMOs such as the sub-prime mortgage, many profits were made initially but the housing crisis led to the worst possible situation for AIG. Before the bubble burst AIG became so intertwined in the world market with many corporations, banks, and governments it was thought of as being too big to fail. However, when AIG decided to secure CMOs they took on serious risks. When a security defaults AIG is forced to pay the remaining balance. Also, when a security lowers in value the middlemen (trading partners) dealing with the swaps can call on AIG for collateral causing its own credit rating to be lowered.  At the start of the recession in late 2007, companies such as Goldman Sachs collected billions of dollars from AIG for the decline of value for the CMO securities.

 

The two elements of risk that AIG took on caused a need for hundreds of billions of dollars when the housing bubble burst. AIG lost over a hundred billion dollars in the fiscal year of 2008 and an astonishing $62 billion dollar loss in the fourth quarter alone. It is clear to see that the insurance force is very capable of failing, unlike its Triple A credit rating would like to tell you. However, it is not the means of AIG failing, but the possibility of it failing that brought the US government into the fold with massive bailout money. The investments over the last twenty years that AIG Financial Products participated in would create a catastrophic effect throughout the world markets if the insurance company folded. AIG holds a market share for most of the international insurance needs, such as the airline industry, insuring both Boeing and Aero bus. It is tied to all the major banks and its collapse could very well result in their collapse. A genius idea of Sosin to involve currency dealings, hedging, interest rate swaps, and stock and bond transfers all in one transaction created an interlocking system that has AIG at the center of the financial world. This is the reason why the Fed has stepped in with over $150 billion dollars in aid and more to come so AIG cannot simply fold.

 

All the risky dealings that AIG was performing went almost unnoticed to the public. Hiding behind its Triple A credit rating allowed AIG to perform financial transactions that are normally associated with junk bond dealers. Fed Chairmen Ben Barnanke has stated, "AIG exploited a huge gap in the regulatory system, there was no oversight of the financial- products division, this was a hedge fund basically that was attached to a large and stable insurance company." The truth is no one knows what will happen to AIG, since it regularly calls on the federal government for billions of dollars and seems to be falling with no end in sight. One thing is for sure no company that is this large and has this great of a financial hold on the world has ever collapsed and that makes the fear of the unknown a driving force in the massive bailouts to keep AIG afloat.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bibliography

 

"AIG - American Intl Group, Inc. At A Glance - Forbes.com." 05 Mar. 2009 <http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=AIG&tab=searchtabquotes>.

 

"The Beautiful Machine - washingtonpost.com." Washingtonpost.com - nation, world, technology and Washington area news and headlines. 07 Mar. 2009 <http://www.washingtonpost.com/wp-dyn/content/article/2008/12/28/AR2008122801916_4.html?sid=ST2009013000235&s_pos=>.

 

EZOnlineDocuments.com Hosting. 04 Mar. 2009 <http://www.ezodproxy.com/AIG/2008/ataglance2007/images/AIG_ATaGlance_2007.pdf>.

 

"Worldwide." Bloomberg.com. 07 Mar. 2009 <http://www.bloomberg.com/apps/news?pid=20601087&sid=a11QFJcR8HSI&refer=worldwide>.

 

"CrossingWallStreet.com: The Fall of AIG." CrossingWallStreet.com: Your Guide to Financial Success. 07 Mar. 2009 <http://www.crossingwallstreet.com/archives/2008/11/the_fall_of_aig.html>.

About the Author:

Article Source: ArticlesBase.com - The Fall Of A Mighty Giant: American International Group Inc

Real Estate Market in 2007 Part 1

Housing Bubble Start

Question: I was in the Handyman Business and want to get back?

I was in the handy man business for 6 years then about two years ago I started seeing a real drop in business due to the housing bubble. I want to get back in as I am seeing the economy start to recover. However I am hearing story's of many who were out of work calling them self's handy man now. when I started in 2000 when time were good home owners could not find a good handyman. my hope is the newbie handy men get job.

Answer: ring up some of your old clients and tell them you are back in business

Ask a Super Genius - The Housing Bubble (4/4)