Question: Would anyone who is in the mortgage business mentor me on how to package and sell subprime loans?

I would like to sell subprime mortgages but need to understand who I am looking for and what their needs are. As well as some good lenders to work with. Thanks!

Answer: good luck

No Risk of Hyperinflation Says Federal Reserve Chairman Ben Bernanke. Rest easy Glenn Beck

How Do Subprime Mortgages Work is a post from: Upside Down Mortgage

Question: What does Subprime Mean? and has anyone seen this....?

What is subprime? and prime minus half (or wut ever its called)? has anyone else seen this vid. So is Obama Bad?

http://www.youtube.com//watch?v=H5tZc8oH--o

and is fannie and freddy....everywhere in the us or just in some areas.

Answer: Subprime means that the loan does not meet normal criteria, that there is a greater risk that it will fail.

Justin OBrien: Future of Financial Regulation

Subprime Meaning is a post from: Upside Down Mortgage

The current mortgage rate credit crisis is a golden opportunity for real estate investors to turn a quick profit, provided they're looking in the right areas of the country. Rising foreclosure rates are quickly becoming a problem for banks and communities across the country.

The President, Congress and the Federal Reserve working to make an amicable rate freeze on Adjustable Rate Mortgages to slow the problem. Yet, even with this effort a total of 437,498 foreclosures were filed in the first quarter of 2007. According to Realtytrac.com, this is an increase of 100,000 foreclosure filings compared to the first quarter of 2006. Imagine what the first quarter of 2008 holds for the real estate investing market!
Savvy business investors interested in pre foreclosure investing can turn these rising foreclosure rates into a golden opportunity. Investors can buy a record number of distressed properties in short sales deals, and flip them with minimal renovations for a high return.

States with the Highest Rates of Foreclosures
Areas such as Nevada, Colorado and Georgia are ripe with opportunities for pre foreclosure investing. According to realtytrac.com in 2007, these states reported an average of one foreclosure filing for every 75 households. That is triple the national average of pre foreclosure properties.

New real estate investors can find these pre foreclosure opportunities in even greater numbers in California, Florida and Texas. According to Realtytrac.com, these states have reported the largest totals of foreclosure filings in the country. California alone reported 80,595 foreclosure filings in the first quarter of 2007. This is double the number of foreclosures in the state with the second highest numbers of foreclosures, Florida which came in with 45,156 foreclosures in the first quarter.

Who’s to Blame?
Many real estate investing experts blame the rising foreclosure rates on the practice of subprime lending. Also known as near prime or second chance lending, this practice involves giving higher rate loans to homeowners with spotty credit, lower incomes and other problems that preclude them from better home mortgage loans. Naturally, these homeowners will have a harder time keeping up payments on their property mortgages.

This unprecedented number of foreclosures has created a problem for the banks. Banks do not want to have foreclosed properties on their portfolios. They simply do not have the time or interest in maintaining these homes until they can be sold. In addition, banks must reserve enough cash to cover that mortgage should it foreclose entirely in every single one of those some 400,000 pre foreclosure properties in default. That’s millions, even billions of dollars that the banks can’t use to make their own profits on!

What it Means for Real Estate Investing?
As you can imagine the banks want to sell those properties, those mortgages or to have their homeowners to catch up bad loans. Investors can easily negotiate great short sales with the banks to pick up these pre foreclosures at a discount. Never before has pre foreclosure investing held so many opportunities for success.

Pre foreclosure investing is an excellent way to take advantage of these foreclosure filings. By negotiating with the banks on short sales deals you’ll be able to pick these properties before they are foreclosed on, and you’ll be helping the homeowner avoid bankruptcy.

Foreclosure rates are skyrocketing, and this is merely the first wave of a credit crisis that's been looming for the past three years. As other credit products eventually adjust to realistic market conditions, the number of opportunities for short sales on foreclosed properties is going to increase. Being a savvy investor, that's something you can capitalize on in pre foreclosure investing.

Learn more about protecting your short sale position at Realestateinvestor.com. We feature an instant network of investors, shortsalers and buyers for the real estate investor. In addition our real estate resources, tools, documents and videos are some of the most helpful one the web.

Colin Egbert is an experienced Real Estate Investor with plenty of short sale techniques to aid fellow investors in their quest to succeed and make huge profits. He's the author of the ebook "Getting Started with Short Sales" providing the tools needed to start your own real estate investing business. Colin is also the CEO of Realestateinvestor.com a website dedicated to helping investors make the most of their business.

About the Author:

Colin Egbert is an experienced
Real Estate Investor with plenty of short sale techniques to aid fellow investors in their quest to succeed and make huge profits. He's the author of the ebook "Getting Started with Short Sales" providing the tools needed to start your own real estate investing business. Colin is also the CEO of Realestateinvestor.com a website dedicated to helping investors make the most of their business.

Article Source: ArticlesBase.com - Pre Foreclosure Investing - Rising Foreclosure Rates are a Great Opportunity

Market Meltdown - An Elliott Wave Look at Subprime Sentiment

Subprime Video is a post from: Upside Down Mortgage

Accounts receivable represent amounts due from customers who have purchased merchandise on credit and who have agreed to pay within a specified period or when billed by a company. Since all accounts receivable represent a portion of purchased merchandise on credit it is a given that some of the income represented within the account will not actually be received by the company.  Due to this business phenomenon it becomes necessary for any company to account for this loss on the balance sheet. Commonly named bad debts expense this has become a major focal point in recent financial history because of the credit crisis in the subprime mortgage industry.  For companies that issued subprime mortgages there is an internal assumption that a large portion of the accounts receivable or credit debt will not be repaid. The reason a company can handle such a large amount of risk is due to overall sales volume. By having a large clientele base revenues can be increased enough to cover the overall loss, but as recent history shows one shift in the current economic climate can have drastic consequences to not just one industry but to the global economy depending on how leveraged the world economy is to any one economic environment. In the case of the US mortgage market we found that it was not only the mortgage companies but all of the subsidiary investors which took on a portion of the risk by chasing large rewards, these risks created an overly leveraged market. As investors continued to build housing in the hope of riding increases in housing prices they created an excess in housing inventory, which in turn devalued the houses on the market as well as those being built. When localized household wealth declined mortgage lenders lost capital and the ability to fund refinancing and the necessity for an increase in the adjustable rates on existing home loans. Since there was already too much risk inherent in the market those borrowers who were questionable to begin with defaulted at an ever increasing rate until the market collapsed around them. These defaulted borrowers have to be accounted for on the books, and this is what we will take a closer look at.

When a purchaser buys merchandise on credit certain entries must be made to the accounting ledger. Let’s say NEC Inc. sells some coffee cups on credit. If we assume the cups were already produced and in inventory then Cost of Goods Sold (COGS) is debited for the manufacturing cost and Inventory is credited for the same amount, say 7,000 dollars. This takes care of the internal cost of producing those cups. Next Accounts Receivable is debited $10,000 and the Sales account is credited $10,000. Now NEC Inc. has transferred the COGS to the customer but instead of increasing cash flow it has only increased the money owed in the form of accounts receivable. Like your average consumer credit card when goods or services are sold from one company to another some form of payment timeline is agreed to, but for ease of use we will assume the retailer who purchase the cups agreed to pay the total amount in full that the end of the month. However, just few days later a natural disaster strikes and not only is the retailer completely destroyed but all possible liable parties are affected to the point where they cannot pay their debts. Now NEC Inc. has 10,000 dollars the on the books that should have become cash flow but instead will never be recouped.

In this situation NEC Inc. has very little choice but to move the debt into a Bad Debt Expense account. This type of account is called a contra account in that it is reported as a subtraction on the asset portion of the balance sheet. Under the asset portion of the balance sheet an entry is logged under allowance for bad debts while bad debts expense is debited. This is of course is not a write off, but it is unlikely that a company would write off the debt until the books have been closed that the end of fiscal quarter. When the write-off entry is noted it will come in the form of decrease to the accounts receivable account and an increase to the allowance for bad debt. In the case of NEC Inc. the initial entry would include a debit of -$10,000 to Allowance for Bad Debts and a credit of -$10,000 to Bad Debts Expense. Then debit of -$10,000 to Accounts Receivable and a debit of +$10,000 to the Allowance for Bad Debts. The allowance for bad debts account is a valuation account because its credit balance is subtracted from the debit balance off the Accounts Receivable. If, on the other hand, a company wishes to use the direct write-off method then a debit is entered under Bad Debts Expense and a credit is placed under Accounts Receivable for the amount of the bad debt. By correctly recording bad debt a company ensures that its net income, ROI, ROE, and liquidity measures remain accurate.

About the Author:

Article Source: ArticlesBase.com - Matching Receivables: How to Account for Bad Debt

Credit Repair- Repair Credit is What We Do! (Risk Free)

Subprime Merchandise Cards is a post from: Upside Down Mortgage

Question: Understanding the Subprime mortgage crisis?

http://genxfiles.com/2008/09/21/the-mess-that-were-in/

This blog did a great job of explaining the crisis, but how do we get back on track?

Answer: Everybody is looking for a quick fix. A fix which involves little or no pain. Such a fix doesn't exist no matter what McCain or Obama says. There will be pain. Lots of it. Anybody who says there's an easy way out of this is lying to you. Housing prices will plummet as loans continue to be unavailable and as foreclosures continue. More people will be thrown out of their homes. Banks will continue to fail. They will be stuck with homes they cannot sell at a price to cover the mortgage. Deflation may occur. Hell, it's happening now with the drop in oil, gas, homes, gold, metals, grains and other commodities. The economy will slow. Interest rates will drop further. Unemployment will rise. Eventually (a year or two from now) a bottom will be reached. Interest rates will be so low and housing will be so cheap, that people will be able to buy them. At least those with the best credit records. The economy will begin to pick up again. Jobs will be created again. But this will all take time and pain. The government needs to let it unwind. I fear they won't and will just delay a more natural recovery.

Inside the US subprime crisis 01 April 2008

2008 Subprime Crisis is a post from: Upside Down Mortgage

Question: how does citibank writes off $XYZ billions work?

I mean I read in many places that major banks write off bad-debt(subprime loan etc...) . Is the real loss to those banks. From what I know, those banks intern have sold those mortgages as some kind of securities or bundles, which are at some point or other finally sold to individual investors. So how do those mortgage loans contribute to the $XYZ Billion write-off. The loss should be to the individual investors not the finance companies. Can somebody explain?

Answer: The bank also bought thos eCDO and MBS to park their cash. Banks seat on billon of cash. When they give you a 6 monbth CD at 3%, the money to pay your CD interest come from their own investment. Banks also set up off balance sheet entities that bought these CDO and MBS, and the bank gaurantee repayment on these off balance sheet arrangement. The write off comes from the issue or marked to market. As there is no liquidity for these type of investments (i.e. it is not being traded daily, nor even monthly) they have design complicated calculations to estimate the fair value of the CDO and MBS. The problem arised when the market froze itself and no one was buying these securities and the deliquency rate was increasing. The banks were stuck with these investments, with increasing delenquency rate and they had to market them down on their balance sheet (eventually that does not mean that the cash flow generated by the investment is bad). If noone can put a fair value to the security you have to writte it off to $0.
Hope this help
PS: bank buy each other bonds and securities all the time. That's how they lend each other.

Fresh Start Auto Loans. Cincinnati's leader in subprime financing!

Subprime Financing is a post from: Upside Down Mortgage

Question: Whose fault it is actually?

for the financial slump now in the US and the fall of companies Lehman Brothers,Merill Lynch and now AIG...who is to blame for the subprime crisis and the slump now?

Answer: the american people for not rising up sooner and taking out the evil that is within are government.. its been there for along time but people are more concerned with dancing with the stars and american idol...
trust me on this its going to be worse then the great depression we are no longer united states of america we are the north american union and are currency is just a piece of paper so we will soon go to the amero.. most of are rights are being stripped away from us and people just continue to be slaves.. no one to blame but are selfs

Random Ass Theatre - AIG gives Congress Sub-Prime lulz

Aig Subprime is a post from: Upside Down Mortgage

Question: what is mean by subprime loan write-off?

I read about a subprime crisis in US and resulted write-off by major home loan lenders. Does it mean customer needs not to pay the home loan taken by them and own the house without paying the rest of installment?

Answer: No! It means the banks are assuming they won't get paid in full - they are 'writing off' the investment as a total or partial loss.

U.S. Sub-Prime Mortgage Crisis

Subprime Housing Crisis is a post from: Upside Down Mortgage

The nationwide mortgage crisis, coupled with the economic recession, has forced many homeowners into foreclosure. For many, losing their home is just the last piece of the puzzle to fall into place once they have either lost their job or experienced a huge rise in their mortgage payments, thanks to adjustable rate mortgages and subprime mortgages.

For many homeowners facing foreclosure, there are solutions to stalling or preventing the foreclosure process. The key, however, is to recognize a potential problem ahead of time and begin to take preventative measures to ensure that you and your home don’t become yet another statistic.

How to Protect Yourself against Foreclosure

There are several steps which typically take place before the lender begins the process of foreclosing on your home. In fact, receiving a notice of foreclosure can take several months, and having that foreclosure hit the court system could take several more weeks. With that said, there are steps you can take to handle your financial situation before the judge issues an order of auction:

1. If you foresee a problem, don’t wait until the problem is staring you in the face. Instead, make a call to your lender, explain that you anticipate having difficulty making your mortgage payment, and begin working with the lender to modify the original loan agreement. Many times, you may have the option of refinancing. Many lenders are also working with homeowners to extend loan repayment terms, among other things, so that homeowners can prevent foreclosure. Remember: your lender doesn’t want you to go into foreclosure either. You can work hard to resolve the issue so that you can keep your home and prevent foreclosure.

2. Make a payment so that your mortgage remains current. For many people, making a payment is next to impossible given their current financial situation, but keeping your home loan current is vital if you want to keep your home and obtain some type of loan modification with your lender.

For many homeowners, making a payment can be accomplished by taking out a short-term loan, also known as a payday loan. A payday loan can be extremely helpful for homeowners looking for instant cash, and it is often a responsible decision for those homeowners that find themselves falling behind on their mortgage payments.

3. Use the extra time allotted to you by keeping your home loan current to consider all of your options. For many homeowners, a payday loan can keep the lender at bay while they review all of their options and map out their next step.

In addition, payday loans may be a more realistic solution to short-term cash flow problems than other types of secured or unsecured loans. Many of the homeowners who find themselves struggling in a sub-prime mortgage have low credit scores, which strongly impacts their ability to obtain credit through traditional bank avenues.

Payday loans, like any other type of short-term loan, should not be considered a cure-all to a mortgage crisis; instead, it should be used to maintain your credit, appease the bank and bide you time to consider all of your options.

About the Author:

Learn more about how a payday advance can help you through any financial difficulty. Take advantage of guaranteed payday advance rates through PayDayOne to quickly obtain the funds you need before your next pay check arrives.

Source - Payday Loans vs. Home Foreclosures: Protecting Yourself and Your Home

"The Sub-Prime Mortgage Mess and Federal Reserve Policy" - Notre Dame's Saturday Scholar Series

Prime Vs Subprime Mortgage is a post from: Upside Down Mortgage

Question: Who's to blame for the subprime meltdown?

The lenders or the consumers? Or is it a little of both? I, frankly, am somewhat saddened by the tighter mortgage standards. My husband and I have credit "issues" that happened in our twenties and doomed us to credit ratings below 650. A "second chance" mortgage was extended to us and we paid a little bit higher (6.6% vs. 5.75%) but we weren't made to put a gazillion down and be forced to take ARMS. Since we've purchased the home (my second, his first), we've been on time, every time. We've even refinanced. The moral of my story is had it not been for second chance loans, people like us wouldn't have been able to purchase a home. However, the same gift also can be a curse since I've seen neighbors go into foreclosure because unscrupulous builders push 3000 sq ft homes on people whose budgets couldn't afford it. What do you think?

Answer: The lenders are the ones who took the risk of lending money to people who cannot afford to repay the money. It is that simple.

Subprime crisis explanation by The Long Johns

Subprime Stories is a post from: Upside Down Mortgage

Question: Is Bernie Frank a combinat. of economic success of AIG, the ethics of Enron and accountability of Ruth Madoff?

Michael Graham of Boston Herald calls Barney Frank an unmitigated disaster and asks whether Bernie Frank a combination of economic success of AIG, the ethics of Enron and accountability of Ruth Madoff.

The author points out that he sat on the regulation committee of Fannie while his partner was a senior exec there.

In 2003, he famously said that Freddie and Fannie were “not in a crisis,” that they were “fundamentally sound financially.” He repeated that expert testimony in 2005, all the while rejecting the argument that the taxpayers were responsible for Freddie and Fannie’s bills.

And in 2007, he actually proposed raising the caps on Fannie/Freddie’s portfolios - exposing taxpayers to even more risk - and then dumping the new money into (drum roll, please) even more subprime mortgages.

What's your take?

http://www.bostonherald.com/news/opinion/op_ed/view.bg?&articleid=1159543&format=&page=1&listingType=opi#articleFull

Answer: "Bernie Frank" is the epitome of today's politicians.

One doesn't know if one should cast a vote or throw a stone.

Part 1/2 Bird & fortune - Financial crisis - Silly Money, Nov 08

Subprime Regulation is a post from: Upside Down Mortgage

Question: Why do people get subprime loans? It's not THAT diffucult to get approved for a fixed rate.........?

I got between 5 and 6% about 3-1/2 years ago, and my credit history was not good, and I had no money in the bank. I had defaulted loans, 2 foreclosures, and lots of late payments in my credit past.

I would NEVER get a variable rate loan, and I never understood why anybody would, ESPECIALLY if they are on a limited fixed income. Why would anybody want a house note that can go up?
Difficult (typo), so calm down OCD people.

Answer: Subprime does not equal adjustable. You got a subprime fixed rate loan.

"Subprime" refers to the type of borrower, someone who does not meet normal lending standards, including someone who has a history of defaults and foreclosures.

You are wondering how you got this fine rate. Possibly it's legitimate if you had a huge down payment, which would offset the credit history you described and lift you out of the subprime category. Unfortunately, you were probably dealing with a mortgage originator who planned to sell the loan quickly and didn't care if it got paid off. (1) produce loan (2) pocket commission (3) sell loan (4) repeat. It has happened that loan originators have made false statements to lenders and even forged paperwork to make a subprime borrower look good, all without the knowledge of the customer.

Rep. Doggett Opposes "Largest Subprime Loan in U.S History"

Subprime Loans History is a post from: Upside Down Mortgage

Question: Are you a borrower that has sought thier own modification through a lender where you are in a subprime loan?

If you are, and you are up for bought with this bank, be advised that they are, in 97% of the cases, going to be coming back at you with every reason why not to do a modification for you and they are going to go the full 13 rounds with you. your opponents (Yes Opponents) that your Lenders are going to place on the other end of the telephone, are so knowledgeable in the banking rules and regulations, that they will literally be able to talk behind your back; in front of your face. It's not brain surgery to know that this is true. Just ask yourself this question. Are the banks looking out for my best interests-or their own? These banks take your money-most of it; invest that money, make a profit from it, and reinvest that money and never even say thank you, do they? Did you get a Christmas card from them last Christmas for all the interest that you paid into them? I know that I didn't.

Answer: I have done several modifications recently, and find your statements untrue.

The banks are all receiving tax payer funds if you qualify to a modification (there are several programs), it is in their best interest to modify your loan as opposed to foreclosure.

Deconstructing the Subprime Crisis

Subprime Regulations is a post from: Upside Down Mortgage

Over the course of the last year, federal laws regarding loan modifications have changed radically.  Between the end of George W. Bush’s presidency and Barak Obama’s new administration, federal laws  have opened new opportunities for homeowners to avert foreclosure and have access to loan modifications.

Basically, there are four core laws which create the guidelines for all mortgages.  These laws attempt to make the guidelines uniform, based upon equality and that they be administered fairly.  All lenders are required to operate under certain rules, regulations and procedures when taking loan applications.  The rules are: the Real Estate Settlement Procedures Act (RESPA), the Truth in Lending Act (TILA), Equal Credit Opportunity ACT (ECOA) and the Fair Credit Reporting Act (FCRA).  Some of these laws are quite old and were passed in a very different era, but Congress hopes that these rules provide the kinds of guidance that will help people borrow money to get a home without being taken advantage of.

RESPA requires lenders to give a good faith estimate of all closing costs that you are likely to pay.  The hope is to keep the borrower from being forced to pay hidden fees at closing.

TILA requires that annual percentage rate (APR), term of the loan and total costs be disclosed to a borrower prior to extending credit to the borrower.  This information must be obvious on documents presented to the consumer before signing, as well as on periodic billing statements (although that is less often).    Obviously, subprime mortgages, and other “creative†forms of mortgages, may have violated this law.

ECOA prohibits any discrimination in lending based on race, creed, religion, national origin, sex, marital status or age.  Discrimination does not just mean refusing to give a mortgage, it could also mean taking advantage of people and giving them unfavorable mortgage terms just because of their minority status.  

FCRA promotes accuracy, fairness and privacy of information in the files of consumer reporting agencies.  When you apply for a mortgage, the lender always pulls a credit report and FCRA gives you access to the report they pull.  If you have ever been rejected for a credit card, you will doubtless have received a letter explaining the decision and informing you of your right to view your credit report; this is due to FCRA.

California loan modification attorneys are familiar with the state and federal laws governing loan modifications, as well as how those laws can be used to benefit your situation.  If you are facing foreclosure, there is a chance that your mortgage company might have violated one of these statutes.  This could be used as leverage either during a loan modification or even during litigation.  The federal government is still investigation how often mortgage companies such as Countrywide violated these laws in selling people subprime mortgages.  Having a mortgage with a highly fluctuating interest rate certainly seems to violate some of the federal laws mentioned above, as does the tactic of lying about the borrower’s income (which some real estate agents did quite often).  A loan modification attorney can be a big help in figuring out just how the laws governing mortgages can benefit you.

About the Author:

Loan Modification Help Center is a free gathering place for resources and information on the rapidly evolving field of loan modifications. The internet is over flowing with information on this subject with the problem being that there can be as much bad information and advice as good. For a homeowner struggling with mortgage payments and facing the possibility of foreclosure, the importance of getting straightforward information with no agenda or ulterior motive is of utmost importance. The resources we make available at Loan Modification Help Center are just what homeowners need as they seek to understand their options and get the information they need to make the critical decisions involved in a loan modification. For more information about loan modification programs visit loanmodificationhelpcenter.org.

Source - Loan Modification Help Center – Federal Law Governing Mortgage Lending

Fight Foreclosure: Make 'Em Produce The Note!

Countrywide Subprime Lending is a post from: Upside Down Mortgage

Accounts receivable represent amounts due from customers who have purchased merchandise on credit and who have agreed to pay within a specified period or when billed by a company. Since all accounts receivable represent a portion of purchased merchandise on credit it is a given that some of the income represented within the account will not actually be received by the company.  Due to this business phenomenon it becomes necessary for any company to account for this loss on the balance sheet. Commonly named bad debts expense this has become a major focal point in recent financial history because of the credit crisis in the subprime mortgage industry.  For companies that issued subprime mortgages there is an internal assumption that a large portion of the accounts receivable or credit debt will not be repaid. The reason a company can handle such a large amount of risk is due to overall sales volume. By having a large clientele base revenues can be increased enough to cover the overall loss, but as recent history shows one shift in the current economic climate can have drastic consequences to not just one industry but to the global economy depending on how leveraged the world economy is to any one economic environment. In the case of the US mortgage market we found that it was not only the mortgage companies but all of the subsidiary investors which took on a portion of the risk by chasing large rewards, these risks created an overly leveraged market. As investors continued to build housing in the hope of riding increases in housing prices they created an excess in housing inventory, which in turn devalued the houses on the market as well as those being built. When localized household wealth declined mortgage lenders lost capital and the ability to fund refinancing and the necessity for an increase in the adjustable rates on existing home loans. Since there was already too much risk inherent in the market those borrowers who were questionable to begin with defaulted at an ever increasing rate until the market collapsed around them. These defaulted borrowers have to be accounted for on the books, and this is what we will take a closer look at.

When a purchaser buys merchandise on credit certain entries must be made to the accounting ledger. Let’s say NEC Inc. sells some coffee cups on credit. If we assume the cups were already produced and in inventory then Cost of Goods Sold (COGS) is debited for the manufacturing cost and Inventory is credited for the same amount, say 7,000 dollars. This takes care of the internal cost of producing those cups. Next Accounts Receivable is debited $10,000 and the Sales account is credited $10,000. Now NEC Inc. has transferred the COGS to the customer but instead of increasing cash flow it has only increased the money owed in the form of accounts receivable. Like your average consumer credit card when goods or services are sold from one company to another some form of payment timeline is agreed to, but for ease of use we will assume the retailer who purchase the cups agreed to pay the total amount in full that the end of the month. However, just few days later a natural disaster strikes and not only is the retailer completely destroyed but all possible liable parties are affected to the point where they cannot pay their debts. Now NEC Inc. has 10,000 dollars the on the books that should have become cash flow but instead will never be recouped.

In this situation NEC Inc. has very little choice but to move the debt into a Bad Debt Expense account. This type of account is called a contra account in that it is reported as a subtraction on the asset portion of the balance sheet. Under the asset portion of the balance sheet an entry is logged under allowance for bad debts while bad debts expense is debited. This is of course is not a write off, but it is unlikely that a company would write off the debt until the books have been closed that the end of fiscal quarter. When the write-off entry is noted it will come in the form of decrease to the accounts receivable account and an increase to the allowance for bad debt. In the case of NEC Inc. the initial entry would include a debit of -$10,000 to Allowance for Bad Debts and a credit of -$10,000 to Bad Debts Expense. Then debit of -$10,000 to Accounts Receivable and a debit of +$10,000 to the Allowance for Bad Debts. The allowance for bad debts account is a valuation account because its credit balance is subtracted from the debit balance off the Accounts Receivable. If, on the other hand, a company wishes to use the direct write-off method then a debit is entered under Bad Debts Expense and a credit is placed under Accounts Receivable for the amount of the bad debt. By correctly recording bad debt a company ensures that its net income, ROI, ROE, and liquidity measures remain accurate.

About the Author:

Source - Matching Receivables: How to Account for Bad Debt

46 Years of Change

Timeline Subprime Mortgage Crisis is a post from: Upside Down Mortgage

In the past when the Federal Reserve cut the discount rate it translated into lower mortgage interest rates for home buyers. This was a convenient way for the Federal Reserve to stimulate the economy during economic slowdowns. By making it easier for people to get loans more cash was pushed into the economy.

But the recent discount rate cuts have failed to have a similar effect. In fact the spread between mortgage interest rates and the discount rate is the greatest in 20 years. Although the Fed has cut rates 3 time in 2008, going from 4.25 to 2.25, if we look at a mortgage rates graph over the same time period we have failed to see much of a change. Two explanations have been put forth to explain why our current situation differs from what we have seen in the past. The first explanation is that the banks are facing almost 200 billion in losses from their misplaced bets on subprime mortgages, and are sticking with high interest rates to offset some of these losses. The other explanation is that banks still see a downside in the real estate market and are attempting to limit their exposure.

Considering that the mortgage industry is comprised of 1000's of people I doubt either of the views is completely accurate. Additionally, considered how short sighted the mortgage industry was in their foolish bets on subprime mortgages during the boom time I think partially the mortgage industry is simply reacting. During the boom time the mortgage industry reacted by competing with each other to create more and more bizarre loan products to allow people with poor credit to receive loans, in order to gain market share. Now that the real estate market is doing poorly the mortgage industry is spooked and is reacting by limiting access to loans.

Is there a light at the end of this tunnel? It's hard to tell. The latest Fed cut from 3 to 2.25 received a positive response from the market as interest rates fell from 6.13 to 5.87 the following week. But its anyone's guess of whether this is a temporary blip or a sign that the mortgage industry is comfortable with the current spread between mortgage interest rates and the Fed's discount rate. If the later is the case future rate cuts should have a more favorable affect on pushing down mortgage rates. While this won't cure the current woes in the real estate market it should help alleviate some of the problems.

One thing that does seem more likely is that if the real estate market continues to suffer the Fed will continue to cut rates. The current Fed Ben Bernanke chairman gave a speech before the subprime crisis detailing out how the Fed failed to respond strongly enough during the events which led to the great depression and seems determined to not make the same mistakes. In fact, in an unprecedented move the Fed injected over 200 billion in the credit markets last week its clear the Fed is committed to doing whatever it can to cure the credit/mortgage crisis. If the banks start reacting to the rate cuts the Fed might be able to succeed in their mission to take a stronger role in preventing an economic recession.

About the Author:

Ki is a realtor in Austin and runs a site with information about Austin Tx real estate. He also wrote mortgage rates html for websites to keep visitors up to date on mortgage rates trends along with a free mortgage calculator

Source - Why the Fed is Having Less Influence over Mortgage Interest Rates

Economic Collapse 2.0

Subprime Graphs is a post from: Upside Down Mortgage

Question: A subprime borrower preparing for refinance?

When I bought my house a year ago I was a subprime borrower. I have a mortgage through Option One a known predatory lender. However I have made all my payments on time and havnt had one problem. In one year my 2 year pre-payment penalty will be up as well as my ARM. My credit score has gone from 580 to 625. It is my understanding that the point in getting these subprime loans is to get your credit in order so in two years you can get a normal, fixed rate. Is this a correct assumption? I am asking because so many people are foreclosing on these ARM and subprime loans. Is it that these folks cant get refinanced? Will I be able to refinance? Thanks for all advice and opinions.

Answer: I'll answer!

NO!

1 - You financed 100% probably and you have no equity!
2 - Prices have fallen and not only do you not have equity, you are upside down.
3 - Even if you had equity a 620 won't do diddly in this market, you would have to come up with cash to refinance and even then your payments would be more than they are now.

Not being mean, just a reality check!

Alt+A and Option Arm Mortage Crises Yet to Come - MORE BANKER FRAUD (2 of 2)

Option Arm Subprime is a post from: Upside Down Mortgage

Question: Do you think people(buyers) or banks are to blame for the subprime crisis?

I really place very little blame on the banks. It is the responsibility of the buyer to determine what they are willing to afford for a mortgage and to determine if the price of the home is accurate. You cannot blame wall street for everything.

My 401k plan is down over 250k since 1 year ago. Should I start blaming banks for that too? This is my problem. My decision to invest, My failure to get out of the market in time.

If we start bailing out home owners that made idiotic decisions, why should I not get the same bailout for my losses?

Answer: I agree with you. People need to stay within a budget they can afford and not go through shady outfits for mortgages. All that crap that comes in the mail that promises cheap mortgages, people should know better than fall for. Only deal with reputable mortgage firms that you can trust. And, if it seems too good to be true, than it probably is.

Credit CRISIS Animation Sub Prime just PRETEXT Banks Brokers Mortgages Foreclosure Money and Debt

Banks Subprime Crisis is a post from: Upside Down Mortgage

Question: How does the global financial crisis happen?

Almost all the world has been suffering from the global financial crisis, my motherland China is no exception. There're hardly any countries could really avoid the bad effects of this crisis on their economy. The USA made the subprime lending crisis, then it spread from the USA to the Europe, then the whole world. I don't know much about economics. What factor did the USA make the crisis? How could it badly affect the global economy? Is it showing the sign of USA's recession and the rise of another power?

Answer: Globalization has taught us just how interconnected we all are, similar to cells in a human body. If you bump your leg, or your knee, the pain from this bump will be felt throughout the entire body. We as human beings are now in a similar situation whereby a crisis in the US is being felt all over the globe in seemingly every continent and country.

The blame for the crisis cannot simply be blamed on one country, or an individual, but what we have to realize is that our egoistic, appalling attitude towards each other, is the real reason for the crisis.

Our nature is exploitive of our fellow man as has been clearly demonstrated with the whole sub-prime mortgage fiasco. Lets face it sub-prime mortgage lenders were not thinking when they offered there "deals." How can we help our fellow man ?. What they were thinking was: How can we line our pockets ? and stuff our fellow man in the process! It is this attitude that is causing all of our problems and leading us into an abyss.

What humans now have to adopt is a nature that looks after it's fellow man and not one that exploits its fellow man.

Have a look at the follow links. They will explain what we need to do in order to invoke this change:

http://www.laitman.com/2008/10/instead-of-seeking-to-change-our-economic-systems-we-should-draw-the-upper-light-of-correction/

http://www.laitman.com/2008/10/humanity-is-one-integral-interconnected-organism/

Credit Crisis to Global Recession: Part 2

Global Recession Subprime Crisis is a post from: Upside Down Mortgage

As of Monday July 14th, 2008, the government has passed new laws which cause a decent amount of change within the mortgage industry and how these companies give out loans to homeowners. Even though they were passed on Monday, these rules wont take effect until October 2009 to give time for companies to transition to the new set of standards.

The concept being birthed in 2007, was in response to the treatment homeowners were facing from mortgage companies and to the foreclosure crisis that took place. It has been stated that the basis for these new rules are to protect future home buyers from mortgage companies.

The Foreclosure Crisis
Within the late 2006, the housing industry felt a large blow when a mass amount of foreclosures occurred due to rates on mortgages and also because of the fact that many of the new loans were made to individuals with either bad credit or too low of an income.

Experts believe that the basis for so many of these home loans being in place was the fact that many homeowners thought they could reap benefits when refinancing later on. Even though, their ideology failed because with the interest rates reset higher, refinancing was hard to come by which led to approximately a million foreclosures.

Mortgage lenders, banks and other financial institutions felt the impact dramatically reporting 100's of billion dollars in losses. Not only was the housing industry devastated, but the US economy in a whole was also rocked by the housing crisis. These issues led to the US Federal Reserve cutting down interest rates and to the creation of the economic stimulus package which was passed by the government in 2008 to help offset debt and to spur on economic growth and instill belief in the US economy.

The Economic Stimulus Package
The Economic Stimulus Package of 2008 was passed in order to restore good faith within the economy. Its main purpose was to provide assistance to low and middle income citizens. From the economic stimulus package, all recipients were set to receive at least $300 and an extra $300 per dependent under the age of 17. The maximum pay that a person would receive would be no more that $600. Any individuals with an annual income over $75,000 would not receive any monetary funds except for those who had qualifying children.

In addition to citizens, the law also applied to businesses offered them certain tax incentives. Those include tax deductions on eqiupment meant to improve ones business and an increase in how much a business can deduct in business expenses.

In an article by James Temple from SF Gate he lists several key changes in mortgage practices that was just passed on Monday.

General Mortgage Rules:
- Prohibit creditors and mortgage brokers from coercing appraisers into misstating a home's value.
- Require additional information about rates, monthly payments and other loan features in all advertising.
- Ban seven deceptive or misleading advertising practices, including calling a rate or payment "fixed" when it can change.

Lending Rules For Higher Priced Subprime Loans:
- Force lenders to consider a borrower's ability to repay loans from income and assets other than the home's value.
- Require lenders to document a borrower's income and assets.
- Ban penalties for borrowers who pay off loans early, if the payment can change in the first four years. In certain cases, a prepayment penalty period can't exceed two years.
- Mandate that creditors ensure certain borrowers set aside money to pay for property taxes and insurance, by establishing escrow accounts.

In reference to the new mortgage rules, many claim that these rules will assist many homeowners and aspiring homeowners from companies that prey on them to make a profit despite the views on their practices are questionable. Yet with this belief intact, many individuals still hold firm in their opinion that these rules are just a tip of the iceberg and much more needs to be done within the housing industry and in relation to some of the illegal practices carried on by some of the lending companies.

About the Author:

Article provided by S-Proprietor.com. A website dedicated to entreprenuers, work at home business opportunities and resources.

Source - Mortgage Reconstruction 2009: The Time For New Mortage Laws

Economy and Real Estate by Hans Boysen August 28, 2009

Subprime Lenders 2009 is a post from: Upside Down Mortgage