Upside Down Mortgage

Posts Tagged ‘realestate’

Subprime Financing

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.

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Prime Vs Subprime 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.

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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

Mortgage Fraud Lawsuits

Question: who is responsible for a fraudulent appraisal?

Our mortgage was approved based on a fraudulent appraisal. We signed the note believing we had 50 thousand in equity, now we find out that we actually owe more on the home than it is worth. Does anyone know of a lawsuit that has gone in favor of the homeowner in this circumstance? I believe the broker shoud be held responsible, as they are the ones that hired the appraiser, who, by the way, is not allowed to renew his license due to another case of fraud.
appraisal saying home is worth 185 thousand, new appraisal? 95 thousand, sorry I know the market is bad, but my house did not depreciate 90 thousand dollars., the comparable photos do not match the addresses, my home is 100 yrs old, the comparables say they are the same age, when upon my investigation, the homes are actually brand new. I signed these papers believing I had 50 thousand in equity, when in reality, I have $0.

Answer: Sue everybody in this order: The Appraisal company, the appraiser themselves, the Broker, and the Mortgage company. Go to your state's Attorney General's office and file a complaint for everyone of these entities. There appears to be so much fraud in your case that you need to pursue this.

Depending on your area, the value of your home may have dipped, even significantly, but not 90 k...

Good Luck...

FHA Shady Mortgage Fraud National City Part 2