Mortgage Rescue Plan Approved by Senate
Filed under: Mortgage News | Tags: Mortgage Rescue Plan Approved by Senate
Leave a Comment Pursuant to this plan, the Federal Housing Administration would back mortgages designed to be more forgiving for those who are being crushed under the weight of their current housing payments. The bill would also allow banks to recover a certain amount of the money that they would have lost by dealing with so many expensive foreclosures. The plan will help almost an estimated half a million homeowners.
The plan is riddled with tax breaks and help for first-time home buyers. Both Democrats and Republicans banded together to pass this bill with an overwhelming 63-5 vote. However, the Bush administration has already promised to veto the bill, claiming that the plan helps lender more than it does borrowers. There are still too many disagreements among the parties, and Bush’s promise virtually assures that the bill will not be passed into law without certain revisions, despite the continuing struggle amongst homeowners.
Foreclosures: Profiting from Your Pain
Filed under: Mortgage News | Tags: profiting from your foreclosures
Leave a Comment I’m generally not one for a sensationalist piece, but this one is a bit interesting. Apparently this guy is scouring the country for foreclosed homes, waiting until the bank buys the home (nullifying any liens on the property), and swooping in to take them off the bank’s hands, who are usually all to happy to get rid of their new problem.
No doubt there are countless investors who are doing the same thing all across America. What’s interesting is how easily he is able to do it. He signed up for a $49 a month plan to access the MLS, does his own research and using his own line of credit. By using comparison data, he finds houses that are grossly under-priced due to foreclosure and scoops them up. No emotion, no attachment to any individual home, just pure numbers.
Granted, you have to have (1) be able to get credit and (2) have a lot of time on your hands to find the deals and do the research, but nonetheless it appears that not everyone is hurt by the current market.
As a side note, AOL seems to pitch this guy as an unfeeling opportunist who is profiting from other people’s pain, which is of course nonsense. The guy didn’t cause the foreclosure, nor did he help it along in any way whatsoever. He is just putting himself in the right place at the right time.
Another Unfortunate Consequence of the Mortgage Crisis
Filed under: Mortgage News | Tags: credit card limits decreasing, mortgage crisis
Leave a Comment In order to further reduce their risk, lenders are lowing credit card limits, reducing the number of allowable balance transfers, increasing interest rates, and generally limiting credit lines. They are doing so in response to more and more people relying on credit cards to pay their bills during our slow economic times. Some are saying this is a good thing; if borrowers have less credit available to them, they are less likely to overextend themselves.
Unfortunately, this is a load of crap. The damage has already been done, and lenders are doing nothing more than trying to save their own tails. The credit limitations are actually really hurting people. For example, let’s say you have a credit card with a $15,000 limit on it, and you have a $6,000 balance. If the credit card company lowers your limit so you won’t “overspend,” you will then have let’s say an $8,000 card with a $6,000 balance. This drastically increases your “credit utilization rate,” which is an important factor in determining your credit score. This in turn makes you less able to secure credit, and makes the credit you can get cost you more.
So, we continue the downward spiral of defaults leading to less credit, leading to more defaults, ad infinitum.
The Right Niches at the Right Time!
Filed under: Mortgage News | Tags: current lender niches, fico score
Comments (1) We’re still doing loans in declining markets, while other lenders have run scared!
- Super competitive I/O’s. Awesome fixed rates, and still offering Option ARMS/Hybrids.
- We qualify debt ratio on the Interest Only payment, not the fully amortized payment!
- LOAN AMOUNTS TO $ 3 MILLION!!!
- Only 1 appraisal required for loan amounts to $ 3 Million.
- Up to 45% DTI allowed on owner occupied properties 80% LTV and below with 680 FICO
- 2×30 Mortgage late’s allowed in the last 24 months, 0×30 in the last 12 months.
- 12 months bank statements as Full documentation for self employed borrowers.
- For Asset verification on Full Doc, we only require 2 Months bank statements to verify 2-4 months PITI, principle, tax and ins.
- Gift equity allowed for full doc purchases ( NO MONEY DOWN )
- Permanent Financing out of Construction loans considered a rate & term and not cash out!!!
- Full Doc on 1-4 Units Investment properties to 70%. No limit on amount of properties FINANCED by 1 investor.
- Borrowers can finance up to a total of 4 properties with Downey or up to $ 2 Million total in loans. ( ask for more details )
- No Seasoning required for R/T refinances, one day on title, one day out of purchase. WE TAKE CURRENT APPRAISED VALUE!!!
- Payoff of seasoned 2nd TD considered R/T(must be 12 months old, draws with the last 12 months okay)
- Non-occupying co-borrowers can help you qualify (blend ratios)
- Non-Applicant spouse income can help you qualify regardless of their FICO score
Shady Credit Card Companies Are Taking Advantage of the Information Age
Filed under: Mortgage News | Tags: information age, Shady Credit Card Companies
Leave a Comment The amount of information that companies can acquire about you with today’s technology is astonishing. Google probably knows as much about you as your own mother (perhaps more for those with less than tasteful Internet hobbies). Now it seems that certain unscrupulous credit card companies are monitoring your purchases and selectively penalizing you for purchases at certain venues.
Granted, the company in question, Compucredit, is known as a “subprime credit card” vendor who extend credit oportunties to slightly riskier propositions. Many of us have held a credit card such as one from this company during difficult financial periods in our own life. They are the ones who seem to invent a new fee each month, charge you to pay your bill, have astronomical interest rates and seem to know just when to insert a fee onto your bill so that your balance will be pushed over the limit (causing yet another fee).
Nevertheless, it seems as if CompuCredit has brought suspicious behavior at a credit card company to a whole new level. According to Business Week, the company is curtailing credit lines for people who use their Aspire Visa in certain places, especially tire repair shops, bars and massage parlors.
Of course, certain companies make financial decisions regarding your life based on your chosen activities often; you may not receive a (decent) life insurance policy if you choose Aviation as a hobby, for example. The difference here is that CompuCredit didn’t disclose that it uses certain criteria, and instead touts that it offers credit for anyone for any use.
The information age is an amazing place and an incredibly scary place, all at once. It is probably only a matter of time before certain Big Brother tactics are commonplace in our daily life. Scary thought.
Mortgage Applications Continue to Decline
Filed under: Mortgage News | Tags: mortgage applications continue to decline
Leave a Comment Gunshy lenders are as hesistant as ever to provide financing opportunities to borrowers. Mortgage applications have continued to decline, falling another 9% just in the last week. We seem to be in a bit of a downward sprial, credit tightening up as rates cotinue to increase, causing potential borrowers to hold off their purchases. Foreclosures continue to rise and the cycle continues.
Homeowners are still losing their homes at record rates, the highest in thirty years, as rates continue to rise for fifteen and thirty year fixed mortgages and one year adjustable rate mortgages.
We can expect the economic slump to continue as long as lenders stubbornly refuse to lower rates below the critical point which will kickstart our economy.
Mortgage Rates Still High After Subprime Mortgage Crisis
Filed under: Mortgage News | Tags: Mortgage Rates, subprime mortgage crisis
Leave a Comment Mortgage rates are stubbornly refusing to fall in the wake of the subprime mortgage crisis, despite countless state and federal initiatives intended to lower rates. The Federal Reserve has drastically reduced interest rates, and there are countless homes across America which are available for sale, many at foreclosure prices. Yet, lenders are still wary. The Chicago Tribune says that the hovering interest rates “defy conventional wisdom.”
The article claims that interest rates are still too high for newer home buyers, and even those looking to move into something a little more accommodating for their families. Because of their stubborn refusal to fall to normal recovery levels, high interest rates are exacerbating the economic stagnation, as the remaining lenders who didn’t succumb to the subprime mortgage crisis refuse to loan money.
All the big companies predicted that the credit crisis would long be over by now. Morgan Stanley and Goldman Sachs both used sport’s analogies to imply that we were witnessing the final stretch (if I may) of the disaster. Yet, here we are, still in post-crisis limbo. Time may be the only medicine for our economy’s gaping wounds, but don’t expect that to console America’s former homeowners.
If you are tired of hearing about the subprime mortgages crisis and would rather read something interested about the cause of the whole mess, read this scathing opinion.
AIG Investigated for Subprime Mortgage Fiasco
Filed under: Mortgage News | Tags: AIG federal investigation, AIG overstated subprime morgages
Leave a Comment AIG is being investigated for potentially skewing the value of certain swap portfolios which were backed by subprime mortgages. Attorney General Michael Mukasey claims that they misrepresented the worth of those contracts. AIG claims that the incorrect appraisal was simply due to the difficulties of valuing complex portfolios and because of the subprime mortgage crisis. Evidently, this is the most common defense to a charge of this nature.
Is the Subprime Mortgage Crisis Helping Third World Countries Develop?
Filed under: Mortgage News | Tags: mortgages in Africa, subprime mrotgage crisis
Leave a Comment Is the subprime mortgage crisis actually helping the economies of other less developed countries? According to this article, that may very well be the case. As we all know, the credit collapse in the Western World has brought our economy to a grinding halt, into what some might call a recession. As such, lenders who would be looking for business in the United States are looking to countries that would never have been a likely candidate in the past.
According to this article about the subprime mortgage lending crisis, the monetary losses that have and will result from the credit collapse are going to be astonishingly large. Countless Americans have been ousted from their properties, and this trend will no doubt continue for some time. The result has been that lending companies are looking elsewhere to create business.
Apparently, Africa is one such place that is benefiting from this trend. Although the African market is still a minuscule piece of the global pie, that chunk is rapidly growing. Ironically, lenders are running into some of the problems that we outlined on our page regarding how to improve your credit score. Many potential borrowers in Africa do not have a credit history, since they have been working on street corners or farms their entire life. “A tiny proportion of people have a bank account and an even tinier proportion have a product like a mortgage.”
The whole thing is a giant crap shoot. Given the complete dearth of information regarding African borrower’s credit histories, lenders have no idea about their potential to repay the loans. If they are too liberal and unrestrained in their lending, they may end up creating another subprime mortgage crisis in Africa, similar to the one we are currently experiencing in the United States.
The Subprime Mortgage and Loan Crisis
Filed under: Mortgage News | Tags: subprime loan crisis, subprime mortgage crisis
Comments (5) In this utterly confusing article, Keith Corbett commented on the subprime mortgage and loan crisis and the possibly causes. He attempts to separate the “myths” from the “facts,” claiming that most people erroneously believe that
-Irresponsible people caused the subprime mess
- Subprime loans increased home ownership
- People bought too much house
He claims that the realities are: (1) there are multiple reasons for the subprime mortgage crisis, (2) loan marketers were too aggressive and (3) the riskiest loans went to the most vulnerable borrowers.
The reason I say this article is confusing is because Mr. Corbett claims to dispel the “myths” with his “facts,” when really they are not mutually exclusive. In fact, they are entirely related. Let’s break down his logic, shall we?
(1) There are multiple reasons for the subprime loan crisis.
- Well, no kidding. In fact, if you look at the “myths,” there are a few of them. Hence, multiple reasons. What exactly did he disprove here?
(2) Loans were marketed too aggressively. Well, that is perhaps true. But loans will always be marketed aggressively when the market is favorable, because lenders make money from lending (all things being equal), and brokers make money from closing loans. The fact that lenders may have also been irresponsible does not mean that the borrowers were not also irresponsible, or that they did not buy too much house. Perhaps it is more accurate to say that the borrowers were ignorant rather than irresponsible, but such is life (read further down for action that California is taking against loan officers who are a little too aggressive).
(3) He says finally that the riskiest loans went to the most vulnerable borrowers. What exactly does that mean? In a financial sense, “vulnerable” can only mean borrowers who were in a shaky financial situation, with either bad credit or low income compared to the loan they took out. Thus, this correlates with both lenders and borrowers being irresponsible, borrowers buying too much house for their current income.
So really all these reasons are related, and no myths were dispelled whatsoever. As for the second “myth,” Corbett claims that subprime mortgages actually decrease homeownership, which would seem to be extremely counterintuitive, while offering no evidence. Perhaps he is correct, perhaps he isn’t; but making a blanket statement without any evidence is not very persuasive.
Regardless of the reasons, the subprime lending crisis is very real. Some claim it is just the result of normal market fluctuations, which may be partially true, although not entirely. The federal government and the various state governments have been scrambling to avert complete disaster for the last few months now.
In the latest attempt at homeowner relief from the subprime mortgage crisis, California seems to have taken the most aggressive action against unscrupulous lenders. The legislation promises to eliminate many of the bonuses which are given to mortgage brokers upon closing loans, in order to deter them from lending to those who might not be making the best financial decision (i.e. “risky borrowers”).
In fact, this legislation rails against many of the reasons we spoke about above as to why there was a subprime loan crisis in the first place. Loose underwriting standards and credit bureaus looking the other way with loans that should not have been given in the first place. It also brings up an important point, indicated that putting too much of the blame on borrowers, rather than aggressive lenders, is misplaced. Supporters of the legislation claim that even sophisticated borrowers are unable to understand all the terms and ramifications of a loan. Perhaps we need more information that is considered mandatory to disclose, such as with car dealerships, in order to avert another subprime mortgage crisis?
Unconventional Lending and the Subprime Loans Crisis
Filed under: Unconventional Mortgages | Tags: credit score, subprime lending, subprime loan, subprime loans, unconventional lending
Comments (2) I get asked on almost a daily basis what exactly unconventional lending means. Many people have never heard of an unconventional mortgage or an unconventional loan. Basically, most of these types of loans fall under the category of subprime loans.
Normally, loans are offered at the prevailing interest rate of the time when the borrower is approved for such a loan. However, for whatever reason many borrowers do not meet the credit score requirements for a certain loan amount at a certain interest rate. But that person may be very interested in obtaining a loan of that amount, whether it be for a new house or a new business venture. Unconventional lending offers them the potential ability to acquire such a loan amount at a higher then prime interest rate. This is known as a subprime loan.
Subprime loans are generally only available during strong economic periods. This is exactly what we witnessed a few years ago. Unfortunately, when the economy rapidly weakened, the subprime lending market dried up, and all the variable interest rates were jacked up. Most homeowners who took out a subprime loan are not able to refinance until their credit is a little stronger. As such, many people are now stuck with an interest rate which is spiraling out of control.
Subprime loans are the first type of financing to dry up when the market collapses. This makes perfect sense; when the economy is good, unemployment is down and people are being paid more, they are less likely to default on their debt. When the opposite is the case, people with lower credit scores become much riskier investments.
So, unconventional lending can be a very neat tool for getting someone into a home who is a slightly riskier investment for a lender. But when things go sour, the funding dries up and subprime loans can be very difficult to obtain.
Adjustable-rate Mortgages are for the Birds
Filed under: Mortgage News | Tags: adjustable-rate mortgages, ARM's, LiBOR rate
Leave a Comment According to Bloomberg news, Adjustable-Rate Mortgages (ARM’s) are going out of style nowadays in the United States. No surprise there, given the incredible number of people today who are losing their homes due to soaring interest rates. In fact, the LIBOR rate rose approximately two-thirds of a percentage point just last month.
Many borrowers choose adjustable-rate mortgages in order to take advantage of the lower interest rate that it inially offers, and corresponding lowers monthly payment. However, this initial rate is generally only secured for a limited amount of time, at which point the interest rate is subject to increase or decrease once a year, every year.
For example, a 3/1 ARM will have a fixed rate for three years, at which point it can be adjusted once a year for the life of the loan. Many people purcased homes using this type of Adjustable rate mortgage just a few years before our current recession, only to be hit hard by the bursting h ome bubble and subsequent rise in interest rates. Many people, and probably some current readers of this blog, spend many a sleepless night worrying about which way the LIBOR rate is going to go.
Adjustable-rate mortgages can be a great way to get into a home with a lower monthly payment. But the current market crash has caused many people to stay away from there for good. In fact, more than three hundred billion dollars of home loans will be refinanced by the end of next month, and ninety percent of those people will chose a fixed interest rate, according to Fannie Mae.
Foreclosure Help from the Senate
Filed under: Mortgage News | Tags: economic stimulus rebate, Federal Housing Administration, FHA, foreclosure help, refinancing mortgages
Comments (2) As we discussed in the last few posts, the vast majority of mortgages taking place this year have been refinancing mortgages. On this note, we have some good news. Just a short while ago, the Senate began considering a bill that would provide $300 billion in loan availability to the Federal Housing Administration (FHA). The money would be primarily available for those seeking to refinance their mortgages.
A similar bill had already agreed on a similar measure a week ago, and a few days ago this bill passed the Senate. Senators who support the bill claim that it will help half a million Americans who are close to losing their homes. Many claim it has come none too soon. The foreclosure situation has shown no signs of improvement since the downward spiral began late last year.
At the core of the bill are lower interest rate, government-subsidized mortgages for five hundred thousand struggling homeowners. This measure, coupled with the economic stimulus rebate, is another example of democrats and republicans banding together in a time of crisis. Can we expect more of this bipartisan cooperation? Let’s hope so, for the sake of dragging ourselves out of this recession.
Foreclosure Prevention Tool
Filed under: Mortgage News | Tags: FHASecure, Foreclosure prevention tool
Leave a Comment As we’ve been talking about for some time now, the incredible fluctuations in variable interest mortgage loans have set off an epidemic of foreclosures across the nation. Various states have attempted to implement emergency measures to stem the rising tide of foreclosures. Now a Federal agency may be stepping in as well.
The Federal Housing Administration (FHA) and President Bush are claiming they have already instituted a program that is the solution to our problems. They claim that FHASecure is the solution, a program that originated last August which allows switching from high interest variable mortgage rates to fixed interest rates. FHASecure was meant to rescue homeowners who have been crushed under the interest of their rising interest rates.
As we mentioned before, mortgage applications are on the rise, which would seem to be a good statistic. However, we mentioned in that short post that these are not your conventional mortgage applications; they are for refinancing. This is corroborated by the fact that foreclosures have doubled in the first quarter of this year, and more than two hundred thousand Americans have been forced to move from their houses this year.
Whether or not this FHA program will end up being a foreclosure prevention tool remains to be seen. It is a certainly a step in the right direction.
Reasons You Have a Bad Credit Score
Filed under: Unconventional Mortgages | Tags: credit report, credit scores, why you have a bad credit score
Leave a Comment We recently made an addition to our site which lists the top eight reasons why your credit score may not be where you want it to be. For better or for worse, our credit score and our credit report are more or less the sole determinants of whether or not we will be able to make the important purchases in our life. As such, it would behoove you to learn as much as you can about the factors that go in to determining your credit score, and do as much as you can to keep it as high as possible.
Check out our new addition, the top eight reasons why you have a bad credit score; and while you’re at it, browse the rest of our credit education section which is currently being updated and revamped.
President Bush aiding foreclosures?
Filed under: Mortgage News | Tags: government backed mortgage, president bush foreclosures
Leave a Comment Is President Bush throwing a monkey wrench in Congress’ plan to bail out those in the middle of foreclosures? It would seem so at first glance (although it is a bipartisan disagreement, so who knows). Two bills were recently accepted by the House of Representatives which were designed to bail out many in the midst of a foreclosure crisis. President Bush is now threatening to veto.
The first bill is intended to assist certain families from being foreclosed on, attempting to help them refinance with a government backed mortgage, as well as extending the reach of FHA programs. Supporters of the bill argue that foreclosed homes are a problem for everyone, not just those who have lost their home; they bring down the overall value of neighborhoods and further injure an already fledgling economy.
The second bill plans to deal with this issue, making $15,000,000 in loans available to states to move in on vacant homes in order to revamp them, stopping the downward spiral of declining prices in many communities.
President Bush considers both the bills nothing more than a bailout, and disapproves of the use of taxpayer funds in an attempt to stall the nationwide foreclosures. There is also resistance from the Senators from states which are not rife with foreclosure.
