Mortgage | Loans | Credits

Are Real Estate Bank Owned Homes a Dime a Dozen?

2009-07-06T22:38:00.000-07:00

Evaluate what you need accordingly starting by assessing your personal finance, weighing in home equity loans pros and cons, debt consolidation, checking home mortgage rates, refinance mortgage rates as well as contemplating an effective strategy for your business & money.

It's not much different when buying a foreclosed home compared to a foreclosed house, except it's a lot less expensive. Set realistic expectations on what you can afford, look at what you can afford to pay monthly in case you don't sell the property right away. It might include insurance, home improvement, house repairs, and what not. Just make sure it is within your budget.

Among all things down payment should be as follows; 10% is usual for those who have good credit, 20% if you have an okay credit or if you'd rather not pay mortgage insurance. If you have a flimsy credit your percentage will retroactively vary. Either way your down payment will be based on whether you make this real estate investment as your primary residence, a second home or a rental. Loan modifiers can be based on your credit score, you can check it for free once a year. You can do this by going to http://www.experian.com.

Credit scores range from 300 to 850. Needless to say you want to have your score as high possible.

A simple advice when applying for your financing, look at your credit and verify anything you see as a mistake. You might as well check a years old account statement for trivial things such as late payment on a revolving account or credit card. It would be your prerogative to dispute any inconsistencies, simply dispute it, “Verify or Remove”

The average American's credit score is 723. Having a high credit rating can yield better interest rates on credit cards, car loans, home equity loans, mortgage and can ideally give you a better overview of your financial status. A few key lee way factors that affect your score, check your credit report for accuracy.

1.Pay on Time

2.Use a variety of credit

3.Keep accounts open

After evaluating these 3 factors, you have to figure the payment. There is a way to do this with a math formula, but for the sake of those that prefer a quick and easier method you can go to a number of websites that offer free amortization schedules. One website is Web Math. Http://www.webmath.com/amort.html

These are very simple to use and will yield an accurate number. Most lenders will not charge Mortgage insurance if you put 20% down. Inquire about which taxes your are required to pay, you can do so buy asking a real estate agent or inquire from a Title Company in your area. Inquire from the company you would use for your home owners insurance and ask what to expect. (Here's a thought; you might want to look at any mortgages you have currently to see if you have 20% equity to loan value. In case you do, you can discuss it with the lender and be amazed at the potential difference it makes each month.

With careful consideration buying a new home will be an enthralling experience, be careful not to be swayed by impulse buying. Good things come to those who wait, with so many bank owned homes in the market you should take time to choose wisely. After selecting the home you would like to purchase you can talk with a real estate realtor, a pre-approval letter from a lender will be quite suitable.

Just inquire about several quaint details about the home, is it in good condition, where it is located, will it be suitable for rent. Inquire if there is a commodity regarding rental market in the area. Work with your realtor for a bit while keeping a keen eye on things on your own as well. Keep in mind that real estate agents get paid on what they sell. Positive cash flow should be our top priority; ideally it means that there is more money coming in each month from the rental property as opposed to the home maintenance and improvements you put in to it. With the influx of REO (Real Estate Owned) Homes flooding the market you can essentially buy a house that would carry itself from the start.

Orange County Loan Modifications

2009-05-26T21:45:00.000-07:00

Loan Modification refers to an amendment in the term of repayment or on the interest to be charged by the lender in case the borrower is unable to repay the loan in the stipulated time frame. Loan modification as a concept has gained great acceptance and applicability in recent times, in the wake of the real estate bust conditions as well as the worldwide recession that has taken its toll on the loans and mortgage repayment abilities of millions of home and property owners. For instance, in the California region, there have been many reports of Orange County Loan Modification as this particular California county has been hard hit by the less than encouraging real estate conditions.

Loan modifications occur when property owners face bankruptcy and have a distinct inability to repay their home or real estate loans, leading to a situation where such folks make an appeal to the bank or lending institution to re-negotiate the terms of the loan to facilitate re-payment. Re-financing is a facility that only some people can avail of, on account of which loan modification is sought. If the financial woes continue the home-owner may have to do a foreclosure or a short sale at a loss in order to make good the payments owed to the lending bank of financial institution. in California, the Orange County has also been hard hit by falling real estate prices, leading to situations that home-owners are finding that they are having to pay high mortgage rates for homes that are greatly reduced in value. This is helping to greatly increase the demand for Orange County Loan Modification.

A case in point here is the instance of Laguna Beach home owners in the famed Orange County, CA. A lot of home-owners with pending mortgages are requesting banks, through their attorneys, to lower the interest rates or the bank repayment balance so that they can make good the monthly mortgage payments while also taking care of their legitimate monthly expenses. This generally involves making a detailed loan modification proposal to be submitted to the Loan Mitigation department of the lending company or bank. This falls under the purview of Orange County Loan Modification.

Article source

Adjustable Rate Mortgages and Its Features

2009-05-26T21:42:00.000-07:00

An adjustable rate mortgage, or ARM as it is popularly known as, is a mortgage loan[1] in which the interest rate on the note[2] is periodically adjusted based on a variety of indices[3]. Different lenders use different indices to calculate their interest rates, or their adjustable rates. Some of the commonly used indices are the 1-year constant-maturity Treasury (CMT) securities, the Cost of Funds Index (COFI), and the London Interbank Offered Rate (LIBOR). However, a few lenders prefer to use their personal or own indices to determine the rates. Lenders may choose to do this to avail a steady margin from the borrower, and their own cost of funding is related to the index. As a result, the payments made by the borrower may also change over time in accordance to the fluctuations in the resultant interest rates. Typically, the adjustable rate mortgages are characterized by their index and their limitations on charges or caps[4]. In many countries, the adjustable rate mortgages are the standard means of availing finance by offering the homes as securities, and in such cases, the credit facility is simply referred to as a mortgage.

Basic features of ARM or adjustable mortgage
The main features of ARM are:

1. The initial interest rate

It is the rate of interest associated with the ARM at the time of conception of the loan facility. The initial ARM rate is generally well below the existing current ARM market rates charged during subsequent years.

2. The adjustment period

This is the actual length of time, of the total loan period of the ARM, which is scheduled to remain constant or unchanged. The interest rate is reset at the end of the adjustment period, and the monthly loan repayment options are recalculated.

3. Index rate

Majority of the lenders prefer to associate the ARM mortgage interest rates changes with changes occurring in a particular index. As stated previously, lenders generally set the ARM rates on a variety of indices. The most common index rate used is one, three, or five years treasury securities index. Another commonly used index is the national or regional average cost of funds to savings and loan associations index.

4. The profit margin

The profit is calculated by adding a certain percentage of the loan amount to the amount of the base index rate. The difference of the net payable loan amount minus the base index amount is the actual profit enjoyed by the lender in an ARM.

5. Adjustments and interest rates

ARMs provide a unique adjustment period for borrowers during the inception of the loan facilities. The rate structure can change at the end of the adjustment period. However, several lenders provide more than one adjustment periods. It is possible for the borrowers to change certain aspects of the net payable interest rates with each new adjustment period. So there is an advantage to avail different interest rates with individual adjustment periods. If the borrower is market savvy, he or she can select different indices or interest rates and save money, provided the lender agrees to the rates and indices.

6. Initial discounts

Initial discounts are interest rate concessions, and are very commonly used as promotional aids to attract customers for ARMs. Such discounts are only offered during the first year of the ARM loan. The discounts help to reduce the interest rate below the prevailing rate for a certain duration of time so the borrower can save some money through temporary reduced rates.

7. Negative amortization

Ideally, the net chargeable interest rate decreases with a regular payment of monthly dues against any credit borrowings. In case of mortgages the rates decrease over a period as loan pay offs occur. However, in case of ARMs, the reverse happens, and the mortgage balance actually increases whenever the ARM base index rates climb up. As the ARM base index increases in magnitude, its associated interest amount and repayment cap also increases, and the borrower ends up paying a greater amount to redeem the loan. This is a negative feature of ARMs and the borrower may suffer a certain loss over the loan tenure until redemption occurs.

8. Conversion to a different loan format

ARMs have an agreement according to which the borrower can convert the ARM to a fixed-rate mortgage at designated times. This is often a fall back facility in case the ARM does not work in the borrowers favor and the buyer wants to revert to a safe option of a steady rate of interest.

9. Loan prepayment
In majority of loans and credit facilities, lenders prefer the borrower redeem their dues as soon as possible, to recover the original lending amount. However, in case of ARMs a prepayment can result into a potential loss for the lender in the long run. So lenders generally include a clause in the ARM agreement which may force the buyer to pay special fees or penalties in case the borrower decides to pay off early. ARM prepayment terms are usually negotiated in the beginning before the credit facility is availed.

Article Source: http://www.articlesbase.com/mortgage-articles/adjustable-rate-mortgages-and-its-features-935277.html

Should I cash out equity in my home to pay it off my high interest credit card balances?

2009-05-26T21:33:00.000-07:00

Using the equity in your home to pay off your high interest credit cards may seem like a no brainer. After all doesn’t it make sense to lower you interest cost from 18% to 7%? Well maybe, if that was the only change that happens when you reposition that debt from an unsecured credit card to a secured mortgage debt. Before you rush out to refinance those high interest credit card balances consider the follow points.

Point 1

You are converting an unsecured debt into a secured debt. Okay, so what? Well consider that if you lose your job or get into deeper financial trouble that unsecured credit card debt would now tied to your biggest asset. Your home! Remember that if you now fail to pay the new secured debt (a new second mortgage), you may loose your home through foreclosure.

Point 2

Ask yourself if you clear your credit card balances to zero will you be disciplined enough to not run the balances right back up? If you have even the slightest doubts that you can be disciplined enough to keep the balances low DON’T DO IT. You will end up in a deeper hole. Remember when you find yourself in the hole STOP DIGGING!

Point 3

Some financial advisers will tell you that moving you credit card debt to a second mortgage or Home Equity Loan may be tax deductible. While it is true that interest on your home loan may be tax-deductible and interest on credit card debt is not tax deductible this is a terrible reason to restructure your debt in this fashion.

These are just three points to consider before converting credit card debt to a debt secured by your home. It is always a great idea to seek advice and council from a trusted professional such as your tax adviser or attorney before you sign on the dotted line.

Article Source: http://www.articlesbase.com/mortgage-articles/should-i-cash-out-equity-in-my-home-to-pay-it-off-my-high-interest-credit-card-balances-936220.html

Is The Housing Bailout For You? - Loan Modification Help Center

2009-05-26T21:28:00.000-07:00

The new housing plan announced by President Obama last week has two main parts. First, there is a $75 billion loan modification plan and, second, there is a program that helps borrowers who are not in danger of defaulting refinance their mortgage.

These are some of the key questions to ask to determine if you can benefit from the plan:

Do I have to fall behind on my loan payments to be eligible for a loan modification?
No. Borrowers must simply demonstrate that they are in danger of falling behind on their mortgage and that they don't have sufficient income to make future mortgage payments. Borrowers with ballooning mortgage payments or interest rates that are resetting may benefit from the new plan.

What are the loan modification requirements?
To be eligible for modification under the plan, the loan must be a first mortgage on the borrower's primary residence. Borrowers must currently be paying more than 31% of their monthly gross income toward mortgage payments. Jumbo loans that exceed Fannie or Freddie loan limits are not eligible. Ultimately, your eligibility will be determined by your mortgage lender.

What if I am "under water" and my mortgage is more than the value of my property?

As long as the amount owed on a first mortgage does not exceed 105% of the home's current value, borrowers with limited equity can refinance into a 30-year or 15-year fixed-rate mortgage. This refinance option is open to only to borrowers with conforming loans that are owned or guaranteed by Fannie Mae or Freddie Mac. Borrowers must show that they are current on mortgage payments and that they will be able to meet the new mortgage payments.

How do I know if my mortgage is owned or guaranteed by Fannie or Freddie?
The White House will release full eligibility details on March 4, when the program begins, and it is recommended that borrowers contact their lender at that time to see if their mortgage is owned or guaranteed by Fannie or Freddie.

Does my lender HAVE to participate in the program?
No. Participation by lenders is voluntary, but the government provides subsidies to encourage lenders to modify loans. For example, mortgage servicers receive $1,000 for each loan modification and can also get another $1,000 annually for three years if the borrower stays current on the loan.

Article Source: http://www.articlesbase.com/loans-articles/is-the-housing-bailout-for-you-loan-modification-help-center--792060.html

Mortgage Fraud Bill Signed, Sealed & Delivered

2009-05-26T21:25:00.000-07:00

Two bills designed to address some of the problems resulting from the economic crisis have been signed by President Obama. The first deals with mortgage fraud and the other with helping families who are involved in a foreclosure situation save their homes.

Look out rip-off artists, enforcers of the new mortgage fraud bill means serious business. Almost half a billion federal dollars has been authorized to spend on targeting charges of mortgage fraud. Agencies the likes of the Secret Service, U.S. Postal Service and HUD are all getting additional funding to increase their security measures.

The Fraud Enforcement and Recovery Act now sanctions the government to go after companies or individuals currently out of reach. Currently, an incidence of mortgage fraud can result in investigation, prosecution, civil penalties and prison time at a federal level, opposed to the prior gentler state penalties previously enforced. This new Act applies to all types of mortgage
fraud, no matter how minor the offence.

In the past, these schemes defrauded home owners, realtors, lenders and builders out of billions of dollars each year. The FBI intends to send a message that mortgage fraud will not be tolerated and it is expected that offenders will receive stiff penalties in order to set an example to others.

The second bill, simply entitled, "Helping Families Save Their Homes Act," is intended to simplify the process for homeowners to receive foreclosure financing and modifications to existing loans. It also makes it easier for the lender to offer these types of options and hopefully prevent an impending foreclosure.

The new law also offers protection for renters who find themselves living in a home whose owners are facing foreclosure. Under the old rules, tenants would have to move immediately following foreclosure, now they have the option to continue renting for a term negotiated with the lender. This makes sense on so many levels. Now hundreds of families who otherwise would have found themselves on the street, still have homes. Lenders no longer have to deal with the problems associated with the upkeep of an empty home. Hopefully this will reduce occurrences of complete neighborhoods of foreclosed houses sitting vacant and facing ill repair and vandalism. In many cases, reliable tenants are happy to stay on and maintain the property.

The law provides additional homeless relief, makes better use of local organizations in this role, and allows them more latitude when allocating federal funds for assistance.

Part of the reason that mortgage fraud became so widespread was attributed to the lack of a single watchdog affiliation to oversee the the sketchy subprime loan offerings, underwriting and lending schemes. Instead there were a number of small agencies, each only seeing part of the problem, but no single unit had the power to actually deal with the issue as a whole. Currently, the Obama administration has a plan in the works to establish a single federal agency designed to watch over everyone involved; from the small brokers to the major lenders.

Article Source:http://www.articlesbase.com/mortgage-articles/mortgage-fraud-bill-signed-sealed-delivered-938546.html

The Business Of Loaning Money

2009-05-26T03:27:00.000-07:00

Most lending institutions are in the business loan money for home buyers or businesses, and have no desire to go through the repossession process for someone who has defaulted on their mortgage. The process of booting someone out of their home or commercial process can be long and costly procedure and working through financial problems with the current owner is often cheaper and easier than taking ownership of a property.

However, in many situations lenders find that repossession may be the only option they have in securing repayment on the defaulted loan and begin the steps to claim the property as their own. Once the process has begun, there are avenues for the debtor to follow in the courts to attempt to retain ownership, but the stipulations are spelled out ion law, and without meeting those requirements, the borrowers will have trouble maintaining rights to the property.

Typically, once a foreclosure order has been sought by a lender, the borrower will have a set amount of time to bring the mortgage up to date, before the entire unpaid balance comes due and payable. Once that time has passed and the mortgage remains in arrears, the entire balance must be paid to stop the repossession proceedings. Since this is unlikely to happen, the courts sometimes give the owner time to sell the property, if it can show that selling the property will provide sufficient funding to satisfy the mortgage agreement.

If the deadline to sell is not met, the borrower can appeal the foreclosure proceedings, but if that fails, repossession of the property is usually granted to the lender and the borrower is evicted from the property. Once vacated, the lender is considered the legal owner of the property and has all legal recourse to collect the balance due on the loan as well as any costs incurred during the process. This can all be avoided however, if the borrower keeps in close contact with the bank.

In most cases, the property is put on the market for sale, or put up for auction and once sold the previous owner is liable for any portion of the balance not covered by the sale of the property. If the sale nets more than what is owed, the lender is obligated to forward the balance to the previous owner. Although this is a rare occurrence, if the property appraisal is high enough, and has built up untapped equity, it is entirely possible.

Most people view repossession as an end to their financial life and accept the probability that they will never be able to own property again. However, once their financial obligations are dissolved and they have rebuilt a positive credit history, there are alternative lending sources that may be willing to take the risk of offering another mortgage in the future. There are many ways to go about rebuilding credit and a wise financial advisor can help with the challenging task. Credit scores are quite important and it is worth the time and effort to repair them for

PPI Claims - Get PPI Claims from shakespearefinance in United Kingdom.

A Guide to Equity Loan Mortgage Refinance

2008-10-26T19:56:00.000-07:00

Author: Cindy Heller

There is a lot to learn about when it comes to the topic of equity loan mortgages, and to be exact you should realize the benefits that you could possibly gain from refinancing your home. In particular since over the past few years the mortgage rates have hit all time lows, by refinancing your home you are able to get hold of the opportunity to benefit from this.

Equity loan mortgages are fundamentally second loans that are used to pay off your mortgage so that you can gain from lower interest rates. By taking out an equity loan mortgage, a homeowner is able to lower their existing monthly mortgage payments, and it is also a enormous way for a home owner to combine their debt and therefore they can save a great deal of money in the long term.

There are different reasons a homeowner would consider about a refinance home equity loan and depending on the worth of the property and the amount of equity offered, it could be a good financial move. If circumstances are right that consent to the owner to refinance their home at a lower interest rate, they could end up saving thousands of dollars in interest charges over the life of the loan.

Let's take for instance, if a person owes $100,000 on their home and it is esteemed to $200,000 they have $100,000 in equity. Nearly all lenders will limit a refinance home equity loan to 80 percent of the home's equity, significance this person may be qualified for an $80,000 refinance home equity loan. They could utilize this money for improvements to enhance the home's value or as a down payment on a second home, education funds or to take an extended vacation to an exotic location.

A lot of people make use of the equity in the home for foremost purchases that may add nothing to the value of their property, or lower their accountability to the original lender. In some case, they are going to end up with two mortgage payments due each and every month. With enough income to cover both payments, there usually are no problems. Conversely, if anything happens that diminishes the available income, there are now two possibilities for a foreclosure.

Lists Of Refinance Home Equity Companies

If you are looking to refinance your mortgage and want to make out which companies are existing to help you do so, then you should know that there are quite a few. There are some in particular which are especially notable, of which will be discussed in more detail here.

The Countrywide Financial

When it comes to refinance home equity companies, this is certainly one of the very best. The Countrywide Financial is a diversified financial services company that is focused on real estate finance and related matters, and their task is to help individuals and families to realize the dream of home ownership.

They are an incredible refinance home equity company, and should definitely be one of your top choices. They have been known as one of the best performing financial services companies in the past quarter century, are recognized as being the #1 lender in America to minorities, and as well #1 lender in general.

The Quicken Loans

This is one greater refinance home equity company, one that has been in the business for a number of decades now and which is known as being one of the largest loan lenders worldwide. They have over 5,000 talented and experienced home loan experts that are equipped and willing to help you at all times.

They also are well thought-out as being the preferred mortgage lender for several of America's top-rated companies; these include AT&T, Google, Compuware, and EDS. They close loans in all of the 50 states, they are capable to process your loan in as little as 15 days, and they offer more than 150 different loan programs, which makes it easier for you to choose the right fit for your needs.

You can submit an application right online with this refinance home equity company, and you will get answers back on average within 24 hours. They always have a qualified and knowledgeable customer sales staff available to respond to any questions that you may have.

The Fannie Mae

This is however another great option that you have when it comes to refinance home equity companies. They are a shareholder-owned company with an open mission, one that has a goal, which is to develop affordable housing and help consumers with their financial issues.

There are many additional options that you have here as well, and whichever you are more concerned in, you just want to make sure that you take your time and actually check the history of the company out as well as the services that they offer, so that you can make the most intelligent decision in terms of which company to go with.

Article source

Your Mortgage and the Government Bailout

2008-10-10T07:22:00.000-07:00

Author: Chad Fisher Author Ranking Bronze

The United States is currently in the middle of a mortgage crisis. Foreclosures on mortgaged homes are at an all time high, and predictions say that billions of dollars of wealth will have been lost before its through. The effects of the crisis are being felt on all levels – aside from people facing foreclosures on their homes, many lenders have gone bankrupt. Finally, the government has decided to step in and provide some relief to lenders and borrowers alike. But the question is, just how will this government bailout affect a person's mortgage?

What this bailout plan does is, unfortunately, pretty limited. It won’t help out everyone. What the bailout does on the level of the individual borrower is to freeze the borrower’s mortgage for five years. This keeps the interest rate of the mortgage down for a period of time so that the borrower can get their finances in order and dig themselves out of their situation. Unfortunately, there are a couple of stipulations on this program.

The first stipulation is that it only applies to people who have less than 3% equity on their homes. People with higher equity are simply out of luck. The second qualification is that the borrower must be no more than 60 days late paying their mortgage. Needless to say, for people who are already in severe trouble and have been missing payments aren’t helped at all by this.

In addition to the above qualifications a buyer would have to prove that he or she couldn’t afford increased interest in their mortgage. The government buyout plan also only applies to subprime mortgages – but there are many people struggling with prime mortgages who face financial difficulties, too. Unfortunately, this leaves a lot of people who were looking for a little relief out of luck.

The ultimate problem with this bailout program is that it only serves to delay inevitable outcome. The bottom line is that if you are living in a home that you can’t afford to live in, even if the government bailout helps you, you may still find yourself in trouble. Unless a significant financial change or a reduction in the interest rate or principle is in the wings, you chances are at the end of the five-year freeze you still won’t be in a good place.

Another perceived problem with the government bailout program is that it works to reinforce the behavior that put the housing market in the crisis it faces today. Subprime lending encouraged people to try and buy houses that they couldn’t really afford, and the bailout program is helping those same people. Meanwhile, people who had made smart choices about buying a home, but faced some other financial problem are left high and dry.

The unfortunate bottom line is that if you can’t pay your mortgage, chances are that the government bailout isn’t going to save you from foreclosure. Unless you have good reason to believe there’ll be a change in your financial fortune, it may be time to start preparing for the worst.

Article Source: http://www.articlesbase.com/mortgage-articles/your-mortgage-and-the-government-bailout-590005.html

Good News About the Sub-prime Mortgage Crisis

2008-10-08T21:35:00.000-07:00

Author: Lloyd Segal

Hey, wait a minute! In recent months, the national media has dwelled on the collapse of the subprime mortgage market and the surge of foreclosures. But there is another side to this story that should also be considered.

The Mortgage Bankers Association recently released its National Delinquency Survey and the numbers are not what you may think. True, the rate of loans falling into foreclosure last quarter was the highest in the survey's 54-year history. 8.4% of subprime loans were more than 90 days late or already in the foreclosure process. That statistic is sobering, but it misses the point. If 8.4% are seriously delinquent or in foreclosure, 91.6% of the sub-prime borrowers are current with their loans and making their mortgage payments on time. They are enjoying the benefits of home ownership. Those borrowers were given the opportunity to own (rather than rent) because of the availability of sub-prime loans and have successfully taken advantage of that opportunity. For them, the "American Dream" has become a reality.

Of course, 8.4% default rate is high, but unanticipated financial problems happen. After all, people don't buy homes, take out loans, and then intentionally default. Usually something serious happens to disrupt the natural process. Commonly, it is loss of job, divorce, medical catastrophe, or some other unanticipated financial emergency that causes people to default. Keep in mind, though, you don't have to a sub-prime borrower to have financial problems. Prime borrowers also default on their loans and lose their homes in foreclosure (no one is immune in this market). Sure, the percentages are higher for sub-prime borrowers, but they are typically in a more vulnerable financial situation. Of course, they have a higher interest rate and pay a larger mortgage payments every month, so cut them some slack. Regardless, the solution is not to cut-off subprime lending, but rather to embrace these borrowers' unique needs. Particularly now, lenders need to offer delinquent homeowners programs to restructure their loans and avoid foreclosure. Let' look at why.

Delving deeper into the MBA survey, we discover several surprising facts. For example, the surge in sub-prime foreclosures last quarter was driven by four large states, California, Arizona, Nevada, and Florida. If it were not for the avalanche of foreclosures in those four states, there would have been an overall drop in the rate of foreclosure filings nationwide. Thirty-four states actually reported a decrease in the rate of new foreclosure foreclosures in the last quarter, and the remaining states (other than those four) reported only a modest increase.

There is also a wide divergence between fixed-rate and adjustable-rate loans. The delinquency rate for prime fixed-rate loans was essentially unchanged from the previous quarter and the rate for sub-prime fixed rate loans actually fell! In contrast, the rate of delinquency for prime adjustable-rate mortgages increased 36% and sub-prime adjustable-rate mortgages increased 227%.

Clearly, adjustable-rate mortgages ("ARMs") are the culprit and present a unique problem. But there is nothing wrong with ARMS, provided they are utilized responsibly. They have benefits you can't find with fixed-rate loans. They have lower interest rates and correspondingly lower monthly payments. They allow borrowers to qualify for loans they would not otherwise receive (of which the vast majority successfully pay each month). Plus, it just doesn't make sense to obtain a 30-year fixed rate loan, when in reality most people sell or refinance their homes every 5-7 years.

Nationwide, California leads the way with over 17% of all sub-prime adjustable rate mortgages. Similarly, California has over 19% of the foreclosures for sub-prime ARM loans. In fact, the same four culprits; California, Nevada, Arizona and Florida, have more than one-third of the nation's sub-prime ARMs, more than one-third of the foreclosures started on sub-prime ARMs, and most of the nationwide increase in foreclosures.

Another factor to consider is the distinction between owner-occupied and investor (non-owner occupied) borrowers. A majority of the delinquencies and foreclosure starts can be attributed directly to non-owner occupied loans. This is because investors are notorious for defaulting on mortgages when the market dips and they see the value of their properties evaporating. Further exacerbating the problem, investors' share of defaulted loans was 32% in Nevada, 25% in Florida, 26% in Arizona, and 21% in California. Yep, those same four states. Those rates are high compared with a rate of only 13% for the remainder of the country. And those percentages will certainly increase as property values continue to decline.

One more thing. The media has been quick to blame mortgage brokers for "forcing" borrowers into sub-prime adjustable-rate loans. I laugh every time I hear that. Anyone who has ever been a mortgage broker knows that you can't force a loan on borrowers, prime or sub-prime. It doesn't work like that anymore. Homeowners are more sophisticated than ever before. They have access to the internet, television and the mass media, and analyze available loan programs. They understand the difference between fixed-rate and adjustable-rate loans, between amortized and interest-only payments, and between "stated" and full documentation. They shop and explore alternatives. Ultimately, they select the loan they want, not their mortgage broker. Regardless of what the media says, that process works successfully for the vast majority of American homeowners.

All tolled, the sub-prime mortgage crisis is bad, but not nearly as bad as the media would have you believe. If you dig deeper into the survey, and segregate the four problem states, subprime ARMs, and investor loans, you will discover that with the vast majority of American homeowners, default and foreclosure are not issues. At least not yet.

Article Source: http://www.articlesbase.com/finance-articles/good-news-about-the-subprime-mortgage-crisis-222314.html

Government To Make Billions From The Mortgage Crisis

2008-10-05T23:55:00.000-07:00

by: Aubrey Clark

The mortgage crisis has had a negative impact on everyone, not just homeowners. Elected officials are working hard to pass legislation that is designed to prevent future banking debacles. Unfortunately, history has proven that when legislators over-regulate banks that it tightens the reins on lending. This is done by raising the bar on what it takes to qualify for a mortgage or installment loan. Predictably, it’s the middle class that will feel the pinch more than anyone. Specifically, it’s the middle-class, self employed small business owner that be injured the worst.

Most people are aware that you can reduce your taxes by deducting expenses and qualified charitable contributions. What most people don’t realize is that small business owners live and die by those deductions. Tax rates have risen on the self employed more than any other segment in our society. To counter these tax hikes, legislators created more “loop-holes” write off’s and deductions for small business owners to use.

For this reason, small business owners rely on creative CPA’s to maximize their deductions in order to show less income and pay less taxes.There are nearly 23 million small businesses in America and over 35 million sole-proprietors and almost every one of them employ savvy CPA’s to keep them in the black. The draw-back is that by doing this most self employed borrowers are unable to prove enough income on paper when applying for a loan or a mortgage.

Traditional mortgage lending practices of yester-year required that borrower’s prove sufficient income when taking out a loan. Over the years, taxes have risen for small business owners at staggering rates, far above what they have for W2 employees. At the same time the self employed borrower's “provable” income has dwindled proportionately. Under traditional banking rules most of the self-employed people wouldn’t be able to qualify for business loans or mortgages. This would ultimately force small business owners out of business and cripple our would economy.

This new business paradigm literally forced the banking industry to create lending products that catered to small business owners who could not prove all of their income. These products were called “stated” income loans and did not require borrowers who had good credit to prove their income. These products originally required good credit and sufficient assets in order to qualify for them. Responsible guidelines and common sense underwriting kept default rates on these products in line with conventional mortgages. Unfortunately, as competition for this segment of borrowers stiffened between lenders the stringency to qualify for these mortgages softened, thus the mortgage crisis.

It is exactly this type of loan that our law-makers are trying to do away with through legislation. The new mortgage bill being bounced around has specific remedies for irresponsible lending. Meaning, if a bank loans you money and it can be proven in court (attorneys like this law by the way) that the bank was irresponsible in doing so they could be penalized. The definition of “irresponsible” is did the borrower have the capacity to repay the loan, meaning did they prove enough income. This bill will kill stated income loans, period.

So where does this leave the responsible self employed borrowers who needed these loans to live and operate their businesses? This leaves them with higher taxes. Should this bill pass self employed borrowers will be forced to claim more income each year on their tax returns in order to qualify for car loans, mortgages and even business loans. This will negate any of the loop-holes and deductions they were promised in lieu of higher taxes.

This means the government will rake in billions in extra revenue as a result of this bill. For example, let’s assume that a small business owner claimed $40,000 in income last year after deductions and business expenses. If she was in a 40% tax bracket she would pay roughly $16,000 in taxes. Under the new banking guidelines that same business owner may have to claim $80,000 In order to qualify for mortgages, car loans and business loans. Assuming she’s in the same tax bracket, she would now have to pay $32,000 in taxes.

Multiply $32,000 by 23 million business owners and that’s one huge pay-day for Uncle Sam. You can bet that the Senators pushing this bill through congress are well aware of this left handed tax raise. You will never hear them mention it either, I wonder why?. You will hear about the naughty lenders that put good wholesome red blooded Americans in the street through predatory lending practices. You will never hear about the 20 million business owners who paid their mortgages on time and actually need these loans to stay in business.
Source:
http://www.articlecity.com/articles/business_and_finance/article_9792.shtml