Understanding What Happened With Subprime MortgagesBy: Donald PlunkettAfter the steep rise in subprime lending in the 2001-2006 period, followed by the credit crunch of 2007, some might ask, If their borrowers cant pay, why did the lenders make these loans in the first place? Did they not want to be paid back? To get to the bottom of this question, people need to understand how real estate lending
The word from the democrats on subprime mortgages is an all too familiar one: We need more regulation, its not your fault, someone else is always to blame.I would be upset if my bank gave me a higher interest rate than I deserved. You protect yourself by shopping around. Does that lead me to foreclosure? Of course not, it just means I'm buying less house and paying more interest. Foreclosures are up because of one thing: homebuyers can no longer afford their payments. This is a combination of poor loan terms, inflated appraisals, and lots of easy credit. However all of this comes down to the person signing up. Your payment is right there on the document. Is it an adjustable rate? Then why are you signing up for a monthly payment you can barely afford knowing it will increase in 2, 3, or 5 years?There are many people taking (and who do bear) the blame: brokers, lenders, Wall Street. See anyone missing from that list?Instead, they call for more regulation. Isn't a bank supposed to make
WASHINGTON - Fannie Mae and Freddie Mac have tightened their policies for purchasing high-priced, high-risk home loans from lenders amid stress in the housing market.The policies issued Friday by the two government-sponsored companies were in response to a directive from the federal agency that regulates the mortgage finance giants.The new policies potentially involve billions of dollars worth of so-called subprime mortgages, those targeted to people with tarnished credit or low incomes who are considered greater risks. The policies spell out to banks and other lenders which mortgages Fannie Mae and Freddie Mac will buy from them and which they will reject.Their new policies, which take effect Sept. 13, call on lenders to exercise caution in making subprime loans and to evaluate more carefully borrowers' ability to repay them.source: www.msnbc.com
WASHINGTON, June 14 — Delinquencies and foreclosures among homeowners with weak credit moved higher in the first quarter, particularly in California, Florida and other formerly hot real estate markets, according to an industry report released on Thursday.
The report, published by the Mortgage Bankers Association, came as the Federal Reserve held a hearing on what regulators could do to address aggressive abusive lending practices. Also Thursday, the latest survey showed that mortgage rates this week reached their highest level in almost a year; the national average for a 30-year mortgage was 6.74 percent, up from 6.53 percent last week, according to Freddie Mac, the mortgage giant.
The delinquency report presented a mixed picture. It indicated that more homeowners with tarnished, or subprime, credit are likely to have trouble making house payments, especially as interest rates rise. But it also suggested that, at least so far, the problems have not extended very far into
It's been all over the news. Mortgage companies are closing their doors! People are running in the streets! Asteroids are headed towards earth!
The media is having a field day with this.
What happened is a direct result of mortgage companies taking risky loans for years. When "subprime" mortgages came onto the scene, it was the answer to many people's prayers. Let me explain what a subprime
A sad, yet interesting phenomenon has been happening with greater frequency in the realm of real estate. That’s the talk of and acceptance of short sales as a way to sell a home.
Short sales, in the “Cliff Notes” version, are the way for sellers to negotiate directly with a bank or note holder the difference in sales price and amount owed on the loan. In other words, a short sale is when a seller realizes that they cannot continue to make payments, cannot get out of the house what they owe in the current market, yet negotiate with the holder of their mortgage note to “forgive” the difference between the loan balance and the sale price of the property. It is the final option, in many cases, prior to outright foreclosure.
Many of the foreclosures that Michigan is seeing is a result of a higher unemployment rate, coupled with a high number of subprime mortgages. A subprime mortgage is a loan that has a higher interest rate attached to it due to the bu
The delivery is a bit dry, but the content is clear enough; here is a one-minute primer on subprime loans. The main lesson is that if you are a realtor and you sell one of these loans, you get more money. What could be simpler? Well, you would think that people would take a look at the repayment capacity of people taking out these loans. Judging by the massive increase in subprime defaults, that simple point was not well understand by many lenders.
