Smart Borrower Blog

Archive for September, 2007

Bursting the Bubble

The real estate bubble, if it ever existed, has burst. The Federal Reserve is making every effort to inject liquidity into the market. They’ve poured $200 billion into the financial system since Aug 9, but in some cases it isn’t enough. Many homeowners are abandoning their homes altogether. Investment properties, purchased in anticipation of being used as income-producing rentals, are sitting vacant. Hardest hit are the homeowners with subprime adjustable-rate mortgages. What’s the problem with our real estate market? One factor in the equation is that lending became so lenient a few years back. Where our parents and grandparents were... more »

What Does Underwriting Mean?

I received this question from a client the other day.  Many of us who live and breathe mortgages daily often forget that our clients don’t necessarily know the lingo we use. According to Dictionary.com, underwriting means “to bind oneself to contribute a sum of money to (an undertaking).”  From a lending perspective, underwriting means the bank is evaluating the risk associated with your loan and will either accept that risk by making a loan to you or deny it.  The two outcomes of underwriting are loan approval or loan denial. Lenders employ underwriters who are trained at evaluating loans originated... more »

Understanding Your Mortgage Loan

Do you fully understand all the terms of your mortgage? Often when loan officers do not disclose all the aspects of the loan and its closing costs, the homeowner is the one who loses – as we’ve recently seen in the rising mortgage debt crisis. If you feel that you don’t understand the loan, ask questions. Don’t be afraid to stop the lender and ask him/her to explain it all to you. These questions will also help you avoid a bait-and-switch, a common ploy with some unscrupulous lenders. For the best results: Do not assume anything. If you don’t see... more »

Recession Discussed At Jackson Hole, WY

At a retreat at Jackson Hole, WY, many of this country’s most prominent economic professors have warned that the troubles in the housing market could lead this nation into a full blown recession. Martin Feldstein, president of the National Bureau of Economics, states that “lower interest rates now would help”.  Feldstein feels that a cut of up to 100 basic points might be needed to undo the effects of lower consumer spending and declining home prices. What to Expect From the Feds Ben Bernanke, also attending the Symposium at Jackson Hole, said the Fed would not rescue investors from self-inflicted... more »

Mortgage Market Gets Encouraging News From The Feds

The chairman of the Federal Reserve Board, Ben S. Bernanke, gave a speech Friday Aug. 31 at Jackson Hole, WY.  In his speech, he said that the Federal Reserve “stands ready to take additional actions as needed”.  Certainly, this is good news for investors and mortgage lenders who are on the verge of going bankrupt. The Feds have already dropped discount rates on Aug. 17th.  This provided some stability in the market, but was not enough to push things towards a more even keel.  Mr. Bernanke did not make any specific promises, but did acknowledge the harm to the economy... more »