Smart Borrower Blog

Archive for November, 2007

In Other News…

The Bush Administration is quickly moving forward to closing a pact with major lending institutions that will freeze the rates on certain sub prime mortgages.   This is certainly good news for those facing foreclosure.   Details are still being worked out, but it looks as if this is a go. The Players The big guns are the ones being approached with this pact.   We will see The US Treasury Department and big mortgage firms like including Citigroup Inc (C.N), Wells Fargo & Co (WFC.N), Washington Mutual Inc (WM.N) and Countrywide Financial Corp (CFC.N) taking part in this.  ... more »

Here come the predatory lenders…I mean lawyers.

I knew it was going to happen sooner or later.   Today on the radio I heard an advertisement for a law firm informing listeners that federal law requires mortgage lenders to give borrowers a three business day right of rescission on refinances.   In other words, all refinances have a three day cooling off period in which the borrower can change their minds. I bet you haven't seen this fact mentioned in all of the media horror stories about so-called predatory lending. The advertisement went on to say that if you felt you were duped by your mortgage lender... more »

Selling in a Down Market - Part 1

If you are thinking of selling your home, you may be concerned about the status of the current housing market. Although the market presents a challenge, there are still buyers out there who want to buy a home or who must buy a home (due to relocation). So it is not a matter of whether you can sell; rather, the question becomes “How do I sell in today’s market?” There are always only two factors that affect the sale of your home, and today I would like to discuss the first one: price. After listing your home for sale, obtaining... more »

What We Learned From The Depression

I think it imperative that we see the housing crisis for what it really is.   Not since the Great Depression has housing been in such a mess.   Between 1925 and 1933, housing prices fell by 30%.   We are seeing much the same thing now. Domestic home prices are already down 5 percent from their peak 14 months ago.   It seems to me that we should be doing some basic thinking about changes in our real estate institutions.   It is no longer business as usual, and if something doesn’t change in the lending industry, we will... more »

We’re Not Out Of The Woods Yet

The doom and gloom fortune tellers are saying that we are not out of the woods quite yet in the mortgage market.   Millions of adjustable rate mortgages (ARM) are due to reset in upcoming months, forcing homeowners to a higher interest rate as required by the loan agreements and leaving many homeowners unable to make their payments. Analysts are concerned that the losses of already battered banks may leach over into the general market, leaving us with a worst-case scenario of another depression. Bill Gross, chief investment officer of PIMCO, said “”We haven’t faced a downturn like this since... more »

The Mortgage Crisis Intensifies

The nation’s second biggest mortgage holder had Wall Street in a tizzy on Tuesday when it was announced that they were showing a big loss.   This put both investors and prospective home owners in a tail spin. Troubles At Freddie Mac Freddie Mac owns or guarantees more than 40% of the country’s residential mortgages.   The guarantee is backed by the federal government.   Freddie Mac has shown a loss of $2bn, and this is putting many investment companies in a quandary.   Countrywide financial is especially hard hit. Freddie Mac has been targeted by congressional Democrats as being... more »

Negative Home Equity

Negative home equity — when the value of your home is lower than the amount you still owe on the loan –is becoming more and more common all across the country. Especially if you purchased your home in the past few years, you may find that you are in this situation. Many people who thought they were “safe” from the mortgage crunch, because they thought it was mostly about foreclosures, have found that they are experiencing negative equity. Nationally the average value of a home is 5.5% less than it was a year ago; in some areas, it’s a lot... more »

First Time Home Buyer Programs

I am not sure when it started, but at some point in our home buying history, first time homebuyers got brownie points from banks.   Whenever I host home buying seminars, people always want to know about these programs.   However, over the years as a loan originator I have learned that when someone asks about first time home buyer programs, it really means that they don't have any money for a down payment.   In my experience, being a first time home buyer is irrelevant for most transactions.   Banks are more concerned about your job stability, income, credit,... more »

Does Congress Need to Address the Mortgage Industry?

Recently the House passed a bill that was designed to protect borrowers from “abusive” home loans. That means if borrowers are not able to realistically pay back the loan, lenders would not be able to make the loan in the first place. The bill also sets up a system of uniform licensing for mortgage brokers, and it also stipulates that the Wall Street banks who are packaging mortgage securities as investments would be liable for breaches of the lending laws. Those who oppose the bill says that it could generate a flood of lawsuits. Mortgage lenders are scrambling anyway —... more »

The Renter’s Dilemma

Drilling down in the crisis in the mortgage market gives you a very good idea of how bad things really are.   It is not just about big companies going belly up or hedge funds suffering.   It is about the little guy that has to take his lumps like every one else. Across the nation, many renters are getting pushed out in the cold by the foreclosures on their homes or housing units.   Smaller speculators have gotten in over their head, and are losing rental properties.   Even though the renter has always paid the rent on time... more »