Smart Borrower Blog

Archive for February, 2008

Paulson Speaks Out

Former chief executive of Goldman Sachs Group Henry Paulson had a lot to say this week about the plans in place by Washington to help ease the crunch in the housing market.   He claims that the plan will do nothing more than bail out for reckless lenders, investors and speculators.   His concern is that these measures as laid out will do little to help homeowners who are struggling. This raises food for thought.   From reviewing the stipulations of what has been presented so far, I tend to agree with Paulson.   The really sad part of this... more »

When Facing Foreclosure

All it usually takes when facing foreclosure is to make a call to your mortgage lender and try to work something out with them.   This first step, if taken correctly, will stall the action taken towards losing a home.   Many people today, though, are choosing to simply walk away.   It is a fact of life - the home is no longer worth what it is paid for. Let alone any increase in value or equity.   What have people got to lose?   It seems to be the attitude of many home owners. Roper Public Affairs, a... more »

BOA and Big Brother

No one has screamed more about Big Brother than the banking industry.   They feel that business belongs to them, and that the government should keep their noses out of banking business, and give them freer rein with financial innovations.   It’s pretty obvious to me that you should be careful what you wish for. Now, Bank of America is circulating a confidential proposal amongst members of Congress, in effect saying that, now that the waters are thoroughly muddied, that they are in trouble and want Big Brother to give them a hand. No one on the Hill with any... more »

What Will Washington Do?

Today, we are looking at what we did during the Great Depression, with home owners owing much more than the property is worth.   If you think the sub prime debacle is just a bubble, then guess again.   I have never been much for “looking at the big picture” but the more I research this situation, they more I see how things all tie in together. The government has come up with several proposals - Project Help is the latest in their lineup - and the eligibility requirements are such that few people in dire straits would be helped.... more »

What Happens When Option ARM’s Reset

Just when I think I am beginning to think that I am getting a handle on the mortgage market, I learn of something new that is considered a real bane to the industry. While researching today for the post, I came across an article on a type of ARM that I have never heard of - the payment option adjustable rate mortgages. I have read that this is indeed a very complicated mortgage to understand and that many homeowners who have made this type of loan are facing big trouble. Many of these loans are due to reset in the... more »

Little Hope Seen For Mortgage Holders

California, always aggressive when it comes to holding people accountable and to be forward thinking in what transpires there, has been working to pass bill pass HR 3609, which would give holders of sub prime mortgages the same opportunity to have the courts change bankruptcy laws to modify mortgages as given to owners of family farms, commercial real estate, and even yachts.   There is no reason why this bill shouldn’t pass, especially in light of what has happened in the market. There really is no cure.   The Bush Administration is now touting Project Lifeline, but it will basically... more »

Fitch Rating Findings

I have been reading with interest Tanya Davis’ posts here on the blog, and begin to look more deeply into things as presented by both her and my research. In a news item today I read about a report that Fitch Ratings put out that gives evidence on what I have figured all along. And that is that the current mortgage mess is more deeply rooted in the mortgage brokers and lenders camp than anywhere else. We have heard a great deal about the sub prime mess and all about people that were buying homes that were beyond their means... more »

Who Pays When Homeowners Walk?

Lots of advice is floating around for homeowners who are facing foreclosure. There are many: 2.2 million in 2007, according to RealtyTrac, a research company based in California. Most civic leaders and lawmakers are trying to educate consumers with steps that a homeowner can do to retain their home, such as: Make their mortgage payments a first priority, budget in order to avoid overspending, save money for an “emergency fund,” and let the lender know as soon as possible if the mortgage payment can’t be made. This is all normal financial advice. Other “experts” suggest that people simply walk away... more »

Walk Away from Debt?

Please read "Homeowners Stuck with Low-Value Properties,” my post from yesterday, if you haven't already. One commonly held theory is this: if you are in danger of going into foreclosure, simply stop paying on part of your mortgage. Here is how this advice goes: If you have two, three, or more loans against your home, figure out which one is the “senior” loan — the loan that would be paid off first if you were to sell the property. Add up the subsequent loans and, if they are more than the value of the home, simply stop paying on the... more »

Homeowners Stuck with Low-Value Properties

The housing “bubble” of the past few years caused a flurry of lending that might not have happened, except property values were rising fast. Buyers felt good about it; after all, buying houses is what we do. And if they put 20% down, they figured property prices would have to drop by 20% immediately to lose out. Prices have been rising since the 1800s, so why would they drop now? Lenders also felt they were safe. Handing out second and third mortgages and home equity lines of credit was not risky because the value of property would rise quickly; the... more »