Smart Borrower Blog

Archive for February, 2008

Subprime Myths Exposed

Because of the sub prime mortgage market, over 1 million homes will go into foreclosure over the next few years.   To put that in perspective, think of a town, like Dallas, Texas, as a virtual ghost town.   With a population of a little over 1 million souls, and if all foreclosures were focused there, the town would be dead. Not good news.   A lot of the news we get on the sub prime debacle, though, is not really what things are about.   I read an interesting article today in the Pittsburgh Tribune-Review that put things in... more »

Piggy Back Loans

One of the things we don’t often hear about are piggyback loans - the loans people take out to make down payments on houses they are buying to avoid paying private mortgage insurance. It is just another sign of the stupidity in the market, when greed takes over and people put their heads where it doesn’t belong. All this was fine and good in the early part of the decade when things were running smoothly and homes were overvalued. Now, though if you have a piggy back loan plus the regular mortgage payment, and find yourself in a position where... more »

The Problem With Fannie & Freddie’s New Cap

Recently I reported on the new guidelines to be put in place for Fannie Mae and Freddie Mac, effectively raising the cap on jumbo loans from their current level of $417,000 to a new cap of $729,750.   Typically, these loans are about 0.25 percentage points above smaller, so-called conforming mortgages.   You have to wonder who this will benefit the most - people wanting luxury homes, or people that are struggling just to keep a roof over their heads. Who will benefit from this new legislation?   Currently, the markets in California, New York, Florida and along the East... more »

States Regulate Mortgage Lending

While the discussion drones on in the U.S. Congress about the proposed economic stimulus bill, there are several states trying to regulate their own reform. Some of the changes in the reform bill proposals make you wonder why there is opposition. For example, in Oregon’s Senate Bill 1090, proposed by Sen. Ben Westlund (a Democrat), these are some of the issues that have been most discussed : Eliminate penalties for borrowers making early payments on subprime and nontraditional loans Require creditors to verify borrowers have enough income to make their payments. Limit incentives that brokers get when they sell a... more »

Government attempts to Regulate Lenders

As I discussed yesterday, the economic stimulus bill that is being debated in the Senate includes some mortgage reform issues. But here is the trouble with adding more regulations to an already over-regulated market: Lenders already have a lot of incentive to assist the borrowers who have trouble meeting their payment schedules. After all, the lender will be hurt by a foreclosure — much more so, in fact, because of the weak housing market we have at the moment, where they might not be able to sell the homes they repossess at a good price. They might not even get... more »

Changes to FHA intended to Spur Borrowing

The latest word on the pending legislation with the economic stimulus bill is that the Senate and House are still ironing out some issues. The FHA conforming loan limit increase, from $417,000 to $625,000 as proposed by the House will be for a limited period of time only– two years. The increase would be even greater in high-cost areas, as much as $730,000 which is great news for those who couldn’t even begin to find a house under $625,000 in their area. This is for government-sponsored loans, like those of the FHA (Federal Housing Administration and GSE (the Government Sponsored... more »

Lawyers and Ruses, Oh My!

I read with interest a commentary by a San Francisco lawyer who isn’t exactly thrilled by the new stimulus package that the Bush administration is touting as good for the economy.   Maybe it is, maybe it isn’t.   A few more bucks in your pocket is always a good thing, but at what price? According to the lawyer, part of the package that Congress is rushing through contains a very disturbing package.   What they are doing with this package is raising the limits on loans for Fannie Mae and Freddie Mac, and giving a shot in the arm... more »

The Case For Reverse Mortgages

Reverse mortgages are nothing new. They’ve been around a long time, and it is now a reality that lenders are taking a closer look at this as profits fall from the sub prime market. Many older Americans aren’t aware of the cost of a reverse mortgage, and it appears the unethical lenders are taking advantage of that. According to the FHA, in 2000 6,637 reverse mortgages were approved. Jump to 2007, where 107,367 were approved. In just 6 short years, the number of reverse mortgages approved is staggering. Over the past 20 years, almost all of these mortgages were offered... more »

FBI To Investigate Sub-prime Lenders

It had to happen.   Following New York attorney general Andrew M. Cuomo’s investigations into Wall Street banks, the FBI is dropping their hat into the ring of investigations into the sub-prime market crisis.   We have seen the effects of this firestorm gaining momentum over the past year.   Today, the Tokyo stock exchange took a big hit due to it, and many investment banks and lenders have fallen.   Last time I checked, it stood at 209 in the industry.   Not a good thing… The Feds are looking into possible accounting fraud, insider trading and other violations... more »