Smart Borrower Blog

Archive for March, 2008

The Slow Wheels of Washington

Congress is making noise about help for homeowners that are facing foreclosure, but it is almost a certainty that President Bush will not back it and, in all likelihood, veto anything they come up with.  All proposals on the table right now would be a big help, but like anything else, have their pros and cons.  Bush proposes that the FHA step in, and work with lenders to “forgive” some of the debt of homeowners who owe more on their home than it is worth, especially since the current drop in median home prices. The White House backs a... more »

Bailing Out Main Street

News on Reuters today tells of a new plan set forth by the Bush administration that will hopefully allow many homeowners facing foreclosure to get a little well needed relief.  Aimed at home owners who owe more on their homes than the house is worth, it  would mark the first time the White House has committed federal dollars to help troubled Main Street.  The new plan would allow the FHA to encourage lenders to forgive a portion of these loans and issue new, smaller loans in exchange for the backing of the U.S. government.  All this comes on the heels... more »

More On Bear Stearns

It seems that even our presidential candidates are jumping on the home mortgage bandwagon, and are offering to the public what they want to hear.  This is, after all, an election year.  Sen. Clinton proposes a 30 billion dollar fund to help those in trouble with mortgages, and Sen. Obama upped the tally this week from 10 billion to thirty, I think following Clinton’s lead. All of this of course comes after the bailout of Bear Stearns, which has a lot of people hot under the collar.  What started out as a $2 a share deal mysteriously jumped to $10, ... more »

Mortgage Insurers Changing Their Terms

The media has made a really big deal in recent weeks about mortgage insurers flagging certain ZIP codes and refusing to inshore home loans in those areas. This decision affects homes in at least 34 states, about 9600 of them. But when you take a closer look, you can see why these particular loans might be risky. The home loans that mortgage insurers don’t want to cover are as follows: Investment loans. Loans for second homes. Adjustable-rate mortgages. Interest-only mortgages. Loans with a down payment of less than 3%. In fact, many of these insurers won’t even be in business... more »

Why Do Lenders Require 20% Down Payment?

Traditionally, a 20 percent down payment was standard on a mortgage loan. Ten or fifteen years ago, that changed, and lenders began offering loans with much less money down. This was good for younger families or first-time borrowers, because it meant that they could get into a home more quickly. With the recent mortgage crisis, the trend is heading back the other direction again — lenders are requiring more money down. Often this translates into a 20 percent down payment for a mortgage loan. So many borrowers are asking, “Why 20 percent?” At least part of the reason is that... more »

Do Banks Need to Change the Way They Lend Money?

Recently, the Associated Press reported that banks need to lend money more freely. But banks “lending freely” is what got us into this mortgage mess in the first place. Banks are tightening their standards, some, but they’re still advertising heavily for borrowers. I’ve noticed that, even with all the attention to the mortgage market, new borrowers are no more educated than they ever were when they arrive at the bank. If you are considering getting a home loan, it is important to educate yourself– perhaps now more than ever, prior to meeting with the loan officer. You cannot rely on... more »

The Feds New Fix

Now that the Fed has made some bold moves in its effort to shore up the fallen economy, there is worry amongst analysts and economists that are wondering if this latest fix will help or just be a short-term fix, or if it will have any real effect on things.  Many are worried that taxpayers will get upset because it is seen as bailing out rich investors and banking firms, and doing little for the blue collar worker on Main Street.  I think there is some good reason for seeing it this way. Economist point to the fact that people... more »

More On Bailouts

I see every day the rumble of folks all the way from Wall Street to the Hill calling for governmental intervention in help for people facing foreclosure.  Already, the Fed has provided a $30-billion short-term loan to JP Morgan Chase & Co. to facilitate its purchase of struggling Bear Stearns Company.  Even Presidential hopeful Sen. Hillary Rodham Clinton is calling for a new initiative to provide $30 billion to help homeowners.  Clinton’s campaign said in a statement that “If we can extend a $30-billion lifeline to avoid a crisis for Wall Street banks, we should extend at least $30 billion... more »

Troubles On The Street

With the fall of Bear Stearns, many other banks are getting a good looking at.  In an article in the Baltimore sun, the journalist Peter Morici makes some very good points about the current mortgage situation.  I quote him often here. Mr. Morici makes it clear to us all the way things have changed over the years.  He states that 30 years ago, a borrower went to a bank, income and assets were examined by the loan officer, and if you qualified, you got your mortgage.  Today, however, it is a very different matter.  According to Mr. Morici, banks have... more »

Mortgage Rates not so Responsive to Fed Cuts

With the Federal Reserve cutting rates–again– many homeowners are wondering how that will affect their mortgage loans. Traditionally, whenever we think the Fed is going to cut rates, we put off refinancing our house, or purchasing a new home, thinking that our interest rate might be better later on. But since September 2007, the Fed’s made several cuts and mortgage rates have actually gone up a little bit. Borrowers who have tried to get a new loan or refinance the old one lately have found that lenders are tightening requirements, making it difficult to get a loan if the situation... more »