Smart Borrower Blog

Archive for March, 2008

Who’s Responsible for the Mortgage Industry Fall-out?

Every day we hear more news about the credit crisis, or mortgage bubble. The industry, most say, has created its own crisis because of the subprime market. But who is really responsible for what happened? Industry experts (and non-experts) blame many sources: Subprime lending Credit problems on Wall Street The Fed for injecting cash into the system — creating what will eventually be regarded as inflation A law put into effect during Carter’s reign, called the Community Reinvestment Act of 1977 Although the mortgage industry is quick to point the finger at the subprime lenders, the fact is that the... more »

Relief For Those Facing Foreclosure?

We hear on and on, as the mess in the sub prime mortgage market continues, about relief for the people who are in a world of hurt.   I have reviewed plans and proposals here, and not one offered any real hope to those that are one paycheck away from living in the streets.   I have to think at the grass roots level, many people are as aware of this as am I, and are doing what the banks are fearful of - walking away from mortgages.   I read daily about appeals from banker who are giving sound... more »

HUD’s Latest Proposal

HUD has proposed new legislation that would insure that lender’s paperwork is understandable and fully explained to prospective homeowners.   Although I feel that if you are making a big decision to buy a home, it is your responsibility to know what you are getting yourself into.   Anyone, unless you are a lawyer, that has tried to wade through the legalese of any lender documents knows what I am talking about.   The proposal also encourages borrowers to shop around for the best available deal. Although I have to take this with a grain of salt, housing officials said... more »

A Plan For The Economy?

On Thursday, some of the nation’s top lawmakers released a plan to help bolster the economy by proposing a broad series of reforms aimed at tightening oversight of financial institutions. This is a plan that should have been in place from day one.   It is kind of like locking the barn door after the horse has been stolen, don’t you think?   Tougher disclosure requirements for banks and Wall Street firms, a nationwide licensing system for mortgage brokers and new rules for credit rating agencies are part of the agenda.   One would think that these safeguards would already... more »

Lower Home Values Cause Upside Down Mortgages

According to a recent report on CBS news, 20 million households are about to be upside down on their mortgage. An upside down mortgage is when the home owner owes more on the house than it’s worth. The result of an upside down mortgage is usually that the homeowner takes a loss on the sale. The other choice is for the home to go into foreclosure. But it costs banks around $50,000 to foreclose on house. So many lenders don’t want to bother. If 20 million is the correct figure, that means 43% of all mortgage holders would be stuck... more »

Avoiding Foreclosure

Many borrowers wonder when they should begin contacting their lender, if loan payments have become late. Most lenders suggest that the wheels begin turning when your payment becomes 16 days overdue. At this point, the lender may try to get in touch with you to help decide how to bring the payment current. If not contact the lender yourself. At this point, lenders might still try to arrange a repayment schedule. You will have to pay some of the delinquent amount up front, and pay off a portion of the balance every month for a year or more. If you... more »

Repayment Plan May Help Prevent Foreclosure

Millions of homeowners are currently experiencing foreclosure proceedings. About half of delinquent borrowers with loans are contacted by their bank and offered some sort of repayment option. Lenders prefer to work out loans because the cost is thousands less than going to foreclosure or repossessing a home. Borrowers who agree to enter such a plan may be up to 80% less likely to lose their homes than borrowers who do not. There are several alternative plans usually offered by Fannie Mae, Freddie Mac and the FHA. Let’s take a look at the terminology used for some of those now. Short-Term... more »

ESOP - Taking It To The Streets

I read with glee today about an advocacy group in Cleveland.   Called the East Side Organizing Group, they are raising their own particular brand of hell in that town.   The report was funny, but gives food for thought. It seems ESOP is climbing aboard a bus, and going around to the three-car home neighborhoods, and seeking out loan companies top execs. There focus lately - and ongoing - has been on Countrywide and its top people.   So, on an icy Saturday morning before people were out of bed, a couple of busloads of the “shark hunters” came... more »

Jumbo Loan Ceiling Raised

It appears the government is moving on raising caps on jumbo loans for Fannie and Freddie.   Southern California is benefiting from this, as is the Boston area.   Reports show that the limits were raised to the maximum $729,750 in Los Angeles, Orange and Ventura counties, to $697,500 in San Diego County and to $500,000 in Riverside and San Bernardino counties. In the Boston area, an increase was made to $523,750.   Loans that fall between the old loan ceiling and the new ceiling will likely still carry higher interest rates than traditional conforming mortgages.   These loans have... more »

Mortgage Investors Backing Off

Investors, scared off by the mortgage market, are beginning a pull back, and with good reason.   Now doesn’t seem like a time to be invested heavily in the mortgage market, with the loss of jobs, high oil prices, and, for the first time since 1945, home values way down.   I read that what is owed on homes now far outweighs what they are worth since 1945, and it is reason enough that many people, unable to get the help they need, are walking away. We are in a serious downturn right now, and Warren Buffet, the Oracle of... more »