Smart Borrower Blog

Archive for March, 2008

Why Buy a House that the Bank Owns?

With all the homes that are going into foreclosure these days, there are tons of bank-owned properties, called REOs, for sale. As a buyer, there are good reasons to purchase these properties — the main one being that the banks will sell them cheap. Let’s see why. Banks are not in the real estate business, so they are not interested in making a profit from the sale. They just want to get their money back, and the money the bank has invested in the house is often significantly lower than the market value. Also, owning the property is a risk... more »

Long-Term Loans Still Carry Some Risk

Because of the way the mortgage market has gone recently, many people are reconsidering the way they finance their homes. Unfortunately, a lot of them still do not quite understand where the problems were, or how they can offset the issues they have seen with their own mortgage. As a result, some people are thinking “longer is better” and are considering longer-term loans — some as much as 40 or even 50 years. The thought behind this is that by getting a 40 or 50 year mortgage, they will be “safe” from today’s fluctuating rates. They will lock in a... more »

What Happens When a Loan Goes into Foreclosure?

With more and more families losing ground in the mortgage payment game, it might be prudent to explain the foreclosure process. Typically when a borrower falls behind on payments, the home doesn’t immediately go into foreclosure. Instead, the lender waits until the payments are delinquent 90 days. He then will send the borrowers a “breach letter” requesting (well, demanding really) that the total loan, including interest and penalties accrued so far, be paid. At this point, the next steps will vary depending on which state you live in. But the loan goes into a foreclosure status and stays there until... more »

Walking Away From The Mortgage

An alarming trend is hitting portions of the nation – people are trying to stay current on their car loans and credit cards, but are not paying their mortgage payment.  The NBC Nightly News reported on this topic, giving a lot of reasons why this is happening.  Today, in The Indianapolis Star and on the KNXV-ABC News website, I see the same story related. The NBC News reports that this is the course of action that people are taking because of several factors.  People are being hurt by the high price of gas, and the cost of groceries has taken... more »

Setting Up Fannie & Freddie To Fail

Recent bill proposals are to give Freddie Mac and Fannie Mae greater power in the mortgage market to increase the cap on jumbo loans.  Seen by many as a boon to the economy, some analysts fear it may be a wrong move.  The biggest risk, say analysts, is that Fannie and Freddie will become burdened with too much financial risk. Let’s look at this.  Fannie and Freddie this week reported fourth-quarter losses totaling $6.1 billion.  They expect to lose even more throughout 2008.  Why, analysts say, should they be set up to take an even further tumble?  The government is... more »