Smart Borrower Blog

Archive for November, 2008

Looking At The Mortgage Industry

If you have been around the mortgage industry for very long, you are aware of Robert Shiller.   Shiller, a well-known economist and professor at Yale University, is predicting that the current financial crisis could go on for a good number of years.   This is probably more reality than we really care to look at. I looked at some figures and statistics before making this post to see what kind of list I would come up with concerning troubled entities and businesses.   Here is what I find: Even though we see the greatest rally in the stock market... more »

Mortgage Interest Rates Fall on New Rescue Plan

Interest rates on long-term U.S. home loans fell in the latest week, a reaction to the newly announced Bush administration's $800 billion bailout package to provide more liquidity for consumer and mortgage debt markets, according to data from Freddie Mac. “Interest rates for 30-year fixed-rate mortgages fell for the fourth consecutive week as signs the overall economy is flagging lowered most interest rates market-wide,” said Frank Nothaft, Freddie Mac vice president and chief economist. “And economic growth in the third quarter was revised downward this week, led by the first decline in consumer spending since the fourth quarter of 1991... more »

Prime Mortgages Showing Signs Of Trouble

Although a great deal of the problems facing the mortgage market is focused on subprime, it is noteworthy to see that even prime mortgages are showing the strain.   In 1985, primes facing foreclosures stood at 1.97%.   Now, we are seeing 3.07% of prime mortgages that are either in foreclosure or are at least 60 days late nationwide.   This rate has jumped since end of second quarter. California is especially hard hit.   Unemployment there stands at 8% and rising, and home values have dropped by at least 40%.   And in California, the figure for homes facing... more »

Crisis In The Commercial Mortgage Market

Following the mortgage market as I have this past 2 years, I see the domino effect of trouble in one market falling over into the next.   Residential mortgages and that market have taken a big ding this past year, with billions lost and foreclosures looming on every horizon.   Experts in the field do not see an end to the bleeding yet, and this situation is affecting almost every area of the country, from gasoline prices to retail sales.   Now looming on the horizon is another event that has the bankers worried. According to the Washington Post, the... more »

Fed, Treasury Answer for Their Bailout Changes

U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke faced bitter criticism Wednesday for their actions in the current mortgage foreclosure crisis, during a hearing before the House Financial Service Committee. Paulson, who has headed up the $700 billion bailout program approved last month by Congress, recently announced his plans to use the funds to shore up the banking sector of the economy, rather than direct them at preventing more homeowner foreclosures as dictated by the legislation. His department has already spent about half of the allotted monies and intends to leave the rest for the incoming Barack... more »

Can Loans Be Restructured To Stop Foreclosure?

Researching for today’s post led me to an editorial that made a lot of sense to me, and one that I hope is brought to fruition.   Basically, some members of Congress are advocating the restructuring of loans so that people who are in danger of foreclosure will be able to make the monthly mortgage payment.   Sen. Christopher Dodd, D-Conn., chair of the Senate Banking Committee, wants Congress to pursue legislation that would open the option of bankruptcy protection to people who face losing their homes.   In Chapter 13, this would allow payment to continue, and the homeowner... more »

Freddic Mac To Tap Bailout Funds

The economy continues to look dismal.   Circuit City, the electronics retailer, has filed for Chapter 11.   Many retail stores are showing huge losses each quarter.   Now we see Freddie Mac dipping into the bailout money for the first time.   And AIG?   Gave out $500 million in bonuses.   I have to admit it - those folks have a lot of moxie. Freddie has been in trouble for a very long time.   The company reported a $25.3 billion quarterly loss on Friday.   They attributed much of the record loss to a write down of... more »

Treasury Shifts Direction of Bailout Plan to Consumer Credit Markets

The U.S. Treasury Department announced dramatic changes to the recently created $700 billion financial bailout package during a news conference Wednesday. Congress passed the bailout bill last month with the understanding that the funds would go towards buying up bad mortgage debt from struggling banks and other lenders. Yet, Treasury Secretary Henry Paulson said that the "troubled asset relief program" or TARP will now focus instead on keeping major financial institutions healthy by buying up preferred stock. He also mentioned using TARP money to provide more liquidity in the consumer credit markets. “Over these past weeks we have continued to... more »

FDIC & IndyMac Work To Help Distressed Borrowers

The NBC Nightly News tonight reported on the hopes of the FDIC and IndyMac to be able to step in and modify mortgages for people who are in financial trouble and about to lose their homes.   This is a good move on their part - they will modify the loans by dropping the interest rates, which will drop the monthly mortgage payment down to a place where people can afford them.   Modifications would be designed to achieve sustainable payments at a 38 percent debt-to-income (DTI) ratio of principal, interest, taxes and insurance. All this comes at a time... more »

Mortgage Rates Remain Unstable

With the election behind us, we will wait with great anticipation to see what happens on January 20th, 2009.   In a press conference today, President-elect Obama reminded us all that this is still not his watch, and until it is, we have to be aware that the current administration will make the shots.   Be ready. The stock market is swinging wildly - up and down, and up and down.   It remains in negative territory.   The goods things that the stock market is seeing is bargain hunters snatching up prime stock for bargain basement prices.   Any... more »