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De-bunking the Mortgage Crisis
Author: Chad Childress  | Posted: 15-11-2007 | Comments: 0 | Views: 9 | Rating: (53)  (?) 
With well over 110 lenders bankrupt, operations seriously damaged at many major mortgage firms, and 5 hedge funds wiped out, along with tens of thousands of jobs, subprime loans have been named as the culprit. They have even led to millions of foreclosures with millions more on the way. And, to make matters even worse, subprime mortgages are also being held responsible for massive volatility in the stock, bond, credit, futures, and real estate markets here in the US and around the world. Some have estimated that losses in the mortgage securities market alone could reach hundreds of billions of dollars this year.
What this means to you is that if you're looking to buy, sell, or refinance a home, you are facing a very different market from the one that existed just 6-12 months ago.
How did we get here?
The recent boom in real estate was fueled by a period of record home appreciation and historically low interest rates. Banks, in due to the intensely competitive atmosphere of this boom, loosened guidelines and began offering more funding to more borrowers through riskier, non-conforming or "exotic" mortgages.
These "too-good-to-be-true" lending conditions persisted for several years, supported by high demand, historical real estate data, home prices, and massive trading volume/profits on mortgage-backed securities and other financial instruments on Wall Street. Like a race car running at maximum RPM, the market plunged ahead, ironically unaware of the impending breakdown.
Then, in 2006, a slowdown in real estate led to a rapid erosion of home values, a spike in supply, and ultimately to today's tightening of credit guidelines, leaving many investors powerless to sell or refinance out of their existing positions. Many Americans who had accessed their equity were suddenly finding themselves spread far too thin as home values dropped. Foreclosures naturally followed in staggering numbers and a re-valuation of mortgage bonds and other financial instruments created the credit/liquidity chain reaction we're now going through.
Unfortunately, the storm will get much worse before it gets better. According to the latest estimates, over 2 million subprime and Alt-A adjustable rate mortgage (ARM) holders will face payment increases of up to 30%-100% when their loans reset in the next 2 to 18 months. While these loans make up less than 40% of the total mortgage market, the negative effects, as we've already seen, of increased foreclosure activity can cause a shockwave effect throughout the industry and around the global economy.
What does this mean to you and your home finance?
Sellers: If you've been planning to sell your home, be prepared for an even smaller pool of qualified buyers. While some experts predict a settling of this credit crisis over the coming year, stricter credit guidelines and a shrinking variety of mortgage products could knock out as many as 15%-30% of potential qualified buyers. The harsh reality is that you simply can't afford to wait around for the best possible offers with conditions as they are. Talk openly and seriously with your real estate agent, and be open to suggestion. The edge he or she has from local real estate experience will prove useful in pricing your home. He or she can also help ensure that your buyers are pre-approved and stay pre-approved throughout the entire process.
Buyers: Get pre-approved by your mortgage professional. While there are a lot of great deals out there, getting credit is becoming tougher and tougher, and it's taking longer and longer to complete the loan process. Remember, what you qualify for today could be a different story tomorrow in an unstable market. If refinancing is your goal, keep this in mind -- You can't afford to waste time! Communicate with your lender. Don't do anything that could reflect negatively on your credit, and make sure to submit all your documentation on time.
ARM Borrowers: If your ARM is scheduled to reset in the next 2-18 months, you need to speak with a mortgage professional immediately. Whether your ARM is subprime, Alt-A, or even if you have a pre-payment penalty, don't let a default or foreclosure situation catch you off guard. Your monthly payments can increase anywhere from 30% to 100% once your loan resets. It's imperative to your financial stability that you at least find out exactly what your adjusted payment will be.
Borrowers with poor, bad, or no credit: Each week it seems lenders are scrapping more and more mortgage products. Many lenders have stopped offering No-Doc loans and are reducing all forms of Stated-Income loans. Though the process could take some work, borrowers with credit issues need to contact a loan expert. Often they have credit repair resources and other strategies to help you reach your financial goals. Both of the sites below contain affiliate links to a legal firm which specializes in credit repair.
Lastly, there's an important principle to understand: all markets, while cyclical in nature, are self-correcting, be it credit, real estate, stocks, or bonds. For the last 6 or 7 years, real estate was booming and riding high. The correction we're experiencing now - while it seems harsh and could get much worse - is, in a sense, "natural" and directly related to the extremely loose guidelines and perhaps over-eager lending and leveraging practices during the boom cycle.
To find a mortgage professional who will assist you with pre-approval conditions and new credit requirements, please visit http://www.flagshipfinancialmortgage.com or http://www.vareficenter.com for veterans.
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Article Source: http://www.articlesbase.com/mortgage-articles/debunking-the-mortgage-crisis-260262.html
About the Author:Chad C. Childress is a unique and experienced Real Estate and Wealth Creation expert. When he was only 24 years old he founded his own Mortgage Planning Practice, Stone Ground Consulting, LLC. He has founded and owns multiple Real Estate, and wealth creation companies. He is a visionary in the Real Estate industry, with his ultimate purpose being the financial independence of EVERY ONE of his clients. Chad has spoken for and trained at numerous Real Estate Investment groups and hundreds of Real Estate Brokerages. His broad experience in the Real Estate and Financial industries have helped him to become one of the top Real Estate trainers in the Western United States. This is no secret, as Chad has been inducted into the MONTCLAIR WHO'S WHO IN REAL ESTATE for 2007. Chad is the publisher of "Real Estate Agent Magazine," Founder of "Real Estate Agent University," Publisher of "Strategic Homeowner Magazine," and is currently writing his first book entitled: "Money Magnet: Retire Right, Retire Right Now." He has helped hundreds of people to achieve Financial independence.
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About four years ago we fell behind in our mortgage payments. As our financial situation stabilized we made an agreement with our mortgage company to make payments every two weeks for three months to catch up, and then they would put the remaining payments at the end of the mortgage. Last spring (2007) we went to refinance our mortgage through another company and our mortgage company reported that we were 19 payments behind and owed over $95,000, yet our monthly statements showed us owing around $76,000. After I contacted them, they said we neglected to sign the forebearance agreement we were approved for. I asked what this was, having no idea, and when their records showed we were notified of any of this. They stated we were not notifed. A month later we received foreclosure papers and have since hired an attorney. Our debt to this mortgage company is now over $100,000 because they are charging us $145 per day in interest, besides many additional other fees. My questions are as follows: Are we better off going through a credit counseling service to negotiate with the mortgage company. They have refused to speak to us about any type of negotiating and have been consistently rude and ignorant, blatantly telling us to "get out" and give them the house. Should we just file bankruptcy? And should we be making our regular payments to the mortgage company as if none of this never happened? We have not made a payment in over a year on the advice our attorney.
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