Mortgages - House Prices - Negative Equity

It is reported that more and more homeowners, both sides of the Atlantic, are being burdened with negative equity. That is the unhappy situation when your outstanding mortgage exceeds the value of your house. It stifles the housing market, because unless they have to, people are reluctant to sell in a downturn.

Those with negative equity, who also have limited or nil savings, could not meet their outstanding mortgage loans if they were to sell their houses. This need not be a problem, because most people consider their house, and the mortgage secured against it, to be a medium to long-term investment. They believe that if they stay put, the current downturn will be over, and property prices will rise again. That has always been the case in the past, although there have been short-term hiccups.

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This time round, the situation has been made worse by injudicious lending; to people that couldn't really afford to fund the mortgages they were granted. Unfortunately, one bad turn often follows another, and a period of unemployment can fast eat into savings, or worse still, maximize other debts. It's a bit of a chain reaction that can only intensify in the impending recession. What could be worse than losing your job at the same time as property prices are falling, but the price of oil, and seemingly everything else, is rising? It may seem like a bit of a recipe for disaster.

The majority who can survive the financial storm will be alright, and come out of it virtually unscathed. But what about the unfortunate minority who are out of work and finding it difficult to meet their mortgage repayments?

The best advice is to discuss your plight with your mortgage provider at the earliest opportunity. There are various ways they may be able to help you. They might agree to extend the mortgage repayment period, or allow interest only repayments for a time. They may even consider a repayment holiday, if they believe that your setback is only temporary, and there are signs that your circumstances will improve.
There are joint equity schemes whereby loan authorities buy a stake in the property, and repayments are proportionately reduced.


Mortgage Bankers Heckled

Never in the field of buying houses, was so much, grabbed by so few, from so many, who were encouraged to borrow more than they could afford to repay!

It's not only in San Francisco that mortgage bankers have been booed by consumers who believe they have been let down. Irresponsible lending, has been used as an excuse for paying phenomenal bonuses, to bankers who did little more than create an unsustainable house price bubble. It is worse than the crash which hit people who knew that they were gambling, rather than people whose only aspiration was to own a home of their own.

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The Gordon Gekko 'Greed is Good' syndrome was everywhere from get rich quick bankers, to buy to let investors who were led to believe they couldn't lose. Investment is a speculative proposition, which is just another way of saying that it is a gamble. The greater the risk the greater the return is a quoted maxim, which is why long shots in horse races, are at long odds, and rarely win. Gekko always won because the insider trading he was involved with controlled markets. By ignoring established banking practices, mortgage bankers have had a field day, but escaped with the spoils before the day of reckoning.

In horse racing, and other forms of gambling, the bookmaker usually wins, as opposed to recent banking ventures whereby bankers always won in the form of ridiculous bonuses. It's the sort of greed excess that allows Gekko type aspirations, to siphon proceeds off to the undeserving few! There are many to blame for the ensuing fiasco, whether they will ever be taken to account is another question!


Mortgages - Once Bitten Twice Shy!

Mortgages are still readily available in the US, but as might be expected, mortgage loan sources require full evidential documentation to support income statements. It may be a case of 'once bitten twice shy' because it is generally agreed that credit policy has been too relaxed, which largely contributed to the current crisis.

Not very long ago it would have been inconceivable to imagine mortgage giants, Fannie May and Freddie Mac, being taken over by the federal government. Equally it would be wrong for the government to proceed with policies that had created unprecedented problems. Therefore, it is unsurprising that a more cautious approach is being followed. In fact it is vital when taxpayers money is involved.

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When credit standards are tightened up fewer people qualify for mortgages, which does nothing to improve the market. It favors financial stability, with mortgages only approved for those who can best fund repayments. For such borrowers there are bargains to be had, but unfortunately at the expense of those who have become overextended.

There are reports that the government continues to support affordable housing, whilst recognizing the need for responsible lending. It's a difficult path because it was irresponsible lending that led to the present predicament. There is little doubt that the US, and the world at large, will recover from the financial storm, but in the short term, there will continue to be credit restrictions and other hardships to endure.


Mortgage Bubble - Double Trouble

Despite UK government assurances of help, home repossessions are forecast to rise substantially. The economy is lumbered with recession and all that it entails, including falling house prices and job insecurity.

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In fact UK repossessions are likely be up 50% on last year, to around 45,000. It is a worrying trend and comes at a time when households are having to pay more for almost everything. Since the oil price peaked it has returned to more normal levels. However, it seems that OPEC is to reduce supplies to maintain prices, and it may not be long before that is again passed onto the consumer in rising fuel costs. People were told that energy prices, that is to say gas and oil, were high because the price was linked to the price of oil. They are quite rightly questioning why, when the oil price dropped didn't energy prices follow as quickly as they did when it went up?

It seems that getting more for less is almost encouraged by the government. Nobody would deny that conserving energy, thereby assisting with global warming is an admirable objective. However, it seems that the more you save the more you pay simply to maintain gas and oil company profits at whatever levels the energy companies say is necessary. It may be necessary for shareholders, and director's remuneration, but the poor old consumer seems last in the queue.

There are government-sponsored schemes whereby insulation can be obtained with various grants and monetary incentives. Again not many would disagree with the theory, but if the end result simply means that people will be paying twice as much for half as much energy, to support energy companies profit objectives, it makes it easy for them and hard for everybody else. Almost a licence to charge what they like!

It wouldn't be nearly so bad if everything wasn't going up, when for lots of people the threat of getting behind with their mortgage, or worse, is on the cards. There are many who believe that the government is not doing enough to help at this difficult time. Insofar as energy is concerned they are probably right.


Buy To Let Getting Tougher

A recent report in The Times provides useful information about the Buy-To-Let property market.

With house prices falling faster than they have done for decades, it seems as though Buy To Let landlords may be in for a hard time, especially if they entered the market when property prices peaked. Some investors will undoubtedly weather the storm, whereas others may not be so fortunate.

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The current trend is all the worse because of gloomy economic forecasts and the threat of recession, which many experts believe is now a certainty.

The following is an extract from the article in The Times:

"It has been an uncomfortable fortnight for Britain's army of landlords. House prices are falling faster than at any point in the past 50 years and experienced lenders have been backing out of the market.

Some commentators have been declaring the death of buy-to-let and experts agree that there is little to be gained from entering the market in the current economic climate.

It has not been all bad news. Rental demand is expected to continue to grow as first-time buyers delay the purchase of their first home. There are 1.6 million 20 to 39-year-olds who are renting because they cannot afford to get on the property ladder, according to Hometrack, the property data company. A 20 per cent fall in house prices would still open the market up to only 600,000 young buyers.

Richard Donnell, of Hometrack, says: “Rental demand is fuelled by young people in their twenties and thirties who cannot afford to buy. Even a sharp fall in house prices won't bring that many people into the market, thus fuelling rental demand for the next 18 months at least.”"

Please Click Here to read the complete story TIMESONLINE.


Wells Fargo To Assist With Problem Mortgages

Wells Fargo, who service about twelve per cent of US mortgages, are to join forces with the NACA (Neighborhood Assistance Corporation of America) in a scheme, to assist people who are behind with their mortgage payments, to stay in their homes.

These two organizations intend to work together, to assist those who are finding their mortgage payments difficult to maintain, to obtain a more appropriate repayment level. This is a welcome initiative, as it should assist many at risk house buyers to remain in their homes. Moreover, as NACA has hundreds of professional counselors available expert assistance is accessible for those able to take advantage of the plans.

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This joint approach by two such respected names in the mortgage business will be extremely welcome at this critical time. Wells Fargo are at the forefront of retail mortgage lending, and the NACA are a non profit making organization, whose assistance has already benefited many thousands of mortgage holders.

To those who have achieved their ambition of having a home of their own the threat of foreclosure is a demeaning and worrying prospect. However, schemes of this sort imply that help is readily obtainable for many people, and should greatly assist in helping them to avoid the agony of repossession.


Voters Back McCain Mortgage Plan

It has been reported in the Phoenix Business Journal that most US voters favor John McCain's mortgage rescue plan.

With the countdown to the Presidential election well under way, Senator McCain will be pleased about this support. The state of the economy is now the major issue, not only in American politics but also throughout the world.

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It seems that Senator Obama is still the front-runner, but in the final run up to the election it is all very much to play for.

An extract from the Phoenix Business Journal is reproduced below:

"A majority of U.S. voters back a mortgage bailout plan forwarded by U.S. Sen. John McCain, R-Ariz., that would have the federal government buy distressed and upside down mortgages and refinance them so homeowners can avoid foreclosures and keep their homes.

A new poll by Rasmussen Reports shows 52 percent of those surveyed support McCain’s $300 billion plan, while 35 percent oppose it. Presidential rival U.S. Sen. Barack Obama, D-Ill., also opposes McCain’s mortgage plan.

Support for the plan crosses party lines with more Democrats backing McCain’s idea than Republicans, according to the Rasmussen poll. McCain unveiled the plan Tuesday at the second presidential debate in Nashville, Tenn."

Please Click Here to read the complete story Majority backs McCain’s $300B mortgage plan.


Is Alistair The Bank's Darling?

Have Gordon (Do what it takes) Brown, and Alistair (Do what it takes) Darling, done sufficient to reignite the UK housing market? A better question might be why they would want to stoke up, what was a significant cause of the problem in the first place. It is surely elementary that whenever anything overheats it eventually cools down.

The telephone number sums of money that are being used to bolster the system are staggering to perplexed, and sometimes angry, taxpayers. They understandably ask how can the people who got us into this mess, be trusted to get us out? There is 50 billion pounds here, 40 billion pounds there, and 6-700 billion dollars somewhere else. While all of this is going on, it is reported that greedy executives of Lehman Brothers were securing millions of dollars in bonuses; at the very time the business was collapsing.

All most people ever wanted was a reasonable home at a reasonable price, not a topsy-turvy, interbank mish mash of swapping mortgages and everything else! Could it ever last? No! Should it have been allowed to continue? No! So who should now foot the bill for all this folly? It looks like it will be the taxpayer; the poor bewildered man in the street!

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It is a pity that those who created this ruinous situation, will not be asked to refund their ridiculous bonuses. They are the beneficiaries and it seems as though most of the rest of us will be their paymasters. Perhaps the Government mantra ought not to be - We'll do whatever it takes - but - We'll do what we like with your money!


Don't Bank On Getting A Mortgage

It seems that when some organizations, shed their building society boots and became banks, they bit off more than they could chew. Bradford and Bingley is a prime example, but by no means the only former building society that has caught a cold. Northern Rock and Halifax - Bank of Scotland, also spring to mind. Wasn't it Alliance and Leicester who boasted that you're a better investor.....?

You are certainly not a better investor with Bradford and Bingley, as it looks as though the dear old shareholders will get nothing, including those who forked out £400 million, for a rights issue in July. The great majority of shareholders are not millionaires, and those who were members when the building society became a bank, and have held onto their stock, are probably hanging on to worthless bits of paper. Such people you can feel sorry for but they are not the perpetrators of the problem.

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Bradford and Bingley were very big in providing Buy to Let mortgages, and to a lesser extent the dubious practice of self certified mortgages. There is no wonder they caught a cold, because there are many who do not profess to be financial experts, who could see the problem coming. Of course the government have been particularly lax in not heading off a worsening situation. It almost seems as though; along with many others they saw mortgages, and house price inflation, as stairways to the stars.

House prices were driven up, not least due to 'Buy to Letters' and Self Certifiers. Many people were encouraged to borrow against the perceived increased value of their properties, and it was all sure to end in tears. But, and it is a reasonable question to ask, who for? British and American taxpayers to name but two, are being asked to foot the bill for excesses the likes of which have never been seen before. There used to be a saying that if you would like to know the value of money go and try and borrow some. That was before the banks borrowed shed loads of international money, and shovelled it out like snowflakes, or stardust!

The chickens have now come home to roost and there is no wonder. In an age of privatization, nationalization is back, and wonder upon wonder, it is some banks, the bastions of private enterprise, that are now in government hands. Many ordinary people are angry at being asked to fork out large sums to bail out irresponsible bankers and financiers. There is an election looming in the United States and there are many in the House of Representatives who have become nervous about recent bail out proposals. We watch with interest from both sides of the Atlantic, and no doubt throughout the world.

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Mortgage Quiz - Are You Greedy or Are You Needy?

Most Americans are good people but there are some who are only motivated by greed. Most Europeans are good people but there are some who are only motivated by greed. Most Asians are decent people but there are some who are only motivated by greed. Better not leave out Africa and Australia because greed is not limited to a particular country or creed. So how can a vast majority stop the few causing financial misery to so many? There is only one answer and that is the ballot box!

That is why the American House of Representatives voted down the recently proposed $700 billion tax bill. They have been heavily criticized, but in a democracy the people elect the politicians, and it is the majority of the people that they should strive to serve. Not the few get rich quick bankers and speculators, but all the people, and it was good in this instance that those elected called at least a temporary halt to a scheme involving vast amounts of public money. At the very least they will get a better deal on the part of the electorate. They have succeeded in diverting some attention from the really, really, greedy, to the very, very, needy.

That's what the present mortgage crisis is all about. It is not going to adversely affect fat cats in the banking business. They have a way of squaring everything to suit themselves. Heads they win, tails you lose is their philosophy. That is why so many ordinary Americans with, and without mortgages are so angry about the proposed $700 billion dollar bail out. They feel that they are being asked to foot the bill, for other people's excesses, and quite rightly ask, why should they?

It seems that the financial sector has been operating almost without regulation. There have been ridiculous bonuses, and salaries, with obscene fortunes being made by unscrupulous people that have caused the financial system to be brought to its knees. Win or lose, they have managed to reward themselves. The problem has got to be sorted out, and it is as well that measures are afoot to prevent those responsible from getting away with it.

There was a famous Wall Street movie with Gordon Gekko extolling that 'greed is good'. The movie had a happy ending when he got his just deserts. We can only hope that reality, to some extent re-enacts the movie.

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