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Old 09-30-2008, 02:43 PM
 
8,287 posts, read 11,834,959 times
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I work in real estate so perhaps I can clarify this issue. When a lender makes a subprime mortgage (high interest rate to a buyer with substanrad credit) the banks can either hold unto these or resell them freeing up capital to the original lender and continue to make loans. The problem really is when lenders have allowed to many of these loans to become a major portion of the investments. Hence banks like Wachovia who held unto these loans or a Lehman Brothers who were an investment bank have buyers default on their mortgages it now becomes a non producing asset so basically there is no money coming in because the buyers on these properties have defaulted. Foreclosures usually start after 3 months of non payment by the buyers.

Now realize these loans are not resold on a one by one basis but thousands to tens of thousand of mortgages so imagine you are one of these companies holding unto literally thousands of mortgages and the vast majority are in default. Something has to give and a lot of the blame goes to mortgage underwriters who approve these subprimes knowing that the buyer wasn't credit worthy but where willing to pay a higher interest rate to buy a home. The higher interest rate is what makes them attractive since most mortgages the lender collects most of his profit (interest) upfront in the first 15 years of most loans. The buyer goes into foreclosure & the bank knows it will have an asset (the house) to resell.

If a person is close to a foreclosure lenders will work with you because the last thing they want is a property. Bankers are into making money not being property owners.

So if you are near foreclosure (3 months or less) call your lender but I doubt they will renogotiate the terms on interest or payments but they will make arragements as to pay only the interest for a while.
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Old 09-30-2008, 02:59 PM
 
Location: London UK & Florida USA
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Quote:
Originally Posted by paperhouse View Post
Credit will dry up for the average American. Businesses will fail. But in the long run, it's better to do it now while these assets still have some inherent value.
Whether the Govt. gets these debts throgh bankruptcy or by paying nearly a trillion dollars for them (it wil be more), they still get the debts. There is no gaurantee that by bailing out the failing companies that they still won't fail. By getting money moving and cutting out the deadwood from the banking system will bring liquidity back. By overloading the system with inept companies will mean that interest will rise to cover any credit given by these companies. Borrowing wil come to a halt as no one will be able to afford it. Trillions would have been wasted and the Govt. will be buying the rubbish and leaving the good assets in the hands of the badly run financial houses..
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Old 09-30-2008, 03:01 PM
 
Location: Santa Monica
4,708 posts, read 7,716,781 times
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Quote:
Originally Posted by MiamiRob View Post
If a person is close to a foreclosure lenders will work with you because the last thing they want is a property. Bankers are into making money not being property owners.

So if you are near foreclosure (3 months or less) call your lender but I doubt they will renogotiate the terms on interest or payments but they will make arragements as to pay only the interest for a while.

You clearly don't work for Countrywide.
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Old 09-30-2008, 03:06 PM
 
Location: London UK & Florida USA
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In theory, mortgage lenders should help when you cannot make payments. In practice they take your home, hoping to get money back on a resale. This is what they are now trying to do with the Govt. Hold back the foreclosures now because they think the govt. will take them off their hands. This is NOT good news for home buyers. These properties will be sold on by the Govt. and put on the market at over the top prices. Mortgage company wins...home buyer loses.
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Old 09-30-2008, 03:08 PM
 
Location: Imaginary Figment
11,456 posts, read 12,726,856 times
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Palin is negotiating a deal to sell Alaska to Russia as we speak. We can use the money to fix this mess. Check ebay for specifics and bidding deadlines.
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Old 09-30-2008, 03:12 PM
 
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Originally Posted by ParkTwain View Post
You clearly don't work for Countrywide.
true because I am not a mortgage broker I'm a realtor.
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Old 09-30-2008, 03:27 PM
 
Location: SoCal
144 posts, read 550,621 times
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In places like Socal this just won't work some 70-80% of all loans were creative financing aka Liar's loans (stated income) or Subprime. Let's say the median income is something like 50K a year so you can afford 4x income which is ~200k, the median prices of homes during the boom was 600k some 12x income.

Now you know why IndyMac, WAMU, Wachovia, New Century, Countrywide, Downy S&L (soon to fail) all failed becuase they were heavily invested toxic Socal real estate. No matter how hard you try and rework the terms the median income person can really only afford a 200k home. The median house now stands at 400k but still far off from 200k.
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Old 09-30-2008, 04:39 PM
 
Location: State of Being
35,885 posts, read 67,165,475 times
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Here's a stat for you all to consider.

95% of the mortgages in this country are being paid on time.

75% of the subprime mortgages are being paid on time.

Do 5% of the mortgages in this country equal $700 billion?
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Old 09-30-2008, 04:40 PM
 
Location: Victoria TX
42,663 posts, read 74,259,760 times
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Because the money they loaned to home-buyers was borrowed from somebody else, and the lenders need immediate cash-flow to pay their own notes. They borrowed at more than the low-ball rate they gave the homebuyer, and can only remain solvent if they up the ante and get more back from the home-buyers. They just got told where the sun don't shine.
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Old 09-30-2008, 04:55 PM
 
Location: Albemarle, NC
7,730 posts, read 12,712,846 times
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Quote:
Originally Posted by anifani821 View Post
Here's a stat for you all to consider.

95% of the mortgages in this country are being paid on time.

75% of the subprime mortgages are being paid on time.

Do 5% of the mortgages in this country equal $700 billion?
Do you have a source for that?
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