Archive for the ‘debt’ Category
admin on December 18th, 2008
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As the US economy continues to sour, many are concerned the $350 billion the government has forwarded to aid the nation’s banks has not filtered down to the businesses and consumers needing it. In October, Congress approved a financial bailout plan for $700 billion to increase lending and stimulate the economy, however, since then very little evidence has been uncovered to demonstrate the banks has increased lending activity. In fact, the economic statistics appear to have worsened across the nation since October.
Many critics of the congressional bailout plan complained banks had used the funds for shareholder dividend payouts and to offset bank losses rather than loaning to their perspective communities. A Congressional Oversight Panel was put into place to monitor the usage of the funds, but have been unable to unveil an effective use of the funds to date, as the mortgage meltdown and increasing unemployment continues.
admin on December 17th, 2008
The White House and Detroit automakers are still scrambling to build a bailout plan for the top 3 US automakers since a similar measure was defeated by Congress just days ago.
When confronted with the possibility of bankruptcy, US automakers have remained steady to point out that people will not buy a car from a bankrupt automaker. However, a recent survey found that 67 percent would buy a US made car regardless of whether bankruptcy was an issue of the automaker. The contention of automakers is its customers will be concerned that warranties and replacement parts production may suffer with bankrupt automakers.
Additionally, a majority of those surveyed feel that some form of government bailout should occur for three of the nation’s largest employers. The US auto industry currently employs roughly 2.5 million people, mainly in the Midwest and across the South states.
admin on December 10th, 2008
Homeowners across America have sought mortgage loan modifications as the rate of home loan default notices have increased to record proportions. A recent survey reported one in 10 homeowners have missed a payment in the last year and as a result, many homeowners have sought loan modifications. A new statistic shows that 30 percent of homeowners that have had their mortgages modified are defaulting on the new loan terms.
Many homeowners are reporting that the modified mortgages actually result in higher monthly payments to include a combination of arrearages, taxes, insurance or legal/late fees. Lender proponents respond that many of the homeowners simply can not afford their homes.
The mortgage banks wrote $2.3 trillion in adjustable rate mortgages (ARM) over the past three years. The ARM starts with a lower rate to allow a borrower to qualify for a mortgage because of a lower introductory interest rate. The ARM fiasco that struck the housing market sparked the current mortgage crisis over a year ago. When the lower introduction rates expired and homeowners were faced with new higher mortgage payments they couldn’t afford, the economy, including consumer confidence, was sent in a downward spiral.
A combined effort of financial institutions and the government are attempting to formulize a modification process that can be successfully replicated from one homeowner to another. On the wake of this news and the worsening statistics on the nations housing crisis, Chairman of the House Financial Services Committee, Rep. Barney Franks of Massachusetts threatened to hold up any further use of the $700 billion economic bailout without a significant portion being used to modify defaulting mortgage loans.
admin on December 8th, 2008
The Mortgage Bankers Association released data from its quarterly survey, reporting 1 out of 10 homes in the US have experienced a missed payment or are approaching a point of missing a payment. The sobering statistic does not just represent the number of homeowners facing foreclosure, it also illustrates that the economic crisis is hitting a wider range of homeowners other than those actually losing their home to foreclosure.
The percentage of those facing a mortgage problem in their homes has increased by nearly 3 percent over the last 12 months. The dramatic increase on unemployment reports and slowed winter production has many wondering if congress will intervene soon.
admin on December 2nd, 2008
The combined effort of lenders, states and agencies to reduce the foreclosure rate has been a slow process for many homeowners. Various banking entities have weighed in on the foreclosure crisis, but only few have actually made measurable progress. The issue lies in requirements of the mortgage loan modification process.
The process involves several factors that are not in tune to the administrative and time requirements to actually modify the mortgage loan. Traditionally, mortgage servicing company personnel are not trained to modify loans. In addition, once these mortgages are provided to the borrower, they are packaged with other loans and sold to investors. Many home loans that require modification may have issues with deferred or forgiven principal amounts due to lost equity. In these cases, any deferred principal amounts must be approved by the investors owning the mortgages. Of the mortgage loans already modified, some have revisited a default status because the modified loans debt to income ratios were still in an unaffordable range for the homeowner.
Many banks are cross training current staff or bringing on new staff to handle the influx of loan modification requests. As banks and government agencies plow through the plethora of defaulted mortgages, formulation for a general acceptance of terms on modified loans and reasonable coverage of losses will formulate and hopefully create a reliable and expedient process as the nation tries to quell its financial crisis.
