Archive for June, 2010
Higher Appraised Values Lead To Sub-prime Mess Appraisers Not To Bame
Higher Appraised Values lead to SubPrime Mess Appraisers not to Bame
I read an article at least once a day the puts the blame for the mortgage mess on lenders who made loans to people with bad credit histories. Although this did happen and there was some fraud involved it is only part of the issue with the subprime problem.
SubPrime loans are defined as loans that are nonconforming to the Fannie Mae or Freddie Mac resale markets. These federally backed publicly traded companies were developed to allow the mortgage markets to maintain the liquidity they need to continue to write mortgage loans in the US.
These conforming loans are packaged and sold on the market as mortgage backed securities and are supported by the US government. Each loan in the package must meet strict guidelines in order for it to be sold. Every loan needs to have documentation as to employment income and the loans cannot be over 417000. Most of these loans also require a credit score of at least 580 and between 1020 equity.
This leads to the logic question of why loan money to people who do not have equity or high credit scores or can prove that they make enough money to pay the loan back? The answer becomes a little more clear when you see where the real estate troubles are the clearest. The states of Florida California and Nevada are currently the hardest hit by the current bust. Ohio and Michigan are also among the list but their issues are more based on job losses in the area than any market based problems.
Florida California and Nevada have problems that are pretty unique unto themselves. First all three states have high median home prices in California it is 514000 In Florida it is 259000 and in Nevada it is 478000. The median price is the exact middle of the range. This means that there were as many homes over that price as there were under that price. So as you can see clearly over half of the homes in California and Nevada are considered nonconforming simply because they are over the Fannie Mae limit.
What it all means
What all of this means is that not all subprime loans are bad. Subprime loans were being made to self employed people with good credit who had a hard time showing enough income to qualify for a conforming loan because of personal guarantees they may have had to make for their business loans. SubPrime loans were made to clearly of every home in California and Nevada simply because they were over the maximum conforming limit. They were also made to people who had credit scores slightly under the minimums needed to qualify for a Fannie Mae product. Things such as having a credit balance too close to your limit on one card can lower your score by as much as 30 points.
These loans are not what most people think of went they hear subprime lending. But with the media missstating the issue banks and the market have effectively shut off the money available for these types of loans. If a borrower that fell into one of these categories were lucky enough to find a subprime product today they would be paying anywhere from 1 to 1.5 more for their loan then they would have a year ago.
This lack of availability to subprime funding is fueling the downward slide in values in these three big markets. If the funds are not available to borrow and the cost of borrowing has increased by more then a percent over the last year it is going to have a negative effect on value. On a 500000 home that could be a 416.00 a month difference. The effect that has on the buying power of that person is about 100000. Meaning that if the borrower has to pay 7 on a loan instead of a market price of 6 then they can effectively afford a home of 400000. This cost and availability of money is one other reason home prices are falling.
About the writer:
About the writer: Robert F. Goldt is a State Certified Real Estate Appraiser 2232 in Florida and also holds a Title Insurance Lisence as well. He has owned his own appraisal and title company for 20 years. If you are looking for appraisers in your area or require any real estate appraised please view visit http://www.appraiserscout.com for a nationwide database of appraisers.
Foreclosures: To Buy Or Not To Buy
When a home gets repossessed due to a delinquent mortgage they will often sell it at a great rate just to get their money back as soon as possible. Sometimes there’s great deals to be had in purchasing bank or real estate owned property. But not always. With bank owned properties just like with any real estate it’s important to do plenty of research to find out just what you’re getting.
As a general rule banks will not make repairs to properties they own nor be held liable for damages therein. If a home is being sold “as is” it may be up to you to find out just what is wrong with the home or property. Hopefully information about the home will be readily available and a good realtor can help you investigate to find out if the “as is” is something you can live with or easily repair yourself. If a home is a complete dump has mold damage or structural damage even if it is priced at 20 below market it isn’t a good deal unless you have the skills to fix it up. Unfortunately with things like mold damage they can be very hard to fix and are often hidden inside walls. In these cases it might be better to find a different home.
However if a home is in a great area with a nice property it may be worth the price just for the land or perhaps the house has amazing heritage character and you the buyer are a skilled crafts person. In this case the property could be gold.
Either way be prepared to sign a lot of addendum’s and clauses exonerating the bank from any responsibility for the home or its condition after the sale. Further banks often place a clause charging you money for every day you are late in closing. So keep this in mind when you negotiate especially if you will need a lot of inspections to determine the state of the home.
Banks never want to own a home or property. It just isn’t cost effective for them. They aren’t real estate agents nor carpenters. They’re money lenders. What they want is to lend money to a borrower and collect mortgage payments. Sometimes this is a motivating factor in them selling a high quality property at a below market rate but this isn’t always the case. Whatever the state of the house you can be guaranteed of a motivated seller. If you’ve done your research and are willing to accept the conditions the bank applies then by all means make an offer.
About the writer: This article was written by the writing team of Kelli Bennett. If you’re looking for a competent Colorado Realtor
Foreclosures: The Pros And The Cons
Foreclosure is a legal process by which a lender can get back the borrowed money by selling or repossessing any mortgaged property if the borrower fails to repay the loan within the agreed time.
Do you know what a mortgage loan is? There are two types of loan available in the market. One is unsecured loan and the other is secured loan. Mortgage loan is a secured loan because this type of loan is provided only when the borrower can deposit any of his/her own property as a security deposit. It means if the borrower can not be able to repay the loan with the added interest in the future then the lender will have the legal right to sell or repossess the property to get the money back.
When a person can not repay the loan within the time that was fixed in the agreement the mortgaged property goes into the stage of foreclosure. The lender can sell the foreclosure property and anyone who is interested to buy that foreclosed property can purchase it legally.
It is true that the price of foreclosed properties is comparatively lower than a same type of property that is not in a foreclosure stage. There are many advantages as well as disadvantages in foreclosure. The advantages are really more than the disadvantages.
The first and the biggest advantage of a foreclosure property is it is cheaper than the other real estate properties. It is true that the prices of two nearly same properties will differ if one of them is a foreclosed property and the foreclosed property will certainly be of lower cost.
What is the reason behind it? It is not that the foreclosed houses are made of low class materials or it is not a beautiful home to stay. The only reason is that the owner sells it at a low price to get the money at a pre foreclosure stage to repay all his debt in which s/he is drowning.
In the preforeclosure stage the bank or the lender allows the owner to sell the mortgaged property and pay back their debts. Usually the foreclosed properties are available in this pre foreclosure stage at a low price.
It is really an advantage that a buyer can have when he/she badly needs a home and does not have a big budget. It is really a great opportunity for them who do not have more money to buy a home.
Do not think that foreclosure provides no advantages to the borrower. If you think that the borrowers are the victim of it and every time they are bound to sell their house in a low price then you are not right. The borrowers can also get some advantages from it. Think about that person who is deep into debts. What will the person do then to get rid of the debts? If the person fails to sell the foreclosed property it will be impossible to repay the debts. In that case if the bank can sell it all the debts will be paid and the person will be free from the debts.
The disadvantage is that if the borrower can not negotiate properly with the buyer to sell the foreclosed property he/she can not get more money out of it. It will not provide the extra advantages to the borrower.
About the writer:nbsp;nbsp;Sal Vannutini is the author of ” The 8 Power Profit Secrets To Making More Money With Less Risk In Real Estate ” a free strategy report for investors. Get your complimentary
copy at www.FastFixerUpperProfits.com today.