According to MSNBC Bank of America, will pay $8 Billion over the subprime lending suite that was filed. Some of the terms calls for BofA to modify bad mortgages for nearly 400,000 Countrywide customers. If you remember Countrywide was the mortgage company that Bank of America purchased.
A few of the specifics for the troubled mortgages:
* $8.4 billion in interest rate and principal reductions for nearly 400,000 customers.
* Loan modificagtions will take place in 11 states
* Some of the Countrywide customers will only have to pay interest for a period of ten years.
* People who cannot afford to keep their homes after the changes will get help moving to new homes.
Bank of America will initiate the new mortgage aid program in December, which calls for customers payments to be revised so that they don;'t exceed 34 percent of income.
Other options call for reducing interest rates and adjusting principal so borrowers won't lose equity.
CountryWide will not charge loan modification fees and will waive prepayment penalties.
And finally the agreement involves no tax money.
It looks like it's a win win situation for all involved. We still have a long way to go before things get completely resolved but this is a start.
To your success
Mel Richardson
P.O. Box 538
Jessup, Maryland 20794
Melvin21@msn.com
Monday, October 6, 2008
Friday, September 26, 2008
The Subprime Lending Fiasco
The Subprime mortgage Fiasco has it roots as far back as 2005. Just to recap, subprime loans are for consumers that don't meet the standards or qualifications of Fannie Mae or Freddie Mac.
Now these requirements, if not met, are primarily due to a number of factors including this first item which is an individuals credit. If someone has had some late payments, say 30 or 60 days past due within the last 12 months that could disqualify you from meeting the standards and
guidelines. Maybe the credit file is not deep enough in other words that individual has not been a member of the credit bureau for very long.
Creditors would love to see someone have credit, with a number of creditors, on file for say 10, 15 or even 20 years with payments being
made on time. This type of file is viewed by creditors as a predictor of future paying habits. Lenders also look at the individuals income. Perhaps the individual is not making a sufficent amount of money or maybe a large portion of that income is derived from commission, which we all know is not guaranteed. Job history is another consideration. Lenders like to see stability within your employment. If you have had 3 or 4 jobs within the last two years they will question that and probably consider you not credit worthy. Basically they want to know that you will still be employed for some time to come after they extend you a loan. (good luck in this economy).
Lenders also want to consider the ratio of debt to income or income to mortgage payment ratio. All of these factors lead to a less than stellar loan applicant if there is a lack of stability with any of these items and it pushes consumers into the dreaded subprime lending zone, where rates are higher to offset the risk mortgage lenders assume. In order to increase earnings through loan receivables lenders were focusing their attention on how to make loans to those individuals instead of looking at the objective aforementioned criteria, thus subprime lending.
The adjustable rate mortgages along with subprime lending began to experience defaults. This was a double negative because the subprime customers were already high risk so it was inevitable that they were going to default. We saw the same thing with the ARM, (adjustable rate mortggages) customers because they took on loans they should not have with the idea that they would be able to refinance at a later date.
Once the ARM rates reset consumers could not afford their homes because the payments increased, depending on the situation, by $500, $700 or even $1,000. This quickly lead to defaults and an increase in foreclosures, which lead to a steady decline in home prices thus taking the
ability from customers to refinance because of declining equity.
Banks because of the astronomical losses were less likely to make any new loans, and they even shut down consumer home equity loans, which caused a further decline in economy activity. This credit freeze was a result of banks not wanting to deplete the reserves they are required to keep on hand to offset the losses.
If consumers cannot receive credit from banks for car loans, purchase of homes and any other retail activity, then we are faced with a situation in which economy activity is furthered curtailed because two thirds of economy activity comes from consumers. Small businesses are also subject to the credit crunch which further exasperates the problem. All this leads to further unemployment.
Now we are looking at a $700 billion dollar bailout which is not likely to work because of how wide spread the problem is.The bailout is supposed to syphon off the bad mortgages and credit card accounts from lenders which would allow them to start lending again and ease the credit crunch and thereby stimulate the economy. Just recently the bailout agreement was approved --- and then it ran into some snags so now it's up in the air, but it would appear that the powers that be are still trying to get it all worked out.
There are hundreds of banks which are on the bubble and stand a very good chance of failing in the very near future. No one is really saying how wide spread this problem is at the very least the bailout will be like bailing water out of the Titanic with a bucket.
Just don't look for this problem to end any time soon. More industrys will be affected. It's almost like a trickle down effect.
To Your Great Success
Mel
Now these requirements, if not met, are primarily due to a number of factors including this first item which is an individuals credit. If someone has had some late payments, say 30 or 60 days past due within the last 12 months that could disqualify you from meeting the standards and
guidelines. Maybe the credit file is not deep enough in other words that individual has not been a member of the credit bureau for very long.
Creditors would love to see someone have credit, with a number of creditors, on file for say 10, 15 or even 20 years with payments being
made on time. This type of file is viewed by creditors as a predictor of future paying habits. Lenders also look at the individuals income. Perhaps the individual is not making a sufficent amount of money or maybe a large portion of that income is derived from commission, which we all know is not guaranteed. Job history is another consideration. Lenders like to see stability within your employment. If you have had 3 or 4 jobs within the last two years they will question that and probably consider you not credit worthy. Basically they want to know that you will still be employed for some time to come after they extend you a loan. (good luck in this economy).
Lenders also want to consider the ratio of debt to income or income to mortgage payment ratio. All of these factors lead to a less than stellar loan applicant if there is a lack of stability with any of these items and it pushes consumers into the dreaded subprime lending zone, where rates are higher to offset the risk mortgage lenders assume. In order to increase earnings through loan receivables lenders were focusing their attention on how to make loans to those individuals instead of looking at the objective aforementioned criteria, thus subprime lending.
The adjustable rate mortgages along with subprime lending began to experience defaults. This was a double negative because the subprime customers were already high risk so it was inevitable that they were going to default. We saw the same thing with the ARM, (adjustable rate mortggages) customers because they took on loans they should not have with the idea that they would be able to refinance at a later date.
Once the ARM rates reset consumers could not afford their homes because the payments increased, depending on the situation, by $500, $700 or even $1,000. This quickly lead to defaults and an increase in foreclosures, which lead to a steady decline in home prices thus taking the
ability from customers to refinance because of declining equity.
Banks because of the astronomical losses were less likely to make any new loans, and they even shut down consumer home equity loans, which caused a further decline in economy activity. This credit freeze was a result of banks not wanting to deplete the reserves they are required to keep on hand to offset the losses.
If consumers cannot receive credit from banks for car loans, purchase of homes and any other retail activity, then we are faced with a situation in which economy activity is furthered curtailed because two thirds of economy activity comes from consumers. Small businesses are also subject to the credit crunch which further exasperates the problem. All this leads to further unemployment.
Now we are looking at a $700 billion dollar bailout which is not likely to work because of how wide spread the problem is.The bailout is supposed to syphon off the bad mortgages and credit card accounts from lenders which would allow them to start lending again and ease the credit crunch and thereby stimulate the economy. Just recently the bailout agreement was approved --- and then it ran into some snags so now it's up in the air, but it would appear that the powers that be are still trying to get it all worked out.
There are hundreds of banks which are on the bubble and stand a very good chance of failing in the very near future. No one is really saying how wide spread this problem is at the very least the bailout will be like bailing water out of the Titanic with a bucket.
Just don't look for this problem to end any time soon. More industrys will be affected. It's almost like a trickle down effect.
To Your Great Success
Mel
Thursday, February 7, 2008
A Repossession
A car repossession can definitely affect your credit. Here is how the process works. Let's say you can no longer afford to make your monthly payments. By the time your discover that you are probably two or three payments past due. This is already showing up on your credit report as 30 or 60 days past due.
It gets even worse if the repossession takes place.
Now ABC company repossesses your car and let's assume you owe $9,000 on your auto loan. Once the company repossesses your car they will sell it for whatever they can. If they sell it for $5,000 you still owe $4,000 and they will bill you and expect you to pay the balance even though you no longer own the car. This shows up on your credit report as a repossessed item and it will show up as a charged off account or an I-9. An I-9 stands for an installment loan, ( I), and when a loan is charged off that means company ABC is submitting your loan account as a loss because they feel it is no longer collectible.
If you ever try to apply for credit for another company they will take a look at your credit report and see that you have a repossession and this will severely impact your ability to get credit in the future. This could remain on your credit file for seven years.
This will also lower your credit score again reducing your ability to receive additional credit from other organizations. Even if you clear this matter up by paying it off in full it remains on your credit file for seven years. Sometimes you can negotiate with creditors if you pay off such a debt. However if you do decide to negotiate so that this does not show up on your credit file make sure you do so in writing. Also you want to make sure the creditor puts their agreement in writing.
There have been some creditors that promised not to report certain things on your credit file but have done so anyway. That's why it is so important to get all information in writing.
Wants your credit file gets destroyed it is very hard to correct it. That does not mean it can never be corrected it just means it will take some time to do so. The best way to correct this situation is to payoff any debts remaining and then after a year you may want to apply for a secured credit card. This is a card where the creditor will approve you for a credit card with a $500 line of credit. And you have to leave $500 on deposit with their organization in the event you default they have your money on hand to cover the delinquency.
After you have paid on this account for one year with on time payments the organization will more than likely increase your credit limit and not require you to have money on deposit with them as security.
Bad credit can sometimes stop you from getting a job, a credit card and sometimes you will be forced to pay higher premiums on your auto insurance.
To Your Great Success
Mel Richardson
VisionStar Enterprises
Melvin21@msn.com
It gets even worse if the repossession takes place.
Now ABC company repossesses your car and let's assume you owe $9,000 on your auto loan. Once the company repossesses your car they will sell it for whatever they can. If they sell it for $5,000 you still owe $4,000 and they will bill you and expect you to pay the balance even though you no longer own the car. This shows up on your credit report as a repossessed item and it will show up as a charged off account or an I-9. An I-9 stands for an installment loan, ( I), and when a loan is charged off that means company ABC is submitting your loan account as a loss because they feel it is no longer collectible.
If you ever try to apply for credit for another company they will take a look at your credit report and see that you have a repossession and this will severely impact your ability to get credit in the future. This could remain on your credit file for seven years.
This will also lower your credit score again reducing your ability to receive additional credit from other organizations. Even if you clear this matter up by paying it off in full it remains on your credit file for seven years. Sometimes you can negotiate with creditors if you pay off such a debt. However if you do decide to negotiate so that this does not show up on your credit file make sure you do so in writing. Also you want to make sure the creditor puts their agreement in writing.
There have been some creditors that promised not to report certain things on your credit file but have done so anyway. That's why it is so important to get all information in writing.
Wants your credit file gets destroyed it is very hard to correct it. That does not mean it can never be corrected it just means it will take some time to do so. The best way to correct this situation is to payoff any debts remaining and then after a year you may want to apply for a secured credit card. This is a card where the creditor will approve you for a credit card with a $500 line of credit. And you have to leave $500 on deposit with their organization in the event you default they have your money on hand to cover the delinquency.
After you have paid on this account for one year with on time payments the organization will more than likely increase your credit limit and not require you to have money on deposit with them as security.
Bad credit can sometimes stop you from getting a job, a credit card and sometimes you will be forced to pay higher premiums on your auto insurance.
To Your Great Success
Mel Richardson
VisionStar Enterprises
Melvin21@msn.com
The Aftermath
It would now appear that the situation with the mortgage industry is having another effect. Now it's spilling over into the credit card industry. Because of the losses a lot of banks are experiencing they are looking to recoup their losses by increasing the interest rates and fees on credit cards even if you have not been late.
Fees across the board are going up it would appear, including atm fees, late fees, balance transfer fees, or even exceeding your credit limit. These are all fees that will definitely affect us.
It would appear that the end is not in sight.
To Your Great Success
Mel Richardson
VisionStar Enterprises
Melvin21@msn.com
Fees across the board are going up it would appear, including atm fees, late fees, balance transfer fees, or even exceeding your credit limit. These are all fees that will definitely affect us.
It would appear that the end is not in sight.
To Your Great Success
Mel Richardson
VisionStar Enterprises
Melvin21@msn.com
Sunday, February 3, 2008
Getting Help
According to the UsaToday nearly 58% of those with delinquent mortgages don't actively seek help from their lenders because they don't know that the lenders may offer some type of help or remedy.
Another 56% don't know that some sort of counseling is available. Most don't know that a missed mortgage payment can be added to the back end of the mortgage and thereby extending the term.
Other obstacles surface because the lender is unable to contact the delinquent mortgage holder and offer help.
It would seem that no remedy is readily available however communication between the homeowner and lender is the first step towards finding a remedy. There needs to be more counseling between mortgage holder and customer during the loan closing process. Communication should be stressed.
Mel Richardson
Melvin21@msn.com
Another 56% don't know that some sort of counseling is available. Most don't know that a missed mortgage payment can be added to the back end of the mortgage and thereby extending the term.
Other obstacles surface because the lender is unable to contact the delinquent mortgage holder and offer help.
It would seem that no remedy is readily available however communication between the homeowner and lender is the first step towards finding a remedy. There needs to be more counseling between mortgage holder and customer during the loan closing process. Communication should be stressed.
Mel Richardson
Melvin21@msn.com
Friday, February 1, 2008
Foreclosure update
I was reading an article in the Usa Today and came across some incredible news. Did you know that 1.3 million homeowners are in some phase of the foreclosure process last year. Approximately 1% of homeonwers are facing foreclosure during not to mention an astounding number of homes have had the values reduced substantially.
Even with the lenders negotiating mortgages in default there is still a forecast for an increase in the number of foreclosures. Due to the volume of homes in default any type of help seems to be minimal at best.
The subprime adjustable-rate mortgages is clearly at the center of attention. The question now is what can we do to solve this problem?
If you have an answer let us know
Mel Richardson
Melvin21@msn.com
Even with the lenders negotiating mortgages in default there is still a forecast for an increase in the number of foreclosures. Due to the volume of homes in default any type of help seems to be minimal at best.
The subprime adjustable-rate mortgages is clearly at the center of attention. The question now is what can we do to solve this problem?
If you have an answer let us know
Mel Richardson
Melvin21@msn.com
Foreclosure crisis
Do you know someone that is facing a foreclosure? Do you know someone that is past due on their mortgage due to the mortgage crisis.
What tips do you have for helping out with the mortgage crisis
To your great success.
Mel Richardson
VisionStar Enterprises
Melvin21@msn.com
What tips do you have for helping out with the mortgage crisis
To your great success.
Mel Richardson
VisionStar Enterprises
Melvin21@msn.com
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