Mortgage Lending: Past vs Present Diagram. Where it went wrong.
Someone sent me an e-mail with a graph of the difference between past and current mortgage lending. I decided to spruce up the diagram to give you a better idea of how many additional layers have been added to the current mortgage lending process. What you’ll notice is the detachment from the actual real estate asset in the new model. In the old model, banks had a major incentive to make sure you did not default on your loan. In the current scheme of things, independent rating agencies and appraisers supposedly were the buffer to all this yet they of course had no actual money in the game. That is, they were paid by the banks and investment firms to meet their expectations or face being out of a job. Hence the new allegations that are now coming out where appraisers inflated real estate prices at the behest of banks and investment firms essentially had rating agencies over the fire in terms of rating whatever they brought to the table AAA.
Retire Extremely Early: Dollar Cost Averaging and Maintaining a Positive Attitude in Tough Economic Times.
During trying times I think it is very easy for many to get pessimistic with all the negative news and let their ultimate goals slip away. Simple rules to live by include keeping debt to the lowest level possible and having clear cut goals of where you want to be in 5, 10, and even 20 years. Wherever you are in life it is never too early or too late to decide what you want out of your life. Money should be a method of achieving your goals and not the ultimate purpose. Unfortunately many Americans live their entire life waiting for that far off day in retirement only to realize that life has passed them by. Why not enjoy life right now as well? As you may already know, I am pretty conservative in my investing style and the current state of our economy has only highlighted the worst in investing habits for the public. We collectively as a nation have become a debtor nation and that is a sure way not to reach your goals.
California Median Home Price, $373,000: Maximum federal government loan limit of $729,500. Does that Make Sense?
One of the flip sides of the major reversal in housing fortune is how quickly the market deteriorated. As many of you know, the new federal government loan limit enacted in March of this year raising loan caps to a new $729,500 ceiling was designed to help jolt the market in higher priced areas including California. The problem with this strategy is that it did not take into account the rapid decline in the market. The speed in which the market reversed is astounding. The argument for raising caps was also to allow homeowners in bad mortgages to refinance into a more typical government loan. The caveat of course is that people have positive equity in their home and now that California is down statewide 21 percent from peaks reached not too long ago, many of these mortgages no longer qualify for refinancing options.
California Mortgage Rates Still High: Examining Actual Mortgage Products in Today’s Market and the Family Budget Impact.
As the housing market continues to slump forward, there are many unintended consequences cropping up all over the country. For one, the intent of the Federal Reserve to inject liquidity into the markets was to bring back confidence in an environment that is cautious about credit. As we are approaching another 1 percent interest rate policy ala Alan Greenspan, the only difference this time is that mortgage rates are not responding like they did during the earlier easing during the Greenspan tenure. There is a couple of reasons for this including the secondary market which was buying up all kinds of new and creative mortgage products that have now turned on the market. Yet your bread and butter 30 year fixed products are still high priced even after the Fed is attempting to induce lenders to be more willing to lend.