If a rash of armed bank robberies swept across merica next year, and if in these robberies criminals absconded with $30 billion dollars, one may be certain that a public panic would ensue. The banking system would likely be changed forever. If thousands of armed thugs went rampaging across the nation forcing people out of their homes, into the streets, and then destroying the properties, leaving the occupants homeless -- well then one might be certain that fear would force our society to adapt its proceedings and its policies to fight this thuggish threat. Yet in many ways this is precisely the situation currently occurring with recent rise in mortgage fraud and abuse. Certainly, the criminals are armed with paperwork instead of shotguns, but the impact they are having is no less real. "uthorities have stated that fraud is involved in $60 billion in loans annually, resulting in…… [Read More]
That is, if the interest rates rise to the point that the monthly mortgage payment does not cover the interest due, any unpaid interest will be added to the loan balance, so the loan balance increases. However, one also has the option to pay the minimum monthly payment, or the fully amortized amount due.
The advantage of negatively amortizing loans is that one can control cash flow with a relatively stable payment, take advantage of low interest rates relative to the market at any given time, and pay back the money borrowed today at a depreciated value years from now because of natural inflation.
With most AMs, the interest rate can adjust every 6 months, once a year, every 3 years, or every 5 years. The interest rate on negatively amortized loans can adjust monthly. A loan with an adjustment period of 6 months is called a 6-month AM, with…… [Read More]
There is a spurt of mortgage refinancing activity in recent times, thanks to interest rates remaining low and more or less consistent over a significant time horizon, appreciation of house prices and the easier refinancing options available in the market. This paper attempts to trace the various issues that influence the homeowner's decision to refinance. The pros and cons of 30-year mortgage vis-a-vis 15-year mortgage are discussed from different perspectives. From a homeowner's perspective the benefits and drawbacks of fixed-rate mortgage and adjustable-rate mortgage are analysed. This analysis is made with reference to basic financial principles - the self-interested behaviour, the principle of incremental benefits, risk-return trade-off and the time value of money. Refinancing makes available fresh capital to the homeowners giving them the opportunity to use it for spending or investing for returns.
Soft interest rates and increasing property prices in recent years have resulted in sharp…… [Read More]
Even worse, the entire process of due diligence with respect to qualifying potential mortgagees carefully to avoid bad risks and of appraising property as accurately as possible dissolved by virtue of the immediate and routine transfer of mortgage instruments to third parties. ealtors began encouraging borrowers to misrepresent their financial information as well as the value of their intended property acquisitions, further inflating the so-called "housing bubble." More importantly, the inflated values were largely illusory rather than reflective of actual property values after diligent appraisal.
In addition to borrowers hoping to make a quick profit, many thousands of ordinary middle class Americans began to take advantage of the lapses that developed in the mortgage lending industry, not uncommonly with encouragement from realtors and lenders who deliberately failed to disclose the meaning of variable interest rates.
Eventually, the housing bubble burst when the supply of so many new housing developments outpaced…… [Read More]
Interest rates will be lowered reaching 3.4% in 2011 and borrowers won't have to begin repayments until they are making about $15,000." (Education Portal, 2007) Furthermore, the effectiveness of this bill is questioned because after 2011 interest rates will quickly climb on these loans again.
The work entitled; "Student Loan Lenders Creating a New Credit ubble" states of investors, that they are: "...clamoring to purchase bundled student loans. According to Moody's Economy.com, the market for private student loan-backed securities has seen an increase of 76% in the last year alone. The same thing happened in the sub-prime mortgage market during 2005 and 2006. There has since been a 'meltdown' in the industry. A total of 161 mortgage lenders have imploded since late 2006 (source: Mortgage Lender Implode-O-Meter), and more than 2 million mortgage borrowers are expected to default on their mortgage loans before the end of 2008." (Education Portal, 2007)…… [Read More]
The Mortgage Meltdown and the U.S. Economy
This paper reviews the subprime mortgage crisis and its effect on the U.S. economy.
The subprime mortgage crisis first gained the public's attention when a steep rise in home foreclosures occurred in 2006, and then spiraled out of control in 2007. At that time the mortgage meltdown triggered a national financial crisis that went global within the year. As a result, consumer spending dropped, the housing market plummeted, foreclosure numbers rocketed, and the stock market was shaken. All these problems have caused furious debate among consumers, bankers, and lawmakers as to the causes and the possible solutions.
There are various theories to explain what led to the mortgage crisis. Many experts and economists believe that the crisis happened because of a number of factors in which subprime lending played a significant role.
The current mortgage meltdown began with the bursting of…… [Read More]
Mortgage servicers are mandated with the responsibility of collecting payments from the mortgage borrower and transferring the payments to the loan owners (Consumer Financial Protection Bureau, 2016). When carrying out their responsibilities, mortgage servicers are required to comply with regulations established by the Consumer Financial Protection Bureau (CFPB) and federal consumer right law. Compliance with these regulations help in ensuring that mortgage servicers carry out their operations in a proper and legal manner. This paper examines compliance issues facing mortgage servicers in two different scenarios based on CFPB regulation and federal consumer right law.
Based on the information provided in Rachel’s case, the major issue is the unavailability of information on payment history for her loan before it was transferred to LandX. The federal regulation that was violated in this scenario is regulation regarding transfers. In this case, Rachel’s loan was transferred to LandX as part of loan…… [Read More]
Debt Consolidation Specialist: This individual, if qualified and reliable is likely to be found through referral of the school one is attending. One may also contact local government offices for referrals to a good debt consolidation specialist. Information may also be found on the Internet concerning debt consolidation services.
Grants: government funding that does not have to be repaid.
Scholarships: college funding that does not have to be repaid in the form of sports scholarships, scholarships won in beauty pageants and other contests and events, and scholarships presented by civic organizations and businesses to students to assist their funding for college.
ASA - the ederal Student Loan Application for ree College unding.
I. EDUCATION SPENDING and EDERAL INANCIAL AID mere generation later, "state spending on higher education is at a 25-year low and federal financial aid is increasingly debt-based, with only 38% in the form of grants." (Draut, 2008) Students…… [Read More]
The focus in the meeting between the parties to the dispute is the initiative of formulating a solution that is agreeable to both parties in lieu of their own individual desire in relation to their 'side' of the matter. Oftentimes coalitions are formed in the negotiations of a 'multi-party nature.
The mortgage company will be bound by certain Federal regulations in their handling of all types of disputes that would be affected by the Fair Debt Collection Practices Act. The contracts of most mortgage companies have specific stated provisions for arbitration and mediation which are both alternative dispute resolution methods. Mediation is the process of resolution with an impartial facilitator while Arbitration is a process in which the impartial party makes the decision which is binding on the parties. There are other aspects of legality in the ADR Process of a mortgage company. One of these is the "agency" or…… [Read More]
Mortgage modification has been in practice in the United States in some form or another for years. The process entails modification of the terms of a mortgage separate from contract and original terms agreed to by both borrower and lender. The United States government has provided Americans with various versions of loan modification to help borrowers make payments via reduction of interest rates or principal balances. However, several recent news articles state the efforts of the American government have been in vain. The negative effects of mortgage modification have led to increasingly risky lending and removal of annual stress test fines for smaller banks leading to some banks' lending to borrowers with poor credit scores.
A New York Times article by Matthew Goldstein opens the discussion with exploration of the recent activity of Lone Star and Caliber concerning the mortgage market and issuing mortgages to borrowers that have poor or…… [Read More]
mortgage default (Elul, Souleles and Chomsisenghept). This model suggests that home owners should only ever default if they have negative equity in their residence. If there is negative equity, then there would be an incentive for the borrower to walk away from the property. However this also does not consider subsidiary effects such as the impact upon the person's credit or the possibility that the property could regain equity in the medium or long-term. Furthermore, other researchers have also proposed that other factors such as being illiquid would also provide a motive for someone to default on their mortgage. A combination of these two variables would also act to amplify the incentive to voluntarily default; and of course being so illiquid that there is no possibility to make a mortgage payment virtually guarantees that a default will occur.
Although this research paper does not necessarily define its hypothesis directly, it…… [Read More]
My student loan payments of $609.07 are scheduled to begin May 1, 2009. I do not have the resources to make these payments and Chapter 7 Bankruptcy does not affect student loans.
Since I have been stretched beyond my financial capacity, I am now consistently behind in my mortgage payments and am not in a situation to rectify this problem. I am paid on the 15th and 30th of each month and because I am so overextended, I can only make my payment on the 30th of each month. Due to my now chronically late payments, I am now subject to $136.44 in late fees every month, which I can ill afford. I am facing eminent foreclosure if I am unable to change the terms of my mortgage.
I believe my circumstances make me an excellent candidate for the Hope for Homeowners Act. The Affordabilty vs. Value portion of this…… [Read More]
secondary mortgage market in detail. It puts light on the functioning of secondary mortgage market. It also discusses different tools that are used in this market and the benefits and drawbacks of this market. This paper also highlights some of the secondary mortgage market organizations and agencies. The evolution and growth of secondary mortgage market has also been discussed in this paper.
The secondary mortgage market is a place where the investors buy mortgage loans from the originators. An originator itself can be an investor also, by buying the loans provided by other originators. An originator can also sell these loans to an intermediary, who then converts these loans into securities and sell them to other people. It is a place where the mortgages originated in the primary mortgage market are resold. The already issued notes are also sold in the secondary mortgage market. These notes are purchased by the…… [Read More]
The term "adjustable-rate mortgage" describes any mortgage with an interest rate and payments that adjust according to some formula agreed upon by the borrower and lender. ARMs have been generally available to borrowers for about three decades on prime mortgages, but variants have been common to subprime mortgages over the past 10 years. The traditional ARM linked the mortgage's interest rate to the LIOR plus several percentage points." (Utt,2008)
Alt -- a Mortgages. Sometimes referred to as a "low-doc" mortgage, an Alt -- a mortgage is structured like the other mortgages described in this section but is made available only to prime borrowers or those with FICO scores above 660. However, these prime borrowers were required to offer only limited documentation on their qualifications, so many may not have been as "prime" as they represented themselves to be, as subsequent default rates indicate." (Utt, 2008)
Extremely Low- or No-Down-Payment Mortgages.…… [Read More]
This would be only natural for central bankers, as wealth effects may be a very relevant factor in determining fluctuations in aggregate demand. Studies on wealth effects have been conducted in recent years, also in the ank of Italy, making use of household surveys. For a given level of net worth, the wealth effect may be defined as the extent to which household consumption changes in response to a change in asset prices relative to the general consumer price level. Conceptually, this is no different from the old Pigou effect, but while that worked through changes in consumer prices that reduced the "value" of money balances in real terms, we now have asset prices rather than consumer prices as the main factor. While consumer prices may be relatively stable, asset prices could move substantially, and the wealth effect could actually be a destabilizing rather than, as was once thought, a…… [Read More]
) This insurance is paid at a fixed 2% of the loan value or can be financed in the mortgage at 2.5% of the mortgage.
Other look-alike programs ask that the loan be paid back during the life of the borrower, and this is entirely unlike the traditional HECM program, designed to allow the elderly an additional source of income during their lifetime.
The pluses of reverse mortgage is that the individuals may remain in their home, living much like they have in the past but be able to support themselves better and maintain the home more easily. Many individuals in retirement that outlive their savings and/or pensions tend to feel trapped to sell the only asset they have, a low or no mortgage home as a result of limited resources for medical care and increased cost of living. The Reverse mortgage program if done right can greatly help such…… [Read More]
Subprime Mortgage Crisis -- 4 Questions
hat is "leverage"? How does leverage magnify a bank's profit and losses?
The term leverage refers to the use of someone else's money to create financial gain. In the mortgage industry, homeowners typically put down a small amount of money on a home, and borrow the rest in the form of a mortgage. This use of borrowed money for a large purchase is referred to as leverage. hile the homeowner has only put down a small amount of money and has borrowed a fixed amount from a bank, he may gain money in the form of home equity as a result of having used leverage to buy his home, because in the meantime, his home has gone up in value. hen a bank uses leverage, it can either gain money as its leveraged assets go up in value, or lose money as they go…… [Read More]
This is one of the biggest causes that contributed to the financial crisis. Where, the lack of ethical standards within the industry, helped to cause a number of executives from: loan officers to real estate appraisers, to engage in predatory and illegal lending tactics. Where, many would falsify the income, credit histories or out right lie to borrows about the mortgages they were receiving, along with the terms. This perpetuated the crisis as millions of bad loans were given to borrowers who did not qualify or could not afford the mortgage, if there was a change in interest rates or the economic landscape. ("Financial Reform") to prevent this situation in the future, the regulation of the entire real estate industry should fall under the jurisdiction of the federal government. Where, the SEC or the Federal Reserve could oversea the proper training standards in the industry. Under this kind of system,…… [Read More]
Improper Foreclosure and Mortgage Practices in the Banking Industry
Efficient Market Hypothesis
Real Estate Bubble
Overview on the Value of Banks
Arguments against Financial Intermediaries
This research paper aims to shed light into what led to the global financial collapse that, for the most part, began in the U.S. housing market and the ethical implications that followed. Many researchers agree that the primary drivers that led to the real estate crisis was the lifting of the Glass Steagall Act, the fostering of sub-prime lending, and the creation of derivatives and credit default swaps which were used as complex financial instruments. This offered the big five banks an entire new range of operating opportunities. All of these financial tools were justified by the efficient market hypothesis and as a consequence provide evidence for the lack of a truly efficient market. As a result of the financial…… [Read More]
pproximately 2 million Subprime borrowers and 80% of them will have their mortgages reset to higher interest rates before the end of 2008.
pproximately 3 million Subprime borrowers and 90% of them will have their mortgages reset to higher interest rates before the end of 2008.
pproximately 4 million Subprime borrowers and 75% of them will have their mortgages reset to higher interest rates before the end of 2008.
pproximately 4.5 million Subprime borrowers and 85% of them will…… [Read More]
Balancing Mortgage ates
Problems Faced While Balancing Mortgage ates
In general terms the monetary policies that contradict themselves mostly involve the process of changing the amount and level of the supply of money in a particular country. When it comes to talking about the expansionary monetary policy, it means that it expands and increases the flow and supply of money, then the impact it has on the monetary policies is that the flow or supply money decreases and hence so does the currency (Fisher, 1932).
Expansionary Monetary Policy
In the U.S., when the government wants to increase the supply of money, it can do so with a combination of three points.
By purchasing various securities from the open market which are also known as the open market operations
It can also be done by lowering the discount rate by the federal government.
It can also be done by lowering the…… [Read More]
Also contributing is the temporal immediacy -- although the reps had known changes were coming, the firings were immediate. The proximity level was high, since the changes had direct impacts on the sales reps and their staff, with a ripple effect throughout the organization. The concentration of the impact was high as well -- many others in the company had their jobs spared, and may even have benefited. The sales reps themselves were directly targeted. Each of these factors contributes to a high degree of ethical intensity.
4. Walsh and Mangel arrived at their decision in part by trial-and-error and in part by developing a strategy. Their first decision -- to transition with both salaried reps and commissioned ones -- was the trial and error component. While there was forethought, there was no research and no concrete decision-making process that lead to that decision. As a result, the decision was…… [Read More]
The facts that are relevant to Benner’s spot delivery claim are (Session 6: Buying a Car):
1) On January 13, 2016, Plaintiff bought a 2012 Chrysler 300 (“the vehicle”) from Defendant
2) When Plaintiff bought the vehicle, she signed a retail purchase agreement and a retail installment sale contract. See Exhibit 1, “Contract.”
3) According to the contract, the Plaintiff agreed to a total sale price of $29.860.80. 10. Of the $29,860.80, $300.00 was a dealer processing charge.
4) The interest rate on the contract was 23.25 percent.
5) On January 13, 2016, Defendant told Plaintiff that Americredit Financial Services Inc. (“Americredit”) would be financing her vehicle.
6) As part of the retail installment sale contract Defendant assigned his interest in the vehicle to Americredit.
7) That same day, Plaintiff and Defendant signed an “Agreement to Provide Insurance” that indicated that Americredit required
the Plaintiff to…… [Read More]
Speech to Support Mortgage for Independent Spanish Village
The focus of this study is to consider the scenario of making a choice in the use of inheritance money and specifically to gain a mortgage for an independent villa which will be a town or villa in realengo and to compose a speech to support this objective
It is my belief that gaining a mortgage for an independent villa is the most appropriate approach to investing of my inheritance money. For to do otherwise would be to render my inheritance under the control of another individual who will hold all power and decision-bearing capacity and who will not be as interested in the profitability or long-term success of the villa since they do not in reality hold ownership to the property. Under the system of feudalism which is a "social system of rights and duties based on land tenure and…… [Read More]
Subprime Mortgage Crisis
A major issue for today's economy in the U.S. is the subprime mortgage crisis. The mortgage crisis has sent the U.S. economy into a recession with greater impact than the Great Depression of the 1920s. One will discover some important terms that will allow the reader to better understand this topic. Additionally, this paper will examine some background information and events that led to the housing market crash and examine the causes and impact on the U.S. economy and current housing market. Also reviewed will be the role of Fanny May and Freddie Mack. This work will additionally make recommendations of what it is that might possibly be done that would serve to improve the current situation.
Sub-Prime Mortgage and Housing Market Crisis
Many factors contributed to the subprime mortgage crisis, which began approximately ten years ago when the expansion of the housing market was increased…… [Read More]
I have had to take a 15% cut in pay in order to continue working and, while I have continued to make the mortgage payments with my reduced income, other areas of my life have suffered from the scaling down of available monies. I have incurred expenses which have increased my debts, such as rising interest rates and penalties, emergency medical expenses and still have student loans to pay for, as I seek to improve my lot. As a result, my credit score has decreased from 740 to 501. Exacerbating the financial problems I am facing, I have just discovered that the property which is mortgaged is worth 5-10% less than the amount paid for it, which would make it difficult to refinance. However, I wish to point out that I have continued to make my payments in spite of my troubles, and therefore deserve the benefit of your trust.…… [Read More]
Enter the Fed, Yet Again
Unable to understand that rapid interest rate moves create shocks to the market, resulting in distortions in supply and demand, the Fed dealt with the bursting of the housing bubble by lowering interest rates rapidly, this time to next to nothing. This response was intended to stimulate the economy. In 2001, the rate decreases were also intended to stimulate the economy, but they mainly stimulated one sector. The Fed's goal with the most recent round of drastic rate cuts is to stimulate lending. The rate cuts came when the scope of the crisis was just becoming apparent. The rapid reaction this time was met with skepticism from markets. here before there was at least one strong sector in which to invest excess capital, this time there were none. orse, the mistakes of the past few years had put banks in a position where they could…… [Read More]
ethical and legal issues regarding sub-prime mortgage lenders. Unfortunately, the focus has been inordinately upon the poor individuals who were exploited by accepting these predatory and exploitive loans o highlight & copy (Goolsbee, 2007) . Simplistically, they have been blamed for the recent U.S. financial meltdown. The emphasis needs to be focused upon the mortgage lenders themselves. hile exploitation of such individuals is bad enough, to make matters worse, they are having the entire economic collapse based upon them. This is not only unfair, but inaccurate. The holders of subprime loans did not come up with the system of bundling whereby their loans were wrapped with other regular loans and with risky no-mortgage products. Needless to say, the regular mortgage loans camouflaged the risky assets. However, worst of all, the victims of subprime loan exploitation who lost their homes and their jobs will now have their government benefits taken away…… [Read More]
Defense of the Fed's New Interest-ate Policy, which was published by The Wall Street Journal on January 6th, 2013, financial reporters Frederic S. Mishkin and Michael Woodford carefully craft a justification of the Federal eserve's latest revision to its federal-funds rate target. The purpose of the article is to inform readers about the Fed's recent Federal Open Market Committee (FOMC), which resulted in the decision to keep the federal-funds rate near zero with a contingency based on the national unemployment and inflation rates. By linking the federal-funds rate target to a baseline of 6.5% unemployment, and a predicted rate of 2.5% inflation, while also providing public notice regarding its previously private policy criteria, the Fed is renewing its efforts to stabilize an economy battered by a prolonged recession. As Mishkin and Woodford state in the article, this "commitment not to raise rates in the future as soon as might have…… [Read More]
hy Did Mortgage Lenders Lend to Subprime Customers?
The growth of the subprime market owes itself to an influx of international and hedge fund investors who were increasingly separated from the final mortgagees. Banks and savings and loan institutions generally knew their borrowers, because they lived and worked in the same communities. hen banks and S&L's held the mortgages, they were making a bet on the creditworthiness of people they knew well. This started to break down in the late 1980's, when the federal government stepped in to the "S&L Crisis" and created the RFC -- Reconstruction Finance Corporation -- to buy assets and close down S&L's which had made imprudent loans.
Loan securitization was thus slowed down by the S&L crisis, but was built slowly over the 1990's as money center investment banks developed ways to evaluate and package the mortgages into understandable assets which could be judged as…… [Read More]
Mortgage Communications Director
We have before us both a significant challenge and a tremendous opportunity. The first few weeks of a new operation can establish the course that the company will follow for years to come and so I'm very excited to have been hired as the new Director of Communications for this group of mortgage professionals who are taking over this mortgage group. We have a number of key issues immediately before us and I will be issuing a series of memos to address these in turn.
This first memo addresses the most pressing need facing our Group, which is the need to raise $3 million in capital to complete the acquisition. This must be done quickly or a number of key personnel will be lost. While the company has some real assets - including its name, its current contractual agreements and its IT system, the real worth…… [Read More]
nd we must take into consideration what would happen if, somewhere down the line, we encountered the very real possibility of changed financial circumstances.
The financial knots we're tying ourselves into now, as we scramble to purchase homes and wind up owning less of them, can have serious long-term ramifications. Because today's overall tighter finances often necessitate putting off major purchases, many adults don't buy their first home until they're well into their thirties or even forties.
s a result, those thirty-year mortgage payments follow us right into retirement, hanging around even as rising health care and tuition expenses for college-aged children begin to spike. s a result, we discover too late that the asset we gambled everything to acquire because it was going to see us through retirement is instead pushing that retirement further and further away. lready, an increasing number of seniors are borrowing against their homes, accumulating…… [Read More]
Deficiencies in Organizational Management That esulted in the Economic Meltdown
Since the onset of the global financial crisis, everyone wanted to know what happened and what caused the entire situation. Analysts, economists and experts have all come up with many different reasons and explanations for what triggered the meltdown. To some extent many of these are intertwined and connected to another. Organizations such as Bear Sterns, Lehman Brothers, Freddie Mac and Fannie Mae were flawed at similar regions. In other words, there was a common denominator that ultimately led to the crisis for all these corporations. A fundamental error which is present in nearly all of the organizations which were directly to blame for and were directly affected is the problem of governance and management within organizations. As the companies and firms were not managed in a sustainable and healthy manner, their minor everyday errors built up and lead to…… [Read More]
The article that was written by Conley (2011) discusses the impact that collateralized debt obligations (CDO's) would have upon the subprime loans. These were created in 1987, by the Wall Street firm Drexel urnham. In this product, the investment bankers would take a number of different articles and combine them together as one investment. The various assets that were used included: junk bonds, mortgages and other high yielding investments from the debt. The idea with these different products is that the investment bank could offer customers a stated return on their investment. The way it worked is the brokerage firm would distribute each investor, the stated amount of returns that they would make off of the tranche (the CDO investment). This was derived using a complex mathematical formula that would divide the total amount of interest that was received, from the various high yielding products that were inside the CDO.…… [Read More]
While it was generally agreed that the increase in prices was due mainly to an insufficient offer as the stock house was limited, opinions have also been forwarded according to which the buy-to-let purchases have contributed to the inflation of the house prices (Property Mark).
The debate concerning the reasons for the massive price increases for residential properties (materialized mostly between 1996 and 2005) is however still ongoing. On the one hand, there are the property bulls, who argue that the increase in the prices of residential builds is the result of natural processes of economic growth and development. In other words, they state that the increase in prices was the natural reaction to higher levels of employment, economic stability and lower interest rates. On the other hand however, sit the property bears, who claim that the increase in property prices is not linked to any economic processes, but is…… [Read More]
(Der Hovanesian, 2010)
Increased Promotion of Discounted mortgages.
The way that subprime lending practices, and some call predatory lending practices affect the housing market has yet to be realized on such a large scale, as these tactics have always been carefully controlled by lending institutions, due in large part to their historical long-range view. Subprime lending on the other hand is fundamentally not a long-term view practice; it is a short-term tactic that is now being dealt with on a massive scale as foreclosures mount and more and more families see foreclosure looming in their future and more and more banks take on this debt, with the added burden of holding on to mortgages that far exceed the new depleted value of homes as the market corrects naturally from the housing bubble. The marketing for such subprime lending was absolutely saturated as nearly every individual was admonished to buy a…… [Read More]
The National Housing Act indirectly promoted the idea of lenders offering much longer-term mortgages with the currently accepted concept of monthly payments with the dual interest and principal payment scale. Amortized real estate mortgages opened the door for an average person to purchase and own a single family home.
As a result of the National Housing Act, the United States government inadvertently committed itself along with private lenders to insure long-term mortgages that could be held for as long as twenty or more years at an interest rate that was affordable. Although the process at first was bogged down by paperwork and bureaucracy it eventually caught on.
Part of the reason the process took hold was because in addition to guaranteeing the loans, the National Housing Act through the formation of the Federal Housing Administration also investigated properties and neighborhoods which added an extra measure of security and guaranteed real-estate…… [Read More]
It is, in this sense, a question of security and risk avoidance. In a financially insecure environment, an environment where state budgeting and financing for hospitals may be influenced by issues such as a change in the governing party, a change in the state priorities or anything like this, it is important to know that, while on one hand your sources of financing are variable, including here the possibility that sponsorship contacts may be less important in some years, your financial obligations remain stable and are not subject to modifications.
A second important advantage for the two types of conventional mortgage schemes I have mentioned is the fact that they seem to be more addressed to long-term activities than the adjustable rate conventional mortgage. Indeed, the adjustable rate advantages people who will prefer to change their asset after the first years and will benefit form the lower interest rate and…… [Read More]
Predatory lenders look to stretch the debt-to-income ratio to a point where, it is not considered responsible lending (Smith 3). Another example of predatory practice is attaching a balloon payment to the loan. Balloon payments are typically seen in prime paperwork used when the borrower is upwardly mobile in their profession. Meaning simply, they will be making more money in the future and able to pay a large compounded payment years from origination. A balloon payment helps maximize the amount borrowed for a higher end property.
Another practice made by these lenders is to put the borrower under distress or fear of non-approval if they sop around but also to present different facts during the home-buying process and then show up at the Closing with different paperwork than discussed prior. Smith argues, "in a study of 255 very high-cost loans in Dayton, Ohio, 75% were found to have prepayment penalties…… [Read More]
.." The Federal Reserve continues to keep a watch on both "current and potential exposures..." And are in the process of a review of the collateral valuation methods of the banking industry." (Kohn, 2008)
Kohn states that disruptions in liquidity in some financial markets have resulted in banking organizations facing challenges and specifically at present "significant liquidity demands can emanate from both the asset and liability of the bank's balance sheet." (Kohn, 2008) Kohn relates that when liquidity is reduced in the markets specifically for "certain structured credit products the creation of challenges and concerns relating to valuating spreads into other sectors and "illiquidity in some credit markets may make it difficult for some market participants, including banking organizations, to hedge positions effectively." (Kohn, 2008) Kohn states that the banking industry in the U.S. is up against some very serious challenges however, the Federal Reserve in cooperation with banking agencies…… [Read More]
4. I did not obtain my current mortgage under any materially false pretenses.
As part of the Hope for Homeowners program, I would be able to attain a new affordable mortgage based on a current appraisal value. I would retain 10% equity in the property, and would be sharing the equity and future appreciation with the Federal government, which would prohibit me from taking out any additional loans against the property except for direct repairs and/or maintenance. There are also up front insurance premiums for this type of loan, which I am aware of.
If you would please consider one of these two options, I believe we can come up with a mutually satisfying solution to help avoid foreclosure on my home. I am writing this hardship letter to plead with your company to review my loan information, take into account my current financial situation, my excellent payment history prior…… [Read More]
This program only covers a restricted amount of assistance at home for certain homebound seniors. Most state Medicaid programs target poor or low-income elders who need nursing home care, with little coverage for services in the home and community. Seniors who do not meet the requirements for long-term care under these programs must use a considerable portion of their resources to pay for long-term care, either out-of-pocket or through a private long-term-care-insurance policy (Stucki, 2004).
In addition to inadequate financing options, impaired seniors who want to live at home face stringent eligibility requirements when using government or insurance benefits for long-term care. This makes it hard for seniors to get help before they face an incapacitating and expensive disaster. "To receive services under the Medicaid Home and Community-Based Services (1915c) waiver program, impoverished elders must be so severely impaired that they would otherwise require nursing home care. Long-term-care-insurance policyholders typically…… [Read More]
The Bank CEO's ole in Defining Ethical Integrity
Based on a thorough review of existing literature of the role of ethics in the banking industry, the role of the CEO as the ethical leader of their organization is next discussion. Based on the concepts presented in the paper to this point as the foundation, these key points provide insights into how CEOs and senior management actively shape the ethical standards of the organizations they manage on behalf of shareholders.
isk Management Is a CEOs' Ethical esponsibility combination of forces -- changing regulatory expectations that open companies up to intense levels of examination, heightened stakeholder sensitivity to and scrutiny of corporate behavior, and the severity of punishment by financial markets for corporate missteps -- push reputation and ethics management onto the CEOs' and senior managements' agenda. The paradox CEOs face is when to risk the reputation and brand of the company…… [Read More]
Bailing out the American economy: Banks vs. mortgage-Holders
In 2008, the United States teetered on the brink of an economic crisis. If the United States were to suffer a financial meltdown, the global economy could spiral downward in a manner unprecedented since the Great Depression. The crisis had begun in the U.S. subprime mortgage market but had rapidly spread to other sectors of the economy. The remedy of the U.S. government was the creation of the TARP (Troubled Asset Relief Fund) ("Troubled Asset Relief," Investopedia, 2012). Almost every major banking institution, deemed in the infamous phrase 'too big to fail' was given some form of relief. However, homeowners who were behind on their mortgages were angry that they received relatively little support from the government even though they perceived themselves as far less culpable than the banks. Even the plan proposed by Jeffrey Fuhrer (Foote et al. 2009) on the…… [Read More]
Predictably, adjustable rate mortgages had a higher rate of default than non-adjustable rate mortgages, given the increase in interest rates in the years before the crisis, after many borrowers took out loans during an era of unusually low, near-zero rates. But another puzzling finding was that loans below $100, 000 and loan amounts in the $250,000 to half-million range had higher interest rates than loans of a half-million and above, once again suggesting that while middle-income individuals who might otherwise appear to be 'good' risks had been targeted for loans that were not advantageous to them.
"The finding that blacks and Latinos tended to borrow more helps explain why they received a disproportionately high share of high-cost loans, but the larger amounts borrowed by Asians contradicts the hypothesis that loan amount explains the rate spread differentials the best predictor that a borrower would default is the amount borrowed" as Asians…… [Read More]
They could not foresee the housing market falling as it did, and the number of foreclosures it would create, and so, they aggressively continued to pursue the market when they should have been cutting back. The top executives left the company, but they were not fired, in fact, Killinger retired, comfortably it would seem. The customers of the bank, especially those with mortgages, are the ones who really will suffer in the long-term. The bank will rebound, but those with foreclosed homes never got the chance for a bailout, and so, they lost everything, while the executives and leaders of the bank are not charged with any wrongdoing. Luckily, the American taxpayers did not suffer, either, because JP Morgan Chase financed the takeover and the continuing operations of the bank.
In conclusion, WaMu's failure came about due to a number of reasons. They invested far too heavily in the sub-prime…… [Read More]
If AIG would not have been helped by the Federal eserve, it is more
than obvious that the financial group would have declared bankruptcy.
Although the bailout reached an enormous sum, the action was justified.
Given the current market conditions, an eventual collapse of AIG would
contribute even more to the fragility of the financial market. Also, it
would have led to a reduction of public wealth, and it would have reduced
The opinion of U.S. taxpayers is that the AIG bailout was not
justified. For them, it did not seem fair that they should pay for the
mistakes made by financial corporations' CEOs and by the defective policies
and strategies practiced by financial groups.
There are two sides to this issue, one opposing the other. U.S.
citizens have strongly declared themselves against the bailout. Their
pressure determined the country's officials to reject financial saving
plans initially.…… [Read More]
institutional economics. When attachment proposal guidelines; I a 1,5-2-page proposal 3-page essay. I minimum 4 book resources. Maybe subject "effects oil cryisis 1973 institutions" "effects subprime mortgage crisis istitutions."
Institutional economics -- Essay proposal
The internationalized economic crisis is now the buzzword across the globe. The impacts it has generated are complex and dramatic, to include corporate bankruptcies or the loss of the population's savings. But aside from these generally accepted dimensions of the crisis, fact remains that the topics pegged to the crisis are more multifaceted and go beyond the impacts on the population and the economic agents. The impacts are as such also felt at the level of the institutions.
The proposal is then that of assessing the subprime mortgage crisis through different lenses -- those of the effects generated upon the institutions. Most of the effects are expected to be felt by the lending institutions -- both…… [Read More]
Financial Fraud Fannie Mae
eview of Fraud Schemes within Fannie Mae 1998-2004
The agency found the fraud understatements of earnings and illegal gratuities that led to accounting violations and inability to meet Wall Street goals.
The investigation of Lee Frakas, executive of a major mortgage company which had dealings with Fannie Mae with hundreds of fake mortgages. The Securities Exchange Commission cited that Fannie Mae had to repay earnings and correct their books for the period 2001 through 2004. This major undertaking will cost the company over $11 billion by SEC estimates. In addition the Department of Justice has conducted a criminal investigation on the board members.
The top executive managing Fannie Mae were found guilty of illegally reporting accounting information that led to their receiving million dollar payments. Under Fraudulent Financial Statement Schemes this case is one of corruption and financial fraud. The specific areas include Illegal…… [Read More]
Interest rates are set at the national level, and the state of the economy is also national. Additionally, trends in investment flows (particularly into real estate) also proved to be national. As a result, the level of market risk remained high even when the level of asset-specific risk was reduced through the securitization process.
It is not inevitable that this had to happen this way. Banks, however, overinvested in the mortgage-backed securities, believing them to be safe. This reflected a lack of understanding of the true risks associated with mortgage markets, and in general the risks associated with the underlying assets of many MBSs. There are two reasons for this. Securitization created a false sense of security, that diversification would lead to these products having low risk levels. AAA ratings from ratings agencies confirmed this view, despite it being false.
The second reason is that the securitization process was complex.…… [Read More]
But Morgenson suggests even more troublingly, that the fundamental assumption of affordability behind the new program is flawed: "in devising what it considers an affordable mortgage payment, the program doesn't account for all of a borrower's debts -- the first mortgage, second lien, credit card debt and automobile payments. Instead, it calculates affordability using only the borrower's first mortgage payment, insurance and property taxes" (Morgenson 2009).
The program may even hurt those borrowers with second liens: "These banks -- the very same companies the Treasury is urging to modify loans that they service -- have zero interest in writing down second liens they hold because it would mean further damage to their balance sheets. Say a troubled borrower has a first mortgage owned by a pension fund in a securitization trust and a second lien held by the bank that services the loans. The servicer is happy to modify the…… [Read More]
Home Building Industry: An Economic Strategy
This paper will briefly explore how recent economic indicators such as record low interest rates for mortgages and housing starts should motivate house builders to strategize for continued economic growth. At this time while the housing bubble has not burst, it is important for such companies to focus on strategy in order to remain competitive when the bubble does burst.
This type of boom in originations has spawned tremendous economic growth with regards to employment rates, reurbanization, new home building, consumer spending and confidence and made hundreds of billions of dollars for the players involved. The housing boom kept this country afloat during the darkest moments after September 11, 2001 when other industries like travel, hospitality, entertainment, energy and telecommunications seemed uncertain. One can argue that such a relationship is cyclical; what comes around goes around in the manner of economic trends such as…… [Read More]
This is a short review of literature that discusses the subprime mortgage crisis which many believe had a significant impact on the financial crisis that began in 2008. The discussion will range from how the crisis started and what the banks knew might happen because of faulty legislation and greedy lenders prior to the crash, to how the crash has impacted families and how some entities have tried to mitigate it with little success.
The financial crisis that began in earnest in 2008 followed many decisions which, in retrospect, were not wise. Legislation can be traced back to the 1960s that began allowing lending companies (banks) and hedge funds to buy large numbers of mortgages and leverage them as if they were real assets (Block-Lieb & Janger, 2011). Other laws followed such as the Community einvestment Act first passed in 1977 and amended with much stronger language in 1995…… [Read More]
shadow banking system, its role in the subprime mortgage crisis, and failures of regulation within the shadow banking system. The term "shadow banking system" was coined by PIMCO's Paul McCulley in 2007 (Spanos, 2012) and refers to a banking system that includes financial intermediaries that are involved in creating credit across the global financial system, whose functions are not subject to regulatory oversight (Investopedia, 2012). The question has been debated as to whether shadow banking meets the definition of true banking. Given that the two systems perform similar functions, including credit intermediation and maturity transformation, the two should be considered parallel systems (Noeth and Sengupta, 2011).
The term shadow banking is used to describe any provision of credit taking place outside of the traditional deposit-funded lending system. This definition includes institutions that range from pawnbrokers and consumer finance companies to securities dealers as well as firms that issue corporate bonds.…… [Read More]
Many subprime mortgages were made with little documentation of income or ability to repay, or other elements that typically safeguard loans of all types and mortgages especially. There have even been cases of widespread fraud, where documents were falsified in order to approve loans. The reason many lenders were so eager to make these bad loans is that they weren't ultimately going to be responsible for them -- the loans were bundled into groups and sold as "mortgage backed securities," so instead of dealing with many individual loans worth an average of a few hundred thousand dollars, banks and other institutions were dealing with bundled groups of these bad loans worth millions of dollars apiece. Companies like AIG made money in the short-term by providing insurance policies for these mortgage backed securities, as well. Eventually, however, people with loans they couldn't really afford began to default, either because they simply…… [Read More]
A key element to Maslow's hierarchy of needs is that it is a hierarchy, namely that the baser needs must be satisfied before the higher needs can be met. A salesperson scrabbling to make a living might be willing, to satisfy his or her physiological needs, to sell anything to anyone, even encourage someone to go into dangerous debt with a mortgage he or she can ill-afford to buy an overpriced or unsuitable house. A person who lives in an unsafe community might enter into such an agreement, to earn enough money for his or her own immediate self-interest to move out of that community. The foolishness of buying a home on such a basis in the long-term is difficult to appreciate when short-term needs are not met on a physical level. Only when the salesperson's bestial instincts of food and shelter and safety are satisfied can he or she…… [Read More]
There is no acknowledgement that leaders may indeed be flexible according to the situation and followers that they are dealing with. Even though women, for example, may favor a more laissez-faire type of leadership style than men (Eagly, Johannesen-chmidt & Van Engen), this does not mean that they will do so in all circumstances, or indeed that all female leaders will have this tendency.
The Path-Goal Theory
The path-goal theory is one of the most flexible and popular models used in the changing business world today. It allows for an integration of various styles, personalities and situations. The components inherent in this theory is the particular path that employees are expected to follow in order to reach a certain desired goal. The position of the leader in this model is to provide followers with desirability in terms of goals and the removal of obstacles along the way towards obtaining the…… [Read More]
Even if no actual money changed hands, anything inherited and then sold may have taxable value (Prendergast, 1982; Yin, 2002).
Cases such as Crane v. Commissioner (1947) and Commissioner v. Tufts (1983) reaffirm the concept that there are many different kinds of taxable gains and a large number of individuals fail to realize that anything they acquire must be accounted for (Bittker, 1978; Pino-Anderson, 1982). By addressing the different between recourse and nonrecourse debt, those who find themselves in inheritance situations attempt to avoid taxation on the property they acquire because there was debt owed on that property at the time it was bequeathed to them (Cunningham, 1984; Isaac & O'Leary, 2012). The belief is that the object that was inherited is worth only as much as (or appreciably less) than the debt that was owed on it, so there should not be any taxation of that object (Isaac &…… [Read More]
This economic indicator can be used to determine inequality within a given region or area. It can also be view the capacity for individuals within a particular nation to consume
b. ate of Value- $41,560
c. Source of Information- "Per Capita Personal Income U.S. And All States." Per Capita Personal Income U.S. And All States. Bureau of Business & Economic esearch, 12 Oct. 12. Web. 02 Feb. 2013.
d. Date of information- September 2012
6) Housing Starts-
a. Economic Indicator- Housing starts are usually indicated by the number of privately owned, new houses, under construction within a given period. This data is usually comprised of three, very distinct components of single family houses, condos, and apartment buildings. Housing starts are very important economic indicators as housing is a substantial component of the middle class family's net worth. Home ownership is also a means by which are other industries are successful.…… [Read More]
ole of Law in Society
The law places a critical role in society, often serving to informally support the same rules and norms that it can formally enforce if someone violates them. The four primary functions of the law are: to ensure that the government, its officials, and private individuals are all accountable for their actions; to protect fundamental rights; to provide fairness; and to ensure justice (The World Justice Project, 2012). The rule of law provides the framework for society, so that all people come to the table with the same understanding of how transactions should work some knowledge of the remedies for wrongdoing, and knowledge of the consequences of inappropriate behavior. In fact, in many ways the presence of the law is prophylactic, preventing wrong behavior simply because that behavior has been made illegal.
One of the most critical uses of the law is to ensure basic human…… [Read More]