Banks Bite the Bullet on Loan Modifications

As you can see from the following WSJ article, more banks are considering lowering the principal along with a rate modification:

By JAMES R. HAGERTY
(See Corrections & Amplifications item below.)
Banks and loan investors are starting to bite the bullet and lower the principal due on home mortgages for some struggling borrowers, a new report from bank regulators shows.
That's good news for some homeowners, but may portend more write-offs over the next few years for banks and other lenders now wading through hundreds of thousands of applications for loan modifications. The tradeoff for banks is that by taking the hit now they can boost their chances of being repaid.
Primary Source
Read the full OCC report.
Banks and loan servicers modify loans primarily by reducing interest rates or extending the term of the mortgage. These methods can temporarily help borrowers struggling to make payments without requiring lenders to lower the principal owed. Now, in a small but growing number of cases, banks are going further and writing off some of the loan altogether.
Part of this is due to prodding from the Obama administration, which has made saving homeowners from foreclosure a cornerstone of its economic-rescue strategy. The administration in March announced plans aimed at helping as many as nine million households struggling with mortgage debt through loan modifications or refinancings. The plans include financial incentives for mortgage-servicing firms that modify loans.
At the same time, banks now have more flexibility to modify loans because of their success in stabilizing their balance sheets and, in some cases, raising fresh capital. Banks can afford "to take the pain up front," said Kevin Fitzsimmons an analyst at Sandler O'Neill & Partners LP in New York. "If they want a legitimate chance of salvaging something out of the loans, they are better off taking the loss now."
Bloomberg News
Rows of tract houses this month in Las Vegas. The median home price in the area fell 40% to a 10-year low in August amid sales of foreclosures.
The portion of loan modifications in the second quarter that involved reducing the principal jumped to 10% from 3.1% in the first quarter, according to the report released Wednesday by the Office of the Comptroller of the Currency, or OCC, which regulates national banks.
Alejandro Estrella, a mail carrier in Riverside, Calif., said he was surprised when his lender, the Wachovia unit of Wells Fargo & Co., agreed recently to reduce the principal he owed on two mortgages on his home by 18% to about $237,000. That will lower his monthly payments to less than $1,500 from about $2,100. "I wasn't expecting it," said Mr. Estrella, who started out seeking just a reduction in his interest rate and got counseling from Springboard Nonprofit Consumer Credit Management.
Principal reductions are still the exception, though. Tom Kelly, a spokesman for J.P. Morgan Chase & Co., said the lender first tries to make loans affordable by lowering the interest rate for borrowers who qualify for modifications. If that doesn't result in a low enough payment, the bank may extend the term of the loan or defer repayments on part of the principal. That deferred principal would come due if the home is sold or refinanced.
But banks and loan servicers are recognizing that modifications don't always work if the borrowers aren't given a big enough break. Of loans modified in this year's first quarter, 28% were in default again within three months, the OCC said. Among those modified in last year's second quarter, 56% were in default again a year later.
Although the Obama administration programs for averting foreclosures got off to a slow start, they are starting to result in larger numbers of modified loans. The OCC report tallied 439,574 agreements to help troubled borrowers, including loan modifications and other repayment plans, in the second quarter. That was up 75% from a year earlier. Of that total, 142,362 of the agreements were classified as loan modifications, and 10% of those involved reducing the principal.

Beyond Housing, a nonprofit in St. Louis that counsels distressed borrowers, recently won a principal reduction for Evone Lester, a prison employee who had fallen behind on her payments and faced foreclosure. The loan was being serviced by Wells Fargo & Co. but was owned by an investor, Beyond Housing said. The investor agreed to reduce the loan balance to about $48,800 from $72,000, said Chris Krehmeyer, chief executive of Beyond Housing. That helped cut the monthly payment to $761 from $1,039.
In spite of these efforts, foreclosures continue to rise. In a report last week, Amherst Securities Group, a New York research firm, estimated that about seven million homes -- representing 12% of U.S. homes with mortgages -- will end up changing hands in foreclosures or related transactions over the next few years. The company said it doesn't expect that loan-modification efforts will ease the problem significantly, largely because so many people default again.
The OCC's report, which covers about 64% of all U.S. home mortgages outstanding, found that 11.4% of those mortgage loans were at least 30 days overdue or in foreclosure at the end of the second quarter, up from 10.2% three months earlier and 7.4% a year before.
The OCC isn't requiring banks to reduce principal, said Joseph Evers, a deputy controller at the regulatory agency. But, he said, the OCC has told banks they need to make sure modifications are "more sustainable," giving borrowers a real chance to keep up with the new payments.
Separately, the Federal Reserve Board Wednesday released a report on mortgage data from more than 8,000 lenders under the Home Mortgage Disclosure Act, known as HMDA. The report showed that blacks and Hispanic whites were far more likely to be denied last year for refinancing conventional mortgages, those that aren't insured by the federal government.
The denial rate for blacks was 61%, compared with 51% for Hispanic whites and 32% for non-Hispanic whites. That may partly reflect the larger proportion of minority borrowers who got subprime loans during the housing boom and ended up in homes whose values have crashed.—Dan Fitzpatrick contributed to this article.
Write to James R. Hagerty at bob.hagerty@wsj.com
Corrections & Amplifications: A report on U.S. mortgage performance in the second quarter came from the Office of the Comptroller of the Currency and the Office of Thrift Supervision. This article fails to mention the OTS.

California Imposes a 90-day Foreclosure Moratorium Effective Monday 06/15/09

The Associated Press

Sat, Jun 13, 2009 (5:03 p.m.)

California is imposing a 90-day moratorium on housing foreclosures under a new law that takes effect Monday.

The law is expected to make lenders try harder to keep borrowers in their homes. Loan companies must prove they tried to modify the delinquent loans before they can begin foreclosing.

But supporters acknowledge the California Foreclosure Prevention Act won't stop thousands of foreclosures from eventually happening. There have been more than 365,000 foreclosures in California since early 2007, with many more already scheduled.

The bill passed in February is similar to the Obama administration's Making Home Affordable Program that began in March.

Both encourages lenders to cut interest rates or rewrite loans to affordable levels

The ten best and worst real estate markets

The cities that are showing signs of stabilization and those that continue to unravel.

In Depth: 10 Best And 10 Worst U.S. Housing Markets
Wishing you'd left the game earlier is a time-honored Las Vegas tradition. Today, that's true not only for gamblers but for homeowners there. The last time Las Vegas properties were worth more than the average mortgage? August 2003.
Blame overbuilding and risky loans, a gambling mentality or even the desert sun, but based on today's results from the S&P/Case-Shiller home price index, which measures metro home prices in 20 cities through December 2008, Las Vegas is the weakest market in the country. Prices are dropping quickly (down 4.81% since last month and 33% in the last year), the pace of decline is accelerating at the third-fastest rate in the nation, and based on lost equity, homeowners are out 65 months of mortgage payments. All signals that things aren't likely getting better any time soon.
"Vegas is a market unto its own," says Steve Cesinger, chief financial officer at Dewberry Capital, an Atlanta-based real estate investment firm. "I don't know what those guys were drinking when they thought all this building made sense. If it does work out soon, then there's some force out there in the universe that I'm not aware of."
The S&P/Case-Shiller home price index, released monthly, examines repeat home sales in 20 metro markets, including the city core and surrounding suburbs. This means that while prices in tony San Francisco neighborhood Pacific Heights might be holding up, the net effect of including a bankrupt suburb like Vallejo brings down the metro area's score. Each city's score is assigned based on the price difference from 2000, which is scored as 100. So San Francisco's score of 130.12 means prices are up 30.12% from 2000. It still has the potential for a further fall, given the 31% year-over-year drop.
Forbes also analyzed monthly declines and year-over-year declines in home prices to determine where prices were falling fastest and where those drops were picking up momentum. It's not a good thing for San Diegothat prices from November 2008 to December 2008 fell 2.13%, but as prices declined by 2.29% from October to November, and 2.44% from September to October, the speed with which prices are falling is slowing.
That slowing rate of decline, also seen in places such as Denver, Washington, D.C., and Boston, helped rank those cities as some of the stronger markets in the country.
Contrast that with Minneapolis, where prices fell just 0.96% from September to October, but by December, the rate of month-to-month declines had jumped to 4.6%, an unwelcome acceleration.
Next, to rule out places in complete depression, we looked at how many months of equity homeowners have lost. Places like Detroit (-2.98%) and Cleveland (-2.07%) haven't declined as quickly over the last month as Seattle (-3.63%) or Charlotte (-2.55%), but that's because prices in those two Rust Belt cities are so depressed it's difficult for them to fall any further. Detroit and Cleveland homeowners have lost 141 and 92 months of equity, respectively, whereas Seattle and Charlotte prices have only declined for the last 39 and 33 months, respectively.
One other factor to consider with the Case-Shiller numbers is that the index tracks repeat home sales. That means cities like Tampa and Miami, which are notorious for overbuilt new inventory and high numbers of foreclosures, perform better on the index than they ought to, as those two factors are not tracked.
"Case-Shiller doesn't take into account new construction or foreclosure sales," says Jonathan Miller, president of Miller Samuel, a Manhattan residential appraisal firm. "In some of these markets, I'm not sure how you can ignore new construction or foreclosures."
Another city with foreclosure and new construction problems is Phoenix, where bad loans have mounted and mortgage delinquencies, a forebearer of foreclosures, have risen.
"It's pretty gruesome," says Anthony Sanders, a finance professor at Arizona State University. He points to delinquencies as a major problem and a sign that the Valley of the Sun won't be bouncing back any time soon. In Phoenix, seriously delinquent loans--those that haven't been paid in 90 days--have increased from 3.5% to 27.3% for subprime loans since this time in 2005. Adjustable-rate mortgages that are seriously delinquent have gone from less than 1% to 20.2% in the same period.
With those problems looming on the horizon in many cities across the country, Obama might need more ammunition than his proposed $75 billion foreclosure prevention package offers.
Then again, even in a boom-bust capital like Los Angeles, if you bought in 2000, paid your mortgage on time and are still in your home, you've seen a 71.5% price appreciation. There's something to be said for that kind of responsible, long-term investor.

For complete article, visit http://www.forbes.com/2009/02/24/housing-cities-ten-lifestyle-real-estate_home_prices.html

Rescue plan continued...

Again, I do not know the author of these articles, but the person knows what he or she is talking about!

Yesterday politicians ran head long into the real issue; that unless there is some sort of plan to re-ignite the credit markets the economy will tank in a major recession that could last longer than their tenures in the House. The House failed in their responsibility to pass the package, doing the politically expedient thing and listening to their constituents that unfortunately in this case are not well informed. The stock market had its biggest point loss in history and hopefully shook the ground under those House members that were too weak to do what needs to be done, regardless of the consequences. With the headlines this morning many of those citizens that didn't understand were given a lesson in financial markets.

Markets rebounded today but still ended the day lower than the close last Friday. There is now a 100% chance a plan will be done by the end of the week; likely on Thursday. The Senate is set to vote on a plan with some changes from the House bill tomorrow.

House Republican conservatives are likely to keep pressing for a mandatory insurance program they initially proposed for mortgage-backed securities. They may also try to force the Securities and Exchange Commission to suspend mark-to-market accounting and require bank regulators to assess the real value of the troubled assets, lawmakers say. Either measure could drive away Democratic votes. The Senate may also consider expanding the authority of the Federal Deposit Insurance Corp. Under one plan, pushed by House Republicans, the FDIC would issue lenders certificates they could use as capital, which the banks would have to pay back with interest. The proposal would give the FDIC more say in how the institutions are run. Democrats say they may also seek stronger oversight on the rescue plan, tougher limits on executive compensation and more relief for homeowners facing foreclosure. (Bloomberg)

Mortgages were hit hard today; lower in price than the improvement yesterday. The mortgage market is likely to have a tougher time than treasuries until there is a plan passed. Potential mortgage investors are not going to step into the pool until they know how deep it is.

Case/Shiller said prices of residential houses in the 20 large markets fell 16.3% yr/yr, the fastest pace on record, signaling the worst housing recession in a generation had yet to trough even before this month's credit crisis. Home prices decreased 0.9% in July from the prior month after declining 0.5% in June, the report showed.

Probably the most impacting result of the House failure yesterday, and the one that should have been beaten into the heads of those on both sides that don't get it, money-market rates climbed even after the Federal Reserve yesterday more than doubled the size of its dollar-swap line with foreign central banks to $620B. In Europe, banks borrowed dollars from the ECB today at almost six times the Fed's benchmark interest rate. Overnight Libor climbed 431 basis points to an all-time high of 6.88% today for overnight lending rates. It above all else is a report card of just how bad the banking crisis is becoming.

Tomorrow's economic data; the ADP Sept employment guess at 8:15; at 10;00 Aug construction spending (-05%), also the Sept ISM manufacturing index (50.0 frm 49.9). Sept auto and truck sales will be reported tomorrow.

Nothing but the rescue package is of importance now. A doable plan MUST be accomplished this week, those Republicans and Democrats that want to act like real heroes to the homefolk got a wake up call yesterday and hopefully realize this isn't a debating society game; that the system is teetering on the edge. Must piss them off that they will actually have to take direct responsibility for their actions and have to work to explain it to their constituents that still believe this is a Wall Street bail out of the rich. By the way, the so-called rich pay 90% of the taxes.

Our Politicians Have Failed Us Yet Again...

I would like to give credit to whoever penned this article; however, I do not know who it is...

The House failed to pass the rescue plan; Republicans rebelled and so too 90 Democrats. A shame that the election is five weeks away; all House members are up for election. As we send this out there is nothing definite as to what the House will do now, most likely they will come together and work something out. Once again after the plan failed we are back to two question of what to do now, and is this necessary? It is necessary! No one likes it, everyone is angry about how Wall Street and Washington caused this mess. There is more bad info flowing on the blogs than ever; most of them sent to us by subs are so far off the mark, no wonder American citizens are generally opposed to this; in and of itself, understanding this mess requires years of professional experience and even that isn't enough at times. People, this is not a bail out plan as was tagged a few weeks ago; the media named it and created a huge deflection away from the problem. This is not a bail out of Wall Street, but Main St.

One idea that is getting a lot of blog talk is to simply let the government issue some form of insurance policy to insure that banks won't suffer with the junk, but that isn't the issue. Banks are squarely on the edge with no cash and less trust of the system as we have been warning for months. Yes it is sub prime and other stupid borrowing and investing(by banks) using excessive and destructive leverage, but banks need liquidity now as credit markets are essentially locked down. Just having the government issue insurance against losses still leaves the junk at the bank, banks need cash and insurance against losses won't generate cash rapidly enough. Most blogs dealing and commenting on the current credit crisis in the financial markets should be ignored.

One good idea to help that has been talked about some this afternoon is to have FDIC issue a statement and say all deposits up to $1 mil would be protected if a bank would fail. A good idea, but again that isn't enough. The financial system needs to be liquefied quickly and so far the only plan that makes that possible is to actually buy the crap from the banks---at deep discount. If there isn't something done the stock market could decline another 2000 points and the US and global economies would suffer a prolonged very deep recession, lasting years.

Given the depth and seriousness of the situation, there is every likelihood a deal will get done. It may now take a day or two (possibly Thursday) to get it done with the Jewish holidays starting tomorrow and many members will not work tomorrow. The US stock market was slapped hard today on the failure, next the global stock markets will be beaten hard when they resume. Banks are falling, so far it is the big ones; next up will likely be National City even though it isn't saddled with a huge portfolio of sub primes, it is leveraged to the hilt and needs cash. Nat City's stock was off 56% from Friday and is trading at about $1.62/share. The longer this continues the worse it will be, there will be a long-lasting recession--- deeper than any since the Depression; jobs will be lost by the 10s of thousands, the housing situation will deteriorate further, otherwise "good" banks will be dragged under.

Crude oil and commodity prices declined in huge selling betting now that the global and US economies are going to decline to a protracted economic slump. Darkest before the dawn? Once those that voted against the plan today see the results of the inaction we believe there will be a sea change in thinking.

Investors are running at light speed to protection of US treasuries. 3 mo T-Bill rate 0.406%, FF rates 0.12%, 2 yr note 1.71% -40 basis points today.

Mortgage prices today were dragged higher by treasuries, didn't look good. Still don't want to hold rate locks overnight as not sure how or what may occur overnight.

A Billion -- Relatively Speaking...

This is too true to be very funny

The next time you hear a politician use the
word 'billion' in a casual manner, think about
whether you want the 'politicians' spending
YOUR tax money.
A billion is a difficult number to comprehend,
but one advertising agency did a good job of
putting that figure into some perspective in
one of its releases.


A. A billion seconds ago it was 1959.

B. A billion minutes ago Jesus was alive.

C. A billion hours ago our ancestors were
living in the Stone Age.

D. A billion days ago no-one walked on the earth on two feet.

E. A billion dollars ago was only 8 hours and
20 minutes, at the rate our government is spending it.

While this thought is still fresh in our brain, let's take a look at New Orleans It's amazing what you can learn with some simple division

Louisiana Senator, Mary Landrieu (D), is presently asking the Congress for $250 BILLION to rebuild New Orleans . Interesting number, what does it mean?

A. Well, if you are one of 484,674 residents of
New Orleans (every man, woman, child), you
each get $516,528.

B. Or, if you have one of the 188,251 homes in
New Orleans , your home gets $1,329,787.

C. Or, if you are a family of four, your family
gets $2,066,012.

Washington , D.C . HELLO!!! ... Are all your calculators broken??

Tax his land,
Tax his wage,
Tax his bed in which he lays.
Tax his tractor,
Tax his mule,
Teach him taxes is the rule.
Tax his cow,
Tax his goat,
Tax his pants,
Tax his coat.
Tax his ties,
Tax his shirts,
Tax his work,
Tax his dirt.
Tax his tobacco,
Tax his drink,
Tax him if he tries to think.
Tax his booze,
Tax his beers,
If he cries,
Tax his tears.
Tax his bills,
Tax his gas,
Tax his notes,
Tax his cash.
Tax him good and let him know
That after taxes, he has no dough.
If he hollers,
Tax him more,
Tax hi m until he's good and sore.
Tax his coffin,
Tax his grave,
Tax the sod in which he lays.
Put these words upon his tomb,
'Taxes drove me to my doom!'
And when he's gone,
We won't relax,
We'll still be after the inheritance TAX!!

Accounts Receivable Tax
Building Permit Tax
CDL License Tax
Cigarette Tax
Corporate Income Tax
Dog License Tax
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel Perm it Tax
Gasoline Tax
Hunting License Tax
Inheritance Tax
Inventory Tax
IRS Interest Charges (tax on top of tax),
IRS Penalties (tax on top of tax),
Liquor Tax,
Luxury Tax,
Marriage License Tax,
Medicare Tax,
Property Tax,
Real Estate Tax,
Service charge taxes,
Social Security Tax,
Road Usage Tax (Truckers),
Sales Taxes,
Recreational Vehicle Tax,
School Tax,
State Income Tax,
State Unemployment Tax (SUTA),
Telephone Federal Excise Tax,
Telephone Federal Universal Service Fe e Tax,
Telephone Federal, State and Local Su rcharge Tax,
Telephone Minimum Usage Su rcharge Tax,
Telephone Recurring and Non-recurring Charges Tax,
Telephone State and Local Tax,
Telephone Usage Charge Tax,
Utility Tax,
Vehicle License Registration Tax,
Vehicle Sales Tax,
Watercraft Registration Tax,
Well Permit Tax,
Workers Compensation Tax.

STILL THINK THIS IS FUNNY?
Not one of these taxes existed 100 years ago,
and our nation was the most prosperous in the world.
We had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids.

What happened? Can you spell 'politicians!'

And I still have to 'press
1' for English.

I hope this goes around THE
USA at least 100 times

What the heck happened?????

News: FHA Reform Bill Could Help Distressed Subprime Borrowers

The prospects for Federal Housing Administration reform legislation brightened last week when a key senator expressed interest in passing a bill before Congress adjourns for its August recess. Senate Banking Committee chairman Chris Dodd, D-Conn., told reporters last week that he would try to get a FHA reform bill done in the "next month or so." Sen. Dodd revealed his intentions only a few days after housing secretary Alphonso Jackson said FHA could help "hundreds of thousands" of distressed subprime borrowers if Congress passes an FHA reform bill this summer. The Department of Housing and Urban Development secretary noted that 80% of subprime loans are sound. But the other 20% are "headed for trouble" and the borrowers will have difficulty making their payments once the loans reset, he said in a speech at the National Press Club last week. "We need this reform now. President Bush and I have repeatedly urged Congress to act," the HUD secretary said. Congress has been looking for ways to address rising delinquencies and foreclosures on subprime loans and FHA reform would give many distressed borrowers an option to refinance into safer and more affordable government-insured mortgages. HUD has already seen a surge in business from homeowners with conventional loans refinancing into FHA products. The agency suspects a majority of these borrowers are escaping high-cost subprime loans. FHA refinanced 60,400 conventional loans in fiscal year 2006, up 80% from FY 2005 and this trend is accelerating. During the first seven months of FY 2007, FHA refinancings of conventional loans jumped 84% compared to the same period in the last fiscal year. As of April 30, the FHA had refinanced 51,349 conventional loans. "In today's mortgage environment, it is safe to say that a significant portion, we conservatively estimated 60%, are subprime loans," FHA commissioner Brian Montgomery told a mortgage conference recently. HUD officials maintain they could help more subprime borrowers if Congress passes a reform bill that allows the FHA to charge risk-based premiums and raises FHA loan limits. The House Financial Services Committee has approved a FHA reform bill and FHA supporters were hoping committee chairman Barney Frank, D-Mass., could bring the bill (H.R. 1852) to the House floor for a vote this month. But an impasse over origination fees on FHA-insured reverse mortgage loans (which are called Home Equity Conversion Mortgages) has bottled up the bill. And it looks like the dispute between AARP and lenders will postpone House passage until July. The impasse is over an amendment attached to H.R. 1852 that reduces the origination fee on HECMs. AARP claims origination fees are too high and supports the amendment. Lenders argue it would no longer be profitable for lenders to make HECMs unless there is a change. "HECM fees have nearly tripled in the past five years," said AARP legislative counsel David Certner, and the high fees inhibit seniors from getting reverse mortgages. "We are looking for a way to reduce the fees," he said. Industry officials are concerned lenders would shift to conventional reverse mortgages if the origination fee is cut, which would result in a drop in HECM originations. That has revenue implications that could place the FHA reform bill in jeopardy of running afoul of congressional budget rules. Every bill has to be revenue neutral or increase revenue under the "pay-go" rules. The FHA reform bill depends on an increase in HECM originations to generate significant revenue to meet the pay-go test. Talks between AARP and mortgage industry groups have been ongoing for months and it has been frustrating, according to one source. "I think we are making progress," Mr. Certner said. "We would like to reach an agreement that is mutually satisfactory."

(c) 2007 National Mortgage News and SourceMedia, Inc. All Rights Reserved. http://www.nationalmortgagenews.com http://www.sourcemedia.com

U.S.Mortgage System Is Unmatched by Rest of the World

It may come as a surprise to learn that America's homeownership rate is not nearly as high as in some other countries. Although our citizens are regarded as the "best housed" in the world, the percentage of folks owning their residences is greater in Norway, Iceland and Ireland, just to name a few.
The term "best housed" refers not to numbers or percentages but to the quality of our dwellings. The United States also has a mortgage system that is second to none. Indeed, our system of mostly fixed-rate loans funded at extremely low rates is widely envied but rarely emulated.
The main difference is that the primary U.S. mortgage market is backed by a sophisticated, well-developed secondary market in which investors throughout the globe keep our local lenders awash with cash.
They do that through largely secondary-market intermediaries like Fannie Mae and Freddie Mac, two government-sponsored enterprises that were chartered by Congress to make sure lenders always have money to lend, even during periods of high interest rates and private conduits that perform the same function.
In recent years, totally private companies have started taking over a larger share of the secondary market, as Fannie and Freddie work through their financial and regulatory difficulites.
These mortgage-market middlemen purchase loans from lenders, package them into securities and sell them to investors. And in so doing, they are able to meet the needs of participants at both ends of the home-loan transaction.
American home buyers often complain about the complicated and lengthy lending process. But most of their counterparts in other countries would love to have a system that works as smoothly as ours - and is as borrower friendly.
Here's a look how the others stack up:

• Canada: Mortgages in our neighbor to the north rarely have rates that are fixed for more than five years. And they almost always come with "yield maintenance penalties" that guarantee lenders a minimum return over the fixed-rate period. When the loans roll over - that is, when the period of fixed rates expires - borrowers select another fixed-rate term ranging from one to five years at the then-current mortgage rate. For the most part, banks and credit unions hold mortgages in Canada as opposed to being sold on the secondary market, which explains why they tend to favor the lender rather than the borrower.
• Great Britain: Variable-rate mortgages dominate here. These are the English version of our adjustable-rate mortgages. But unlike our ARM's, which usually come with annual and life-of-loan caps that protect borrowers against uncontrolled spikes in their monthly payments, those in England are held in check solely by the competition. When market rates change, lenders in the United Kingdom review what their borrowers are currently paying and decide at their own discretion whether or not to raise or lower the rate. But if lenders adjust too much (or more than their competitors), borrowers take their business elsewhere. A number of countries allow buyers to borrow the full value of the property, but the United Kingdom is a rarity in that it permits borrowing up to 110 percent of the value.
• Japan: The Japanese mortgage market has grown rapidly in the past 30 years, according to a report in The Journal of Economic Perspectives. "In fact," states the article by Richard Green, a professor of real-estate finance at George Washington University, and Susan Wachter, a professor of financial management at the University of Pennsylvania's Wharton School, "Japan's mortgage market has evolved in a way that resembles the evolution of the U.S. mortgage market, although with a lag." As a result, bank lending still dominates, and banks offer mostly adjustable rate mortgages or short-term (typically three-year) fixed-rate loans. Also, down payments average 50 to 60 percent.
• Germany: Borrowers have limited options in Germany. Buyers usually put down at least 40 percent. If they want to borrow more than 60 percent, they can take out a second mortgage for up to an additional 20 percent of value. The rates charged on first mortgages are only slightly higher than rates on government bonds with a similar maturity. But if the loans are paid off early, they are required to pay the lender all the interest they would have paid had the loan amortized through to maturity.
• Denmark: Denmark's mortgage system, like ours, relies heavily on the capital markets. Consequenlty, it is the only country to have home loans with most of the key features of those found in the Unites States. But there are limitations. For one thing, lending criteria is extremely rigid, much more so than in the States. For another, Danish borrowers must come up with far larger down payments. In the United States, borrowers who have a 20 percent down payment tend to get the best terms available. But in Denmark, to achieve an 80 percent loan-to-value ratio, Danes must take out a variable-rate second mortgage to cover the difference. Danish mortgages are pre-payable with penalty, just as they are (for most part) here. But they are also "portable," meaning that when owners sell their homes, they can carry their mortgages over to the new house. In other words, loans with rates that are below the market at the time of the sale need not be paid off.
• France: France has a remarkably small mortgage market for a country with an economy of its size and sophistication. Yet, by world standards, loan terms are considered consumer friendly. More than half the loans there have fixed rates, but the term is typically less than 20 years. Fifteen-year terms are most common. Prepayment penalties are limited by statute, but required down payments are as much as 40 percent.
• Italy: The market here is small, too, but developing. Still, most loans come with variable rates, short terms, prepayment penalties and low loan-to-value ratios. The average down payment is 50 percent; the typical term is 10 to 15 years. Moreover, the process of valuing collateral appraising takes longer than in other countries.
• South Korea: The mortgage system here lags far behind those in other affluent Asian countries, such as Singapore and Taiwan. Loan-to-value ratios, while rising, still remain at 40 percent or less.

Lew Sichelman, United Feature Syndicate, Inc.

Are We the "Greediest & Most Ungrateful Generation?"

Posted: November 20, 2006 By Craig R. Smith © 2006

The other day I was reading Newsweek magazine and came across some poll data I found rather hard to believe. It must be true given the source, right? The same magazine that employs Michael (Qurans in the toilets at Gitmo) Isikoff. Here I promised myself this week I would be nice and I start off in this way. The Newsweek poll alleges that 67 percent of Americans are unhappy with the direction the country is headed and 69 percent of the country is unhappy with the performance of the president. In essence 2/3s of the citizenry just ain't happy and want a change.

So being the knuckle dragger I am, I starting thinking, ''What we are so unhappy about?''

Is it that we have electricity and running water 24 hours a day, 7 days a week? Is our unhappiness the result of having air conditioning in the summer and heating in the winter? Could it be that 95.4 percent of these unhappy folks have a job? Maybe it is the ability to walk into a grocery store at any time and see more food in moments than Darfur has seen in the last year?

Maybe it is the ability to drive from the Pacific Ocean to the Atlantic Ocean without having to present identification papers as we move through each state? Or possibly the hundreds of clean and safe motels we would find along the way that can provide temporary shelter? I guess having thousands of restaurants with varying cuisine from around the world is just not good enough. Or could it be that when we wreck our car, emergency workers show up and provide services to help all involved. Whether you are rich or poor they treat your wounds and even, if necessary, send a helicopter to take you to the hospital.

Perhaps you are one of the 70 percent of Americans who own a home, you may be upset with knowing that in the unfortunate case of having a fire, a group of trained firefighters will appear in moments and use top notch equipment to extinguish the flames thus saving you, your family and your belongings. Or if, while at home watching one of your many flat screen TVs, a burglar or prowler intrudes; an officer equipped with a gun and a bullet-proof vest will come to defend you and your family against attack or loss. This all in the backdrop of a neighborhood free of bombs or militias raping and pillaging the residents. Neighborhoods where 90 percent of teenagers own cell phones and computers.

How about the complete religious, social and political freedoms we enjoy that are the envy of everyone in the world? Maybe that is what has 67 percent of you folks unhappy.

Fact is, we are the largest group of ungrateful, spoiled brats the world has ever seen. No wonder the world loves the U.S. yet has a great disdain for its citizens. They see us for what we are. The most blessed people in the world who do nothing but complain about what we don't have and what we hate about the country instead of thanking the good Lord we live here.

I know, I know. What about the president who took us into war and has no plan to get us out? The president who has a measly 31 percent approval rating? Is this the same president who guided the nation in the dark days after 9/11? The president that cut taxes to bring an economy out of recession? Could this be the same guy who has been called every name in the book for succeeding in keeping all the spoiled brats safe from terrorist attacks? The commander in chief of an all-volunteer army that is out there defending you and me?

Make no mistake about it. The troops in Iraq and Afghanistan have volunteered to serve, and in many cases have died for your freedom. There is currently no draft in this country. They didn't have to go. They are able to refuse to go and end up with either a ''general'' discharge, an ''other than honorable'' discharge or, worst case scenario, a ''dishonorable'' discharge after a few days in the brig.

So why then the flat out discontentment in the minds of 69 percent of Americans? Say what you want but I blame it on the media. If it bleeds it leads and they specialize in bad news. Everybody will watch a car crash with blood and guts. How many will watch kids selling lemonade at the corner? The media knows this and media outlets are for-profit corporations. They offer what sells. Just ask why they are going to allow a murderer like O.J. Simpson to write a book and do a TV special about how he didn't kill his wife but if he did, insane!

Stop buying the negative venom you are fed everyday by the media. Shut off the TV, burn Newsweek, and use the New York Times for the bottom of your bird cage. Then start being grateful for all we have as a country. There is exponentially more good than bad.

I close with one of my favorite quotes from B.C. Forbes in 1953:

"What have Americans to be thankful for? More than any other people on the earth, we enjoy complete religious freedom, political freedom, social freedom. Our liberties are sacredly safeguarded by the Constitution of the United States, 'the most wonderful work ever struck off at a given time by the brain and purpose of man.' Yes, we Americans of today have been bequeathed a noble heritage. Let us pray that we may hand it down unsullied to our children and theirs.''

I suggest we sit back and count our blessings for all we have. If we don't, what we have will be taken away. Then we will have to explain to future generations why we squandered such blessing and abundance. If we are not careful this generation will be known as the ''greediest and most ungrateful generation.'' A far cry from the proud Americans of the ''greatest generation'' who left us an untarnished legacy.

Payment Options/Minimum Payment

Thanks to Mangie Koza who taught me how to insert a table!

Let's return to the previous Payment Options post for a refresher:

The primary feature which makes this loan program so flexible and customized, if you will, for each borrower is the payment options. Each monthly statement will reflect four payment options:

• 
  The minimum payment (remember, you must always make at least the minimum payment),
• 
  An interest only payment,
• 
  A fully amortizing payment based on a 30-year term, and
• 
  A fully amortizing payment based on a 15-year term.

Of course, you can really pay anything greater than the minimum payment, so the borrower has a myriad of payment possibilities. However, the four shown above will be the ones reflected on the monthly mortgage payment.

Returning to our sample loan, let's see how this works:

$200,000 loan amount
1% start rate
7.5% annual payment cap
MTA index
2.75% margin
110% neg limit


In the example shown above, the first minimum payment of $643.28, based on a 1% interest rate, was posted. $166.67 was applied to interest; $476.61 was applied to principal; the principal balance was reduced to $199,523.39

For the second payment the interest rate changed to 7.508% (index in effect at that time plus the margin). The minimum payment of $643.28 was made; however, the minimum payment was insufficient to cover even the interest-portion due on the loan. The interest due was $1,248.35. The difference the payment did not cover, $605.07, was added to the principal balance. Consequently, the principal balance increased to $200,128.46 after the second payment was applied.

For the third payment the interest rate changed to 7.577%. The minimum payment of $643.28 was made. The interest due was $1,263.64. The difference the payment did not cover, $620.36, was added to the principal balance. The principal balance increased to $200,748.22 after the third payment was applied.

This process will continue through the 12th payment. For the 13th payment, the lender will attempt to recast the loan by taking into account the principal balance at the time, the interest rate in effect at the time, amortized over the remaining term (348 months). The payment amount for the 13th payment will be increased to $691.53 (increasing by the full 7.5% payment cap).