Adilson da Villa Mortgage Advice

Mortgage modifications are become more and more common, with the rising foreclosure rates in the United State, until recently mortgage, companies have been reluctant to provide help to people facing foreclosures by utilizing a mortgage modification program. Lenders are starting to use them more often not with the huge influx in homeowners that are in jeopardy of losing their home to a foreclosure. The lenders have come to realize that by working with the homeowners they have a chance at taking additional loses that are putting many mortgage companies into bankruptcy.

A mortgage modification or often times called a loan modification allow borrowers the opportunity to re-negotiate the terms of their mortgage loans, thereby reducing the required monthly payment. This option gives people facing a financial hardship the chance to save their home from a foreclosure. Establishing a new payment plan trough a successful mortgage modification will help you avoid foreclosure.

Lenders and borrowers have many reasons to work through this hard situation together, and establish a suitable plan that works for all parties involved. Selling you home may not be an option, especially with today’s market conditions and the circumstances that have causes this unfortunate situation to begin with. Therefore, if your home is to be saved from foreclosure, you and your lender will have to work together.

Mortgage modifications are often times a reasonable solution to prevent foreclosure. By negotiating a new payment, structure lenders still get their money and the borrower is able to keep their home. However, negotiating a mortgage modification is not that simple. Successful loan modification will require documentation to prove your current financial position with the lender. This information is also use to verify your ability to pay the new loan if the bank is willing to work with the homeowner.

While not all banks offer this type of solution, it never hurts to talk to them and find out. Who knows, it may be just what you need to prevent losing your home to a foreclosure. Lenders are staring to work more with borrowers facing foreclosure in this difficult time, lenders do not want your home, they are in the business of lending money not property management, and with the close to 2 million homes in foreclosure lenders are running out of options too. Qualifications for this type of solution, may be difficult and time consuming, but keep in mind what your goal is. Protect your most valuable asset, save your home from foreclosure with a mortgage loan modification.

Some questions about the mortgage crisis:

>Can the government stop the decline in home prices?

>Can they avoid more loan defaults?

>Can they engineer a soft landing for the mortgage loan industry?

>Is the crisis already over?

>Where are we in the process?

>Can the government actually manage the situation?

Ben Bernanke, Chairman of the Federal Reserve, recently endorsed the need for government intervention, saying that letting markets take their own course could destabilize communities, reduce the property values of nearby homes and lower municipal tax revenues. He is asking lenders to consider cutting the principal of some customers loans to prevent foreclosure, noting, When the source of the problem is a decline of the value of the home well below the mortgages principal balance, the best solution may be a write-down, perhaps combined with a government-orchestrated refinancing. (Bernanke pushes government help to curb foreclosures, Los Angeles Times, May 6, 2008).

Bernanke also recommended legislation permitting the FHA to increase its scale, along with Rep. Barney Frank (D-MA) and Sen. Chris Dodd (D-CN), who are calling for up to $300 billion in loan guarantees from the Federal Housing Administration to refinance loans that homeowners cant afford as long as the original lender reduces the principal on the loan to 85% of the homes current market value. (Many problems with mortgage bailouts, CNNMoney.com, April 22, 2008).

This plan to induce lenders to write-off a portion of loans that homeowners cant afford, is a very bad idea. In exchange for taking an immediate 15% write-down, the federal government will provide replacement financing, thus effectively transferring the remaining risk of loss to the taxpayers. It would favor borrowers who foolishly took larger loans than they could afford or on terms they could not handle and lenders who knowingly made high risk loans to unqualified applicants. If property values continue to drop, it would simply result in another round of defaults and losses. To his credit, President Bush has threatened to veto this legislation if Congress should pass it.

Who would we really be bailing out, anyway, lenders or borrowers? And, where would the $300 billion come from? Certainly not government reserves, because there are none, which leaves more borrowing as the source of funding.

Warren Buffett, of Berkshire Hathaway fame, currently ranked by Forbes magazine as the richest man in the world, recently told Bloomberg.com, The worst of the crisis in Wall Street is over. However, in terms of people with individual mortgages, theres a lot of pain left to come. Mr. Buffetts conclusion was echoed by Alan Greenspan, former Federal Reserve Chairman, who is reported to have also said that the worst of the credit crisis is over.

According to Cyril Moulle-Berteaux, writing in the Wall Street Journal (May 6, 2008), it is very likely that the housing crisis is already over, pointing out that the current bust is nearly three years old. He further notes, New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.

We should not be influenced by media sob stories about people losing their homes and avoid any attempts to have the government further interfere in the market. Real estate cycles have occurred many times before, and we should simply let this one finish playing out, especially since it looks as though it may have already bottomed.

2008 Harris R. Sherline, All Rights Reserved

NOTE: Read more of Harris Sherlines commentaries on his blog at opinionfest.com.

Commercial and residential mortgage plans in Florida are grouped in a particular form of finance policies and options, normally called Florida mortgage loan. These apply everywhere in the State of Florida. A effective number of mortgage lenders operating in Florida offer up mortgage loan calculators, frequently observed on their company internet sites. A lot of numeric and data-related information is easily handy and should help you better understand a Florida mortgage loan.

Virtually all mortgage lenders in Florida operate through brokers to assure quality and good services to their clients. The mortgage companies have respective services specifically costumed for each specific customer. For instance, customers who desire to get their loan reduced are proposed refinance loans. The mortgage companies in addition offer a variety of loans which take on commercial mortgage loan for business people, construction loans, and loans for farmers, special loans, and consolidation loans among numerous different loans.

Mortgage loans are available in different places in the State of Florida, and there are equally several companies that offer these services. The only prerequisite a possible client or customer needs really is to make a sound decision on the type of mortgage that best accommodates their needs. As brought up earlier in this article, a refinance mortgage is readily obtainable because these mortgage loans that are offered by various companies.

Such a loan becomes required when a client, having borrowed money from a financial institution, encounters difficulties in the repayment of the same type of loan. In addition, a customer who notices the mortgage rates that are oftentimes adjusted and difficult to handle can easily have such a loan converted to a fixed rate mortgage. The conversion is concluded as the period of the mortgage continues to extend.

It is of paramount importance that a client is mindful of all the types of mortgages that a company has to offer, in order to attain a wise option. For Example, mortgage loans whose rates are adjustable ordinarily extend with them the concept of shared risk between the lender and the borrower. The risk associated with adjustable mortgage loans therefore is a high possibleness of the interest increasing with time. In the mortgage business, your debts are unquestionably considered which include credit cards, home equity and auto mobile loans when applying for these individual loans. In Florida, there are companies that help clients in the clearance of some debts.

In mortgage business, interest rates are categorized into two categories. All The Same, the fixed rate is the most commonly used, with the interest remaining constant throughout the repayment period. Just In Case you are interested in receiving a mortgage loan, it is constantly advisable to consult a mortgage loan processor. In the past, it was quite difficult for a foreign citizen to obtain a loan from a financial institution in another country. This was due to the high value assets that the bank would call for before approval. This has however changed, and it is now easy to obtain a mortgage loan regardless of your nationality.

You are given notice to refer to a real estate agent, as they would possess the correct information needed before applying for a mortgage loan. When in doubt a real estate agent of financial advisor that deals with Florida mortgage loans will be able to provide the needed information that will allow you to make an informed decision and potentially place you into a mortgage that best suites your requirements.

If you would like more information on this topic and Bad Credit Mortgage Loan Repair or if you are in need of a Credit Check Collection Agency, Beatlands Credit Repair has many credit repair topics and tips that can be very useful.

Hey, wait a minute! In recent months, the national media has dwelled on the collapse of the subprime mortgage market and the surge of foreclosures. But there is another side to this story that should also be considered.

The Mortgage Bankers Association recently released its National Delinquency Survey and the numbers are not what you may think. True, the rate of loans falling into foreclosure last quarter was the highest in the survey’s 54-year history. 8.4% of subprime loans were more than 90 days late or already in the foreclosure process. That statistic is sobering, but it misses the point. If 8.4% are seriously delinquent or in foreclosure, 91.6% of the sub-prime borrowers are current with their loans and making their mortgage payments on time. They are enjoying the benefits of home ownership. Those borrowers were given the opportunity to own (rather than rent) because of the availability of sub-prime loans and have successfully taken advantage of that opportunity. For them, the “American Dream” has become a reality.

Of course, 8.4% default rate is high, but unanticipated financial problems happen. After all, people don’t buy homes, take out loans, and then intentionally default. Usually something serious happens to disrupt the natural process. Commonly, it is loss of job, divorce, medical catastrophe, or some other unanticipated financial emergency that causes people to default. Keep in mind, though, you don’t have to a sub-prime borrower to have financial problems. Prime borrowers also default on their loans and lose their homes in foreclosure (no one is immune in this market). Sure, the percentages are higher for sub-prime borrowers, but they are typically in a more vulnerable financial situation. Of course, they have a higher interest rate and pay a larger mortgage payments every month, so cut them some slack. Regardless, the solution is not to cut-off subprime lending, but rather to embrace these borrowers’ unique needs. Particularly now, lenders need to offer delinquent homeowners programs to restructure their loans and avoid foreclosure. Let’ look at why.

Delving deeper into the MBA survey, we discover several surprising facts. For example, the surge in sub-prime foreclosures last quarter was driven by four large states, California, Arizona, Nevada, and Florida. If it were not for the avalanche of foreclosures in those four states, there would have been an overall drop in the rate of foreclosure filings nationwide. Thirty-four states actually reported a decrease in the rate of new foreclosure foreclosures in the last quarter, and the remaining states (other than those four) reported only a modest increase.

There is also a wide divergence between fixed-rate and adjustable-rate loans. The delinquency rate for prime fixed-rate loans was essentially unchanged from the previous quarter and the rate for sub-prime fixed rate loans actually fell! In contrast, the rate of delinquency for prime adjustable-rate mortgages increased 36% and sub-prime adjustable-rate mortgages increased 227%.

Clearly, adjustable-rate mortgages (”ARMs”) are the culprit and present a unique problem. But there is nothing wrong with ARMS, provided they are utilized responsibly. They have benefits you can’t find with fixed-rate loans. They have lower interest rates and correspondingly lower monthly payments. They allow borrowers to qualify for loans they would not otherwise receive (of which the vast majority successfully pay each month). Plus, it just doesn’t make sense to obtain a 30-year fixed rate loan, when in reality most people sell or refinance their homes every 5-7 years.

Nationwide, California leads the way with over 17% of all sub-prime adjustable rate mortgages. Similarly, California has over 19% of the foreclosures for sub-prime ARM loans. In fact, the same four culprits; California, Nevada, Arizona and Florida, have more than one-third of the nation’s sub-prime ARMs, more than one-third of the foreclosures started on sub-prime ARMs, and most of the nationwide increase in foreclosures.

Another factor to consider is the distinction between owner-occupied and investor (non-owner occupied) borrowers. A majority of the delinquencies and foreclosure starts can be attributed directly to non-owner occupied loans. This is because investors are notorious for defaulting on mortgages when the market dips and they see the value of their properties evaporating. Further exacerbating the problem, investors’ share of defaulted loans was 32% in Nevada, 25% in Florida, 26% in Arizona, and 21% in California. Yep, those same four states. Those rates are high compared with a rate of only 13% for the remainder of the country. And those percentages will certainly increase as property values continue to decline.

One more thing. The media has been quick to blame mortgage brokers for “forcing” borrowers into sub-prime adjustable-rate loans. I laugh every time I hear that. Anyone who has ever been a mortgage broker knows that you can’t force a loan on borrowers, prime or sub-prime. It doesn’t work like that anymore. Homeowners are more sophisticated than ever before. They have access to the internet, television and the mass media, and analyze available loan programs. They understand the difference between fixed-rate and adjustable-rate loans, between amortized and interest-only payments, and between “stated” and full documentation. They shop and explore alternatives. Ultimately, they select the loan they want, not their mortgage broker. Regardless of what the media says, that process works successfully for the vast majority of American homeowners.

All tolled, the sub-prime mortgage crisis is bad, but not nearly as bad as the media would have you believe. If you dig deeper into the survey, and segregate the four problem states, subprime ARMs, and investor loans, you will discover that with the vast majority of American homeowners, default and foreclosure are not issues. At least not yet.

So now we have the mega US government fund that will save the markets from imploding.

It has stopped the rot in sharemarkets, but credit markets remain wary and uncertain.

But for the time being, we have to assume that the bailout is going to work even if it could allow some of the folk who caused the current crisis to keep ducking reality and avoid taking their lumps.

So it’s no wonder there are mutterings about the fates of Lehman Bros, Merrill Lynch and AIG: the usual collection of opportunists and lurk merchants want to know why the bailout came Friday and not last Sunday when Lehman failed, and then AIG was taken over and Merrill Lynch sent hurrying into the embrace of Bank of America.

Lawyers are being assembled and loopholes looked for.

So the cynics and smarter investors are asking who gets to bear the cost in the long run.

The answer is the American taxpayer is the only one who will pay.

So the poor American taxpayer who have already lost their homes in three million cases; faces that prospect in millions more; are losing their jobs (an extra 610,000 so far this year), will now having to support stumping up $US700 billion, and well over a $US1trillion if the costs of early support moves are added in.

What about shareholders and managements of the institutions being supported by the Treasury plan?

The plan will be rightfully extended to foreign institutions which hold these dodgy securities (That includes the likes of Barclays in London and Deutsche Bank in Germany), so what also about their management and boards?

On all the evidence so far, it will do nothing to help end the root cause of the problem, the continuing decline in US home sales, new home starts and house prices.

Until that happens, the cost to the US Treasury and to US and other financial groups will continue to escalate.

It’s going to do nothing to stop that, or change the direction of the US economy which is sliding towards an increasingly nasty looking recession.

An announcement is due from the US government shortly, led by Treasury Secretary Hank Paulson, Federal Reserve chairman Ben Bernanke and US Congressional leaders, detailing the final agreement and the scope of the legislation for the fund.

The fund will be around $US700 billion, but that considerably underplays the true cost of the debacle so far.

Since March Mr Paulson and Mr Bernanke have spent $US29 billion guaranteeing the bailout of Bear Stearns, $200 billion at least on the bailout of Fannie Mae and Freddie Mac, $85 billion on the bailout of AIG (the big insurer which wrote credit default swaps on a range of debt that it had no idea about) and at least $US50 billion guaranteeing money market funds.

That’s $US364 billion.

Seeing financial institutions around the world have already written down or lost over $US500 billion (and have raised around $US360 billion in new capital), the cost so far of the debacle that started with dodgy subprime mortgages and associated credit derivatives is well over $US800 billion (including Fannie, Freddie IAG etc).

If the $US700 billion is for new purchases of bad securities (and it could be extended to non-US groups at the decision of the Treasury secretary), the cost will balloon.

That will allow the likes of Deutsche Bank, UBS, Credit Swiss and French and UK banks to unload their dodgy securities in certain cases.

Assuming that the $700 billion is spent on new securities, the cost could be well over $US1.1 trillion, excluding already announced losses (and over $US1.6 trillion if they are included).

Remember that a lot of analysts and commentators, plus bankers and their mates laughed at the International Monetary Fund when it said earlier in the year that the losses could be $US1 trillion.

It was obviously very conservative.

We are yet to see whether the debt to be bought will include non-mortgage related debt, say CDSs (Credit Default Swaps) and other dodgy credit derivatives issued over the debt of groups like General Motors or healthy US or foreign corporations’ debt.

Will it include leverage buyout debt for the likes of private equity groups like Blackstone, KKR, CVC and the like?

And on top of all the spending so far on the likes of Bear Stearns and AIG, there’s the $US500 billion spent or being spent a day by the Fed funding the markets in the US, Europe, Japan, Canada, Switzerland and other areas.

There’s the $US180 billion swapped last week, there’s the monthly $US200 billion being lent to banks and other groups in the US each 28 days and there’s the daily $US33 billion being injected into US commercial banks each day and the $59 billion primary dealers last week (investment banks).

Even in a US economy that produces $US14.4 trillion worth of goods and services a year, that’s a lot of loot.

In fact a working paper from two IMF economists estimated that banking crises chew up an average of 16% of the GDP of an economy. That’s based on looking at 42 major banking crises around the world from 1970 to 2007 (and not including the current problem).

Spending all that money will intensify long-standing questions about America’s fiscal health, possibly at the expense of another drop in the value of the dollar.

No wonder the US dollar blew out on Friday, sliding to over $US1.44 on the euro (the Australian dollar rose by more than 1.5c in offshore trading on Friday night).

To mitigate the cost and make for a more brutal (to the selling groups) and equitable arrangement for US taxpayers, the purchases could be made by the US Treasury through a bidding process.

Companies that want to offload their dodgy assets would bid to sell to the government at a huge discount. The company willing to sell at the lowest price wins. That’s a reverse auction.

The government would then be able to sell the assets back into the market when it wanted: the government could give the banks a share of the upside if there are any profits.

The Fed lent that $US85 billion to AIG at a margin of 8.5% over the rate banks lend to each other internationally (so-called 3 month LIBOR). That’s around 11% or a bit more in normal times outside of last week.

Using that as a yardstick, the pricing by the Fed could be brutal indeed.

So far it seems like the purchases will be aimed at dodgy housing-related debt of varying kind, but you can bet there will be pressure to offload corporate and buyout loans that are going bad. The property related debt specified in the proposed bill is residential (AND) commercial.

That alone will limit the Funds ability to concentrate solely on residential debt.

And what about personal loans, credit card and car loan debt tied to foreclosures and home equity loans which is another disaster area?

The idea seems to be that the US government will buy at below-market rates and sell for a gain when the housing market recovers: when that will happen, no one is willing to say.

The problem is that the dodgy housing-related assets have proven extremely difficult to value as the demand for them has disappeared.

And there is a nasty message there: those banks and financial groups that stayed away from this sort of toxic debt are being punished. The incompetent and imprudent will be rewarded by being bailed out. This is what moral hazard is all about.

The strong stock-market rally late last week reflects the belief that companies have been saved from the cost of making dodgy decisions on these loans from incompetent and risky decisions to speculate and gear balance sheets to generate big earnings for the company and themselves.

The inevitable death of weaker firms will be delayed, and in turn that will delay the reckoning that must occur before a sustainable economic recovery can take shape.

The US government is seeking to eliminate legal challenges by making the Treasury the sole and final arbiter and not allowing any legal challenges, a move that has upset Americans in the legal field (naturally).

While the proposal calls for the purchase of as much as $US700 billion of bad loans, it’s unknown what taxpayers will ultimately pay for the bailout.

The Bush administration’s proposal requests that the US Congress authorises an increase to America’s debt ceiling.

That’s set to rise to $US10.6 trillion for fiscal year 2009 - which runs from October 2008 through September 2009, to accommodate a Federal Budget deficit already estimated at some $US580 billion.

But now the Administration wants to lift the ceiling to $US11.315 trillion to allow for the purchases of these dodgy mortgage-backed assets.

US commentators say that it’s unclear at this point if it will help homeowners.

If the Treasury buys an entire securitized loan, it could help struggling homeowners by modifying the terms. This could include reducing a loan’s interest rate or principal balance to help prevent foreclosure.

But if it doesnt buy all the securities. It could be held to ransom by the other holders.

The bottom line remains: if the plan doesn’t stem the tide of foreclosures, home prices will not stabilize and the economy will not recover and banks and other financial groups will still be on death watch.

It will not help them lend more money for housing business, credit cards and the like.

IMPORTANT: AIR reports about financial markets and investment products in the widest sense possible. The AIR website and all its contents is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore talk with their financial planner or advisor before making any investment decisions.

When you’re looking to buy your first house, or possibly re-finance your existing mortgage, there are a whole host of mortgage advice options open to you. Some are better than others, however, so you need to know what type of advice you need for your individual requirements. As a guide, the basic information you should be looking for include:

Which One is Right for You?

With so many different types of mortgage available, it can get pretty mind-boggling when all you want to do is pick a mortgage and buy your home. This is where specialist mortgage brokers and advisors can be so useful, as they will be able to help you siphon through all the jargon used by the various mortgage companies.

How much will it Cost?

The biggest mistake many people make when thinking about a mortgage is not taking into account all the ins and outs of the whole process. Most people forget about the additional costs on top of the mortgage itself - things like closing costs, solicitor fees, how the type of mortgage you take out affects your repayments, insurance and mortgage protection, etc.

These are just some of the additional costs you need to factor in when you sit down to plan how much buying your home will cost. On top of that, you need to worry about repair costs that you never had to when renting, as well as council tax and other similar charges.

What Insurance you need for your Home

Although you know that you’ll need home insurance for your new home, there are other types of insurance that you should consider. For example, taking out mortgage protection will help should you lose your job or are unable to meet payments, and can make a huge difference should you ever find yourself in a financial tight spot. Again, this is fairly basic information yet you’d be surprised how many people ignore it when planning for a mortgage.

So now that you know the basics of what type of mortgage advice you should be asking for, the next step is knowing where to find this type of advice. There are a few different ways that you can find out the information needed. One of the most obvious is to speak to a mortgage specialist, such as a broker or advisor.

However, there are also other ways, and can even be from the comfort of your own home. For example, you can use online mortgage advisory services, where you can get advice on everything from how much you can borrow and different rates of interest to poor credit mortgage lenders and some of the most commonly asked questions when applying for a mortgage. Alternatively, you could speak to an independent financial advisor, who has no affiliation to any lenders and can therefore give you completely unbiased advice.

Although it’s the most expensive thing you’ll ever do, with the right mortgage advice you can guarantee that you won’t be going in blind, and buying a home will be much easier than you might have thought beforehand.

Too many people or borrowers these days are in big trouble as the subprime fiasco or crisis is worsening. Consolidate debt loans is the answer? Borrowers are in a quandary as to what to do next in search of a better deal to survive this crisis. Some have already foreclosed their properties and have to contend with living in an apartment. Too many live and dreams are shuttered to say the least.

To consolidate debt loans, may be a hard sell especially with the current situation with subprime mortgage. Many financial institutions may have already raised their interest rates and it would be difficult to consolidate debt loans. Too many stringent attachments would be place under these consolidation loans as risk is getting higher with the present situation. If you can weather the storm, you will probably be better off. There is already talked about subprime mortgage rate being frozen for borrowers who are not in arrears.

There is a mounting pressure for the largest financial institutions in the US to freeze some subprime mortgage loans rates. These are for borrowers who are able to pay their monthly mortgages but cannot afford to any increases in the present mortgage payment rates. The intention will be to freeze the interest rates on subprime loans with adjustable rates, which generally begin to increase after a two year introductory period. Borrowers would instead continue to pay the introductory rate.

This plan generally benefits those borrowers who are still able to pay their mortgage payments at current levels of interest rates. By doing this, it is the hope that this will create some ease and relief from the pressures put upon by the subprime mortgage crisis. Thus revitalizing the financial and real estate industry. And it will good for the economy and everyone. The plan cannot be achieve without the full cooperation and support of the big financial institutions and investors who are watching very closely.

For the most part of last year, the lending industry resisted the proposals to rewrite large numbers of at risk loans, preferring to instead to working with the borrowers on a case to case basis. The federal government encourages borrowers to contact their lenders and make some arrangement to avoid sudden rate increases or foreclosures.

For subprime loans with adjustable interest rates made in 2006, the average introductory rate was about 8.5 percent. Those loans are supposed to reset in 2008. If they reset at current market conditions, the new rate would be around eleven percent. For an individual with three hundred thousand mortgage payment, the monthly payment will increase by five hundred dollars. And if you are tight with your budget and just making enough to pay your mortgage, then it will be very tough to maintain your monthly payments in good standing.

This plan which is still in the works has not come out yet with the length or duration of the freeze. The plan which involves both the federal government and the largest financial institutions in the country, stills has to decide about the duration. There is talk of anywhere from one year to seven years. If this plan works, a lot of people or borrowers and large financial institutions will benefit.

Consolidate debt loans? Hold off for a moment until all the dust has cleared out. This way you will make that informed and wise decision about consolidate debt loans.

Although the problems regarding subprime mortgage may seem numerous, they are not that complicated. The core of this situation has its roots in the fact that many consumers were able to buy houses that exceeded their financial condition or worse, they could hardly afford any kind of house. The consequences of these actions were rapidly noticed and the results turned out in a level of the interest rate that is considered as unusual and hard to control and, thus an expensive mortgage payment was created.

All these subprime mortgage problems are also affecting people’s lives and the explanation is very simple. Even if the home loan of many consumers has increased quickly, their budget has not changed. But they still must look for solutions to find the necessary money and keep paying their bills. There are times when solutions are easy to be found, but there are times when answers and right decision are critical. Plus, when you are being affected by the mortgage crisis that as lowered the house value and your mortgage costs are increasing, the solutions are not so easy to be determined. This phenomenon is all over the country and what is worse is that a situation considered insignificant is now getting out of control.

Most homeowners are afraid that their homes could be caught into foreclosure. Because many lenders are stiff and not willing to cope with borrowers, until now there were millions of borrowers who have been displaced from their homes. Having this in mind, we can find many examples of problems everywhere in the country and with no matter for race or gender. Although in some parts of the country the crisis seems to have ended, there are cases in which the mortgage crisis spreading could discover older victims that had once been displaced.

The most common examples of subprime mortgage problems imply middle class borrowers, but there were also cases of upper class borrowers who have encountered problems. Some changes as the decrease of the currency and dollar value, the price of gas and many other usual household necessities have increased, but the budgets have stayed the same and do not cover the excess spending. Therefore, more and more borrowers are in the facing the difficult situation of not having the possibility to pay their payments and must find rapidly solutions to save their homes. For this reason, there are families who are trying their best to juggle payments and increasing their credit debts in order to survive.

The reality is a cruel one and in which there are many borrowers from all over the country converted into victims by the strong impact of subprime mortgage crisis. You can find examples of subprime mortgage crisis everywhere and its effects are even deeper. Besides the fact that there are a lot of homes in foreclosure, more dramatically is the case of those homeowners which been left without a roof over their heads and are struggling to find a new place so that their family could continue living. How much time this situation will last it is still uncertain, but answers are starting to be found and for homeowners, hopefully it will soon end.

Phil Gordon, the Mayor of Phoenix, Arizona states that the housing bailout legislation is a great start but falls short to stop the mortgage meltdown being experienced today. Today Mayor Gordon will meet in Washington, D.C with House Speaker Nancy Pelosi and other lawmakers to fight for additional funding for the first time home buyers. He states that the new housing bailout will help those with troubled mortgages but does not help the first time home buyers; something Mayor Gordon wants changed.

According to Gordon, “We got hit particularly hard because most of our foreclosures are as a result of the sub-prime. While people have been losing jobs here, (it’s) nowhere near the rate of the rest of the country.” Gordon goes on to say the speculators are to blame for a lot of the mortgage meltdown by adding, “The fundamentals of Arizona are strong. People are still coming here, jobs are still growing. But there were so many speculators who bought homes to make a profit on.” Gordon believes mortgages should not be a vehicle to profit but should be meant to raise a family. This is a sentiment that is shared with many families and potential home owners that are hoping for a break for the first time home buyer.

This past weekend, the Senate approved the housing bailout legislation that was primarily designed to aid troubled homeowners and slow down the rate of foreclosures. President Bush is expected to sign this legislation this week. The legislation includes provisions that will also help families that are in no danger of losing their home as well. One of the money-saving provisions that is hidden deep inside the housing bill includes changes for reverse mortgages.

A loan against home equity that is not required to be paid until the house is sold or the homeowner dies is a reverse mortgage. To qualify for a reverse mortgage the homeowner(s) must be 62 years of age or older. A reverse mortgage can offer the much needed income for the retired individual or couple who have gathered a lot of equity but little in savings. The bill has addressed two aspects of the reverse mortgage that has made it less than attractive to potential borrowers; fees and loan limitations.

Most reverse mortgage borrowers will pay a hefty upfront fee which will reduce the total amount of money that is available to borrow. The housing bill will limit the origination fees for federally insured reverse mortgages on loans up to $200,000 of a homes value to 2% with an additional 1% for up to $6,000 over $200,000.

The amount of the reverse mortgage is based on the current interest rate, the home’s value and the borrower’s age. Previously the maximum home value for a federally insured reverse mortgage topped at $200,160 to $362,790 and was dependant on the homeowner’s location. The restrictions prevented the homeowner in a high cost area form getting the most out of the equity in their home. The legislation bill has raised the maximum home value to $625,500 resulting in homeowners living in high cost areas to qualify for a larger reverse mortgage loan.

The general arguments concerning the bailout have gone something along the lines of

Anti Bailout : “The taxpayers should not have to foot a 700 billion dollar bill to bail out Wall Street”

Pro Bailout : “But if taxpayers do not bail out Wall Street the economy will fall apart and those same taxpayers will be hurt”

If we could be sure the bailout would work the second argument has some merit. While the bailout will certainly help the banks, the problem is we have almost no guarantee the bailout will help the real estate market and the general economy.

First let’s look at some recent history of how the Fed has tried to help the troubled real estate market. The Fed usually attempts to lower mortgage interest rates to help the real estate market. By lowering mortgage rates houses become more attractive to buyers. In addition, with lower mortgage rates home buyers can buy more expensive houses with the same monthly payment. Therefore lower rates can help stop falling home prices. So it was not surprising in early 2008 the Fed cut the Fed rate. In normal markets lowering the Fed rate helps banks and causes them to lower mortgage interest rates. And following the Fed cut mortgage rates dropped to 5.5 for a period of time. If they had stayed down we might have averted some of the problems with the current housing crisis. But instead a few weeks later rates had jumped backed up to 6.2. Basically banks said thanks for the lower fed rates but we are not going to alter our mortgage rates.

In fact, over the next few months mortgage rates rose all the way to 6.6. The next big move was acquiring Freddie Mac and Fannie Mae. This was one of the largest government takeovers in US history. The move was risky because the government was providing insurance for trillions in loans. And it initially had a positive effect on the housing market. But a few weeks later AIG ran into financial problems. This dominated the news cycle. It was almost as if the government takeover of Freddie Mac and Fannie Mae never happened.

So the previous moves the federal government has made to stop the financial crisis have not worked. Should the 700 billion dollar bailout be different? It could certainly help the housing markets. But it might not. Lets look at why.

One of the benefits of the 700 billion dollar bailout has nothing to do with banks. It has more to do with perception on Main Street. The hope is that the bailout will restore confidence in the real estate market on Main Street.

In politics people often talk about news cycles covering up the last news cycle. Basically the last piece of news stays in people’s minds until the next piece of news comes along. The Fannie Mae and Freddie Mac news cycle (and the billions the government will spend on it) only lasted until the next piece of news, which was about a week. While the 700 billion dollar bailout should restore some confidence in the real estate market, that confidence might only last until the next piece of news. And with things happening so quickly that news cycle might not last very long and given the current market the next piece of news will probably be negative.

The other benefit of the 700 billion dollar bailout is that the government is hoping to influence banks to start lending again. The idea is that by taking billions in toxic loans off the books for banks they will start lending again. The problem is that their is no guarantee this will happen. In fact, when the Fed lowered rates banks said thanks but decided that prospects for the housing market looked negative and continued to add restrictions to lending. In a similar fashion banks could say thanks for the 700 billion but we continue to see negative prospects in the housing market and therefore we will continue to have strict lending practices. But thanks for the 700 billion taxpayers.