subprime mortage loans rate lending market lenders credit June 2009

World Financial Crisis Global Solutions

2009-01-15T07:22:00.000-08:00

Today, as global stock markets continue to fall and fears of a global recession deepen, finance ministers from the Group of Seven (G7) are meeting in Washington in advance of IMF and World Bank meetings tomorrow. These ministers from the United States, Canada, Britain, France, Germany, Italy and Japan are expected to address the current global financial crisis. Many policy makers and central bankers around the world originally viewed the mortgage meltdown primarily as an American problem with secondary ripple effects in Europe. But the interconnectedness of the world financial markets soon brought this crisis to markets in Europe and Asia, requiring a coordinated international response. This is a global problem, and it will require a global solution.

Indonesia will not immediately reap great benefits from the commitment made by the leaders of the world’s 20 largest and emerging economies (G-20) — including Indonesia’s President Susilo Bambang Yudhoyono — at their summit in Washington over the weekend to launch coordinated fiscal and monetary measures to counter the global economic slowdown.

But their determination to enhance cooperation to restore global growth, achieve badly needed reforms in the financial systems and give more say to emerging economies in global economic policy making would be a confidence-building block in the effort to curb wild financial volatility.

This new mechanism of international economic cooperation has yet to be deliberated at their next gathering scheduled for April but this is already a good signal for similar reforms within the decision- and policy-making processes at the International Monetary Fund and World Bank.

Yet most promising is the leaders’ strong commitments to reform the governance of the financial system — including the banking industry — and to provide joint economic stimulus to mitigate the effects of the deepening global downturn as the recession has spread from the United States to Europe and Japan.

This and similar commitments by the central bankers around the world to ease credit strains and support faltering economic growth would be a boost to further global cooperation in coping with the financial crisis and economic slowdown.

However, Asia should support the promises by the G-20 leaders with its own coordinated policies in monetary, fiscal and exchange rate areas to ensure financial market stability for macroeconomic management. This is where Japan, China, South Korea and ASEAN should show leadership.

The leaders of these leading Asian economies should bring to the next G-20 meeting a coordinated Asian macroeconomic policy framework since economic expansion in Asia will not only help to sustain Asia’s own economic growth and employment levels but also will also help to put a floor on the coming global slowdown.

Trade-wise, higher growth in Asia will also mean more sales of U.S. goods in Asian markets, thereby helping to moderate the U.S. and European recessions as well. For this reason, coordinated macroeconomic expansion among China, Japan, and Korea will be highly appreciated in all other parts of the world.

A few days before the G-20 summit, the World Bank and IMF came up with a grimmer economic outlook for next year, projecting an economic contraction of 0.1 percent for the advanced economies and a growth of only 4.5 percent for developing countries. Global trade, which grew by 9.8 percent in 2006, is projected to fall in 2009 for the first time since 1982.

The strongest message from the G-20 summit which is most relevant to Indonesia is the need to provide strong fiscal stimulus and rescue packages. As the international financial condition has now become much tighter, with capital flight leading to sharp falls in equity markets and steep rises in government and corporate bond spreads, the government needs to provide most of the pump-priming force. Aggregate demand needs to be sustained by fiscal policy.

This is the momentum for both the public and private sector to better coordinate measures to facilitate basic infrastructure development which needs little foreign exchange financing.

However, fiscal stimulus alone is not enough. It should receive strong support from an easier monetary policy, especially since inflationary pressures have weakened due to the combination of lower import prices and falling demand.

But again an easier monetary policy without significant improvement in the business or overall investment environment could provide more ammunition for foreign exchange speculation against the rupiah.

We suspect that the estimated Rp 50-70 trillion (US$4.5-6.3 billion) in additional liquidity made available by the lowering of the minimum reserve requirement at commercial banks last month to 7.5 percent from 9.5 percent (of deposits) played a part in the latest wave of speculative attacks on the rupiah over the last two weeks.

Subprime Mortgage Lenders Implode-o-meter

2008-12-13T03:03:00.000-08:00

The misery in the housing market is registering on the Implode-O-Meter. As millions of homeowners fall behind on their mortgages, a fledging Web site called the Mortgage Lender Implode-O-Meter is gleefully tallying the number of lenders that run into trouble too.

Mortgage Lenders Implode-o-meter.Did you hear about this? There is a forum group that keeps track of which mortgage companies have gone belly-up, out of biz....called Implode-o-meter. They also monitor those lending companies that are on trembling ground....referred to as Ailing/Watch list Lenders. Notably on that watch list is Sallie Mae, a company that bills itself as the nation's leading provider of student loans. (They're not expected to implode, but start paying your student loans off people....so the next generation can get an education!)

Implode-o-meter is an independent source/website who state their standards are more concerned with content, not reputation or resources. But you can bet everyone in the lending business is watching this website. And if you've got a mortgage or are in the loan process you should be watching this list too....and perhaps read the forum comments.

Big Three Bail Out : Ford, GM, Chrysler

2008-12-06T08:06:00.000-08:00

US big three : Ford, Gm, and Chrysler are the biggest auto company, with the long lasted history. But now this Detroit's Big Three automakers returned today to Capitol Hill to take another stab at getting $34 billion dollars of your money. Yes, this big three are getting a serious problem, near to bankrupt.

It is still hard for US White house to approve this big three big deal. How come the big company like GM, Ford, and Chrsyler are begging for bailout ?

Washington is engaged in a giant game of chicken with the Big Three automakers, and unless someone swerves soon, Detroit is going to end up as wreckage on the side of the road.

In their first day of testimony before Congress, the chief executives of Ford, General Motors and Chrysler were the picture of humility. Hats in hand, they pleaded for money. "We made mistakes, which we're learning from," GM's Rick Wagoner told the Senate Banking Committee, outlining plans for change that Congress had requested as a precondition for receiving billions of dollars in much needed loans. Ford's Alan Mulally said his company has shifted "in a completely new direction." (See the 50 worst cars of all time.)

Unlike the hearings last month, though, when Congress presented a nearly united, hostile front against the Big Three, the fight Thursday was not so much over whether Washington should let them fail; almost all the witnesses and lawmakers agreed that would be like "playing Russian roulette with the economy," as Senate Banking Committee Chairman Chris Dodd put it. But that didn't mean there was anything like a consensus on how to handle the urgent request for a total of $34 billion in bridge loans — $7 billion for Chrysler, $9 billion for Ford and $18 billion for GM. Democrats and Republicans clearly still have major disagreements about where the money should come from, how much Detroit should get up-front and what kind of conditions to impose for such government assistance.

From left, Richard Wagoner, chief executive of General Motors, Robert L. Nardelli, chief executive of Chrysler, Alan R. Mulally, chief executive of Ford, and Ron Gettelfinger, head of the United Automobile Workers, during a House hearing on Friday.

CitiBank to lay off and fire 10.000 workers

2008-11-19T07:09:00.000-08:00

Citibank is a major international bank, founded in 1812 as the City Bank of New York, later First National City Bank of New York. Citibank is now the consumer and corporate banking arm of financial services giant Citigroup, one of the largest companies in the world. As of March 2007, it is the largest bank in the United States by holdings

Citibank has operations in more than 100 countries and territories around the world. More than half of its 1,400 offices are in the United States, mostly in the New York City, Chicago, Miami, and Washington DC metropolitan areas, as well as in California.

Citigroup (C) plans to lay off and fire at least 10,000 people starting this week and to raise interest rates on millions of its credit-card customers, The Wall Street Journal reported Friday, citing people familiar with the matter.

Executives have told officials to slash their compensation budgets by 25%, the Journal said.

In addition, Citibank is going to announce steep increases in the credit card interest rates and I’m sure we’ll also see higher credit card fees as well. The goal will be to place more “innocent” land mines in front of consumers that they can step on to increase revenue for Citibank.

Consumers can opt out of the rate increase, the Journal said, and will be able to use their credit cards until their expiration. This follows a similar move by American Express
(AXP).

The Journal also mentioned that Citigroup called “completely erroneous” its report that the firm was considering replacing Sir Win Bischoff as chairman, but it said it stood by the article and that people familiar with the matter said the move was still being considered.

American Express to Be Bank Holding Company

2008-11-11T06:58:00.000-08:00

American Express (NYSE: AXP), sometimes known as "AmEx" or "Amex", is a diversified global financial services company, headquartered in New York City. The company also has major offices in Fort Lauderdale, Florida; Salt Lake City, Utah; Greensboro, North Carolina; and Phoenix, Arizona. The company is best known for its credit card, charge card, and traveler's cheque businesses.

American Express agreed to Be Bank Holding Company

American Express announced today that the U.S. Federal Reserve has approved its application to become licensed as a bank holding company and to be regulated by the Federal Reserve.

Qualifying as a bank holding company will provide American Express maximum flexibility and stability in this challenging economic environment. It aligns American Express' regulatory status with other companies in the financial services industry, further diversifies the Company's funding sources and access to capital, and provides opportunities to expand its deposit-taking capabilities.

American Express had already operated a commercial bank and a savings bank supervised by federal regulators. But the bulk of its assets were not in those institutions. As a bank holding company, these assets are now under federal supervision, a move that expands the amount of financing it can request from the government. That means the bank could qualify for up to $3.6 billion of the Treasury Department’s money, instead of just a small portion.

His announcement came as American Express reported a 24 percent drop in third-quarter profit and said it would slash 10 percent of its work force as it prepared to write off a larger pool of credit card loans. American Express wrote off about 5.9 percent of these loans in the third quarter.

How Barack Obama to cure Subprime Mortgage Crisis

2008-11-04T05:43:00.000-08:00

US citizens will face their election on 4th November 2008. Who will become the president? Barack Obama or John McCain ? Who will be elected, one thing sure to do is to solve the US Economy, including the subprime mortgage crisis.

What did Obama do to help create the subprime debacle? Well, Obama joined with a group of other Chicago lawyers who bullied and threatened area banks to loan money to poor minorities who couldn’t afford the mortgages.

Barack H. Obama is running around telling everyone that the housing mortgage market collapsed primarily because of some vaguely described “deregulation” that took place sometime under George Bush–or maybe under Clinton; I’m not clear on that. I’m not sure he is.

Whatever his claim is, it’s a lie.

The reality is that the housing market collapsed in large part because a coalition of race-baiting bullies brought very heavy pressure to bear on the banks to make more subprime loans on properties in low-income communities. Those who didn’t approve the risky subprime loans were accused of “redlining”–i.e., refusing to make loans on properties in those neighborhoods.

Who were these bullies?

Some of the bullies were out in Washington pounding the tables and screaming at bank executives about “redlining”.

At the same time, other bullies were stalking big city courthouses, filing frivolous and extortinate lawsuits against banks based on novel “disparate impact” theories of what might be held to constitute “redlining.” In other words, even banks which were making lots of loans in low-income communities were being sued if they weren’t approving just as many loans in low-income communities as they were in high-income communities.

Here is a short video from Democratic presidential candidate Barack Obama in which he promises to create a ten million dollar fund to help keep people in their homes and a tax deduction for homeowners who do not itemize on their income tax returns.

Things that You Never Want To Tell A Mortgage Company

2008-10-29T07:55:00.000-07:00

Yes it is important to be honest when speaking to a mortgage company, however when you are starting or in negotiations with a mortgage lender in an attempt to stop or delay a home foreclosure there are some facts that you should never tell your mortgage company.

Personal Finances
Never discuss your household finances over the phone with the collection department. What you don’t know is that you are being qualified and not know it. This is the easiest and fastest way to get a turn down. Request a homeowners assistance package so that you can submit the require information.

Cash Flow
Never tell them you are broke. Even though you may qualify for a special forbearance or modification, you will still need legal fees and foreclosure cost. These fees cannot be put back into the loan. Your lender prepaid them to their attorney to start the foreclosure process.

Not Living In The Property
Never tell them you do not live in the property. Under FHA guidelines, before you are granted any workout, you must reside in the property. If you have moved out and your property became an investment property, you better get someone in there with a lease or rental contract before the sale date.

Employment Status
Never tell them you are not working, in most cases you will not be approved. Depending on your sale date, your mortgage lender may not be able to qualify you for a special forbearance because of the amount of time left. If you can’t find a job, I suggest you start a small business months before your sale date, make some money, deposit your income and prepare a Profit and Loss Statement to prove income. Telling them you get paid cash and you can’t prove it won’t hold water.

Money Management
Never admit the reason you fell behind is because you mismanaged your money. How do you expect for them to give you a workout when you still have the potential of falling behind again?

It is important to be honest with a mortgage lender, it is also imperative that when speaking of personal financial details you are giving such sensitive information to the correct department and person.

The manner in which your personal information may be used to either help or hinder your efforts to stop foreclosure is not always used in the same way.

If you are behind on the mortgage or the lender is starting foreclosure proceedings now is the time to act, and I mean act fast. Educate yourself on what the foreclosure process is and how it will progress. Learn who you need to talk to and in what order you should contact them. What other options are available instead of simply allowing the lender to foreclose and sell your home. Check out The Foreclosure Survival Handbook for answers to all these situations.

Dollar Rises Against Euro in Europe Global Crisis

2008-10-24T09:02:00.000-07:00

The euro and dollar dropped to fresh multi-year lows Friday as emerging markets continue to flush investments with heightened fears of global recession.

The euro fell to a new two-year low of $1.2496 overnight and nearly a six and a half year low of ¥113.79. The dollar dropped to a 13-year low of ¥90.87.

Now one would think that the dollar, viewed as the source of much of the world's commodity price inflation this decade, rising from long-term lows would be a cause for celebration.

Not exactly.

While the dollar's rally against most of the world's other major currencies does mean commodity price pressures are likely to continue to subside -- and that's good news for inflation, economists say -- the dollar is nevertheless rising for the wrong reason. Namely, an economic slowdown in Europe.

Euro, pound plunge on recession concerns

"It's not so much as the dollar is strengthening but that the euro and pound are weakening on the likelihood that central banks in Europe will have to cut interest rates more to deal with a recession," economist Peter Dawson said. "Europe is also seen as later in the business cycle than the U.S., which means the U.S. economy is likely to recover sooner, which also helps the dollar. "

The dollar took full advantage of that sentiment Wednesday, surging two cents to $1.2837 versus the euro and three cents to $1.6407 versus the British pound. The dollar also rose 1.6 cents to $1.1672 versus the Swiss franc.

However, the dollar fell one yen to 98.91 versus Japan's yen on the relatively stronger Japanese economy. Japan's banks have only modest exposure to toxic assets, one major reason why risk averse investors are seeking out the yen, Dawson said.

Dawson's outlook for the dollar heading into Q1 2009? "The dollar will continue to strengthen. The focus in Europe and the U.S. has to be on stimulating the economy, and that includes more interest rate cuts, along with fiscal stimulus, and other measures," he said. "The U.K. and European Union are not likely to complain about their currencies weakening. They'll probably secretly cheer it because it will make their exports cheaper."

Forex / Economic Analysis: Indeed, all dollar rallies are not alike. And as economist Dawson noted, the focus on all continents is on jump-starting economies. The euro and pound will fall, since the two currencies strengthened to extreme levels during the commodities boom -- one of the major, unsustainable imbalances that existed in the global economy.

Fannie Mae Freddie Mac take over by government

2008-10-17T08:18:00.000-07:00

What are Fannie Mae and Freddie Mac

Fannie Mae is the nickname of the Federal National Mortgage Association, while Freddie Mac is the Federal Home Loan Mortgage Corp.

Fannie Mae is the older of the two. It was created as a government agency in 1938 under U.S. president Franklin Roosevelt's New Deal. The idea was to give local banks federal money to finance home mortgages, since private lenders were leery of lending money. The government wanted to help more people buy homes, and encourage the building of affordable housing. In 1968 it became a private company.

Freddie Mac was set up in 1970 to expand the secondary mortgage market, and ensure there was competition with Fannie Mae's monopoly. Both companies buy loans from banks or mortgage firms, and re-sell these as mortgage-backed securities. Together they own or guarantee about half of U.S. mortgages.
The two were put under "conservatorship" by the U.S. Federal Housing Finance Agency on Sept. 7 - essentially a takeover by the government.

UK bank bail-out 64$ Billion to HBOS Barclays and Royal Bank of Scotland

2008-10-13T08:51:00.000-07:00

Britain waded in with 37 billion pounds ($64 billion) of taxpayers' cash to bail out three major banks on Monday, in a move that could make the government their main shareholder.

Royal Bank of Scotland (RBS.L) said in a statement it will boost its capital by 20 billion pounds, including the UK government taking 5 billion pounds in preference shares and 15 billion pounds underwritten by the government.

HBOS (HBOS.L) and Lloyds TSB (LLOY.L) will also participate in the government scheme "upon successful merger," the Treasury said in a statement on Monday.

Barclays (BARC.L) said in a separate statement it would boost its capital by more than 6.5 billion pounds but expected to do so without government help.

Finance Minister Alistair Darling said extreme times called for extreme measures and that he was prepared to make even more money available if necessary.

Japan Global crisis financial sector

2008-10-10T08:19:00.000-07:00

Japan, Asia most powerful country, has claimed its first financial crisis due to global economy crisis.

The Nikkei tumbled 11.4 percent at one point before it found its feet, with a surging yen adding to fears for Japan's big exporters.

Trading in key stock futures was briefly halted, as the Nikkei took its losses this year to 46 percent.
Escalating bankruptcies in the property sector and among small businesses, along with fears of a global recession, have dragged Japan's export-dependent economy into the crisis, sending blue chip shares sliding by a quarter so far this week.

"This is panic. New York, the currencies -- there's nothing left for us to trust," said Takashi Ushio, head of investment strategy at Marusan Securities, as the Nikkei share average slid more than 10%, following sharp falls on Wall Steet.

"Investors are scurrying to convert to cash. A lack of confidence is coupling with panic."

As unlisted Yamato Life Insurance failed, the government said that to help hard-hit smaller lenders it may revive a bank rescue law from the 1990s Japanese banking crisis. One newspaper report suggested Tokyo may set up a $100-billion fund.

Fearful selling also sent Hong Kong and South Korean shares down 7% while Singapore declared its first recession in six years as the US stock plunge heaped pressure on economic powers to halt a global spiral of financial distress and slowing growth.

Financial policy makers from the Group of Seven major industrial nations, including Japan, are to meet in Washington later on Friday to consider what to do next, as bank bailouts, liquidity injections and interest rate cuts across the world have failed to quell investor anxiety.

After arguing for months that Japan had avoided the worst of the global financial crisis, its leaders acknowledged they were increasingly worried about the stock falls.

"[Share prices] have fallen to the level where they can hurt firms' funding. So I have instructed the ruling coalition to come up with steps," Prime Minister Taro Aso told reporters.

IHSG Saham Indonesia suspended on Jakarta Stock Exchange

2008-10-09T04:24:00.000-07:00

Indonesia Stock Exchange or IHSG (Indeks Harga Saham Gabungan) was suspended indefinitely Wednesday on the Jakarta Stock Exchange after shares plunged more than 10 percent on fears about the global financial crisis.

The benchmark JSX index tumbled 168.1 points, or 10.4 percent to 1,451.67 points before the trading halt was ordered just before midday.

The Indonesian Stock Exchange suspended trading for a second straight day Thursday following a drop of more than 10 percent amid a rout in global markets.ADVERTISEMENT

"Hopefully the market will resume (Friday)," said the exchange's president director, Erry Firmansyah.

The exchange suspended trading for only the second time in its history on Wednesday after the main index plunged 10.4 percent. It fell by a similar margin on Monday.

The only other time trade had been halted was when a bomb exploded in the basement of the exchange in 2000, killing 10 people.

Stocks Saham IHGS Indonesia Turun Tajam Tumbled

2008-10-07T08:13:00.000-07:00

Stocks in Indonesia is called Saham. Saham in Indonesia tumbled or anjlok turun tajam in this few months. IHSG or Indeks Harga Saham Gabungan is the stocks indicator in Indonesia.

Indonesia's key stock index tumbled 10 percent Monday (06 October 2008), its biggest one-day drop ever, on worries that fallout from the U.S. credit crisis is spreading around the globe.

This pasar saham anjlok (Stock Index Tumbled) is the biggest drop since the terrorist bombing attacks on Bali in 2002, over fears from investors that the $700-billion U.S. government bailout plan will be unable to resolve its financial crisis.

Resuming trading after a four-day break last week to mark the end of the Islamic fasting month of Ramadan, the benchmark JSX index shed 183.77 points, or 10.03 percent, to close at 1,648.7 points.

Indonesian investors had lot of news to digest after the long holiday. Sentiment also was hurt by the announcement of a 12-percent jump in consumer prices for September, a two-year high.

Decliners led gainers 209 to 10 with heavyweight commodities shares, which make up around 40 percent of the index, leading the drop.

Mining company Bumi Resources shed 32 percent, followed by coal miner Bukit Asam and palm oil manufacturer Astra Agro, which both lost 23 percent.

Indonesia's decline came after other Asian markets dropped last week in response to the deepening financial crisis, which appears to be spreading to Europe.

Indonesian President Susilo Bambang Yudhoyono convened high level Cabinet meetings to discuss the impact a global downturn would have on the economy, Southeast Asia's largest.

US Senate approves $ 700 billion rescue plan

2008-10-04T21:13:00.000-07:00

How much is 700 Billion? 700 Billion or in Indonesia is 700 Trilliun, has 11 zeros. A super-duper great huge money. And this fresh money will be used to rescue US economy.

The American Senate approved the 700 BN bailout plan put up by the Bush administration and the Treasury secretary, Henry Paulson. Both Paulson and George W. Bush welcomed the decision and asked the House of Representatives to follow the example as soon as possible.

"The legislation, approved last night on a 74-25 vote, authorizes the government to buy troubled assets from financial institutions rocked by record home foreclosures. It contains two provisions favored by House Republicans: One raises the limit on federal bank-deposit insurance; the other reiterates the authority of securities regulators to suspend asset-valuing rules that corporate executives blame for fueling the crisis", Bloomberg.com reads.

Both presidential nominees, Democrat Barack Obama and Republican John McCain, returned from the campaign trail to vote in favor of the plan.

Tax provisions in the new version of the plan are expected to win the necessary votes in the House of Representatives, several politicians declared for the US media and the international press agencies.

But the questions here arises Is it enough to heal the economy?. However some financial experts says that US$ 700 billion dollar is still not adequate to bring back the financial condition back to its previous state but it can help to recover from current crisis. The crisis are so deep that the company like AIG is helpless and preparing for bankruptcy which was later helped by US$ 85 billion to carry on its business. One of the major reasons why the Fed rescued AIG was to prevent a fall in the value of bank assets, a fall that would in turn expose their true net worth and cause (it is generally believed) a run on banks that would decimate the entire banking system. As long as the AIG can keep paying the banks’ losses for their suspect (but insured) investments, those banks don’t need to reappraise their true values.

It’s just a line of zeroes. It’s merely 700,000,000,000, and if you look closely and blur your eyes just right and then hit yourself in the face with a brick, you’ll soon see that each and every one of those cute little circles is filled with goodness and candy and the sweet sighs of puppies and pie. The rescue plan of 700 billion dollars still does not buy all the bad mortgages. The main concern is now how the 700 billion will be allocated.

Subprime Lenders Definition and guide to find

2008-09-30T04:38:00.000-07:00

What is Subprime Lenders :

A sub-prime lender is one who lends to borrowers who do not qualify for loans from mainstream lenders. Some are independent, but increasingly they are affiliates of mainstream lenders operating under different names.

Sub-prime lenders seldom if ever identify themselves as such. The only clear giveaway is their prices, which are uniformly higher than those quoted by mainstream lenders. You do want to avoid them if you can qualify for mainstream financing, and I’ll indicate how shortly.

There are lenders who offer both prime and sub-prime loans, and one of them is referred to below. For borrowers who aren't sure where they stand, dealing with a lender who offers both has a distinct advantage. They will try to qualify you for prime and only if that fails will they drop you to subprime. Lenders who are strictly subprime might refer a prime borrower to an affiliated prime lender, but their financial interest dictates otherwise.

How to find a subprime mortgage lender?

If you have a bad credit history, you will probably be fed up with dealing with financial institutions. Trying to find a subprime mortgage lender may seem like too much hassle. In fact, if you need a mortgage to buy your first property, or to move up the property ladder, you will need a mortgage and if you have adverse credit a subprime mortgage lender is your best option.

Many subprime mortgage lenders are specialist companies, which may mean that you won't have heard of them - they can't afford the level of advertising that high street banks and building societies undertake. So how can you tell the reputable lenders from the not-so-reputable?

The best way to find a good subprime mortgage lender is to enlist the help of a mortgage broker. Whilst not all mortgage brokers have the necessary expertise in the subprime market, many do and so it's worth talking to some of your local brokers to see if they can help. Those with experience will know the majority of products in the market and will already have a relationship with the provider. This means that they can tell you which lenders to avoid and which have a product that will work for you.

Mortgage Loan and home loan credit

2008-09-27T02:56:00.000-07:00

What is Morgage Loan? Why US got in Crisis because of Mortgage Loan?

A mortgage loan is a loan secured by real property through the use of a mortgage (a legal instrument). However, the word mortgage alone, in everyday usage, is most often used to mean mortgage loan.

Mortgage refinancing and second mortgages have become popular as the market tightens and interest rates become volatile. As you search the real estate market and decide on a new home, make sure to become educated on the mortgage process by working closely with a mortgage broker.

Not all mortgage loans are created alike. There are many variations among mortgage loans, meaning that some will be perfect for your situation, and others will be completely inappropriate. You need to understand mortgage loans and do the necessary research to be sure that you get the best financing deal possible.

The type of mortgage loan that you choose will determine how much you need to put up as a down payment, how much you’ll pay in interest, and for how long you’ll be making monthly payments. Likewise, the type of lender that you choose will significantly affect the terms and conditions that are available to you. The choice of lender can even influence how much you have to pay in closing costs for your home’s sale.

Subprime loans: These mortgage loans are available to borrowers whose low income, credit rating or both disqualifies them from government loans (i.e. VA and FHA loans) and traditional loans. Subprime loans usually impose a higher interest rate and down payment due to the increased risk involved in lending to individuals with a tarnished credit history.

Mortgage Loans Credit Rates Calculator are the things related to Mortgage loansc

Goldman Sachs, Morgan Stanley To Be Bank Holding Companies

2008-09-23T06:41:00.000-07:00

The Goldman Sachs Group, Inc., or simply Goldman Sachs (NYSE: GS), is a large global bank holding company that engages in investment banking, securities and investment management. Goldman Sachs was founded in 1869, and is headquartered in the Lower Manhattan area of New York City at 85 Broad Street. Goldman Sachs has offices in all major world financial centers.

The Federal Reserve said Sunday it had granted a request by the country's last two major investment banks — Goldman Sachs and Morgan Stanley — to change their status to bank holding companies.

The Fed announced that it had approved the request of the two investment banks. The change in status will allow them to create commercial banks that will be able to take deposits, bolstering the resources of both institutions.

The extraordinary Sunday announcement places the last two independent Wall Street investment banks under supervision by bank regulators and opens a wider range of credit to the two firms.

In a statement, the Federal Reserve said its board had approved the applications of Goldman Sachs and Morgan Stanley to become bank holding companies and authorized credit to the two firms "against all types of collateral" that commercial banks can use to get central bank loans.

The Fed also made these collateral arrangements available to the broker-dealer subsidiary of investment firm Merrill Lynch, which was bought a week earlier by Bank of America at the same time that another Wall Street giant, Lehman Brothers, filed for bankruptcy.

Bank of America Corp's $50 billion acquisition of Merrill Lynch & Co

2008-09-20T03:29:00.000-07:00

Merrill Lynch is one of the world's leading financial management and advisory companies, providing financial advice and investment banking services

Multiple news sources are reporting that Bank of America has struck a $44 billion deal to buy Merrill Lynch, pending final legal documents. Apparently, the federal government was involved in brokering the deal to prevent a collapse of Merrill Lynch. Meanwhile, a plan to rescue Lehman Brothers has apparently failed and Lehman is expected to be liquidated. AIG appears to be next, as it is facing a liquidity crisis. Along with the collapse / bail out of Bear Stearns earlier in the year, Wall Street appears to be in serious trouble.

Bank of America is the nation’s largest retail bank and had the opportunity to buy Lehman as well, but passed for the chance to buy Merrill Lynch, the nation’s largest retail brokerage. With the largest retail bank and retail brokerage, Bank of America may now be the country’s most important financial institution. Lehman Brothers and AIG are two of the largest and oldest financial institutions in America. If one or both collapse, there would be reverberations throughout the world.

"Acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders,” Bank of America Chairman and Chief Executive Officer Ken Lewis said. “Together, our companies are more valuable because of the synergies in our businesses.”

"Merrill Lynch is a great global franchise and I look forward to working with Ken Lewis and our senior management teams to create what will be the leading financial institution in the world with the combination of these two firms," said John Thain, chairman and CEO of Merrill Lynch.

How You Can Survive The Credit Card Crunch

2008-09-18T07:41:00.000-07:00

If you thought the mortgage market was the only area of borrowing being hit by the credit crunch, then think again. Credit cards and loans are also harder to come by, and this is bad news for those struggling to make ends meet each month.

The next big financial issue for America is credit card debt. Coming on top of the sub-prime mortgage mess, credit-card defaults will be the next blow to both consumers and our financial institutions.

Americans now have nearly $1 trillion outstanding on credit cards. That's the amount "riding" as balances carried forward every month, on which interest is charged. Nearly half of those accounts are paying only the minimum monthly payment.

Americans are falling behind on their credit card payments at an alarming rate, sending delinquencies and defaults surging by double-digit percentages in the last year and prompting warnings of worse to come.

An Associated Press analysis of financial data from the country's largest card issuers also found that the greatest rise was among accounts more than 90 days in arrears.

Experts say these signs of the deterioration of finances of many households are partly a byproduct of the subprime mortgage crisis and could spell more trouble ahead for an already sputtering economy.

Crisis in Credit Default Swaps (CDS)

2008-09-17T06:52:00.000-07:00

You think the US subprime crisis is big?? Wait till you take a look at the NEXT BIG CRISIS that will be caused by Credit Default Swaps (CDS) in a potential colossus problem! I mean sure the US subprime has cause losses to the tune of over US$200 billion… but the Credit Defaults Swaps are problems with the big T. Yes, the problems are in the trillions… or US$50 trillion to be exact! That is over 3 times the US GDP (US$13 Trillion) and many many times Malaysia’s GDP (don’t ask).

Credit Default Swaps (CDS) are financial instruments (or derivatives) to transfer the credit risk of fixed income products. The buyer of a CDS receives credit protection while a seller ‘guarantees’ the credit worthiness of the product. For example, ‘Mr. Investor Inc’ purchases a US$1bil bond from ‘Mr. In Need of Cash Inc’, but is not sure of its credit worthiness. So Mr. Investor Inc purchases a CDS from ‘Mr. Solid Bank Inc’ to transfer its credit risk by paying a premium of US$50 mil to Mr. Solid Bank Inc. At first, this seems like easy money for Mr. Solid Bank Inc as long as Mr. In Need of Cash Inc does not default. If there is a default, Mr. Solid Bank Inc will have to pay Mr. Investor Inc US$1bil if the bond is totally worthless.

Somewhere along the way Mr. Solid Bank Inc sold the CDS to ‘Mr. Hedge Fund Inc’ who in turn sold it to ‘Mr. Greedy Trader Inc’, who in turn sold it to ‘Mr. Speculator Inc’. If Mr. In Need of Cash Inc defaults and somewhere along the line Mr. Speculator Inc has no capability to cover the US$1bil in default, it will affect everyone along the line and you will find that Mr. Solid Bank Inc. will not be so solid anymore. So a potential US$1bil in losses are not just US$1bil in value but multiplied 4 times over (in this example) to US$4bil in write-downs. Of course, I am using a simplistic calculation for my illustration. But just to give you an idea on how big this problem is… the US commercial loan market is worth US$5 trillion but the volume of CDS outstanding is US$50 trillion. It simply means, CDS have changed hands and are traded many times over, thus further amplifying the problem.

If just 1% of the CDS in the market goes bust… somewhere in the financial system there will be US$ 500 billion in losses (far greater than subprime, so far). In fact, some companies that are already affected are American International Group (AIG) with CDS losses of US$11.5 billion and not forgetting that the top 25 banks in US holds more than US$ 13 trillion in Credit Default Swaps potentially triggering The Next Crisis. See the problem right now? Well they don’t call derivatives “financial weapons of mass destruction” for nothing. In the famous words of Warren Buffett himself; “…counterparties record profits and losses (often huge in amount) in their current earnings statement without so much as a penny changing hands. The range of derivatives contracts is limited only by the imagination of man (or sometimes, so it seems, madmen).”

If this is too much gloom for you in a day (sorry, about that mate)… why not take a look at a place which seems to defy the gloomy economic outlook? A place where luxury automobile dealers like Ferrari Maserati and Bentley Motors have arrived in this town. Land investments anyone?

Will AIG Insurances go to bangkruptcy?

2008-09-17T06:42:00.000-07:00

AIG or American International Group, is the giant world insurance company based in New York City US. On 16 September 2008, The AIG will file for bankruptcy possibly today or tomorrow. What could keep it from filing is a $75 billion raise in capital from the remaining investment banks. But thanks to a $14 billion margin call on its Credit Default Swaps (CDSs) resulting from S&P's downgrade of its credit rating, this capital raise is unlikely to happen.

Company executives were huddled with advisers last night planning a rescue deal, following a threat on Friday by Standard & Poor's, the credit rating agency, to downgrade the company's debt. AIG shares collapsed by 31 per cent in the hours after that threat was made, and Robert Willumstad, recently installed as chief executive, made plans to bring forward a review of the business that was previously scheduled for 25 September.

The emergency restructuring plan, which AIG was aiming to announce before the start of trading this morning, is likely to include the disposal of major assets including its aircraft leasing business, International Lease Finance Corp. It is also believed to be considering disposals of assets related to its property and casualty insurance businesses.

In the continuing meltdown in the US financial market, World's largest insurer, American International Group (AIG) was today downgraded by credit rating agencies and was racing against time to find a multi-billion dollar infusion to stay afloat.

If AIG declares bankruptcy and they decide to sell off American General, their life insurance subsidiary, there will be a line of companies ready to buy that block of business. If that happens, you will be notified and your next annual payment will be made to a different life insurance company. By law all of the guarantees such as death benefit, term length and rates have to remain the same, so your coverage will be uninterrupted and unchanged.

While this weeks news has been upsetting and volatile, insurance companies are purchased by other insurance companies all the time. A few examples recently would be Chase being purchased by Protective Life and Traveler's Life being purchased by Met Life.

Lehman Brothers US investment Bank bangkruptcy

2008-09-17T04:59:00.000-07:00

Lehman Brothers , the fourth largest investment bank in the US, has declared itself bangkruptcy. What exactly happened in USA, the biggest economy leader in the world?

Lehman Brothers is declaring bankruptcy, Bank of America is buying Merrill Lynch. Sounds like the beginning to what everyone has been warning me about.

Yes, Lehman Brothers Bankruptcy is something one does not wish it to happen in US. USA is the leader of the world. Developing countries such as those in Africa are looking upto USA to learn the lessons of free market and smart State intervention.

The employees of Lehman Brothers and its supply chain should really look into Africa for better returns on itheir skills, expertise and nvestment.
For those that are at the edges of loosing their jobs , they are invited to really look into contributing their expertise into Africa.

Here are the facts about Lehman Brothers Bangkruptcy

Lehman Brothers Bangkruptcy article from yahoo.com/news

Lehman Brothers declared itself bankrupt Monday and Wall Street rival Merrill Lynch had to be taken over in a new financial earthquake that sent global markets into a slump. ADVERTISEMENT

The US Federal Reserve, European Central Bank and Bank of England injected tens of billions of dollars into money markets after the fall of the banking titans under the weight of the massive financing of bad loans.

Lehman Brothers said it would file for bankruptcy on Monday after a frantic weekend of negotiations failed to arrange a rescue.

In the fallout, Bank of America took over Merrill Lynch in a 50 billion dollar deal, insurance giant AIG was reported to have sought a massive emergency loan to head off its own crisis and a group of banks set up a 70 billion dollars global emergency fund.

Lehman Brothers Bangkruptcy article from rsc.org

Lehman Brothers, the fourth largest investment bank in the US, has filed for bankruptcy protection, dealing a blow to the US chemical industry's hopes of an end to the credit crunch.

The US government's 8 September bailout of the two mortgage giants Fannie Mae and Freddie Mac had raised expectations in the US chemical industry of an easing to the lending squeeze, and a revival in its two key customer sectors of housing and automobiles.

However, Lehman's bankruptcy has reinforced anxieties in Europe about weakening economic conditions. European chemicals companies fear that the full impact of the credit crunch has still not been felt, and could be greatly compounded by the reverberations of a steep fall in oil prices, which could reduce demand for bulk chemicals such as polymers.

Subprime Mortgage definition

2008-09-17T04:34:00.000-07:00

What is subprime mortgage exactly means? Will it really make US and the global world into a big recession ?
Here is the definition of Subprime Mortgage, which in Indonesian means "Krisis Kepemilikan Rumah"

Subprime Mortgage definition from Wikipedia :

The subprime mortgage crisis is a current economic problem characterized by contracted liquidity in the global credit markets and banking system. An undervaluation of real risk in the subprime market is cascading, rippling and ultimately adversely affecting the world economy.

The crisis began with the bursting of the US housing bubble and high default rates on "subprime" and adjustable rate mortgages (ARM). Loan incentives, such as easy initial terms, in conjunction with an acceleration in rising housing prices encouraged borrowers to assume difficult mortgages on the belief they would be able to quickly refinance at more favorable terms. However, once housing prices started to drop moderately in 2006–2007 in many parts of the U.S., refinancing became more difficult. Defaults and foreclosure activity increased dramatically, as easy initial terms expired, home prices failed to go up as anticipated, and ARM interest rates reset higher. Foreclosures accelerated in the United States in late 2006 and triggered a global financial crisis through 2007 and 2008. During 2007, nearly 1.3 million U.S. housing properties were subject to foreclosure activity, up 79% from 2006.

Subprime Mortgage definition from About.com :
Definition: A subprime mortgage is granted to borrowers whose credit history is not sufficient to get a conventional mortgage. Often these borrowers have impaired or even no credit history. These can also include interest-only loans.

The subprime mortgage crisis is threatening to put the U.S. economy into a recession. This primer it tracks how the subprime crisis unfolded, affecting first the real estate market and now the economy overall. It gives you definitions of important terms. It also explains how interest rates and real estate play an integral role in the U.S. economy. Finally, it gives resources for those who are suffering from the subprime mortgage crisis directly.