More than 20 percent of all home mortgage loans in the period from 2004 to 2006 were subprime mortgages. Almost one quarter of all American owners in recent years have purchased homes through sub-prime mortgage programs. Most of these software packages have been eliminated. Mortgage expert Jim Kemish as the possible consequences.
At the end of the subprime industry
At the end of 2006, as property values continued to decline, subprime lenders, making it possible for these borrowers at home to begin towards the end. During the 90 days between December 2006 and March 2007, the entire subprime industry as we know it disappeared. And since these lenders either closed or strengthening their leadership, millions of potential owners found they could not cover a mortgage financing.
The real question
As disappointing in May it would be for the millions of houses in the hope to find that they now no longer to housing loans, the real problem lies elsewhere. Subprime mortgage programs, as welcome as they are borrower credit profiles have been carefully structured to the creditors to take additional levels of risk associated with these loans to poor credit.
The incidence of adjustable
With few exceptions, these loans with an interest rate adjustable features, which are usually time to adjust upward for the first five years. The most popular of these programs is called 2 / 28, timed up to two years. Most borrowers with these loans must be refinance subprimed after two years. Funding should not be a problem. At the end, real estate values were all the houses and financing was readily available.
The changing real estate market
In a perfect world, subprime borrowers to buy a house with a product such as the 2 / 28 and Carefree. Expanding markets real estate will almost guarantee there will be enough new shares to his house to be able to refinance subprime mortgage best time. Or perhaps it is fair to sell, and with his windfall will be capable of large initial contribution for a new home.
Nobody believes that can happen
The worst scenario was unimaginable. Real estate values have moved up more than a decade. Mortgage banks have more and more entries. Whoever thought that home prices stop climbing slowly, and then sickeningly begin in the fall? And even if that happens, who believes that all subprime lenders click on the brakes at the same time, within 90 days?
Personal history
Personal knowledge of minutes went through a difficult divorce in 2005. During the divorce, if awarded him, was seriously injured. When the divorce was finalized, he decided to Florida for a fresh start. He was lucky that enough money to be able to offer 20 percent of the deposits into the new house. Thanks to its credit, he was in the category of subprime, and have chosen, with 2 / 28 for financing.
Reasonable Expectations
It was unwise not to feel fairly safe. He buys a house in a beautiful South Florida. Home prices were strong. His Florida home mortgages was easy, and he made an important advance enough to feel secure in righteousness. Currently, 20 months later. Four months remain before his mortgage rate is around 2 percent. He said that the time had just begun its plan to refinance subprime.
Reality dawns
His first shock was the discovery that the true value of the neighborhood has to such an extent that the original 20 percent of the shares virtually none. He has enough money to reduce their loans to 80% of the cost, he felt that they refinance subprime the loan more than fair value, and find a way to a higher proportion than expected. Unfortunately, there was more disappointment in the future.
As a result,
He soon found that he could not obtain financing at all. The combination of his skills of credit, lack of equity in his home, as well as the elimination of sub-prime products, which enabled him to buy a house now makes it impossible to refinance subprime. Rather, he must try to sell his house in the environment where there is only enough money to pay their mortgages and closing costs.
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