Is the following report too alarmist? Perhaps not. The subprime crash is rippling out and infecting the wider financial system. The danger is that higher defaults in the subprime market will lead to a banking crisis along the lines of the savings and loan crisis in the 1980s. All the ingredients are there already; poor asset quality, exploding foreclosure rates, liquidity tightening, and regulatory failure.
(UK Telegraph) The United States faces a severe credit crunch as mounting losses on risky forms of debt catch up with the banks and force them to curb lending and call in existing loans, according to a report by Lombard Street Research.
The group said the fast-moving crisis at two Bear Stearns hedge funds had exposed the underlying rot in the US sub-prime mortgage market, and the vast nexus of collateralised debt obligations known as CDOs.
"Excess liquidity in the global system will be slashed," it said. "Banks' capital is about to be decimated, which will require calling in a swathe of loans. This is going to aggravate the US hard landing."
Charles Dumas, the group's global strategist, said the failed auction of assets seized from one of the Bear Stearns funds by Merrill Lynch had revealed the dark secret of the CDO debt market. The sale had to be called off after buyers took just $200m of the $850m mix.
Abandoned by fellow banks, Bear Stearns has now put up $3.2bn of its own money to rescue one of the funds, a quarter of its capital.
Lombard Street’s warning comes as fresh data from the US National Association of Realtors shows that the glut of unsold homes reached a record of 8.9 months supply in May. Sales of existing homes slid to an annual rate of 5.99m.
The median price fell for the 10th month in a row to $223,700, down almost 14pc from its peak in April 2006. This is the steepest drop since the 1930s
A loss of a job, death in family, medical expenses and other life-altering situations can happen to anyone, causing us to
ReplyDeletefall behind in our mortgage loan payments.
If we neglect paying our credit cards it hurts our credit rating; if we neglect our home loan payments the lender
will foreclose, and repossess our home. We are often embarrassed to talk about our money problems, but that approach doesn't solve anything.
Credit Repair could help you get back on track in the future
Put your pride on hold and get serious about avoiding foreclosure. Contact your lender as soon as you know your payments will be late.
Never ignore the lender's letters and do not assume you are in a hopeless situation. Lenders do not want to foreclose, and will usually work with you to get your account back on track.
Below are Solutions for Temporary Problems
1. Reinstatement When you are behind in your mortgage payments but can promise a lump sum to bring payments current by a specific date.
2. Motgage Forbearance. You are allowed to delay payments for a short period, with the understanding that another option will be used afterwards to bring the account current.
Lenders sometimes combine Forbearance with Reinstatement if you know you'll have the funds to bring your account current by a specific date.
3.A mortgage Repayment Plan If your account is past due, but you can now make payments, the lender may agree to let you catch up your home loan by adding a portion of the
past due amount to each current monthly payment until your account is current.
Solutions for Longer-Term Problems
1. Mortgage Modification If you can make your regular payment now, but cannot catch-up the past due amount, the lender may agree to modify your mortgage.
One solution is to add the mortgage behind amount into your existing loan, financing it over a long term.
Modification might also be possible if you no longer have the ability to make payments at the former level.
The lender might modify your mortgage to extend the length of your loan, or take other steps to reduce your payments.
2. Selling Your Home If catching up is not a possibility, the lender may agree to put foreclosure on hold, giving you some extra time to attempt to sell your home.
http://www.webuyhouseseasy.com/listings/index.php can help by purchasing your home.
3. Deed in Lieu of Foreclosure The lender may allow you to give-back your property, in turn forgiving the debt.
This does negatively affect your credit record, but not as much as a foreclosure. The lender may require that you attempt to sell the house for a specific time
period before allowing this option; the option may not be possible if there are other liens against the home. http://www.webuyhouseseasy.com/sell_house.htm
If these options aren't available and time is against you. Contact a realtor and have your house listed on MLS (mutly listing service) immediately.
It is better to sell your home and keep a mortgage foreclosure from affecting your credit rating so that you can qualify for a mortgage and buy a house again in the near future rather than
the far future.