100 Percent Financing on Investment Property [mortgageinsurance-101.blogspot.com]
Question by matt m: General question about Freddie, Fannie, and other mortgage lenders...? I am a little confused as to where this so often talked about loss is coming from in the present economy. I get that x amount of homeowners are defaulting on payments. I get that x amount are being forclosed. I get that x amount are abandoning their mortgage payments, and moving in with momma. I assume a large percent of this mortgage debt for the above mentioned companies are for this reason. What I don't understand is, if the house is still standing and in good shape exactly where does the bulk of the loss come? isn't the overall picture one that more than 95% of homeowners are making their payments? IF the other 5% of homes are just vacated and resold at a later date and logic suggests that eventually new homeowners will come along to buy the foreclosers why such worry? it's not like the homes are being destroyed. Are analysts having us believe all the mortgage notes abandoned total losses? so if you still owe 100,000 on your home and you abandon it the bank is at 100,00 0 loss? Best answer for General question about Freddie, Fannie, and other mortgage lenders...?:
Answer by MSAD
The areas where it is hurting is where real estate prices got too high (the bubble). When the bubble burst - the house prices dropped. So the house that you purchased for 500,000 --- borrowed 500,000 from the bank to purchase is now worth 400,000. So even if the bank forecloses on the home....it's only worth 400,000. They lose 100,000 right of the top. Plus they incur the expenses associated with foreclosure. This is happening on a pretty wide scale. Foreclosure rates are at an all time high and its not going to get better any time soon.
Answer by Mark C
The losses come from when the banks or lenders sell the mortgage to a second or third party. They want to see monthly income uninterrupted being paid on those notes. With the sub prime mortgages, they were expecting 10 to 15% returns. Good loans are mixed in with the bad as a package. As soon as the income stops, they sell all those notes at a huge discount. The other problem is that banks are terrible owners of foreclosed property and drive the price down by selling it for what ever they can get. Sometimes the bank waited so long to foreclose that the house is in poor condition. The main problem is that some communities have decreased in value up to 50% and the houses are no longer worth the 100% financing on them.
Answer by kemperk
Fannie Mae, et al, are not lenders; they buy mortgage notes. The banks make the loans, and then, because of complicated federal regulations, in order to be able to continue lending, they have to reduce their RATIOS of loans to deposits. ---------- According to some people, what was 5% 2 yrs ago, may now be 25%. IT is a vague number to follow. We both know that of 100% of all homes in the US, less than 25% are debt free as of now --what with equity loans being taken out in the last 6 yrs. The good question becomes, of all the ones that have mortgages, how many are actually delinquent? I read one article myself that said it was fewer than 5% of all home owners. If this is the case, then Shakespeare's Play comes into play-- [double cliche?] "Much ado about nothing." what if, however, it is the 25% who took out dif mortgages that are in default? we can do some math since the mortgage problem is supposed to be about $ 5 billion dollars; average home 125k 5,000,000,000 divided by 125,000, =i get about 39,000 houses. bad but not horrible. if we presume 380,000,000 population, and 2 people per house average, 190,000,000 houses and then figure 10,000 apts bldgs, [number pulled from thin air] 85.000.000 houses total and 39,000 of those in trouble, or 1 in every 200. NOT horrible at all.
Answer by goz1111
One major issue for them is the source they used to finance these purchase of home loans, One way is to sell commercial notes/bonds on the market backed upon the note on the land, now besides the obvious of the danger of foreclosing, you also have the real problem of declining house values, this declining over all of the assets makes the bonds less attractive which leads to more cost to Freddie and fannies to borrow monies to buy more loans
A 100-percent mortgage can be obtained from different lending institutions, which can be researched on the Internet. Get a 100-percent mortgage, or a federal loan at 97 percent, with tips from a licensed mortgage broker in this free video on personal finance and real estate. Expert: Adriel Torres Contact: ultimatecredittoday.com Bio: Adriel Torres has been in the mortgage business for over a decade. He has owned two mortgage companies and is a licensed mortgage broker. Filmmaker: Christopher Rokosz
mortgageinsurance-101.blogspot.com Mortgages : How to Understand 100 Percent Mortgage Financing
Caixa Economica Federal, the state-run lender that accounts for more than 70 percent of home loans in Brazil, and Madrid- based Banco Santander SA's local unit said this month they will offer 35-year mortgages for the first time. Caixa, based in ... Brazil Banks Sweeten Loans to Win Over Wary: Mortgages
The days of obtaining 100 percent financing on investment property from bank mortgages are over. There are government programs for first time home buyers, but that excludes investment properties. The traditional methods of buying property with no money down all include owner financing. Here are some examples:
Wrap Around Mortgage: This is where a seller finances the property by obtaining a new mortgage that is more than his or her existing mortgage. The seller charges the buyer a higher interest rate in most cases.
Seller-Financed Second Mortgage: Here the buyer gets a new first mortgage and the seller issues a second mortgage in lieu of a down payment. Most lenders will not issue the first mortgage if the second mortgage is done at closing, so this is best done privately between the buyer and seller.
Bond for Deed or Land Contract: Here the buyer assumes responsibility for the seller's existing mortgage.
The bank with the existing mortgage can't stop it because title to the property does not actually transfer to the buyer until the existing mortgage is satisfied.All out owner financing: It is rare to find a seller who has no debt against a property, but they do exist. When a seller has no debt they can finance the full amount of the property investment. This is attractive to some sellers because they usually will get a higher price than on the open market, and they receive interest on the amount financed.
After the Savings and Loan crisis there were many investors who bought property through the Resolution Trust Corporation for pennies on the dollar and turned around and owner financed sales of the real estate they bought. We will likely see something similar coming out of the current housing crisis.
If so, it will be a hey day for savvy real estate investors. Find More 100 Percent Financing on Investment Property Articles
