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Robert Thomson's Articles in Mortgage

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  • Record Numbers of Prime Fixed Rate Mortgages Head into Foreclosure
    Prime fixed-rate mortgages now account for one in three foreclosure starts. The best borrowers in our financial system are defaulting on the best loans in our financial system.
  • Mortgage Grant Money is easy when you know where to look
    Real Estate Grant Money is definitely something that citizens could use right now. With the American realty market being battered by the worst financial plummet in this century
  • Are You Unsure If You Can Or Should Get A Mortgage?
    Did you hear that you can qualify for a mortgage, yet you don't think you would?
  • Is A Mortgage A Good Or Bad Thing?
    Are mortgages simply a trap? Many people have been burned by the real estate market and the corruption in this industry over the past several years.
  • Are You Ready To Get A Mortgage And Buy A Home?
    We all want the American Dream of owning our own home. If you're a potential first time home buyer, this prospect can be both daunting and exciting all at once.
  • Great News For The First Time Home Buyers!
    Are you planning to buy a new home? If you are a first time home buyer then don’t worry for the money required because new plans and financial programs are now there for you. Through the new 8,000 Tax Credit or to say, the first time home buyer tax credit, the first time home buyers are surely going to enjoy preferences.
  • What is the Option ARM Payment Rate?
    A negative amortization loan is any loan where the monthly payment does not cover the monthly interest expense. Interest-only or conventionally amortizing loans do not have this feature, and the monthly payments are based on the interest rate charged and/or the duration of the amortization schedule. Since the negative amortization loan breaks down this traditional relationship, there is a completely separate rate calculated for the minimum payment amount.
  • People Will Not Want Mortgage Debt in the Future
    The next big psychological change to impact housing will be a change in homebuyer's relationship with debt. When prices were going up, and nobody thought they were going to have to pay the debt off themselves, people borrowed all they could. Once prices stopped going up, and people were faced with paying off these enormous debts, the appetite for borrowing cooled significantly.
  • Recourse and Non-Recourse Loans - What Is the Difference?
    When a borrower cannot repay a loan, the lender may or may not be able to sue the borrower to collect any shortfall. The key difference is whether or not the loan is classified as a recourse loan or a non-recourse loan.
  • Future Loan Terms and Residential Real Estate Markets
    One of the primary mechanisms for inflating the Great Housing Bubble was the widespread use of exotic loan terms including interest-only and negative-amortization adjustable rate mortgages. The appeal of interest-only and negative-amortization loans is the lower payments they offer, or their ability to finance larger sums of money with the same payment. These loan terms are unstable, and they may not be offered to future buyers. If these loan programs were eliminated, the financing sums would decline, and home prices would decline along with them.
  • Credit Crunch - Why Did We Have It?
    In 2007, the financial markets were abuzz with talk of a "credit crunch." It was portrayed as some unusual and unpredictable outside force like an asteroid impact or a cold winter storm. However, it was not unexpected, and it was not caused by any outside force. The credit crunch began because borrowers were unable to make payments on the loans they were given. When lenders started losing money, they stopped lending money: a credit crunch.
  • Housing Bubble Credit Expansion - Credit Inflated the Housing Bubble
    The Great Housing Bubble was inflated by a massive expansion of credit and the influx of capital into residential mortgages. The expansion of credit took four forms: lower interest rates, lowering or eliminating qualification requirements, different amortization methods, and higher allowable debt-to-income ratios.
  • Mortgage Loans for Bad Credit
    Having bad credit won't prevent you from owning your own home, but it will cost you tens of thousands of dollars more over the life of your loan. Your credit score changes as time goes by and bad credit can be corrected.
  • Mortgage Interest Rates and House Prices
    Mortgage interest rates are determined in an open market and are subject to the forces of supply and demand. These rates are the sum of three main components: riskless rate of return, risk premium, and inflation expectation. The Great Housing Bubble was characterized by historic lows in the federal funds rate, risk premiums and inflation expectations which resulted in the very low mortgage interest rates. These low mortgage interest rates allowed people to finance large sums of money, and these larger bids helped inflate the housing bubble.
  • Financial Innovation is a Fallacy
    When the lending industry developed exotic loan products, they touted them as "innovation," and they sold these toxins far and wide. Since these loans achieved the highest default rates ever recorded, it is apparent the "innovations" of the bubble rally were not entirely successful. The cutting edge is sharp. Innovators often pay a heavy price for attempts at advancement. Sometimes these advances lead to quantum leaps in human knowledge and understanding. Sometimes the time, effort, and money are merely thrown into the abyss. The financial innovations of the Great Housing Bubble are of the latter category.
  • Mortgage Equity Withdrawal is a Cultural Pathology
    Mortgage Equity Withdrawal or MEW is the process of obtaining cash through refinancing residential real estate using the accumulated equity as collateral for the loan. This is a cultural pathology because it is not sustainable. Many people became addicted to using their houses as an ATM machine, and when prices fell, these people lost their homes in foreclosure.
  • Downpayments Are Back! What Happened to 100% Financing?
    Downpayments are required again thanks to the credit crunch. Many people thought 100% financing would be made available forever. They were mistaken. One-hundred percent financing will never return because it exposes lenders to too much risk.
  • Pick-a-Pay Option ARM Loans - What Are They?
    The Negative Amortization mortgage (aka, Option ARM or Neg Am) is the riskiest loan imaginable. It has all the risks of an interest-only, adjustable-rate mortgage, but with the added risk of an increasing loan balance. Using this loan, there is the risk of not being able to make the payment at reset, and the borrower is much more at risk of being denied for refinancing because the loan balance can easily exceed the house value. In either case, the home will fall into foreclosure.
  • The Interest-Only, Adjustable-Rate Mortgage is Very Risky
    The interest-only, adjustable-rate mortgage (IO ARM) became popular early in the Great Housing Bubble. When fixed-rate mortgage payments were too large for buyers to afford, they turned to IO ARMs as an affordability product. Unfortunately, these mortgage products are not stable because at some point, payments increase, and the borrowers often default.
  • Conventional 30-Year Amortizing Mortgage - Why use It?
    A fixed-rate conventionally-amortized mortgage is the least risky kind of mortgage obligation. If borrowers can make their payment, a payment that will not change over time, they can keep their home. At the end of a predefined term, the original funds have been paid in full, and the loan is discharged.
  • Exotic Loan Programs Always Fail
    Over the last 60 years since World War II ended, a number of experimental loan programs have been attempted. These include interest-only loans, adjustable rate loans, and negative amortization loans among others. It is this group of loans that has consistently failed in the past for one simple reason: if payments can adjust higher, people will default. High default rates doom mortgage programs because these high default rates will eventually cause large default losses for the holders of these loans.
  • Adjustable Rate Mortgage Payment Recast - What is It?
    Interest-only and negative amortization payments cannot go on forever. At some point, the loan balance must be paid in full. For all adjustable rate mortgages, there is a mandatory recast after a fixed period of time where the loan reverts to a conventionally amortizing loan to be paid over the remaining portion of a 30 year term.
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