Getting Approved
Despite The Mortgage Crisis
It is widely publicized that the US in in the midst of a
mortgage crisis. Because of this crisis, it is now much more
difficult to qualify for a home mortgage. But it still
can be done if you understand what is going on and how to work
within the confines of the current mortgage market.
For a complete understanding of what is really going on with
the
subprime mortgage crisis,
it is suggested that you read the rather lengthy expose.
In the past 20 years the mortgage market has changed
dramatically. In days past banks used to make mortgage loans by
lending from their own deposits. However, the advent of the
secondary mortgage market allowed banks to package a group of
mortgage loans together and sell that package to large investors
such as mutual funds, large insurance companies and
corporations, as well as other such types.
Wall Street investment firms have been involved since the
beginning in the packaging process. But these Wall Street firms
got greedy and didn't want to settle for just packaging loans
for a small 1 to 2% fee. They wanted more, much, much,
much more.
So instead of just packaging 100 loans and selling that
package of 100 loans in the secondary mortgage market, Wall
Street firms mixed in very large amounts of derivatives and sold
the packages for fees often in excess of 50%!
It is hard to believe that Wall Street firms took such a big
piece of the pie, but it is true. Their actions are detailed and
documented in
subprime mortgage crisis
and
derivatives abuse by Wall
Street.
When a relative few subprime borrowers were unable to meet
their monthly payments and defaulted, institutional owners of
structured finance packages such as CDOs (collateralized debt
obligations) and MBSs (mortgage-backed securities) wanted to
sell for fear of loss. Unfortunately, the packages in their
portfolio included derivatives that were extremely overpriced
and risky. Consequently, there were no buyers to be found. They
were stuck holding the bag.
And that is the current situation that the mortgage market
is in. Now these institutional type investors no longer want to
purchase any packages of mortgages. The abuse of derivatives by
Wall street has caused the secondary mortgage market to stop
functioning properly. In fact, it is not really functioning at
all.
As a result, banks now have to lend money only from their
own deposits. Banks don't have as much capital available as when
they could tap into the secondary mortgage market. Also, they
are much more concerned about the quality of the borrower now
that they are lending their own deposits, and not just making a
loan that would be sold to a third party.
The Best Source For A Home
Mortgage
Qualifying for a mortgage is now much more difficult than it
was one or two years ago. The key is to find a big bank that has
ample funds, which has also not been hurt by the derivatives
crisis. The multi-national giant ING currently is the top of
that short list. If you will be applying for a mortgage,
ING DIRECT Orange Mortgage
offers great rates, an easy online application, and they are the
most able to approve loans in this very difficult borrowing
environment.
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