The Parasitic Financial Business – Why Wouldn’t They Need Property Foreclosures?
Posted on November 16th, 2011
Although I was out running this weekend, it was difficult not to notice all of the new houses for sale in the area, together with all of the old houses that have but to be sold after almost a year. I’ve small doubt why these properties have not but found buyers, as banks are just not lending to new loan applicants unless they’ve fantastic credit and numerous cash. In a community built on manufacturing jobs, those two circumstances aren’t likely to be met.
But it was also not surprising to notice that gas is now nicely more than $3.00 a gallon in the middle of the winter. Naturally, the truth that Americans are spending much more of their shrinking supply of dollars on transportation expenses just to get to their increasingly insecure job contributes to the problem of not having sufficient cash to pay the bills, let alone save up for a down payment or overcome a monetary hardship.
Why is it that the price of practically everything vital, including food and oil, has been going up, even as consumers are saving less money and also the economy is slowing down?
Looking to the government, the issue must develop into apparent. As the banks realized just how much poor mortgage debt they held, panic set in. The Federal Reserve bailed out the banks with newly-created funds, attempting to inject liquidity into the program. But the banks didn’t use that money to keep operating and lending, instead utilizing it to bail out underperforming hedge funds or to serve as a reserve for future losses.
In essence, the banks got free money which will support them ride through the economic slowdown without having getting to make wiser economic choices to make back their losses. So they will not have to provide mortgages to home buyers and produce profits from offering a service that will benefit clients. They are able to just use the inflated money to avoid from having to create good lending decisions.
Now the homeowners who’re facing foreclosure are simply getting shut out by huge lenders, who refuse to lend them money to refinance or work with them to put together a loan modification or repayment program. With the banking business bailout, the banks have no incentive to do anything but foreclose on the houses and let them sit till the real estate market recovers and they can make a larger profit. Immediately after all, the funds they would have received from collecting payments on great loans has been supplied free of any threat by the Federal Reserve.
Why not just do away with the whole lending approach altogether? Banks can now start giving out loans to those who can not afford houses at all, then get the money they would have made on a superb loan as a gift from the Fed, and end up with the real estate, also.
If this sounds like quite a few mortgage lenders are parasites utilizing homeowners as their hosts, sucking away as significantly money as possible and then leaving the residence an empty shell soon after the foreclosure victims are evicted, this analogy may well not miss the mark by significantly. It’s just more evidence of the “Tapeworm Economy” in action.
Needless to say, not just about every homeowner will experience this in action, but a lot of will find out just how little their bank cares about them when they begin missing payments. We get emails every single day from homeowners attempting to stop foreclosure, asking why the bank is not accepting their payment any longer, or why they are able to not get a call back from the bank, even when they would like to work out a remedy.
In an economy where the banking market can do as it pleases, producing loans it knows will in no way be paid by the homeowners, but realizing they’ll make their money back through inflating the money supply, and end up with the underlying asset, is it any wonder banks would rather make new loans instead of supply service to their existing shoppers?
It would be exciting to examine how banks would act if they had been not particular that poor choices would lead to a central government bailout.
Filed under Banks, Economic Choices, Economic Slowdown, Financial Business, Hedge Funds, Home Buyers, Houses For Sale, Loan Applicants, Loan Modification, Losses, Manufacturing Jobs, New Houses, Old Houses, Profits, Property Foreclosures, Real estate, Transportation Expenses, banking institutions, federal reserve, foreclosures, free money, liquidity, mortgage debt, mortgages | No Comments »
Fed Stays the Course on Mortgage Bond Buying, Interest Rates Fall
Posted on November 4th, 2011
After a two-day meeting, the Federal Reserve’s Federal Open Market Committee decided to maintain “its existing policies of reinvesting” in mortgage-backed securities (MBS) in order to bolster the faltering housing market and broader economy.
“The housing sector is a very important sector,” Bernanke said at a press conference in Washington after the meeting, as quoted in BusinessWeek. The Fed hopes to bring long-term interest rates even lower by buying up MBS, which will (hopefully) allow more homeowners to refinance and plug their monthly savings back into the economy.
And because the Fed “anticipates that economic conditions…are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013″ it left its target rate in the range of zero to 0.25 percent.
“I’m dissatisfied with the state of the economy,” Bernanke said. “Unemployment is far too high,” and “I fully sympathize with the notion that the economy is not performing the way we would like.”
Meanwhile, mortgage interest rates did fall in the latest week, according to Freddie Mac, with the average on a 30-year fixed rate loan dropping back down to 4.00 percent, excluding points, from 4.10 percent the week before. The 15-year FRM also declined to 3.31 percent from 3.38 percent and the one-year adjustable rate mortgage carried an average rate of 2.88 percent, slipping down from 2.90 percent.
The decrease was blamed on investor concerns about the financial plight of Greece.
“Market concerns over the European debt market drew investors to U.S. Treasury securities, lowering bond yields and mortgage rates,” said Freddie Mac vice president and chief economist.
Yet in contrast to the Fed’s dour report, Freddie Mac reported a bit of good news.
“Meanwhile, on the home front, the U.S. economy continued its gradual recovery,” Nothaft added. “…The economy grew 2.5 percent in the third quarter, the strongest pace in a year… In addition, consumer spending rose 0.6 percent in September, nearly threefold that of August. Finally, consumer sentiment…rose for the second month in a row in October to its highest reading since July.”
Filed under Adjustable Rate Mortgage, Interest Rate News, Mortgage, Mortgage Loan News, Mortgage News, federal reserve | No Comments »