Monday, October 23, 2006

Nontraditional Mortgages Don't Wane Under Warnings

der nackte wahnsinn. und nebenbei wohl auch der grund warum der abschwung im immobiliensektor härter als erwartet und auch in anderen ländern wie irland , spanien etc ausfallen wird.

das nächste halbe jahr wird zeigen inwieweit die neuen kreditrichtlinien diesen wahnsinn eindämmen können.

crazy! that is the reason why the us housingmarket will fall harder than expected and the effects of the decline will be worse than in countries with bubbles like ireland, spain etc.

the next 6 month will show if the new lending guidelines will have any effect to make an end to this madness

Washington Post
Despite concerns expressed by federal regulators about the growth of nontraditional mortgages, their popularity among borrowers continues to rise, according to statistics released yesterday.

About 26 percent of mortgage loan originations by dollar volume in the first six months of 2006 were interest-only loans.......

Another 13 percent were "option" adjustable-rate loans, which allow customers to pick their payment amount, including a low-cost choice that covers neither the full interest nor the principal.(negative tilgung)

In comparison, in the last six months of 2005, 25 percent of mortgages were interest-only and 8 percent were option products.

Until 2000, less than 2 percent of consumers had interest-only or similar loans. Most people bought their homes with traditional, fixed-rate loans that allow borrowers to steadily pay off their mortgages until they are free of housing debt. (aus der mode..../ out of fashion)

The lower monthly payments of nontraditional loans have been particularly attractive because home prices have risen so quickly. But regulators have said they worry consumers don't understand that payments on the loans can double or even triple, and that if they pay less than full payment toward principal and interest, they run the risk of seeing their mortgage balance rise, even after years of payments. Most homeowners are making only the minimum payments, according to banking data.

.....The loans have been aggressively marketed by lenders, some of whom have earned record profits by promoting them to consumers.

Last month, federal banking regulators issued a warning to federally regulated lenders, banks, thrifts and credit unions, that the loans could pose risks for lending institutions because consumers can be unprepared for the sudden jumps in payments, known as "payment shock." These jumps could lead to loan defaults, causing losses for the lenders. Lenders outside of federal oversight, who make 60 percent of these loans, were not affected by the regulators' warning. (what a joke! was für ein witz)

The Mortgage Bankers Association criticized the government warning as "regulatory overreach."
(natürlich, of course)

Last week, the Federal Reserve Board took the warning to consumers by issuing a pamphlet about the dangers of nontraditional loans. The pamphlet contains a glossary of terms for these loans and provides worksheets for people to compare risks and rewards. It is available through the Federal Reserve and other banking regulatory Web sites. ( only 3 year too late!, leider 3 jahre zu spät)

.....In a separate report, the trade group reported that origination volume fell 30 percent for subprime loans, which are higher-rate mortgages for borrowers who pose greater credit risks, in the first half of 2006 compared with the first half of 2005. Of all loans originated, about 19 percent were subprime.


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