| |
Home Loans -- Federal Regulators Warn Lenders to Be More Careful
By Charles Essmeier
Federal banking regulators have recently expressed some concern over the housing market as home prices in the United States have risen to record levels. While homes are more unaffordable than ever for many people, the lending market remains strong, mostly because of the introduction of new, ever-more-flexible types of loans. While these newer loan types, such as the interest-only loan, make buying a home easier for some borrowers, they also propose a greater risk to the lender.
The lending market has been quite aggressive during the last five years, as investors and homebuyers have purchased real estate in record numbers. Buyers who are skittish about investing in stocks have put their money into real estate instead, and prices have climbed to record levels. Lenders have been all too happy to accommodate the long line of customers in their offices with an ever-increasing array of products. With hundreds of loan types available, nearly everyone can qualify for some type of mortgage today. The problem, as regulators point out, is that some of the more popular types of loans are inherently risky. Two such examples are the interest-only loan, and home equity loans that exceed 100% of a home’s value.
The problem with such loans is that they are both issued under the assumption that home prices will continue to rise. Prices may continue to rise, but if they don’t or worse, if they fall, lenders could find themselves in the ugly position of holding liens on property that is worth considerably less than the amount of the loan. As of yet, there’s no sign of a crash in real estate prices, but foreclosures are up in both Texas and Florida, and this could be an indictor of more difficult times ahead for the lending industry. The banking regulators didn’t issue any orders regarding how high-risk loans should be handled, but they did caution lenders to check the credit scores of borrowers carefully and to eschew or cut back on so-called “no-doc” loans, which do not require full documentation of a borrowers assets or income.
This should be of relatively little concern for the average borrower, who would probably think that such guidelines represent ordinary common sense. Unfortunately, common sense sometimes gets ignored during boom times in business, only to be remembered when buyers start to default on their loans. By that time, it’s too late to do anything, and the stockholders are left with the debt.
About the Author
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a Website devoted to debt consolidation information and HomeEquityHelp.net, a site devoted to information on home equity loans.
Article Source: http://www.simplysearch4it.com/article/3486.html
| If you wish to add the above article to your website or newsletters then please include the "Article Source: http://www.simplysearch4it.com/article/3486.html" as shown above and make it hyperlinked. |
| Some other articles by Charles Essmeier | Deed Theft Criminals Get More Aggressive at Stealing Your Home
Deed theft is an increasingly popular crime in the real estate industry. It usually works like this: A company will post signs around town offering to "help" those facing debt problems ...
Will Online Mortgage Lenders Replace Traditional Banks?
The Internet has changed our lives in more ways than we can imagine. The Web provides a convenient, fast, comprehensive source of ...
Is Mortgage Life Insurance a Good Buy?
Buying a house is one of the most expensive things most people will ever do. With the average home in the United States now costing more than $200,000, it will take a ...
Home Equity Just Part of a Good Rainy Day Plan
In the last five years, values of homes throughout the United States have increased dramatically. With that, the American public has resorted to ...
Discount Points May Be Wise When Purchasing a Home
There are many expenses one must pay when closing on a mortgage. Some of these include taxes, a down payment, loan origination fees, and miscellaneous fees for couriers, copying or other office ...
Mortgage Tips for First Time Buyers
A home is the single most expensive thing most people will ever purchase. In addition, paying off a home loan can take as long as forty years and will involve paying an amount ...
|
|
| |
|
