What's with Subprime?

These days a whole lot of "Subprime" is being tossed around. But what exactly uis subprime? Luckily the Mortgage Professor can help...

Subprime Lenders Defined

A sub-prime lender is one who lends to borrowers who do not qualify for loans from mainstream lenders. Some are independent, but increasingly they are affiliates of mainstream lenders operating under different names.

Subprime Borrowers Defined

A subprime borrower is one who cannot qualify for prime financing terms but can qualify for subprime financing terms. The failure to qualify for prime financing is due primarily to low credit scores. A very low score will disqualify. A middling score might or might not, depending mainly on the down payment, the ratio of total expense (including debt payments) to income, and ability to document income and assets.

The article not only defines the terms, but goes into some of the problem with subprime loans. Click here for the whole article...

2007 Subprime Mortgage Financial Crisis

Well you know that the sh*t has hit the fan when you have a Wiki article entitled "2007 Subprime Mortgage Financial Crisis". It was created back on March 15th of this year and has been updated quite a few times. Here is a snippet...

The subprime mortgage financial crisis was the sharp rise in foreclosures in the subprime mortgage market that began in the United States in 2006 and became a global financial crisis in July 2007. Rising interest rates increased the monthly payments on newly-popular adjustable rate mortgages and property values suffered declines from the demise of the US housing bubble, leaving home owners unable to meet financial commitments and lenders without a means to recoup their losses. Many observers believe this has resulted in a severe credit crunch, threatening the solvency of a number of marginal private banks and other financial institutions.

Click here for the full article...

Mortgage News Daily

What is it?

A website

What kind of information do they cover?

Daily Mortgage News

Brilliant. Any other ingenious insights?

No

Can I at least have a link?

Sure.

Avoid Bankruptcy

I was looking at some other debt related blogs on Blogger and came across Debt Consolidation Management Assistance. Here is a snippet of one article that caught my eye:

Here is a snip:

Avoid Bankruptcy: You May Have to Pay the Debt Back Anyway

The most widely held misconception about bankruptcy is that it’s the debtor’s version of the “get out of jail free” card in Monopoly. While most people know that bankruptcy affects your credit for 7 to 10 years, very few people know that it’s possible that you’ll have to pay back the debt anyway, even if you file a Chapter 7 “straight” bankruptcy. The formal definition of bankruptcy is “a proceeding in federal court in which an insolvent debtor’s assets are liquidated and the debtor is relieved of further liability.” On the other hand, the commonplace definition of bankruptcy is probably “the process of completely wiping out your debts for free.” In some cases, the latter definition may be appropriate, but in a good number of scenarios, it’s likely that even with bankruptcy, you’ll still have to pay back at least a portion of the debt.

Click here to read the whole article.

I was unaware of that whole scenario. Good to know....

Consolidation Loan Tip

Here is a tip that I found yesterday:

The truth is, you probably have more options then you realize. Traditional "consolidation loans" from a financial institution may not even be your best choice. Instead, you may want to think about:

* using credit cards
* a home equity loan
* a loan from your insurance policy or retirement plan
* a loan from a relative to consolidate

Each of these options can be extremely helpful or extremely dangerous depending on how you use them. The key when you consolidate is to create a plan that will have you out of debt in three to five years, and to stop adding to your debt

I came across this tip while Googling for tips. It came from the nice people over at Gay Mortgage Loans.

Click here for the whole article.

10 Debt Consolidation Myths

What are the biggest myths surrounding debt consolidation? I am glad that you asked...

1. Credit counseling, debt-management programs -- it's all the same.
2. Credit counselors can cut your monthly payments in half.
3. Some companies offer lower interest rates than others.
4. Some agencies can negotiate lower DMP payments than others.
5. Debt settlement is the cheapest way to go
6. You need a formal program to get out of debt.
7. Debt consolidation always saves you money.
8. DMP helps your credit rating.
9. Bankruptcy will ruin your life.
10. Bankruptcy is no big deal.

This is just a high level overview. To find out more of what each of these mean, read the full article over at BankRate...

Debt Consolidation FAQ

I came across a pretty informative FAQ about Debt Consolidation over at FH Financial Service.

Here are some of the questions:

1. Why should I use FH Financial Debt Settlement Plan?
2. What is debt settlement?
3. What is a Debt Management Plan?
4. Is Debt Settlement the same as Debt Consolidation?
5. Is Debt Settlement the same as Consumer Credit Counseling?
6. Can you settle your debt on your own?
7. How long does the Debt Settlement program take?
8. Are your Debt Settlement services guaranteed?
9. What is the effect of how much debt I have on my credit score?
10. How will Debt Settlement affect my credit score?
11. How does Debt Settlement compare to bankruptcy?

Well that should answer a couple of questions at least.

Here is the link to the Debt Consolidation FAQ.

Pros and Cons

Should I consolidate? Well one would think the answer would automatically YES, but there are some Pros and Cons. The following link is a page that can help answer this question.

The calculator provides two types of information about each of these options. One is the total monthly payment, which consists of mortgage payments, mortgage insurance premiums if any, and non-mortgage debt payments if any. Borrowers on tight budgets must be concerned with the monthly payment, but it should not be the major determinant of their choice. It fails to reflect differences in tax savings or debt reduction as between the options.

The second type of information the calculator provides about all the options is their total cost over a period specified by the user. If the user’s time horizon is, say, 5 years, the total cost of each option is the sum of the monthly payments over 5 years including lost interest, less the tax savings and reduction in total debt over that period. Minimizing this cost should be the borrower's major objective.

Here is the link to the article...

Debt Consolidation Calculator

Being that this blog is trying to find out some helpful information about Mortage Debt, I thought that a "Debt Consolidation Calculator" would be useful. There is a decent one over at Mortgage 101. Over there it says:

Discover your potential monthly savings by combining your bills into a single source. Eliminate high interest rate credit card and installment loans with a tax deductible (consult your tax advisor) consolidation loan. Use our calculator to figure how long before your savings equal the cost of obtaining a new consolidation loan.

Here is the link for the Calc.