Eliminating Your Subprime Mortgage [mortgagerates-tips.blogspot.com]
Financial Theory (ECON 251) Standard financial theory left us woefully unprepared for the financial crisis of 2007-09. Something is missing in the theory. In the majority of loans the borrower must agree on an interest rate and also on how much collateral he will put up to guarantee repayment. The standard theory presented in all the textbooks ignores collateral. The next two lectures introduce a theory of the Leverage Cycle, in which default and collateral are endogenously determined. The main implication of the theory is that when collateral requirements get looser and leverage increases, asset prices rise, but then when collateral requirements get tougher and leverage decreases, asset prices fall. This stands in stark contrast to the fundamental value theory of asset pricing we taught so far. We'll look at a number of facts about the subprime mortgage crisis, and see whether the new theory offers convincing explana tions. 00:00 - Chapter 1. Assumptions on Loans in the Subprime Mortgage Market 18:27 - Chapter 2. Market Weaknesses Revealed in the 2007-2009 Financial Crisis 29:00 - Chapter 3. Collateral and Introduction to the Leverage Cycle 38:53 - Chapter 4. Contrasts between the Leverage Cycle and CAPM 43:36 - Chapter 5. Leverage Cycle Theory in Recent Financial History 01:03:55 - Chapter 6. Negative Implications of the Leverage Cycle 01:14:14 - Chapter 7. Conclusion Complete course materials are available at the Open Yale Courses website: open.yale.edu This course was ...
mortgagerates-tips.blogspot.com 25. The Leverage Cycle and the Subprime Mortgage Crisis
A subprime mortgage seemed like a good idea for many aspiring homeowners just a few short years ago. It was the most touted real estate loan by most lenders. Unfortunately, after taking out the loans, many borrowers realized just a bit too late, that they were not able to meet their loan's requirements. Thankfully, there are ways to get out of the predicament now.
Subprime Mortgages - What Are They?
To give you a brief background, subprime mortgages are usually offered to people with a poor or bad credit history. Since low credit scores did not prevent folks from getting approved, these mortgages were often the last resort. Of course, the terms often included high interest rate, loan application fees as well as balloon payments and prepayment penalties.
Refinancing A Mortgage
Here are five quick steps to help you refinance your subprime mortgage.
Step 1: Timing is important when refinancing a mortgage.
It is vital that you take action when the timing is just right, especially if your existing mortgage comes with an adjustable interest rate.
Just before the interest rate adjusts to a higher rate, Before your pre-payment penalty is activated and Before the required balloon payment is called. If you don't have those key pieces of information about your mortgage, you can always contact your lender and ask for it.
Step 2: Re-evaluate and assess your credit rating.
Have you made any improvements to your credit score since it was last reviewed? There are several things you can work on right now, to repair your credit.
You are entitled to one free annual credit report from each of the three major credit bureaus, Equifax, Experian, and TransUnion, so take advantage of that opportunity.
Step 3: Have a steady source of income.
Creditors always want to be reassured that their borrowers have a steady sources of income. That steady job ensures that you will always have enough money to at least cover the interest payments of the loan.
To qualify for a second mortgage or eliminate your existing loan, you must prove that you have a stable job and steady paycheck. If your income is strictly cash, provide documentation certifying that your cash income is constant and steady.
Step 4: Evaluate the equity in your home.
How much home equity do you have left? If the equity is 10% or less of the value of the property, chances are you might not be eligible for the best refinancing rates at the moment. Start reducing the size of your existing mortgage before applying for a second mortgage.
Step 5: Shop, Compare, and Apply
Once you have lined up all the details and are ready, the only thing left to do is shop for best mortgage rates, make comparisons, and submit your application.
