Word: loan
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...house prices they perpetuate entered a new phase on Tuesday as Fannie Mae and Freddie Mac announced a fast-track program meant to make hundreds of thousands of mortgages affordable to people who can't currently meet their monthly payments. The roll-out follows on the heels of new loan modification programs at JP Morgan Chase and Citigroup, but the move at Fannie and Freddie, which together hold or guarantee some 58% of single-family home loans, has the potential to reach much farther since the mortgage industry often takes its cue from the two entities...
...Fannie and Freddie who are at least 90 days delinquent will be eligible to have their monthly payment reduced to 38% of gross income, as long as they're not in bankruptcy and can illustrate a hardship or change in financial circumstances. This model, based heavily on a streamlined loan modification program the FDIC is implementing at the failed lender IndyMac, is a strong endorsement of the idea that doing a lengthy analysis of homeowners' finances is taking too long to make a dent in the nation's housing woes...
...details of how, exactly, monthly payments will be lowered has raised concern in certain quarters. In a news conference explaining the program, James Lockhart, who runs the agency that oversees Fannie and Freddie, highlighted three tacks: reducing interest rates, extending the length of loans and, in some cases, deferring payment on part of the principal. There is a big difference, though, between permanently reducing an interest rate and doing it temporarily. And the new program doesn't forgive principal, only defers it, which may not go very far at a time when some 18% of mortgage holders owe more...
...Ottawa agree to insure the money they routinely borrow from other banks, a practice that keeps their credit operations liquid? Ironically, the troubled non-Canadian institutions that received capital injections and loan guarantees in other countries now carry a government seal of approval that tilts the playing field in their favor when it comes to borrowing. That leaves Canada's big banks, including Scotiabank, TD Bank Financial Group, RBC Royal Bank and CIBC, at a competitive disadvantage. So the government acted to level the field, not to aid troubled banks. (See pictures of the global financial crisis...
...Home buyers have long been able to purchase so-called loan points, which can lower the interest rate they have to pay on their mortgage. Generally, it costs 1% of the total amount of the loan to lower a mortgage rate by a quarter of a percent. That means on a $200,000 loan, a home buyer would pay $8,000 to lower their mortgage rate to 5.5% from the current rate on a 30-year mortgage of about...