What is housing market correction and subprime mortgage? - subprime mortgage explained
These two terms are often confused me. I need someone to explain it in simple words. Thank you.
Tuesday, January 5, 2010
Subprime Mortgage Explained What Is Housing Market Correction And Subprime Mortgage?
3 comments:
A "correction" is a polite way of saying a sharp decline in values. This term is often used with the bag, too.
The subprime mortgage is a condition for borrowers with bad credit and financial conditions more restrictive than the traditional "prime" mortgages. These include a higher interest rate market interest rate adjustable negative amortization (the loan amount actually increases during the term of the loan) loans, shorter (under 15) and whether they were loans were to borrowers with little or no Down payment is less than perfect credit. In return, the borrower must pay more, for the loan. Those who are these loans is not what ultimately paid the money and has pushed hard by a portion of the loan application to gather. They also often overlooked facts about the borrower, to approve the loan. This is the result of a market in which mortgage loans of people who give no risk if the borrowers do not ultimately afford. Fortunately, this type of loan is completely dryabove, but it is also difficult to obtain the loan amount and seriously wounded in the housing market.
Green Lady has a good job in explaining the high risk.
Extension of Correction ... This applies to many industries, not just housing. In this case, the property prices have risen strongly, on average, something around 3% per annum in the last 60 years, before 1995. This is roughly even with the average increase in payments for the average American worker. Thus, increased housing wages increased.
In spring 2000, the house began to increase 20-30% per year. People continue to increase each year only 3-5% to obtain, so that housing is historically included in the price. However, because the houses are now worth as much appeared everywhere manufacturers and construction plans of condominium homes, sell them for huge profits. Bad loans are also shown, because no one would allow the exorbitantly high prices and bad loans to unqualified people to buy a house and realize the American dream to pay. If someone makes minimum wage can be a 500K house, greed / jealousy, and all is moving and what to keep subprime and to buy with the Jones.
Good orOwnership dares dreams are nightmares. The people are gone in over their heads and bought homes as their incomes to meet and never repaid. The house is now "right" to the level I've always been, an increase of 3-5% per annum of the value back. The problem now is that rising revenues, but still less because of the slowdown in property prices "should be" more like this ... Correction last even longer.
Subprime resources are below the most important rule. Investment in low quality. It happened when U.S. financial institutions have the money to the mortgage interest rates are extremely high given for people who know people at high risk vulnerable groups "with a history of bad credit who do not anywhere else on a mortgage.
They are a lot of these types of mortgages in the same package and other financial institutions sold. It is estimated that 50% were bought by European banks and purchased a smaller percentage of institutions in Asia. It sold very easily, because it seemed a good source of income in the short term, and they were. In the long run, however, was a complete disaster.
Finally, people from "high risk" is "high risk" and pay the loans repaid, banks quickly realized that an agreement was very bad. They had borrowed more than they are in their funds.
When the public realized that losing a way of money from banks because of the high-risk "sub-prime lending," said theand everyone went into the bank and demanded money. It crashed a few banks and they can block more.
Market correction Wikipedia:
http://en.wikipedia.org/wiki/Bear_market ...
A market correction is sometimes defined as a decrease of 10% to 20% in a short period of time. Could be identified reason for the low price and valuation, market corrections (if possible, to as such) a good opportunity for investors value strategy. E-money when shares are sold, if all purchase prices are low, and therefore P / bottom. So you can "stock" undervalued with potential for profit.
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