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Mortgages in sentence

375 examples of Mortgages in a sentence

Third, we could adopt an alternative approach that directly reduces the value of underwater mortgages.
Start with the proposal made by Martin Feldstein, who recommends a trade: the government should reduce the value of mortgages when they are sufficiently underwater, with the government and the banks splitting the losses; in exchange, the borrower must agree that the new loan becomes “full recourse.”
Realistically assessed, the full downside legal risks to financial institutions are in excess of $1 trillion – particularly if it can be demonstrated that the “mortgage-backed securities” sold to investors were not backed by mortgages at all, because the proper legal paperwork was never done.
Any settlement should also include the banks’ explicit agreement that they will support modifying America’s bankruptcy law to enable inclusion of mortgages in the usual court-run processes.
The remedy here is not to break up the banks, but to limit bank loans to this sector – say, by forcing them to hold a certain proportion of mortgages on their books, and by increasing the capital that needs to be held against loans for commercial real estate.
The economy grew, but mainly because American families were persuaded to take on more debt, refinancing their mortgages and spending some of the proceeds.
To get more people to borrow more money, credit standards were lowered, fueling growth in so-called “subprime” mortgages.
Moreover, new products were invented, which lowered upfront payments, making it easier for individuals to take bigger mortgages.
Some mortgages even had negative amortization: payments did not cover the interest due, so every month the debt grew more.
Fixed mortgages, with interest rates at 6%, were replaced with variable-rate mortgages, whose interest payments were tied to the lower short-term T-bill rates.
And Alan Greenspan egged them to pile on the risk by encouraging these variable-rate mortgages.
On February 23, 2004, he pointed out that “many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade.”
Did he not think about what would happen to poor Americans with variable-rate mortgages if interest rates rose, as they almost surely would?
Fortunately, most Americans did not follow Greenspan’s advice to switch to variable-rate mortgages.
But even as short-term interest rates began to rise, the day of reckoning was postponed, as new borrowers could obtain fixed-rate mortgages at interest rates that were not increasing.
The housing price bubble eventually broke, and, with prices declining, some have discovered that their mortgages are larger than the value of their house.
Too many Americans built no cushion into their budgets, and mortgage companies, focusing on the fees generated by new mortgages, did not encourage them to do so.
Politics aside, property bubbles leave in their wake a legacy of debt and excess capacity in real estate that is not easily rectified – especially when politically connected banks resist restructuring mortgages.
With the government assuming credit risk, mortgages become as safe as government bonds of comparable maturity.
Hence, the Fed’s intervention in the housing market is really an intervention in the government bond market; the purported “switch” from buying mortgages to buying government bonds is of little significance.
Securitization – putting large numbers of mortgages together to be sold to pension funds and investors around the world – worked only because there were rating agencies that were trusted to ensure that mortgage loans were given to people who would repay them.
For one out of four US mortgages, the debt exceeds the home’s value.
What is needed is a quick write-down of the value of the mortgages.
In Spain and Ireland, though, the gap reflected a construction boom; euro accession suddenly gave people access to much cheaper mortgages.
And then those who bought these mortgages never bothered to investigate their underlying value – a spectacular abdication of managerial responsibility.
Lower interest rates worked (a little), but for the most part by encouraging households to refinance their mortgages, not by stimulating investment.
But some US banks, including Bank of America and Citi, are still vulnerable, with considerable toxic assets (mainly related to home mortgages) on their balance sheets.
Even the relative affordability of houses doesn’t change much, because lower interest rates make larger mortgages possible.
Learning from LehmanHONG KONG – When the US investment bank Lehman Brothers collapsed five years ago, emerging-market economies did not hold many of the toxic financial assets – mainly American subprime mortgages – that fueled the subsequent global financial crisis.
But house prices have since fallen some 40% on average, leaving one-third of homeowners with mortgages owing more than their house is worth.
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