Personal Finance: foreclosures, mortgages, banks and you
With the current crisis in home sales, both new and existing, made worse by a still high and alarming number of foreclosures, it really makes sense to look at mortgages: first, from the standpoint of getting a mortgage to buy either an existing or a new home; and second, trying to refinance your mortgage on your existing home.
To begin with, even though many major banks have received billions and billions of federal (taxpayer’s) dollars in “bailout funds,” both to provide money in loans for new mortgages, while providing money to refinance existing loans or to help those facing foreclosure to refinance their “subprime” mortgages and become current again under more appropriate interest rate conditions, too many such banks are still not making such loans, or they are making the application process for those loans quite difficult, as well. Interestingly, as more and more institutions are beginning to understand, the banks that created these subprime mortgages and the international financial crisis that followed are now the ones standing in the way of solving that crisis.
Why would I say that? Quite simply, because these same banks who wanted to “cash in” on the nearly white-hot home sales of the past 4-5 years, created these subprime mortgages to make their terms more attractive to home buyers who, otherwise, wouldn’t have qualified for mortgage loans under those same banks’ existing loan/collateral policies. At the bottom line, the banks that created the subprime crisis can also solve it by changing their policies again to allow those mortgagees facing foreclosure to renegotiate their loans to more favorable, and affordable, terms.
In so doing, can you and the banks even imagine the absolutely positive PR that the banks would accrue by being perceived as “good guys,” for a change, rather than the image of the big, greedy, monsters they are now being perceived as? Instead, I guess they would prefer to keep on foreclosing and be “stuck” holding homes that are not providing any financial return in a home sales market where homes can’t readily be sold or, if they are, must be sold at substantial losses. I guess that our elected politicians in Washington are also too myopic (or otherwise) to see this, as well.
What can you do, then, as an average American to help solve this issue, both for yourself and for our country and the world? To begin with, you can start calling and writing (and keep on doing so with your relatives and friends) your elected congressional and senatorial representatives in Washington to hold their feet to the fire for more appropriate and consumer-friendly banking legislation; write letters to the editor and call your local TV news operations to keep them “on the story;” and talk to your bank about refinancing your mortgage to get better and more affordable terms, especially if you are near or at a foreclosure stage. If they are reluctant to do so, then consider transferring your banking accounts to another bank that may be more accommodating. It’s still a competitive world out there and such actions as possibly transferring your bank accounts may open up more favorable discussions. It’s certainly worth a try.
Finally, if you are considering buying a new or existing home, you should really “shop” for the best mortgage rate. Let your fingers do the walking through your local telephone directory and find the bank that’ll give you the best interest rate and terms. Remember, at the bottom line, you are “buying” money and you want to get it at the right price.
Moreover, consider making your mortgage for a shorter period of time, as well. Look at 15, 20, and 30-year mortgage rates and calculations. You may be quite pleasantly surprised at the monthly payment amounts, while saving even larger amounts of interest over your mortgage payback period. Next week, we’ll provide some of those actual math comparisons.
Paul Rendine is a Financial Consultant with more than 30 years of experience. You can contact him at quoteman3@aol.com with any comments or questions.