The big R

Over here this is the way they say you can afford a house. Say if you want to buy a house over 25 years, after reckoning your earnings they say you cannot afford it. But if you were to take the loan out over 40 years then you could afford it at present interest rates. When the rates go up you find that you cannot afford the loan and so you hand back the keys. Then the morgage company sells your house at auction if it cannot sell it thro the normal estate agent route. This brings in less money and you are then responsible for the loss. So lets say the loss is $10,000, you have to pay that amount to the morgage company plus interest which is higher than the normal interest rate. Usually 5 to 7% above the base rate.

Around Christmas time the Reps were saying their was no problems and the economy was strong even tho the dollar was weak. Three weeks later the 5hit has hit the fan and George is having to give out some cash to stop you slipping into a deep recession. Funny thing is that the dollar has improved since then, I would get 10 cents less per pound today than if I had changed my money around 20th December.

So is it just a bribe, you voted us in 2000 and 2004 and we are giving you a hand out to vote us in again in 2008. When was the last time a Dem President had to do this. I heard tonight that the last time was when Daddy Bush had to do the same thing. I could be wrong, please correct me if I am.

Most of the major banks do not use standard real estate appraisals for a large percentage of their residential loans. In the last 10 years or so, most large lenders have gone to a system called an AVM (Automated Valuation Model). In a nutshell it is a computer generated value for your home and the banks love them because it saves them about $400 per loan. That's a lot of cabbage. Another habit the banks got into was ordering what we call a 2055 Drive By appraisal. In this appraisal there is no interior observation of the home, it is from the street only. So in their attempts to save money the banks have probably cost themselves more in the long run.

Thank you for that DB. I was under the impression that the Estate agents and their agents were just raking in the money. I had heard of some bad apples but not what you have just explained. If what you say is true then the banks have bought this on themselves. Over here not every bank is a morgage lender but they do buy up morgages and hope to make money on them. An old lady took out a loan on her house to see her thro to her old age, the house already was hers, but she thought that if she remorgaged it then she would have spare cash. The firm she borrowed from went bust after failing to pay the true loanee the money the old lady was paying them each month. The true loanee called in the courts and she was evicted. The TV company traced the loan and the old dear was surprised to find out the true loanee was a little bank in the Mid West.

The house went to auction and the bank ended up with less money than it first forked out. Multiply this by the number of foreclosures and you can then see how they lost out big style.

But like I have said before folk got greedy and tried to live upto their neighbours way of living.