I sure hope it helps America to realize that we should not attempt to buy everything we want rather than what we need.  The idea that everyone should own a home is just ludicrous.  Not only own a home, but an extremely nice home.  I think that this financial disaster we are going through will make sure this does not happen again.

Well, Mr. Lewis, I hope you enjoyed your reign as the most unsuccessful Chief Executive in the history of big banks.  You not only drove the nations largest bank into the ground, you repeatedly lied to the American public.  In March you told us that you were going to pay back TARP funds by the end of the year and today we learn that Bank of America will need another $34 billion?  I’m not good with numbers, but how the hell are you going to pay funds back when you need more?

When Ken Lewis and Bank of America decided to sink their money into Countrywide and Merrill Lynch, I think any right minded American citizen knew this company was doomed.  Countrywide was eyeball deep in the subprime mortgage crisis yet you decided to buy it outright?  That makes perfect sense.  Then after you have made this enormous mistake, you decide to buy a company who’s CEO spends $80,000 on area rugs for his office.

Honestly Ken Lewis, I can’t say that I didn’t see it coming.  I hope you enjoy your infamous reign as the supreme misfit CEO.  I guess we should thank you though as you are part of the reason mortgage rates will stay below 5% for quite some time.

The mindset that something that goes up will not come does has caused the global economy to wither.  After decades of allowing loans to the wrong types of borrowers, the whole world is suffering.  When the largest economy on the globe takes a hit everywill will see the effects.  Unfortunately, it wasn’t just a “hit” that America took, it was repeated haymakers to the jaw.  While the entire meltdown was not the fault of subprime loans, much of it was.

Subprime loans kicked off the global meltdown when subprime borrowers could not make their payments and were foreclosed upon.  It was then a ripple affect that accelerated causing the stock market to fall off a ledge.  A large amount of the money on Wall Street was involved in real estate in some form or fashion.  With the value of homes dropping like a rock, it was only time before we saw everything else take a nose dive.  That is where we are today and ultimately, we can blame the beginning of this financial crisis on subprime loans.

This is the first week since January that Subprime Blogger saw a drastic variation in my prediction and the actual mortgage rate surveys.  This just goes to show you that predicting moretgage rates is almost possible.  Make sure to check back in Monday as I attempt to predict mortgage rates next week; hopefully I will get back on track next week!

Mortgage Rate Predictions

HSBC hopes to raise an additional $4 billion by selling London, New York and Paris offices.  What a novel idea, not only get rid of some of the excess fluff as far as employees, do the same thing as far as real estate.  Maybe we can get the board of directors of HSBC to visit all the major worldwide banks and give them a lesson on how to run a business without government help, aka sell all the excess shit you’ve got.

We will see how this works out for HSBC, who got deeply involved in the subprime mortgage crisis, but at least they are taking action rather than waiting around for the government to bail them out.

After three very successful weeks of mortgage rate predictions, I am going to go out on a ledge and make the prediction that mortgage rates will bounce higher.  I do not think they will bounce MUCH higher, but we will see a stop to the steady declines.  No need to worry as the overall trend is still down but this week, we will see rates up a tad.

30 year fixed rate mortgage – 4.86%

Freddie Mac released their weekly survey last week and it showed……4.87%.  I am definitely on a roll as most of the analysts are predicting for rates to go under 4.5%.  If you want a true predictor of mortgage rates, make sure to check out Subprime Blogger each money.

The troubling thought is that the interest starts off very high for many of these cards; sometimes as high as 30% apr.  If you have built up $5,000 on your credit card and the first month after the initial grace period is charged at 30% apr, you will be paying $125 a month solely in interest.  The monthly minimum payment will be below the amount of the finance charge and sadly, many people will pay that minimum and neglect actually paying off any of the principal.

It is wise to make sure an pay off the majority of any card with a high interest early and often.  Unless you have been a great investor, you are not going to get an investment return higher than the rate on a subprime credit card.

Related Posts:

Subprime Lending in a Nutshell

Subprime – What Exactly is Subprime?

Subprime – The Cause of the Financial Crisis

Subprime is considered to be an individual or entity that is below the requirements to meet prime borrowing guidelines.  Those who are subprime have a heightened risk of default due to previous loan default or delinquency.  They may also have filed for bankruptcy of have limited debt experience.  There is no true definition, but those with a FICO credit score below 650 are considered on the border for a subprime loan.

In 2006, prior to the financial crisis, the Wall Street Journal reported that 61% of all borrowers receiving subprime loans had credit scores high enough to qualify for conventional, prime loans.  This is quite disturbing to think about when we look at our current financial situation.  If those borrowers had done their research and signed conventional, lower rate loans, it is likely that many of the problems we are currently having would not exist.  There is no way to determine what would happen, but if 61% of borrowers saved at least one percentage point on their mortgages, BILLIONS of dollars would have been saved over the last two years.

Subprime started in 1993 when lenders realized the high demand for loans to high-risk borrowers.  Statistically, one fourth of Americans have impaired credit or have limited debt experience.  The market for subprime loans is quite large and many lenders felt the need to jump on this opportunity.  The lenders knew that they were giving risky borrowers with little debt responsibilty large sums of money.  They also knew that these borrowers had a good chance to default.  This is why we should have no sympathy towards the lenders.  They knew what they were getting into and they should go bankrupt!

Subprime Column

Subprime – The Cause of This Crisis?

Subprime mortgage – what are my options explained that the first step in getting a subprime mortgage is to get a credit score.  After you have gotten a reputable credit score you need to decide what your options are. Individual credit scores are analyzed as follows:

lower than 539 – very poor credit
between 540 and 589 – poor credit
between 590 and 669 – fair credit
between 670 and 729 – good credit
above the 730 – very good credit

A credit score of 650 is currently considered being on the border for a subprime loan.  If your rating is below 650 you need to decide if you can increase that score in the near future.  If you have the financial means to pay off debt before getting a subprime mortgage, that would probably be the best idea.  In the long run, you will save more by increasing your credit score before getting a mortgage.  It would be wise to see down and see where your financial status will be in the next six to twelve months.  If you cannot lower your overall debt and increase your credit score, you should go forth with contacting a lender to get a subprime mortgage.  If you can lower your debt and increase your score, create a spreadsheet to get this done and do it!

Tomorrow we will show you some numbers on how you can increase your credit score and lower your overall mortgage payment.

Subprime Mortgage Series

Subprime Mortgage – What are My Options