The mortgage industry of the United States is the main financial sector. The federal government created several programs, or government sponsored entities, to encourage mortgage lending, build and encourage home ownership. These programs include the Government National Mortgage Association (known as Ginnie Mae), the Federal National Mortgage Association (known as Fannie Mae) and the Federal Home Loan Mortgage Corporation (known as Freddie Mac).
The subprime mortgage crisis is one of the first indicators of the financial crisis of 2007-2010, which is characterized by an increase in subprime mortgage delinquencies and foreclosures, and a decrease resulting from securities that support the mortgage. The previous savings and loan crises of the 1980s and 1990s as well as the national mortgage crisis of the 1930s also arose mainly from unhealthy mortgage lending. The mortgage crisis has led to an increase in foreclosures, leading to a 2010 United States confiscation crisis.
Video Mortgage industry of the United States
Mortgage lenders
Mortgage lending is a major sector financing in the United States, and many guidelines to be met are suitable loans to satisfy investors and mortgage insurance companies. Mortgages are commercial paper and can be delivered and freely given to other holders. In the US, the Federal government makes several programs, or government-sponsored entities, to encourage mortgage lending, construction, and encourage home ownership. These programs include the Government National Mortgage Association (known as Ginnie Mae), the Federal National Mortgage Association (known as Fannie Mae) and the Federal Home Loan Mortgage Corporation (known as Freddie Mac). These programs work by offering mortgage payment guarantees on certain loans. These loans are then securitized and issued at slightly lower interest rates to investors, and are known as mortgage backed securities (MBS). After this securitization is sometimes called "agency paper" or "agency bond". Whether or not a loan is appropriate depends on the size and set of guidelines applied in the automated guarantee system. Unsuitable mortgage loans that can not be sold to Fannie or Freddie are "jumbo" or "subprime", and can also be packaged into mortgage-backed securities. Some companies, called correspondent lenders, sell all or most of their covered loans to these investors, accepting some risks to publish them. They often offer niche loans at higher prices that investors do not want to come from.
Securitization allows banks to quickly spend their money on other borrowers (including in the form of mortgages) and thereby create more mortgages than banks with the amount they have on deposit. This in turn allows the public to use this mortgage to buy a home, something the government wants to encourage. Investors in adjusting loans, meanwhile, earn low-risk income with higher interest rates (essentially mortgage rates, minus bank deductions and GSE) than they can get from most other bonds. Securitization has grown tremendously in the last 10 years as a result of the widespread deployment of technology in the world of mortgage lending. For borrowers with excellent credit, government loans and an ideal profile, this securitization keeps interest rates almost artificially low, since the pool of funds used to make new loans can be refreshed faster than in previous years, allowing more capital outflows fast from investor to borrower without as much personal business bond as in the past.
An increase in the number of borrowing causes (among other factors) to the housing bubble of the United States 2000-2006. The growth of light-weighted derivative instruments based on mortgage-backed securities, such as bond and credit default swaps, is widely reported as the main contributing factor behind the 2007 subprime mortgage finance crisis. As a result of the housing bubble, many banks, including Fannie Mae, a stricter lending guide making it much more difficult to get a loan.
Fake mortgage lending
There are concerns in the US that consumers are often the victims of malignant mortgage lending [1]. The main concern is that mortgage lenders and brokers, operating legally, find a loophole in the law to earn additional profits. A common scenario is that the terms of the loan are outside the means of borrowers who are uninformed and uneducated. The borrower makes a certain amount of interest and principal payments, and then fails to pay. The lender then takes the property and recover the loan amount, and also keeps the interest and principal payments, as well as the loan origination fees.
Misbehavior
As of early 2008, 5.6% of all mortgages in the United States are in arrears. By the end of the first quarter the rate has increased, covering 6.4% of residential properties. This amount does not include 2.5% of houses in foreclosure.
Maps Mortgage industry of the United States
AS. mortgage process
Origination
In the US, the process in which the mortgage is secured by the borrower is called origination. This involves borrowers who apply for loans and documentation related to their financial history and/or credit history to the guarantor, which is usually the bank. Sometimes, a third party is involved, like a mortgage broker. This entity retrieves the borrower's information and reviews a number of creditors, choosing the one that best suits the needs of the consumer. Origination is governed by law including the Truth in Lending Act and the Real Estate Settlement Procedures Act (1974). Credit scores are often used, and this should be in accordance with the Fair Credit Reporting Act. In addition, various state laws may apply. The guarantor accepts the application and determines whether the loan is acceptable. If the underwriter is not satisfied with the documentation provided by the borrower, additional documentation and conditions may apply, the so-called conditions.
Documentation and credit history can be used to group loans into high-quality A-paper, Alt-A, and subprime. Loans can also be categorized based on whether there is complete documentation, alternative documentation, or little or no documentation, with extremely extreme "no-job income" loans called "NINJA" loans. There was no documentary loan that was popular in early 2000, but was largely removed following the subprime mortgage crisis. Low pledge loans carry a higher interest rate and are theoretically available only to borrowers with excellent credit and extra income that may be difficult to document (eg, entrepreneurial income). As of July 2010, unsecured loans were reportedly offered, but more selective and with higher payment terms (eg, 40%).
The following documents are usually required for a review of the traditional person in charge. Over the past few years, the use of statistical models of "automated underwriting" has reduced the amount of documentation required from many borrowers. Such automated underwriting machines include Freddie Mac's "Loan Prospector" and Fannie Mae's "Underwriter Desktop." For those borrowers who have excellent credit positions and debt positions, there may be virtually no documentation of income or assets required at all. Many of these documents are also not required for loans without documents and low loans.
- Credit Report
- 1003 - Uniform Residential Lending Application
- 1004 - Residential Appraisal Report
- 1005 - Job Verification (VOE)
- 1006 - Deposit Verification (VOD)
- 1007 - Daily Family Rent Schedule
- 1008 - Summary of Delivery
- A copy of the current home deed
- Federal income tax records for the past two years
- Verify Mortgage (VOM) or Payment Verification (VOP)
- Authority of Borrower
- Sales Purchase Agreement
- 1084A and 1084B (Own Income Analysis) and 1088 (Comparative Income Analysis) - are used if the borrower is self-employed
Closing costs
In addition to the down payment, the final agreement of the mortgage includes closing costs which include fees for "points" to lower interest rates, application fees, credit checks, attorney fees, title insurance, appraisal fees, inspection fees, guarantee fees and other possible costs. These fees can sometimes be financed and added to the mortgage amount. In 2010, one survey estimated that the average total closing cost of the United States at home $ 200,000 was $ 3,741.
Market index
Common indices in the US include the US Prime Rate, the London Interbank Offered Rate (LIBOR), and the Treasury Index ("T-Bill"); other indexes are in use but less popular.
In the US, the fixed interest rate mortgage period is usually up to 30 years (15 and 30 are the most common), although longer terms may be offered under certain circumstances.
International comparison
Mortgages with fixed interest rates are common in the United States, unlike most Western Europe where the level of mortgages with variable rates is more common. The United States has a level of home ownership comparable to Europe, but the overall default rate is lower in Europe than in the United States. Mortgage lending relies more on the secondary mortgage market and less on official government guarantees supported by closed bonds and deposits. Paying pre-payment is not recommended by major organizational guarantee requirements such as Fannie Mae and Freddie Mac. Mortgage loans are often not nonresresidential debt, unlike most of the world.
See also
- Underwriting mortgages in the United States
- List of US mortgage terms
- Savings and Loans Association
References
Source of the article : Wikipedia
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