RESOURCE CENTER REAL ESTATE GLOSSARY LISTINGS

 I’m mad at President Bush. It isn’t the first time. But never before have I actually agreed with the guy and been mad at him.

I think this time he’s telling the truth. So why am I mad? Because he didn’t explain to all of us exactly what’s going on in our economy.

 

I’ve spent the last week answering people’s questions, listening to all the talking media heads, reading and cobbling together any piece of information I can decipher to help me understand. And I think I get it. So I’m going to try to explain.

 

Once upon a time, not so long ago, we Americans went a little house crazy. Nothing terribly unique there. After all, home ownership is the American Dream. At the same time, in an effort to stimulate the economy, the Federal Reserve kept interest rates low. While this did not directly impact rates on home loans, it did mean the banks were making less money elsewhere. So, they did what any business does when its profit margin is slim (see WalMart); they concentrated on volume.

 

Meanwhile, many of the restrictions on lending; either to each other or us were eased. So, the banks were able to offer us more exotic types of loans: loans with no money down, interest only loans, stated income loans, 80-10-10 loans which didn’t require mortgage insurance, and adjustable rate mortgages (ARM). And in many cases, mortgage insurance was no longer required for borrowers with little equity in a property; making the purchase even more affordable.

 

 

We liked houses. With low interest rates, and no longer having to scrimp and save for a down payment. Many of us who didn’t think we could afford a house suddenly discovered we could. So we went shopping. Read the rest of this entry »

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