Real Estate Finance Article Discussion
Real Estate Finance Article Discussion Fin 4440
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This 5 page Class Notes was uploaded by Anna Notetaker on Thursday September 8, 2016. The Class Notes belongs to Fin 4440 at Middle Tennessee State University taught by Phil A Seagraves in Fall 2016. Since its upload, it has received 15 views.
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Date Created: 09/08/16
Real Estate Finance Week 3 What Do These Articles have in Common? Discussion of the Housing Market Crash The effects on the economy The effects on the Housing Market and the prices Discussions on the different types of Loans and the changes Real Estate Finance: Articles Anna Jacobs FIN 4440 Sept. 6, 2016 Fannie Mae and Freddie Mac First-Time Buyers Program FHA Loans and VA Loans Interest Rate Subprime Loan Crisis: What is Happening? Subprime loans are loans that hare made to individuals with bad credit. These loans created issues and the market crash in the mid-2000. Bad Credit loans are going sour again – Individuals are having a hard time paying loan payments, which essentially foreshadows the future. Finances are beginning to dry up and loans are now going unpaid. Example: Individuals are not able to pay auto loans, which is now leading to other loans not being paid - mortgages, student loans, credit card debt, etc. Subprime Loan Crisis: Why? First, lenders were giving loans out to individuals with no credit and bad credit, which essentially resulted in foreclosures and soon the housing market crashed. Second, loans are still being given to individuals that do not have great credit or finances to begin with – loan payments are not being held off. In this article, subprime loans are becoming most popular in the auto industry. All in all, loans are not being paid back in all categories – student, auto, and home – because lenders are giving loans to individuals that cannot afford the payments. Subprime Loan Crisis: What is Missing? In this article, I believe the following is missing: Information on how Subprime Loans are truly affecting the Housing Market today. Comparison of the 2008 Housing Market and Today’s Market. Percentage of Housing Prices Falling. Process of gaining a loan if the individual has bad credit. Subprime Loan Crisis: What should be Done? I believe that more restrictions should be given to loans when it comes to Subprime Loans. First, the red flag should be the fact that these individuals have no credit or bad credit. Second, proof of income should be a requirement for the individuals. Example: Car Loan Process with the Bank Third, individuals should be educated on loans, especially first-time users. Home Equity Loans: What is Happening? Before the Housing Market Crash, were using these loans to buy luxury items – vehicles, pools, etc. – items that only depreciated or gave no value to the home. Today, individuals are putting more money into their home. They are seeing their home as an investment piece rather than just a place to stay. These types of loans are known as HELOCS . Home Equity Loans: Why? The reason behind individuals now taking out loans for improvements is the following facts: Individuals are staying in homes longer. Rather than buying a home as an upgrade, improvements to current home is done. Correct investments into the home can improve the value. Home Equity Loans: What is Missing? In this article, I believe the following is missing: More details should be given on why loans won’t get individuals in trouble like before the Market Housing Crash. More information regarding HELOC Loans. Information regarding how the economy is affected by individuals staying in their homes longer. Home Equity Loan: What should be Done? I believe smarter strategies should be given when it comes to the types of Home Loans and how they affect the individual. I also believe that individuals should be educated more on how investments is important. First, individuals must realize that their home is an investment property that can gain value. Second, individuals must be educated in the types of investments that will improve the value. Third, improvements should not exceed the value of the homes in the market area. Another Housing Crisis: What is Happening? Homes were selling for prices way less than paid before because of the Housing Market Crash. Currently, a rebound is occurring in both the prices of homes and in the economy. Fannie Mae and Freddie Mac created a program that was solely for individuals whom where first-home buyers. FHA loans are now are new and improved with new restrictions, which gives individuals potential of owning a home. Another Housing Crisis: Why? The Economy and the Housing Market has both improved over time because of new lending programs. These lending programs have become stricter because of the past Housing Market Crash. Lower percentages now in interest for loans along with zero or low down payments. Freddie Mac and Fannie Mae has created a program that allows first- time buyers to have a low down payment - over time, this could potentially create issues with the economy and Housing Market once again. Another Housing Crisis: What is Missing? In this article, I believe the following information is missing: How and if unique situations affect gaining a loan . Example: Multi-generational households If the current economy and Housing Market is mirroring the early 2000’s Housing Crash. What is the other criteria for low interest loans for homes? Another Housing Crisis: What should be Done? I believe that individuals should be educated more on how loans work and the process of payments towards their mortgage. First, individuals must realize that their home is an investment property that can gain value. Second, individuals must be educated in the types of loans that are available to them based on their credit and educated on what they can and cannot afford. Third, the process of payments should be known along with the effects of not paying these payments regarding their home. Fourth, individuals must be educated specifically the difference between a FHA and VA loan. Mortgage Borrowers: What is Happening? Difficulties are occurring in the Mortgage Market – prices are peaking, which is causing a ballooning in payment at some Lending Companies. Individuals are having to pay a large amount of money over a short period of time as a result of the ballooning. Mortgage Borrowers: Why? Individuals are now seeking Fixed Rate Mortgages. This means that the individual and the lending company agrees on a set price. Individuals are now wanting a Fixed Rate Mortgage because they want relevancy and stability. They are seeking a way to avoid interest rate fluctuations. Mortgage Borrowers: What is Missing? In this article, I believe it is missing the following information: Comparison to the United States. What are the rehabilitation packages the customers have agreed upon with the Loan Companies? How and if this affects the United States regarding our economy and ways of doing the loan process with customers. Mortgage Borrowers: What should be Done? I believe that Fixed Mortgage Rates should become the norm with all loans. If an individual gets a loan that is going to balloon over time, they should be aware of it from the beginning that the prices will fluctuate. I also believe that all individuals should be educated on the consequences on not paying their loans or fully understanding the requirements of the loans. Often individuals think paying a loan is all they have to do, but depending on the loan will depend on the requirements – some loans have improvement standards as well as requirements over time like refinancing and appraisals. Conclusion: All in all, loans are not being paid back in all categories – student, auto, home – because lenders are giving loans to individuals that cannot afford the payments. Freddie Mac and Fannie Mae has created a program that allows first-time buyers to have a low down payment - over time, this could potentially create issues with the economy and Housing Market once again. In the end, I believe that all individuals should be educated on the consequences on not paying their loans or fully understanding the requirements of the loans. References: http://thedailycoin.org/2016/08/30/the-subprime-loan-crisis-is-backheres- what-it-could-mean-for-the-economy/ http://www.nbcnews.com/business/real-estate/more-homeowners-want-tap- their-homes-cash-today-n641556 http://www.nation.co.ke/business/Mortgage-borrowers-opt-for-fixed-interest- rates/996-3366742-b6hr2/index.html http://money.usnews.com/money/personal-finance/articles/2016-05-12/are- we-heading-for-another-housing-crisis
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