Have Remortgages, Mortgages And Secured Loans Really Improved?
by quapan
The news about the home loans industry in the recession varied all the time.
The original news at the beginning of the credit crunch was accurate when it was reported that these three home loan products were very much in the decline
The reason for that of course was obvious, as apart from people being unsure of their financial futures, the underwriting of lenders became so restricted that even those who wanted a mortgage, remortgage or secured loan were unable to obtain them.
The underwriting for mortgages, remortgages and secured loans used to be very lax.
It was possible to obtain a 100% mortgage from a number of lenders while the Northern Rock had 125% deals.
It claimed that the mortgages or remortgages were at 100% and the remainder was on a personal loan basis. However this was not the case, as the sum granted over this was secured on the property and added to the total borrowings of the applicant.
At that point self declarations of income were available for the self employed which meant that the applicants for remortgages, mortgages and secured loans simply declared their own earnings on a business letter head or on a plain sheet of paper accompanied by a business card.
Secured loans were extremely popular, with 100% LTV plans right up to 125% LTV available from a number of lenders.
Therefore it was apparent that the acceptances of appplicants for these three loans declined as self declarations were totally abolished for mortgages and remortgages and equity margins were greatly reduced to a maximum of 85% with most mortgage lenders, while a few were pepared to lend up to to 90%.
Secured loans are now advanced at 75% for the self employed and 85% for those in employment.
One lender is pepared to accept self declarations for secured loans at 50% LTV.
The reason for applications declining is therefoe obvious, but what is not so easy to understand is that from 2007 until the end of the recession in 2010, reports in the press and on television abounded with contradictory reports, stating one day that remortgages and mortgages were delining, and then not long after we were told by the same sources that they were very much on the up with more people applying.
Now in October, months after the recession, the same thing seems to be happening with reports that the home loans industry is showing great signs of improvement, to be told days later that mortgages were again in decline as the house prices slump again.
The applications for remortgages have not been as low for ten years.
It is to be wondered if there have been any improvements to home loans since the recession ended.
I show using props my take on how Mortgage Backed Securities work, and why it is such a mess. I could be mistaken in my details, but I think I get the basic idea. They are called “mortgage backed securities” because the banks sell the loans to corporations that bundle them together, and then issue stock. People own stocks, which contain these mortgages in them. A more boring explanation: en.wikipedia.org
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@sstoy10 Thanks for the great feedback, my mission on here is to be able to explain what I learned to others.
Great demonstration, I definitely feel like I learned something and understand things better now. Thank you!
I used to think the same thing, but he mentioned on another vid that this is his Spare room….used for storage! lol!
@PressForFreedom yea, he is. Thank you for tipping me to this channel.
@earthwayexperience, yea, I was wondering why Gerald was so confident those things were crap, and now I know why!
@LysSpooner I was going to use a blender at first, to throw those little bits of paper, but I got tired of making more props.
I think you could do something with a microwave oven or garbage disposal for this demo
Thanks for the info…I did learn something!
I have been wondering what all the derivatives,mortgage backed securities etc mean….Gerald Celente tosses around the words…so now I understand what they are – ok getting a feeling for what they are (>:
great
@connectingdots1 cool, when I start traveling again it would be good to meet people I interact with on youtube.
Nice vid man this is hilarious!
great video, now go clean your living room LOL u messy bastard
Almost a childishly simple explanation, but I mean that in a good way. I doubt I could understand this stuff without an example like this, thanks
Very cool, I can picture you doing a similar demo for a software program or such for a company. Worth your weight in gold!
Excellent video&info as per usual…keep it up Bro.
And btw,let me know when you come up to Canada,we’ll set up an interview or something of the sorts.
Great explanation, I wish this kind of stuff was being taught in our schools today.
I always learn something from your vids, Thanks!
Excellent!
Def glass half empty…
Also the size of the derivatives is mindblowingly massive.
If I remember it is thought to be around 600 Tril $ (?) … when the whole world GDP is only 50 (?) ???
Somebody somewhere is going to get the wrong end of this deal?!
One of your best yet though!
Well put.
Thanks for explaining.
Thanks for sharing
The ten dollar bill should have gone in the China cup lol!
Instant Classic-!!!!! Should be required viewing for college students in Finance 101
I learned you are messy
)
All 5
haha, ur enthusiasm is quality! 5*
@micidragan Most people I know with 401ks have no idea what exactly is in them. Lots of this crap ends up in mutual funds, because these loans are owned by corporations who issue stock (securities.) So they will end up being “suckers.” I tell them all to buy gold/silver and they used to think i was crazy…
@micidragan They split the loans into different groups. The riskiest group takes the losses first, but they also have the highest potential return. The safest group has the lowest rate of return, but they are the first ones to get paid. 401k participant get to choose between “risky but higher paying” funds and “safe but lower paying” funds. Advisers tell young people to do risky investments, because the market always goes up in the long run.