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What is Chapter 13?
Chapter 13 bankruptcy is one of the most often used. It is similar to a Chapter 7, but it does not have income limits. It involves liquidating the assets of the debtor and making payment arrangements over a longer period of time than Chapter 7. Chapter 13 allows a debtor to propose a schedule for repaying debts that seems reasonable to the bankruptcy judge. It is for individuals who can prove steady income. Often Chapter 7 is filed by people who are impoverished, while Chapter 13 is the middle-to-upper class equivalent. Continue reading...
What is a Mortgagor?
The mortgagor is the borrower in a mortgagor/mortgagee relationship, where the mortgagee is the lending institution that makes the mortgage loan. Mortgages are used to purchase real property, usually single family homes. The purchase of a home with a mortgage and the payments on the mortgage are one of the largest financial decisions or obligations that a mortgagor will ever make. If a mortgagor is delinquent on payments, he or she might be categorized as a home debtor, and the loan would be subject to foreclosure. If there is a foreclosure, the bank or lender will reposes the house, evict the former owner, and sell the house as quickly as possible, sometimes through an auction. Continue reading...
What is a Mortgage?
When a mortgage loan is made to a consumer, the bank or loan institution is the mortgagee, while the consumer is the mortgagor. Mortgages are long term loans secured by the real property of the individual borrowing the money, and they are generally used for homes, called home mortgages. The lending institution, which might be a bank or a mortgage company, is the mortgagee, lending money to the homebuyer, who is the mortgagor. Continue reading...
What is a Balloon Payment?
A balloon payment is a lump sum due at the end of a balloon loan term. In a balloon loan arrangement, the payment schedule does not amortize the entire amount of the loan, but instead allows for lower installment payments by holding a lump-sum payment until the end of the term. These terms are usually relatively short, such as 5 years, and often these arrangements are taken by individuals or consumers who plan on refinancing before the balloon payment comes due. Continue reading...
What is a Mortgage Forbearance Agreement?
In the event that a borrower is having issues making mortgage payments on time, they may try to seek a mortgage forbearance agreement to delay the foreclosure process. The mortgage forbearance agreement would specify the plan for resuming mortgage payments on time, and is designed to be a temporary solution to an unforeseen issue with the borrower (unemployment, health issues). Continue reading...
What should I look for in a good Mortgage Calculator?
Mortgage payment arrangements can be engineered in a number of ways, and a good mortgage calculator will give you enough flexibility to input the terms of your own. Ideally a mortgage calculator will be flexible enough to let you input the following: an adjustable rate, a rate cap, optional mortgage “acceleration” payments, balloon payments and resets, impound account calculations which take into account the property taxes and insurance you pay, as well as calculations which take any origination fees into account. Continue reading...
What is a No-Fee Mortgage?
No-fee mortgages are synonymous with no-cost mortgages, which might apply to first mortgages or refinancing arrangements where the closing costs are paid by the lender, broker, or bank, but a higher interest rate is charged on the loan as a means of recouping those waived fees. Closing costs and fees are calculated based on the total amount being loaned, and might be about 3% for a first mortgage and 1.5% for a refinanced mortgage. When the fees and closing costs associated with a mortgage loan are waived for the borrower, they are usually baked in to a higher interest rate on the loan. Continue reading...
Will Ripple Make a Superior Payment System?
Ripple is already making waves in the banking world and may be poised to become the #1 option for cross-border settlements between banks worldwide. Ripple is described as giving cross-border payments a protocol as universal as Http does for the web. The current default system for communicating cross-border payments, SWIFT, has been around since the 1970s, but transactions can take nearly a week to settle. This is because SWIFT only provides secure messaging services for the requests from different institutions, but each transaction still requires several intermediaries who each might take a day to negotiate or complete their part in the deal. Ripple offers a revolutionary way to complete transactions in a matter of seconds, by directly linking banks around the world and cutting out the middlemen wherever possible. Continue reading...
What is Amortization?
Amortization is like giving a life span to a financial obligation, over a set number of years, and gradually killing-off the obligation with set payments. Amortization is the calculation of a fixed payment schedule over a set number of years to allow the repayment of a loan, such as a home mortgage. From an accounting standpoint, it can refer to the practice of spreading-out the cost of any intangible asset over time. For example, the IRS will allow a taxpayer to amortize the premium of a bond for deductions. Continue reading...
What is Mortgage Life Insurance?
Mortgage life insurance is any life insurance policy which covers the life of the borrower in a mortgage loan and assigns the mortgage lender as a creditor-beneficiary entitled to recoup their losses from the life insurance policy. The bank or lender will be designated as the assignee for the collateral of the life policy. Historically speaking, mortgage life insurance was a term policy with a decreasing death benefit, also called a face amount, that equaled the remaining amount due on the mortgage loan. As the home was paid off, the amount of life insurance required would decrease, and, in most cases, the premium with it. Continue reading...
Can Blockchains Reduce Fraud and Failed Payments?
Blockchains can validate, clear, and document transfers of value much faster and more securely than traditional methods. Blockchains offer an extremely efficient and reliable means of processing transactions of any size in a way that reduced the likelihood of fraud and failed payments. If a cryptocurrency wallet says that there is a specific balance present in a specific wallet, then that balance is there; it can be validated using the transaction record held on the thousands of computers on a b... Continue reading...
What are 'Liar Loans'?
Liar loans are a term that refers to loans or mortgages that were granted with little or no request for qualification documentation, such as proof of income. On certain low-documentation loan programs, such as stated income/stated asset (SISA) loans, income and assets are simply stated on the loan application. Then there are still other loan programs known as no income/no asset (NINA) loans, where the applicant essentially does not have to provide any proof of eligibility. These types of loans opened the door for fraudulent lending practices, which ultimately bankrupted several mortgage companies during the 2008 financial crisis. Continue reading...
What is Long-Term Debt?
Long-term debt refers to the duration of a liability/amount owed, and to qualify it must be due at least 12 months out. The period is in reference to 12+ months from the date of the balance sheet. A company will typically take on long-term debt in the form of a mortgage for property owned, or as capital for growth raised through bond sales or other debentures. Continue reading...
What is a No-Cost Mortgage?
No-Cost Mortgages waive the initial closing costs by making a repayment structure for those costs into the interest payments on a mortgage loan. Closing costs can range from 2%-5% of the total cost of the home, and include attorney fees, underwriting fees, application fees, and so on. These costs are deferred and are paid in the form of additional interest on the loan. Closing costs are separate from down-payments of equity, and are a miscellaneous hodgepodge of a wide range of fees associated with closing a mortgage deal. These costs are sometimes covered by the seller, but most often they are paid by the buyer. Continue reading...
What is a Mortgage Broker?
Mortgage brokers act as agents for consumers looking for the best deal possible on a home mortgage loan. Lenders at banks may not be able to find the most competitive interest rates out there. Mortgage brokers can help consumers become more educated about the various kinds of loans out there, some of which are subsidized by the government. Mortgage brokers find and place mortgage loans with consumers who need it to buy a house. Continue reading...
What is Mortgage Modification?
Mortgage modifications are arrangements agreed to by the lender that are outside of the contractual mortgage agreement, in instances where the borrower experiences unique circumstances or hardship. An example of a mortgage modification is a loan forbearance, which is when a lender agrees to let the borrower temporarily stop payments for an agreed-upon span of time, before resuming payments with an added repayment stipulation for the time spent not paying. Continue reading...
What are Collateralized Debt Obligations (CDOs)?
Collateralized Debt Obligations (CDOs) are bond-like investments backed by debts such as mortgages. The mortgages or debt obligations are pooled together and divided into tranches based on the maturity date and coupon payments and sold as securities (CDOs). If interest rates change and the borrowers in the underlying pools can refinance their debts, the CDOs will experience some volatility as the obligations are paid off early, but how much volatility depends on which tranche the investment is in. Continue reading...
What is a Home Equity Loan?
Home equity loans give a homeowner the ability to borrow a lump sum against their home equity. Homeowners have the ability to use their home equity as collateral on a lump-sum loan from a lending institution. This may be done on a paid-off home or on one with an outstanding first mortgage. People sometimes use these to pay for large expenses such as their children’ s college, or as a debt consolidation tool. When used for debt consolidation, a homeowner will take out a large loan against the equity they have in their home and use it to pay off debts to credit card companies and other creditors. Continue reading...
What is a Home Equity Conversion Mortgage?
The main type of reverse mortgage that people get today is the Home Equity Conversion Mortgage, backed by the US Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA). These reverse mortgages are available to people age 62 or older who are interested in leveraging their home equity to gain liquidity, either in the form of a lump sum, monthly payments, or other arrangement. A Home Equity Conversion Mortgage (HECM) is a reverse mortgage available to homeowners age 62 or older, insured by the Federal Housing Administration (FHA). Continue reading...
What is Accelerated Amortization?
Accelerated amortization is the recalculation of an amortization schedule, such as mortgage payments, after the borrower pays off some of the debt ahead of schedule. Amortization describes the accounting practice of giving a one-time expense a retirement schedule or payment plan by which it is to be either deducted for tax purposes, repaid, or paid out. Accelerated amortizations allow for more payments or deductions in the early years rather than later years. Continue reading...