Mortgage, loan and property. What is a mortgage?

A mortgage is putting a property as a guarantee to a lender as a security for a mortgage loan.

While a mortgage in itself is not a liability or a dept, it is evidence of a debt. It is a transfer of an interest in property, from the owner to the mortgage lender, on the condition that this interest will be returned to the owner of the property when the terms of the mortgage have been satisfied or concluded.

In other words, the mortgage is a guarantee for the loan that the lender makes to the borrower. In all but a very few states, a mortgage creates a lien on the title to the mortgaged property.

Thursday, May 22, 2008

Record decline in home prices is only the beginning

Home crisis - looks like a great puzzle
Home prices fell 1.7% in the first quarter of 2008, with California, Nevada seeing the sharpest drop revealed a government study today.

The prices of home properties sold in the first quarter of 2008 posted a unsurpassed decline, according to a new report from the Office of Federal Housing Enterprise Oversight.

Compared to the first quarter of 2007, home prices fell 3.1%, the largest drop in the purchase-only index, which excludes refinancing, since the agency began keeping records more than 15 years ago.

First-quarter home prices dropped 1.7% from the fourth quarter, the largest quarterly fall ever.

According to Peter Schiff, president and chief global strategist at Euro Pacific Capital, "It's not going to be the largest decline on record for long. Prices are going to keep falling until we get to the equilibrium, which is much, much lower. This is only the beginning."

On a year-over-year basis, the inflation-adjusted price of homes fell 7.7%. At the same time, the prices of other goods and services went up by 4.6%, according to OFHEO.

"The nominal price declines aren't as spectacular as they would be if we didn't have so much inflation. Houses are becoming a less valuable asset relative to the cost of living." Schiff said.

The Office of Federal Housing Enterprise Oversight reported that prices dropped in 43 states, with 8 states seeing quarterly price declines of more than 3%. California and Nevada were the major losers, with home prices falling more than 8% in each state.

Prices on all homes sales and refinancing, fell 0.2%year-over-year and remained flat compared to the fourth quarter, OFHEO reported.

California, Nevada, Florida, Arizona and Michigan showed the greatest price decline in all transactions in the first quarter. Wyoming, Utah, Montana, Texas and Alabama all saw an increase in prices for all transactions.

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