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.

Friday, August 8, 2008

Unsold U.S. homes still at their highest since 1982

Hovnanian Enterprises Inc. Most important builder of homes in New Jersey, has reduced its number of unsold houses more than 50% over the past two years after it slashed its prices, and yet it still had over 1500 units to sell last April.

"At the moment, we begin to build a house only when we have a contract signed by a buyer who wants to have one," said Larry Sorsby, chief financial officer of the company, during an interview in his office in Red Bank, New Jersey.

In the north-east of the U.S., prices of houses that are the subject of a sales contract had fallen by 7.4% in April compared with a year earlier. "We do not build more houses in the hope that buyers will come," adds Mr. Sorsby.

In the U.S., there are 3.9 million unsold single-family homes, the highest since at least 1982, when the National Association of Realtors (NAR), of Chicago, began to compile statistics in that area.

The stock of houses and condos has to come down by nearly 50% if we want to see stable prices, argues William Wheaton, professor of economics at the Massachusetts Institute of Technology (MIT) in Cambridge. At the current pace of sales, there is a stock of 11.1 months of unsold existing homes, up from the 4.6 months reported in September 2005, according to data from the NAR.

We must now count on average 10 to 12 weeks to sell a house, compared to four to five weeks at the peak of real estate boom, which lasted five years, says Walter Molony, a spokesman for the NAR.

Confidence is down

The builders of homes face a record number of seizures, declining consumer confidence and higher standards that apply to mortgages.

During the first quarter of this year, nearly 10% of mortgage loans in the U.S represented a dubious claim, the highest since 1979 according to the annals of the Mortgage Bankers Association, an organization with headquarters in Washington.

The defaults on loans or mortgages whose payments are overdue 30 days or more, represent 6.35% of all mortgages in force while the percentage of houses in a situation wher they can be seized rose to 2.47%.

"It will take several years to get rid of all the over stock of unsold houses, said Eli Broad, philanthropist and founder of KB Home, in Los Angeles. The Builders are therefore forced to sell at a discount," he said.

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