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.

Monday, September 8, 2008

Mortgage Crisis: The U.S. government takes control of Fannie Mae and Freddie Mac

As expected, and to avoid a major crisis, the U.S. government today announced he was taking control of the two mortgage giants who where on the brink of bankruptcy, Fannie Mae and Freddie Mac.

This operation designed to save the property market from a crash of enormous proportion is expected to cost billions of dollars to taxpayers. The US Treasury Secretary Henry Paulson has stressed that the financial consequences of a bankruptcy affecting Fannie Mae and Freddie Mac would be far more serious than one might expect.

Freddie Mac and Fannie Mae guarantee about 5000 billion dollars in loans, more than half of U.S. residential loans.

Having taken on their shoulders the weight of the subprime crisis while other credit corporations collapsed one after the other, Fannie Mae and Freddie Mac have lost between them 3.1 billion dollars between April and June. More than half of losses come from non-repayment by debtors of high risk mortgages.

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