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 15, 2008

Resale of homes at their lowest in 10 years in the U.S.

The residential housing market slows down

The real estate recession worsens in the U.S., where sales of existing homes fell to their lowest in 10 years and the median price of a single-family home declined by 7.6% during the second quarter.

The median price slipped from U.S. $ 223 500 to U.S. $ 206 500 in a year, unveiled yesterday the National Association of realtors. Sales of single-family homes and apartments fell by 16% and amounted to 4.913 million units in volume annualized.

Prices have plummeted in 115 of 150 metropolitan areas surveyed, while sales by mortgage default and sales at a loss have represented a third of all transactions of the quarter. The banking seizures have almost tripled in July compared to last year, stated RealtyTrac, an agency that specializes in the market for properties sold by mortgage default.

"In several regions with a high proportion of sales by mortgage defaults, people buy houses below the value of the replacement cost," writes in his report the chairman of the association of brokers, Richard Gaylord.

The largest declines were observed in Sacramento, California’s capital (36%) and in the metropolitan area surrounding Cape Coral-Fort Myers, Florida (33%).

Prices show a decrease of 32.7% in Riverside and San Bernardino, California, and 30% in Los Angeles, according to the report.

Banks repossession of residential properties for non-payment jumped by 184% in July and reached 77,295, according to RealtyTrac. This is the most abrupt increase ever recorded since the California firm began disclosing such data in January 2005.

Failure to Pay

More than 272,000 properties, which represents one household out of 464, have been the subject of a notice of default, threats of arrest or effective repossession, unveiled RealtyTrac. It is in Nevada, California and Florida that recorded the highest proportion of one or other of these measures.

At the end of June, there were 4.49 million houses to sell the U.S., a number never seen in a year, according to the association of brokers. The current volume of homes for sale is equivalent to 11.1 months of work for a broker compared to an equivalent of 10.8 months at the end of May, the association said in a report unveiled on July 24.

Seizures depress the residential market, causing job losses and slowing consumption because fewer people can borrow on the value of their homes, declared on August 7 analysts of Lehman Brothers Holdings in New York.

Monday, August 11, 2008

The mortgage crisis will persist well beyond 2008

The crisis in the real estate sector will continue well beyond the end of 2008 the USA before being overcome, said Sunday U.S. Secretary of the Treasury Henry Paulson.

"I think we need to go much beyond the end of 2008 before we can forget about the problems of housing," he said from Beijing in an interview with NBC television, reiterating statements made late July.

"I think the main question (for the economy) is that of knowing when the greater part of the correction in real estate will be behind us, because until we know we will continue to experience instability in our markets," said Paulson.

He commented the heavy losses announced last week by Fannie Mae and Freddy Mac, the two major U.S. facilities in mortgage refinancing.

"They account for approximately 70% of financing loans to the USA and thus are a key to ending the crisis in this sector and restore stability in mortgages," said the Treasury Secretary, he also stressed that "the correction of the mortgage market was really the heart of the current American economic problems. He did not consider it necessary to inject more public money into these two bodies.

Mr. Paulson also said on NBC that he would not remain at his post at the Treasury whoever is the next president elected in November.

He recently met with the likely Democratic candidate for the White House Barack Obama, feeding speculation that Mr. Paulson could stay at the Treasury in January 2009 to ensure continuity in the current financial crisis.

"No, I will not stay," he said categorically in response to a question from a journalist.

"Whoever the next president-elect is, John McCain or Barack Obama, I will do my utmost to ensure a smooth transition by working closely with my successor," said Paulson.