Financial backers that pumped money into the mortgage industry are getting pretty tight with their money. In the following example the banks we refer to are not like your local bank. These banks lend money to a mortgage lender, the mortgage lender funnels that money into mortgage loans, and the mortgage loans act as collateral securing the credit line. Lenders are not normally entitled to demand upfront repayment. A margin call takes place when collateral securing a loan loses its value. When that happens, there is nothing protecting the lender from default by the borrower – in this case the borrower is a mortgage lender – so the lender pulls the plug with a margin call.
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Many other countries have not gotten down to the dirty task of lending money for housing to people who can’t afford it and then financially leveraging the loans to create billions in false value. That’s what the U.S. has done and it has the potential to impact people around the world. The U.S. subprime market has been used in numerous fund portfolios.
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By Timothy Blake
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Posted in Archives, Editorial
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Tagged Archives, Bear Stearns, Congress, Editorial, Fortune, Goldman Sachs, industry, investments, mortgage, sub-prime, subprime, the New York Times
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Allegations of mortgage fraud are again echoing through the mortgage industry. Many people think mortgage fraud is perpetrated by potential borrowers. Evolution in a greedy mortgage industry seemed to hit a balance of responsibility with no-doc loans and no verification. Images of shady deals, where a loan officer was told about rental properties that leased for more than they did, and unverified income from eBay and Amazon, give the impression that the potential borrower is running a scam.
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By Timothy Blake
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Posted in Archives, Mortgage Fraud
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Tagged Archives, bank, banks, HSBC, industry, Lenders, mortgage, mortgage broker, Mortgage Fraud, SEC, subprime
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American Home Mortgage is singing the blues today but their issues are not clear at this time. Mortgage Blues reports that American Home Mortgage is not involved in the subprime market. To survive, American Home needs the secondary credit markets to stabilize, so the company can re-sell its loans for a profit. Their shares fell 42% in NYSE trading on July 30.
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GMAC today reported that second-quarter net income fell to $293 million from $787 million a year earlier. Its mortgage unit, Residential Capital LLC, had a loss of $254 million, compared with a profit of $548 million a year earlier, because of loans to buyers with poor credit ratings.
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By Timothy Blake
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Posted in Analysis, Archives
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Tagged Analysis, Archives, Capital, failure, industry, investor, mortgage, SEC, sub-prime, subprime
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