Can I Get a Mortgage After Filing Bankruptcy

Author: Nikola Govorko

Usual opinion is that with an item like bankruptcy on your credit report you do not stand a chance of getting a mortgage. While it might have been true until as little as 4 - 5 years ago it is certainly not true today.

It is natural that bankruptcy does not help your credit score but it is not something that can prevent you from buying your own home in near future, in say next 2 to 5 years.

And in case that you already have a mortgage on your record, you will be happy to know that you can refinance your mortgage and get a much better deal which can enable you to pay off your creditors much easier and faster. You will have to work long, hard and smart to repair your credit rating.

Here are steps you will have to take in order to get a mortgage after filing for bankruptcy:

1. Make a budget that you can stick to and the one your family can live with. It is very important to make a realistic list of your monthly income.

In this list include any income that you can count on100%, leave all the other possible money sources out. You can do it easy with a pen and paper or you can use your PC/Mac.

Place any other possible sources of income on a separate list, so if it happens OK, if it does not no harm done to your budget planning.

2. List your expenses include all your monthly bills in this like car or a home loan, rent, insurance payment, utilities and food. Keep ALL the bills, and at the end of the month you should have much clearer picture where does your money go to.

Many people do not do this, and that is a HUGE mistake. Small $10-20 bills soon ad up without you noticing it. It is not big expenses that push people in debt, in most cases it is lots of small charges you do not take notice off until you have to pay them.
You have gathered similar information before, probably when filling for bankruptcy. At the end of the month or at the beginning of one, when you do the math you will be able to find out if you are living above your means.

If that is the case you are just going to have to give up some of the unnecessary costs. What that is I can not tell you, each of us is different but usually things like cigarettes, bar bills, DVD rents and other entertainment oriented expenses are not necessary for living normal lives.

You would be surprised to know how much you can save on things like this.

3. Pay ALL your bills ON TIME importance of this can not be stressed enough. If you follow above two steps you should have less trouble with this probably the most important step in your credit repair.

Make sure to have your mortgage, car loan, or a secure credit card bill (that you have naturally been paying on time) listed with credit bureaus.

It will provide the proof your creditors need that you have been working hard on your credit repair and that you have learned how to live within your means.

4. Fourth step is optional; you can apply for a mortgage after bankruptcy even with bankruptcy discharged yesterday and just about any time you want.

But even if you are approved you will have much higher interest rates to payback and those rates can be just thing that will push you even more towards financial bottom.

If not absolutely necessary wait for at least a year (during which you will naturally working harder then ever to improve your credit score) and then apply. Also make sure to check all your options, apply online with reputable lenders and get as many offers as you can right to your e-mail.

This is much, much easier, faster and over all better way to apply for any kind of a loan then the traditional methods.

So can you and should you apply for mortgage after filing bankruptcy? The answer to both questions is YES. But you will have to undertake above steps to get a better deal.

Article Source: http://www.articlesbase.com/finance-articles/can-i-get-a-mortgage-after-filing-bankruptcy-74488.html

About the Author

At www.Debt-Free-Family.com we are dedicated to help regular people get out of debt, avoid bankruptcy and enjoy a debt free life. Get easy 4 step tutorial how to get Mortgage After Bankruptcy.

Bankruptcy and Related Ability to Purchase Home

Author: Ravisankar

Bankruptcy and related ability to Purchase home

Bankruptcy, the dreaded word, can pull you down very badly at times. It not only drains you financially but even creates emotional and social blockades that some find difficult to breach. Having a home to shelter you in such times is very comforting. It soothes your frayed nerves. But what if you do not have one? Can you still apply for a loan to buy one? It is considered quite difficult for bankrupt individuals to get a home loan sanctioned in such times of crisis. Not anymore.

There are options that are available for individuals in such a state to still get a home loan. All it takes is some good planning and a disciplined approach to managing your credit. Many lenders think twice before sanctioning a loan for property to people who have filed for bankruptcy. It all depends on how you are able to convince the lending institution about your ability to repay the loan back. A few steps to help you are detailed below:

First, you need to decide on the type of bankruptcy filing that needs to be adopted. There are basically two types of filing; Chapter 7 and chapter 13.

Chapter 7 involves liquidation of all assets where as chapter 13 is a safer route. This entails re-organization of the financial portfolio, assets and liabilities and even the budget. This is considered a safer option as it provides a security for the debtors about the repayment of loans sanctioned. Taxes to be paid are also put on the back burner till such time as the individual gets back on track, financially.

Secondly, it is advisable to wait for atleast a couple of years after filing, to apply for a mortgage loan. Also all information related to the bankruptcy has to be declared upfront, before the same is unearthed by the institution. This gives a sense of transparency and clarity to the entire procedure.

Most importantly, you need to prove that you have a steady income to support you as well as enough additional income that can help you repay the loan in future times. This creates a sense of security for the lending institution which helps in convincing them about your repayment capability. The records have to be submitted to prove the same.

You can start with a smaller amount and later ask for an additional top-up amount as times pass by and you become more financially strong.

Credit worthiness is an important aspect of such transactions and hence ensure that you do not default at any times, as any such action can adversely affect your reputation.

It is always advised that a bankruptcy attorney be entrusted with the work of putting your finances back on track, as such professionals are experienced in all the legal aspects that can get crucial reprieve from authorities and absolve you of complicated liabilities, if any.

Article Source: http://www.articlesbase.com/real-estate-articles/bankruptcy-and-related-ability-to-purchase-home-953113.html

About the Author

Beautiful homes for sale at Arizona City Real Estate , Avondale AZ Homes for Sale and Buckeye Realty.

Top Reasons That Drive People into Filing Bankruptcy

Author: Eulalia Allmand

Filing for bankruptcy can be a hard decision for most people to make; however, the circumstances surrounding their situation make it impossible for them to see any other way out. There are many reasons that normal trustworthy people, much like you and me, decide that filing for bankruptcy is their only option. These reasons include:

1. Job loss/unemployment - Many people have great paying jobs and rightfully decide to buy their family a nice home, good cars, and send their children to upscale schools. And why not? They have the money to pay for it. Unfortunately, right when some people are in the prime of their financial life, they find themselves suddenly laid off with little more than a severance package if they are lucky. While they are looking for a new job, the large mortgage, large car payment, and the children's monthly tuition is due. To top it off, many of these people will jump into new jobs that pay significantly less than their old one, just to get some of their bills paid. These people have now found themselves in an unforeseen situation that was beyond their control.

2. Medical bills - Sometimes the systems that are supposed to protect us, fail us. Other times, we are victims of unfortunate accidents that require extensive hospital stays and months of physical therapy. Even if we have a medical plan that pays 80% of those bills, we still have a large deductible and the other 20% to worry about. Sometimes these medical costs mount up to more than we have the ability to pay back, while still paying housing costs and buying groceries. This is another example of someone who has found themselves in an unforeseen situation that was beyond their control.

3. Divorce/separation - Not only is divorce costly, but you could also end up owing portions of your spouse's debt even ones that you didn't know about. If your spouse files for bankruptcy or is otherwise uncollectable, their creditors will not hesitate to try and get the money from you especially if the divorce is not yet final. Unemployed spouses may also find themselves taking on debt in order to get a car and a place to live after a sudden separation.

4. Predatory lending practices - Some lenders (usually labeled "subprime") prey on those who cannot get loans from traditional lenders and offer them money that they can definitely use, but will likely have trouble paying back when coupled with the large interest rates and fees that these companies often charge.

These situations catch people off guard and throw them into a circumstance that they cannot handle. All of the sudden they are in over their heads, have creditors harassing them left and right, and need a way to get out of this mess. Bankruptcy can be a practical and respectable solution to help these people get back on their feet.

Article Source: http://www.articlesbase.com/finance-articles/top-reasons-that-drive-people-into-filing-bankruptcy-383852.html

About the Author

Fort Worth Bankruptcy Attorneys Allmand & Lee specialize in personal bankruptcy and offer bankruptcy services that help good people through one of the toughest times in their life. We have experienced bankruptcy attorneys who can help you work toward a better future. For more information please visit us at http://www.allmandandlee.com/

Deed In Lieu Of Foreclosure

Author: Anthony Petrucci

If you are facing foreclosure, you may have another option. The deed in lieu of foreclosure offers advantages to both the lender and the borrower. The main advantage to the borrower is that it immediately releases him from all or most of the indebtedness associated with the loan in default. It also saves the borrower from the embarrassment that can be attached to foreclosure proceedings. 

If you have been unable to make your monthly payments and your home has been on the market without success of sale, this form of foreclosure may be what is necessary to get you back on track.  Deed in lieu allows you, the borrower, to transfer your property to your lender voluntarily and your debt is often forgiven. This procedure will not save your home, but it will help the possibility of you getting another loan in the future. It will also help prevent the lengthy and costly procedure of a foreclosure. It is a negative strike on your credit, but not as bad as a foreclosure.

Most mortgage companies will require you to have your home listed with a realtor at least 30 to 90 days in order for them to approve you for a deed of lieu. Other things that may be required are as follows:

1.      The property may have to be vacant.

2.      You may have to get an interior appraisal of the property.

3.      You may need a minimum of 60 days prior to your foreclosure date.

This is not an option for someone who wants to stay in their home. This is only an option for someone who owns property and has had it on the market with no success of sale. Your lender can

inform you of their requirements based on your individual situation. Get informed and then act.

It may take some negotiating with your lender to complete this process.  If you do not feel qualified to negotiate something of this magnitude, seek advice from an expert in this field or from an attorney. Always be careful what you put in writing for it can be binding. Make sure you are knowledgeable as to the proper language being used in any official paperwork.

If your bank agrees to accept short sale, that is a better option than deed of lieu. However, if you are facing foreclosure and no buyer is interested in a short sale option, then consider deed of lieu. It just might save your credit from a "dark" mark to a somewhat "grey" mark, meaning it is the lesser of the two evils. 

Remember, you always want to avoid bankruptcy (the greatest evil). The overall summary is this…it would be great if you could bypass foreclosure. It is best to short sale, but if it is not possible, then shoot for a deed of lieu. This just might be the missing link you have been looking for.  

Article Source: http://www.articlesbase.com/mortgage-articles/deed-in-lieu-of-foreclosure-683423.html

About the Author
Foreclosure Defense Law Center is the parent company of ForeclosureDefenseLawCenter.us and its affiliate websites. Since founded, our top goals and priorities have been to maintain the integrity of service we provide and the guaranteed satisfaction of our users and customers alike. We provide Borrowers nationwide with a service geared to make the loan process as stress-free and simple as possible. Our Lenders and brokers across the country are given accounts to access borrower information and make successful loans.

How to Prepare Filing Bankruptcy

Author: Teeny

If you are already sure that filing for bankruptcy is the only solution to all your financial problems but are unsure of how to get started, you can quickly feel overwhelmed with the number of resources you can go through for information.  Reading up on how to get started filing for bankruptcy may not be enough if you aren't really familiar with the terms and processes.  You should know that there are also a lot of people available who have the knowledge and resources to help you file for bankruptcy and make sure you have all the necessary paperwork in order.  It may be best if you consult them for your bankruptcy issues.

Your first step would be to gain as much knowledge about bankruptcy as possible. Know exactly what bankruptcy is, what it involves, and how it will affect your life in the long run. You must understand that bankruptcy is when the court system assists you in arranging payments will all of your creditors, or when they discharge your debts. It is not the easy way out of your current financial problems.  There are many tips about financial information at http://www.fidetips.com/finance for you to read.

When you file for bankruptcy with the courts, they will appoint a person to review your case, conduct a thorough study of all your finances.  That person will decide whether or not you are qualified.  If you are, the same person will likely be in charge of deciding on which of your debts can be discharged and which will require arrangements for payment.  The person will find a way to make sure that a payment plan you can handle is developed and agreed upon. Normally, the payments will be deducted from your paychecks.  This will continue until you have paid off all your debts to your creditors.

Another thing about bankruptcy you should understand is that some debts will never be discharged.  These include tax liens and back child support.  The court system makes the decision regarding which creditors you will have to pay back and which ones you do not have to but you are likely to pay off all as long as there is a way to do so.  Any assets or property you have will likely be sold off to pay some of your creditors.

If you have a particular question about bankruptcy, you can always rely on the internet and perform an online search to get the answers that you are looking for. Also, be advised that there are bankruptcy law experts and attorneys available online to guide you through the bankruptcy process as well.  Just be sure that before you get help from anyone online, you should do research on the company and the individual to verify if they are legitimate.  You should try to find the more reputable ones to help you.

You should try to avoid becoming a victim of a scam or a fraudulent entity. For this, you can go to some online forums for references and recommendations from people that have already gone through similar situations. These people can offer you a lot of great advice and tips on how to go about your own financial situation. Of course, you can also rely on your local telephone book to seek bankruptcy help, or speak with a bankruptcy expert.

Always consider other means before you decide to file for bankruptcy. You should only consider bankruptcy when you have no other means and have tried all other financial routes available to you.

Article Source: http://www.articlesbase.com/finance-articles/how-to-prepare-filing-bankruptcy-932003.html

About the Author

Teeny is a writer for finance, computer, travel, cars, shopping and other subjects for many years, please visit http://www.fidetips.com/finance for more information.

Mortgage Reaffirmation after Chapter 7 – What is it all about?

Author: Jessica Bennet

If you'd like to reaffirm your personal liability for a secured debt even after a discharge from Chapter 7 bankruptcy, a reaffirmation agreement is what you need to sign with the lender. Reaffirmation agreement is usually executed for secured debts such as mortgage, car loan, RV loan etc.

What is the reaffirmation agreement?

Reaffirmation of debt is a voluntary agreement on the part of the debtor to keep paying his mortgage or other secured debts even after receiving a discharge order in Chapter 7 bankruptcy.

The Reaffirmation agreement is not required by the Federal or State laws or the US Bankruptcy Code. By signing the agreement, the debtor becomes legally obligated to pay the portion of the debt for which he has received a discharge under Chapter 7 bankruptcy.

When to file the agreement?

Reaffirmation agreement should be filed prior to the date of discharge of debts so that it can be enforced. The time period for filing the agreement is limited to 60 days after Section 341 Meeting of the debtor with his creditors in the presence of the court, the trustee and bankruptcy attorney.

The Reaffirmation Agreement must be approved by the bankruptcy court or it should be signed by a declaration of the debtor's attorney. Otherwise, it will not be considered as valid. The agreement should include details of your income and expenses and a signed statement where you admit that you can afford the payments under Reaffirmation.

Can mortgage lender foreclose even if I reaffirm?

When you reaffirm mortgage, it implies that you've agreed to pay off mortgage dues even after you've received a discharge from bankruptcy. As long as you catch up the dues and do not fall behind, the lender will not initiate a foreclosure.

What if I fail to make payments under reaffirmation?

If you fail to pay off the mortgage after you've reaffirmed, the lender can obtain a judgment against you in order to place a lien on your assets or garnish your wages. Moreover, you won't be able to discharge the debt you've reaffirmed. This is because you cannot file Chapter 7 bankruptcy in the next 8 years.

Can I cancel the agreement?

You can cancel the reaffirmation agreement within 60 days after it is filed at the bankruptcy court. It should be canceled prior to the discharge order being issued. You need to inform the mortgage lender about your decision to cancel the agreement. Once you withdraw from reaffirmation, the lender should return you any payments you've made so far under the agreement.

It's good to reaffirm your mortgage as it has a positive impact on your credit score. This is because reaffirmation allows you to pay off any unpaid mortgage balance and fulfill your obligation. However, make sure you can afford the payments before you sign on a reaffirmation agreement or else chances are that you may lose your home in foreclosure.

Article Source: http://www.articlesbase.com/mortgage-articles/mortgage-reaffirmation-after-chapter-7-what-is-it-all-about-830025.html

About the Author

Jessica Bennet is an experienced financial writer associated with Mortgagefit.com. She has been guiding the Community through her writings and suggestions in our Community forum. So if you have any question regarding bankruptcy then please contact her.

Pre Foreclosure Profits, Laws and Opportunities

Author: Jeremy Lawrence

Refinance Pre Foreclosure Options For Owners

It is always devastating to families and individuals when they are in default of their mortgage payments and face the possibility of being forced out of their homes. Thankfully there are several refinance pre foreclosure options that are available for homeowners, depending on their financial standing, credit history and record and the circumstances that led to the home or property mortgage not being paid. Refinance pre foreclosure methods will also differ slightly from state to state, so always do some research and learn about what your state offers and requires. This will help you discuss refinance pre foreclosure options with your lender from a knowledgeable and informed perspective.

Three things for a good start are:

1. The first step in obtaining information on how to refinance pre foreclosure property if you are home owner is to talk to someone that is knowledgeable about both your options and your legal rights.

2. A HUD housing counseling agency can be a good first step, as these counselors can provide information on various government programs that may be available in your area.

3. To access these services check your local government website or contact your Veterans Affairs department if you are current or past military and purchased your home with a Veteran's Administration (VA) guaranteed loan.

Refinance pre foreclosure options may also include an actual modification in your mortgage payment, without the requirement of a full refinance. This can be arranged between the lender and the borrower and typically occurs due to some specific issue such as a loss of income, disability or a change in your income that will not allow you to pay the amount you were previously able to cover. Clear information to the lender as well as a prior good payment history before the pre foreclosure is usually critical in this special situation.

A partial claim refinance pre foreclosure deal can be a true lifesaver for both the borrower and the lender. In this option there are several criteria that may be met, but what actually happens in the lender is able to claim the deficit amount through a no-interest loan directly from HUD (United States Department of Housing and Urban Development). This can only happen if the house or property in not currently in foreclosure but is in default between four and twelve months and the homeowner is able to now make full mortgage payments to the lender at the terms of the original loan.

Typically home owners in looking for refinance pre foreclosure options may also be able to work through banks or lenders if they have a significant amount of equity built up in the home. In cases where the homes have no equity or negative equity, options will be very limited. Negative equity occurs when there is more owed on the home than the property would bring in if placed on the market.

Where Can I Find A Pre Foreclosure List?

A pre foreclosure list is a tool that can be used to determine what properties in your area or an area you are interested in may be going into foreclosure and be available for purchase. It is important to keep in mind that houses or properties on a pre foreclosure list may not end up in foreclosure, especially if the owner is able to either refinance or work with the lender to set up a repayment plan that will deal with the deficit in the payments.

A home makes it onto a pre foreclosure list in several different ways, depending on the type of financing and the various real estate laws within a state. Lets explore a few possibilities:

Typically the lists are developed by the local courts through public notices, which are found through court filings by the lender. In some states where Judicial foreclosures are used, the lender has to file a notice of Lis Pendens with the court, which then hears the complaint of the lender. The homeowner is allows to also present their information, during this process the house or property is considered in pre foreclosure. The lender and borrower may resolve the outstanding debt prior to the court hearing, at which time the house would be removed from the foreclosure list and would not move into foreclosure.

The other option for a foreclosure is called a Non-Judicial Foreclosure, although a legally established process is still followed. The lender will file a Notice of Default as well as notify the homeowner that the house or property is in pre foreclosure. The owner then has a set amount of time to communicate with the lender to attempt to develop a plan to address the default payments. Once the time has passed for the owner to attempt to correct the problem, the lender will sell the property through a public auction.

While a pre foreclosure list does not necessarily mean that the property is going to go to foreclosure, it can be a useful tool in determining what homes or properties may be available for sale during the pre foreclosure period or may come on the market shortly. There are many different websites offering both foreclosure and pre foreclosure list information either on a state by state, county, city or broader area search option. These sites may be free and open to the public or there may be sites that require a paid membership to view the pre foreclosure list area. There are also several agencies that specialize in locating pre foreclosure list information for specific categories of properties that buyers or investors may be interested in purchasing.

Article Source: http://www.articlesbase.com/national-state-local-articles/pre-foreclosure-profits-laws-and-opportunities-481381.html

About the Author

Jeremy Lawrence is an independent business person and Niche Marketer. See his website - http://bestwaytostopforeclosure.info - to download a free report on Everything You Always Wanted to Know About Pre Foreclosure Profits

California Respa Attorney Warns That Respa Imposes Severe Penalties On Realtors And Lenders Who Violate The Kickback Provisions

Author: R. Sebastian Gibson

RESPA

For thirty-five years, RESPA has confused people in the real estate industry and attorneys alike. In 1974, Congress enacted RESPA, the Real Estate Settlement Procedures Act primarily to address abusive practices, promote greater understanding to homebuyers and to prohibit practices such as kickbacks or referral fees that result in higher costs.

Efforts began in earnest in 2008 to reform RESPA and on November 17, 2008, HUD published its new 341-page RESPA final rule. Though published in the Federal Register, there is a one year implementation period and mandatory compliance begins January 1, 2010. Now RESPA is about to confuse the real estate industry once again, this time perhaps even more so with respect to its prohibition against kickbacks and fee splitting with questions of how those prohibitions will be enforced.

If you have been the victim of a violation of RESPA in California and have been improperly charged as a result of such a violation, or if you are in the real estate industry and are facing RESPA litigation visit our website at http://www.sebastiangibsonlaw.com and call us at any of the numbers easily found on our website.

RESPA Prohibition of Kickbacks

RESPA was created in the first place partly because various types of entities involved in the purchase and sale of real estate such as Realtors, lenders, construction companies, and title insurance companies were often engaged in providing undisclosed kickbacks to each other, thereby causing the costs of real estate transactions to become inflated.

RESPA was designed to prevent kickbacks not just in California, one of the states with the greatest number of foreclosures in this current economic crisis, but throughout the U.S. But RESPA has been criticized for failing to prevent what it was meant to prevent. Lenders and others in the real estate industry in California, for instance, still see customers go with the default service providers associated with a lender or Realtor, even though the documents the homebuyer signs explicitly state they can choose any service provider they wanted.

However, Section 8 of RESPA quite explicitly and forcefully prohibits a person from giving or accepting a fee, kickback or anything of value for referrals of settlement service businesses relating to a federally regulated mortgage loan. It also prohibits fee-splitting or a person from giving or accepting any part of a charge for services that are not performed.

RESPA Penalties for Kickback Violations

Violations of Section 8's kickback, referral fee and unearned fee provisions subject a person who violates RESPA to criminal and civil penalties. In criminal cases, a person in violation of Section 8 cam be fined up to ,000 and imprisoned for up to one year. In a civil lawsuit, a person in violation of Section 8 can be liable to the person who was charged for a settlement service an amount equal to three times the amount of the charge paid by the person for the service, and for the person's attorneys fees. Individuals have one year to file a complaint to enforce violations of Section 8 in federal court in the district the property is located or where the violation occurred.

Without oversimplifying Section 8, a real estate agent in California or anywhere in the U.S. may not offer nor may a real estate agent accept anything of value for referring business to a settlement provider such as a mortgage banker, mortgage lender or title company or to a friend who refers the agent business. Realtor to Realtor referrals are excluded and there is a contract for such referrals that is enforceable. It is probably still acceptable to take such contacts out to dinner, discuss business and thank them for their support, but that is about as far as one can go.

With all that has happened in the mortgage industry in California and throughout the U.S. that has led to the current economic recession (and some would call it a depression), anyone criticizing the kickback and fee-splitting prohibitions should remember the excesses in lending to unqualified homebuyers that led us to the situation the financial industry now finds itself.

Visit our website at http://www.sebastiangibsonlaw.com and call us if you have been the victim of a violation of RESPA in California and have been improperly charged as a result of such a violation, or if you are in the real estate industry and are facing RESPA litigation.

Entities who are found to have formed sham joint ventures for the purpose of evading the Section 8 prohibitions risk potentially millions of dollars in damages and attorney fees as well as criminal charges and imprisonment.

If you believe you have been the victim of a violation of RESPA in California and have been improperly charged as a result of such a violation, or if you are in the real estate industry and are facing RESPA litigation, we recommend that you consult with our California RESPA law firm immediately.

Article Source: http://www.articlesbase.com/law-articles/california-respa-attorney-warns-that-respa-imposes-severe-penalties-on-realtors-and-lenders-who-violate-the-kickback-provisions-784285.html

About the Author

Visit our website at http://www.sebastiangibsonlaw.com if you have been the victim of a violation of RESPA in California and have been improperly charged as a result of such a violation, or if you are in the real estate industry and are facing RESPA litigation in California. We have the knowledge and resources to be your California RESPA Lawyer and California RESPA Attorney or anywhere in Southern California.

Fair Value?

Author: Wesley Fraser

Take a deep breath. The market recovered from terrorist attacks, the falls of Enron, WorldCom and Arthur Andersen, soaring oil prices and one very expensive war. Can this sub-prime crisis really hold the market back? To answer this query, the cause must be examined.

Sub-prime loans are generally offered by lenders to customers with either no credit or a poor credit history. In most cases, these loans include adjustable interest rates. During the initial years of the loan, the interest rate will be low (as compared to fixed rate loans for the same customer) and fixed, effectively lulling the payer into a false sense of security. After this initial period, the rates generally revert to the prime rate plus a specified margin. The prime rate varies directly with the Federal Funds Rate set by the Federal Reserve. For example, for the first two years, the lender may offer the loan for 8.9 percent, and then the rate for the remaining years becomes the prime rate plus 6.5 percent. If the prime rate is 5.5 percent for year three of the loan, the payer is stung with a twelve percent interest rate.

The problem was simple, right? The sub-prime crisis was caused by banks offering customers with poor credit adjustable rate loans and mortgages that those customers would never have the ability to honor once interest rates began to rise from their basement of several years ago. As interest rates continued to rise, more borrowers defaulted on their loans. The banks seized houses and any other assets they could grab as their customers declared bankruptcy. In this scenario, the banks do not seem to be the losing party, but they are. Not only do they lose millions of dollars in interest revenue when their borrowers default, but they acquire assets that are quickly declining in value as the economy slumps. In the past, banks could hold these assets at cost until a good market for them arose. In 2007 with the addition of Financial Accounting Standards Board Rule 157, banks were required to report their assets at fair value instead of cost. Now, the banks are forced to write down the value of their assets to market prices at which they do not intend to sell the assets. These huge write-downs have cut profits drastically and sent investors packing for the next available flight. As more assets are written down, lower profits are not the only problems facing banks. These huge write-downs are proving hazardous to the banks liquidity and solvency.

Proponents of the new fair value standards would argue that writing down assets to market value gives investors a better picture of the current financial standing of the company. Is this true? American International Group (AIG) Chief Executive Officer Martin Sullivan begs to differ, saying, that companies should not be forced to write down assets which they will not sell at basement prices. This statement came after a five billion dollar mortgage related write down (Hughes 16). This is not to say that the company would not have suffered losses without the new standard, but they would have been minimized. Under previous rules, the assets would be checked for impairment. If the expected future cash flows were lower than the net book value, then the assets would be written down to market value. This system seems much more suited to handle the ups and downs of the economy. If a company plans to sell an asset during the next upswing, then the future cash flows are still the same, even if the current market value is low due to external economic factors.

As the problem grows, companies outside the financial sector are writing off huge sums. Bristol Myers Squibb wrote assets down by 275 million dollars in early February (Guerrera 17). Many more seem sure to follow as the first reporting year with FAS 157 in effect trudges forward. The question then arises, is it wrong to keep assets on the books at historical cost if there is no current market for them? If companies plan to hold these mortgage securities until maturity, then why should they be forced to revalue them at current market price? There is no way to make an accounting system perfect. There are, of course, faults with the old system of booking at historical cost and testing for impairment periodically, but these old faults did not exacerbate an already volatile situation sending the economy into a recession. FAS 157, if nothing else, was poorly timed. The Financial Accounting Standards Board should have had the foresight to delay FAS 157 until the economy worked through the sub-prime mess. If they had waited one year, the economy could have recovered and the banks could have begun to unload some of their mortgage securities over time in order to soften the blow.

In accounting since Enron and WorldCom, it is undeniably important to keep companies honest in their reporting, and seemingly, that is the intent of FAS 157, but to some extent FASB should ask itself; at what cost do we regulate proactively? Does perfectly accurate information for investors trump the value of the jobs that will be lost as bankers slash costs to cover losses?

CFO.com. FAS 157 Could Cause Huge Write-Downs. Retrieved March 15, 2008, from CFO.com

Guerrera, F. & Hughes, J. (2008, February 7). Effects of Credit Crisis Spreading Says PwC Chief. Financial Times (London), p. 17.

Hughes, J. & Tett, G. (2008, March 14). An Unforgiving Eye Bankers Cry Foul Over Fair Value Accounting. Financial Times (London), p. 15.

Hughes, J. (2008, February 14). Concept of 'Fair Value' Ignores Stench of Real World. Financial Times (London), p. 16.

Koza, H. (November 9, 2007). Thought the Subprime Mess Was Bad? Wait Till the Accountants Get Involved. The Globe and Mail (Canada), B10.

Plender, J. (2008, February 13). Financial Crisis Presents a Test for Fair Value Accounting. Financial Times (London), p. 22.

Article Source: http://www.articlesbase.com/accounting-articles/fair-value-398614.html

About the Author

Undergraduate in Accounting

How to Qualify for Mortgage after Bankruptcy

Author: Sonia

            After declaring bankruptcy, you might wonder when you can qualify for a home mortgage. Your credit score will naturally plunge down after insolvency. The most basic question is when you will be able to qualify to file for mortgage. Actually it is not very hard to get a mortgage after bankruptcy if you have tried to build up a good credit score. You can obtain low mortgage loans like home equity loans, interest only loans and even a business venture funding.

It does not mean that you can no longer be given a chance to purchase a home after you declare yourself bankrupt. There are plenty of lending source in America. They are known as the “B-C-D” lenders. They specialize in helping people who file for bankruptcy and therefore do not qualify for a conventional mortgage. There are however drawbacks like very high interest rates, fees and equally very high deposit. It will also take longer since you still have to establish a good and strong employment record and you must save money for a down payment.

            Consult a good mortgage broker to help you determine whether you qualify for a home mortgage after bankruptcy. The mortgage broker can gather your data and information and shop around for several mortgage lenders that will accept your mortgage application.

            To build up a good credit to improve your credit score, you have to continue paying for items such as your home or cars that were not discharged in the bankruptcy promptly. Maintain a low credit card account and lessen your bank loans. It is important that you take up a new credit only when it is very necessary.  Your debt-to-income ratio will be focused on by the mortgage lender. This helps them determine whether you have the capability to repay your mortgage. It is essential to provide all the necessary documents immediately to your loan consultant. Any information and data on your credit report must be checked for accuracy. Any false data should be corrected immediately.

After your credit reports are updated, you can now be eligible for a better interest rate on a home mortgage. It is best to wait for two years after your bankruptcy discharge to file for a mortgage. However, you can still buy a home before that but it will cost you thousands of money since you have to pay very high interest rate and deposit. The high deposit is necessary to assure the mortgage lender and will convince them to lend you the money to purchase a house.

             Again, it is preferable to file for mortgage from two to three years after declaring insolvency. Interest rates after bankruptcy could reach as high as twelve points higher than regular mortgage. After your insolvency, you have to deal with credit history before bankruptcy, the reasons for the bankruptcy and how you can handle home loan finances after insolvency.

            If you do not qualify for a home mortgage after bankruptcy, do not despair. These things can take a lot of time and usually needs your utmost patience. Following the suggestions above and you can have more options later on and can avail of mortgage as early as six months to a year after your bankruptcy discharge.        

Article Source: http://www.articlesbase.com/home-improvement-articles/how-to-qualify-for-mortgage-after-bankruptcy-1322772.html

About the Author

Your dream house available at these locations,
New Real Estate in Southern Phoenix Metro,
Condos for Sale in Florence and
Chandler Homes for Sale