So what is going on with all the mortgage companies? Either they shutting their doors down or some of them stopped funding loans. For one, it all started with Alt-A mortgage loans and jumbo loans. Alt-A are loans which were made to borrowers whose credit score was not so perfect, that is right below 640 FICO, who were self employed, could not prove their income. Jumbo loans are loans that are above conforming limit of $417,000. Any loan amount that is below $417,000 is considered conforming loan and Fannie Mae and Freddie Mac, the two government backed companies are purchasers of these loans.
However; as you may have seen on TV, Alt-A loans and jumbo loans are loans that are causing problems as of right now as banks cannot sell these loans to open market, get additional funding to make new loans. So they are stuck. No Wall Street Investors are buying these loans and banks do not know what to do with its portfolios.
Subprime lenders, lenders that only specialized in Alt-A and jumbo loans could not find any investors to buy these loans and therefore liquidated their companies. So know the finger pointing starts!
Who is to blame? Banks for making these loans? Wall Street companies for buying and selling these loans even further? Or even customers that got those loans in the first place because they did not qualify for conforming loans? Or even mortgage brokers for pushing borrowers to get these types of loans.
There is no answer as who is responsible for these loans. It all started slowly with 1% loans and borrowers who started to default in a huge numbers. Than it escaladed to all non-conforming programs and jumbo loans. But there is no way to know as how far this actually spread. Yes, we are not done yet!
This may get even uglier down the road as additional adjustable rate mortgages will reset soon again and it is expected that most borrowers will default again. Fed however, took one action this week by injecting billions to open market.
So far it is slowly working. Still volatile trading as you have seen news reports all over, but Fed is trying the best. But, what if Fed just lowered the interest rate, would that fix the problem? Yes and No. This is a really tough decision for Fed to make and the injection of funds into open market showed that Fed is watching and trying to help. If Fed lowers the interest rate today and later in a month additional adjustable rate loans are resetting and more borrowers defaulting, we would have the same exact situation. The problem is no one knows how many of these adjustable rate loans will actually reset, no one know how many people will default on these loans. All we have are simply estimates.
But than there is market. Most of the big mortgage companies are traded on stock exchange that has been effected by the current conditions, and of course market will react right away to this situation. Investors get scared, start to sell quickly in every sector, and leaves you with Dow loosing 100 points easily.
Fed wants to wait until September meeting to either keep rate as is, or lower the rate. So far all indication leads that Fed may keep rates as is, but do not quote me on that.
So what is next for mortgage market? So far many banks have canceled many loan programs that dealt with jumbo loans and Alt-A loans to prevent any future risk. Some banks just simply closed its doors down without any notice. Some are still struggling and hoping that something will happen in the future to bring their portfolios back.
And above all, housing market just killed home prices and many people own more on their mortgage than their property is worth. But it not all over yet!
What you see on TV, news, etc. are banks that are mostly backed by Wall Street Companies. However many mortgage brokers work with private investors that can still do Alt-A loans and jumbo loans. Loan criteria or qualifications may have changes little bit, but it is still possible to get a loan.
Right now, everyone will wait what Fed will do and hopefully they will make the right move.
Here's the new ruling! Even if you own property in Spain but don't live in Spain you will have to pay taxes on your property in Spain as if you were living there. This is just one of the many tax rules that have come into play recently and is causing the off shore owners of property in Spain to consider whether it is lucrative to keep their property in Spain. These rules came into effect as of January 1st 2007 and are proving to be a challenge to those property owners who don't live in Spain.
While certain changes give the property owners who don't live in Spain a little break on taxes owed at the close of a sale, others are not quite as forgiving. There is a tax increase of 25 to 30% for companies owning property in Spain who would purchase and resell within a year, which would make the most avid investor cringe. Here are some items of importance concerning these new tax rules:
An amnesty/transition period for companies owning property in Spain to close and acquire their assets is one solution for dodging the tax bullet. Offshore companies who have primary property in Spain will now be considered as a resident and will be taxed accordingly. The CGT fell from 35% to 18% - a good thing for non residents If you plan to purchase property in Spain simply purchase it in your name rather than a company name While some taxes are increased, others are decreased. Nobody likes to pay more taxes than what is absolutely required. Taking into account the number of wars and other violent acts that have been spawned by over-taxation, these law makers will do their best to make taxation as fair as it can be for both the very wealthy and the less than fortunate property owner in Spain.
The desired result that the European Commission is seeking with regard to the non-resident owner of property in Spain is that they will have to pay the same tax upon the sale of said property as a resident would.
Incentive to own property in Spain and live there as well:
One relief that residents have as property owners is that they don't have to pay any tax on profits made from the sale of their primary residence as long as the profits are put towards their next primary residence. If property was purchased after 12/31/1994 previously determined capital gain will be reduced by 11.11% for each year after the first two that the property in Spain is owned by the resident in Spain. It is still the same idea that has held true through time; the man who works hard will have something to show for it in the end. This includes owning property in Spain. Thus, do not let taxes deter you from investing in this beautiful land.
Both Rateempire & Steven Magill are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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