| The Option ARM Loan: Turning the American Dream into a Nightmare
At first glance, an Option ARM loan can seem like a great opportunity for someone who is looking to purchase a home with the lowest monthly payments possible. An Option ARM mortgage starts out with low "teaser" interest rates that are only good for a month but are extremely appealing. An Option ARM loan also offers the borrower his choice of payment type: a minimum payment, an interest payment, or an amortizing payment. And the minimum payment can be seductively low, offering a borrower with limited cash flow the chance to buy a larger property than he expected to be able to afford. The problem is that if a borrower makes only the minimum payment on his Option ARM mortgage each month, he will quickly find that he is sliding into debt. As the teaser rate expires and the actual interest rate rises, the borrower's minimum payments will not make a dent in the actual loan principal nor the interest that is rapidly accruing.
High price to pay for a foot on property ladder
Properties in this area are going for 20%-25% above the asking price," the estate agent at our first flat viewing told us. "But this one is so desirable, it could go for anything." Desirable? Up to a point. It was all right if you had oxygen for the climb to the top floor. The sitting room looked on to a wall; and the kitchen was so narrow I had to reverse out of it. She was right, of course. It did go for anything - and add a bit. Ours was the bottom bid. I say "ours" euphemistically. It is our grown-up children who are trying to put a toe on the property ladder. Accompanying them on this so far fruitless voyage has been a revelation. .
HSBC to Scale Back US Subprime Mortgage Division (Update2)
March 29 (Bloomberg) -- HSBC Holdings Plc Chairman Stephen Green said the U.S. subprime mortgage services division will be ``run down significantly'' as the world's fourth-biggest bank by market value tries to recover from loan losses. HSBC is curtailing the sale of so-called second-charge loans, which don't have first claim on assets when a loan isn't repaid, as it tightens credit controls after an increase in defaults at the unit caused U.S. earnings to plunge. ``Whether or not we completely write it off I'm not sure,'' said Green, in reference to the subprime mortgage services unit, speaking to reporters in Kuala Lumpur today. HSBC had said it would stop buying second-charge loans from other lenders earlier this month, when it reported 2006 results.
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