What’s Next Economically

During the past three years, the world witnessed great changes. In 2007, the United States was hit with a subprime crisis which dried all available liquidity from the markets. The world reacted and demand for oil raised dramatically driving crude oil to trade for $135.00 on the stock market. Europe began to suffer after as European banks and investment firms failed in bulk. U.S. voters brought their frustration to the polls and voted in a government controlled and administered by the Democratic Party.


Ironically, change failed to produce sustainable achievements. Yes, the “Great Recession” is officially over, but facts are still the same. Currently, the U.S. unemployment is 9.3%, up from 5% in January 2007 (U.S. Bureau of Labor Statistics 2010). The federal government is split as voters voted the Republican Party to control the House of Representatives. Stock markets are in a constant frenzy due to debt worries as members of the European Union are requesting assistance (The Associated Press and Reuters 2010). Even the great Asian economic powers are concerned. China is currently facing its highest level of inflation since the new century began (MediaCorp Press Ltd. 2010).


How about real estate, did the industry recover? U.S. real estate values have stabilized overall except for high end properties. A different story is drawn internationally. United Arab Emirate, Spain and Japan are suffering from debts related to real estate. Spain saw its national bonds’ grade downgraded a number of times within the last 12 months (Oakley and Mallet 2010).


Domestically, the Obama administration will be forced to work with a different government. Analysts are generally optimistic about corporative governments where the government is controlled by more than a single party. They cite former U.S. President Client and his achievements after 1994 when the GOP gained control of the U.S. Congress. There is also the success of the French government – split between different parties – in addressing France’s budget worries in comparison with other European nations.

Finally, consumers ought to expect modest inflation as the world recovers from the last economic pitfall. This inflation is the result from redistribution of wealth and more constraint government spending. The United States will continue to dominate the economic world as the world’s leading consumer, but new middle class – from rising economic powers – will compete with U.S. consumers as they become fully accustomed to an American style living.


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Important Steps When Filing For Loan Modification

When faced with foreclosure, a loan modification is usually the best and last hope for keeping your home (and credit) safe. The application process can be complex and daunting and the way you file the paperwork can be the determining factor in the lender accepting the terms of the modification. Here are a few simple, yet important steps that are needed to be successful in the process:

Work With An Experienced Loan Counselor/Underwriter When your options are exhausted you need someone with experience that will know what you’re qualified for regarding your specific situation. Legal Debt Solutions is able to challenge lenders, make counteroffers on your behalf and make sure that all paperwork is filed completely and professionally.

Make Sure Your Loan Workout is Realistic Modifying your mortgage loan often means extending payback periods or lowering interest rates, but make sure that the payment schedule is sustainable. It’s important that the homeowner gives accurate financial information to us so we can work with the servicer to give you the best options for a payback plan.

Watch Your Budget Troubled borrowers should cut back on spending and make accurate calculations on the financial information given to their servicers. Homeowners will often give inflated or overestimated figures which may result in unsustainable loan workouts.

Understand Loan Modification Lingo Borrowers and homeowners should know what they’re dealing with. There can definitely be a frustration when dealing with terms that aren’t easily understood. To make things a little easier for our clients. We have an extensive frequently asked questions and a glossary database for your loan modification reference.

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The Economy of Bankruptcy

Every market has its buyers and sellers. Some parties profit which some other parties acquire losses. The same is true of the foreclosure crisis. During the past two years, almost every city in the United States experienced the ironic and joyful nature of the real estate world. In turn, this helped to form market equilibrium where supply and demand exchanged patterns giving rise to a new economic wave with foreclosure acting as the inner motor.

In order for any market to operate, two main mechanisms must exist: supply and demand. Supply refers to availability of products, while demand refers to consumers purchasing the available products. In the foreclosure market, the product is mainly devalued real properties. In addition, devalued banking assets became also steadily available. Potential property buyers, including individuals and investors, comprise majority of consumers demanding such product. Recently, NAR – National Association of Realtors – announced a 24% increase in property purchases. Moreover, many commercial banks bought devalued banking assets from failed investment firms. For example, Bank of America acquired Lehman Brothers for pennies on the dollar.

Supply and demand within any market yields profit and loss. Starting with loss, the upcoming middle class and blue collar working class were the primary losers. Most of the foreclosed properties were funded through risky investments in the form of subprime lending practices. In turn, banks and lending institutions, which supplied subprime loans, found their assets devalued by rating companies and lowered investors’ confidence.


In the profit corner, traditional buyers profited the most. Potential buyers, who enjoy good credit and had saved enough of a down payment, are able to acquire real properties at almost 50% discount in comparison with real property values from 2005. Moreover, consumer banking in the United States became stronger as risky banks flunked under economic stresses.

Furthermore, consequences of a market fueled by foreclosure can be divided into economical, social and political spheres. First, the economical sphere carries consequences of failed economic policies. The United States government bailed out over 100 financial institutions, in addition to a number of bail out policies directed towards failed industries, through public funds.

Most of those public funds are collected from current tax-payers’ pay check. Second, the social sphere as many cities are forced to cut services due to loss of income from taxation of properties and regulatory fees associated with real estate transaction. And third, the political sphere was demonstrated during the 2008 Presidential and Congressional elections. Both Democratic and Republican politicians had manipulated the foreclosure crisis to gain votes and attack the other side.
Finally, the crisis of foreclosure is part of the American real estate market cycle.

In 1989, a similar foreclosure crisis existed, where Saving and Loan financial institutions were over burdened with bad real estate mortgage loans. But, Americans must learn from every crisis in order to develop strategies to deal with future problems. As with any market, the foreclosure crisis created its own economy. Better regulations of both the supply and demand of the real estate market can limit the affects of such economic downfalls. At the end, life experiences are the road map for future stability.


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