The mortgage crisis in the US has now spread far beyond the sub-prime loans that precipitated the crash. As those ill advised loans have gone into foreclosure in massive numbers, the resulting glut of homes on the market has damaged the appraised value of those with standard home loans. Nationally, home values have fallen over 13% and another 10% decrease is being predicted by economists.

When the housing bubble began in the mid-90's, homes were appreciating in price so quickly in some locations buyers were seeing a return on their investment if they sold in as little as two years. As the average price climbed month after month, year after year, ARM's again became popular but for a different reason. Families were buying at the top of their price range. By applying for adjusting loans, they were able to buy more house for the same payment. The result was homeowners who were stretching to afford the low introductory rate of interest and many unable to qualify for fixed rate loans that would cause the payment to increase.

Though some economists warned of the dangers, the popularity of these specially structured mortgages soared though fixed rate loans were were the lowest seen in years. New buyers wanted bigger and better homes and saw no reason they shouldn't have them. After all, they reasoned, real estate values always increase - right?

The person who could qualify for a 5.75% fixed rate on a 30 year fixed rate mortgage on a $150,000 property learned he could also qualify to buy a $200,000 home by taking an adjustable loan with interest that began at 3%. For many buyers, it was a no-brainer. Assuming interest rates would not rise, assuming home values continued to rise rapidly, assuming their own income would be as good or better in future years - buyers assumed they were safe.

The harsh reality is this:

A fixed rate loan at 5.75% on a $150,000 will have a payment (P&I) of about $875 each month for the full term of the loan. An A.R.M. with an initial rate of 3% for a $200,000 home will require a payment of "only" $843 per month....to start. That same ARM after just two adjustment periods could require, at 7%, a monthly payment of $1330

Most lenders do have a cap that limits how high such a loan can go, but the caps are often high themselves. Should interest rates rise in the next year or two as expected, it's possible that same home purchased for $200,000 and $843 a month could cost $1700 a month or even more. For a family on a budget this could break their financial back.

Reality hit the fan when many of these risky loans reached their first adjustment period. The economy was slowing, layoffs were common, jobs hard to find, interest rates had risen somewhat - and the refinancing option was difficult as mortgage money had become tight and loan requirements had been raised.

If you have a fixed rate loan or a ARM and are responsible for making payments, the best option for you now, do not panic. If you have no choice but to stay at home until the situation improves. Now sells will sell at a loss, but if we can survive a year or two of the mortgage crisis and confusion, it must be good if prices stabilize and begin to grow again.

Are you gong to apply for bad credit home mortgage refinance? If you say yes, then undoubtedly you are going to deal with sub prime lenders. It is so because usually traditional lenders don't possess interest in refinancing. And that's why it becomes essential for you to opt for sub prime lenders in order to protect your home and satisfy your financial needs. But, when it comes to find out such lenders, there are some facts which you must clearly bear in mind.

First of all, make sure that you are offered all the closing costs in written by the lenders at least twenty four hours prior to their closing. Always bear in mind that most of the sub prime lenders charge higher fees at closing because they know that the people with bad credit points has limited options and that's why they will surely pay them.

While dealing with sub prime lenders, it is prudent to accept the loan amount which fits best according to your repay resources. In case the lender tries to make you accept the loan that is beyond your affordability, then it's just a simple step to foreclosure. And that's why it would not be beneficial to opt for such lenders anymore.

Another factor which you should take into consideration is pre-payment penalties. Generally, all the sub prime lenders will require you to pay these penalties. So, you must be aware about the amount and period of them.

Once you have finalized all these factors, it's time to acquire interest rates in written. This is the major mistake that most of the people commit worldwide and as a result they are trapped. Always ensure the interest rate from your lender in written while signing the contract.

Last but not the least, do not sign a deal with the lender who requires you to pay a fee upfront. Whenever you apply for a refinancing loan, the only fee that you are liable to pay is acquiring your credit application. Apart from this, you shouldn't pay even a single buck from your side in the name of processing fees which is the most prominent way for lenders to grab money from the borrowers.

Again, keep in mind that once you sign the contract, you won't be able to neither change the agreement nor quit the bad credit home mortgage refinance. That's why you should opt for a cautious approach while dealing with these loan options.

As a practitioner in the fields of bankruptcy, workout and corporate restructuring, and in a shameless admission of self-interest, I readily admit to being vitally interested in whether the U.S. Economy is due for a downturn. It has often been said that economists have predicted nine of the last five recessions. The notion was also advanced, by the Clinton Administration, not so long ago, that the business cycle, as we have always understood it, was a thing of the past. Is this so?

On the one hand, there have been only two recessions of any real lasting power over the past twenty years. The first was in the early days of the Reagan Administration, when aggressive budget cutting and revenue loss occasioned by the David Stockman “supply side” economic strategy took an enormous bite out of government spending power, forced massive public borrowing, and triggered a recession. The economy soon grew itself out of recession, either through growth or excessive government deficit spending, depending on one’s point of view.

In 1990, another recession ensued, partly as a belated result of the 1987 Stock Market crash. This downturn lasted about two or three years, and the economy expanded once again. After a lengthy period of prosperity, the Clinton Administration declared the business cycle dead, and boasted that the combination of fiscal and monetary policy had permanently rendered it obsolete.

The bursting of the dot-com bubble allegedly triggered a recession in 2001, but it was short-lived enough to be barely noticeable (except, of course, to those who had their entire net worth tied up in it), and was soon replaced by a real estate bubble. By the time the powers that be admitted that there had been a recession, they declared it over, in the same breath. Not even the horror of 9/11 was able to take the speculators off track. In the meantime, hedge funds (truly a misnomer for what, in essence, are private equity funds) were able to generate unprecedented liquidity by “monetizing” all sorts of collateralized obligations…from so-called “sub-prime” mortgages to more conventional asset based lending obligations. This, in truth, was nothing more or less than a replay of the leveraged buyout craze of the 1980’s, in which speculators and corporate raiders took out the value of companies today in the hope that tomorrow’s earnings would be sufficient to replace the withdrawal. And if not, well, that would be someone else’s problem.

The major difference this time around, of course, is that the vast pools of liquidity generated by this mechanism have (after, of course, making some people incredibly wealthy), been largely plowed back into businesses as extremely low cost loans, mezzanine financing and equity. Too much money chasing too few deals has led some of these funds (and, indeed, more traditional lenders, who have to put their shareholders’ investments to work), to put money into marginal businesses, or to finance questionable collateral. Thus far, it has paid off, with the seemingly endless sources of easy money available, and the economy’s enjoying a very long “sweet spot,” of profitability and resource to capital.

The problem will come in one of two ways: either the economy will heat up noticeably, raising the cost of funds to businesses in the form of higher interest rates or reluctance to fund marginal profits, or perhaps losses, or the economy will weaken noticeably, which, though resulting in lower cost of borrowing, will ironically result in tighter lending standards, and increased business failures. You see, profits are infinitely easier to generate if the cost of money is essentially taken out of the equation. In more traditional business environments, debt service is an important component of the profit and loss analysis.

This phenomenon is already beginning to manifest itself in the highly publicized “sub-prime” mortgage crisis. Secondary and tertiary lenders (and in some cases banks and funds lending under the radar screen through the vehicles of these lenders), have been extending mortgages to homeowners whose creditworthiness is suspect, betting on an endlessly rising real estate market, and continued historically low rates. This system worked just fine for a long time, as the position of these lenders was protected by their enhanced collateralization and the ability of borrowers to carry their overleveraged positions through availability of easy money. Now, with the national decline in home values, and upcoming ratcheting up of adjustable rate mortgages, many of these loans will go into default.

What makes this situation particularly dangerous is that the original lenders, for the most part, no longer hold the paper. These mortgages have been “monetized” and place in pools of securities, managed in bulk by faceless, nameless trustees. When the mortgages default, these trustees will be forced to foreclose and will, for the most part, have no discretion to “work out” the loans. This is a potential disaster waiting to happen, especially for the middle class.

The cheerleaders for the economy and the stock market, who contend that the “sub-prime” and home value problems are likely to be contained and not spill over into the economy at large are, I believe, missing a salient point. A full two thirds of the U.S. economy is driven by the only weapon left in our arsenal: our seemingly endless appetite for consumer goods. After all, we scarcely manufacture anything in this country anymore. Ours is almost entirely a service and consumer driven economy. Large numbers of homeowner foreclosures, caused by overleveraging (in many cases, by homeowners seeking to retire high rate credit card debt) cannot fail to have an effect on consumer spending.

In addition, our very weak dollar threatens to make us a secondary power even in consumption. For example, China’s consumption is growing exponentially, with a rapidly growing economy and the largest savings rate in the World (not to mention a billion potential consumers). Chinese holders of stock brokerage accounts have more than tripled in the last two years. And what will we have to export to these folks? Cars? We can’t even sell them here. Technology? Well, many of the intellectual property originates here, but the products are much more cheaply manufactured abroad, as is the service component. Have you called Microsoft tech service recently? Did you get connected to the Silicon Valley or Bombay/Mumbai?

The competition around the World for our historical economic pre-eminence is fierce. If our lead in manufacturing goes (and for the most part, it already has) and our position as the great bastion of international consumerism diminishes, we are threatened with becoming a second rate economic power. And all the easy money in the World will not save us from that.

The business cycle may, indeed, be a thing of the past, but not in the way it has been advertised. This time, we may not recover so easily from the downturn. That downturn may yet be a long time coming, what with the almost conspiratorial partnership of business, financial institutions, the markets and the government to inject oceans of liquidity into a system which depends upon all of our acquiring stuff and expenses beyond our means. But for all that money, we should have a solid foundation for profitable business. There are (and only one) is our only hope for the future economic domination.

Warren R. Graham

Copyright 2007

In a perfect world everyone would have a 720 credit score and a trouble free credit history. Unfortunately we live in reality and the truth is that many home owners have less then perfect credit scores. While bad credit can make refinancing a home loan difficult getting a mortgage with bad credit is actually easier then you think.

The first thing you must determine is how bad your credit actually is. Knowing your credit score will help determine your loan options and save you the headache of having to apply for a mortgage only to be turned down.

Bad Credit Refinance Options

If your score is 600 or higher then you more then likely will be able to secure a good low fixed rate FHA mortgage. Keep in mind that FHA requires your last 12 months mortgage payments to have been paid on time and your debt to income ratios need to be at or around 42%. FHA will refinance up to 97% of the value of your home so it works well for people with little to no equity in their primary residence.

If your credit score is under 600 and not below 500 you really have no other option but to use a sub prime lender. although they have gotten a lot of bad press lately sub prime loans can help people refinance their homes when other lenders turn them away. However never under any circumstance take a sub prime adjustable mortgage and always opt for the fixed rate. Sub prime loans allow you to refinance with mortgage lates, open collections and many other derogatory credit situations.

However if your credit score is under 500 you have some serious work to do because even sub prime lenders will not lend to borrowers with credit scores under 500. At this credit score level you have two options. You can either invest some time and money into credit repair to improve your scores to the level where you can secure sub prime financing. The other option is for you to use a hard money . Creditors typically hard lender interest rates and high lending rates and should be used only as a last resort. In addition, they usually provide only up to 70% of the value of your home, not to be able to help everyone on the basis of capital requirements.