Interesting article sent in from a HREU student. Sorry for not posting this sooner. Last section talks about the 100 year mortgages.

In case you haven’t heard of this type of mortgage, you are not alone. However, it may come of a surprise to you that 100 year mortgages are already being used in Japan and parts of Europe. Considering the perilous economic path the US is currently on I would almost expect that the government proposes FHA backed 100 year loans as yet another ’solution to save housing’.

Along those lines, expect mortgage loan modifications to become the hot topic in real estate for 2009. Currently the typical loan mod result in:

1) Lowered rate (sometimes just temporarily) to create an lower house payment.

2) Extended loan term. Stretch the mortgage our longer to make the payment lower.

3) Rarely, the lenders will lower the mortgage balance. (Remember, I said rarely)

In 2009  there will most likely be these added tools for doing loan mods:

1) 100 Year mortgages.

2) A program whereby the sellers negative equity is ‘forgiven’ but, the lender has a sake in the profit if the house were to be sold.

Regardless, 2009 will be assuredly be ‘The Year Of The Loan Mod, Short Sale and REO”.

Be sure to watch the free video on how to do loan mods. Start by modifying your own mortgage then offer loan mod services to others..for a fee. Here is the free video.

If you thought Greenspan was a maniac for temporarily dropping interest rates to 1% in the years after 9/11, just wait until you seen what Uncle Ben Bernanke has in store.  Since taking on his positioin, Bernanke has so far ratcheted the federal fund rate down to Greenspan’s low of 1%.  But the two day fed meeting that started today is expected to commence tomorrow with an announcement that interest rates are going lower, and quite possibly to zero percent!

The United States bubble based economy is in trouble.  Instead of focusing on innovating and exporting our way to a stronger economy, we instead choose to borrow more, cut taxes, inflate, and spend.  Our government insists on short sighted solutions to keep asset prices artificially high.

In 1981, the federal fund interest rates topped out at over 19% and mortgage borrowing costs were expensive.  Borrowers were responsible, 20% was the customary home down payment, and the economy was humming along.  But with the first sign of economic trouble, the targeted strategy was to inflate asset prices at any cost, and the preferred solution was lowering interest rates.  Since that time, every new sign of trouble brings lower and lower interest rates, and those rates are now widely expected to hit zero percent in 2009, if not sooner.

Stimulating after zero percent? – Japan had deflating asset problems in the 1990’s Rather than allow the market to naturally self correct, they chose instead to aggressively lower interest rates.  When they approached and  hit zero perecent, they extended mortgage terms to 100 years to dupe consumers. 100 year mortgages were introduced in Japan starting in 1995 obsessed only with monthly payments and no comprehension of true value.  If desperate homebuilders, mortgage lenders, and real estate agents have their way, they will be introduced in the United States starting in 2009.

The sellsius real estate blog called for 100 year mortages recently.  Sellsius attempted to justify 100 year mortgages with seven ridiculous and unfounded benefit claims to the 100 year mortgage.  Unfortunately, every indication is that the United States will follow on with every policy mistake Japan has already made, including the 100 year mortgage.  Consumers will initially resist 100 year mortgages, but later embrace them.  Stupid Creative financing wins over most unsophisticated borrowers in the end as they consider only the monthly payments with no regard for longer term considerations.   But a few savvy consumers will make better choices.  And in most parts of the country, the wiser choice is still building equity through renting.  The equity comes from investing and compounding all the additional disposable income you keep from not buying inflated assets!