Subprime Loans – Playing Against the House

A subprime mortgage used to be an alternative for borrowers who did not fit standard guidelines. Maybe they just started a new business or had some past credit problems. These borrowers paid a high interest rate or put more money down to compensate the lender for making a risky loan. Private investors who were willing to accept higher risk for higher returns funded these loans.

In recent years we began to see a new type of subprime loan. It was intended to enable a lot more people to buy homes, and indeed it did accomplish that. It achieved such popularity that, from 2005-2007, this subprime loan accounted for one-third of all mortgage loans issued. Borrowers often did not fit the standard qualification profile. They had issues such as: minimal job history, debt repayment problems, low FICO scores, previous bankruptcy, sketchy documentation, or little cash on hand.

A typical scenario was to start with a very low rate for the first two or three years. Or, the payment was set artificially low, so that the loan balance went up each month, absorbing the unpaid interest. After two or three years a very high rate would begin.

How was it possible to make loans such as these? What made them work? The underlying strategy was this: Instead of relying on the credit worthiness of the borrower, the lender expected to refinance the loan after a short period of rapid appreciation. The refinance requirement was the feature that distinguished these loans from prime or old subprime loans.

The low initial rate was not profitable to the lender. The loan needed to reach its refinance phase to become profitable. A hefty pre-payment penalty discouraged borrowers from paying the loan off early. Squeezed between a pre-payment penalty and an impending high interest rate, the borrower had no choice but to re-finance after the initial two or three years. At that time the borrower could apply for a prime loan – if payments had been made on time, and if their financial condition improved, and if the house had good appreciation.

In fact, most borrowers did not get a prime loan at refinance time. They got a new subprime loan, doubling the requirement and the cost of refinancing. Refinance fees could be added to the loan balance. The lender had a lot of control over the borrower at refinance time. For subprime borrowers, refinancing was not a choice made at their discretion, as it is with prime loans. It was an integral part of the subprime loan.

One could say that this subprime loan was, in effect, an agreement to allow mortgage lenders to play the real estate market – betting all their chips on appreciation.

Why did borrowers agree to this? Borrowers saw their neighbors buying houses, using subprime loans. And it is true that home values were rising, from about 1998 through 2006. In many parts of the country homeowners saw 25 – 50% escalation in their home values. So it seemed to be a safe bet. However, one could say that it was, in effect, a massive pyramid scheme. The more people who participated, the more the early players were rewarded. Demand for houses raised prices, and higher prices stimulated more people to get subprime loans.

Why did investors buy these loans? Subprime loans were financed through complex securitization structures, with multiple levels of risk spread over many parties. Insurance protection could be purchased, shifting the investor’s risk to other entities. The layers of complexity were astounding. The investment bankers who created the structures were the only ones who seemed to understand them.

Unfortunately, investors did not know very much about what they were buying. They trusted rating agencies and investment bankers to protect their interests. Yet, no one at any level seemed to understand how dependent subprime loans were on market appreciation. They did not recognize the need to refinance under better market conditions that was implicit in the loan. It was this need for rapid market appreciation that made their investment a very high risk – in fact, doomed to failure.

When the potential downside became apparent to investors, the ownership of risk within complex mortgage securities was very hard to figure out. There was confusion, and then the worst possible reaction – panic. Investments in mortgage securities abruptly ended, investment banks closed, and related financial institutions were harmed. The panic spread, as people pulled their money out of other investments.

Real estate roulette was possible because the borrowers who accepted money, and the investors who supplied money, were not at all clear about the high level of their risk. Had they understood the impending downside, they might have left the table before the game got out of hand.

The Selfing Process Series – Grooming and Cosmetics – Step 4 of 5

Beholding a well-groomed individual is quite pleasing to my spirit. My eyes begin to twinkle and sparkle and my lips curl upward, leaving me with a little burst of positive energy. Do you know that the measure of a well-groomed woman starts with how good her skin looks? Also, how good her skin looks goes beyond its surface. It’s true-how good your skin looks is an inner beauty being thing.

How are you being-on the inside? Having worked in the image, beauty and fashion industries all of my adult life, I’ve witnessed a lot of vanity…with me being right there in the middle. But, what’s important and lasting is inner beauty being; which always begins with you loving, liking and respecting yourself first. The women who practice inner beauty being are IBBers-their beauty radiates from the inside out. They eat the proper foods; which are fueled by chemical substances called essential nutrients, such as: carbohydrates, fats, proteins, minerals, vitamins and water-these nutrients come from the proper and right food sources. So, eating right will help you to reproduce, build, and repair body tissue and to regenerate new skin cells-and we love that.

Water is the most important essential nutrient. It’s an elixir within itself-the fountain of youth. Every cell in your body needs water for optimal health, including your skin cells. You could survive for weeks, perhaps even months, without food but you could only last about eight to ten days without water.

Water circulates through your blood transporting oxygen and nutrients to your cells. It helps to maintain the body’s natural balance. It has no caloric value, though, and it is not a source of energy within itself. On the other hand, water promotes good digestion and it helps you to absorb the right nutrients from the foods that you eat. It removes your body’s waste through urine and sweat and it eliminates digestive waste. It’s so good for you!

Your body is made up of about sixty-five percent water and on most days you’ll need to drink at least eight to ten cups of water to replenish what you’ve lost during the day. Water can be replenished also by drinking other decaffeinated and non-alcoholic liquids and by eating fresh fruits and vegetables. Getting your fair share of water will cleanse and flush out impurities that clog your pores and diminish your natural beauty. It will help to promote a more supple and youthful complexion. Next time you’re dying of thirst, quench it with water.

IBBers believe in herbs and supplements and know that they are essential to their well-being and longevity. They participate in fun, natural and exhilarating activities that encourage them to breathe deeply, giving their body a good cardiovascular workout while rejuvenating their spirit. The breathing that comes from moving your body through fun physical activities is deep, simple, smooth, and strong. This type of breathing will help you to feel more youthful and energetic while at the same time helping you to relax and focus. It will build your heart muscle and clear the clutter from your mind and spirit.

IBBers laugh a lot too-for the fun of it and for the health benefits derived from a good belly laugh. According to Proverbs 17:22, “A joyful heart is the health of the body.” Take the time to have fun and laugh. It is not a luxury, like so many of us believe, but just what the doctor ordered. If you’re sick, it might make you well. If you’re sad it might make you happy. Go on, girl, try it out loud… laugh!

IBBers also know the intrinsic value of friendships with other IBBers and living their lives full out, regardless of where they live, how much money they earn, married or single. They love being with other people and being alone. And most importantly, IBBers honor the essence of who they are through quiet time, inner reflection and meditation-a sure and proven way to rejuvenate your body, mind and spirit. Daily meditation can help you get rid of toxins and clear the cobwebs that may have entered your essence, trying to block your natural flow. Meditation will encourage you to relax and to release, allowing you to hear the soft whispered words that are just for you. Consider this: the next time you’re getting ready think about the selfing process and its grooming layer to see how you’re doing with your inner health.

Okay, you now know that the foundation of grooming begins with good skin and a glowing complexion-which is a direct reflection of your inner health and well-being. You also know that paying attention to what goes into your mouth and what’s inside your body is key. No amount of topical creams, ointments and serums can be effective when you’re covering up for years of neglect.

Color Clash – Hair Color and Cosmetics

Have you ever returned home from the salon after you changed your hair color and thought, “This is totally wrong. This color doesn’t work for me!”? Chances are that your new hair color is gorgeous but you are still wearing the same make-up! As odd as it sounds, the shades of cosmetics you wear can make or break a new hair color. If you are changing your hair color don’t forget to change your make-up too!

Why Changing Makeup with Hair Color is so Important

When you change your hair color your whole appearance changes. The new shade can make your skin and eyes look more pale or more intense. Your new locks can bring out hidden undertones in your skin and new dimensions to your eyes. New hair color can also make you look younger and more confident, but if you continue to wear the same make-up then you can also look a little odd. This clash of colors comes down to color theory. The lipstick that might have looked fabulous on you as a blond now can look decidedly odd with your new red locks. Why? Because the new hair color and cosmetic undertones clash.

The color of our hair really does affect our overall appearance and so when you change it, it is essential to change everything else too from the clothes you wear to your make-up. This allows you to give a better balance to the face and it also finishes off the overall new look. The wrong cosmetic colors can make your look go from pale to dull to downright clownish.

How to Find New Makeup to Suit Your New Color

When it comes to finding new make-up to suit your new color, you may have trouble knowing what to opt for. Though you might not want to overhaul your make-up bag, you should seriously consider adding a few key colors to complement your dramatically changed hair color. The right make-up to compliment your hair color and skin tone with help you get the most out of that expensive dye job!

You should look at a number of factors first in order to choose the right colors for you. Some of these factors include hair color, eye color, and skin tone. Still confused? If you need guidance to get the most out of your new hair color ask the stylist that is dying your hair to suggest cosmetic shades that will fit your skin tone and match your new mane. Often times your salon will have a cosmetic line on hand and can do a mini make-over to demonstrate the power of the correct colors. If your stylist is of little help go to visit your local department store’s cosmetic counter or just pop on-line and ask the Beauty Advisor at your favourite cosmetic website for guidance and shade suggestions.

Overall cosmetics should be chosen with various things in mind. When you change your hair color your make-up should definitely be changed too. So the next time you color your hair, take these tips into consideration to get the most out of your new look.