Posted on 24 August 2013 with no comments from readers
When the technology stock market breaks down that looks a bad omen indeed. The US housing market is already reeling from the impact of higher mortgage rates on new loans.
Usually, when interest rates go for the higher side, the lenders are supposed to have a party time. Most of the mortgage loans are taken on floating rate option and therefore whenever there is a change in the Repo rates, MLSR points, debt ceiling etc, there will be a corresponding change in the mortgage loan rates. There are numerous cases where within the same loan application, the sanctioned amount was drastically reduced in a small span of time between the submission of application and the processing of the same.
For example, a public sector bank has the policy of funding a maximum of up to 90% of the estimate of the construction or property purchase, provided the particular customer has met all other eligibility requirements. Alter the submission of the application, there might have a change in the Federal Reserve Policy or a fluctuation in the market scenario and the bank reduces the sanctioned amount to comparatively lower 80% of the total estimate. This is a big setback for the customer who now has to run for arranging the unexpectedly arisen extra fund in addition to the breaching of the trust factor between the lender and the borrower.
This can be compared to the situation when a trader who has entered into a stock purchase with a retailer on an agreement of a pre-decided brokerage at a certain percentage of the returns deals with the grim situation of the retailer escalating his charges in between the transaction. This is exactly why the systematic trading approach of Bitcoin Trader has earned it the prestige it enjoys now. There can be two dire consequences on the economy and its elements because of these changing mortgage policies of the bank. One is that the customer has all chances to switch to a private sector bank that provides more flexibility and even 100 percent funding for privileged customers. The second is that it as to the debt woes of mortgage loans that can reduce its takers, at least till the Federal laws loosen a bit.
Meredith Whitney, CEO of Meredith Whitney Advisory Group, talks about yesterday’s shutdown of the Nasdaq Stock Market, regulatory probes of US banks and the outlook for Ben S. Bernanke’s successor at the Federal Reserve. She speaks with Sara Eisen and Michael McKee in Jackson Hole, Wyoming, on Bloomberg Television’s ‘Surveillance’…