Your Questions About Save Loan Crisis

William asks…

Why some countries are caught in a debt trap and how does it affect their economic and social development?

How does the role of loan conditionalities come in?

John answers:

Countries find it easier politically to increase spending and lower tax-collection than to decrease spending or raise tax-collection.

At a certain point, debt repayment and interest on the loans are so high that they take up a large portion of the government’s anual budge and it becomes even more difficult to come up with the savings to pay down the debt or to be prepared for difficult financial times.

The debt itself crowds out investments, as people use their savings to buy government debt which guarantees a secure return. When there is a lot of government debt, the government offers more of an interest yield in its repayment to attract buyers of this debt (loans), other things being equal.

A high debt level creates vulnerabilities to swings in the flow of capital markets and investor confidence that may result in capital flight, which in turn makes the country less capable of repaying its own debt and further loses investor confidence. Furthermore, as the budge is strained with a high debt load, governments have less room to enact counter-cyclical monetary policies.

Loan conditionalities for a country may set up the country to succeed in paying back its loan timely and improving its own financial management if it chooses to keep the frameworks of the conditionalities.

For example, the IMF made loans to many developing countries in crisis with the condition that the countries cut spending and even have a budget surplus or at minimum a balanced budget. Though politically unpopular, this made the country responsibly pay back its debt and have money left over to to save and invest in its future development.

Sharon asks…

What steps do I take to try to buy a house?

My husband makes a little over 24,000 a year, we have 3 kids and not so good credit. I really want to buy a house or even a manufactured home. I just want to own my own home! What are my chances of getting a first time home buyers loan? Will I ever achieve my dream of owning a home?

John answers:

Step 1. Pre-qualify.
– Work out a Buyer’s Budget – know how much you can really spend on buying a home. Don’t just take for granted you can meet th payment because you qualify. Planning now should save heartache later.

Step 2. Work to fix any issues found during pre-qualificaiton.
– This may mean saving money for a down payment or closing costs or adressing a credit issue.
Step 3. Do your homework. – Find out what programs are available in your area. The lender you pre-qualify with should be able to provide you with this type of information.
Step 4. Look at non-comventional purchase options.
– Lease/purchase options, Real Estate Contracts Mortgage Assumption.
Step 5. Don’t “Emotion Buy”. Shopping for the best purchase price, loan program, lowest closing cost package, buyers home warranty can save you thousands of dollars.

Agencies like HUD-FHA, USDA Rural Housing and the MFA are just a few places to look for help. You can own a home, effort and time if needed will get you there.

Here are a few links which should help you;

Dept. Of Housing and Urban Development
HUD’s Homes and Communities Page is a clearinghouse of information and services about homes and communities for citizens and for HUD’s current …
Www.hud.gov

National Low Income Housing Coalition
Dedicated to ending America’s affordable housing crisis. Weekly news and alerts about affordable housing.
Www.nlihc.org/

Enterprise Foundation
Enterprise helps build affordable housing for low-income Americans by providing financing and expertise to community and housing developers.
Www.enterprisefoundation.org

New Mexico Mortgage Finance Authority
The New Mexico Mortgage Finance Authority (MFA) is a quasi-public entity financing housing and related services for low to moderate income and
www.nmmfa.org (Every state has a MFA office I just wan’t sure what state you are in by contacting this office they can point you to your’s.

Joseph asks…

Is the Democrats plan to save the financial institutions and stabilize the US markets just more of the same?

Chris Dodd and Barney Frank were the principles in causing the crisis by refusing over sight over Fannie and Freddie after Greenspan brought to their attention in 2005. How can we expect that they as chairman of the house and senate committees do the heavy lifting to straighten out the mess that they caused.
Shouldn’t they resign their positions as chairman and let someone without an agenda of social engineering take control?

John answers:

Obama is more of the same corruption.
In 2003 Bush tried to head off this crisis:
Under the plan, disclosed at a Congressional hearing in 2003, a new agency would have been created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.
But the Dems said:
”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts the ranking Democrat on the Financial Services Committee in 2003.

McCain warned about Fannie/Freddie in 2005 and introduced a bill to fix it. The Bill Federal Housing Enterprise Regulatory Reform Act of 2005.
The Dems. Voted him down because it would kill their cash cow! Check link to see campaign contributions from Fannie Mae:
http://www.opensecrets.org/news/2008/09/…

The whole thing started with Jimmy Carter relaxing the rules for home loans!
Http://www.presidency.ucsb.edu/ws/index.php?pid=6782

Bill Clinton put that policy on turbo-charge!

HUD
http://newsbusters.org/blogs/p-j-gladnic…

BILL CLINTON and a congress of 1999 for this recent crisis.

Glass-Steagall Act of 1933 was designed to prevent the kinds of speculative conflicts of interests that pervaded Wall Street in the 1920s and helped bring about the Great Depression and this resent crisis.

In 1999, the law banning brokerages and banks from marrying one another — the Glass-Steagall Act of 1933 — was REPEALED , and voila, the financial supermarket has grown to be the places we know as Citigroup, UBS, Deutsche Bank, et al. But now that banks seemingly have stumbled over their bad mortgages, it’s worth asking whether the fallout would be wreaking so much havoc on the rest of the financial markets had Glass-Steagall been kept in place.

Donald asks…

After watching and listening to Obama, how can a consumer have confidence?

Artificially low interest rates means your saving rates stink.
Don’t spend it because he is coming to take it and if you don’t have it the a New Black Panther family will be living in your house after the IRS takes it.

John answers:

CBO came out TODAY and said at the rate we are spending we cannot recover. We are headed for EU type depression and bankruptsy. THEY ALSO SAID that we have to STOP the spending NOW!

Confidence? When the federal Budget Bureau under BOZO’s thumb that allowed health care to take place….tells you things are going downhill…you better believe it.

Some snippets from the CBO report: (full report here)

Further increases in federal debt relative to the nation’s GDP almost certainly lie ahead if current policies remain in place.
Unless policymakers restrain the growth of spending/increase revenues as a share of GDP, budget deficits will cause debt to rise to unsupportable levels.
A growing level of federal debt would increase the probability of a sudden fiscal crisis, during which investors would lose confidence and the government would lose its ability to borrow at affordable rates.
Having a small amount of debt outstanding gives policymakers the ability to borrow to address significant unexpected events such as recessions, financial crises, and wars.
The government would need to undertake some combination of three actions:
-restructuring its debt;
-pursuing inflationary monetary policy;
-adopting an austerity program of spending cuts and tax increases.
Governments can attempt to change the terms of their existing debt—investors would demand a large interest premium on subsequent loans for many years.
Foreign investors would face substantial losses.

CONFIDENCE? Sounds pretty grim to me

Charles asks…

How did the whole recession happen ?

People say it was the mortgage loans and other blame the high gas price so how did it start.

John answers:

In the US, people were buying homes and other things they could not afford, and doing it on credit. Well, eventually many people have lost their homes because they bought more than they could afford (stupid) and the banks loaned them the money to do it (even more stupid). So those homes were foreclosed on, and the property values have declined, and the banks have lost huge amounts of money on these homes. The way people were able to keep borrowing money to keep buying what they couldn’t afford was by taking home equity lines of credit, but now many people’s homes are worth less than what they paid for them, so they can’t borrow anymore. So those people are not buying. When a lot of people can’t buy stuff anymore, businesses go out of business, and people lose their jobs. Then THOSE people don’t have any money to buy stuff, either, and it just keeps going on and on. That is basically what has caused this economic crisis. In addition, the banks lost so much money, a lot of them went bankrupt, and the ones left solvent are refusing to loan money to anyone, so other businesses are going under because the way they kept their cash flow going was to borrow money sometimes. So even businesses that are doing sort of OK are having trouble because they can’t borrow money. High gas prices just made people even less able to afford their homes, but these forclosures would have happened anyway (and still are, even though gas prices fell).

This economic crisis is the fault of many people, including consumers who bought more than they could afford & didn’t know how to do the math to figure that out. So I personally think math illiteracy and the inability of people to defer gratification (save for what you want, don’t put it on credit, don’t keep up with the Jones) has most to do with it.

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