In order for an organization to carry out their duties and responsibilities they should have financial resources to run their affairs effectively. On the other hand the financial institutions require the organization to have collaterals that act as evidence that they can borrow money and repay money from those institutions. In case they don’t meet those requirements then, they should look for alternative sources of financing in case they face financial difficulties such as the mortgage markets.
Mortgage markets are the channels that are used to transmit information from one place to another. They involve the individuals such as the mortgage brokers, correspondent lenders and loan officers that conduct initial marketing and sales efforts that generate loan applications, organizations as banks or the non-bank entities that evaluate those applications and the entities that either purchase loans to act as investments or those that sell their goods in the national and international capital markets (Ren, E.and Apgar, W. 2007).
It also refers to the form of financing that enables an organization or a bank to lend money to people so as to acquire a house and later on repays back the money together with the interest that is accrued from the loans borrowed. Residential mortgage is a form of financing to individuals in an organization. The mortgage may last for a period of five to seven years due to the level of redemption that is within a market.
Residential market consists of additional incentives such as the cash back payments and the survey reimbursement fees. The costs that are associated with the repayment of the mortgage are reduced by imposing repayment charges and other times recovering the portion of cost that is related to the mortgage services. Residential mortgage leading technique can be implemented through enforcing factors such as the low risk lending strategies within an organization.
Characteristics of Residential Mortgages
Residential mortgages enable one to buy a home and also indicate the company’s income levels, amount of down payments and how they are expressed as percentages of acquisition costs of the properties involved .The other characteristic of the residential mortgage is that it shows the types and the locations involved while one is carrying out transactions as well as the mortgage principal amounts of an organization (Mills, E., & L. Lubuele. 1994).
Creative mortgage financing
It refers to the type of finance that enables a buyer to purchase a home that one would not be in a position to purchase under the traditional mortgage loans policy. While one is using the creative mortgage financing one should consider how long the loan will last whether for a short or a long period of time so as to repay in good time to avoid long delays .At the same time its monthly repayment period may change as compared to the predetermined formula set by an organization even if the interest rate may change with time.
The common types of creative mortgage financing
Graduated payment mortgage loans
It’s a type of mortgage that is applied on the persons that have their income increasing each year. It allows the buyer of a house to have an opportunity of accessing lower monthly payments at the beginning of the loans as the payments increase each year for the customers. The loan is repaid after several years by refinancing it with another type of loan.
50 Year mortgage
It’s a type of mortgage that has a lower rate of monthly payment, but the principal amount of the mortgage declines as each part of its payment goes to the principal amount while the other goes to the interest accrued from the loan that has been borrowed by a buyer.
The Community Land Trust
It’s a type of fund that is used by the federal state, county’, municipals and other private sectors in order to provide funds to the low and moderate income earners. They were established over thirty years ago so as to provide housing facilities to the creditworthy, moderate-income earners such as the policemen, teachers, firemen and the public employees. They also provide special mortgage financing from the government sponsored programs (Ren, E.and Apgar, W. 2007).
Current article of finance topic published within the last 90 days
In the United Kingdom and other parts of Europe, the banks and lenders changed their attitude towards the lending activities within their countries; this was as a result of the problem of credit crunch that was experienced in that country. Credit crunch refers to the sudden reduction of loans that can be given to the customers due to increased cost of obtaining loans from the banks. It also occurs as a result of the declined value of the collaterals that are used as securities to obtain loans from banks and also occurs as a result of increased rate of interests or reserve requirements and also imposition of direct credit controls from the central government.
Even as the problem of credit crunch was experienced in those countries, this problem did not deter the private developers from carrying out their duties and responsibilities. With the presence of appropriate locations, proper feasibility and the right project planning techniques then these would led to successful implementation of property development within those countries (Ouachita, C. L. 2008).
According to Frank Martens, and Richard Ellis of Europe, Middle East and Africa (EMEA) they stated that the process of changing the lending practices was not as a result of credit crunch, but it was a form of putting up more restrictions on the institutions from excessively lending out their money to their customers without the following the right protocols and procedures within the organization.
In order for the financial institutions to overcome the problem of credit crunch, they should put strategies that are meant for individual lenders so as to avoid the problems of excessive lending from happening in the future.
In my opinion financial institutions should always be cautious when lending money to the borrowers since failure to adhere to this rule can lead to financial difficulties for the lending institutions .It was noted that financial institutions could face financial difficulties if the right mechanisms are not put in place to overcome the problem of excessive lending as some of the borrowers my fail to honor their obligations thus lead to inadequate funds to supply to other customers.
Lynn Bonachita, C. (2008,). The Current Lending Attitude for Development Finance. Retrieved August 27, 2008, from http://ezinearticles.com/?The-Current-Lending-Attitude-For-Development-Finance&id=1343510
Edmund L. A., (2008). “Fed Chief Shifts Path, Inventing Policy in Crisis.” New York
Ren, E.and Apgar, W. (2007). Understanding Mortgage Market
Behavior: Creating Good Mortgage Options for All Americans. Cambridge:
Harvard University, Joint Center for Housing Studies
Mills, E., & L. Lubuele. (1994). “Performance of Residential Mortgages in Low- and
Moderate Income Neighborhoods,” Journal of Real Estate Finance and
Economics, 9, 245-260.