Archive for April, 2010

On Mortgage Market In Turkey

Since the new Turkish mortgage law passed on March 2007 the mortgage and real estate markets have continued their growing trends that are mainly driven by lower interest rates; however this growth is probably just the tip of the iceberg.

The Turkish mortgage law that passed on March 2007 has two important properties that are expected to boom the mortgage and real estate markets in Turkey:

1 New mortgage products :

With the inclusion of the adjustable rate mortgage products banks are able to transfer some of the economy related risks in their balance sheets to borrowers. In adjustable rate mortgage products the interest rate is a sum of a fixed margin that is determined by the lender and a benchmark index that is set by Central Bank of Turkey. In May 2007 central bank decided that Consumer Price Index should be the benchmark index for the variable interest rate calculation. In summer of 2007 some banks started to offer various adjustable rate mortgages and these loans as expected have lower APRs. However as Central bank’s current records show there is almost no interest in these variable interest loans right now. This lack of interest is probably due to several factors such as: i the lack of trust in Turkish economy and the fear of a substantial increase in the interest rates even though the economy has been performing fine in the last 5 years without any major crisis; ii the recent mortgage crisis in the USA and particularly the rise in mortgage default rates in the USA and the fact that most of the increases in the defaults were in the sub prime market and adjustable rate mortgages; and iii the lack of understanding of the benefits and risks of these new products. We believe that these three reasons are temporary and in the near future as people are educated about the risks and benefits of these new products and mortgage brokers fill the necessary knowledge gap the interest in the products will increase.

2 Securitization of Loans :

About six months after the new mortgage law passed Capital Markets Board of Turkey completed secondary legislations on mortgage covered bonds and mortgage backed securities. With this addition to the law banks are now able to bundle the loans into securities and take them off their balance sheets. Covered mortgage bonds and mortgage backed securities are debt instruments secured by a covered pool of mortgage loans or publicsector debt to which investors have a preferential claim in case of default. These instruments are among the most liquid fixed income securities after the government bonds in Europe. While it is not expected to see the first securitization until early 2008 reduced risk for the banks will cause a significant and sustainable growth in the mortgage market in the coming years.

Expectations for the future

aThe secondary mortgage market will probably trigger a decrease in the interest rates as banks will be able to transfer their risks off their balance sheets and the ratings of the deals in the secondary mortgage market could be higher than Turkey’s subinvestment grade sovereign rating this has been the case in similar cases.

bWith the secondary mortgage market’s effects the banks’ competition growth will fuel an already booming housing market. Especially when the monthly interest rates get closer to 1 percent per month the volumes will be substantial as they were earlier. Expected growth in the mortgage market is expected to mimic those in Spain and South Korea as these countries have followed similar paths as Turkey. Sizes of the mortgage market in Spain and South Korea GDP are 50 and 25 percent of the GDP respectively. So it is not inconceivable to expect that Turkey’s mortgage market may grow up to 30 to 40 percent of the GDP from its current share of less than 10. Note that since Turkey has a very strong ownership culture the ratio can be even higher.

cTurkey’s new long term mortgage laws will increase the investment in Turkey. The new instruments that will be introduced with the securitized mortgages will increase the stability and depth of the financial system probably creating a natural cushion for any unexpected events and decreasing the volatility and avoiding the episodes of financial crises that were observed in 2001 and 1994.

d Enhanced foreign investment in the property market will cause a boom in the property market. Also in addition to real estate market as mortgages will need associated insurance it is expected that insurance sector will be a big beneficiary of the new mortgage law.

e The central bank will have more dominant place in the economy similar to the developed countries.

fNew law will help strengthen Turkey’s EU bid. The Turkish mortgage law will bring Turkey into line with the standards and practices expected from worldwide property purchasers and investors.

In addition to the tangible effects listed above we expect that there will be very important intangible effects too. For example in a country like Turkey where ‘future planning’ is measured with months mostly because of the economic financial and political crises just the fact that people are now able to get a loan up to 30 years is an encouraging incident that will probably change the way people plan invest spend and save in the future. Since being able to plan for the future is one of the most important requirements of economic development the additional foresight produced by the new mortgage law may be one of the biggest impacts of the new mortgage law in the long run.

About the writer:  Berk Akman works for KrediHavuzu.com Turkeys leading online mortgage broker uygun konut ev kredisi bavurusu temsilcisi dedicated in providing interest rate fee information and various advanced mortgage calculators e.g. refinansman mortgage kredisi hesaplama.

Effective Economic Stimulus For Housing
span style=”fontsize: 12pt; fontfamily: Times New Roman;”>Now that the majority of elected officials serving in Congress and the White House have publicly stated their resolute intent to spend United States Treasury funds to attempt to stimulate the nations economy the ideological debate as to whether it is proper to use taxpayer dollars in support of this effort should now be set aside as moot. It is more appropriate for our nations leaders to focus on the most effective timely and relatively frugal means of achieving the desired end. Although federal stimulus plans that thinly spread billions of dollars out to various individuals corporate entities and state governments may appease many of these politicians constituents these quick fixes only serve to temporarily satisfy the immediate monetary needs of the recipients and fall well short of halting the downward spiral in which our economy is imprisoned. The bandage approach to fiscal inducement will only lead to further and larger federal expenditures in the future all the while increasing the likelihood that rampant inflation will be added to the mix of economic problems with which we must grapple.

Instead a more significant and concentrated infusion of these precious funds into the core cause of the crisis should be instituted as quickly as possible to prevent this seemingly endless domino effect from further contaminating our public and private sectors. Remember the majority opinion is dictating that the money will be spent so now we must ensure that it is used effectively. Also recall that this dilemma started in the housing market and the vast majority of economists and analysts agree that a turning point will not surface until housing prices stabilize and the financial institutions that make loans secured by housing can recover. Recent piecemeal attempts to stimulate both the housing and financial industries through interest rate reductions tax deductions foreclosure leniency and purchasing troubled bank assets will not prevent future defaults and foreclosures from further deteriorating housing values and bank balance sheets. Unfortunately this reality is becoming clearer with the release of each housing and bank earnings report.

Without healthy banks businesses will be unable to obtain adequate financing to continue existing operations which will lead to more job losses and ultimately more foreclosures. Increased foreclosures leads to more bank owned properties for sale on the market thereby increasing the inventory of houses for sale and decreasing home values. Real estate is the security for most bank loans and when property values decline so do the values of the banks themselves. Sound familiar? It should as this pattern is now likely to repeat until forcibly halted.

The infusion of money into banks is actually the correct course of action it just needs to be done in a more specified manner and in greater initial amounts to prevent needing to infuse much more in the future. Under the Troubled Assets Relief Program TARP often referred to as a bank bailout the government purchased troubled loans and securities from lending and investment institutions. But the hundreds of billions of dollars spent were used up far too quickly as entire loans were purchased not just the troubled portions of the loans. For example a homeowner may owe 300000 against a home now worth only 200000 leaving only the difference of 100000 as the troubled portion of the banks asset. In this hypothetical instance if the government were to just relieve the bank of the 100000 portion the governments allotted funds for economic stimulus could go three times further by not having to purchase the entire 300000 loan. Plus the TARP program does not prevent foreclosures since the governments purchase of these loans merely relieves banks of having to foreclose and take the loss. Instead eliminating only the troubled portion of the assets allows homeowners to stay in there homes since their principal loan balance is reduced and ultimately prevents more foreclosures from saturating the market.

The mechanics of this proposal are amazingly simple. The government simply guarantees to reimburse banks for reducing the loan balances owed by borrowers to market value. Once the new loan documents are formally executed reflecting a reduction of the amount owed the documents are submitted by the bank to the government for reimbursement. Both Wall Street and Main Street then collectively rejoice. Bank balance sheets immediately shore up due to their once toxic assets being converted to adequate security. Homeowners once faced with foreclosure are now comfortably making lower fixed monthly payments due to reduced loan balances. No more government funds being used to pay executive bonuses for employee retreats or to simply keep bank operations going until it comes time to drink from the government trough again.

Again for better or for worse the ideological debate over whether to use treasury funds to stimulate the economy has ended. Now is the time to institute the most effective plan with the least amount of waste. To escape this destructive vortex we must first put concentrated stimuli into the housing and financial industries.

About the writer:  Brian S. Icenhower Esq. BS JD CRB CRS ABR a California Association of Realtors Director practicing real estate attorney a real estate expert witness and litigation consultant a prosecution consultant of Tulare County District Attorney Real Estate Fraud. He may be contacted at bicenhowericenhowerrealestate.com or www.icenhowerrealestate.com

Buying Real Estate Steps

Buying Real Estate is part of the American dream. For those who have never been down the “buying real estate” path yet you just…

1. Get PreApproved. Even if you don’t think you can afford it or are concerned about a down payment or your credit the first thing you should do is talk to a skilled mortgage lender. It’s their job to help you fix your credit tell you how much you can afford and help make it all happen. They will advise you if a down payment is needed it may not! Many people arrange to buy a home with nothing down 500 down or 5 down how much your monthly payment will translate to i.e. tell them you want to spend X a month and they’ll translate that into a purchase price of Y. If you need to repair your credit they’ll be able to refer someone or give you some tips and help on how to fix it up.

2. Once you meet with a mortgage lender you’ll get a letter of preapproval. It looks informal but what matters is the listing agent representing the sellers of a house you later want to buy calling them and doing some research on whether you can in fact close and purchase the property. You then take this letter to a Realtor R / Real Estate Agent note: Realtor is a real estate agent that adheres to a code of ethics; for practical purposes they’re essentially the same though a RealtorR has more accountability and is therefore more highly recommended. This is step 2 of buying real estate.

3. The fun part: Shopping! Step 3 of buying real estate usually involves you looking at a bunch of properties on the internet driving around some neighborhoods then when you see some homes you think you might like just email or call your agent and ask to go see it. Don’t get too hung up on this and at first go see some houses even if you know it’s not quite right just to get some ideas of what you like and don’t like. On paper or on the computer a house is just a bunch of numbers 3 bedrooms 1873 square feet etc. but in person you’ll find that the “bones” of a house they layout and the materials vary widely. On each home communicate what you like and don’t like to your agent. Ideally you should do this on each home and by listing your favorite points and factors you didn’t like you’ll help your agent slowly hone in on what you really want. This is step 3 of buying real estate and it usually turns out to be more work than you expect. By the way it’s OK if a house or condo or lot seems ok on paper but just doesn’t feel right. Trust your gut…buying real estate is emotional and you want to feel at home. Usually if something doesn’t feel right it’s because it reminds you of some other home and many times people ultimately buy a home that feels like a home they lived in as a child and therefore feel at home in.

4. The exciting part of buying real estate comes when you find a home you want. Just tell your agent this one feels right and you’d like to put in an offer. Let your agent do the negotiating for you it’s their job and they get paid by the seller so the service is essentially free. You can call the mortgage lender back now and tell them you’re finally buying real estate and give them the purchase price you want to offer along with any other expenses such as taxes and insurance. They can give you a more exact payment on the house which you’ll then give your agent a range to offer starting low with a walkaway price. The agent helping you in buying real estate will know the conventions and strategy best for your local market and sniff out competing offers etc. This offer will then be accepted or declined or counteroffered.

5. The nervewracking part of buying real estate is closing the actual transaction. Once your offer is accepted you then start a 2way “dance” called “escrow” or “under contract” or “closing”. This means the further you get into the deal the more committed you are financially and the more committed the seller is because they’re packing their life into boxes. Expect a bit of buyers remorse it always happens about a week in and just remind yourself why you like the house and imagine your life in your new home. Also expect that the closing date is just a guideline and it could be earlier by a few days or later by a few days. Most commonly people close in about 3045 days. Depending on your state you’ll sign a new loan on about day 25 or day 29 and then move in about day 30 or 45 depending on your contract period. You’ll sign a binding loan and get keys the seller gets cash and their old loan paid off if they have one and the bank gets an enforceable contract that you make house payments toward. Once it “records” the deal is 100 done you own the home and about 6 weeks later you’ll make your first house payment to the bank.

Buying real estate is fun and can make a big impact in how you live your life. For most Americans buying real estate is one of the most important financial investments they ever make and regardless of market it continues to prove a good investment simply due to inflation if not market appreciation. Just as your grandparents paid 15 cents for coffee and bought their first house for what seems like little money so will your grandchildren or you in your old age! look back on buying real estate that first time as “cheap”. Back when people were buying real estate for 5000 for a home the average income was only 1200 a year for some… our relationship with money changes over time. Once you cross the buying real estate bridge you’ll not only build wealth but you’ll build a home filled with memories as well.

About the writer:  Roger V runs http://BuyingRealEstate.ME a portal for home buyers with mapsearch free videos reports local agent search more resources for those considering buying real estate. Roger is a former mortgage lender real estate agent and internet marketer helping real estate professionals connect with home buyers.