Monday

What are subprime mortgages?

Over the last few years, there has been a great deal of press coverage regarding subprime mortgages. While in many cases, the accusations about these mortgages is true, there is a lot more to a subprime mortgage than most media outlets have covered. The majority of Americans are not even certain of what subprime mortgages are, they assume they were given primarily to deadbeats by crooked lenders. While there is some particle of truth to this, this fails to tell the whole story that effectively answers the question - what are subprime mortgages.

The simple explanation

The most simplistic explanation of a subprime mortgage is a mortgage loan that is made to a borrower who has a credit score of below 600 and has other risk factors that make them a more risky borrower than those with better credit scores. However, subprime mortgages were made by commercial banks of all sizes, private lenders and by mortgage companies.  For several years, subprime mortgages were an attractive option for those who were self-employed or faced other financial challenges.

Remembering the good days

Between 2004 and 2006, mortgage rates were at a lower level than they had been for some time. During this period of time, banks who had stringent lending guidelines loosened their guidelines to consumers who had less than perfect credit. Hence the birth of the subprime mortgage. These mortgages were made at higher interest rates to compensate for the increased risk that the loan presented to the bank.

Credit worthiness was not ignored

It is important to understand that the creditworthiness of borrowers was not always ignored by banks who were involved in subprime mortgages. After all, banks are not in the business of owning real estate, they are in the business of loaning money. However, many borrowers fell into “gray” areas meaning they were recovering from a bad divorce, they were returning to the work force after a long period of unemployment or in some cases, they were self-employed. Typically when these loans were sent to underwriting, these “special circumstances” were taken into consideration.

The role of government

Legislative action between 1977 and 1986 had a significant impact on the availability of subprime mortgages. First, the Community Reinvestment Act of 1977 provided incentives to lenders to loan money to lower-income borrowers. In 1980, the Deregulation and Monetary Control act allowed lenders to make loans at higher interest (not always in the best interest

How nonprofit organizations spend your donations

Every time you donate a dollar to a special cause somewhere in the back of your mind you wonder where that money is going. Fortunately, all not for profit and nonprofit organizations are required to post information about where the money they collect is spent. Before you donate, you should carefully review all information to find out just how much of your donation is going to real people and how much is going out in other expenses. Let's take a look at some of the typical expenses incurred by various causes and how they spend money.

Advertising

There is no doubt that most organizations need to spend money to let you know they are looking for money. Advertising is not generally free and many causes will spend money advertising for your dollars. Even though a number of causes can obtain free advertising from a variety of sources, there are still expenses incurred.

Salaries

Like it or not, various causes do have substantial salaries to pay. Salaries are incurred for CEOs, CFOs, grant writers and others. Regardless of the size of the group behind a cause, money is almost always spent on salaries in one form or another.

Events

We have all seen major fund raisers for causes such as "$100 a plate dinners", "Walks for...", "Phone Drives for..." and other such fund-raising methods utilized by some of the most popular causes. These events do not run themselves nor are they without their costs. Often there are event managers who are