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It earns revenue based primarily on the unpaid principal balance of loans serviced.
WSJ: Nationstar to Buy $10.4 Billion in Mortgage-Servicing Rights from BofA
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With the former, a borrower only pays the interest on the loan not the principal balance during the introductory period.
NPR: Mass. Homeowners Rally Against Foreclosures
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The solution is a "dual-index" mortgage, in which the principal balance is indexed to inflation, and payments are indexed to Mexico's government-decreed minimum wage.
FORBES: Mortgaging The Future
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If a borrower wants to rescind, he also should be prepared to sue and put up the cash to pay off the principal balance.
FORBES: Court Decision Gives Lenders A Headache, Borrowers An Ace In The Hole
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In October, the company restructured the securities so the original maturity date was extended, with half the principal balance being due on Feb. 15, and the rest on March 13.
FORBES: KKR Financial Feels The Crunch
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Some loan pools already have seen default rates exceeding 40%, a big reason many subprime bonds trade at a fraction of their face value, and their holders won't recover their full principal balance, despite the recent rally.
WSJ: Toxic? Says Who? Taste
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Of course, lenders are quick to point out that escrows are not actually a cost since they are just establishing the escrow reserves to pay your taxes and insurance, but it is a sum of money above and beyond the principal balance of the mortgage you are refinancing and it has to be funded by somebody!
FORBES: The No-Cost Refinancing Myth
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There are two upsides to paying with plastic: First, if you borrow enough to pay off the balance of your mortgage, all of the money goes towards principal.
WSJ: Should You Pay Your Mortgage With Plastic?
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But the balance of the argument was finer than the Fund and its principal sponsor appear to think and chances to strengthen the case for action have been missed.
ECONOMIST: Kill or cure?