FHA to offer loan modifications
July 31, 2009 by admin
The department of Housing and Urban Development (HUD) announced this week they will now allow for FHA mortgages to be modified under similar guidelines followed by Making Home Affordable Program (MHA). The making home affordable program was targeted as home owners who were currently past due with their mortgage payment or in jeopardy of becoming past due with their mortgage payment. The government rolled out the Making Home Affordable Program earlier this year, in conjunction with mortgage lenders and the agency partners Fannie Mae and Freddie Mac, these loans would only offer the ability for a loan modifications for conventional home loans.
The push by HUD to expand the MHA program to include FHA loans comes at a time when home foreclosures are continuing to increase. The conventional loan MHA program has also come under fire from advocates in the consumer industry as it has been slow in helping out home owners as consumers struggle to deal with their loan servicer to refinance or modify their home loans. This past week, the government met with the nation’s largest twenty loan servicers to push them to expand their ability to meet the market demands and help struggling home owners. The announcement this week by HUD expanding the MHA program to FHA loans will certainly help homeowners in these mortgages. The program is similar in its goal to help struggling home owners, but offers an alternative course to bring the house payment down.
The FHA program will lower the principle balance for the homeowner to lower their house payment and bring their monthly payment in line so that their housing payment ratios do not exceed thirty one percent of their gross monthly income. Homeowners, who are currently behind on their mortgage payments, qualify with a few caveats:
• They can not be more than twelve months behind on their loan
• The property must be their primary residence
• They must document their financial hardship was not caused intentionally
• Total debt to income ratios cannot exceed 55%
The HUD program is aimed at helping bring down the rate of home foreclosures that have crippled the real estate market. HUD is offering financial incentives to mortgage lenders who offer the loan program. FHA mortgages have become increasingly popular over the last six months, as they offer buyers the opportunity to purchase a new home with minimal down payments (3%) and provide additional credit flexibility that is not found with conventional home loans. The real estate market is showing signs of improvement and this latest HUD program will only help stabilize the market further.
July 29, 2009
July 29, 2009 by admin
The stock market continued moving lower on Wednesday as investors appear to be taking a more cautious approach to equities following the recent short bull rally. The major news of the day centered on the energy sector, which led a broad market sell off and a partnership between Yahoo and Microsoft.
The technology market appeared less than inspired following the long await partnership for Yahoo and Microsoft, one that will provide Microsoft an additional platform to market their Bing search engine as the companies collectively work to try and gain ground against market leader Google. The partnership did not ignite a rally in share price for either company or the reality of the synergies and economic benefits being realized are likely over one year away at this point.
The energy market was instrumental in leading the overall stock market lower. The price of oil dropped almost $4 per barrel today, one of the largest declines in the past two years as news reports leaked of accumulating supply levels and weakening demand. This abrupt sell off in oil has erased the gains oil prices have realized as they have benefitted from the broader market rally over the last three weeks. The short term proposition for oil to move over $70 per barrel is looking less likely as the Labor Day holiday is now less than five weeks away. The drop in oil will aid the market and help reduce the only true inflationary threat in the economy today.
Yesterday, the market received some great news from the S&P Case Schiller report which indicated that home values on average in the nations largest twenty metropolitan areas have increased for the first time in the last three years. This was the third report this month that indicated the housing market is improving. The solid economic report on housing was challenged by a weaker than expected report on consumer confidence. This report, however reflects the sentiment from June and the strong July stock market rally and improved housing numbers could dramatically alter the outlook of confidence in July and the months ahead.
Mortgage rates have drifted sideways over the last two days, despite the sell off in the equity markets. The mortgage bond market is being pressured by results of the Fed’s most recent auctions, which have pushed the ten year bond above the 3.65% level. Fixed rate mortgage loans are averaging five and a half percent with national mortgage lenders, relatively unchanged over the last week, but below their peak levels of early June. The next major report that will impact mortgage rates is the July job market report due out next week. This report will crystallize if the economy has truly found a bottom and is on the way to higher ground or if the recent rallies in equities are false signals of optimism this year.
Cash for clunkers program goes live this week
July 28, 2009 by admin
This week the government finally kicked off their Cash for Clunkers program, aimed at helping to improve fuel efficiency and provide a sales boost to auto manufactures. The new “CARS” program will be a great avenue for consumers who have been in the market for a new vehicle purchase or individuals who may have been hesitant to purchase a new car amid the economic challenges. The CARS program is designed to offer rebates/vouchers ranging from $3,500 to $4,500 when you trade-in a vehicle and purchase a new one that meets or exceeds higher MPG standards
The voucher is applied on eligible trade-in new vehicle. The government will allow the voucher to be redeemed at participating dealers who have to meet the requirements set forth by the National Highway Traffic and Safety Administration (or NHTSA). As a consumer you do not need to sign up or enroll with a specific dealer and can shop almost all large auto manufacturers for both domestic and foreign car purchases (General Motors, Ford, Chrysler, Toyota, Honda, etc). The voucher transaction is conducted between the dealer and the NHTSA (National Highway Safety Transportation Association)
To be eligible for the program, you must trade-in a vehicle that meets the following criteria:
• The vehicle will have needed to been manufactured less than twenty five years before the date you trade it in
• Must have a combined fuel economy of 18 miles per gallon or less for both city and highway driving
• Must be in drivable condition and (running)
• Must have been continuously insured, registered and driven by the same owner for the full year prior to the trade in
General Motors website covering the CARS program, provides some great insight into how the process should look when you are trading in a vehicle and looking to purchase a new vehicle, here are the key points according to GM’s site:
• Bring the title, registration and insurance papers showing continuous registration and insurance coverage for the past full year.
• When you buy a new vehicle, the dealer handles the submission of all required information to NHTSA.
• NHTSA ensures that your purchase meets the requirements.
• About 10 days later, NHTSA will issue a financial credit to the dealer—assuming all program requirements have been met.
• That credit will be applied to the purchase price of your vehicle.
In synopsis, if you are looking to purchase a new vehicle and use the CARS rebate you should plan for the transaction to take between one and two weeks for all of the necessary paperwork. The good news, is that this extra administrative time may allow you to research financing options more thoroughly to ensure that the auto loan (where applicable) you are looking to obtain has the best rate and terms for you’re your individual situation.
You can utilize these resources for additional information on this program:
Government cars program here
Verify the fuel effeciency of the vehicle you are considering at the Governments EPA site here
GM rebate here
Ford rebate here
Totota rebate here
Honda rebate here
July 27, 2009
July 27, 2009 by admin
The stock market is trading sideways, despite a spectacular report on the housing market. The market is struggling to find positive ground on Monday, following an impressive week on Wall Street as equity investors sent the stock market past the 9000 point level as corporate earnings and economic news fueled a rally in the broader markets. Today, the market has struggled to find a direction, as investors appear to be cautiously moving in and out of the equity markets, trying to determine the markets next course of action after the recent rally.
The market did get a solid boost early this morning when the new home sales report for the month of June was released. The report indicated that new home sales have move up over 10% last month. The numbers were the best figures for the new home industry in the last nine months. This report, combined with the existing home sales report released earlier this month, have some predicting that the housing market has finally reached a bottom point. The real estate market is certainly being assisted by the government tax rebates, abundant inventory and historically low mortgage rates. The month of June saw a spike upward with mortgage rates as the markets grew concerned that the U.S. debt load was growing too large and too fast. This upward spike briefly sent interest rates on thirty year mortgages up to six percent. The spike upward, and subsequent media coverage could have pushed more buyers into the market and moved some of the “on the fence” buyers into the market. There has been much debate and coverage on the housing market bottom and the media speculation certainly has led a percentage of home buyers to continue to try and wait to time the bottom. The recent news, could be a significant boost towards ending this trend and pushing more buyers to act aggressively. The housing market is still under stress from home foreclosures and the struggling U.S. job market, but an improvement in housing would be a great boost to consumer confidence.
The mortgage market has felt a bit of pressure from the sharp increase in equities over the last two weeks. The yield on the ten year bond, has move from 3.35% past 3.71% on Monday. This has pushed long term interest rates up by over .375% during this period. Most national mortgage lenders are offering thirty year loan terms at or above 5.5% currently. Long term rates have been rising in lockstep with the increase in the equity markets as well as the upward move of oil. The trading range for the ten year bond to be concerned with is the 4% level. The market has shown some resistance, once it approaches the 4% level for ten year bonds, which has helped to keep mortgage rates below six percent.
Freddie Mac sweetens the pie to try to entice home buyers
July 25, 2009 by admin
The opportunity to buy real estate in America may never have been better and new programs adding additional incentives are continually being added into the market. This past week, Freddie Mac, one of the nation’s largest agency mortgage lenders, announced they would be offering a promotional program called “smart buy”. The program is aimed at trying to attract home buyers to purchase bank owned properties.
Freddie Mac plays a critical role in the mortgage industry. Serving as one of the nations largest agencies that securitizes conventional home loans, they have been in a precarious financial position over the last two years as home foreclosures have swept over the housing markets. Freddie Mac, along with Fannie Mae, another large national agency covering the mortgage markets, have both received billions of dollars of capital from the U.S. government in the last twenty four months. The companies financial problems escalated as they were leveraging the value of their loan portfolios in multiples over ten percent. The value of their portfolios began to fall sharply in 2007 and on into 2008 as home foreclosures reached historically high levels. Combining the company challenges with the fall out in the credit markets, presented an enormous challenge to the government as the lack of investors purchasing mortgage loans threatened to spiral the housing markets in a free fall down. The government’s response was to pump billions of dollars into both companies as well as commit to helping home owners refinance their mortgages through new programs, modify their home loans and subsidize mortgage rates through the FOMC.
The government’s intervention has helped to keep the agency lenders from going out of business as well as providing a necessary secondary marketplace for mortgage bonds, but has not helped the companies to slow down their inventory of foreclosed homes. The burden of carrying the extra inventory is one of the key reasons why Freddie Mac has announced the “smart buy” program. Their goal, is to provide an incentive to home buyers to purchase the lenders properties. Home owners who are purchasing single family, primary residences, receive a complimentary two year home warranty to cover the properties mechanical items. The home warranty helps provide peace of mind to new home buyers, and a great marketing tool for properties in the Freddie Mac inventory.
The housing market has started to show some signs of life in the summer of 2009. Existing home sales peaked up in both June and July. The improvement in the market has yet to make a significant dent in slowing down home foreclosures, but is a small step in the right direction. Bringing housing inventories down will help to stabilize home prices, providing a necessary component to help keep homeowners from simply walking away from their homes, which has been a major challenge for the current market. Home foreclosures generally sell between twenty to forty percent below comparable homes in the neighborhood. The dramatic drop in value has led markets such as California, Nevada and Florida to realize home declines in excess of fifty percent over the last twelve months. Freddie Mac, realizing they have properties competing in a tough sellers marketplace is proactively trying to differentiate itself, perhaps even helping to bring more buyers into the marketplace and realize a higher sales price along the way.
July 23, 2009
July 23, 2009 by admin
The stock market is flirting with the 9000 point level for the first time in the past six months as a better than expected housing report, combined with a number of better than expected corporate earnings reports has lifted the stock market. The stock market surge has regained life in the month of July as investors are looking into 2010 as a realistic point for the economy to begin a full recovery. The improved levels in the stock market will also lead towards higher expectations for earnings and economic reports in the coming months. Improving confidence in the market will help both consumers with purchasing and corporations with hiring, both key components to ending the economic recession.
There were two major economic reports that hit the market today. The first report was the weekly job loss report. Job losses continue to be the economies Achilles heal, continuing claims trended downward, with an uptick in initial claims, a mixed report that did not move the market significantly. The second major economic report released today was the existing home sales report for the month of June. The report indicated a move up over 3.5% last month, stronger than most experts were predicting. The housing inventory is also beginning to see a decrease with inventory. Reducing home inventory is a critical step towards bringing a balance to the housing markets and helping to find a bottom to the market, to help restore home value appreciation. The existing home sales improvement can be traced to the government tax rebates, historically low mortgage rates and great supply of homes.
The market has been digesting corporate earnings reports for the last two weeks. Today the market gained additional confidence as Ford, UPS, and AT&T combined to beat most expectations. Corporate earnings have been consistently beating on both revenues and earnings over the last two weeks, which has been instrumental in lifting the Dow almost 800 points over this period of time. Investors have move aggressively back into the equity markets with a belief that the economic woes have seen their worst levels and brighter days are in the future for the economy. Oil prices are continuing to move higher, approaching the $70 per barrel level again for the first time in the last thirty days. There is a good chance that the price of oil has peaked for the year. The price for a barrel of surpassed $71 earlier in the year, considering that Labor Day is less than sixty days away
Mortgage rates have remained relatively steady over the last two weeks, despite the rapid improvement in the equity market. The yield on the ten year Treasury bond is still well below levels it reached in early June and moved slightly over the 3.6% level on Thursday. Fixed rates for thirty year home loans have moved up roughly .125% over the last two weeks and are around 5.25% with most national mortgage lenders. The housing market is likely to continue to benefit from the current low rates, combined with improved investor psyche with a rebound in the equity markets.
Personal loans become popular option as old school lending returns
July 21, 2009 by admin
Watching classic television evokes an era when consumers would only borrow money from a local bank where they established a relationship with the local banker. The fallout from credit card lenders tightening guidelines, home equity lenders reducing available credit and tightened guidelines in the finance market is pushing more consumers to apply for personal and signature loans for their borrowing requirements.
In years past, consumers had multiple borrowing options with short term financing for large retail purchase, weddings and home improvement projects. With fewer options, today consumers are contacting their local banks or credit unions to find out the availability of a signature loan, or scouring the Internet to find a personal loan lender. Personal loans, often feature a higher level of underwriting than a traditional credit card, but generally do not require the borrower to provide collateral (assets) to obtain the loan.
Personal loans offer borrowers multiple options with a tremendous amount of convenience. Consumers can apply for loan amounts ranging from $500 to $100,000 and lending decisions are generally based on the borrower’s credit history, job stability and income. Personal loans can be obtained in as short as twenty four hours with select lenders. Personal loans are not lines of credit; they offer the borrower a fixed amount of money to be paid back over an agreed period of time.
As lending takes a turn towards the past, personal loans evoke an era when consumers had fewer options to obtain money and banks and lenders held their customers to a higher standard. The major change is the method for obtaining these types of loans. Today, consumers can apply from the convenience of their home computer and have the money wired into their account in a short period of time. The ability to obtain a personal loan to finance a home improvement project, health care expense or take a vacation has become increasingly more popular. The downside to this increase in popularity is that consumers can become the target of bait and switch advertising much easier. Most states have yet to regulate the personal loan marketplace. Credit cards and payday loans are typically regulated either at the national or local level as regulators try to curb predatory lending practices and provide limitations on fees and interest rates. Personal loans have yet to become regulated to the extent of their counterparty options.
Consumers shopping for a personal loan should have a general idea on the amount of money they are attempting to pay, a comfortable payment amount and knowledge of their current credit situation. This information will greatly assist them as they shop for a personal loan lender to cover their financial goals. Consumers who have relationship with a local lender should compare their offerings versus companies who are Internet based to ensure they receive the best loan terms. The next time you have your tv on and a classic black and white movie hits the screen you may realize the more things have changed, the more they stay the same.
July 20, 2009
July 20, 2009 by admin
The month of July has been great for stocks. The march up to the 9000 point level is fast approach as investors are gaining confidence by the day. Stocks surged again on Monday as the dow finished at 8848. The market started the morning on a positive note as CIT, one of the nations largest mid market lenders announced that they were able to successfully renegotiate three billion dollars of financing with their leading bond holders. The companies fate has been greatly debated, as recently as last week their was sentiment that the company would be forced to file for bankruptcy after the government announced that they would not be offering a direct financial bail out.
This week will be light on key economic reports, but the market will gain insight from Ben Bernanke and the FOMC as to the health of the U.S. economy. The Fed is likely to continue a status quo pattern and with oil prices trading in a pretty consistent pattern this summer, the threat of any inflationary pressure in the market is all but non existent. The fed is likely to be under pressure from key members in the government who want to know what the exit plan is for all of the debt that is being accumulated. The likelihood that the housing market will find its bottom in 2009 is no longer a reality. The number of home foreclosures and declining home values will continue to pressure housing, which is feeling added pressure by the job market. The Feds ever growing balance sheet is the main concern of the government and investors. The ability to continue to finance future projects and the current debt levels will become more difficult without the Fed putting an exit plan into place.
The market that is most effected by the Fed’s actions and policies is the bond market. Earlier this year, as concerns over the Fed’s balance sheet became more apparent, investors in the bond market began to require higher yields, quickly driving long term rates up by almost one full percent. The Fed was instrumental in helping to drive down long term rates earlier in the year when the committed to supporting the mortgage backed bond market to the tune of five hundred billion dollars. The Fed is not likely to move in this direction again, even if the housing market is slow to rebound. Its more likely the government is now hoping that the free market system will bring more balanced pricing into the marketplace and as investors take money out of cash positions, both the equity market and bond market could benefit. The key action the Fed will likely move forward with is language indicating a timetable to begin raising short term rates (late 2010 at the earliest) and reducing their balance sheet by bringing more private investors back into the market. The run up with stocks over the last two weeks has pushed long term mortgage rates slightly higher (mid 5.5% range for thirty year loan terms) as the ten year bond is now approaching the 3.7% level (closing at 3.61% on Monday).
Health insurance and the Obama plan
July 19, 2009 by admin
The promise of universal health insurance for every American has been a long standing political lightening rod. President Obama has aggressively pushed for new health insurance alternatives to help provide coverage to the millions of Americans who currently have no health care coverage.
The president has been running into the traditional roadblocks that have prevented a nationalized health care reform in trying to push through his landmark legislation. There are numerous groups that are lobbying against health insurance reform as they believe this could do a number of things including raising taxes, limiting coverage and reducing the quality of coverage available. Health care and insurance reform remains one of the largest political obstacles that the government has ever undertaken. The idea that one of the worlds wealthiest countries has millions of individuals without basic health care coverage seems incomprehensible, while universally almost everyone agrees that their should be coverage in place for everyone, the big problem arises once the question of paying for the insurance arises. There have been many documentaries and articles written over the years criticizing the U.S. health care industry and pointing towards countries such as Canada and France that have nationalized health care system in place. The Obama plan is not likely to universalize health care, but still does not have the endorsement of the American Medical Association.
The Obama health insurance proposal is centered on a key tax related item.. The main ingredient is implementing a tax for individuals who receive the highest premium coverage from their employers. The centerpiece of the legislation aimed at paying for universal coverage is based on the principal that employees are currently receiving a tax free benefit from their employees in the form of their health care. For example, if your company pays total annual premiums to a health insurance provider of $15,000 for you and your family, the government does not require you to pay income tax on the premium that is paid for your benefit. The new proposal would implement a taxing threshold, and require you to pay income tax on amounts paid over a certain government minimum ($11,000 was an estimated figure). This new tax would then be used to help generate the required revenues necessary to cover the universal health care coverage and offer insurance to individuals who currently do not have health care coverage. It is estimated that the total tax on all health insurance coverage is in excess of two hundred billion dollars. There is speculation that the government could place income restrictions on the new taxes, trying to target only families where the household income is above $125,000 annually.
The Obama proposal is going to bring out strong opposition from lobby groups and could dramatically change insurance programs for those who have not had coverage. This key piece of legislation is going to be hotly debated in both the Congress and Senate and could take the balance of the year to work through all of the negotiated details.
July 17, 2009
July 17, 2009 by admin
The stock market is mixed in trading on Friday, following a strong week of gains, highlighted by key economic reports and major earnings reports from three of the nations largest lenders (Bank of America, Citigroup and JP Morgan Chase). Stocks have jumped almost 2% for the week and there is growing sentiment speculating that a bull market rally could return as investors regain confidence in the health of the economy.
The major economic report released today focused on the health of the housing market. The month of June was surprisingly strong for housing starts, up almost three percent for the month. The market benefitted from a pullback with mortgage rates and increasing confidence in the real estate market. Large government tax rebates, have been a catalyst with bringing new buyers into the market. Any improvement in the housing numbers is great news for the real estate market. Despite and uptick in home sales, there remains larger concerns with stabilizing home prices. Home foreclosures are continuing to increase at record rates and a recent report from RealtyTrac showed a twenty percent increase in home foreclosures in the first half of the year compared to the same point in 2008.
Investors have been eagerly anticipating corporate earnings from the countries largest banks and lenders. This week the trifecta of JP Morgan, Bank of America and Citigroup all posted revenues that were above expectations. The banks beating on revenues and earnings are all a great sign for the health of the credit markets. The big downside to the company reports arose in the credit reserve areas. All three companies have been forced to increase their credit reserve pools(setting aside capital), anticipating future loan losses, primarily from an uptick with commercial loans and credit card lending. Both areas are expected to see much higher write offs in future months, following the downturn with the economy. In the midst of the current recession, all companies will have a challenge predicting future growth as long as the employment markets remain in such as state of turmoil. The good news for the economy is that the three banks are continuing to lend and generate revenues and profits, this should be a catalyst towards restoring the credit markets and corporate growth.
Mortgage rates have edged up this week, following a lead from the stock market. The yield on the ten year treasury bond, has moved off of a low of 3.3% up above 3.6% on Friday. This move has helped to pressure fixed rate loans to move up about .25% for the week. As of Friday afternoon, most national mortgage lenders were offering thirty year loans in the mid 5.5% range and fifteen year loan terms just above five percent. If the stock market continues to move higher, this is likely to bring mortgage rates up in the near term, with the next area of concern arising if the ten year approaches 4%, pushing long term mortgage rates beyond six percent. Rates touched this level in early June, but have dropped sharply over the past 45 days, prior to the upward move during the last two weeks. Oil has also pulled back, but is also following the recent upward move from the stock market and has move back above $60 per barrel.