August 27, 2010
August 27, 2010 by admin
The stock market finally caught a relief rally on Friday, as the DOW jumped well over 100 points on optimism from a reassuring speech from Fed Chairman Ben Bernanke. The DOW was able to get back above the 10,000 point market as investors took advantage of lower equity prices across the board on the market. The relief rally follows four days of heavy selling as investors grew weary of the fallout from disappoint resale and new home sales reports that sent shock waves through the market and firmly entrenched the idea of the double dip recession becoming a strong possibility. Yields on the ten year treasury bond jumped back above 2.65%. The jump in bond yields is likely to push long term mortgage rates up from their historical lows. The average thirty year fixed rate mortgage loan was available at just around 4.37% to start the day on Friday, but will certainly be higher for borrowers trying to lock this afternoon and potentially into next week.
Three reasons why payday loans may still appeal to borrowers
August 27, 2010 by admin
Yes it is a fact that Payday Loans have super high interest rates and can be very habit forming. But to some borrowers there may not be any other options that make sense or are available, especially in an emergency. Are you undecided on whether to apply for a short term cash advance or payday loan or not? Here are some bits of information you should be aware of, which will basically explain why payday financing is a may or may not be a good option for you.
Minimal Requirements
Payday financing only requires proof of regular employment, bank account information, and a post-dated check to receive a loan. Banks on the other hand would need all the above mentioned documents plus collateral (for secured loans), certificate of employment, a spot-on credit history, and in addition, you also need to establish a strong capability to pay the loan. If you cannot make the bank believe that you can pay it off, they will not approve your application.
Higher Approval Rate
Apparently, if you have a property that you can use as collateral, you get better chances of getting approved for loans from banks and other lending institutions. But, for those who have no property to put up as security, the likelihood of getting approved may not be as good, especially if they have very low FICO scores. You are better off going to payday lenders if you have not had any luck getting a loan from your bank.
Fast Approval
Because banks and other lending companies have to run a complete credit check on loan applicants, the time it takes to process and approve/disapprove a loan will take a few days and even weeks, particularly if additional documents are required from the applicant. With payday financing options however processing will take 24-hours or less, which makes it the most ideal choice for people who need quick cash.
Convenient and Easy Application
Banks would require you to go to their office to file all the necessary documents, and although others offer online applications, you would still need to fax so many papers to them so that they could properly assess your capability to pay. Credit unions may have lesser requirements and also gives you an option to apply directly from their websites, but just like banks, you will need to go to a local branch to sign some paperwork. Payday lenders, on the other hand, would only require you to fill out their online application form, and a number of them do not even need you to fax any documents to them.
These advantages offered by payday lenders are what made this kind of loan very popular among a large fraction of the employed consumer market today.
Rates are super low but dont forget to check the APR
August 25, 2010 by admin
Historically low rates can offer a great opportunity for borrowers to borrow money at extremely low rates, but don’t forget to check the APR of the loan you are receiving to be sure that the fees and lender costs are comparable to other financing offers and that you are truly saving over the long haul. Borrowing money from any financial institution can be a very stressful experience. Issues such as interest rates, repayments and collateral all make for the borrowing and qualifying experience a bit overwhelming. The lenders APR disclosure is a piece of he puzzle designed to help make clarity out of all of the financial numbers and help consumers when negotiating loan terms.
One of the terms that you definitely need to understand, is one used by all banks and other lenders: APR. It is also one of the things that will determine whether you will be able to afford the repayments or not. APR is the acronym for Annual Percentage Rate. This has several meanings, as there is more than one kind of APR. APR is can be either effective APR or nominal APR. When talking about savings, APR is referred to as APY – Annual Percentage Yield.
It all seems very complicated but is, in fact, a matter of simple mathematics. Nominal APR is about the percentage that will be added to your loan calculated on an annual basis. It is not a compounded figure and therefore simple to calculate, e.g. 12% of $100 stays $12 so you end up paying $1 per month in interest.
It becomes interesting when you start working with compounded interest i.e. when you start paying interest on interest. This means that you have your initial interest and it then also is also calculated over a period of time = compounded.
This means that an interest rate of 12% no longer stays $12. In month one the interest repayment will be $1. In month two you will pay interest not only on $100, but the additional $1 that was added as interest. Now you pay $101 + $1.02 = $102.02. Therefore it is advisable to keep up with your payments or else the interest will keep mounting up.
It is important to note that there are a few concerns about the use of the terminology for APR. One of the concerns is that the terminology could be misleading or misconstrued. Another concern is that it might not be considered a valid legal term.
The failings of the APR are that nominal APR does not always fully measure in the way it should. Credit cards in particular calculate interest on a daily basis and then only add it to your statement at the end of the month.
When getting involved with a loan, make sure that you are fully informed before making a decision.
August 23, 2010
August 23, 2010 by admin
The markets strong start lost momentum over the course of trading on Monday and the market ended up dropping nearly forty points in trading. The dip follows a swing of nearly 100 points in light trading on Monday as investors pulled back when he market was up nearly fifty points when the market opened this morning. The lack of gains were propelled by a relatively slow day of news and no market moving economic reports.
The double dip economic theme continues to be central on investors minds as confidence has all but eroded that the recovery would gain steam into the second half of 2010. The drop in confidence is likely going to weigh on the retail and real estate sectors for the upcoming months and quarters. The fallout in real estate is bringing to life new ideas to try and stabilize home prices. The inability for loan modifications and historical low rates to reduce inventories of bank foreclosed homes has been a well documented challenge over the last two years. A proposal to offer struggling borrowers the ability to rent their present homes from Fannie Mae & Freddie Mac as opposed to being foreclosed and adding more distressed real estate into the marketplace has resurfaced as ideas to try and bring some relief to the real estate market continue to make the rounds.
One common theme that has been making headlines regularly is the historical low mortgage rates that are presently available. Fixed mortgage rates for thirty year loan terms were available around 4.4% with most national mortgage lenders on Monday. Fifteen year loan terms were available in the high three percent range. Mortgage rates were flat in trading on Monday with little movement, despite a dip in equities. Yields on the ten year treasury bond were also flat as the ten year closed at 2.6% on Monday.
Making Home Affordable Mortgage Modification Program Is A Flop
August 21, 2010 by admin
Failing at over a fifty percent clip in their prospect of modifying mortgage loans, the Making Home Affordable mortgage loan modification program has been a complete bust in helping struggling homeowners keep their homes. The number of borrowers that applied for the governments modification program and have since fallen behind on their home payments eclipsed fifty percent according to recent reports released from the government. The number of areas the program has fallen short is wide ranging from the inability of lenders to process paperwork in a timely manner, to the inability of the programs to stabilize housing and incentivize borrowers from walking away from their homes.
Recapping the Making Home Affordable Mortgage Program at its original premise:
One of the current issues that the American President addresses is the inability of some American homeowners to keep up with their home mortgage loan payments. The President presented a program called Making Home Affordable Home Loan Modification Plan that caters to those homeowners who have a hard time paying their monthly mortgage with a possibility of home foreclosure.
The said program has two primary components. The first element is catered to those American homeowners who can barely afford to get a home mortgage refinancing due to a decrease in the market value of their home from the so-called “housing bust.†Refinancing is replacing an existing loan with a new loan under a different scheme. With the new mortgage plan, the interest rates are lower and more favorable to the homeowner to be updated with the monthly repayments. The second component of the program is addressed to homeowners who find it difficult to pay their monthly mortgage regularly, especially those who are at the brink of foreclosure and would like to take advantage of home loan modification to keep up with their mortgage payments. Loan modification is an alteration of certain terms of an already existing loan.
The Main Aspect of the mortgage program
The major aspect of the making home affordable modification and refinance program is allowing more than 80% for the loan amount from the market value of the property. The depreciation value of homes today allowed for a higher loan amount and a lower mortgage interest rates.
General Eligibility Requirements for the Refinancing Program
In order for homeowners to take advantage of the program, they have to qualify for the following requirements:
1. The home for refinancing must be occupied by the primary resident and not by an investor
2. The home loan must be under the protection of Fannie Mae or Freddie Mac
3. There must be no late payments made more than 30 days for the mortgage in the last 12 months
4. The home must not be vacant or unoccupied by the residents
5. The homeowner must have sufficient amount of income to get an existing loan
6. The current mortgage should be between 80% to 105% of the current market value of the property or otherwise known as the loan to value (LTV) ratio
Although this has been a pretty good offer by the government to the people, not everyone qualifies for the refinance program due to the restrictions of the qualifications. Home properties that are owned by real estate investors, second homes, homes with loan to value (LTV) ratios below 80% and loans that are not within the control of either Fannie Mae or Freddie Mac cannot qualify for the refinancing program as well as the loan modification program.
August 19, 2010
August 19, 2010 by admin
Jobs are certainly the largest component to any economy and has the potential to drive markets sharply. Today, we witnessed another example of the fallout from the employment sector as unemployment claims jumped to their highest levels in the last nine months, news that quickly led to a dramatic sell-off on wall street that sunk the DOW by over 150 points. The probability of a double dip to the economic recession is almost becoming a certainty as day by day the economic news continues to point to a grim road towards recovery. The lack of job creation and employment stability is clearly going to hang over the market for quite some time. The major challenge to the economic recovery is the lack of private capital being put to work. The 2009 and early 2010 rebound to the economy was fueled by the government stimulus programs, but as this money has exited the market, the economy has not shown that it is able to continue growing, a trouble concern for the government. While there have been calls for additional stimulus, there is a growing voice in Congress pushed hard by the (tea party) that is saying we are digging ourselves a large whole and need to look at dramatic reduction, not more economic stimulus. If we look to countries such as Greece and Spain it is clearly justifiable to be concerned that additional borrowing will likely do more harm that good when it comes to the state of the economy.
The sell off in stocks helped bond yields move lower and long term mortgage rates dip to their lowest levels in over forty years. The ten year bond, a strong indicator for long term mortgage rates is now under 2.6% closing on Thursday at 2.58%. Long term mortgage rates were being offered at 4.375% for thirty year loan terms with major national mortgage lenders and could be moving lower if the equity market continues to show signs of weakness.
August 16, 2010
August 16, 2010 by admin
The month of August has been very beneficial to the mortgage market as interest rates have dropped to their lowest levels in nearly thirty years. Today the market continued heading lower for bond yields, despite a relatively flat day for equity traders. Yields on the ten year treasury bond dipped into below 2.7% their lowest levels since March of 2009. Treasuries in March of 2009 were at a similar level when the stock market saw the Dow near 6500, today the Dow sits near 10,500 but bond yields have continued to move lower. This represents a few critical items relative to the economy. There is a lot of cash that has been on the sidelines of the recession and it appears a bulk of this has been poling into bonds which have been viewed as a safe investment area as the economy appears to be waffling on a “double dip” recession.
Fixed mortgage rates were available in the mid four percent range with national mortgage lenders on Monday, and fifteen year loan terms were hovering in the high three percent range, both representing the lowest levels in over 25 years. The low rates have done little to bring new buyers into the real estate market and it appears many consumers have been sitting on the sidelines and not taking advantage of the low refinance rates as well according to data released from Mortgage Bankers Association. The great mortgage rates have also done little to inspire home builders who have seen a drop in market confidence for the third straight month. Lowes, the nations second largest home improvement retailer also sounded the pessimism button today, which weighed over the equity market and helped keep stocks from moving higher.
There is an update from HUD regarding FHA mortgage loans and the PMI changes that are upcoming shortly. HUD announced they would delay the PMI pricing changes which were scheduled in the next forty five days in an effort to give more lenders a chance to alter automated software programs and pricing models to accommodate the forthcoming changes. FHA will be shifting away from a large upfront PMI charge to a substantially higher monthly charge. This is yet another change FHA has made as they try to juggle underwriting guidelines and premium pricing amid one of the worst periods in the real estate industry. HUD has been searching for avenues to increase revenues and offset the billions of dollars in losses they have accrued due to foreclosures and charge offs over the last three years.
Low Mortgage Rates Continue To Benefit From FOMC Subsidy
August 13, 2010 by admin
The last few years of economic recession has brought turmoil to the real estate industry as it produced more and more American homeowners who are on the brink of foreclosure for non-payment of their home mortgage. One of the main driving factors is due to the plight of unemployed and laid off American workers from their jobs, which gave them a really hard time managing finances. The government has already addressed the issue on mortgage troubles through a loan modification program.
In the real estate industry, the secondary mortgage market plays a crucial role in the mortgage business. The Federal Reserve System, being considered a private investor headed by Chairman Ben Bernanke, introduced its MBS purchase program as a way of helping out the homeowners and borrowers in their mortgage problems. How did it come to help to the mortgage issues of homeowners?
Bernanke’s MBS Purchase Program
MBS Purchase Program is an 18-month running program of the Federal Reserve Board with a plan of purchasing $1.25 trillion of mortgage-backed securities. These securities are mortgage bonds that are bundled in a package and sold to investors, both public and private. With the slow purchase of these bonds from investors, Bernanke came in the picture and purchased the said amount. This program was a big help to financially struggling homeowners since the mortgage rates became low and steady. Many of them were able to take advantage of the adjusted 30-year fixed low mortgage rates of near five to six percent for the entire duration of the program. It also helped the primary mortgage market or the lenders in a way that they were able to continue with the mortgage business to more borrowers.
The Impact of Ceasing the Purchase Program
Since the said program only ran for a year and a half, which ended last March 2010, the homeowners and homebuyers fear that the mortgage rates will again increase. However, according to Bernanke, the mortgage market will less likely be suffering from high interest rates again even if the Federal Reserve will cease buying mortgage-backed securities. He is positive that the situation is now gradually getting stabilized with the economy coming back to a normal condition. Many housing properties are currently made affordable with reasonable price and low mortgage rates. Bernanke and the current government administration have agreed to keep the market situation in this desirable condition by keeping the interest rates low. The government entities Freddie Mac and Frannie Mae have given its signal of purchasing more mortgage securities to continuously iron out the mortgage market.
The FOMC recently announced they would be shifty dollars into purchasing long term treasury bonds, a move that combined with their involvement in the secondary MBS market should help keep long term mortgage rates near historical lows for the balance of the year.
August 12, 2010
August 12, 2010 by admin
Mortgage rates dropped to their lowest levels since 1971 as investors continue to pull money out of equities and invest into bonds, sending yields to record lows. For the third straight day the stock market lost ground. Thursday the stock market sold off following disappointing news that unemployment claims climbed again. The continued decline in the labor markets is a huge cloud that is hanging over the economic recovery.
Fixed mortgage rates dropped below 4.5% with major national mortgage lenders as the market is benefiting from news out the FOMC. Despite the drop with long term mortgage rates there was less than a one percent increase in application according to the mortgage bankers association latest report. The slight uptick in application volume is more likely a signal that refinance applications are increasing and not a sign that the low interest rates are moving consumers closer to purchasing homes. The fact that the housing industry has shown very minimal positive influence from the historic low mortgage rates makes the FOMC decision to try and drive interest rates lower all the more puzzling. The governments continued guideline tightening with conventional loans (fannie mae & freddie mac) as well as FHA mortgages is likely having a larger impact on restricting the improvement of housing sales. It will be interesting to see what avenues the government takes in the near future to try and stimulate the real estate and housing market as it appears they are running out of ways to stimulate home sales, a challenge that could further hurt the economic recovery this year.
As rates have dipped in the month of August, expect mortgage lenders to ramp up incentives and marketing ploys to try and drive loan application volume. One interesting offer that some lenders were offering was an opportunity to get a fixed loan rate below four percent by purchasing discount points. If you are offered this opportunity make sure you analyze the math to determine your break even point and the long term advantage of buying down the loan rates.
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August 11, 2010 by admin
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