October 27, 2010
October 27, 2010 by admin
Mortgage rates are moving higher, despite a drop in the stock market. The trend for bond prices has done a complete 180 this week as investors have lost confidence in bond pricing, fearing the potential of inflation creeping into the market in 2010. So while interest rates for fixed mortgage loans were hovering at or below four percent with major national mortgage lenders, those rock bottom mortgage rates may be in the rear view mirror. As investors gauge the Feds ability to continue supporting the bond and mbs market, they are looking more optimisitic that the end result will lead to higher prices, but remain uncertain as to the overall jump start this provides the economy and is a reason for the DOW to be selling off.
The article below does a great job of highlighting the bond market and rate correlation and we have publishe the entire post originally from Yahoo Finance below.
Paul R. La Monica, editor at large, On Wednesday October 27, 2010, 1:25 pm EDT
Has the long-term Treasury bond bubble finally burst?The yield on the 30-year Treasury rose above 4% Tuesday for the first time since August. The rate on the benchmark 10-year Treasury is now hovering just below 2.7%. That’s a sharp increase from the 52-week low of 2.33% that the 10-year hit earlier this month.
Bond prices and rates move in opposite directions. So the recent spike in long-term yields is a sign of bond selling. That’s interesting, especially since as the chart at the top shows, short-term rates have not moved up by nearly as much in the past few weeks.
With the entire free world expecting the Federal Reserve to unveil a new program of bond purchases at the conclusion of its two-day meeting on November 3, you might think investors would be unwilling to sell long-term bonds.
Many experts have been talking about how fixed-income investors should not fight the Fed. Why sell now when it’s likely the Fed will be there as a buyer of last resort to keep rates low?
Influential bond fund manager Bill Gross of PIMCO wrote in his most recent outlook, published Wednesday, that bond yields should be on the rise after the Fed announcement. He thinks the Fed’s next round of so-called quantitative easing, which many are dubbing QE2, should eventually lead to higher inflation.
“Check writing in the trillions is not a bondholder’s friend; it is in fact inflationary,” he wrote, adding that QE2 “will likely signify the end of a great 30-year bull market in bonds.”
That’s obviously a very bold statement. But it makes sense. It seems many investors have now more than priced in the notion that the Fed is going to spend upwards of $500 billion (and perhaps more than $1 trillion as Gross suggests) to keep rates low.
And investors apparently are making the leap that QE2 will work well enough to spark inflation. Perhaps too well.
“If you believe the inflation story, I wouldn’t be buying Treasuries,” said Vladimir Milev, a financial analyst with Payden & Rygel, a money manager in Los Angeles. “It’s going to be a bad deal.”
That also helps to explain how the Treasury Department was able to sell 5-year inflation-protected securities, or TIPs, at a negative yield earlier this week.
The market clearly isn’t expecting inflation right now but the cumulative effect of the first round of quantitative easing and QE2 should add to pricing pressures significantly in the next few years. So buying a 5-year TIP — even at a negative rate — should lead to a healthy return as long as inflation eventually picks up.
Michael Strauss, chief economist with Commonfund, a money management firm based in Wilton, Conn., thinks inflation is on the horizon — regardless of what the Fed does. That’s because it appears the economy is slowly improving and a double-dip recession is far less likely.
Strauss is forecasting that the rate of inflation a year from now will run at about a 2% to 2.5% annual pace. If that’s the case, the 10-year yield should be in range of 3.5% to 4%, he argues.
Still, some bond experts think short-term concerns about QE2 may resurface and that the recent bond sell-off could be nearing an end.
In a recent report, G. David MacEwen, chief investment officer of fixed income for American Century Investments in Kansas City, wrote that it’s not as if the economy is going to suddenly spring back to life. What’s more, even with quantitative easing, short-term rates are likely to remain near zero for a while.
“The Fed has reiterated its commitment to hold interest rates at record lows for the foreseeable future. It is precisely these conditions of stagnant growth, modest inflation, and low interest rates that we believe investors should prepare for going forward,” MacEwen wrote.
Joe Balestrino, fixed income strategist at Federated Investors in Pittsburgh, added that it’s difficult to imagine how investors won’t be disappointed by the Fed next week since there is so much hype about QE2.
Along those lines, stocks took a tumble on Wednesday due to several reports indicating that the Fed may not announce as bold a plan to purchase more bonds as once thought. Balestrino said that could lead to more bond buying again in the coming week.
“I think long-term rates will fall after the Fed announcement. They are close to peaking,” he said. ” I would buy long-term Treasuries at this point.”
Balestrino added that the rush to conclude that QE2 will be a success — before investors even really know just how big the program is — is a reckless bet.
“It will be a while before we get tangible evidence that QE2 is working and given the lagging nature of inflation, it could be a scary long time,” he said. “I am not in the camp that this is a bond bubble.”
But Strauss disagrees. He said that if the Fed does not announce some sort of major “shock and awe” type program, investors will quickly realize that there’s once again a compelling reason to sell long-term Treasuries.
“Will the Fed continue to be a price insensitive buyer of Treasuries? Yes, but maybe not as big as we once thought,” he said. “And if the Fed is not going to move quite as quickly, then why buy long bonds here?
- The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney.com, and Abbott Laboratories, La Monica does not own positions in any individual stocks.
How Foreclosure Crisis Has Affected the Entire Mortgage Industry
October 26, 2010 by admin
The economic downturn created a very bad effect on the mortgage business. The loss of jobs of many American workers caused problems in their mortgage payments. Because of this, many of the housing properties in the United States have been foreclosed. In the past few years, the foreclosure crisis in the US has dramatically heightened and many homeowners are struggling with difficulties in trying to keep their homes yet they seem unable to. Apart from the home owners, there are many others who are directly affected by the crisis and that would include even the lending firms, banking institutions, government-regulated mortgage services, and all those involved in the mortgage business.
Impact of Foreclosure Crisis on the Bank of America
A mortgage bank is a possible option for a borrower to acquire a house on mortgage. In the current foreclosure crisis, the banking business is definitely affected through a decrease in bank stocks and shares. In the case of Bank of America which is known to be one of the leading banking institutions in the country, the shares dropped to more than 5% and mortgage bonds also weighed down. This has been considered the largest drop in shares of the said bank since mid-July of this year. One contributing factor is the filing of lawsuits by investors against mortgage banks and lending companies due to faulty documentation and bad foreclosure practices. These issues brought short-term losses to the bank.
Foreclosure Crisis on other Major Banks
Apart from Bank of America, other banking institutions dealing with mortgage business are also facing troubles with the current foreclosure crisis in the US. JP Morgan and Wells Fargo Bank both declared more than $20 billion of recently foreclosed mortgages or still in the pipeline for foreclosure. Due to pending home seizures lately, these banks have to cover the cost of $2 in the late or past due mortgage payables. The bank shares of Wells Fargo dropped to more than 4% and JP Morgan Chase bank shares decreased to 2.8% as an effect of the crisis. To add to the grievance, these banks have to face lawsuits filed by investors and home owners on the malpractices in foreclosure such as that of robo-signing.
How Fannie and Freddie Mac Dealt with the Crisis
Fannie and Freddie Mac are government-regulated treasuries which act as a secondary market in the mortgage business. They do not primarily lend or offer mortgages to the borrowers but buy mortgage bonds from the banks and sell these bonds to investors as mortgage-backed securities. These treasuries help create the framework for dealing with mortgage loans. They have a list of accredited vendors who manage all mortgage transactions from processing foreclosures to selling properties. Because of this, they are greatly affected by the foreclosure crisis after the banks temporarily suspended foreclosures in many states. The foreclosure delays caused an increase in the carrying costs of the vacant properties. In order to remain stable, the federal government gave $148 billion to both Fannie and Freddie Mac.
October 20, 2010
October 20, 2010 by admin
If you are a fan of roller coasters than the last two days of market activity has been fun to follow. The DOW has moved over 250 points in a 48 hour period, going down and then back up and showing a tremendous amount of volatility exists for the average investor. The market is moving sharply based on large swings in currency values, particularly the U.S. dollar. There are a number of DOW companies that have been and are announcing their earnings, which is also having a large impact on market direction this week. Today, the market moved with news from Exxon Mobile. The market is also trying to understand the potential impact of billions of dollars of buybacks for large banks such as Bank of America and JP Morgan Chase from Fannie Mae, FHA and Freddie Mac as well as other institutional investors The banks are facing attacks on a number of fronts, including foreclosuregate which continues to draw the ire of local politicians, despite a reprieve by the Obama administration.
Mortgage rates remain near historical low levels in October. Today’s dramatic stock turnaround put a small amount of pressure on the bond market. Most national mortgage lenders are offering thirty year loans at or around 4.125% and in the upper three percent range on shorter loan terms. Numerous lenders were also marketing fixed rates under four percent for thirty year loan terms with the buyer purchasing discount points to buy down the interest rate.
Five steps to getting the right type of auto insurance
October 20, 2010 by admin
The Process of Getting Auto Insurance, broken down into five easy to follow steps
In choosing the type of auto insurance coverage you would like to have for your vehicle, factors like affordability of the insurance policy, its coverage, and premiums are considered. How do you go through buying car insurance? This article will provide you the necessary steps in doing the process.
1. Determine your needs.
If you are still planning to buy a new car or replace your old one, it is best to start scouting for insurance companies that can give the best deal at a cheaper rate. The kind of car you have will be a factor in the type of insurance policy you need to get.
Given that you now have a car or have owned one, you must start out by figuring out what type of coverage you need for your vehicle. Consider the insurance rate and the benefits inclusive of the policy. Also, the amount of coverage you will need may differ from state to state, so check with your state government for the requirements in your location. Once you have identified the minimum car insurance based on state requirements, then you can decide to include add-ons for extra coverage. Liability insurance is usually mandated in almost every state.
2. Review your driving record and other insurance policies.
Before you start scouting for an insurance company for your vehicle, make sure you have checked your driving standing and your other insurances as well. Insurers place high importance on their clients with good and clean driving records for a smooth business transaction and hassle-free process when getting the claims. Also, if you have a current insurance policy for other types of coverage, you might want to stick to the same company for your auto insurance. This saves you time and money in the process, unless there are much better offers available.
3. Conduct your research.
When you start shopping for an insurance company, widen your search through several ways of choosing for the best insurance. Utilize the telephone by calling insurance providers and seek answers for things that are not so clear to you. If visiting one insurance company office to another is an inconvenience, go through the online process which is actually the most convenient method. Using comparison websites, get instant car insurance quotes from several insurance providers and find out what suits your needs and your budget.
4. Decide for the right insurance company of your choice.
With the increasing need to secure protection for our life and our vehicles, a lot of insurance providers have also sprouted in the market. After making an initial choice from the best quote, learn about the company you have chosen by gathering information about their service from friends, your state’s department of insurance, or reviews on the Internet.
5. Go through the insurance policy before sealing the contract.
After finalizing things with your insurance agent from the chosen provider, it is a must to review the content and stipulations of the policy before signing it. Make sure it contains the coverage you have chosen, and it specifies two very essential clauses, which are retaining your integral right to sue in case of disagreement and the other one must be avoiding from aftermarket parts requirements.
Tips for getting a personal loan with a bad credit history
October 18, 2010 by admin
Follow these tips for help with getting a personal loan with a bad credit history
Even though you have a bad credit history, there may come a time when you’ll need a loan to help pay for an unexpected expense or to help out in an emergency. Normally banks and other money lenders don’t give loans to people with bad credit histories as they a considered a risk to default on the payment.
However, there are several high-risk lenders available that will be prepared to give you a signature or personal loan despite the bad credit record attached to your name. Here are a few pointers on how to get a loan with a bad credit record:
• First of all you need to shop around a bit to find lenders that will give you a loan. In some instances banks will give loans to those who have a bad credit record, so check with them first. Alternatively look in your local phone directory or on the internet – high-risk lenders advertise widely.
• Clarify the reason why you want this loan. It is not advisable to take a short-term loan for major purchases like homes or vehicles. They are more suitable for expenses such as home improvements, unexpected medical bills, weddings etc. Remember that the interest rate may be quite high and if you’re looking at long-term debt like a mortgage, it may be worth your while to clear your name and then apply through the conventional channels.
• Read the terms of your loan very carefully. Other than your repayments and interest rate, you should also be aware of the different fees/costs that you may have to incur during the loan period.
• If your bank is willing to give you a loan, meet with the loan consultant in person. The same with a lending company. Be aware of who you are dealing with. With online applications you need to fill these in very carefully as there is no person sitting opposite you making a judgment of you as a client.
• Take all your supporting documentation with you so that you don’t have to go back again. It also gives the lender a sense that you are conscientious and reliable. Banks and other lenders generally want to make sure that should you default on payment, you have enough collateral to pay off the debt.
Don’t forget to explore all of your lending options (borrowing from friends, cash advance on your credit cards, social lending sites, credit unions or local banks).
Once you have the loan, try and get your credit record out of the red and your name clean. It’s always easier that way.
October 13, 2010
October 13, 2010 by admin
The stock market jumped sharply in trading on Wednesday as earnings season appears to be kicking off with better than expected news from a number of large companies today propelling the trading surge. News out of Apple and JP Morgan Chase demonstrated strong earnings in two key sectors, reassuring investors that the growth potential exists in today’s economy despite challenges in job growth. The stock market is firmly moving about the 11,000 point level and has not shown many signals for a potential pullback despite numerous concerns existing in the broader markets.
Mortgage interest rates edged up with today’s market surge. On the heals of a report showing a jump with refinance loan activity last week, spurred by historically low interest rates. Freddie Mac reported rates were down below 4.3% and many national mortgage lenders were advertising thirty year fixed rate loans at 3.875% this week (likely with at least 1 discount point) providing consumers with a great window to take advantage of super low mortgage rates. October mortgage rates have been trending lower up until today, but the potential for a move up certainly exists, especially if the market continues to see a rally in equities. Yields on the closely followed ten year treasury jumped by nearly ten basis points today and finished at 2.47%, another signal that fixed mortgage rates would be moving higher.
The real estate and mortgage industry will continue to dominate much of the national news as the foreclosure scandal gains momentum. Today, State Attorney Generals have banded together to demand lenders and servicers acknowledge the mistakes made throughout the foreclosure process and reform the “robo signing” problems of the past. The halt on home foreclosures from banks such as Bank of America, GMAC and JP Morgan Chase is certain to grow in size and stature as more evidence comes to light. The potential for a national moratorium on foreclosures does not have the political clout to date, but could quickly change as new evidence comes to light with this crisis. One thing is for certain, this is going to present a large challenge to a soft real estate market and derail home sales for the near future.
Thinking of a payday loan, check your states regulations
October 11, 2010 by admin
Many states across the U.S. do not allow borrowers to apply for payday loans and cash advance loans. These loans are strictly forbidden and are not available on the Internet or in person.
In the US, payday loans are quite popular as one of the best loaning options to avail of. 37 states in the country have payday lending legalized. However, in 14 states, this form of cash advance is illegal under their state laws. Here is the list of 14 states in the US in which payday loans are banned:
• Arkansas
• Connecticut
• Georgia
• Maine
• Maryland
• Massachusetts
• New Hampshire
• New Jersey
• New York
• North Carolina
• Ohio
• Pennsylvania
• Vermont
• West Virginia
There is an ongoing debate about this growing industry with lots of legalities and observations involved in the nature of this business. The states that permit payday lending regularize them on their own accord but at the same time, there are lobbies that stand for consumer protection and vehemently oppose the high rate of interest and fees attached to payday loans.
In the US, there are usury laws, which do not allow interest rates to rise beyond a specific Annual Percentage Rate. There are some payday lenders who manage to get around these laws in some states by forming tie-ups with national chartered banks that is located in a different state like for instance, Delaware; with no limitation for usury. This kind of business practice is also known as ‘rent a bank’ model. Due to this, the loan that is offered is governed by the state law where the bank is chartered, irrespective of the borrower’s state domicile. States like South Dakota and Delaware are countries that have done away with usury laws and are able to offer credit cards throughout the country. Federal banking regulators, when they became aware of this practice, tried to crack a whip on partnerships between payday lender and commercial banks.
Though Federal Deposit Insurance Corporation (FDIC) permits its member banks to practice payday lending, it has still made them abide by the fact that they would go for a longer-term loan post six payday renewals.
To make the usury laws effective, experts feel that loans fees should be included as a part of the interest. Otherwise, lenders can levy any amount they want as fees and pass it off as a low interest rate opportunity to borrowers. Though there are 37 states that do allow payday loans as legal, there are laws in place that place a limit on the number of loans that can be borrowed at one time. In states like South Carolina, Florida, Michigan, North Dakota, New Mexico, Oklahoma, Indiana, Illinois; there are real-time databases operating statewide that ask all licensed lenders to verify the customer’s eligibility to receive the loan before any further course of action. There are some states that also place a limit on the number of loans that can be taken by a person annually, like in the case of Virginia. In some cases, states deem that after a certain number of loan renewals, the lender has to offer a loan with a lower interest rate and a longer tenure to help the borrower get out of the debt trap. In places like Oklahoma, the consumer can have more than one outstanding loan; there is no enforcement mechanism in such states.
October 8, 2010
October 8, 2010 by admin
The stock market moved past the 11,000 mark for the first time in six months. Investors piled into equities, despite a disappointing report on the non farm payroll labor markets that was released early this morning. The non farm payroll report showed another month of improvement in the private sector, but continued declines in the public sector, certainly a report that could have sent a mixed message to investors and the economy. The national unemployment rate remained at 9.6% and there were very few positive changes to pull out of today’s employment report.
Equity investors looked past the soft report and focused on the expectation that the disappointing reports would force the FOMC’s hand to assist with economic recovery. There is a strong belief that the FOMC will now be forced to make aggressive changes to try and stimulate job growth. The avenues the FOMC will pursue for stimulus remains a bit unclear, as they are clearly in uncharted waters after the major reductions to the discount rate and their commitment to purchase MBS securities and treasury bonds.
The rally in the market had no impact on driving fixed mortgage rates higher. October mortgage rates continued moving lower, as yields on the ten year treasury dipped to 2.38%. The decline in yields has pushed rates to historical lows as reflected by an announcement by Freddie Mac this week. Fixed rates for thirty year loans are now at 4.25% with most national mortgage lenders. The potential for rates to continue moving lower seems plausible based on the recent market trends, but again the market is in unchartered territory.
In other real estate and mortgage news today, Bank of America has made a bold statement by temporarily suspending all home foreclosure activity. The decision comes just days after the bank announced they would be reviewing policies for their foreclosure process amid growing political pressure and numerous lawsuits that are targeting major lenders over their documentation and legal process of handling home evictions and foreclosures. The banks decision to suspend foreclosures will have a lasting impact on the real estate recovery and could be a red flag that the home foreclosure crisis is bound to get worse in the months ahead.
October 6, 2010
October 6, 2010 by admin
The market continues to dazzle investors and move lower for home buyers. Great news for those in the real estate and housing industry, as market trends continue to defy the odds. Today, the stock market was up again, moving to its highest levels in the last six months. The DOW is up nearly 900 points in the past forty days. The market was fueled today by a better than expected report from ADP showing improved figures in the labor markets.
Another report on the mortgage/real estate front showed that applications for new purchase mortgages were up by almost ten percent last week. A signal that the historically low mortgage rates may finally be helping to drive the real estate market. Fixed mortgage rates have continued to improve in the month of October. Long term thirty year loan rates were being offered at 4.3% with many national mortgage lenders on Wednesday, a signal that rates are continuing to decline, despite the efforts of the equity market. Yields on the ten year treasury bond retreated by seven basis points, dropping the yield down to 2.399.
All eyes will remain fixed on the dollar and the FOMC to see how long they are able to keep the market momentum moving forward. The present market is being heavily influenced by the Federal Reserves unending commitment to purchase treasury bonds. This move is aimed at keeping rates near historical lows. The low rates are designed to boost lending and promote growth. To date their have been few signals that this approach has worked with any success, but today’s purchase mortgage activity could be a signal that better days are ahead for the economy and real estate markets. The larger and long term concern remains the same, how will the U.S. economy formulate a recovery without private capital and what happens when the FOMC tries to reduce its leverage in the markets.
Shopping for auto insurance, its easy to do online
October 2, 2010 by admin
Shopping for auto insurance online is a smart thing that you can do, considering the fact that you can take advantage of low premium amounts and benefits of comparing affordable insurance quotes online.
Here are some tips that can help you in clinching the best auto insurance deal
1. Go to an insurance comparison website: You should go for an auto insurance insurance website where you can compare insurance quotes from different auto insurance vendors on the same website. The insurance companies will naturally reduce their prices and offer more frills because they are competing against each other on the same page, and want more market-share. As a consumer, you can benefit from a lot from such a scenario.
2. Deductible amount: The amount of deductible plays an important role in determining the cost of the car insurance. Though there are people who want to take an insurance with the a $200 deductible, you should be in a better position if you raise your deductible to a thousand dollars per accident; this can actually save 45 percent of the insurance cost
3. The kind of car you have: If you have a spanking new sports car or a luxurious upscale BMW, you may have to shell more for insurance because the more expensive the car, the more it would need to pay for maintenance and repair, which makes auto insurance costly as well.
4. Your driving record: If you have a dubious driving record and traffic violations against your name, insurance companies will be wary about giving you coverage at low-cost premiums. In case, you have traffic violations, you should ideally go to a traffic school and get the points removed from your driving license, so that you can apply for a new car insurance policy without these blemishes.
5. Good credit report: If you have a good credit report, you can auto insurance easily and at low premium amounts
6. Your age: If you are below 25 years of age or above 75, you are risky to insurance companies; which is why you may be charged high premiums.
7. Your sex: Women get auto insurance at cheap costs because they are perceived to be safe drivers. Well, there is nothing we can do about it!
8. The area that you usually drive your vehicle: Almost all state with the exception of California have a grading system where they put high premium rates for car owners who drive their vehicles in urban metros compared to small towns and villages.
9. The garage: Auto insurance companies who are careful with every nuance of the policy offer given to you are keen to know how you guard and secure your car at the garage. If you are someone who parks the car every night in a high crime prone area, you may have to pay higher premium.
10. Type of insurance policy: If you are taking a comprehensive insurance policy,you have to pay a higher premium amount. This insurance includes add-ons like towing insurance, car rental insurance etc.