The Debate on How to Spark the Housing Market Continues

Posted by cmsadmin & filed under Home & Mortgage Refinance Information.

The Debate on How to Spark the Housing Market Continues

During a recent speech on the state of the economy, President Obama reopened what has been a fiery and exhaustive debate on how to inspire the sluggish housing market.

Though the President provided no specifics, he did announce that his administration has decided to increase the availability of refinanced mortgages through the Home Affordable Refinance Program, which was designed to help homeowners stuck in upside down mortgages refinance their home loans.

So far the HAMP has grossly underperformed, granting only 840,000 refinanced mortgages while 16 million of the 40 million U.S. home mortgages are still underwater. Meanwhile, these struggling homeowners are missing out on record low 30- and 15-year fixed mortgage rates that could be saving them thousands of dollars in interest payments.

While some economists and experts believe the Program should be expanded to help a wider base of American homeowners, others say the housing market is better off left alone.

One of the requirements for taking part in the HAMP is that the mortgage must be backed by Fannie Mae or Freddie Mac. In order to offset the risk of homeowners defaulting on their new loans, Freddie and Fannie have been charging banks a refinancing risk fee; these fees have been tricking down to borrowers, and some experts believe they may be dissuading homeowners who otherwise would choose to refinance.

The HAMP only allows homeowners to refinance into a mortgage that is at most 25% more than the value of their home, meaning that the most drastic upside down mortgages, and the most struggling and desperate of homeowners, are not qualified to receive help.

In order to help more homeowners, some experts suggest lowering that requirement and creating a new high-risk investment product to back these subprime refinanced loans.

However, research conducted by the Congressional Budget Office and the Chicago Federal Reserve have concluded that they don’t believe any tweaks would have much of an impact on the market.

Critics argue that the amount of extra revenue generated through refinancing more mortgages would account for only one tenth of one percent of the housing market, therefore not enough to make a real impact on spurring economic recovery.

The critics believe the housing market would be far better off if the government would stop intervening, claiming that changes in policy and expected changes in policy are slowing the process.  If the government were to allow housing prices to fall naturally, buyers would eventually return to the market.

One way or the other, the fact stands that the housing market is still struggling, and is expected to do so for the foreseeable future.

Most Homeowners will miss out on Historic Mortgage Lows

Posted by cmsadmin & filed under Home & Mortgage Refinance Information.

Despite the fact that 30-year mortgage rates might soon be dropping beyond record lows, few Americans will reap the benefits.

According to a Freddie Mac survey, mortgage rates dropped to 4.32%, the lowest since last November when rates hit a 50-year low of 4.17%.

Due to tightened credit and lending restrictions, the people who would be best served by these super low mortgage loan rates  — homeowners who suffered through the recession – are unlikely to see these rates if they try to refinance their loans.

Most homeowners are paying a rate of around 5%. On a $200,000, 30-year mortgage, a 4.32% rate would save the average American homeowner around $30,000 in interest payments. However, with new lending restrictions, only the well off with high credit will be able to find the lowest rates.

With the economy still struggling, and the recession not too far behind us, most prospective homeowners are using their extra cash to pay off debts or rebuild their savings, instead of jumping into mortgages.

However, a  recent decision by the Federal Reserve might keep home mortgage rates down for the near future. The Fed has announced that they will keep treasury yield interest rates at their current lows through 2013.

Treasury yields and mortgage rates are closely tied together, with mortgage rates typically 1.6% to 1.7% higher than the treasury yields. With the treasury yield currently at a very low 2.24%, many economists expect mortgage rates to follow and drop below 4%, which would be unprecedented.

The low treasury yield is a great sign for investors, unsure of the economy, who want to buy into treasury bonds. Long-time investors, however, may get annoyed by slow returns and push for an increase in mortgage rates to mitigate their sluggish profits.

Whether mortgage loan interest rates continue to drop or remain stable, economists don’t expect much of a boost to the housing market.

Looking at the U.S. Debt Debate

Posted by cmsadmin & filed under General Debt & Loan Consolidation Information.

Looking at the U.S. National Debt

As Congress debates how to best handle the horrifyingly obese national debt, the non-partisan Congressional Budget Office has released its alternative fiscal scenario for the U.S. debt over the next 10 years. The staggering number is $13 trillion. Yes, the CBO predicts the United States to be $13 trillion dollars in debt over the next 10 years.

Additionally, they estimate that we will only be able to cut $2 trillion to $4 trillion over that time span.

Congress is discussing several options for dealing with the growing debt. The national debt ceiling (the amount that Congress has determined the U.S. can legally allow itself to owe) is at $14.3 trillion, a number we are set to blow by very soon. Congress has raised the debt ceiling 10 times in the last decade, and many critics believe the current heated debates are merely an act before Congress chooses to raise the ceiling again.

Proposals on how to cut into the debt have been offered by both sides, but none have managed to placate both parties.

Only complicating the matter, the U.S. economy is still floundering and fragile. Any sudden changes could have disastrous effects or at least stunt recovery.

Former President Bill Clinton believes Congress should wait to execute a debt help plan until the economy shows signs of stability.

Meanwhile, a bipartisan group of six Senators has come up with a plan that they believe can serve as a framework for a plan to reduce some of the deficit. The plan includes over $4 trillion in government spending cuts, including half a trillion from Medicare and another trillion from tighter tax restrictions.

Overall, the plan has more tax increases than Republicans would like, and more spending cuts than Democrats would like – but that is the true essence of compromise. With only 13 days left for negotiating, members of both parties and even President Obama have praised this bipartisan plan as a strong starting point for a solution.

Could More Credit Spending be Good for the Economy?

Posted by cmsadmin & filed under General Debt & Loan Consolidation Information.

Could More Credit Spending be Good for the Economy?

This might seem completely counter intuitive, and exactly how we got ourselves into this mess in the first place; but yes, its true – the U.S. economy would receive a much needed boost if Americans started buying a little more on credit.

Before we move forward, let’s take a quick look back and see why this didn’t work the first time. To keep this short, Americans were spending well beyond their means, using credit cards as gift cards, with little foresight and no real plans on how to pay all the junk off in the long run. Coupled with the mortgage crisis and housing market collapse, and the U.S. had a perfect storm of economic problems that almost toppled the economy.

Obviously, when economists and Wall Street scream “depression” and “crisis” and banks start toppling like dominos, people listen and stop spending their money. This only exacerbates the problem (because how does an economy run if no one is buying anything?) and presto; we have a stagnant economy receding faster than Joe Biden’s hairline.

So how do we fix it? Foreclose on all homes in Florida! No. Jobs! Yes, but how if we can’t pay current employees? The answer, and Americans will love this, is to spend more money!

Our economy runs on people buying junk! 70% of the U.S. economy is predicated on consumer spending. Understandably, with a record high of over a trillion dollars in credit card debt, and an economic crisis to show for it, Americans have become more tight-fisted and have been paying off their debt.

Amazingly, we’ve managed to cut the country’s credit card debt by over 20% in just two years. While we should certainly continue to live within our means and continue to pay off the debt, putting a little more money into the economy is the only way to return to normalcy.

Spending more money will lead to more jobs, which will lead to even more jobs. People with jobs can afford mortgages, which will then help with this pesky housing issue.

Nothing will solve the problems we have overnight, and by no means am I suggesting that you go spend more than you can afford. But pumping more money back into the economy will surely help. So, go buy yourself a lollipop; you deserve it. Or maybe a DVD player, instead.

How to use Home Equity to Take Control of your Debt

Posted by cmsadmin & filed under General Debt & Loan Consolidation Information.

How to use Home Equity to Take Control of your Debt

Credit card debt, overdraft fees, late utility bills – living on the edge of a tight budget is like playing with fire, occasionally a miscalculation will cost you, and you’ll end up getting burned.

Many Americans today live beyond their means, spending lavishly on expensive home entertainment systems, gaudy cars or indulgent vacations. They swipe their credit card and all their worries go away – until it comes time to pay the bills.

Rolling over credit debt comes with a heavy price; typically an exorbitant interest rate is tacked on every time an outstanding balance is left unpaid. This can lead to a cycle of paying off the interest, and putting off the principal, as utility bills and mortgage payments take precedence.

While this technique is fine in the short term, paying off credit card debt should be a top priority, as interest payments is you’re hard earned money simply flushed down the drain. As a homeowner, one option is opening a home equity line of credit (essentially a second mortgage) to consolidate your debt payments into a loan with a much, much lower interest rate. Not only will you be paying less in interest, mortgage loan interest fees can be dedicated from your taxes, while consumer debt interest is not.

While taking out a second mortgage on your home is no quick fix, you would be saving thousands of dollars in interest payments by borrowing against the equity you have in your home. These loans could have a term limit of 10, 15, even 20 or 30 years, so it’s important to fully understand the risks and commitments before you sign on the dotted line. Obviously, the longer the lifetime of the loan, the lower your interest rate but the longer you are on the hook making payments.

Keep in mind, the amount you will owe at the end of every month is not a maximum amount due, but a minimum amount due. You can also reduce the amount you pay in interest by paying more off each month than is due, thus paying the loan off quicker than necessary.

Typically, the issue with people who get into debt troubles is spending habits. Careful budgeting and money management will help you reduce your debt, as well. Try limiting your credit card use, and stop automating your bill payments so every month you see exactly how much is coming in, and how much is going out.

If a second mortgage isn’t an option, there are still other vehicles out there for taking control of debt. There are debt consolidation and debt counseling services available, and many creditors are willing to negotiate payment if you call them and explain your situation. Obviously, when entering into an agreement with a third party to settle your debt, be wary of extra fees and lofty promises. Scams run rampant in the world of non-bank financial products.

Consumers Increase Spending but Cut Credit Card Debt in February

Posted by cmsadmin & filed under Credit Card Debt Consolidation Information.

Consumers Increase Spending but Cut Credit Card Debt in February

According to the Federal Reserve, February 2011 was the fifth month in a row that saw an increase in non-revolving U.S. consumer debt. Americans paid out more than expected on car loans, student loans, and personal loans, while continuing the trend of paying off their credit card debt.

Credit card debt is known as revolving debt, and despite the increase in spending, credit card debt is down 4.1% and credit and delinquencies are down, as well.

February saw the largest increase (3.8%) in consumer debt since June of 2008, bringing the total consumer debt to a whopping $2.42 trillion. In January Americans spent an extra $8.35 billion in non-revolving debt, followed by another $10.33 billion in February.

Economists and analysts have varied views of the growing trends.

On one hand, a Barclays economist believes the up-swing in spending shows that the American auto industry is beginning to turn around.  On the other hand, Ameriprise Financial believes the numbers show that people are going back to school and they believe the recovery will continue.

The decrease in credit card debt and delinquencies and increase in spending may hint to an increase in economic stability and Americans’ ability to pay their bills.

Another positive sign today, as the U.S. Census Bureau announced that the U.S. trade deficit decreased in the month of February, as well.

The Wall Street Journal, however, paints a far more conservative picture, claiming that the economy’s growth is not substantial enough to cut into the unemployment rate, and while income-tax cuts have stimulated spending, high gas prices are costing Americans that extra cash.

While consumer spending accounts for 70% of all U.S. economic activity, average households are increasing their debt in order to spend, thus fueling a necessary cycle of spending and debt really making the overall prognosis of these numbers uncertain.

A Two Card Approach to Credit Card Debt

Posted by cmsadmin & filed under Credit Card Debt Consolidation Information.

A Two Card Approach to Credit Card Debt

A few years back, as we all know, various forms of American economic overindulgence came to a head and almost caused a collapse of the country’s economy. The Great Recession, as it is being called, was an economic squeeze caused by overestimated property values and a country wide epidemic of revolving credit card debt.

The mess forced several of the nation’s titan financial institutions to close shop and according to the Mortgage Bankers Association led to over 1.2 million (and counting) home foreclosures, mostly across and California. Even though the recession is now shrinking smaller and smaller in the rearview mirror its effects can still be felt.

For Americans who have credit card debt the average amount of credit card debt per household is almost $15,000, totaling a staggering $2.4 trillion in consumer debt across the country.

It was thought that perhaps the recession had taught the many Americans who live beyond their means a lesson, as many started tightening their budgets and the national consumer debt began to shrink. However, now that the tension is easing, it seems that Americans are going back to their old habits as January marked the first month of last 27 where consumer debt increased.

Obviously lacking in self-restraint Americans need a plan to systematically lower – and hopefully eventually eliminate – their credit card debt. Though traditionally having multiple credit cards is considered a bad move for someone in debt, having two credit cards: one strictly for everyday purchasing and one specifically for the debt, may be just the trick to help you track and minimize your expenses and work down your debt.

With one card it is hard to track exactly how much you’re spending per month, and the interest you pay monthly for not paying the card off will be higher than if you were only paying interest on the debt.

Therefore with, one card strictly for your monthly expenses you can see exactly what you’re buying each month and look for ways to cut down. You can pay this low amount off each month and not have to pay interest on it.

The other card specifically for the debt you will have to pay the interest, but at least it is as small as possible. You can also take the extra money you save from tightening your budget and use it to slowly pay off your credit card debt.

This plan isn’t a magical cure to debt problems, it will still take budgeting and sacrifice, but hopefully by being able to see exactly your monthly expenses and debt you can start making changes to get back into the green.

If you’re piling up debt and feel bankruptcy creeping closer, debt consolidation may end up being your best solution. Before you try a consolidated loan, give budgeting and planning an honest shot.

SEC Evaluating Bank Restructured Loans

Posted by cmsadmin & filed under Home & Mortgage Refinance Information.

SEC Evaluating Bank Restructured Loans

Officials at the Securities and Exchange Commission are looking into a large number of regional and community banks that have been restructuring commercial real estate loans to make them appear healthier than they really are.

These banks are working to improve (at least the appearances of) their portfolios as they continue to recover from the recession and financial crisis that almost toppled the banking industry. The industry’s plight was caused by over-valued home prices and irresponsible home loan mortgages. This perfect storm caused a housing market catastrophe that has put millions of Americans out of their homes.

By law banks are allowed to tweak loans to help struggling borrowers. While the practices being implemented are within the law the SEC is looking into instances where banks have been altering loans to give clients more time to repay their loans.

One of the practices under question, “troubled debt restructuring” allows the bank to break the loan up into smaller loans or change the terms of the loan altogether. Unfortunately, the SEC believes that banks have been exploiting these loopholes to refinance or restructure loans to their benefit instead of the consumer’s.

Furthermore, the SEC is scrutinizing how banks are identifying and filing these restructured loans.

Over two-thirds of mortgage loans held by banks are currently upside down, meaning the homeowner owes more than their home is worth. This amounts to over $156 billion that banks are still accountable for.

Currently about less than 8% of home loans held by banks are delinquent, down 50% from last ear. The Federal Reserve believes this number indicates that the housing market is slowly starting to recover.

Since the floor fell out on mortgage prices news has gone from bad to worse in the industry. At the end of last year big banks like Bank of America and JP Morgan were under scrutiny for improperly filing foreclosure paperwork. This time around smaller banks are going under the microscope.

How to Refinance Your Credit Card Debt

Posted by cmsadmin & filed under Credit Card Debt Consolidation Information.

How to Refinance Your Credit Card Debt

If you’re falling behind on payments on several credit cards, one option that you should consider is refinancing your credit card debt by consolidating your payments.

If you’re in debt you are probably paying the minimum you can on your monthly payments, thus not getting any closer to paying off your debt. This means that month after month you’re paying an interest rate – money that you never used but are forced to pay – while getting no closer to being debt free.

Consolidating your debts into one loan with one interest rate will save you money by decreasing the amount you owe towards different interest payments. Credit cards usually come with very high interest rates so transferring the debt into an unsecured personal loan or some kind of secured loan will definitely be in your best interest.

•    Discuss your plans with your creditors.
Often times people who fall in debt try to hide from their creditors thinking that this will buy them more time. In fact, the reality is quite the opposite. The more open and communicative you are with your creditors the more likely they are to provide you with options to help your situation. Many times you can negotiate with creditors to low your interest rates.
•    Only borrow as much as you owe. You may be tempted to take out a large loan to pay off your credit cards and more, but this will only increase your interest and the amount of time you will be making payments. Find out how much you owe and take out a loan for that amount. Transfer your debt into your new loan so you only have one interest rate and one payment.
•    Try to avoid secured loans. Unless you are sure that you will be able to pay off your debt under the new plan, avoid turning to a secured loan because it will risk whatever collateral you put against your debt.
•    Cancel credit cards as soon as the debt is paid. Don’t make additional charges on the card. As soon as your debt has been paid off cancel your credit cards. Once you’re in the green take out a credit card with favorable terms and be cautious with it. Make sure that you don’t charge more onto the card than you can afford to pay off.

Debt consolidation
can help you solve your debt problems and avoid bankruptcy. There are many debt consolidation services that can help you get out of debt. Understand that these companies will require a fee too. In tight financial times it is crucial to read all fine print to understand exactly what you’re getting into.

Avoid Bankruptcy by Restructuring Your Business Debt

Posted by cmsadmin & filed under Tax & Bankruptcy Law Information.

Avoid Bankruptcy by Restructuring Your Business Debt

Even though filing bankruptcy can help an overburdened business avoid liquidation it will also effectively ruin your credit and make applying for loans and lines of credit nearly impossible. Though bankruptcy can pull you and your business out from under an insurmountable mountain of debt it is best left as an absolute last resort.

One easy tip for stimulating interest and income is to discontinue your lesser or struggling products or services. If they aren’t making money, focus on your core products or services until your business is more stable.

Crunch the numbers on your operational costs. Research your healthcare and benefits providers, your utilities providers, and the companies that provide you with services or products that you need to run your business. If you are meticulous you can often find better deals with companies who can provide you what you need for cheaper.

Unfortunately, if its feasible you may want to consider downsizing to help you get you manage your debt.

If your business is incorporated, buy back shares from investors and offer these to your creditors. Don’t sell off your own shares and relinquish your stake in your company.

Research options to consolidate debt. Debt consolidation is the process of combining all your debts into one payment and negotiating the amount that you owe your creditors. Usually people who fall into debt panic and try to hide from their creditors. Creditors are people too, and all they want is the money they are owed. Therefore, they are very willing to negotiate. After all, receiving most of your payment is better than receiving none of it.

As you research debt consolidation services check with your local Better Business Bureau to make sure the company you settle on is licensed.

Offer your creditors equity in your business. However, make sure that the equity does not give your creditors control over your company.

Hiring an attorney or debt management agency to handle negotiations with your creditors will help you in the long run. They have more experience and backing than the lowly business owner.

Negotiate a payment plan that you can afford and make sure that you make timely payments to your creditors from here on out. If you start to see yourself falling behind on payments for your new payment plan, contact your creditors. Keeping your creditors in the loop is much more beneficial than avoiding them. The more they know you and your business the more likely they are to cut you some slack.

Using these tips to get out of debt and avoid bankruptcy could mean the difference between turning your business around and closing your doors. Stay active and aware in your finances, communicate with your creditors and make every cent count.