Rates on [tag]30-year mortgages[/tag] fell for a fifth consecutive week as sales of both existing and new homes in July declined, confirming a cooling housing market. The mortgage company Freddie Mac said yesterday that 30-year, [tag]fixed-rate mortgage[/tag]s fell to 6.48 percent this week, down from 6.52 percent last week. That was the lowest level for 30-year mortgages since they averaged 6.43 percent the week of April 6. Mortgages had risen since then, hitting a more than four-year high of 6.8 percent the week of July 20 before falling in the past five weeks. Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, averaged 6.18 percent this week, down from 6.2 percent last week.

Rates on five-year adjustable-rate mortgages declined to 6.14 percent this week from 6.18 percent last week. Meanwhile, the Milwaukeee Journal reports, homeowners are getting one more cash advance from their homes. They’re doing it with cash-out refi’s – home mortgages big enough not just to cover debt, but to deliver some immediate cash to the borrower. Cash-out refi’s this spring hit their highest market-share percentage in 16 years – 88 percent of all mortgages refinanced through Freddie Mac, the McLean, Va.-based firm said. (more…)

We are at the end of the [tag]credit boom[/tag] — certainly the six-year boom and maybe the 60-year boom. Has any society ever created so many ways for people to go into hock? In 2003 Americans had 1.46 billion credit cards, or five per person. Home mortgages total $9 trillion, and some initially don’t require borrowers to repay all their annual interest. In 1946 households had 22 cents of debt for each dollar of [tag]disposable income[/tag]. Now they have $1.26. Behind these numbers lies a profound social upheaval: the “[tag]democratization[/tag]” of debt. Everyone gets to borrow. But this process may have reached its limits.

The origins of today’s credit culture date to the 1920s and the advent of installment lending for cars and appliances (stoves, refrigerators, radios), says economist Martha Olney, author of “[tag]Buy Now, Pay Later[/tag].” Attitudes changed. In the 19th century, “it was thought that only irresponsible families bought on credit,” she says. “By the 1920s, it was only foolish families that didn’t buy on credit and use it while they were paying for it.” In the mid-1920s, 60 to 70 percent of cars were sold on one- to two-year loans. (more…)

Many first-time buyers take it for granted that their parents will help them get on to the property ladder, a study revealed today.Some 23% of those looking to buy their [tag]first home[/tag] expect their parents to give or lend them the money for a deposit, according to mortgage lender Abbey. And 12% anticipate their parents will act as [tag]guarantor[/tag] on their [tag]mortgage[/tag], with 13% looking for help with buying furniture or white goods.

Rising prices remain a concern, with a quarter saying they would abandon their plans to buy if property values continued to shoot up. The research also revealed that 40% of first-time buyers will live with their parents to save money for their new home. One in 10 will stay at home for between one and two years, with a further 9% taking root for more than two years. In return, a quarter of these buying their first home say they will help their parents out round the house in years to come, and 18% claim they will pay back the money loaned to them. (more…)

“Two months ago I lost my job; I have since been late on my [tag]credit card[/tag]s; most of them are maxed out; and I am two months late on my [tag]mortgage payment[/tag]s. I had a chance to [tag]refinance[/tag] early on, but the rates were very high so I turned them down; now I can’t refinance at any rate. A friend of mine has offered to lend me the $30,000 I need on a second mortgage at 15 percent, plus I must pay all the fees, and I must repay him in full after three months. To repay him, I would have to refinance at that time. Should I?”

There is no possibility that you will be able to refinance in three months. Your equity will be reduced by the second mortgage and your credit won’t be significantly different, even if you have paid off all your overdue credit cards. The process of rebuilding your credit will take years, not months. Your best option now is to sell the house ASAP and retrieve as much as possible of the equity you have in it. (more…)

Consumers who have [tag]home mortgage[/tag]s tend to carry more debt than those without mortgages, but they manage it well and their credit scores are higher, according to a study released Monday by a division of the Experian credit rating agency. Experian Consumer Direct, an [tag]online credit service[/tag], said a nationwide study found that consumers who have a mortgage carried an average of $24,565 in [tag]credit card[/tag] and other installment debt in addition to their mortgages compared with $4,565 in installment debt carried by consumers without a mortgage.

Credit scores are important because lenders use them to set the terms on loans; a poor credit score can result in a consumer having to pay a higher rate for borrowing. Samah Haggag, manager of analytics, said the results show that higher debt doesn’t necessarily hurt a consumer’s score. “In this case, consumers with mortgages are doing a better job managing their credit,” she said. “When you look at the late payments, the consumers without mortgagees were much more likely to have payments past due.” (more…)

Lower monthly payments are the appeal of interest-only mortgages. But those low payments don’t last forever. Typically, within five to seven years the borrower must start to pay principal and the payments jump skyward. Members of the Financial Planning Association of Greater Indiana offer advice on whether such an option is right for you.

The quick answer to this question: never. his is especially true if the loan is variable and interest rates are rising. Unless the borrower has access to a substantial amount of liquid capital that can be used to fund the higher debt service, retire or refinance the principal, the property could quickly become the subject of a foreclosure proceeding, which often results in the loss of a substantial amount of equity. (more…)

U.S. mortgage applications rose for a second consecutive week as demand for home refinancing rose to its highest level since March, an industry trade group said on Wednesday, even as other measures point to a slowing housing sector. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity which includes both refinancing and purchasing loans, last week increased 1.4 percent to 561.2 — its highest level in 11 weeks.

Borrowing costs on [tag]30-year fixed-rate mortgage[/tag]s, excluding fees, last week averaged 6.54 percent, up 0.09 percentage point from the previous week when they sank to their lowest level since March. The rates hit a four-year high of 6.86 percent last June. After historically low mortgage rates helped fuel a five-year housing boom, the sector is feeling the heat and most analysts agree the market is cooling off from its record run. They point to housing market indicators showing sliding sales, swelling supply and slower price appreciation. (more…)

Freddie Mac today released the results of its Primary Mortgage Market SurveySM (PMMSSM) in which the 30-year fixed-rate mortgage (FRM) averaged 6.48 percent with an average 0.4 point for the week ending August 24, 2006, down from last week’s average of 6.52 percent. Last year at this time, the 30-year FRM averaged 5.77 percent. This is the lowest the 30-year FRM has been since the week ending April 6, 2006, when it averaged 6.43 percent.

“The Fed has acknowledged that it is closely monitoring the housing market as it slows down from last year’s record pace,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Although this fuels arguments about whether we will experience a soft landing or a bursting housing bubble, market watchers also perceive that it possible that the Fed may stop raising short-term interest rates over the near term. This perception takes upward pressure off mortgage rates.” (more…)

Back in the 1980’s, when I was in graduate school, I remember my [tag]economics[/tag] professor comparing the handling of the American economy with navigating a ship through a narrow channel with dangerous rocks on either side. On the starboard side, the rocks represented inflation — runaway prices that can ultimately destroy an economy. On the port side, the rocks represented anemic [tag]economic growth[/tag] — slow consumer spending, high unemployment, and low corporate earnings.

Over the last couple of years the “core” consumer price index (CPI), which excludes volatile food and energy prices, has been hovering around 2.50 percent. But the overall CPI during the same period, has been closer to four percent — a much more uncomfortable number. Although economists like to look at the core rate as the “real” gauge, inflation is inflation to the American consumer. Just because the inflation is coming from “non-core” places (oil prices, the Katrina aftermath, housing prices, Mid-East conflicts, etc.), prices are higher regardless. Can the Fed control these kinds of things by adjusting short term rates? I doubt it. (more…)

Hold the fees please. How to save if you’re buying a new home or just [tag]refinancing[/tag].

With [tag]mortgage rates[/tag] still as low as they are, financing a house is dirt cheap these days, right? Not if you pay a fortune in closing costs. As anyone who has shopped around for a mortgage knows, it’s extremely difficult to compare one [tag]lender[/tag]’s offering to with that of another lender because the up-front fees vary so much and are not guaranteed. Lenders and their venders can, and sometimes do, add or inflate fees in the eleventh hour of a transaction.

If you’re looking into refinancing, the first call you should make is to your existing lender, who already has critical information about you and your house on file, said Keith Gumbinger, vice president for HSH Associates. Since you have an existing relationship, a “streamlined” process might be possible. That can save you a lot of extra paperwork and money on everything from application fees to appraisal fees. (more…)

For most people who fall behind on their mortgage, their first instinct is to avoid all contact with the [tag]lender[/tag]. But that’s a mistake, [tag]consumer counselor[/tag]s and others say, because it’s likely those financial problems will only get worse, making it harder to work out the best repayment terms. Many borrowers don’t realize that lenders are as eager as homeowners to avoid foreclosures, which cost lenders $40,000 to $60,000 per house, according to industry estimates. Most lenders offer “workout” programs where they work with the [tag]borrower[/tag] on repayment plans that meet the borrower’s financial circumstances.

But plenty of borrowers — about half, according to some focus-group research — are afraid that divulging their money woes to their lender will prompt the lender to accelerate the foreclosure process. That fear is not surprising: Often, when borrowers fall into financial difficulty, their first contact with the lender may encourage them to run in the other direction the next time the phone rings. That’s because many lenders, if a borrower is 30 to 60 days’ late, initially have the collections department call. “A collection agent’s job is really to get you to pay. They want to know when you’re going to pay, how much you’re going to pay, how you’re going to pay,” said J. Michael Collins, a principal at PolicyLab Consulting Group, LLC, a market-research firm focusing on consumers’ financial decisions, in Ithaca, N.Y. “It’s a very … aggressive approach.” (more…)

Do home buyers with [tag]reduced-payment option[/tag] [tag]adjustable rate mortgage[/tag]s really understand the big monthly cost increases headed their way? Major lenders who actively pushed option [tag]ARM[/tag]s during the heyday [tag]housing boom[/tag] years have now scaled back, and at least one is concerned enough about the coming payment “reset” dates that it has sent letters directly to thousands of borrowers.

Many option ARMs are scheduled to reset to higher payments this year and next — an estimated half trillion dollars worth during 2006 alone, according to mortgage giant Freddie Mac. Federal and state financial institution regulators, along with some prominent lenders, worry that not all borrowers now making minimum payments are aware of the size of the monthly payment increases they may soon face. Worse yet, some of these loans were made to people who were on the financial bubble to begin with: their credit was stretched to make even the minimum payments necessary to afford the house they purchased. (more…)

Almost nine of 10 [tag]homeowners[/tag] who refinanced during the second quarter of this year cashed out additional money — often tens of thousands of dollars — according to mortgage investment giant [tag]Freddie Mac[/tag]. The 88 percent cash-out refinancing rate was close to the all-time record and could surpass it later this year.

Cash-outs may be booming, but they are not a new phenomenon. They’ve existed for years as a financial tool to extract equity tied up in real estate and convert it to immediately spendable money. During the refinancing boom of 2003 and 2004, for example, anywhere from a third to half of all refinancers pulled out additional cash. However, the overwhelming majority of borrowers during the go-go [tag]refinancing[/tag] years chose traditional rate-reduction replacement mortgages in which new balances approximated the old balances and the new monthly payments were lower. (more…)

[tag]Mortgage[/tag] demand is down and delinquencies and [tag]foreclosures[/tag] are up, but just as the [tag]housing market[/tag] bust is more of a soft landing, major financial institutions and most households aren’t likely to crumble under the weight of risky loans. While the number of riskier loans has risen in the past few years, lenders still hold more traditional mortgages than subprime and “non-traditional” mortgages.

Most homeowners, however, should weather even a nasty housing market storm. The [tag]Federal Reserve[/tag]’s July 2006 Senior Loan Officer Opinion Survey on Bank Lending Practices, defines subprime mortgages as loans made to borrowers with weakened credit histories stemming from [tag]payment delinquencies[/tag], [tag]charge-offs[/tag], [tag]judgments[/tag], or bankruptcies; loans made to borrowers with reduced repayment capacity as measured by [tag]credit score[/tag]s or[tag] debt-to-income ratio[/tag]s; and loans to borrowers with incomplete credit histories. The Feds consider as non-traditional mortgages, [tag]adjustable rate mortgage[/tag]s (ARMs) with multiple payment options; interest-only mortgages; mortgages with limited income verification; and mortgages secured by non-owner-occupied properties, among others. (more…)

Almost nine out of 10 homeowners who refinanced during the second quarter of this year “cashed out” additional money — often tens of thousands of dollars and more — according to mortgage investment giant Freddie Mac. The 88 percent cash-out refi rate was close to the all-time record, and could surpass it later this year.

During the refi boom of 2003 and 2004, for example, anywhere from a third to a half of all refinancers pulled out some additional cash. However, the overwhelming majority of borrowers during the go-go refi years chose traditional rate-reduction replacement mortgages where the new balance approximated the old balance, and the new monthly payment was lower than the old. Scroll ahead to mid-2006: Short-term interest rates no longer hover near 4 percent. Thirty-year fixed-rate first mortgages no longer are in the 5s. Now the prime rate is 8 1/4 percent and could move higher. Standard 30-year mortgage rates are nudging 7 percent. Home equity credit lines are slumping as their adjustable rates — typically set one or more points above the bank prime — start racking up bigger monthly costs. (more…)

Increase for the second consecutive week, according to industry trade group; refinancing demand at highest point since March.

U.S. [tag]mortgage applications[/tag] rose for a second consecutive week as [tag]home refinancing[/tag] demand reached its highest since March, an industry trade group said Wednesday.

The [tag]Mortgage Bankers Association[/tag] said its seasonally adjusted index of [tag]mortgage application activity[/tag], which includes both refinancing and purchasing loans, last week increased 1.4 percent to 561.2 – its highest level in 11 weeks. Fueling the rise was a 4.6 percent jump in the MBA’s seasonally adjusted refinancing index to 1,640.8, its strongest level since the end of March. The refinance share of mortgage applications also increased to 39.6 percent in the latest MBA weekly survey period, which ended Aug. 11. In the prior week the refinance share was 38.0 percent. Borrowing costs on 3[tag]0-year fixed-rate mortgages[/tag], excluding fees, last week averaged 6.54 percent, up 0.09 percentage point from the previous week when they sunk to their lowest level since March. The rates hit a four-year high of 6.86 percent last June. (more…)

With the once red-hot housing sector cooling, domestic U.S. banks reported weaker demand for mortgage loans in recent months, while demand for consumer loans also slowed, according to a Federal Reserve study released Monday. “In line with other evidence of a slowdown in housing activity this year, domestic institutions reported that demand for[tag] mortgage[/tag]s to purchase homes had continued to weaken over the previous three months,” the Fed said in its latest quarterly survey of banks’ senior loan officers.

Domestic and foreign institutions both eased their credit standards for business loans over the survey period. Those banks that reported an easing of standards “pointed to more-aggressive competition from other banks or non-bank lenders as the most important reason for having done so.” On the [tag]commercial real estate[/tag] front, a net 10% of domestic banks said they had tightened standards on commercial real estate loans over the past three months. Foreign banks, on the other hand, reported no change in commercial real estate loan standards over the same period. (more…)

A [tag]reverse mortgage[/tag] is available to senior-citizen homeowners who are at least age 62. It is the opposite of a regular, or “forward,” mortgage. The [tag]reverse-mortgage lender[/tag] pays money to the borrower, and no repayment is required until (a) the home is sold, (b) the borrower doesn’t occupy the residence at least six months a year, or (c) dies.

The new book “[tag]The Reverse Mortgage Advantage[/tag]” by financial columnist Warren Boroson provides an excellent overview of the choices available. Written in an easy-to-understand style, with lots of important facts and real-life examples, this guidebook explains virtually all the key reverse-mortgage considerations for senior homeowners and their heirs. (more…)

The [tag]Federal Reserve[/tag] left short-term interest rates unchanged at 5.25% Tuesday after two years of steady increases, pointing to the slowing economy. The Fed didn’t rule out future rate rises, however, if needed to contain “inflation risks.”

The Fed had raised its target for [tag]short-term rates[/tag] 17 times since mid-2004, when it was a low 1%. Banks, in turn, have increased rates on consumer loans. With the Fed’s pause, banks’ prime lending rate, to which many [tag]credit cards[/tag] and consumer loans are pegged, stays at 8.25%. The central bank is trying to balance evidence of slower growth, including Friday’s weaker-than-expected jobs report, against continuing inflation worries. Oil prices are at near-record levels, following BP’s Sunday announcement that it was shutting down a major Alaska pipeline. And a government report Tuesday showed big gains in wage costs, another inflation driver. (more…)

Fannie Mae said Wednesday it believes a massive review of its accounting has uncovered all of the errors, clearing the way for the mortgage company to complete the restatement of its 2004 earnings by the end of this year. The company disclosed that the multibillion-dollar correction could be less than estimated previously.

[tag]Fannie Mae[/tag] also said its 2004 losses related to accounting for mortgage commitments will be “significantly smaller” than its previous estimate of $2.4 billion, though it could not specify by what amount. Fannie Mae said the newly disclosed accounting errors involve its so-called master servicing arrangements with the trusts it creates to issue securities backed by the billions of dollars of home mortgages annually that it buys from lenders and bundles together for resale to investors worldwide. (more…)

In recent years, homeowners have embraced [tag]adjustable-rate mortgages[/tag] — and such variations as option [tag]ARM[/tag]s, [tag]interest-only mortgages[/tag] and “piggyback” loans, which, respectively, allow borrowers to make a minimum monthly payment, pay interest and no principal in the loan’s early years, or finance 100% of the purchase price. The growing popularity of these products has helped fuel consumer spending, as well as double-digit home-price gains and rising homeownership rates.

Recently rising interest rates are taking a toll on family budgets as growth in home prices flattens — and, in some areas, prices fall. [tag]Mortgage delinquency[/tag] rates hit 2.32% in the second quarter after bottoming out at 2.06% in the fourth quarter of 2005, according to an analysis by Equifax/Moody’s Economy.com. The portion of adjustable-rate mortgages that were at least 90 days past due has climbed 141% in the past year, according to a recent study by Credit Suisse that looked at loans made to borrowers with good credit. That compares to a 27% rise in such delinquencies for fixed-rate mortgages. (more…)

Bankruptcy is legally declared inability of an individual or organization to pay their creditors. The purpose of bankruptcy laws are:

1) To give a fresh start in life to honest debtors.

2) To repay the creditors to the extent that the debtors has property available for payment.

There are several types of Bankruptcy: Chapter 1, Chapter 3, Chapter 5, Chapter 7, Chapter 9, Chapter 11,
Chapter 12 and Chapter 13. Among them chapter 7 and 13 are most popular.

Difference between chapter 7 and chapter 13 Bankruptcy:

Chapter 7 bankruptcy: It will eliminate most of your debt like credit card debt, unsecured debt, repossession balance etc. You will get relief from your creditor’s harassment. But how will you be able to qualify chapter 7? It’s not so easy; you have to prove the court that you don’t have enough money to pay your creditors as well as to maintain regular living expenses.

Chapter 13 bankruptcy: The person who has a regular monthly income can file this case. It is a plan to repayment your debts. The creditors get their payment from chapter 13 Trustee to whom monthly payment is made by the bankruptcy debtor. After filing of chapter 13 case, Bankruptcy Court orders your creditors to stop all collection efforts immediately. It is good for those persons who don’t qualify for Chapter 7 because of his income or within last six years he filed a Chapter 7 case.

Effects of Bankruptcy:

There are some bad effects of Bankruptcy filing:

1) When you have declared yourself Bankrupt, all of your assets including your home will be under the control of the Trustee.

2) Bankruptcy filing can damage your credit history. It will be in your credit report for the next 10 years from the date it was discharged.

3) The chance of getting loans will be decreased because the creditors will first check your credit report before lending you money. So a fresh start in your life will also be affected by this.

4) You may lose your social status by filing bankruptcy. The status that you had in the past, in front of your friends and your family may not remain in future after filing bankruptcy.

We may think that Bankruptcy filing is the solution to get a rid of all debts. But it is not at all true; it will ultimately push you into rather deep trouble. The ways of making your financial position strong will be closed. Most importantly your mental stability may be in stress because of your surroundings. You will find no one is looking at you with the same kind of respect or honor that you had previously. There are certain expenses like Govt. tax, child support, federal student loan etc. which can’t be written off through bankruptcy.

Debt consolidation or Bankruptcy – Which one you should prefer?

The persons who are in debt problem can either chose debt consolidation or can file bankruptcy. But the question arises which will be the better choice. The answer absolutely without any hesitation is debt consolidation. The reasons behind this are:

1) Bankruptcy is temporary solution which can only give you relief for a certain period of time where debt consolidation is a permanent solution to make you debt free.

2) By choosing debt consolidation and to pay the creditors in full, you will be able to keep your credit report clean. Your debt will be reduced by a certain amount and with easy monthly installment you will be able to pay your creditors if you take debt consolidation program. The debt consolidation company will take care the dealing with your creditor, so that harassment from the part of creditors will be nil.

Now it’s up to you, which one you will prefer. It is your condition that should influence your choice. But before taking any major decision you should take the advice from professionals to know whether you should avoid bankruptcy or not.

Nancy Smith is a contributing writer to www.debtconsolidationcare.com and currently working to find out helpful alternatives of bankruptcy.

The [tag]Federal Reserve[/tag] left [tag]interest rates[/tag] steady Tuesday for the first time in two years, gambling that a nascent economic slowdown will cap growing inflation pressures. In leaving its [tag]short-term interest rate[/tag] target at 5.25%, the Fed said: “Readings on core inflation have been elevated in recent months,” but “inflation pressures seem likely to moderate over time, reflecting contained inflation expectations and the cumulative effects of monetary policy actions and other factors.”

Signs of slowing growth and [tag]rising inflation[/tag] have aroused deep disagreements among economists on what the Fed should do. Some economists think the Fed has already raised rates too far and is courting recession; some think it must raise them further to stop inflation from accelerating. Some say both things are true. “You can’t fight inflation without risking overkill on the economy,” said Ethan Harris, chief U.S. economist at Lehman Brothers, who thinks the Fed shouldn’t have paused and predicts it will eventually raise the rate to 5.75%. “That is a risk, and it’s a risk they should take.” He added: “It’s not fair to Bernanke that he steps into his job just as the economy is set to decelerate and inflation takes off.” (more…)

Borrowers are reacting to incentives to cash out home equity through refinancing, according to Frank Nothaft, Freddie Mac vice president and chief economist. They are also responding to incentives to change their [tag]mortgage[/tag] as they reach an interest rate adjustment level, he said. “The staying power of refinance activity has been much stronger than we initially thought,” he said in a release accompanying the report. “While still stronger than expected, the share of all mortgages applications that were for refinance did slip for the second consecutive quarter to 42 percent from 44 percent in the first quarter of 2006, according to Freddie Mac’s Primary Mortgage Market Survey,” he said. (more…)

We are having great difficulty selling our rural house. It has been listed for sale about eight months with only one “Mickey mouse” offer. The buyer will obtain a 70 percent [tag]first mortgage[/tag], pay us a 5 percent down payment, and give us a 25 percent second mortgage. However, this is to be an unrecorded “[tag]silent second[/tag]” mortgage.

An unrecorded silent second mortgage is dangerous for you. If you don’t record it, and if the borrower doesn’t make the payments to you, you can’t [tag]foreclose[/tag] to get the property back if your second mortgage hasn’t been recorded. At the very least, you should record your silent second mortgage after a week or so. But you should be aware that before it gets recorded, your buyer might incur liens, which would have priority over your later-recorded second mortgage. For example, your buyer might have a prior judgment lien, income tax lien, child support lien, or other possible liens, which could attach to the property. If you decide to proceed, please be aware of your high risk and do everything possible to minimize it. For details, please consult a local [tag]real estate attorney[/tag]. (more…)

[tag]Long-term fixed home loan rates[/tag] are getting closer to those on shorter-term [tag]adjustable mortgages[/tag], but many buyers still prefer the riskier [tag]ARMs[/tag] because they offer l[tag]ower monthly payments[/tag].

For other buyers, lower payments are often the only option. Hans Johnson, a demographer for the Public Policy Institute of California, said it all came down to monthly income. “For many people, it’s not a question of choosing a fixed-rate or adjustable-rate mortgage, it’s, ‘Do I buy the house with the adjustable rate or not?’” he said. Monthly payments can vary widely with all the various flavors of alternative loans. A $500,000 mortgage can range from $1,666 a month for the minimum payment on a negative amortization loan to $3,160 a month for a traditional mortgage, Damato said. (more…)

Economists who missed the stock bubble may be embarrassed again. Several reports released this week provide the strongest evidence yet that the housing bubble may finally be deflating. Sales of new and existing homes are down peaks last year. [tag]Mortgage applications[/tag] are down 20 percent. Sale prices have barely risen from the level of last year, and are actually down after adjusting for [tag]inflation[/tag]. Inventories of new and existing homes both stand at record levels, and the [tag]vacancy rate[/tag] for ownership units has also hit a new high.

This bubble sustained the economy through the 2001 recession and provided the basis for the recovery. The housing sector directly employs more than 6 million people in construction, mortgage issuance and real estate. The indirect effect of the bubble was even larger, as people took advantage of the rapidly growing value of their homes to borrow huge amounts of money. This borrowing binge supported rapid consumption growth in a period of weak wage and job growth. It also pushed the U.S. savings rate into negative territory for the first time since the beginning of the great depression. (more…)

The [tag]Federal Reserve[/tag] is done, says the [tag]bond market[/tag], now convinced that the Fed’s next move will be to cut [tag]interest rates[/tag]. Not soon — winter, maybe — but cut, and maybe a lot. The clincher was this morning’s news that the unemployment rate rose from 4.6 percent to 4.8 percent in July, the highest since February, and a slim 113,000-job gain in July payrolls portends further increases in unemployment.

Mortgage rates are falling again this morning, 6.5 percent on the low-fee deals, taken by the straight-line decline in the 10-year T-note to 4.88 percent. That good news said, be careful out there. Mortgage bankers: dampen ye hopes for a new refinance frenzy; Realtors: do not expect your hit-the-wall markets to re-leap; adjustable borrowers: do not expect the Fed to bail you out of your free-lunch error. The bond market is way ahead of itself. It is supposed to be ahead: long-term investors think long term, always anticipating the next cycle. So, the ideal time to buy bonds is at the moment the economy shifts from overheating to slowing, and we are now through that moment and its buying surge. (more…)

U.S. law limiting their deposits through acquisitions has exceptions

[tag]Savings and loans[/tag], also known as [tag]thrifts[/tag], are state or federally chartered financial institutions that are required to make a percentage of their loans as home mortgages. Over time, many thrifts have converted to banks, been bought by banks or come to more closely resemble banks, offering products such as credit cards and consumer loans.

Golden West, the second biggest thrift by deposits, is one of the few remaining large savings and loans. The biggest is Seattle-based Washington Mutual Inc., which has about $202 billion in deposits and attractive retail banking locations in New York, California, Texas and Illinois. While a bank could buy a thrift without worrying about the cap, there are limits to the savings and loan exception. Once a bank buys a thrift, those deposits become part of the bank’s holding company. That means if the bank buys another bank those deposits would count toward the 10 percent cap for that acquisition. (more…)

Much discussion has been made concerning [tag]negative amortization home mortgage[/tag]s. What does that mean? Is it good or bad?

A negative amortization [tag]home mortgage[/tag] is an [tag]adjustable-rate mortgage[/tag] ([tag]ARM[/tag]). The borrower’s [tag]monthly loan payment[/tag] remains fixed for a specific time, such as one year, three years, or even longer. Such loans can be a big help to home buyers because their monthly mortgage payments won’t increase for the agreed period. However, because it is an [tag]ARM[/tag], the interest rate adjusts periodically, such as monthly, quarterly, semi-annually or annually. When the interest rate goes up, but the monthly payment stays fixed, the unpaid interest is added to the mortgage’s principal balance. (more…)