China cuts rates on policy loans, analysts point to more easing ahead

SHANGHAI, China - China's central bank on Monday unexpectedly cut the borrowing costs of its medium-term loans for the first time since April 2020, while some market analysts expect more policy easing this year to cushion an economic slowdown.

The People's Bank of China (PBOC) said it was lowering the interest rate on 700 billion yuan ($110.19 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points to 2.85 percent from 2.95 percent in previous operations.

Thirty-four out of the 48 traders and analysts, or 70 percent of all participants, polled by Reuters last week predicted no change to the MLF rates in January, with the rest betting on a rate cut.

The world's second-largest economy has shown signs of slowing after a rapid rebound from the COVID-19 slump, with concerns about the financial health of property developers and the rapid spread of the Omicron coronavirus variant clouding the outlook.

"The PBOC's decision to ease early in January suggested that economic downward pressure intensified at end-2021 and room for improvements in the first quarter of this year is not huge," said Ken Cheung, chief Asian FX strategist at Mizuho Bank.

Cheung expects that the PBOC could deliver more easing measures this year than previously expected by market analysts.

Such expectations were also reflected in the bond market, with China's 10-year treasury futures rising to their highest level since June 2020 and the yield on China's benchmark 10-year government bonds falling more than 2 basis points in early trade.

Market analysts said the size of the rate cut and the timing were a big surprise, and they believe further monetary stimulus could follow.

"The 1Y LPR signaled that another rate cut was coming," said Carlos Casanova, senior Asia economist at Union Bancaire Privee in Hong Kong.

"However, the 10 bps cut was larger than expected, suggesting that the authorities have become more preoccupied about weakness in the economy," he said, adding he also expects an additional 100 bps reduction to banks' reserve requirement ratio (RRR) this year.

With 500 billion yuan worth of MLF loans maturing on Monday, the operation resulted in a net injection of 200 billion yuans into the banking system.

The central bank also lowered the borrowing costs of seven-day reverse repurchase agreements, or repos, by the same margin to 2.10 percent from 2.20 percent, when it offered another 100 billion yuan worth of reverse repos into the banking system.

-reuters

The Top Questions to Ask Your Lender Before a Refinance

You waited long enough – interest rates are right where you want them so you are ready to refinance. Before you jump in head first, you should ask your lender the following important questions.







What is the APR?

Don’t let yourself get so focused on the interest rate that you forget about the APR. The APR is the total cost of the loan, including the closing costs in percentage format. It gives you a better idea of what the loan actually costs you.

Sometimes loans with low-interest rates actually have high APRs because of the excessive fees charged. The APR can help to keep you in line and avoid you from refinancing when it’s really not worth it. It’s so easy to get caught up in the low-interest rate that you completely overlook what the loan will cost in the end.

Is There an Origination Fee?

If you are using a lender other than your current lender, you may pay an origination fee. Even if you use your current lender, don’t just assume they won’t charge it – ask them. Lenders charge an origination fee when they think an applicant has a risk of default. Unless you have exceptional credit and a super low debt ratio, you have some level of risk of default; it’s only natural.

Not all lenders charge the origination fee, but if they do, it can really make your closing costs get expensive. One point in an origination fee equals 1% of your loan amount. If you have a $200,000 loan, that’s $2,000 on top of all of the other closing costs.

Can You Pay a Discount Fee?

The discount fee is an optional fee. If you want to buy your interest rate down, you’ll pay the discount fee. Lenders usually discount the rate 0.25% for every point that you pay. Each lender has their own pricing structure, though.

Make sure you look at the big picture before you decide to pay the discount fee. First, will you stay in the home long enough to realize the savings? Remember, you have to pay off the closing costs before you truly start putting the savings in your pocket. Also, is the savings enough to make it worth it? If you’ll only save $25 a month, do you really want to pay thousands of dollars? It will take many years for it to make it worth it.

When Can You Lock the Rate?

Just like when you bought your home, you need to lock the interest rate. You’ll have a certain amount of time to close the loan before the rate lock expires too. Luckily, you can usually take a smaller lock period with a refinance because you don’t have to do any of the legal work that was necessary when selling the home.


Make sure you know the cost to lock the rate (if any) and the consequences of an expired lock. You don’t want to find out the hard way that you’ll have to pay to re-lock your interest rate because you locked it too early.

What’s the Turnaround Time?

If you are in a hurry, such as is the case with some cash-out refinance loans, you’ll need to know how long it will take the lender to process your loan. don’t be afraid to ask what the turnaround time is and what you should expect as far as a closing date.

If you are getting cash out of your home’s equity, you’ll want to know when you’ll receive it. Plus you need to schedule your life around the closing. For example, your closing date will affect when you have to make your first payment. If you have a month off, you can use that extra money that you’ll save to cover your closing costs. If you close at the beginning of the month, though, you won’t have that month off; your first payment will be due the next month.

Who Will Service Your Loan?

Finally, you should know who will service your loan before you close on it. If the lender doesn’t do their own servicing or they know they will sell your loan, you’ll need the details of where your loan will land. Just because you like the lender you are using now doesn’t mean that you’ll like the company that services your loan.

The loan servicer is actually the company that you’ll have the most communication with so you want to make sure that it’s a company that you like. If your lender can’t tell you exactly who will service your loan, they can at least tell you the possibilities of who will so that you can do your research and decide if it’s the right loan for you.

Take your time to ask your lender these important questions before you refinance. They will give the answers that you need to make the best decision about your refinance. Since you already own the home, you aren’t under any pressure to refinance like you were when you bought the home and needed financing. This time around, you’ll have more time and be able to make clear choices.

source: blownmortgage.com

Qualifying for USDA Loan with Low Income

Consumers often shy away from applying for a mortgage when they know their income is too low to qualify them for a program. While this might be true for traditional type loans, such as the conventional loan, there are options out there for people with smaller incomes. If your desire to become a homeowner is held back by your lack of income, consider looking into the USDA loan, a successful option for those with lower incomes. This successful loan program which is offered by the United States Department of Agriculture offers flexible guidelines, low-interest rates, and fewer requirements than most other loan programs.

Little Money Needed

The down payment requirement is often what holds people back from purchasing a home. The all-too-common need to put down 20 percent on a home is what people focus on, thinking that they will never be able to afford a home with that kind of money required up front. On the contrary, the USDA loan does not require any money down – you can finance 100 percent of the purchase price of the home. Right off the bat, this takes a huge amount of pressure off of the buyer as there are not thousands of dollars needed up front to purchase the home. In addition to not needing a down payment, you may be able to finance the closing costs into the loan, including the funding fee of 2.75 percent of the loan amount. You are able to finance up to 102 percent of the value of the property, according to the USDA, which can include the funding fee and closing costs. If you offered a lower amount for the home than it is worth, you have even more room to roll closing costs and the funding fee into the loan amount.

Low Monthly Payments

Sometimes it is not just the down payment that scares people away from applying for a mortgage, but the monthly payments as well. If you have a high interest rate, your payment is going to be high, even if the home you purchase is relatively cheaper than other homes in the area. With the USDA loan, however, the interest rates charged are much lower than any other loan program. Typically, they do not alter with debt ratios or credit scores, giving everyone that qualifies for this program a low interest rate and affordable monthly payments. Since the USDA program is for low-income families and homes that are located within rural areas, the purchase price of the home is not going to be very high as it is, further contributing to the affordability of the mortgage payment. In addition, the mortgage insurance that the USDA charges for any mortgage that has a loan-to-value ratio higher than 80 percent is well below the costs of any other program, giving you even more reasons to be able to afford the loan.

Flexible Guidelines

Credit scores, debt ratios, and income requirements often render many potential borrowers ineligible for a loan program, but that is not often the case with the USDA loan. In fact, the less money you make, the more eligible you become for the loan. This is not to say that they do not have credit or debt ratio guidelines in place – they do, but they are much more flexible than other programs, including FHA and VA loans. The guidelines include:

    Minimum credit score of 580, but if your score is less than 620 but higher than 580, you will have to go through some additional evaluation to ensure that you can afford the loan. If your score is higher than 620, the guidelines are very simple to meet. If you do not have a credit score due to insufficient credit reporting, you are eligible to use alternative trade lines, such as insurance, utility, or rent payments.
    Your income cannot be higher than 115 percent of the average income for the area. Every area differs, but you can find the maximum amount for your area on the USDA website. They do offer allowances on your income if you have children, elderly, or disabled family members living with you, enabling you to increase your chances of having income low enough to qualify for this affordable program.
    Your credit history should show on time payments with no more than 2 late housing payments within the last couple of years. Your other payments should also be timely for the most part; however, a few late payments will not disqualify you for the program, especially if your credit score is above that 620 range.

The USDA loan makes it possible for people with low income to qualify for a loan. Granted, you have to purchase a home in a rural area, but a large majority of the United States falls into this category. A search on the USDA website will show you where these affordable homes are located, enabling you to purchase a home despite your low income and put the days of renting behind you.

source: blownmortgage.com

Top China paper warns of crisis risk over debt

BEIJING, China - China must turn off the taps of credit-driven growth to avoid a financial system crisis in the face of rising bad loans and other risks, the Communist Party's official mouthpiece newspaper said Monday, citing an unnamed "authoritative" source.

The prominent article, in question-and-answer format, started on the front of the broadsheet paper and took up the entirety of page two.

China's Communist authorities are trying to retool the economy away from the investment- and export-led growth of the past to one more led by consumer demand, and reform lumbering, loss-making state-owned enterprises to make the sector more efficient.

But the transition is proving bumpy, raising fears of a hard landing, and global markets have been alarmed by slowing expansion in the world's second-largest economy.

Attempts to address the slowdown in the first quarter of this year -- when growth slid to 6.7 percent -- were largely driven by investment, the People's Daily quoted the source as saying, putting more financial pressure on some local governments.

Analysts said the comments could be a signal that Beijing is to rein in monetary stimulus efforts.

"A tree cannot grow in the air," said the source, arguing against raising debt further.

"Further leverage must not be added to push up growth, nor does it need to be," the interviewee added, warning of a possible crisis as high debts "will definitely bring about high risks".

"A system financial crisis could be triggered if no good controls are implemented, leading the economy to contract and even household savings to evaporate."

It is the third time in less than a year that the People's Daily has cited "an authoritative person" to discuss top-level economic policies.

Chinese news portal Sina has previously said that such an "authoritative source" in similar People's Daily articles could be a high-ranking government official, such as the head of the top economic planning agency the National Development and Reform Commission, or a respected scholar who participated in major economic policymaking.

"While the anonymity has been protected, the views expressed in these articles did have a large impact in China," Nomura economists said in a note.

The report implied that future monetary easing "may be more cautious and that the government may try to hasten the pace of reforms", they said, evidence that China's "debt-fuelled rebound in investment growth will be short-lived".

China's growth will continue to slow, the source said, as sluggish demand and overcapacity are "unlikely to turn around fundamentally in several years".

Boosts from credit expansions have declined and the government must "completely abandon the delusion" of trying to stimulate growth by loosening money supply, added the source.

Instead authorities should accelerate reforms, stop lending to "zombie companies" to reduce overcapacity, allow migrant workers to settle in cities to expand demand, and further cut taxes.

source: interaksyon.com

Should You Pay Off Student Loans Before Investing?

Millennials who have been out of college for a few years are starting to wonder if they should start investing before they’ve paid off their student loans. There is no one-size-fits-all answer to this question, but each person should be able find the best path forward.

Investment and debt-repayment are two sides of the same coin. Most people with student loan debt pay interest and annual fees totalling 4-6% of the balance of their loans. This is in addition to the premium payments made every month. This percentage is a loan’s APR, and it is an immovable object. Unless you look into student loan refinancing, this APR represents the annual cost of the money you borrowed for your graduation. This rate will stay the same for the entire term of your loan.

Investment portfolios bring in returns that vary year by year. If the economy is active and healthy, you could see returns of 7-9% or even more. Some years see investors receiving enormous returns that far exceed 10%. The thing is, these returns are unpredictable. Unlike your student loan APR which never changes, investment returns go all over the place. Some years, your portfolio may even lose money.

In years where your investment return percentage exceeds your loan APR, you will make more money than you lose, making investment a worthy pursuit, even if you haven’t paid off your student loans yet. But on years where your portfolio brings in less money than you lose in student loan interest payments, your investments won’t be “worth it” in a way that is easy to appreciate.

However, investing has one advantage that makes this decision a little more complicated than subtracting interest payments from investment returns. When people start investing at an early age, compound interest kicks in earlier, greatly amplifying the overall growth potential of your investments over your lifetime.

Most readers will already be familiar with this concept, but it’s worth a review. If you make regular payments into an investment account for your whole life without withdrawing funds, the dividends that your portfolio earns will also be added to the pot. In this way, a successful investment pays into itself. This creates a snowball effect. As time goes on, you’ve got more money, so it grows faster, so it gives off higher returns, which makes your money, which can then grow faster, etc.

With compound interest, the sooner you begin the better. Therefore, a lot of advisors consider it prudent to start investing as soon as possible, even if the return you expect from your investment is nearly equal to your student loan APR.

However, you shouldn’t begin investing if you don’t have certain financial details worked out. If you have no savings to cover you if you lost your job or experienced a personal emergency, you shouldn’t put aside money to invest. Instead, create an emergency fund. You may also have personal preferences that motivate you to pay off your student loans as soon as possible. Some people find a lot of personal comfort in being debt free, and may invest with more fervor once the debt is cancelled. Finally, explore investment acceleration options, like employer matched 401(k)s.

Hopefully this has given you a clear way of figuring out how to prioritize your investments and student loan repayment. Simply giving these concepts clever consideration indicates that you are careful about your money, a trait which will serve you well for life, long after your student loans are paid off.

Photo Source

source: modestmoney.com

Private sector takes out more dollar loans in 3Q

MANILA – Foreign currency deposit units (FCDU) of banks issued more loans in the third quarter, according to the Bangko Sentral ng Pilipinas (BSP).

In a statement, BSP Governor Amando M. Tetangco, Jr. said FCDU loans grew by 2.6 percent to $10 billion at end-September from $9.7 billion at end-June.

Sixty-three percent of those loans are medium- to long-term, or those maturing in more than a year, with the remaining 36 percent pertaining to short-term credit.

Eighty-one percent of the loans was taken out by the private sector.

The major beneficiaries were public utilities at 21.3 percent; merchandise and service exporters, 15.4 percent; and producers or manufacturers, including oil companies, 14.7 percent.

Gross disbursements during the third quarter increased to $11.6 billion from the previous quarter’s $8.1 billion. The bulk of loan releases had short-term maturities, 74.3 percent of which was for working capital requirements.

FCDU deposit liabilities increased by two percent to reach $26.2 billion at end-September from $25.6 billion at end-June. The loans to deposit ratio slightly improved to 38.1 percent from 37.9 percent in the second quarter.

Ninety-eight percent of the deposits were held by residents.

source: interaksyon.com

Lifestyle changes and how they affect your mortgage

Maybe you just lost your job. Perhaps you just had a baby. Or,maybe you’re planning your wedding. No matter the reason, any time your lifestyle changes is an opportunity to evaluate your home loan, to help you reduce your expenses and maximize the money in your pocket.

Major Illness or Job Loss

If a pink slip or a major illness knocks you out of work for a few months, you may panic as you wonder how you’re going to make ends meet. Fortunately, there are ways to rearrange your mortgage to make the situation work for you.

Your first step may be to refinance. Use a mortgage calculator to see how much you could save by refinancing to a loan with a lower interest rate; mortgage rates are currently near historic lows, meaning now is a great time to shop around. Depending on your current interest rate, a refinance could save you hundreds of dollars a month in mortgage payments.

If that’s not enough, you may consider a forbearance. This option allows you to halt your mortgage payments, typically between six and twelve months, until your financial situation is less dire; then, you’ll have another six to twelve months to repay the interest and principal payments that accumulated while you were out of work. Most lenders will only offer a forbearance to borrowers who can prove their financial hardship is temporary, typically lasting six months or less.

Here Comes the Bride

If wedding bells are in the future, it’s a great time to look at your mortgage using a home loan calculator. Marriage means not only joining your lives, but your finances as well. If you’re in the market for a new home, adding in a second person to your family – and a second income – can increase the amount you may qualify for. If your partner has a strong credit score, he or she may also help you qualify for a lower interest rate based upon it.

You may be tempted to draw money out of your property to pay for your wedding through a cash-out refinance. This is where you liquidate some of the equity in your home to pay for expenses. If at all possible, resist the urge. For one thing, a wedding is a day, while your home is your shelter for months, maybe even years, down the road; reducing your financial stake in your home to pay for a one-day party is putting the cart before the horse. If you need more convincing, you should know that withdrawing some of your home’s equity will lead to higher mortgage payments, since you’ll have a higher principal to pay down on the loan.

And Baby Makes Three!

If your major lifestyle change involves starting a family, you’ve likely already started evaluating everything in your world, whether it’s the arrangement of furniture in a previously unused bedroom (where will the crib go?) to when – or if – you’ll return to work after the baby’s born. Spending some time with a mortgage calculator should be on your list, too.

Although the U.S. Government does not offer paid maternity leave to new parents, you can take advantage of the Family Medical Leave Act, or FMLA, which guarantees new moms and dads up to 12 weeks of leave – unpaid leave. To bridge the gap in finances during that period, consider refinancing your mortgage to a lower rate. Not only could you save hundreds of dollars a month, depending on your current interest rate, but you may also be able to “skip” a mortgage payment while you refinance from one loan to another.

One thing to consider here: my husband and I refinanced right after the birth of our first child. Shortly thereafter, we discovered that our previously-roomy house wasn’t big enough for our growing family. However, the refinance had really locked us in to staying in our home for the foreseeable future. In other words, the birth of a child may not be the best time to make dramatic changes to your mortgage situation.

source: everythingfinanceblog.com

Bank loans up 14% to P3.134 T

MANILA, Philippines - Loans granted by big banks grew at a slower pace in November, but the Bangko Sentral ng Pilipinas (BSP) said credit levels remained supportive of economic growth.

Excluding BSP placements, outstanding loans extended by universal and commercial banks rose 14 percent to P3.134 trillion as of November last year, slower than the 15.8-percent growth recorded in the first 10 months.

The growth rate further drops to 13.3 percent when money with the central bank is included, data released yesterday showed. That also marked a slowdown from 14.2 percent the previous month.

Loans are good gauge of economic activity. As a regulator, BSP sees to it that banks are healthy enough and are able to lend to boost consumption and investment activities.

In a statement, BSP Governor Amando Tetangco Jr. attributed the over-all slowdown to an easing across all types of loans. During the period, credit to production activities grew 14.6 percent from 16.4 percent, while consumer loans expanded 12.1 percent from 13.9 percent.

“The growth in bank lending, especially to productive activities, should provide needed resources to raise the growth potential of the economy,” Tetangco explained.


Loans for production activities accounted for the bulk of loans, amounting to P2.860 trillion for the first 11 months of 2012, figures showed.

Under this category, credit to public administration and defense expanded the fastest pace at 48.9 percent. This was followed by loans to the following sectors: financial intermediation (37.3 percent), wholesale and retail trade (26.9 percent) and transportation, storage and communication (26.5 percent).

Lending to real estate, renting and business services and manufacturing sectors also grew by 24.8 percent and 13.6 percent, respectively, data showed.

Declines, on the other hand, were observed in lending to agriculture, hunting and forestry which dipped 41.8 percent, and mining and quarrying that dropped 39.5 percent.

Meanwhile, consumer loans— or credit used to finance household needs such as purchasing of appliances— reached P252.116 billion as of November with credit card and auto loans leading the pack.

Compared to previous year, credit card receivables grew 10.1 percent while auto loans increased 13.1 percent.

Continued loan growth was supported by increasing domestic liquidity, which accelerated to P4.9 trillion as of November, an improvement of 9.8 percent year-on-year, figures showed. Expansion was faster than October’s 8.6 percent.

“The faster expansion in domestic liquidity during the month reflects in part the impact of previous policy actions of the BSP to help support non-inflationary economic growth…,” Tetangco said.

source: philstar.com

File Bankruptcy to Get Off Mortgage With Ex?

Dear Bankruptcy Adviser,

My ex-husband and I divorced in 2005 and he kept the house. The problem is that we agreed to everything but didn't specify that he must get my name off the house in the divorce papers. So we both have remarried and he has been late on the house payments, which is affecting my credit and preventing me and my husband from getting a home loan. My ex-husband is missing payments. He does get caught up, but this has occurred on and off. It also means he cannot refinance because his credit is poor and now mine is, too. So my question is: Could I file bankruptcy and list only the house so that I am no longer responsible for it? Also, if I did file, would that affect me being able to get a loan for a house?

-- Kathy

Dear Kathy, Most things in life are not as simple as we want them to be. I respect that you just want to be done with the ex-husband and the past. Your approach may work, but not as easily as you would like it to.

If you are eligible for the Chapter 7 bankruptcy, it would eliminate your liability on the mortgage but it would not remove your name from the property title or the mortgage loan. You may have signed your name off of the title during the divorce, but your ex-husband would have to refinance the mortgage to take your name off the loan.

Here are the issues you have to address.

Are you eligible for Chapter 7 bankruptcy? You did remarry. While you can file bankruptcy as an individual, you must qualify as a couple. Your new husband may have separate assets and those generally do not need to be listed in your bankruptcy. However, his income and any post-marriage assets must be listed in your case. So, you need to find out whether you are eligible for Chapter 7 bankruptcy.

Do you have joint accounts with your new husband? The bankruptcy will impact any joint credit card accounts that you have with your husband. He can keep paying and his credit should not be harmed, but the lender may place a notation on his credit report. That note will say, "Included in bankruptcy." I am not a credit reporting expert, but I have researched this issue and my research shows that this note should not impact his credit score. It may only require an explanation to future prospective lenders.

Know that all debt must be included. You cannot file bankruptcy only on some debt. You have to include all other accounts, such as credit cards or personal loans. Even accounts without balances will likely be closed. You can start over, but not with your current accounts.

What will happen to your mortgage with your ex-husband? The mortgage lender will receive notification that you have filed bankruptcy. The positive part is that future late payments will no longer report to the credit bureaus.

The negative part is that a future foreclosure will show up on your credit report. Your ex-husband may lose the house in foreclosure one, two or many years later. The lender would not have been reporting the late payments on your credit report all that time, but will report the foreclosure. That will definitely impact your credit.

Will you be able to get future mortgage loans? The bankruptcy will impact your credit for the next few years. Even though the bankruptcy notation stays on your credit for 10 years, you can get new credit sooner. Obtaining credit after bankruptcy is not impossible and your new husband could help you establish new, post-bankruptcy credit. Even though I do not endorse co-signing, it is a way for your current husband to help rebuild your credit faster.

You cannot expect to get a mortgage loan immediately after filing. Lenders want to see that you have established post-bankruptcy credit and confirm the bankruptcy case was filed more than two years ago.

As I said, this is an option, but most things are not as easy as we would like them to be. You will have to do some research and may need to talk to a bankruptcy attorney before you take this approach.

source: foxbusiness.com

The Many Flavors of Loans

Money can be lent to those in need, at a reasonable rate, from a pool of money that comes from investors and savers. When the lending institution provides money for consumers to borrow, either secured or unsecured, the practice is known as providing a consumer loan. These loans do not include loans such as mortgages, which are reserved for solitary purposes. The different kinds of consumer loans each carry a different set of rules regarding who can borrow, for how long, and so on. What will be available to you will greatly depend upon your credit rating, income and all of the usual measures.

- Personal Line of Credit

These accounts are offered by personnel of the lending institute. These accounts offer a flexible way to use credit, because funds are pulled out as needed, and the interest payment will adjust every month. They are typically only given to worthy creditors, with a maximum placed upon the amount that can be lent. Creditors will also typically offer the prime rate + 1%.

- Overdraft Protection

This account affords protection to a deposit account from being overdrawn. The amount over what is lacking becomes a loan which accumulates interest. This sort of account protection is especially handy, since it allows you to avoid bounced check fees and the other problems that come with having a check or payment not go through.

- Credit Cards

A credit card is in effect a loan system, where instead of purchasing items yourself, the credit card company pays for your item, and you then become responsible for paying the company back, usually with an interest applied.

- Credit Card Cash Advances

Available from their credit card, these loans are known as cash advances. These loans immediately begin to accumulate interest, which is typically higher than for a cash advance on a credit card. These enable you to get cash in hand, but at the cost of a much higher interest rate than for an actual cash load or line of credit.

- Demand Loan

If the borrower has good credit, then they may be able to arrange for a demand loan. These loans require an agreement to repay in full by a certain date, while just the interest is due monthly and the lender can recall the loan at any time.

- Installment Loans

These loans offer a set interest rate, a repayment schedule, a maturity date, and can require certain security features. Basically, it is a set number of payments of a set amount that you are required to pay.
These are a few of the kinds of loans that a person can get through a financial institution. There are other kinds of loans available that have other rules to their use. What will be available to you will greatly depend upon you credit score and situation, what you can offer as collateral, the amount of income you possess, and much more.

source: richcreditdebtloan.com

What alternatives are there to bank loans?

Unless you have failed to pick up a newspaper in the last four years, you will be aware that bank lending to both consumers and businesses has plummeted.

Despite various measures designed to ease the flow of credit, the truth is that for many people it has never been more difficult to access funds from traditional lenders.

Inevitably, that has led consumers and businesses to explore other avenues – some good and some not so good.

Today, you can apply for finance from various institutions, including banks, online pawn shops, credit unions, payday loan and cash advance providers and more.

Below, we explore each of these options and look at the pros and cons associated with them.

Online pawn shops

The concept of an online pawn shop may be one that is difficult to get your head around given many people’s ideas of what pawn shops are like.

Instead of loaning against cheap jewellery and various household items, the new, high-end asset lenders that are emerging provide loans against valuable items ranging from fine wine to prestige cars.

They provide short-term loans taken out for between one and six months and once the loan has been repaid, your assets are returned to you.

Interest rates tend to be higher than those associated with bank loans, however, the loans are designed to cover you for a short period of time and only become unsustainable if you fail to use them properly.

Many middle-class individuals who are asset-rich but cash-poor use pawnbroker loans to ease their immediate financial concerns, so if you are of the opinion that pawnbrokers are for the poor and unemployed, you are mistaken.

Payday loans

Payday loans have been heavily criticized in recent years as they have become more popular.

Essentially, you borrow a small amount for anything between a few days and one month and repay the loan once you have the funds to do so.

However, these loans charge an eye-watering amount of interest and many firms have been guilty in the past of imposing hidden charges, therefore making them even more expensive.

The real problems arise when borrowers cannot meet the repayment date and the debt is rolled over, which can see it snowball to such an extent that people cannot afford to repay it at all.

Credit unions

Credit unions are small not-for-profit bodies established and controlled by members with a common link.

That link may be through a trade union, a local community or another connection. There are no shareholders to worry about and any profit taken by the organisation is used to develop it further.

The interest rates charged by credit unions are often lower than those attached to pawnbroker loans and are significantly lower than payday loans. Also, terms can range from five years to 25 years depending on whether the loan is secured or unsecured.

Another benefit is that as a member of the union, you have voting rights and an influence over how it moves forward.

As you can see, banks are not the only places you can go if you need a loan.

Change can be hard for some people to handle and if you are one of them then that is fine. However, the financial landscape is not what it was four years ago.

Doors that were once open may not be any more, but new doors have opened in their place in the form of pawnbroker loans and other alternative forms of credit.

source: everythingfinanceblog.com

World Bank will not provide loans to Greece - president

STOCKHOLM - The World Bank will limit its work in Greece to offering expertise, and will not provide loans, the bank's president, Jim Yong Kim, said on Tuesday.

"We will not lend money to Greece" because "this is not a country that qualifies, for example, for an IBRD loan," Kim told a press conference in Stockholm.

The International Bank for Reconstruction and Development (IBRD) is an arm of the World Bank which extends loans to governments, but Greece is classed as a "high income" country, rather than the "middle income" states to which it typically lends.

Hungary, another high income country, was made an exception to the US-based bank's rule in 2008 when it received a loan that was part of an aid plan coordinated by the European Union and the IMF.

The World Bank said in November that Greece had requested its expertise on the issues of how to improve its business climate, and how to boost growth.

On Tuesday, Kim suggested that Greece could benefit from the bank's experience in another area: "We have a lot of experience in assessing whether particular social sector expenditures are actually achieving the desired outcome," he said.

"For example we worked in Korea during the crisis in the 1990s, we worked in Indonesia. We worked in many countries that have had very similar experiences with the ones that countries in Southern Europe are going through," he added.

"We're hoping to be helpful whenever we can. But again, we're an organisation that works on request. People have to come to us."

source: interaksyon.com

Does Your Credit Score Matter If You Don’t Do Debt?

A long time ago I told my friend Brad from EnemyofDebt.com that not paying attention to your credit score is dumb. I refused to listen to him on all his thousand and one reasons why he could care less, and I thought the fact he said he had a score of “0″ (yes, ZERO) was cockamamy. I’m pretty sure I told him it wasn’t even possible, which I later came to find out was kinda sorta untrue (it’s possible to have no credit score, which in essence is kinda like a “0,” even though it’s not).

Here we are though, 3 years later and much wiser in my age, and I’m starting to come around to the idea a bit more :) Not that I’m sold completely on the whole thing – I’m not, and I’ll totally continue to monitor my own ‘cuz I think it’s smart – but I do see where Mr. Brad is coming from more now. His stance can be simply summed up like this:

If you’re never taking out a loan again, why does your score matter?

An interesting take on the whole score game for sure. Especially if you’ve never really thought about it before. Why DOES your score matter if you don’t  have any loans or credit to your name at all? Is your CASH worth less depending on what your score reads? It’s a cool way to think of things mainly because it’s so drastic. When was the last time you decided to never have a loan or credit card?? Haha… for me it’s probably been a good 25 years, like when I was 7 ;)

And just like I thought 3 years ago when first debating against Brad, some of the same questions remain for those who believe it’s just not that possible:

1. How do you rent an apartment without a credit score?
2. How do you BUY a car without being able to take out a loan??
3. How do you get A HOUSE without taking out a mortgage?? Or mortgageS?

All common occurrences in our lives which we’re just so used to these days – something Brad says is part of the problem: Society has deemed taking on credit and loans as perfectly normal, so people rarely stop to consider the alternatives anymore! Nonetheless the consequences.

But what about those questions up there? What do people like Brad (aka the anti-debtors) say about ‘em? I picked apart an email he had shot me a couple weeks ago where he was doing a Q&A with one of his readers (I had told him if he didn’t put it on his blog  I was going to! Haha…), and he answers all 3 of those questions as he is always known to do: with passion and vigor :)

Renting an apartment without a credit score:

“You can definitely rent an apartment without a credit score. You can check out a service called eCredable.com that allows you to build a payment history to show landlords that you are financially reliable. It allows you to track your payments for utilities, rent, etc. It is a great resource! It’s also great to have an emergency fund savings statement showing how much you have saved up.

If you have no debt, can prove you are reliable, and can show you have savings, most landlords would be glad to have you. As a former landlord myself I know for a fact that a credit score really isn’t a reliable indicator as to how good of a tenant someone will be — financially or otherwise.”

Buying a car without a credit score:

“Buying a car is certainly possible without a credit score, assuming you are planning to buy one without going into debt. Having a car payment is one of the worst ways to own a car. You do not need a car payment to own a car as long as you buy a gently used 2-3 year old car that has had one owner who took care of it and can prove it. I do not recommend getting a car using debt — EVER — therefore your credit score doesn’t really matter when buying a car.”

AKA if you’re paying all *cash* for something, your credit doesn’t even become an issue. And I’d even tack on here that you could get a car for CHEAPER too if you presented the “all cash” option during your initial negotiations! Whether you buy it from a dealer, or from an individual. Here’s a good article Lance did for us the other month on paying cash for a car vs. taking out a loan, for what it’s worth. Even though it’s def. PRO-loanage ;)

Buying a home without a credit score:

“If you’re looking to get a house via mortgage one day, then you can do so without a credit score. It’s not as popular as other routes because society is so attached to their credit scores. It’s called “manual underwriting” and there are places that will take your real life information (renting receipts, eCredable reports, credit history (different than credit score), savings, income, and how much debt you have to evaluate your ability to pay a mortgage. (15-year fixed rate) My wife and I are paying cash for our next house so we don’t even need that.”

While pretty extreme, you can see it IS possible to function in this world without worrying about your credit and/or credit score. It mainly becomes an issue whenever you need to take out that loan or get approved for something/etc. (And maybe when you’re looking to get employment too as many companies now check out your credit too, whether you believe it’s right or wrong). If you have no plans on ever doing it though, why should it matter if you can get an excellent interest rate or not?

Brad ends his email to his reader like this:

“Chasing a credit score is a slippery slope and many experts still believe that it’s the only way to function in today’s day and age. It’s not true though and there are plenty of people living debt free without a single worry or care about their credit scores. It’s just a matter of how much you really want to be, stay, and live debt free. You don’t have to play the credit score game. The choice is yours…”

Interesting stuff to think about either way. Could I do it? No way. I enjoy taking advantage of my credit cards and loans to better leverage my money and (more importantly) my TIME, and I also like trying to compete for the best score too ;) As possible as the non-credit lifestyle may be for some, it’s just not that practical in my world. And I’m totally okay with that as long as things keep pushing forward and I don’t make any stupid mistakes ;) I’ll gladly take on a car loan if I can do something better with my cash instead, and I def. don’t want to wait 100 years to save up enough to buy a house cash-free either! Haha… Though I’ll gladly give Brad mad respect for doing so as it takes a LOT more restraint and patience that I’ll ever have, that’s for sure.

At the end of the day, though, I choose practicality and convenience over extremism. ‘Cuz I know myself well, and I’m confident I won’t get into much trouble using credit towards my advantage.  If you DON’T trust yourself though, or you SUCK at managing debt/credit cards/etc, by all means stay away!!  Maybe give Brad’s take some serious thought and slow things down a bit? There’s nothing wrong with choosing either side here as long as it’s the right one for YOU. So definitely consider your own habits when reading info about this stuff online, or wherever. You personality matters a LOT here.

Thoughts? Questions? Concerns? I’ll try and get Brad to watch this thread in case anyone wants to throw some zingers his way and/or give him props ;) He’s one of my best blogging friends I have, and I know he appreciates a good debate! So let’s see what you’ve got.

source: budgetsaresexy.com

Personal Loans With Bad Credit: The Advantages of Instant Access Financing

Not everyone has the kind of collateral needed to secure a loan approval quickly. Even when an applicant has a good credit history, the challenge of getting approval on an unsecured loan can be quite hard, so when seeking personal loans with bad credit, the difficulty is understandably much greater. But there are loan options available.

The problem with pledging an item as collateral is that, should the loan be defaulted upon, it is lost. And when the item is a family heirloom or a piece of valuable jewelry, losing that collateral for the sake of $3,000 or so can be a bitter pill to swallow. But there are other options when hunting for guaranteed loan approval.

These are basically fast access personal loans that require the minimum time for approval. They are usually referred to as payday loans, but there are large loan options too, providing sums greater than $1,500. But these loans come at a price, and compromises must be accepted before funds can be accessed.

What Creates a Bad Credit Borrower?

Many people are categorized as bad credit borrowers, but while this once occurred as a result of poor money management and unreliable borrowing, the impact of the recent economic crisis has seen many honest borrowers slip down the credit rating table. As a result, there has been a jump in the number of people seeking personal loans with bad credit.

A low credit rating can come as a result of a county court judgment, or a bankruptcy ruling or even with a growing number of loans that have fallen into arrears. Of course, they can all affect the chances of getting guaranteed loan approval, but it is important to understand that they cannot halt the chances of getting approval itself.

The problem is that, when it comes to applying for a personal loan, a higher interest rate is charged, raising the cost of the loan and providing the opportunity for lenders to reject the application. This is where a no credit check loan with same day approval can be so valuable.

Terms To Consider Before Applying

As great as a no credit check loan might seem to someone seeking a personal loan with bad credit, there are negatives to the deal too. The fact that a low score can be ignored and have no bearing on the application process, is a boost but that convenience comes at a cost.

These loans practically offer guaranteed loan approval, but they are also considered the most expensive loans on the market. Because lenders are foregoing a credit check, they are leaving themselves vulnerable to borrowers with very bad track records in repaying loans. So, a higher interest rate is charged to cover their potential losses, sometimes as high as 30%.

What is more, the repayment term is usually very short. A typical payday loan is repaid within 30 days, while larger instant approval personal loans may require between 90 and 180 days.

Find the Best Loan

With these factors to consider, it can be hard to find a loan that is affordable. But there are lenders out there that specialize in lending to bad credit borrowers, mostly to be found on the Internet. Take your time in assessing the deals available there before making a decision on where to apply for a personal loan with bad credit.

When there is pressure to find funds, these fast access loans are definitely the best choice out there, with the much-needed cash accessed as quickly as in just a few hours. With guaranteed loan approval, this means that a lunchtime application can result in the money in the hand before 4 pm, so even financial emergencies can be dealt with very quickly through a personal loan.

Want to learn more about Guaranteed Bad Credit Personal Loans and Bad Credit Home Loans? Please subscribe to my channel.

Article Source: http://EzineArticles.com/?expert=Mary_Wise

Federal Loan Consolidation: Key Qualifying Aspects to Consider

It is common practice to see federal governments invest in the future of its population. An effective way to do so is through providing loans, either to encourage or sustain growth in industries and in education, but there is a drawback. These loans create debt, and sometimes those who benefit from the loans can struggle to repay them. The solution to the problem? Federal loan consolidation plans.

Consolidation can rescue a borrower from bankruptcy court. There are many reasons why a borrower might find it too difficult to repay the loans they have taken out, ranging from the financial impact of a weakening economy to the destructive impact of an act of God. Normally, securing loan approval depends on proving the ability to repay, but in these cases, proving an inability to meet existing repayment terms is essential.

The key to a bright financial future is to properly manage the debt created by federal loans. Even though these typically come at a lower interest rates than those charged by private lenders, consolidation can make a real difference.

Difference Between Federal and Private Consolidation Programs

Normally, there are two types of loans to take out: namely private loans and public loans. The terms can differ greatly, with private lenders seeking to make a profit on their investment and, for the most part, public or federal lenders not. With federal loan consolidation, the distinction is similar.

The differences are manifest in interest rates, with the federal option clearly less expensive due to the low interest rates that are charged, compared to those charged by private lenders. The result is that consolidation loans are much more affordable so, as long as an applicant qualifies, securing loan approval is no great problem.

The problem is that many business owners take out both federal loans and private loans, and mixing these loans in one consolidation plan is not always a good idea. This is especially true since the federal options have low interest and good terms anyway, so it is harder to improve on them than private loans.

Qualifying for Consolidation

Qualifying for a federal loan consolidation plan is pretty straightforward, with loan authorities requiring proof that the applicant is in financial difficulties. Help is granted only to those in debt to the federal government, and not to any other loan source. The chief sectors to benefit are agriculture and commerce.

The farming industry is known to be one of the most heavily supported in practically every country. And in the US, there is a wide range of loans available to aid the sector, including Farm Loans, Commodity Marketing Loans and Farm Storage Loans. These are issued through the FSA. Borrowers on these schemes qualify for a consolidation loan, but securing loan approval is reserved for those in the most serious situation.

Businesses operating in the commercial sector can also benefit from a long list of financing schemes designed to stimulate growth and employment. The range of federal loans includes Small Business Loans, Indian Loans for Native Americans, and Physical Disaster Loans for businesses that have suffered damage to property, infrastructure and facilities.

Criteria to Satisfy

Of course, meeting the stated criteria is essential if an applicant is to have any chance of securing federal loan consolidation. The good news is that this is not particularly difficult; all that is really needed is to prove financial difficulties. What is more, securing loan approval is dependent on the severity of the financial situation of the applicant, not their credit score, and on the ability to meet the restructured repayments.

The purpose of federal loans relate to aspects other than financial. For example, repairs may need to be made to a warehouse after a tornado hit town, or flooding damage may mean a business must close for several weeks. Federal governments are happy to provide support if it means people keep their jobs.

Want to learn more about Guaranteed Bad Credit Personal Loans and Bad Credit Home Loans? Please subscribe to my channel.

Article Source: http://EzineArticles.com/?expert=Mary_Wise

Using a Secured Card to Rebuild Your Credit

Sometimes, things happen and your credit takes a hit. Whether you have made some serious mistakes, or whether you have weathered a financial emergency like a job loss or a medical problem, you might need to repair your credit.

Indeed, your credit situation has a great deal of influence on the rest of your financial situation. Loans cost you more when you have poor credit, and even your insurance rates and other costs can be influenced by your credit situation.


One of the fastest ways to rebuild your credit is with the help of a credit card. Because credit card information is regularly reported to the credit bureaus, you can speed up the rate at which you see solid improvement to your score. Unfortunately, if your credit situation is especially poor, you may not be able to qualify for a “regular” credit card.

In those cases, you might need to turn to a secured credit card in order to help rebuild your credit.

What is a Secured Credit Card?

A secured credit card, or a guaranteed credit card, is one that requires you to provide collateral in order to gain approval. Nearly anyone can be approved for a secured credit card, but you have to guarantee your line of credit with cash. Most of the time, you are required to deposit a certain amount of money into an account connected to your guaranteed credit card. If you miss payments, the credit card issuer can take money from your account, and use it to pay what you owe.

Most of the time, a secured credit card requires that you put in an amount of money that corresponds to your credit limit. Some guaranteed cards, though, don’t require you to put in as much. You might only have to guarantee the card with a percentage of your credit line. In any case, it’s a good idea to find out what is required of you before you sign up for a secured credit card.

You should also be aware that using a secured credit card will come with relatively high costs. You will pay a higher interest rate if you carry a balance, and you might be subject to a battery of fees, including activation fees, annual fees, and other fees. You need to be on your guard when it comes to secured credit cards. They can be useful tools when you have no other option for building your credit, but you need to use them carefully.

How to Use a Secured Card to Rebuild Your Credit

Using your secured credit card to rebuild your credit requires planning and patience. First of all, make sure that you are actually getting a secured credit card. A prepaid debit card is not the same thing. At first glance, they might appear to be the same thing, but they really aren’t. A prepaid debit card won’t report your payments to the credit bureaus, so you won’t see improvement. Verify that you are actually using a guaranteed credit card, and that the issuer will report your history to the credit bureaus.

Once you have your secured card, you need to use it. Realize that the money in the savings account is only collateral. You should make your regular payments with other funds, and not rely on the money being held as a guarantee. Make one or two small purchases each month with your secured credit card. Then, pay off the purchases. Make sure you only buy what you already have money for. You don’t want to carry a balance.

After a few months (usually between nine and 12), you can ask if you can convert your secured card to a “regular” unsecured credit card. Many secured cards offer this option to consumers who make regular payments and show themselves responsible. Even if you can’t convert, as long as you make all your payments on time, and you are up to date on your other bills as well, you should be able to try to apply for — and qualify for — an unsecured card.

Responsible financial habits are vital to the process of rebuilding your credit. If you are careful, you can use a secured credit card to demonstrate your level of financial responsibility, and improve your situation.

source: financialhighway.com

HEIs, GFIs, Central Bank support loan facility for college students

MANILA, Philippines -The country’s private higher education institutions, government financial institutions and even the Bangko Sentral ng Pilipinas have expressed their support to a proposed bill that would establish a loan facility for college and university students.

During a hearing on the proposed Senate Bill 3285 authored by Senator Edgardo Angara Tuesday, it was made clear that the country is way behind many countries including its Asian neighbors, in terms of providing financial support for higher education students.

Dr. Vincent Fabella, president of the Jose Rizal University, representing the Coordinating Council of Private Educational Associations (COCOPEA), noted that the cost of higher education continues to rise in the country and across the globe.

“We’re part of that trend. But around the world, government and banks help finance it. So the idea is the students study first, when they get the jobs and the money, then they repay their loans. That’s what we’re trying to push with the proposed bill,” Fabella said.

According to Fabella, the estimated cost for all higher education students in the country, including the tuition and miscellaneous fees, would amount to P145 billion.

Based on the models of Hong Kong, which provides student loans of up to 50 percent of the total cost, and South Korea at 30 percent, Fabella said that the government would have to shell out between P36 billion and P72 billion for the loan facility.

At present, Angara noted that the only loan facility available to higher education students in the country involves the Social Security System (SSS) and Government Service Insurance System (GSIS).

The total amount made available by the national government and the two pension systems for its members and dependents for education loans was pegged at P12.5 billion a year.





For the SSS, loans program management head Miriam Milan said that a member could get a maximum of P15,000 per semester for degree courses while vocational courses would get only P7,500 per semester.

The GSIS, on the other hand, provides a maximum of P25,000 per semester.

Fabella pointed out that the average tuition for private schools is somewhere between P40,000 to P50,000 per semester, so what the two pension system provide for student loans is still far from what is needed.

Angara explained that the approval of the bill would allow the students and parents to tap the new loan facility through the private banks to cover the balance after SSS or GSIS loans.

He said that the interest rates on the loans under the new facility would be lower than market rates.

What makes the proposed loan facility different from the existing products is that the loans do not have to be paid right away.

“Education is the only activity that parents pay in advance. At the beginning of the semester you have to pay for the (cost of) full semester,” Angara said.

“Most of the student loans now, the difference is, when you take (out) the loan you have to start paying right away, which is unfair because students don’t have the money now, they have money when they graduate. That’s how it’s done in other countries,” he said.

source: philstar.com

Why Home Refinancing Boom Is Different This Time

CNBC) — U.S. home owners are refinancing their mortgages at the fastest clip since 2005, but the difference now is they are putting cash in, not taking it out.

At the going rate, 25 percent of all first-lien U.S. mortgages will be refinanced this year, according to LPS Applied Analytics. That represents about $7.1 billion —just through June of this year — in savings on monthly payments, according to economists at Freddie Mac, who ran the numbers for this report.

Seven years ago, refinancing wasn’t about saving on monthly payments; it was about pulling cash out. Homeowners extracted close to a trillion dollars collectively in home equity in 2005 and largely put it toward home remodeling, swimming pools, cars, vacations and retail spending.

Today, 81 percent of homeowners refinancing their first-lien mortgages either kept the same loan amount or lowered their principal balance by paying-in additional money at closing, according to Freddie Mac.

“The net dollars of home equity converted to cash as part of a refinance, adjusted for consumer-price inflation, was at the lowest level in 17 years,” the Freddie report notes. Rather than build debt, they reduced it.

Refinances are surging this year, not just because interest rates are hitting new record lows but because the government is making severely underwater loans eligible for refinance.

Read full article from CNBC

source:  thenichereport.com

New York Mortgage Trial Could Have Broad Impact on Wall Street

NEW YORK (Reuters) - A Michigan bank accused of misstating the quality of home loans it repackaged into mortgage-backed securities is set to go to trial on Wednesday, in a case that could affect pending lawsuits against some of Wall Street's biggest firms.

The lawsuit against Flagstar Bancorp Inc of Troy, Michigan, is one of the first to go to trial over claims that a lender misrepresented loans pooled into mortgage-backed offerings. 

Flagstar was sued in 2011 by bond insurer Assured Guaranty Ltd, which had guaranteed $900 million of securities and was on the hook to pay investors when the investment plummeted in value in the housing market meltdown. 

While Assured is seeking only $108 million in its breach-of-contract case -- a relatively small sum in financial industry litigation -- Wall Street will be watching the Manhattan federal court trial closely. Assured has also sued UBS AG, Credit Suisse Group AG, Deutsche Bank AG and JPMorgan Chase & Co over similar allegations. 

Leading up to the lawsuit, Assured had demanded Flagstar repurchase some of the loans, and Flagstar refused, according to the insurer's complaint. Flagstar has countered that Assured is a sophisticated party that extensively reviewed the securities before agreeing to insure them. 

During a September 5 insurance industry conference hosted by brokerage firm Keefe, Bruyette & Woods, Assured Chief Executive Dominic Frederico referred to the potential impact of a "big win" in the Flagstar case. 

The other defendants "will all of a sudden get really interested in getting a settlement achieved," he said. 

Ashweeta Durani, a spokeswoman for Assured, and Susan Bergesen, a spokeswoman for Flagstar, declined to comment for this story. 

FIRST TO TRIAL 

The Flagstar lawsuit is one of many cases over mortgage practices when the housing market was booming. 

In February, Flagstar agreed to a $132.8 million settlement to resolve civil fraud claims by the U.S. Department of Justice that the bank had improperly approved thousands of home mortgages for government insurance. 

The Justice Department on Tuesday sued Wells Fargo, also on allegations of falsely certifying mortgages that were federally insured. 

In another case, the New York attorney general sued JPMorgan earlier this month over the quality of the loans in mortgage securities sold by Bear Stearns. 

Other bond insurers, including MBIA Inc and Ambac Financial Group Inc, have also brought lawsuits similar to Assured's over repackaged mortgages. One of the biggest pending cases is MBIA's $3 billion lawsuit against Bank of America Corp's Countrywide Financial unit in New York State Supreme Court. A trial date in that case has not been set. 

The Flagstar case has progressed swiftly to trial thanks in part to the presiding judge, Jed Rakoff, who is known for trying to get cases to move along quickly. A settlement is still possible ahead of the trial, but neither side would comment on whether any settlement discussions were underway. 

Rakoff, who is hearing the case without a jury, is well known in the financial industry. He is the same judge who last year rejected Citigroup Inc's $285 million settlement with the U.S. Securities and Exchange Commission over the sale of toxic mortgage debt. He criticized the SEC for allowing the bank to settle without admitting or denying the allegations. 

The Flagstar trial is expected to focus heavily on why certain loans were included in mortgage-backed securities, an issue at the heart of the lawsuits brought by the bond insurers. 

The question is whether lenders misrepresented details of the loans, such as homeowners' credit scores and their debt-to-income ratios, painting a false picture of the default risks of mortgages underlying the securities. The insurers point to underwriting guidelines that required all the loans in the securities to meet standards. 

Assured has accused Flagstar of falsely representing the quality and characteristics of loans packaged into two offerings issued in 2005 and 2006. An analysis of 800 loans found 610 instances of misrepresentations, according to Assured's lawsuit. 

The trial could also test bond insurers' ability to recover damages using evidence from so-called "statistical sampling." Insurers say they should be able to rely on a sample of the multitude of loans underlying a mortgage pool, rather than have to go loan by loan to prove their case as the defendants have sought. 

Flagstar has denied misrepresenting the loans, and has said Assured's case is based on "faulty statistical hypotheses." 

The case is Assured Guaranty Municipal Corp v Flagstar Bank, FSB in U.S. District Court for the Southern District of New York, No. 11-2375 

source: nytimes.com

Refinance your mortgage without extending the term

OBVIOUSLY, the simplest way to refinance without extending the term is to select a new mortgage with a shorter term. How do you refinance your 30 year loan after paying for a few years to another 30 years loan without extending the terms is the questions. This is what banks don’t really want you to know if order for you to keep paying your mortgage sometimes never really paying it off. Much the best method is to refinance at the same term or a shorted term, but increase the payment by the amount required to amortize over the period you wish. Let me explain:

“I want to refinance my 5.25% 30-year mortgage, taken out in 2006, without starting the 30-year amortization period all over again. I read recently that the best way to do this is to borrow an amount equal to the original balance, then immediately prepay an amount equal to the difference between the original balance and the current balance. Do you endorse this?”

No, there are better ways to accomplish your objective.

Assume you took out a $250,000 fixed-rate mortgage in 2006 for 30 years at 5.25%. Your monthly mortgage payment was $1380.51. If you made no extra payments, your balance 5 years later would be $230,373.72. You now have an opportunity to refinance at 4.25% on a new 30-year loan, but you want to pay off in 25 years, as you would have if you hadn’t refinanced. There are 2 ways to do this.

Shorten the term

The simplest way is to make the term on the new loan 25 years instead of 30. Then your new payment will be $1354.35, which would still be below your current payment. The rate on 25-year loans is usually the same as that on the 30, but 20-year terms carry lower rates..

Increase the payment

A much better alternative is to refinance the current balance for 30 years, but increase the payment by the exact amount you were previously paying $ 1380.51, instead of paying $1136.38 which will take you for another 30 year full interest payment.

The beauty of this approach is that it is exact. If you are able to continue the $ 1380.51 payment, that means you are actually reducing your principal balance from day 1 by $ 244.00 and that is all applied towards your principal reduction therefore will translate to your term reduction.. Now your savings, if this is applied you would have saved 8 years and 9 months of interest payments totaling $ 58,416.52 and actually reducing the terms by 3 years and 9 months. If you would have stood still now and do nothing you wont enjoy the savings, even if you sell or refinance again, your balance would have been much lower due to your principal reduction options.

Of course, the extra payment is not obligatory, which can be viewed as a drawback or an advantage. It is a drawback if you lack the discipline to pay more than you are legally obliged to pay. It is an advantage if you have the discipline, and value the flexibility of being able to skip the additional payment in a pinch.

Of course if your objective is to reduce your monthly mortgage payments, based on this example a $244. decrease in your monthly payments translate to about $3,000 a year in savings. Which compounded will add up to a nice sum of cash you can use to pay a car or enjoy a yearly paid vacation. So, there is more benefits to being able to refinance your payment.

My best advice is to be able to refinance without any out of pocket loan fees and no closing cost added to your loan balance.

If you are refinancing again, remind your lender that you don’t want to pay closing cost and also you want a no points no fees loan. Don’t get fooled by just looking at the rates being offered, remember to look at the overall picture. A “No Cost” loan might be worth while for you to do without having to pay cost to line up pockets of your lenders.

Paying closing cost will take years to break even on the payment adjustments, if you happen to refinance or sell within less than the break even period, you would have lost that money.

source: asianjournal.com