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

ABS-CBN to refinance debt

MANILA – ABS-CBN Corp will refinance an outstanding loan owed to Security Bank.

In a disclosure to the Philippine Stock Exchange, the Lopez-led broadcast firm said its board approved the refinancing of its outstanding obligations under a P1.65 billion loan with Security Bank Corp through a four-year term to be arranged by SB Capital Investment Corp.

Rolando P. Valdueza, ABS-CBN chief financial officer, said the company will use internally generated cash for its loan refinancing.

Earlier, ABS-CBN raised P6 billion from the first tranche of its P10 billion in fixed-rate bonds. The proceeds will be used to finance the company’s capital expenditure program over the next few years.

The company intends to construct sound stages. The planned sound stages will deliver improvements to operations by increasing production quality and reducing costs associated with on-location shoots.

At present, the majority of ABS-CBN's filming is done on-location.

The company will also use part of the proceeds for the rollout of digital terrestrial TV and the expansion of its pay-TV business through Sky Cable.

In the first nine months of 2013, ABS-CBN recorded a profit of P1.89 billion, up by 22 percent from P1.555 billion in the same nine months in 2013.

Consolidated revenues of P25.227 billion from advertising and consumer sales had risen 16 percent from P21.79 billion in 2012.

Advertising revenues reached P14.773 billion, a growth of 20 percent from P12.33 billion in 2012. Consumer sales amounted to P10.454 billion for an 11 percent increase from P9.46 billion in 2012.

Mobile app

ABS-CBN on Monday launched a mobile application aimed at ensuring the safety of passengers in the country.

Called PasaHero, the mobile app allows users to record, plot and broadcast details of their trip via social media and texts and notify family and friends of any danger encountered on the road.

Donald Lim, head of ABS-CBN's digital media division, said when passengers feel threatened they can press the app's "panic" button to activate the phone's video camera, record audio and video files on the device, and send details of their exact location to a customized list of emergency contacts.

"It's very simple and easy to use. Our vision is to make people safer when they go around," Lim said.

To date, PasaHero has been downloaded by 25,000 people to their iOs and Android devices.

ABS-CBN also partnered with Department of Transportation and Communication (DOTC), Land Transportation and Franchising Regulatory Board (LTFRB), and Land Transportation Office (LTO), as well as other corporate partners for a taxi booking app -- Grab Taxi -- and carpooling app -- Tripid -- for its safety mobile app.

Under the partnership, DOTC, LTFRB, and LTO will help in informing the public about the PasaHero app and educate stakeholders such as bus franchise owners and taxi operators about how the app can help in promoting passenger safety and security.

Michael Arthur Sagcal, spokesperson of DOTC said ABS-CBN's safety mobile app is a "good" step towards achieving safer transportation.

"This is in line with the government's vision to provide a safer transportation for the public," he said.

source: interaksyon.com

How to Refinance Any Debt

What do you think of when you hear the word refinance? If you’re like most people, you probably think of refinancing a mortgage.

In my weekly newsletter, however, we’ve been talking about how you can refinance any debt. I’ve encouraged my newsletter subscribers to write down every debt they have, including the interest rate. With the list in hand, they are reviewing each loan to determine if they can lower their interest rate. It’s one of the easiest ways to save money.

So today I thought we’d look at what refinancing involves, why you might want to refinance, and how to refinance any type of debt.

What is Refinancing?

Refinancing is trading one debt for another. If you refinance your mortgage, you’re trading your original mortgage for a new mortgage, usually with better terms that save you money.

You could also trade your credit card debt for a lower-interest home equity loan, which is refinancing. Or you could move your car loan to a new lender to get a better interest rate.

Sometimes you refinance with the same lender. In this case, you’re changing the terms of your original loan based on new financial factors, such as a better credit score on your part or lower overall mortgage interest rates. Sometimes, you may take out a new loan to pay off the old loan, getting better loan terms in the process.

As an aside, a loan consolidation is a bit different. With consolidation, you are usually consolidating multiple loans into a single loan. This process is a form of refinancing, but involves trading multiple debts for one.

When Should You Consider Refinancing?

Usually the goal of refinancing is to save money, especially on interest paid over time and on monthly payments. But you could also choose to refinance to change your loan terms.

For instance, you might refinance your mortgage from a 15- to a 30-year loan. A longer term gives you lower (often much lower) monthly payments, which are great if you’re in a financial pinch. Even if you’re paying your 15-year mortgage with ease, you might want to take a longer term and invest the extra money each month, hoping to come out ahead financially in the long run.

On the flip side, you might choose to refinance your 30-year mortgage to a 15-year mortgage. If you want to be debt free faster, this is a way to make it happen without making extra mortgage payments. Plus, the shorter loan term can save you tens of thousands of dollars in interest paid over time because 15-year interest rates are lower and you’ll pay down principal faster.

If you owe less on your home than it’s worth, you might want to do a cash out refinance, in which you remortgage it and take the difference in cash.

One more option is to switch from a variable-rate mortgage to a fixed-rate mortgage. A set interest rate and predictable payments can make it much easier to plan your personal finances.

As you can see, there are many instances in which you might consider refinancing your debts. Be sure you run the proper calculations, especially if you’re refinancing a larger debt like a home or a car. These refinances can cost you cash up front, so make sure they’ll be worth your while in the long run.

Refinancing other debts, on the other hand, may not be so complicated. If you’re dealing with high-interest credit card debt, all you need to do is transfer the balance to a lower-interest card to save a fortune.

How to Refinance all Your Debts

As I said earlier, you can refinance any debt with the proper steps. Here are some of the ways that you can refinance various types of debt:

Straight-up refinancing

 

Although any of these methods is refinancing, let’s first talk about traditional refinancing. This term is most likely to be used for mortgage loans, auto loans and student loans. Basically, you either get a loan with better terms from your current lender or from a new lender. The key to this is to shop around for your new loan.

Refinancing your mortgage may take more legwork because you’ll likely need to talk with loan officers about refinancing offers and the potential costs of the process. When refinancing a secured loan like your home or auto loan, you may not be able to refinance if you owe more than the home or vehicle is worth. A loan for more than an item is worth is riskier for lenders.

We talk elsewhere about how to refinance a home in which you don’t have a lot of equity. One option is to refinance through the Home Affordable Refinance Program, and another is to take out two loans, one for the negative equity in your home, and another for a regular mortgage at a lower rate.

If you have negative equity in your vehicle, you may need to take out a separate, unsecured loan to pay down part of the car loan. For instance, if you owe $15,000 on a car worth $11,000, take out an unsecured loan (or use a low-interest credit card) to pay off $4,000, and then refinance the remaining auto loan. Or you could keep paying on the vehicle until you build more equity.

Finally, let’s talk about straight-up refinancing of student loans. Because student loans are unsecured, it’s very hard to get a new lender to take them on at a lower interest rate or better terms. Bloomberg’s BusinessWeek notes that there are several ways to change some of your student loan terms. If you can’t make minimum payments on federal loans, look into modified payment plans or forbearance. Even some private lenders offer forbearance in some instances.

Unfortunately, you probably won’t be able to refinance these loans at a lower interest rate simply by finding a new lender. But you may be able to use one of these options for refinancing your student loans:

Using your home’s equity

 

If you have equity in your home, you can use that to refinance some of your other debts, such as school loans, credit cards or other personal debts. There are three options for doing this, including a home equity loan, a home equity line of credit, and a cash out refinance:

• Home Equity Loan: This is an installment loan based on your home’s equity. It’s also known as a second mortgage. If your home, for instance, is worth $500,000 and you owe $300,000 on your first mortgage, you could borrow $150,000 against your home’s value as a second mortgage. You’d pay back this type of loan in set installments, just like your first mortgage. All other things being equal, however, the interest rate on a second will be higher than your first mortgage
• Home Equity Line of Credit: This is similar to a home equity loan, except that it’s a revolving debt like a credit card. With a HELOC, you can write a check or use a debit card attached to the account, pay back some or all of the charge, and then charge again.
• Cash Out Refinance: Instead of taking out a second mortgage as a home equity loan, you might consider a cash out refinance, which will leave you with one mortgage payment. In the home equity loan scenario above, you could just refinance your first mortgage as a $450,000 mortgage, and take the excess $150,000 in cash.

Using your home’s equity to refinance other debts can be a good option because a secured loan against your home’s equity will likely have a much lower interest rate than the rates on other debts.

The rates you’ll pay on a home equity loan are typically much lower rate than you’re likely to be paying on any credit cards, and it’s also a lot lower than the locked-in 6.8 percent rate on federal student loans. So you could lower your overall debt payments and reduce the time it takes to pay off debts by using your home’s equity to pay off the balance of other loans.

If you can’t pay on your credit cards or student loans normally, the creditors can’t come after your property directly. If you can’t pay your HELOC or home equity loan, your lender could foreclose on your home.

Refinancing with credit cards

 

The most common way to refinance credit card debt is a balance transfer. You transfer the balance from one credit card to another, normally with a much lower interest rate.

Your best bet is to consider a zero interest credit card set up to encourage balance transfers. Note that some balance transfer credit cards come with fees, even if they have a limited-time zero interest rate on balance transfers.

There are some no-fee balance transfer cards available, so you should check out these options first. Some cards have an option for either zero interest with a balance-transfer fee (which is usually a percentage of the balance you transfer), or a zero transfer fee with a low interest rate. You’ll have to do the math to figure out which works best for you.

If you get a really great deal on a credit card and have enough available credit, you can use a credit card to refinance other higher-interest debts, as well. For instance, you could pay off a very high-interest personal loan with a lower-interest credit card, effectively using your credit card to refinance it.

Always check your credit card contract first because different types of purchases, transfers and payments may result in different interest rates.

Debt consolidation

 

If you’re swamped in debt and are unable to make minimum payments on everything, debt consolidation could be a good option. You’ll get one large loan to pay off part or all of your other debts, consolidating them into one loan.

The advantage of debt consolidation is often that it lowers your overall monthly payments, a relief for hard-hit consumers. Depending on the interest rates of the loans you’re carrying, consolidation may lower your overall interest rate and total interest payments.

According to the FTC, using your home’s equity is the most common way to consolidate debt, but you may also be able to get a consolidation loan. However, some disreputable so-called debt relief organizations will offer debt consolidation loans that aren’t a great deal. They may increase the overall interest paid, extend your repayment time to decades, or charge fees that increase your overall debt load.

It’s very common to consolidate student loan debt, and this is usually an automatic option with federal student loans. If you took out student loans for several years in a row, you probably have several loans from several lenders. It’s a pain to make so many separate payments, and your minimum payments are probably quite high.

In this case, you can consolidate all your loans into one by a single lender. Consolidating federal loans usually means that you lock in your interest rate, which may otherwise vary from year to year. Plus, you could lower your overall monthly payments and gain access to several repayment plans.

You’ll have to consolidate private student loans separately, but there are several lenders who will do it. You can read more about how to consolidate student loans here.

Using LendingClub or Prosper

 

LendingClub and Prosper are peer-to-peer lending marketplaces. Basically, you can get a fairly low rate on an unsecured personal loan that comes from other individual lenders. LendingClub statistics say that nearly half their loans are used to consolidate debt or pay down credit cards with a lower interest loan.

Peer-to-peer lending options generally come with competitive interest rates that depend on your credit history, and they’re relatively quick to get. But the loan limits are usually around $25,000, though you may be able to take out multiple loans at once. They can be a good option if you need to refinance debt quickly.

The Bottom Line

 

Refinancing some or all of your debts may or may not be a good idea. Look at your debts, interest rates and minimum payments. If you could reduce interest rates significantly, refinancing is usually a great option. Also, if you can lower your monthly payments, you could kick the money you save into paying off your principal balances more quickly, or into investment accounts that allow you to save for the future.

source: doughroller.net

Ways to Renegotiate Your Mortgage

If you are like many Americans struggling to make your monthly mortgage payment, you are not alone.  While the current economy has many struggling, the good news is that banks are more likely now to work with you than ever before.

Because banks have had to foreclose on so many homeowners, they would rather negotiate with you than have another foreclosure where they will likely lose money.  Banks want to get paid, and they now understand that the best way to get their money is to work with you, the borrower.

What You Need Before You Begin to Renegotiate

If you would like to renegotiate your mortgage, you will need several documents to prove that you are having a hard time making your payments.  You’ll want to round up your credit card statements, loan statements, unemployment information (if applicable) or your last paycheck stub, your last two years’ tax returns, and your checking and saving information as well as possibly other investments you have.

Ways to Renegotiate Your Mortgage

There are two main ways you can renegotiate your mortgage.  Which way you chose depends on several variables.

1.  Work with the lender.  Call the lender and honestly tell them that you are having a hard time making your monthly mortgage payment.  You will need to also tell them why you are having trouble, whether that be because of job loss, an injury or illness or another reason.

Ideally, the best time to work with the lender is before you fall behind on your payments.  This was not traditionally the case, but times have changed, and the lender wants to hear from you and work with you as soon as possible.

2.  Consider refinancing.  If you have more than 10% equity in your home and a credit score of 720 or higher, you may be a good candidate for a refinance.  Refinancing can lock you into a lower interest rate and give you a lower monthly payment that you will be able to afford.

While you may initially work with your own lender on a refinance, that is not your only option.  You can contact a mortgage broker who can help you find the best offers, or you can look around yourself and compare rates.  If you belong to a credit union, don’t forget that credit unions often offer lower rates than banks do.

In addition, consider changing the terms of your loan.  If you have a fixed rate mortgage, a 5 year adjustable rate mortgage may give you some breathing room with a lower interest rate and lower monthly payment.  This alternative is especially attractive if you plan to move within 5 years.

If you are having trouble making your mortgage payment, don’t despair.  You are certainly not the only one who has been in this situation, and you will likely find your lender willing to work with you.  Even if your lender isn’t, there are likely other lenders who will work with you and be glad to get your business.  Remember, in general renegotiating your existing mortgage is easier than getting a new mortgage.

source: everythingfinanceblog.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

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

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

10 facts on debt forgiveness on your main residence mortgage

1. AS A general rule, debt forgiveness results in taxable income.

2. You may be able to exclude debt forgiven on your principal residence under the Mortgage Forgiveness Debt Relief Act.

3. The debt must be secured by your main residence.

4. The debt must have been used to buy, build, or substantially improve your principal residence

5. Debt forgiven on second homes, rental property, business property, do not qualify for this tax relief provision (but may qualify for other tax relief).

6. Refinanced debt qualifies if proceeds are used to improve your principal residence.

7. Refinance debt proceeds used for other purposes (travel, buy a car, or pay off credit card debt) do not qualify for the exclusion.

8. The exclusion amount is limited to $2 million ($1 million for a married person filing a separate return).

9. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

10. If your debt is reduced or eliminated, you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. The form shows the amount of debt forgiven and the fair market value of any property foreclosed. Examine Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

source: asianjournal.com

SM Investments cleared for fund-raising

SM Investments Corp. was cleared to undertake a top-up placement to raise money that would be used to refinance the company's debt and widen its free float.

In a disclosure to the Philippine Stock Exchange, the Henry Sy-led conglomerate said it will sell primary common shares worth $150 million to institutional investors.

"Apart from raising additional funds for the company, the top up is meant to further enhance the free float and liquidity of SM shares," the company said.

The proceeds of the placement will be used to refinance some of the company’s existing obligations and for general corporate purposes.

SM has tapped Macquarie Capital (Singapore) Pte Ltd as the underwriter and placing agent.

Management was authorized to negotiate and finalize the terms and conditions of the share sale, including pricing and any increase in issuance amount, and execute any and all documents necessary, to implement the placement.

The SM group is in the business of shopping mall development, retail merchandising, financial services, real estate development, and hotels and conventions.

source: interaksyon.com

With Rates Low, Banks Increase Mortgage Profit

Interest rates on mortgages and refinancing are at record lows, giving borrowers plenty to celebrate. But the bigger winners are the banks making the loans.

Banks are making unusually large gains on mortgages because they are taking profits far higher than the historical norm, analysts say. That 3.55 percent rate for a 30-year mortgage could be closer to 3.05 percent if banks were satisfied with the profit margins of just a few years ago. The lower rate would save a borrower about $30,000 in interest payments over the life of a $300,000 mortgage.

“The banks may say, ‘We are offering you record low interest rates, so you should be as happy as a clam,’ ” said Guy D. Cecala, publisher of Inside Mortgage Finance, a home loan publication. “But borrowers could be getting them cheaper.”

Mortgage bankers acknowledge that they are realizing big gains right now from home loans. But they say they cannot afford to cut rates even more because of the higher expenses resulting from stiffer regulations.

“There is a much higher cost to originating mortgages relative to a few years ago,” said Jay Brinkmann, chief economist at the Mortgage Bankers Association, a group that represents the interests of mortgage lenders.

The jump in revenue for the banks is not coming from charging consumers higher fees. Instead, it comes from the their role as middlemen. Banks make their money from taking the mortgages and bundling them into bonds that they then sell to investors, like pensions and mutual funds. The higher the mortgage rate paid by homeowners and the lower the interest paid on the bonds, the bigger the profit for the bank.

Mortgage lenders may also be benefiting from less competition. The upheaval of the financial crisis of 2008 has led to the concentration of mortgage lending in the hands of a few big banks, primarily Wells Fargo, JPMorgan Chase, Bank of America and U.S. Bancorp.

“Fewer players in the mortgage origination business means higher profit margins for the remaining ones,” said Stijn Van Nieuwerburgh, director of the Center for Real Estate Finance Research at New York University.

Mary Eshet, a spokeswoman for Wells Fargo, said the mortgage business remains competitive. “The only way we can effectively grow our business and deliver great service to customers is by offering market competitive rates,” she said.

The other three banks declined to comment. But the banks are benefiting from the higher mortgage gains. Wells Fargo reported $4.8 billion in revenue from its mortgage origination business in the first six months of the year, an increase of 155 percent from $1.9 billion in the first six months of 2011. JPMorgan Chase and U.S. Bancorp, the other big lenders, are also reporting very high levels of mortgage origination revenue. Wells Fargo made 31 percent of all mortgages in the 12 months through June, according to data from Inside Mortgage Finance.

“One of the reasons that the banks charge more is that they can,” said Thomas Lawler, a former chief economist of Fannie Mae and founder of Lawler Economic and Housing Consulting, a housing analysis firm.

The banks are well positioned to profit because of their role in the mortgage market. After they bundle the mortgages into bonds, the banks transfer nearly all of the loans to government-controlled entities like Fannie Mae or Freddie Mac. The entities, in turn, guarantee the bond investors a steady stream of payments.

The banks that originated the loans take the guaranteed bonds, called mortgage-backed securities, and sell them to investors. The banks nearly always book a profit when the bonds are sold.

The mortgage industry has a yardstick for measuring the size of those profits. It compares the mortgage rates paid by borrowers and the interest rate on the mortgage bond — a difference known in the industry as the spread.

For example, a bank may lend money to homeowners at a 3.6 percent interest rate. After bundling those mortgages, the bank may then sell them in bonds that have an interest rate of 2.8 percent. The lower interest rate on the bond shows that the banks are effectively able to sell the mortgages to investors for a gain.

The banks pocket that markup when they sell the bonds. The bigger the spread between the mortgage rate and the bond rate, the bigger the markup for the banks.

Mortgage analysts who track this difference say it has been historically high in recent months. They contend that if the market were functioning properly, the recent drop in the bond rates should have led to a larger decline in mortgage rates for consumers than has actually occurred. .

Instead, the difference between the two rates is increasing: mortgage rates are falling much more slowly than the bond interest rates.

In the six months through June, the average difference between the two rates was 1.1 percent, and at the start of this month it was 1.26 percent. From 2000 to 2010, it was about 0.5 percent.

If banks offered mortgages with an interest rate that was half a percentage point lower — a move that would leave their mortgage gains closer to the historical levels of 0.5 percent — borrowers would see real savings.

Bankers say they need the extra mortgage revenue to cover new costs. As a result of more stringent conditions since the housing bust, bankers are required to be more diligent in approving loan applications. The banks say this requires better-trained employees and other added expenses. If Fannie Mae and Freddie Mac find flaws in the loan applications, they ask the banks to buy back the faulty loans, which can be expensive for the lenders.

“Fannie and Freddie are requiring zero-error loans,” said Tom Deutsch, executive director of the American Securitization Forum, a group that represents financial firms active in the mortgage market.

But Mr. Lawler, the housing analyst, is somewhat skeptical about the banks’ fears about the costs of buybacks. “If banks do their job properly, there should be little buyback risk,” he said.

The failure of mortgage rates to fall further poses a quandary for the government entities like the Federal Reserve and the Treasury Department, which have spent hundreds of billions of dollars to help make home loans cheaper.

“Policy makers get a little frustrated that they are not getting all the bang for their buck that they could,” said Mr. Lawler.

If the Federal Reserve bought more mortgage bonds in the market, it could actually increase banks’ mortgage profits, since such buying could drive down bond rates and increase the size of the markup banks take when they sell their mortgages.

It is hard to see how this situation can change in favor of lower rates for consumers. The banks are finding plenty of consumers wanting mortgage loans at current rates, and bond investors are happy to pay whatever low rate is offered.

And regulators, who are loath to dictate business practices, are unlikely to force banks to lower mortgage rates.

Still, the housing market would benefit if rates to consumers fell in tandem with the bond rates, said Mr. Van Nieuwerburgh of New York University.

“The relatively high mortgage rates do not help the housing recovery because they make it harder for new homeowners to get on the housing ladder and because they make refinancing relatively less attractive,” he said.

source: http://dealbook.nytimes.com/2012/08/08/with-rate-twist-banks-increase-mortgage-profit/?hp

Spain PM says difficult for Spain to refinance debt

MADRID - Spain's Prime Minister Mariano Rajoy reiterated on Friday that it has become increasingly difficult for the state to refinance its debts.

"The biggest problem for our country is that we owe a great deal and we must repay that money and, right now, it's very difficult that anyone would lend to us, or would refinance the debts that we have," he said.

Spain paid the second highest rate since the launch of the euro in 1999 to auction 10-year bonds on Thursday as investors become increasingly concerned the country may need to apply for a sovereign bailout.

source: interaksyon.com