Archive for October, 2007
Apartment Complexes May Benefit From FCC Action Against Cable Contracts
October 31st, 2007
Consumers, at least those who live in large apartment complexes, may be poised to win one for a change if an article by Stephen Labaton published in The New York Times on Monday is correct.
According to the Times report, the Federal Communications Commission (FCC) is considering striking down exclusive contracts between cable companies and apartment building owners and...
Fixed Rate Mortgage Refinancing - Your Financial Peace of Mind
October 31st, 2007
If you are in the market to refinance your existing home mortgage you might be considering the pros and cons of a fixed rate mortgage over their adjustable rate counterparts. Fixed rate mortgage loans can give you financial peace of mind knowing that your payment will not change over time; however, this peace of mind comes at a price. Fixed rate mortgages come with higher interest rates than similar adjustable rate mortgages. Here are several tips to help you decide if fixed rate mortgage refinancing is right for you.
Fixed rate mortgages are exactly what their name implies; a mortgage with an interest rate that does not change over the duration of the loan. This is a great loan option for homeowners in need of consistent financing for a long period of time. The peace of mind offered by fixed rate mortgages comes from the fact that your payment amount and finance charges remain constant regardless of what’s happening with the economy or if mortgage rates skyrocket.
This consistency of payment amount and mortgage rate is an advantage when interest rates are rising; however, when interest rates go down homeowners can choose to refinance it paying the expense of a new mortgage is beneficial. Many homeowners rush out and refinance their fixed rate loans at the first dip in mortgage rates without considering how long it will take them to recoup the expense of taking out a new mortgage loan. All mortgages come with fees and other expenses; you should evaluate refinancing on a cost and savings basis before going forward with a new mortgage. Never let your bank or mortgage broker pressure you into refinancing without doing this cost/savings analysis.
Fixed Rate Mortgages Are More Expensive
Having financial peace of mind will cost you. In almost every case a fixed rate mortgage is a more expensive option than a similar adjustable rate mortgage, at least initially. This means you can expect to pay on average .5 to 1.5 percent more than an adjustable rate mortgage, which translates to a higher monthly payment. Fixed rate mortgages are higher because the lenders assume greater risk of higher rates when locking you in at a fixed interest rate.
Is Fixed Rate Mortgage Refinancing Right For You?
The answer to this question depends on your individual situation, including your tolerance for financial risk. If you purchased your home with one of those risky option or interest only mortgages and are facing a higher payment when the lender resets your loan a fixed rate mortgage could be right for you.
If you need a lower payment and can tolerate some risk with your finances, consider a hybrid adjustable rate mortgage which allows you to take advantage of a lower fixed rate period before the lender starts adjusting your mortgage rate.
You can learn more about your fixed rate mortgage refinancing options, including expensive pitfalls to avoid like paying retail markup on your mortgage interest rate, by registering for a free .
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O’Neal is History and Merrill Lynch is Sued
October 30th, 2007
As was widely expected on Monday, Merrill Lynch & Company Tuesday morning announced the "immediate retirement" of Stan O'Neal as the company's Chief Executive Officer.
In other news, an investor lawsuit has been filed against Merrill Lynch & Co contending that the company issued false and misleading statements regarding its exposure to risky mortgage investments, the plaintiffs' lawyers said on Tuesday.
Subprimes Next Victim: Merrill Lynch CEO
October 29th, 2007
A death watch was underway on Wall Street on Monday as investors and financial analysts waited for what was rumored to be the imminent resignation or firing of Stan O'Neal as CEO of Merrill Lynch & Company.
Mr. O'Neal, architect of his company's plunge into the sub- prime mortgage market announced last week that...
Credit Counselors and Short Sales May Bail Out Mortgagors
October 29th, 2007
Several weeks ago we wrote two-parts of a three-part series on foreclosure fraud, i.e. scams perpetrated against troubled homeowners ostensibly to help them save their house or at least avoid legal action but are actually intended to strip off the home's equity or take legal title to the property.
While it is pretty depressing to see the lengths to which some people will go to profit from another's misfortune, there are people who do legitimately seek to rescue homeowners who are delinquent on their payments.
Mortgage Refinancing Advice
October 27th, 2007
If you are in the market for a new mortgage loan and are looking for refinancing advice to get the best deal for your new mortgage, the best bit of advice I can give you is to avoid paying Yield Spread Premium on your new loan. Never heard of Yield Spread Premium? Well you are not alone; in fact most homeowners have not and it’s gotten so bad that the Secretary of Housing and Urban Development recently stated that Yield Spread Premium is responsible for homeowners in the United States overpaying sixteen billion dollars every year. Here’s what you need to know in order to avoid paying this ridiculous markup when refinancing your mortgage.
Yield Spread Premium: What Is It?
The term Yield Spread Premium or YSP sounds scarier than it really is. In fact, all Yield Spread Premium does is add markup to your mortgage interest rate to give the person originating your loan a bonus. The person “originating” your loan could be a mortgage broker, a local mortgage company in your town, or even the Internet mortgage giant you see advertising on television.
How does this markup work? When you apply for a mortgage the wholesale lender that approves your application qualifies you for a specific mortgage interest rate. Your broker knows this rate but quotes you an entirely different, higher mortgage rate.
Your mortgage broker does this because the wholesale lender pays them a bonus for overcharging you. For every.25% you agree to overpay beyond what the lender approved you, the broker gets a kickback of one percent of your mortgage amount. This “kickback” is paid in addition to the perfectly reasonable origination fee you’re paying the broker for their part in arranging your loan. A reasonable fee to pay for mortgage origination is one percent of your loan amount; although many brokers charge more unnecessarily.
If you agree, unknowingly or otherwise, to pay Yield Spread Premium when refinancing your mortgage you are doubling, often tripling, the commission your broker receives for arranging your loan. Many people think that since the lender is paying the premium and that fee doesn’t come out of their pocket they don’t need to worry about Yield Spread Premium. The problem with YSP is not the fact that this fee is being paid by the lender but the reason these lenders pay the fee. The fee is being paid because you’re agreeing to an above market mortgage rate which can result in higher monthly payments as much as several hundred dollars per month.
Why Do Lenders Pay Yield Spread Premium?
Mortgage lenders reward loan originators for overcharging homeowners because they know that mortgages with above market interest rates bring them a premium profit on the secondary mortgage market. Lenders sell their loans to investors and make the majority of their profits doing so. Your mortgage with an above market interest rate is the icing on the cake; this is why wholesale lenders offer an incentive to loan originators for overcharging people.
Yield Spread Premium Can Be Avoided
Fortunately for you, Yield Spread premium can be avoided. By learning how to recognize this unnecessary markup of your mortgage interest rate you can negotiate with potential mortgage companies and brokers to avoid paying it. You can learn more about recognizing Yield Spread Premium on your Good Faith Estimate and HUD-1 statement, including strategies to negotiate and avoid paying it, by registering for a free .
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Subprime Fallout Will Cost U.S. Billions
October 26th, 2007
There were some pretty scary statistics swirling around Capitol Hill on Thursday as the Joint Economic Committee (JEC) released a report attaching dollar figures to the impact of the subprime mortgage fallout.
The report, entitled "The Subprime Lending Crisis: The Economic Impact on Wealth, Property Values and Tax Revenues, and How We Got There" estimates that...
Countrywide Mortgage Reports Huge 3rd Quarter Loss
October 26th, 2007
Countrywide Financial Corp, the largest mortgage lender in the nation announced, before the stock marketed opened on Friday, that it is posting a loss of 1.2 billion for the third quarter of 2007 because of millions it had to set aside in loan loss provisions, write downs, and lowered loan values.
This was the first quarterly loss posted by Countrywide in 25 years.
Corporate spokespeople, including President Angelo Mozilo however, were upbeat, saying that...
Mortgage Refinancing and Adjustable Interest Rates
October 25th, 2007
If you used an adjustable rate mortgage to purchase your home or are considering refinancing your existing loan with an Adjustable Rate Mortgage, there are several things you need to know to protect yourself from economic uncertainty. Many homeowners view Adjustable Rate Mortgages as an unnecessary financial risk and avoid them completely. Here are several tips to help you make an informed decision as to which type of loan is right for you before refinancing your home mortgage.
While it’s true that no one can predict or control mortgage interest rates there are steps you can take to protect yourself from uncertain times. This is true if you already have a mortgage with an adjustable interest rate or need to refinance with one to get the lowest possible payment amount.
Many homeowners initially choose Adjustable Rate Mortgages because they need the lowest possible payment. Problems generally arise when the lender begins resetting the loan and the interest rate and payment amount go up. When using an Adjustable Rate Mortgage you always run the risk of payment shock after your loan resets. Payment shock is the risk of waking up one day to find that your loan has reset and the new payment amount is now several hundred dollars higher.
If you are concerned that payment shock could happen with your existing Adjustable Rate Mortgage or the new loan you are considering, there are steps you can take to protect yourself. This allows you to take advantage of the lower introductory mortgage rate while limiting your risk of experiencing payment shock.
Understanding Teaser Rates
Teaser mortgage rates are frequently used as a marketing tactic to attract borrowers. While teaser rates are not necessarily a bad thing as long as you know what you’re getting yourself into, it is important to understand that the teaser rate is not your contract rate. Your contract mortgage rate is the initial interest rate your loan is based on once the teaser expires. When the teaser expires your payment will go up based on this contract interest rate.
Some teaser rates are only valid for 30 or 60 days while others may last for as long as six months. Homeowners who don’t understand how teasers work often find themselves in trouble when the lender resets their loans to this contract mortgage rate. After your teaser expires your loan should remain at the initial contracted rate until your first regularly scheduled reset.
Protecting Yourself When Refinancing
Hybrid Adjustable Rate Mortgages are a special type of mortgage loan that combines the savings of an adjustable rate loan with the stability of a fixed rate mortgage. Hybrid mortgages offer an initial fixed rate period that lasts anywhere from three to ten years and may include an unusually low teaser rate. During this initial period your mortgage rate remains fixed and the payment will not go up. Mortgage rates on hybrid loans are typically lower than traditional 30-year, fixed rate loans without the risk of a standard, Adjustable Rate Mortgage loan.
Homeowners who financed their homes with ultra risky interest-only or option Adjustable Rate Mortgages can take advantage of the Hybrid loan’s fixed rate period to avoid their lenders reset without taking a large jump in their payment amount refinancing with a conventional fixed-rate mortgage loan.
Are All Indexes Created Equal?
Many homeowners obsess over the index their Adjustable Rate Mortgage is based. Every Adjustable Rate Mortgage and Hybrid loan is tied to a financial index that the mortgage interest rate is based on. While it is true that some indexes can experience more volatility than others there isn’t necessarily one index that is better than the others. Common indexes include the Treasure one, two, and three year indexes, the Bank Prime Rate, and the LIBOR (London Inter-Bank Offered Rate).
Many homeowners are surprised to find their mortgages tied to the LIBOR Index; however, the LIBOR is popular because many lenders that sell their loans to European investors. The bottom line when choosing an index for your Adjustable Rate or Hybrid mortgage is that there is no “best” index; you should concentrate on making your decision based on loan terms and interest rates rather than worrying about which index you are getting when shopping for an Adjustable Rate Mortgage.
What About Loan Caps?
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September New Home Sales Report is Modestly Upbeat
October 25th, 2007
There was the tiniest ray of sunshine in the September New Residential Sales Report issued on Thursday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
Good news is usually relative but in the current environment most of us take what we can get and the news that new home sales in September were at a seasonally adjusted annual rate of 770,000, an increase of...