30 Year Mortgage Rates Continue To Fall > 4% When?

May 21, 2009
Economic News and Information for Consumers
30 Year Mortgage Rates Continue To Fall 

The Fed has been consistently buying up treasuries.  Today they purchased nearly $8 Billion more in an effort to keep 30 year mortgage rates moving in the right direction.

The reason this works is that mortgage rates are closely tied to 10 year bonds.  When the Fed buys up treasuries it forces the yield down, which in turn, forces down mortgage rates.

For months the 30 year mortgage rate has hovered around 5%.  This number can obviously vary depending on the bank you check.  The Fed had made some veiled promises to get rates down to 4% but that is yet to happen. If it does, the window of opportunity could be short but we believe that window is short anyway due to other factors.

The first time home-buyer tax credit provides $8000 in relief, not a bad deal at all but you need to purchase a home before the end of the year.  For details you should check the IRS website.  There was some information distributed that mentioned the tax credit could be used as a down-payment but this appears to have been rescinded at this time.

As an example, if you paid $1200 in taxes for 2008, then purchased a home, you could amend your return and get a $6800 check.  You could also just carry the $6800 forward to pay for taxes next year.

The next point to consider is housing prices.  Some have said that they are beginning to stabilize but this was primarily due to moratoriums that artificially caused inventories to shrink.  The moratoriums have expired causing a near future release of a 70% backlog.

Much of the inventory is due to be released this Summer starting the first week of June.

Your New 2% Mortgage

May 14, 2009
Economic News and Information for Consumers 
Are you sure you’re ready for this one?  If you own a home or want to own a home, this will interest you regardless of which side of the debate you fall.

Mortgage rates have been low for months, hovering around 5% but often getting down to 4.5% (points, loan type and money down matter).  This has created an environment where many have attempted to either refinance their loans at a lower rate or to obtain a loan modification.  Which one is better?

Can you believe that for some it might be better to actually default on your loan then apply for a loan modification?

In a recent press conference, Treasury Secretary Tim Geithner discussed a man that was behind on his mortgage but was able to obtain a loan modification with a whopping interest rate of 2%.  After a specified number of years (typically about 50, the rate jumps to the ridiculously high rate of 4.85%!!  There isn’t a person in this country that would turn down the latter interest rate as it’s lower than what we’ve seen in a number of decades.

If you had tried to just refi your loan, you likely would have ended up with a rate above 5% with more fees to pay.  This still isn’t a bad rate but it’s certainly not 2%.  The entire program seems to reward behavior that is not consistent with responsible finances.

What can you take from this?  If you want to gain a loan modification, you might get a sweetheart of a deal.  If you want to refi, be prepared for more hurdles and more money.

Fed On The Move To Buy More Treasuries

May 11, 2009
Economic News and Information for Consumers 
Today the Fed announced the purchase of an additional 3.5 billion in Treasuries.  What does this mean to you?

The purchase of these Treasuries is part of a long-term plan to keep interest rates down.  The purchases affect 10 year bonds, which is what 30 year mortgage rates are tied to.  So each time the Fed makes these purchases the rate effectively goes down or stays where it is instead of going up.

Today the published rate (on Ditech.com) is 4.625%.  It has been mentioned on a number of occasions that the Fed would like to see the rates get down to 4% but this is yet to happen.  We have seen rates drop below 4.5% but that has been it.

If you are in the market for a home there are a couple of variables to consider as we move through the final stages of this recession.

First, the cost of money.  Interest rates should remain 5% or below for some time but not forever.  Purchasing a home this year is probably a very good idea.

Second, contrary to what you hear in the news, there is a glut of inventory that has not yet been released by the banks due to moratoriums.  The moratoriums have expired so get ready for lots of homes to view by the end of Summer.

Remember that there is an $8,000 tax credit for first-time home-buyers you’ll be able to use as long as you purchase before the end of the year.  Check with your accountant or the IRS website for details.

When To Use Debt Consolidation > Dr. Debt

May 8, 2009
Economic News and Information for Consumers 

Dr. Debt was recently featured on Fox News.  One of the questions Dr. Debt answered was regarding the use of debt consolidation companies for young vs. old.  Dr.  Debt responds by saying that it doesn’t really matter if you are young or old but rather, the financial situation you are in.

It’s important to know that there are great debt consolidation companies available and also ones that aren’t so great, meaning they can take your money and do nothing, just like any other industry.

When considering a debt consolidation company, think about your financial situation.  If a large portion of your income is going to pay debts, say 20% and you have multiple creditors, debt consolidation might be a perfect fit for you.  If you have a low balance on a credit card and that’s all you have, debt consolidation is probably not for you.

Many people also ask about bankruptcy and how it fits into all of this.  Bankruptcy is an option that will remove all of your debts with exception to spousal support, child support and student loans.  There could be other debts that are immune to bankruptcy so it’s best to check with an attorney for your specific situation. Bankruptcy attorneys typically cost anywhere from $1500-$2500.

Bankruptcy also stays on your credit report for up to 10 years.

Debt consolidation can actually help to protect your credit or even improve it, while stopping annoying collection calls.

For more information on consolidating your debt, fill out the short form below and a specialist will contact you to help:

1. Your Name(required)
2. Email(valid email required)
3. Telephone(required)
4. State
5. Debt or Mortgage Amount(required)

 

Should I pay down my credit card debt or just pay minimum?

May 1, 2009
Economic News and Information for Consumers 

 

A big name in consumer advice recently suggested NOT paying down your credit card if you need the cash in case of emergency.  Suze Orman provided this advice, which was in direct contradiction to her advice in times past.  Obviously this is due to the state of the economy but is it good advice given the circumstances or will it simply put consumers at greater risk?

The answer to this is that it depends.  In a perfect world, many advisers suggest we have 8 months of cash saved up to cover expenses.  How many of you have that?  It’s likely not many, so now what?

Now you need to consider your individual circumstances.  Did you just get laid off and you have absolutely no savings to cover any  expenses?  In this case it might be a good idea to only make minimum payments on your card to preserve cash.  When your circumstances improve you can always pay that card down again.  Hopefully you have a decent rate so charges don’t accrue too quickly.

If your circumstances aren’t dire it’s probably a better idea to continue paying down the card.  The primary reason for this is the effect on your credit score and the potential loss of credit opportunities.

If you begin making minimum payments your credit score will be affected.  In fact, you’ll likely be categorized as a high-risk customer.  The result of this is that credit can be withheld, which is not a good thing in this environment.

Interest rates on everything from home loans to car loans are rapidly dropping.  There hasn’t been an opportunity like this in decades so those who manage their finances wisely will gain the benefits over the next year.

The economy will improve in spite of all the bad news and government intervention.  Will you be ready?

If you’re currently struggling with credit card debt, know that it can be fixed.  There’s no need to lose your credit rating and have collection agencies calling you.  Fill out the short form below and a specialist will contact you to help:

1. Your Name(required)
2. Email(valid email required)
3. Telephone(required)
4. State
5. Debt or Mortgage Amount(required)

 

Getting out of debt > Can’t make payments on credit card

Many people have recently lost their homes to foreclosure or are in the process.  A foreclosure is a serious mark on your credit but not one that will stick with you forever.

The scoring for FICO scores changed recently so more weight is given to current events.  Over time your credit score will improve greatly so long as you continue to make on-time payments for other debts.  Your foreclosure will become less of a factor as you move forward and manage your debt properly.

The FHA will provide a loan if you’re 3 years removed from foreclosure or bankruptcy so there are options.

There will also be an opportunity to obtain seller financing.  Seller financing essentially means that the seller owns the house outright and would like to finance the sale as opposed to using a bank.  Your payments would be made directly to the seller.  The seller obviously retains the right to foreclose if you default on the loan just like a bank would do.

Credit cards have become an enormous credit problem not only for consumers but also for banks. Consumers have become increasingly dependent on credit as job losses and expenses increase.  This dependency has forced balances higher while at the same time banks are reducing lines, and increasing interest rates.

The reduction of a credit line while you’re carrying a balance will likely damage your credit.  If you have a credit card it’s more likely than not that your terms have been affected over the last year or will be shortly. Call your bank to be sure.

If you’re carrying credit card debt greater than $10,000 and can’t pay it off fill out the short form below and a specialist will contact you to help:

1. Your Name(required)
2. Email(valid email required)
3. Telephone(required)
4. State
5. Debt or Mortgage Amount(required)

 

Loan Modifications > Banks get Fed payoff

Loan modifications have been in the news for months.  The mere mention of the term leads people to believe that there is a path to modifying their home loan that will allow them to stay but in past months, this has not been the case.

In fact, most banks took federal money and held onto it when they were supposed to loan the money out to consumers, homebuyers and those wanting to refinance or have their loan modified.  Essentially banks protected their balance sheets and left the American public hanging.

The administration has had a difficult time with banks because they are a private industry (except for those that accepted government bailout money).  They can’t simply tell banks to modify loans or to provide new loans to home buyers but they can create incentives and that’s just what they did.

A new mortgage saving program was mentioned today.  This program is providing a payoff to banks that modify loans.  Details are forthcoming on this new program but basically a bank that modifies a loan under certain conditions will receive several thousand dollars from the Fed to do so.

Now that banks are motivated to do loan modifications, they might just do it but it’s dependent on whether or not the payoff is worth it.  It may not be large enough for banks to make that jump particularly given the fact that most people re-default on their loans even after a loan modification.

On the positive side, interest rates are extremely low and money is slowly becoming more available.  

If you’re interested in having your home loan modified and need assistance, fill out the short form below and a specialist will contact you to help:

1. Your Name(required)
2. Email(valid email required)
3. Telephone(required)
4. State
5. Debt or Mortgage Amount(required)

 

Can’t pay your credit card? The next big crisis…

One problem with America has been the accumulation of debt instead of wealth.  During the industrial revolution it was all about growth, saving and marking smart decisions for American families but that slowly changed as we became more of a debt-based society.

There are some good debts, like home mortgages but others can be very problematic.  In the distant past people would buy their cars with cash.  They figured if you don’t have the money right now for the car, you don’t have it at all.  This changed with creative and cheap financing offered by every major auto maker and banks all over the country.

We’ve all seen the fact that basically anyone could get into a car, even one that is extremely expensive.  We cared less about getting from A to B and more about how we looked getting there. Rising repossessions are a sure sign that financing didn’t work in the end.

But autos are not the next big thing to fall, it’s actually credit cards, which are completely unsecured.  Just like autos, anyone could get a credit card and lots of them.  The goal for banks is to get consumers stuck with a balance so they can charge high interest rates, additional fees and all while also charging fees to the merchant.  It’s an incredibly lucrative business for banks with little risk.

Even as consumers defaulted on their cards, banks still did well by raising interest rates in their good customers.  They also cut credit lines or canceled cards altogether.  It’s more likely than not that one of these scenarios has played out with your card.  If you think it hasn’t, call your card company and make sure.

Some analysts believe the next big crisis will be the continued defaults on these cards, possibly larger than the housing debacle.  But the reality is that card companies have insulated themselves well by charging extra fees and interest to their good customers.  The chances of banks hurting from card defaults is not nearly as high as those at risk from bad home loans.

If you’re stuck with a high balance credit card that you can’t pay off, get the debt consolidated before it destroys your credit.  Debt consolidation will reduce your payments, eliminate fees, protect your credit, stop collection calls and create a path to being debt-free within 18-36 months.  

For more information on debt consolidation, fill out the short form below and a specialist will contact you to help:

1. Your Name(required)
2. Email(valid email required)
3. Telephone(required)
4. State
5. Debt or Mortgage Amount(required)

 

How do I stop collection calls? Bankruptcy and options

Most of us have received a collection call or notice at some time or another in our lives.  Even if you’re the most on-time payer in the world, creditors still make mistakes on accounts and even call the wrong people on occasion. 

The calls and letters are frustrating and intimidating as they are intended.  The obvious goal is to get you to pay the debt.  Remember that the person calling you only gets paid if you pay the debt.  You are one of hundreds of calls they will make in a day so try not to take it too personally.

But collection agencies do need to follow rules when they contact you.  Many don’t, so it’s best to be informed of your rights.  When you’re in-the-know, you can inform collection agencies that they’ve violated the law and you can take action.  Be sure to document what’s happening and keep good records.

To better understand your rights, read the Fair Debt Collection Practices Act.

After you know your rights remember that the creditor has rights too.  If you do indeed owe the debt, it will need to be dealt with, preferably sooner than later.

Ignoring creditor calls and notices is a bad idea because they will not go away.  If calls suddenly stop, it probably means your account has been turned over to an attorney to file suit.  This is inescapable because the creditor can obtain a judgment, which can be turned into a lien on your home or a garnishment of your wages.

But you do have options.

Bankruptcy can be kind of a nasty word but really it’s just a financial tool designed to give people a second chance.  Bankruptcy does cure collection calls (by law) but it will leave certain debts like student loans, child support and spousal support.  

Bankruptcy can be expensive when done properly.  Plan on paying an attorney $1500-$2500 depending on your area.

Debt consolidation is another option that won’t damage your credit like a bankruptcy filing will (for up to 10 years).  Debts are effectively reduced either in overall balance or by reducing the interest rate.  The typical debt can be down to zero within 18-36 months while potentially improving your credit.

If you have unsecured debt greater than $10,000 and would like to learn more about consolidating your debt, fill out the short form below and a specialist will contact you to help:

1. Your Name(required)
2. Email(valid email required)
3. Telephone(required)
4. State
5. Debt or Mortgage Amount(required)

 

Should I Keep My Credit Cards? Credit line cut in half…

Dr. Debt from Fox News answers some great economic questions in the video below.

Of note were two questions regarding keeping old credit cards that aren’t really used and what to do when a credit line is cut in half.

If you have old credit cards that you no longer use, it could be a decent idea to cancel them but that comes with some conditions.  You should not cancel all of your cards, but rather, keep the ones you’ve had the longest with the best payment history.  You want future creditors to see you in a positive light when it comes to your pay habits.  Furthermore, your credit score (FICO) is calculated in part by the amount of available credit you have so it’s better to retain a decent line.

This creates a nice segue to our next topic of what to do when your bank halves your credit line.  Know that this is happening to many people, even those with stellar credit.  It’s more a function of banks pulling in credit to protect their own balance sheets from further damage.

When a bank cuts your credit line a few things can happen.  Your credit score can be reduced significantly because your available credit has dropped.  You can be hit with fees you had not planned on because you suddenly charge over your limit.  You also lose valuable access to credit, which many people are using for necessities.

Remember that when you’re dealing with banks, you can negotiate.  If your lines have been cut or rates have increased, call them and ask that the changes be reversed.  The bank reps do have some room to make these changes.

 

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