Friday, March 13, 2009

Duncan Grilled About Obama’s Student Loan Proposals

Education Secretary Arne Duncan ran into some pointed questions on Capitol Hill Thursday about much of President Obama’s higher education agenda.

Obama’s budget blueprint proposes eliminating subsidies to private lenders who make federally guaranteed student loans. Instead, the government would make such loans directly, with banks and other financial companies merely servicing the loans.

Both Democrats and Republicans on the House Budget Committee questioned whether the Education Department has the capacity to originate all federally backed student loans. Ranking Republican Paul D. Ryan of Wisconsin denounced what he called a “government takeover” of the lending system. Under the president’s proposal, the government would stop providing subsidies to private lenders in mid-2010.

Thomas P. Skelly, director of the Education Department’s budget service, said the department could handle a significant increase in the direct lending program, in part because it still would use private lenders to service those loans.

“The main difference is with direct, the interest borrowers repay comes back to the government,” he said. Under the subsidized private system, “interest stays with the banks. The programs are really very similar.”

Ryan and other Republicans also objected to Obama’s proposal to transform Pell grants for low-income college students into an entitlement, so the funding would not fluctuate according to the annual congressional appropriations process.

Ryan objected to Obama’s plans to make Pell grants another “autopilot entitlement immune from congressional oversight.”

The president proposes increasing the maximum Pell grant to $5,550, indexing the grant to account for inflation and making the spending mandatory, not discretionary — all at a cost of $116.8 billion over the next 10 years.

Duncan said that increases in Pell grant maximums, combined with other higher education initiatives in the budget and the economic stimulus package, would amount to the “biggest boost in higher education funding since the GI bill.”

Student loan repayment rate to be cut to 1.5%

Further cut in student loan repayment rate  

Reduction in interest rate from 2.5% to 1.5%

Students and recent graduates will again benefit from recent cuts in Bank of England Base Rate as the interest charged on student loans, which was cut from 3.8% to 3.0% in December 2008, and 2.5% in January, will be further reduced to 1.5% from 6 March 2009. 

Unprecedented reductions    

Interest on student loans (income contingent loans from the Student Loans Company) is normally fixed in September each year, according to the rate of inflation as measured by the retail prices index (RPI) in March. In 2008 the new rate was 3.8%, which marked a welcome reduction from the previous year's rate of 4.8%.

Exceptionally, the rate was further reduced in December 2008 in response to a big cut in Bank of England Base Rate. This fell from 4.5% to 3.0% in November 2008 and to 2.0% in December. The December rate cut prompted the Student Loans Company to revise the interest rate it charges as this cannot be more than 1% higher than Bank of England Base rate. This was the first time that this formula was lower than RPI. In January a further cut in Base Rate, to 1.5%, caused the rate charged to graduates to fall again, to 2.5%. Further reductions in Base Rate, which fell to 0.5% on March 5th, have caused a new cut in the rate charged on student loans- to 1.5% from 6 March 2009.          

Not all loans to be cheaper    

While current students and recent graduates will benefit from the recent cuts, student loans taken out earlier than September 1998 are not affected. The interest rate for these is simply based on RPI in March, so will stay at 3.8% until 31 August 2009.

Competitive Student Loans

Re “Helping Students, Not Lenders” (editorial, March 4):

While you praise the proposal to eliminate the Federal Family Education Loan Program, you do not factor in the choice and valuable services offered to student borrowers that are a product of the competition between the Federal Family Education Loan Program and the government’s direct loan program. The nationalization of student lending would eliminate those benefits and hurt the very students the proposal intends to help.

The claim that the direct loan program is “less expensive” is tenuous at best, as originating all loans through the direct loan program during the next five years would require roughly $500 billion in new Treasury borrowing.

In the end, we’re confident that federal policy makers will closely scrutinize this proposal, as well as potential alternatives, before terminating a successful 40-year-old program with proven results in providing college access and opportunity for millions of students.

Peter Warren 
President, Education Finance Council
Washington, March 5, 2009

To the Editor:

Why do you not support free-market principles in student loans with the same tenacity that you support them in other areas? You endorse a proposal by the Obama administration to abolish guaranteed loans, thereby eliminating all consumer choice and competition in federal student loans.

In an editorial about the airline industry in 2007, you wrote that the government “could have gone further and opened up the American market to more competition, and the superior service and lower prices that come with it.” You also said, “We hope that politicians will embrace the free-market principles they so frequently tout.”

Your support of a government monopoly in student loans — which could eventually have the Department of Education managing $1 trillion in loans — is irreconcilable with your embrace of competition elsewhere.

Competition in student loans has created significant consumer benefits: free delinquency and default prevention services, increasingly important in this economy, as well as better terms, college access programs and consumer-friendly processes.


http://www.nytimes.com

Details are vital in president’s mortgage relief proposal

Last week we talked about the apparent winners and losers in the president’s plan to help

homeowners. Now we have the details we’ve been waiting for — information on who gets what and how lenders will be encouraged to participate.

One of the early surprises was the scope of the refinancing plan. In case you haven’t been paying

  • Attention, this part of the program is aimed at responsible homeowners who would like to refinance to today’s low interest rates but are prevented from doing so due to falling home values.

We had originally been told that only “conforming” loans would qualify for this departure from conventional “loan to value” guidelines. In other words, the benefit would only be available to borrowers whose loan balance was less than the Fannie Mae maximum loan amount of $417,000.

I was particularly pleased to see that the details of the plan allow refinancing up to a current balance of $729,750. This part of the plan makes good sense, and here’s why:

  • The program is only available to owner-occupants who are current on their existing loans. Borrowers in this group are statistically least likely to default.
  • The program is only available for loans which are owned or guaranteed by Fannie Mae or Freddie Mac. Since the government is already on the hook for these loans, it makes sense to make them affordable, thus slowing down the foreclosure rate.

Who qualifies for Obama’s mortgage refinance plan?

Randy Johnson, president of Independence Mortgage Co. in Newport Beach, author of “How to Save Thousands of Dollars on Your Home Mortgage” and a mortgage broker since 1983, answers questions…

Q. I have been reading about Obama’s new housing bailout, and they say that homeowners who are “underwater” will still be able to refinance if their home loan was backed by Fannie Mae or Freddie Mac. 

Immediately, I started thinking, “do I qualify?” I’ve asked friends and have searched the Internet and have found varied responses to the one question I have — how do you find out if your loan is backed by Fannie Mae or Freddie Mac? 

We write our (whopping) mortgage check to Wells Fargo every month, and it’s not like the bank teller has that information readily available. I can’t find a straight answer anywhere. And if I do find out my loan is backed by Fannie or Freddie, what do I do next?”

A. Regarding not being able to get a straight answer, don’t feel like the Lone Ranger. But I do have good news for you. 

  • If your loan servicer won’t or can’t tell you, you can still find out. To see if Fannie Mae owns it, go to www.fanniemae.com/homeaffordable. For Freddie Mac the website is www.freddiemac.com/avoidforeclosure/.Fill out their forms. Make sure your name and address are exactly the same as on your loan coupon. Just for fun I filled out the forms at each Website to see which one owns my loan. I am still awaiting a response.
  1. If the loan is owned by either Fannie or Freddie, then you would qualify for the recent initiative for reducing the rate on loans that are between 80 to 105 percent loan-to-value (LTV) without mortgage insurance (PMI). 
  2. If the loan required PMI initially, the lender can use the existing PMI contract.

The catch on this for Orange County owners is that any home bought in the last few years has likely dropped 20 to 30 percent, maybe more, and would be over 105 percent LTV. However, people who bought in the early 2000s might still be in that bracket and certainly can benefit.
  • REALITY: this program has just been announced and it is highly likely that servicers have not yet developed their own policies and procedures and have not yet trained the staff on how to respond to inquiries. 

Danny in Corona asks:

Q. I purchased a condo in Oct. 2005 and financed both first and second mortgages at Chase. The first mortgage is a deed of trust (fixed rate) and the second mortgage is a California close-end deed of trust (a balloon note, but fixed rate). 

I have been unemployed since Oct. 2007 and all of my savings and emergency funds have been exhausted. I’m two months behind on both mortgages and approaching three months behind. I listed my condo for sale for over a year. Unfortunately, I had no luck. I also consulted with real estate brokers about doing a short-sale. However, they didn’t want to take it. 

I have no clue why. Anyway, if I successfully negotiate with Chase to have deed-in-lieu of foreclosure on my property or if Chase forecloses on my property, may Chase seek delinquent judgment on the second mortgage (closed-end deed of trust)? I have not refinanced since I purchased my condo.

A. First, I’m am sorry to hear about your situation and you have my prayers and good thoughts for a better outcome. You really need to ask a lawyer because technically that is a legal question. I think you will feel better informed if you look at a Website www.foreclosure.com/statelaw_CA.html, which summarizes current law. Frankly, I think that lenders have their hands full today and that they rarely go after defaulting borrowers, so I wouldn’t worry. Best of luck to you.

If you deduct mortgage interest, be careful -- IRS may be ramping up audits

Recently a business owner asked TaxMama to review his personal tax return for 2007, which included income from several businesses. The return had just been targeted for audit. Despite several business-related red flags on the return, that wasn't what triggered the audit. The auditor said the return was pulled for audit specifically due to the high mortgage interest deduction. This taxpayer is not alone.

Did you know there are limits to the mortgage interest that you can take? Most people don't realize they may be deducting more than they're entitled to use.
Reports from tax professionals indicate that they are starting to see audits on tax returns with high mortgage interest deductions, specifically Schedule As with mortgage interest deductions of over $50,000. The IRS has not yet had time to respond to our specific questions about this audit program.
If your interest deduction is less than $50,000, can you breathe easy? Well, not exactly. If you're audited for any other reason, IRS will look at your mortgage interest deduction, too. So be sure to heed the rules.
Rules of the mortgage-deduction road
We're only going to talk about laws in effect right now. We're not getting into laws that might take effect later, such as President Obama's proposal to reduce the value of the mortgage deduction for those earning $250,000 or more.
The overall limit on the mortgage interest deduction is the interest paid on mortgages of up to $1 million used to buy or fix up the house, plus another $100,000 of debt used for any other purpose. In other words, the maximum limit is interest on up to $1,100,000 of mortgage debt. Your mortgage balance is higher than these numbers? Too bad.
  • There is one exception. If your loan was originated before October 14, 1987 and it's higher than $1 million dollars, you can deduct all the interest. So, if you've never refinanced, be sure you have proof of the original note.
  • If you have refinanced that loan, you may still deduct the interest on the balance of the original debt at the time of the refinance. In other words, let's say you had a pre-October 14, 1987 loan with a balance of $3,500,000 and you refinanced it in 2007 for $4 million and a lower interest rate. You may still fully deduct the interest on the $3,500,000 balance. In other words, you'll be able to deduct 87.5% of the interest (3.5 divided by 4 = 0.875).

Bad Credit Mortgage Refinance

If you are sick with your finances, scared to deal with your bad credit situation and would like to somehow get out of this and start all over again keeping your credit score perfect, then there is one easy way to go about it. The simplest thing for you to do would be to go for a bad credit mortgage refinance. Now you might wonder who is going to refinance your mortgage when you have only very bad credit records to show. In this article you will find information on why it is possible for you to get refinance and also how you will have to approach lenders to get it done.

Bad credit mortgage refinance is not a big deal these days. Bad credit itself is not something to be ashamed of but simply a financial phase which anyone can overcome as there are any numbers of loans you can have to deal with it. The competition in the lending market is so high that financiers, banks, credit unions etc are coming up with new and new schemes designed to meet any financial problems you may have. There are lenders who have solution for just any financial problems or situation.

The first thing you have got to do to get a refinance for your mortgage would be to analyze your financial situation. Get to know where you stand with your credit records, how bad is it, what is the amount required to keep your credits clean, how much is your debt etc. This way you will have a better understanding of your finances and will let you look for refinancing which will cover all this, and still have amount left to let you get on with life.

Now you will have to do some home work to find lenders perfect for your situation. The best place to start will be to go online and look for lenders who provide bad credit mortgage refinance. Then do some comparison shopping by getting quotes from some of the lenders you would prefer aligning to. Weigh all the pros and cons to know which lender will be most beneficial to you. Remember to consider the interest rate, fees, cost, other charges etc while calculating the final amount.

Best way to go about it would be to look for a bad credit mortgage refinance plan for which the monthly payment would come within your monthly budget. You may use a mortgage calculator to easily get the various possibilities with your refinance plan. This will help to also decide on the term or period to choose for your loan. The longer the period of loan the lower your monthly payment will be but you will end up paying more for your loan than shorter term loans. All these factors considered do not expect to get a bad credit mortgage refinance with as low an interest as for good credit holders. The higher cost on your refinance is what you will have to pay as penalty for letting yourself into a bad credit situation.


Source

Thursday, March 12, 2009

Paying Your Credit Cards With Student Loans

Student loans are supposed to be earmarked for academics, but can they also pay your Visa bill (Stock Quote: V) ? The answer is yes.

After covering $2,500 each semester for tuition at Baruch College in New York City, Jorge Bautista, 26, uses about $3,000 left over from his student loan to buy food and pay off some of his $10,000 in credit card debt.

It is no surprise Bautista is an accounting major: One of his credit cards has a 31APR. The interest rate on Bautista’s $10,500-per-year federal Stafford loan is 6%.

And his payment strategy is perfectly legal, according to experts.

While federal student loans are limited to the cost of attendance, students get to use the money for living expenses once tuition and fees are taken care of, and college financial aid administrators have little oversight of how that money is spent, says Mark Kantrowitz, publisher of the financial aid site Finaid.org.

Generally what happens is that the proceeds from a student’s loan are sent to their school, and any money beyond tuition and fees (and room and board, if the student lives on campus) is refunded to the student.


“While that money is supposed to be used to further their education, there really aren’t any requirements or controls that prevent a student from using their aid to buy a music CD, for example,” says Kantrowitz. “So long as the student is actually attending classes and actually making progress toward a degree, there is little that can be done to deny those students of those funds.”

The definition of “cost of attendance” is pretty flexible and includes books, supplies, transportation, computers and even child care.


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Long term bad credit loans: Helps to recover lost credit score

Bad credit score often acts as a dilemma for the borrowers especially when they are looking for loans. But, now bad credit borrowers can surpasses their dilemma and get the required amount by considering long term bad credit loans. The financial market is flooded with various banks, financial institution, leading online and conventional lenders. The procedure for applying these loans is easy and hassle-free.

Long term bad credit loans are tailored for borrowers who possess bad or low credit score. These loans are categorised into secured and unsecured. In the secured option, borrowers are required to place their valuable asset against the loan amount. The borrowers can avail large amount ranging from $10,000 and $75,000 for the period of 25 years. On other hand, unsecured loans are free from collateral possession. Therefore, the borrowers can avail the amount ranging from $1,000 to $25,000 for 1-10 years. The loan terms and conditions are flexible in nature.

Keeping in mind financially unfavourable situations, the lenders offer the amount at competitive rate of interest. But, if you are interested to procure the low prevailing rates then you must compare and contrast the loan quotes. Moreover, to have a preview of the monthly instalments then you must consider online loan calculator. Such services in the internet are offered without any cost.

Home loan approvals up 3.5pc

The number of home loans approved for owner occupiers has risen as lower interest rates and improved housing incentives flow through to the market.

Official figures show almost 56,000 loans were granted to owner occupiers in January, in seasonally adjusted terms.Justificar completamente

That is 3.5 per cent more than the previous month but below economists' expectations of a 4 per cent rise.

Westpac economist Andrew Hanlan says the rise has been driven by first home buyers, with lending up 60 per cent since August.

"It's certainly clear that housing demand, or demand for housing finance has been in recovery now for five months," he said.

"That comes as no surprise given the change in interest rates and the Federal Government's incentive for first home buyers."

Source

When Banks Say No, Microlenders Say Yes


WHEN banks say no, owners of cash-starved small-businesses aren't giving up on finding loans. Many are turning to microlenders for the money they need to meet the payroll, buy supplies, pay the rent and keep the lights and heat on.


These microlenders — community-based nonprofit lenders that draw on a varying mix of financing from the Small Business Administration; other federal, state and local government agencies; and some philanthropies — say small businesses and entrepreneurs are increasingly seeking financing as home equity loans, credit lines and other loans have all but evaporated.

Adding to the pinch, credit card companies are slashing spending limits for many cardholders, including some longtime small-business customers who have relied on their credit lines as a source of ready cash.

Even profitable small businesses that once relied on banks for financing are depending more on microlending, a resource that was originally intended to be a lifeline for women, low-income and minority entrepreneurs.

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Foreclosure Filings in U.S. Jump 30%, Thwart Prevention Effort

March 12 (Bloomberg) -- Foreclosure filings in the U.S. climbed 30 percent in February from a year earlier as the worsening economy thwarted efforts by the government and lenders to prevent homeowners from losing property,RealtyTrac Inc. said.A total of 290,631 homes received a default or auction notice or were seized by the lender, the Irvine, California-based seller of default data said in a statement today. It was the third-highest monthly total in RealtyTrac records dating to 2005. 

February filings increased 6 percent from January.“More people have lost their incomes or are underwater on their mortgages, so a new housing plan won’t change those facts by itself,” Barry Eichengreen, professor of economics at the University of California, Berkeley, said in an interview.The U.S. housing crisis is deepening as President Barack Obama attempts a $275 billion rescue to help borrowers with sinking home values or unaffordable loans. 

Declining prices sapped $2.4 trillion in value from the nation’s residential market last year, according to First American CoreLogic. Prices in 20 U.S. cities have fallen every month since January 2007, the S&P/Case Shiller index shows.Rising unemployment also is making it harder for homeowners to keep up with payments. 

The U.S. jobless rate rose to 8.1 percent in February, the highest in more than 25 years, according to the Labor Department.Wait and SeeSome of the top U.S. lenders own as many as 700,000 foreclosed homes they have yet to offer for sale, said Rick Sharga, executive vice president for marketing for RealtyTrac.The banks may be waiting to see how U.S. government plans develop before selling the properties, Sharga said. 

The lenders and government-owned Fannie Mae and Freddie Mac, the two biggest U.S. mortgage financing companies, have already extended temporary foreclosure moratoriums.The combined percentage of loans in foreclosure or at least one payment past due in the fourth quarter was 11.18 percent, the highest on record, according to the Mortgage Bankers Association in Washington. 

The percentage of loans 60 days past due and 90 days or more late also were at record levels.“Many elements are lined up to suggest we’ll have more foreclosure activity in the future, maybe an all-time high,” Sharga said.


Obama introduced a plan Feb. 18 to use $75 billion of public funds to entice lenders to modify or refinance home loans, stem foreclosures and rescue delinquent homeowners. The president also said the Treasury Department would provide as much as $200 billion in additional backing for Fannie Mae and Freddie Mac to free up funding for new mortgages.

Re-Financing PlanTo qualify for a refinanced loan, applicants will have to fully document incomewith pay stubs and tax returns, and sign an affidavit attesting to “financial hardship,” according to Treasury.One in 440 U.S. housing units received a foreclosure filing last month, andNevada, Arizona and California had the highest foreclosure rates, RealtyTrac said.

Idaho, Illinois and Oregon joined the list of top 10 states with the highest rates, a sign that rising unemployment is now pushing defaults, Sharga said. Florida, Michigan, Georgia and Ohio were also in the top 10.

Greenspan Forgets Where He Put His Asset Bubble: Caroline Baum

March 12 (Bloomberg) -- “Counterfactuals from such flawed structures cannot form the sole basis for successful policy analysis or advice, with or without the benefit of hindsight.”

Even if one missed the headline (“The Fed Didn’t Cause the Housing Bubble”) and the byline (Alan Greenspan) on theop-ed in yesterday’s Wall Street Journal, there could be no confusion over authorship: That “Master of Garblements” and former Federal Reserve chairman was back to defend his legacy.

Greenspan lays out his case that the Fed’s easy money policies can’t possibly be to blame for “the U.S. housing bubble that is at the core of today’s financial mess.” It is long-term interest rates that determine “the prices of long-lived assets,” such as housing, he writes. And those rates, which stayed low as a result of a “global savings glut,” are out of the Fed’s control.

Control, yes. Influence, no.

“Why not try raising short rates if long rates are too low?” asks Paul Kasriel, chief economist at the Northern Trust Corp. in Chicago. “The recession was over in 2001. Why did he take so long to start to raise the funds rate?”

Greenspan is selective in arguing his case. By any measure, the overnight fed funds rate was too low earlier in the decade. The real funds rate, which is the nominal rate adjusted for inflation, was negative for three years, from October 2002 to October 2005, a longer stretch than in the mid-1970s. And we know how well that turned out.

Now we have additional evidence of the effect of negative real rates. When financial institutions are being paid to borrow, borrow they will.

Free-Money Policy

Banks and other mortgage lenders were happy to arbitrage the spread between the free money provided by the Fed and the rate they charged for an adjustable-rate mortgage. The share of ARMs as a percentage of total mortgage loans averaged 10 percent in 2001; by 2004, it was 32 percent, according to the Mortgage Bankers Association. The dollar volume swelled to more than 50 percent that year.

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Govt introduces ailing commercial project support bill

The Federal Government has introduced a bill to Parliament to set up a special fund to help commercial property projects struggling to refinance their loans.

The $4 billion partnership between the Government and the four major banks aims to help projects with liquidity, if foreign banks will not refinance loans.

But Opposition Leader Malcolm Turnbull says the draft legislation is much more expansive than the Government led everyone to believe.

"It can refinance any commercial property syndicate and, I might add, it's not limited to commercial property," he said.

"It can extend to any other form of commercial finance that the banks and the Government agree.

"So what Mr Rudd has done has gone way beyond what was originally announced."

Source

Margot Bai's strategy for getting – and staying – out of debt

Writer Margot Bai says Canadians have embraced the idea that shopping is a form of entertainment. (White Knight Books)Margot Bai knows something about owing and saving money. When the Markham, Ont.-based author married her husband, James Bai, in 1998, they shared a tiny one-bedroom apartment and $18,000 in student loans. To realize their dream of buying a house, they had to hunker down and focus on their financial goals.

Many Canadian consumers are facing a situation similar to that of the Bais in these rocky economic times. But instead of formulating a sound financial plan and sticking to it, they're see-sawing between saving and spending.

Case in point: Canadians queued for Boxing Day electronics sales, and according to Interac, on December 23 (its busiest pre-Christmas shopping day), they upped debit card usage to 15.9 million transactions from 15.6 million for December 21, 2007. Meanwhile, 62 per cent of 1,000 Canadians recently polled by the Boston Consulting Group said they plan to start living more frugally and skip big-ticket items such as travel, cars and electronics.

In her book Spend Smarter, Save Bigger (Toronto, White Knight Books 2006), the 35-year-old Bai says, "Canadians have embraced the idea that shopping is itself a form of entertainment."

The trouble is, those shopping sprees are leaving many saddled with growing debt loads.

John de Wit, president and chief executive officer of Abbotsford, B.C.-based DebtManagers, Canada's largest independent credit counselling firm, says his clients range from recently graduated students to individuals earning six figures. They have debts ranging from $1,000 to $50,000, with some reaching $100,000 or more, and the number of people on the higher end of that scale is rising.

"We started to notice it [increasing numbers of people with higher debt] first in B.C. with the reduction of labour with the forest industry, then in Ontario with the layoffs in the auto industry," de Wit says. Lately, he adds, debt loads are increasing in affluent provinces such as Alberta as the global downturn in oil prices drives the oil industry to cut jobs and backburner development projects.

Margot's Story

Margot Bai learned frugal living from her family. Her father, nearly 30 years older than her mother and a retired Stelco professional engineer, started up a home-based tax-return business; mom taught piano. Dad's thrifty modus operandi included saving energy, driving one used car, seldom dining out and vacationing in a camper in provincial parks (free then to seniors).

But the heart of the family's control of finances was "the budget." Everyone recorded personal expenses in a budget notebook. Dad added the amounts and compared them to the annual family budget. Margot and her sister were paid an allowance for household chores (teenage Margot discovered she could make more money cleaning houses than flipping burgers). Dad contributed to the Canadian Scholarship Trust Plan. When he died (Bai was 17), to supplement her widow's pension, mom continued teaching piano and rented out the basement of the family home. When Margot moved to Guelph for university, she took a page out of dad's budget book — keeping track of spending, first in longhand and then on a computer.


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Mortgage Investors Call for Changes in Rescue Plan

Investors who hold billions of dollars of residential mortgage-backed securities are pressing the Obama administration to make changes in its housing rescue plan.

Participation by these investors will help determine the success of President Barack Obama's $75 billion plan to reduce foreclosures and help stabilize the housing market. But many investors are critical of features of the program and have been meeting with Treasury officials in an effort to influence parts of the plan, such as how it treats second mortgages.

Some investors say they are contemplating legal action because they think the administration's plan and legislation before Congress would violate their rights. They are particularly concerned about measures that would prevent lawsuits against mortgage servicers, which collect loan payments for the investors and are responsible for modifying loans with homeowners.

"Investors are given rights through the contracts in the securities, and we expect those rights to be honored," said Jeffrey Gundlach, chief investment officer of TCW Group Inc., which manages roughly $52 billion in residential mortgage-backed securities.

Many of the four million borrowers the administration hopes to help through its loan-modification program have mortgages that were packaged into securities and sold to investors world-wide. Roughly $1.9 trillion of mortgage loans outstanding as of Dec. 31 had been packaged into securities that don't carry government backing, according to Inside Mortgage Finance. Thus far, servicers have been more reluctant to modify those loans than mortgages they own.

Administration officials say they are trying to address the concerns of investors and others as they work out details of the program. The range of investors in mortgage-backed securities includes hedge funds, insurance companies and pension funds.

Some investors say they are willing to work with the administration. Mr. Grundlach says the program would be more palatable to investors if, for instance, modifications weren't given to borrowers who lied when they took out their initial mortgage.

Treasury Department officials say they believe that servicers will be able to modify the vast majority of investor-owned loans based on their current contracts. They also point out that the plan includes financial incentives to encourage investor participation in loan modifications, but doesn't mandate that investor loans are reworked.

Home-equity loans and other second mortgages are an issue because such debt is junior to first mortgages. Some investors and analysts say that mortgage servicers may find it in their own financial interest to modify the first mortgage and not touch the related home-equity loan or line of credit.

Roughly half of delinquent subprime borrowers also have a second mortgage, according to Credit Suisse Group.

Mortgage investors say that rewriting the first mortgage without touching the second violates their rights, because second mortgages are supposed to be repaid second. Modifying the first loan can help the holder of the second mortgage, because it increases the chances the loan will be repaid, they say. But fixing both loans is a better strategy, they add, because it will produce a more affordable payment and reduce the chances that borrowers owe more than their homes are worth.

Investors say the Obama plan results in a conflict of interest, because many loans are serviced by big banks that also hold second mortgages -- and as a result have a financial interest in how these loans are handled.

Government officials say they are working on a plan that would provide incentives for servicers to extinguish these second mortgages.

Investors are also calling on the administration to strengthen the federal government's Hope for Homeowners program. Under it, some delinquent borrowers can refinance and get a more affordable, government-backed loan, provided the investor who currently holds the mortgage agrees to a principal write-down. So far, the program has fallen far short of initial expectations that it would help as many as 400,000 homeowners.



Source

Wednesday, March 11, 2009

View The Option Of An Unsecured Debt Consolidation Loan

Bankruptcy is an awful word, but a dead real possibility to many people struggling to pay a laundry list of bills that never appear to end. At times, that mass of bills appears unachievable to deal with, a mess you’ll never get out from below without carrying out drastic steps. But bankruptcy isn’t the only alternative to a life tethered to the continuous cycle of bills, late fees and more bills.

Entertain consolidating your debt in a single loan, a variety of refinancing that helps you put your finances back in your command and your life back in order. But refinancing is for people who own a home, right? What if you don’t have a home, or you don’t desire to risk losing it by putting it up for collateral? That’s where an unsecured debt consolidation loan comes into play.

Unsecured debt consolidation loans don’t require you to possess any collateral. They give you the power to pay back all of your financial debt without suffering to put your home, or lack thereof into any peril. In most instances the interest rates are a bit steeper because of the risk the financial institutions are taking, but the consolation of not placing your belongings at jeopardy is most times worth the incremental cost.

But this can nonetheless interpret into smaller monthly requitals for you, especially if your charge cards carry lofty interest rates to begin with and you’ve fallen into the hole of paying late and accruing late requital fees. Those melt when you pay back that debt with the moneys from the consolidation loan. It avails to have a working unsecured debt consolidation loan. And don’t forget, shopping around always compensates; this shows you are capitalistic and you may be able to negotiate a nicer interest rate.

If though, even after browsing, you still can’t find an interest rate that is going to in reality make any difference in your requital amount, or make life even a little bit more easy, you may want to look into a long term loan. This will most definitely cost you more in the long haul but to be honest we are not considering the long haul in this spot. We wish to relieve your suffering now. Requitals spread out over a longer period of time will be less and that may be exactly what the Dr. ordered for your financial position.

Probabilities are that, if you are in this place, the late payments are already playing havoc on your credit score so the chances of acquiring this unsecured loan are remote right? Well yes and no. With the current economy and the financial crisis banking companies are getting more stringent on who they will loan to but there are still organizations out there who will loan you money to consolidate, particularly if you have a great work history. Having this history isn’t always necessary either though it certainly helps, there are organizations who will lend out to anyone you can just count on paying a steeper interest rate.

If you are right at the verge of registering for bankruptcy, hold back for a minute , assemble all of your bills together including utilities, medical bills, credit accounts and whatsoever else you may be paying out on and check over an unsecured debt consolidation loan. There isn’t any tangible reason to be missing all this sleep and enduring from this stress. Discover how simple it is to be financially free.

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Student Debt Consolidation Loans – Tool to Consolidate Finance for Students

In your schooling and college days, you have limited chances of earning. While most of the students get help from their parents or guardians, some of them also take up some form of part time job or summer job to meet their needs. But the expenses are not lower. Each and everything has a cost: books, bags, clothes, shoes, and many other things. Due to these expenses being higher than the income, students easily fall prey to different types of debts.

Each debt has a different rate of interest and different due dates due to which the students get more confused and start focusing on the finances rather than focusing on their studies. To help such students, the online money lenders have come up with the student debt consolidation loans.

This schemes aim at relieving the students of the different debts so that they can better concentrate on their studies. The consolidation debts are available for all students irrespective of their credit ratings. The factors taken into consideration are: age, academic record, and the different sources of income. The sources of income include the student's parents too. If the student is getting any sort of scholarship or is earning on a part time job, it is also taken into consideration for approving student debt consolidation loan .

The consolidation loan in effect is the takeover of all the different loans of the student by the consolidation service provider after negotiating with all the different creditors of the student. Once they agree, the consolidators take over the debt, that is, they pay it off. The student is then left with a single loan, which he or she availed under the scheme of student debt consolidation loans. Students are also often given some grace period so that they can start earning and repay the loan in ten to fifteen years.


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