Ecb Strikes Hawkish Tone on Interest Rates as U.s. Fed Plans Further Cuts

While the U.S. Federal Reserve is expected to cut its benchmark Federal Funds target rate to a record-low 0.5% at its policymaking Federal Open Market Committee meeting tomorrow (Tuesday), the European Central Bank (ECB) is signaling a reluctance to drop its key rate below 2.0%.

Since the Euro-region slipped into a recession in October, the ECB has cut its main interest rate by 175 basis points to 2.5%. However, the bank’s policymakers, led by ECB President Jean-Claude Trichet, are now sounding calls for more fiscal discipline.

Investors are betting that the ECB will be forced to shave another 50 basis points off its benchmark rate in January, but ECB council member Axel Weber warned last week that the bank “would like to avoid” taking it below that level.

“We should be cautious when our rates approach territory we haven’t explored before,” Weber told Bloomberg News. “Our lowest level so far was 2.0%.”

ECB President Trichet told The Financial Times today (Monday) that there was “a degree of excessive pessimism” when the bursting of the dot-com bubble drove central banks to slash benchmark borrowing costs. Many analysts believe those excessively low lending rates fueled the asset bubbles of the past decade, including the massive run-up in real estate prices whose subsequent collapse helped trigger the current global downturn.

Trichet added that policymakers had a duty “to eliminate as completely as possible all the inbuilt elements in global finance that are amplifying booms and busts.”

ECB Executive Board member Juergen Stark said Dec. 10 that any room left for further rate reductions is “very limited, potentially allowing for small steps only.”

Of course, there are some analysts who believe the recent rhetoric coming from the ECB is just that.

“They will be forced to go to 1.0% or lower by June,” Juergen Michels, chief Euro-region economist at Citigroup Inc. (C) in London told Bloomberg. “The rhetoric at the moment is to justify their forecasts, which are too optimistic.”

The ECB forecasts the greater European economy will contract by 0.5% in 2009, before expanding by about 1.0% in 2010.

If the ECB’s estimates are too generous, the European central bank could again be forced to backtrack on its policy mandates. The ECB actually raised its benchmark rate to 4.25% in July, with policymakers expressing concern that “price and wage-setting behavior could add to inflationary pressures.”

The bank reversed course just four months later in October, cutting its rate by half a point on Oct. 8.

Making a Profit on Investment From Social Lending Sites

The worldwide lending industry is a multi-billion dollar industry where people borrow from banks, financial institutions and other private lenders. In the last couple of years, the lending industry has gone through an evolution and has given way to social lending as the new and promising mode of lending. Also known as peer- to- peer lending or person to person (P2P) lending, one of the first companies to set the base for social lending are Zopa, Prosper and more recently LendingClub.

Zopa is considered the first social lending marketplace in the world and its roots are in the United Kingdom. With the launch and immediate success of Zopa, other similar peer to peer lenders have sprung up like Prosper in the US, Boober in Netherlands and Smava in Germany.

If you are wondering whether the P2P loans offered at the social lending sites are worth it or not then the answer is most likely yes. There is not much of a difference as far as the P2P loans from these lending hubs and from a bank is concerned. The difference lies in the fact that there are no banks, no long procedures, and no middleman and above all the entire process is transparent for both the lenders and borrowers (no more hidden hard to find loan agreements!).

The main objective of the social lending hubs is to offer an online loan with the best interest rates and to make customers feel like they are borrowing from a friend or community. This peer to peer borrowing is increasingly being seen in a new light and is being considered as a part of community borrowing (which was more traditionally offered by small local community banks).

Other benefits:

1.class, which they can add to their portfolio because it doesn’t fall under an investment or even a savings account.

2.Choosing interest rates and loan repayment: There are several benefits for lenders as well as borrowers. In social lending hubs like Zopa or Prosper, lenders have the freedom and the flexibility to choose a loan repayment time period as well as the interest rate on the p2p loan.

3.Active community participation: one of the salient points is that this kind of a lending hub make borrowers feel as if they are following from an actual person and not an organization or a faceless institution. Hence it helps in developing a strong community feeling.

Lenders at any of the social lending websites have the power to set a minimum interest rate that they want to earn and can bid in an increment of $50 till $25,000 through loan listings. Borrowers can create a loan listing for a period of 3-years, and borrow an amortized and unsecured loan of up to $25,000 and also provide the maximum interest rate that they will be able to pay a lender.

The success of Zopa lies in its facts and figures. They are the largest lender today and have loaned out in excess of $930,000. The return on investment for lenders has been around 5.01%, which is healthy especially in the wake of the fact that social lending is still in its nascent stages. One of the top lenders even got an ROI of 19.8% on social lending websites.

The Lenders

By now you are probably thinking who these lenders really are? Are they banks in disguise or are they really other people? The truth is that they are really people. Let’s take Zopa and Prosper for example. Both the social lending hubs are backed by Benchmark Capital who also funded eBay. Zopa or Prosper are the best alternatives that anyone can have to banks or other financial lending institutions, however they are restricted to the UK and US markets.

The current business model of Zopa is based on a 1% exchange fee that borrowers are paying them upfront. In return, Zopa is offering borrowers a better interest rate by cutting out the bank middleman. More than that, a borrower will have more control of the entire lending process and has the flexibility to establish an interest rate.

Zopa is the acronym for Zone of Possible Agreement, and its lenders include only U.K. residents who are over 18 years of age. To qualify as a lender, a person needs to have a valid bank account and a high personal Equifax credit rating. There are two restrictions for becoming a lender and they are:

•Lenders have to be individuals and not businesses.
•Lenders will not be allowed to have anything in excess of £25,000 ($47,000) in outstanding loans at a given point in time.

The American counterpart of Zopa is Prosper and they also handle maximum loan of $25,000 at a time. At this point the future of social lending looks bright as it has now hit New Zealand and Australia with the first peer to peer lending hub in Australia to launch shortly being Lending Hub (you can see their site at lendinghub.com.au and their active blog at blog.lendinghub.com.au) which will offer P2P loans with a strong community focus to ensure a truly social experience for both borrowers and lenders rather than just being a transactional online loan tool.

Golden Days for Car Buyers are on Cards

As people succeed in life and achieve new milestones, they reward themselves with better things and a quality life. Buying a car is one such thing that enables people to keep pace with the fast moving and highly tasking professional world . It is not necessary that a prospective buyer must have the entire amount to fund the car in his pocket. Based on certain conditions, banks in India are now willing extend loan to finance the major share of the car's cost. Getting the dream car is now very easy as the interest rate is also cut by many banks.

In order to make the car loan deal more lucrative,in march 2008, State Bank of Bikaner and Jaipur, an associate of State Bank of India has reduced its interest rates by 1-1.5 % on car loans taken by state government employees. This finance facility is also available to the employees of major corporate houses. The new decreased interest rates are applicable on loans will be charged from first march 2008. For car loans of more than 7 lakh and a repayment period of 3 years, the interest rates have been slashed to 12% a year as compared to benchmark prime lending rate (PLR) of 13% for last year. For loans of less than 7 lakh with a repayment period of 3 years, there has been a 1.5% reduction in the payable interest rate.

If the repayment period of more than 3 years, the bank has reduced the rate of interest by 1% to 12% per annum. Keeping pace with the industry trend of decreasing interest rates, SBI has also reduced its interest rates by 0.25% on other loans also. The Finance Minister has recently advised the public sector banks to reduce its interest rates car loans and follow the example of SBI.

The car financing sector of Indian economy will be benefited a lot if there will be an uniform rate cut by different banks. This will not only give birth to a healthy competition, but also will increase the car sales in India. Apart from this, the banks should adopt different innovative strategies to attract the prospective imported car buyers. Though, these buyers constitute a smaller section, yet the habit of replacing the existing model for a new stylish one is more intense. In order to tap the unbound profit prospectives in this short segment, private banks like ICICI are now thinking seriously. Whatever may be the outcome, it can be told without any doubt that prospective car buyers are going to have golden days.

Personal Loans Interest Rates and More

SBI loans offer affordable interest rates The State Bank of India (SBI) has been in the business for a long time now. In February this year, it came up with a bumper offer for car loan seekers. SBI loan interest rate was slashed from 11.5 per cent to 10 per cent and lenders were also freed from paying the car loan processing fee for an entire year. Personal loan interest rates at SBI are highly versatile. They let the borrower choose between a fixed interest rate and a floating one. In the former case, the interest rate on the loan remains fixed throughout the tenure. But in the case of a floating rate loan, the interest rate need not remain constant. It could decline or rise, depending upon the changes that the Bank's Medium Term Lending Rate (SBMTLR) goes through.

A striking feature of SBI that makes it stand out among several others is the fact that the interest is levied based on the daily/monthly reducing balance. While others use the annual reducing balance method, SBI offers an advantage to the customer. He does not have to pay interest on the amounts he keeps repaying. The interest is computed only on the loan amount that is presently outstanding. Since, this figure goes down with every EMI, the effective rate of interest is considerably reduced.

Getting the ICICI Advantage

ICICI Bank is one of the top most approached banks, easily India's second largest lender. ICICI bank loan interest rates have also been significantly lowered keeping in mind the need of the hour. A 50 basis point reduction in the benchmark lending rates is evident from the fall to 15.75 per cent. The floating reference rate, which applies to floating rate retail loans, has dropped to 12.75 per cent. Though the bank owes the reduction to a decrease in the cost of funds, the borrower's convenience has enhanced manifold.

Loans are now available from ICICI bank at an increased comfort level. This includes personal loans of all types, including for home, car, education or any other. There are also plans that offer a fixed rate of interest for a period of the loan tenure and then switch to the floating rate. Similarly, ICICI bank loan interest rates for cars are not ruled by a uniform, absurd guideline. They vary according to the car model and the tenure of the loan, which is also dependent on the customer and his location.

Sky rocketing interest rates are no longer the obstacle they used to be. There are people who shy away from a loan even when they have the urgent requirement of one, only because they fear the impossible rate of interest. Gone are the days when wicked money lenders in villages would amass land and wealth by trickery and exorbitance. With reliable and helpful banks like ICICI, SBI and many more, getting a personal loan at a reasonable rate of interest is simple for one and all.

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Commercial Finance- Hard Money

The Merriam- Webster Online Dictionary defines hard as:

“1 a: not easily penetrated: not easily yielding to pressure b of cheese: not capable of being spread: very firm

2 a: of liquor (1): having a harsh or acid taste (2): strongly alcoholic b: characterized by the presence of salts (as of calcium or magnesium) that prevents lathering with soap

3 a: of or relating to radiation of relatively high penetrating power: having high energy b: having or producing relatively great photographic contrast

4 a: metallic as distinct from paper b: of currency: convertible into gold: stable in value c: usable as currency d: of currency: readily acceptable in international trade e: being high and firm

5 a: firmly and closely twisted b: having a smooth close napless finish

6 a: physically fit b: resistant to stress or disease c: free of weakness or defects

7 a (1): firm definite (2): not speculative or conjectural: factual (3): important or informative rather than sensational or entertaining b: close searching c: free from sentimentality or illusion: realistic d: lacking in responsiveness: obdurate unfeeling

8 a (1): difficult to bear or endure (2): oppressive inequitable b (1): lacking consideration, compassion, or gentleness : callous (2): incorrigible tough c (1): harsh, severe, or offensive in tendency or effect (2): resentful (3): strict unrelenting d: inclement e (1): intense in force, manner, or degree (2): demanding the exertion of energy : calling for stamina and endurance (3): performing or carrying on with great energy, intensity, or persistence f: most unyielding or thoroughgoing
9 a: characterized by sharp or harsh outline, rigid execution, and stiff drawing b: sharply defined: stark c: lacking in shading, delicacy, or resonance d: sounding as in arcing and geese respectively —used of c and g e: suggestive of toughness or insensitivity

10 a (1): difficult to accomplish or resolve: troublesome (2): difficult to comprehend or explain b: having difficulty in doing something c: difficult to magnetize or demagnetize

11: being at once addictive and gravely detrimental to health

12: resistant to biodegradation

13: being, schooled in, or using the methods of the natural sciences and especially of the physical sciences

14: of money: contributed (as by individuals or political action committees) directly to a particular candidate or campaign

Synonyms: hard difficult arduous mean demanding great exertion or effort. Hard implies the opposite of all that is easy . Difficult implies the presence of obstacles to be surmounted or puzzles to be resolved and suggests the need of skill, patience, or courage . Arduous stresses the need of laborious and persevering exertion .”

As used in this article, hard money is intended to convey the idea that because of the current economic conditions, many financing needs will be more difficult to accomplish. They will require great exertion and effort to overcome the economic obstacles of the current economy. Compared to 2006 and 2007, periods of relatively easy money, to obtain financing today you will have to have firm, definite facts to support your financing needs. And the cost of money will be more difficult to bear. Hard money is harder to find, harder to obtain and harder to repay. Nevertheless, hard money may be an economic necessity as a means to an end to grow a business or complete a real estate transaction.

Why is 2008 a time of hard money? This is a difficult question to answer. If you ask 3 experts you probably will get three different answers. It may be the economic equivalent of The Perfect Storm- a True Story of Men against the Sea. The phrase perfect storm refers to the simultaneous occurrence of events which, taken individually, probably would be far less powerful than the result of their rare combination. These occurrences are rare by their very nature, so that even a slight change in any one event contributing to the perfect storm would lessen its overall impact. The stock market crash of 1929 and following depression exemplifies a perfect storm of economic consequence.
What are these events today? 1) The Mortgage Melt-down. Major financial institutions in the United States are incurring billions of dollars in losses due to the loss in valuation of their investments in mortgage securities. The consequence for borrowers is that these institutions are less inclined to take risks when loaning money for fear of additional losses. And their regulators are demanding that regulated lenders raise their credit standards for borrowers to qualify for a loan. 2) The devaluation of the American dollar versus other world currencies. The U.S. government is spending ginormous amounts of money in excess of what it collect in revenue due to the political compulsion to spend taxpayers’ money, the war in Iraq, Hurricane Katrina (and other natural disasters) and the war on terrorism. This makes our currency less valuable. It makes importing to the U.S. more expensive. The American people have less money to spend on goods and services, and their money buys less than it did a year ago because prices of necessities such as gasoline are higher. 3) The current tendency of Federal and State governments to reduce funding for social services, health services and education because of inadequate revenues; this hurts individuals and businesses who have less money to spend on products and services which creates additional drags on our economy. 4) The diminishing value of residential real estate all across the United States. This is related to the mortgage meltdown and the fact that many people incurred debts that they cannot repay. The real causes of these events are complicated and beyond the scope of this article. Suffice it to say that these are hard times and hard times create needs for hard money loans.
What exactly is hard money? Here are seven examples:
1) A commercial real estate loan where the borrower receives funds based on the value of the property, usually 50% or less, at an interest rate higher than a bank would charge. This is the most commonly understood type of hard money. In this financing, neither the income from the property or the borrower demonstrably supports the repayment of the loan.
2) A real estate loan to buy a residential property where the borrower cannot prove their income. This may be accomplished with financing from a seller, the only party willing to take the risk of non-payment.
3) A small junior lien on income producing commercial real estate where the first lien is very large. For example, a million dollar second lien behind a ten million dollar first lien. Most lenders simply do not want to consider a loan of this type because of the potential liability for repayment of the first lien. It is ten times the risk of the secondary loan.
4) Most loans to people with less than excellent credit. Many loans are based on credit scoring. If you do not have a credit score that is high enough for the lender’s requirement, you simply do not get their loan and you may or may not be able to find a hard money loan to accomplish your objective.
5) Accounts receivable financing to construction contractors, medical providers and sellers of agricultural products. Most factors do not offer to these sectors of the economy because of the risks and complexities that are involved.
6) Purchase order financing for items with gross margins less than twenty percent. The twenty percent margin is a benchmark for sufficient profitability in a transaction to pay all financing costs and create profits for the business after all costs are paid. During hard economic times margins are squeezed. It is a vicious cycle.
7) Loans to businesses that are particularly negatively affected by the current economy. For instance, a loan to build a new lumberyard is impacted by the downturn in new real estate construction and a lower need for lumber. Most banks would simply decline to consider such a loan. The same is true for developers seeking to build new housing tracts or office building developments. This is not a good time to try to start a new mortgage brokerage company; although it may be a good time to be a hard money lender provided that you are very, very careful in assessing your transactional risks.

What do all of these situations have in common? In times of easy money these situations would be less costly to finance and more likely to receive funding. Today, the lender’s answer to your request for funding is more likely to be a polite but strong “no way”. Many lenders have effectively (if not actually) shut their doors. Many lenders will simply decline to lend on hotels/motels, gas stations, owner/user properties, properties with any environmental issues. Borrowers who do not have FICO credit scores above 680, with substantial net worth and income will find it is very difficult to obtain many types of loans. Fortunately, the door for accounts receivable financing is still wide open.

The bottom line: Hard times in our economy will tend to force more individuals and businesses to borrow hard money- if they are able to get any money at all. Commercial financing with hard money will tend to grow as traditional sources of financing from banks and institutional lenders simply will not be available.
Copyright © 2008 Gregg Financial Services
www.greggfinancialservices.com

Refinancing

After learning about Mortgage Refinancing, you must be thinking, how to go about doing this refinance? How to actually carry out Refinancing? Basically, in every individual's life, it is the housing mortgage which takes up a major part of his monthly payments. And if paying this mortgage amount becomes a headache for the individual, it is refinancing towards which he turns for help. There are three ways in which you can refinance your mortgage.
First, you can go directly to the lenders from whom you are thinking of borrowing the money. Make your intent clear about reducing the payments. This will inadvertently bring in good offers for you. Knowing everything about the financial market is not at all necessary to make good judgments. It depends on personal intellect as well.
Second, decreasing the period after which you make your payments can also help you save money. Thus making two or three payments a month will be an added advantage to you.
Also, in case you get a tax benefit or a bonus at work, you can use majority of it for paying off the loan. This will really ease off the tension of your mind.
There are a number of steps that need to be followed to refinance your mortgage. First and foremost, you must get an application form regarding the loan from a consultant. Next step obviously is to fill up the forms and submit them. After that, you will receive quotes from the consultant you have applied with. The quotes are intelligently framed keeping in mind the financial situation of the borrower. Then, you need to select the lender who is offering the best deal. After selecting the lender, the consultant will start processing your request. Initially, some personal documents are required to begin with the processing part. Then, you will receive a legal paper from the consultant stating all the terms and conditions and other information. Make sure that you go through the entire matter carefully. After that you need to sign the documents and return them back to the consultant. After the initial processing is done, the consultant will put you in contact with the money-lending company. Then the company calculates the value of your house. This serves as a benchmark for the amount of money to be released as loan. Then, it is the lender who makes the required arrangements to repay your original loan with the latest loan. Then, your loan application goes through further processing. Till that time, it is the company which makes a decision on whether to accept the loan application or not. After the application has been accepted, the consultant makes a final document which needs the approval of a notary and a lawyer after which it comes to you for your signature. Then, you are given a grace period of three days in which you can cancel your loan application if you want to. The end of this period marks the completion of your application process and entitles you to legally borrow money from the lender.

For the U.s. Economy in the New Year, the Pain Will Precede the Promise

If there’s a proverb that captures the outlook for the U.S. economy in the New Year, it’s the one that says: “It’s always darkest before the dawn.”

Regardless of any formal announcement of whether or not the United States drops into an actual recession, the ongoing credit crisis guarantees a contraction of the American economy by virtually every measure we know. That period of darkness will be marked by a dramatic slowdown in economic activity, as well as by rising unemployment, additional declines in U.S. stock prices, and constant volatility. It could last as long as 12-18 months.

But when the dawn does come, it will be one to remember. If U.S. President-elect Barack Obama gets it right - and I have every reason to believe that he will - then investors will be presented with the greatest investment opportunity of our generation. At that point, shares of American companies will be at such low levels that wholesale buying by individuals, mutual funds, pension funds, institutional money managers, and foreign-controlled sovereign wealth funds, will generate gains that will not only make us whole, they will make us rich once again.

A Market Mandela

Creating an analysis of the U.S. economy’s outlook for the New Year is akin to creating a mandala, a geometric work of art whose pattern, symbolically or metaphysically, represents a microcosm of the universe from the human perspective. In some Buddhist temples, mandalas are made of tiny colored beads, painstakingly created by several monks as a form of meditation. In celebration of the ever-changing nature of the universe, the mandala is then joyously shaken by its creators, until it is once again nothing more than chaos embodied in a box of colored beads.

Regardless of the big picture, analysis of a mandala - or the economy - always starts at the center and emanates outward. With the U.S. economy, that centerpiece is credit. The credit crisis has shaken the complex mandala that is our economy and transformed the United States economy into chaos. It’s complex because this economic-forecast mandala derived its form from thousands of individual pieces - in the case of the economy, from scores of data points, many of which are currently dark and foreboding.

The credit crisis we are experiencing results from the contraction - or worse, the cessation - of lending. Under normal circumstances, institutions and markets freely facilitate capital movement between lenders and borrowers. But that’s not happening, now.

Because of a lack of transparency into the balance sheets of borrowers holding such complex and illiquid securities as collateralized debt obligations, credit-default swaps, and non-performing loans, and because of increasing recessionary fears affecting businesses and households, lenders don’t want to increase their loan exposure. Banks are holding onto the cash and liquid securities they control, using them as a cushion against their own potential losses. The U.S. Treasury Department’s direct-to-bank capital injections do not alter these banking realities. In fact, as a Money Morning investigative story recently demonstrated, instead of using these taxpayer-provided infusions to increase their lending, these banks are using the money to finance takeover deals.

The Recipe for a Recession

Whether or not the United States is technically in a recession ultimately will be divined by the National Bureau of Economic Research (NBER). The business-cycle dating committee of this privately run, nonprofit economic research group is right now studying five factors in an attempt to determine if the United States has entered a recession and, if so, when that downturn started, MarketWatch.com reported. Those five factors are:

• Gross Domestic Product (GDP).


• Industrial production.


• Employment


• Income.


• Retail sales.

Regardless of any formal announcement by the NBER of whether we’re in a recession, the credit crisis guarantees a general contraction of economic activity, by every measure.

“Any doubt that we’re officially in a recession can be put aside,” Anthony Karydakis, former chief U.S. economist for JPMorgan Asset Management (JPM) - and now a professor at New York University’s Stern School of Business - recently wrote in Fortune magazine. “The rapid deterioration of labor markets points to a sharp decline in hours worked and output in the fourth quarter. This is likely to lead to a decline in personal consumption to the tune of 5.0% or so for that period. Since [consumer spending] makes up about 70% of the economy, the stage has already been set for real GDP to shrink at a more than 4.0% rate in the fourth quarter.”

Confirmation of that belief is evident by looking at each of the NBER’s five key indicators.

• Gross Domestic Product (GDP): The U.S. Commerce Department estimated that the U.S. economy, as measured by GDP, rose 0.9% in the first quarter. In the second quarter, GDP advanced an estimated 2.8%. For the third quarter, GDP declined an estimated 0.3%. My own econometric models suggest that GDP actually contracted at a 1.5% pace in the third quarter and will decline another 2.75% in the fourth quarter. For the year, that would mean the U.S. economy actually fell 0.55%. The U.S. economy last posted a full year’s negative GDP in 1991, when it declined 0.2%. Verdict: Recession.


• Industrial Production: This measure of output by the nation’s factories and mines dropped 2.8% in September, and a very steep 6.0% in the third quarter. Verdict: Recession.


• Employment: The U.S. Bureau of Labor Statistics announced Friday that October’s unemployment rate was 6.5%, a jump of 0.4%, which was double what most economists expected, and also its highest level in 14 years. The economy has now lost a total of 1.2 million jobs since the beginning of the year, with nearly half of those losses occurring in the last three months alone, pointing to an acceleration in the pace of erosion in labor markets. Karydakis, the Stern School professor, wrote in
  Fortune : “By way of comparison, during the 2001 recession and in the sluggish growth that followed in 2002-03, the unemployment rate reached a peak of only 6.3%, in June 2003. We’ve already exceeded that mark and, given that we are still in the early phase of the current recession, the unemployment rate should be expected to push toward the 7.5% range - and possibly higher - during the next three months to six months.”
  Verdict: Recession.


• Income: Personal income increased $24.5 billion, or 0.2%, and disposable personal income (DPI) increased $25.7 billion, or 0.2%, in September. Personal consumption expenditures (PCE) decreased $33.6 billion, or 0.3%. Excluding the rebate payments made to U.S. taxpayers under the Economic Stimulus Act of 2008, DPI increased $30.3 billion, or 0.3%, in September, and increased $44.0 billion, or 0.4%, in August. Verdict: Too close to call.


• Retail Sales: October retail sales are coming in well below already-diminished expectations, and some reports have been downright depressing - including The Neiman Marcus Group Inc. -26.8%; The Gap Inc. (GPS) -16%; The Nordstrom Group (JWN) -15.7%; J.C. Penny Co. Inc. (JCP) -13%; Kohl’s Corp. (KSS) -9%; Ltd. Brands Inc. (LTD) -9%; Target Corp. Inc. (TGT) -4.8%; and Wal-Mart Stores Inc. (WMT) +2.4%. In a report last week, Moody’s Investors Service (MCO) projected that the retail sector’s woes will continue into 2009 as consumers cut back on buying apparel, footwear and accessories “in order to save money for essentials.” The credit rating firm said in a separate report that holiday spending “will prove even weaker than expected,” amid October’s financial-market swoon. Verdict: Recession.

If U.S. exports are taken out of the GDP calculations going back to January, it’s apparent that there has been very little domestic growth in the economy. And when revisions are finalized in the next few months, we’ll be looking back at the recession that we’re all but certain is upon us right now. Until the credit markets are freed up and borrowers are extended credit at reasonable rates, it’s unlikely that credit, the centerpiece of the economy, will be anything other than a major cog in the wheel.

There are some signs of a thaw, but not anytime soon. The U.S. Federal Reserve’s lowering of the Fed Funds target rate to 1.0%, and coordinated rate reductions by the Bank of England and the European Central Bank, as well as other major world-wide central banks, may start to ease the stranglehold gripping the worldwide credit markets. The London interbank offered rate (Libor), a critical interest rate against which trillions of dollars of mortgages, bank loans and derivatives are priced, dropped to 2.39% last week from a high of 4.82% on Oct. 10.

The prospect of President-elect Obama’s choosing a different means of attacking the credit crisis will be closely watched and, by itself, may create an air of confidence that perceptions will change. But changed perceptions will not be enough.
The truth about our economic outlook is that it is predicated on demonstrably better transparency. If U.S. banks follow the lead of their European counterparts, which have recently been freed from fair-value, mark-to-market accounting, and which may retroactively mark assets to “internal models” back to July, then balance-sheet clarity will continue to be cloaked in darkness. Lack of confidence in the banking system will persist, especially among the banks themselves. The first order of attack needs to be the creation of a fundamental leadership position that leads to an open, transparent and accountable measure of balance sheet assets and liabilities. As long as failing banks are being propped up, this cycle of credit contraction will persist.

The outlook for the economy is inextricably tied to the price of oil. The run-up of benchmark crude this summer to the record $145 a barrel level, and its subsequent fall to half that level, has wreaked havoc throughout the economy. Similarly, the run-up in commodity prices, and their subsequent fall, also has caused a lot of damage. Together, the dramatic rise and fall in the pricde of oil and other commodities is a harbinger of greater volatility in the future.

Follow the Money

Follow the money. Capital rapidly inflated the tech-stock bubble. When that bubble burst, capital flowed into and flooded the hard-asset world of real estate. When that bubble burst fast, speculative money dove into oil and commodities. When the U.S. and world economies looked weak, those bubbles burst. The looming threat of inflation this past summer instantly gave way after the drop of oil, gold, metals and agricultural commodities. And now, deflation is seen as the looming threat on the horizon.

Which threat should we worry about?

The answer is - both. The prospect for near-term deflation seems all too real. As raw material prices fall and finished good prices fall due to a lack of purchasing power resulting from lack of credit and world-wide recessionary fears, the U.S. consumer has fundamentally changed his or her collective psychology. Is U.S. consumerism, which is responsible for 70% of GDP, in full retreat? If it is, as all measures project, then it’s likely that government stimulus efforts will overshoot their intended mark.
Just look at what the United States has done already as it battles this financial crisis. It has:

The Source of Mortgage Money

Where does mortgage money actually come from? When you get a $500K mortgage, who actually writes the checks? Most people have no idea. Does it come from a bank? Does it come from the government or some large quasi-governmental agency like Fannie Mae or Freddie Mac? It all seems so confusing and the numbers are so big that they become abstract. But an understanding of where the cash comes from is the first step to understanding how the mortgage industry operates.

You can effectively break down the source of money into two broad categories. On the one hand, you have banks that recycle money that's been deposited into personal and corporate accounts. We all have bank accounts; checking accounts, savings accounts. That money all belongs to us and the bank pays us interest on it. But they, in turn, lend that same money out to people who want to borrow it.

These banks then charge their borrowers a higher interest rate than they offer to their savers. That's how they make their money. They charge what's called "a spread" between their borrowing interest rates and their deposit interest rates. In fact, banks can even lend out more money than they physically have on deposit, based on ratios federally regulated by certain governmental agencies. But the details of that mechanism are beyond the objectives of this article. The point is that banks get money from our deposits and that's what they lend out to their borrowing clients.

The interest rates charged by these banks are heavily influenced by the decisions of the Federal Reserve. Most of us are familiar with Alan Greenspan who has been the chairman of the Fed since 1992. His term just came to an end on January 31 2006 and he is now being replaced by Ben Bernanke. At the time of this recording, the Fed has raised interest rates 14 consecutive times during the past two years to gradually tighten a highly accommodating monetary policy that's been in place since 2001.

The Fed manipulates interest rates by buying and selling bonds in the bond markets. During challenging economic times, the Fed buys bonds on the open market, and they pay for these bonds with cash. As the Fed continues buying bonds, it floods the market with cash. All of this excess cash makes money more available for people who want to borrow and interest rates naturally come down as different lenders compete for a limited number of borrowers. Think about it. If there's excess cash out there, the interest rates to borrow that money gets bid down as different lenders compete for the business. Borrowers naturally go for the lowest rate.

When the economy starts growing again, consumer confidence starts rising and people start spending money again. They buy cars. They buy stainless steel refrigerators. They buy computers. With rising demand, companies can start charging more for their products. Profits start rising and soon, workers start asking for raises and better benefits. That increases costs for companies and a vicious cycle of inflation begins.

Inflation is a complicated phenomenon but suffice it to say, it can send the economy into a tailspin. So, to slow down that cycle, the Fed can start selling bonds on the market. Buyers pay for these bonds with cash and the Fed immediately puts that money away, taking the cash OUT of the economy. With less cash available on the open market, borrowers start bidding up interest rates which dampens the feeding frenzy and keeps the economic growth at a sustainable level.

The interest rate directly affected by the Fed is what's called "the Overnight Rate." This rate is what the banks charge each other. You may or may not be familiar with the Overnight Rate but most of us are familiar with the Prime Rate. This rate is simply the Overnight Rate plus 3. Right now, for example, the Overnight Rate is 4.5% so the Prime Rate is 7.5%. Every time the Fed makes a change, the Prime Rate changes at the exact same time.

There are also a number of indexes that are affected by these policy changes made by the Fed. Some of you have heard of the LIBOR index. If you're curious, the acronym LIBOR stands for the London Inter-Bank Offered Rate. You may have also heard about the MTA index. It stands for the Monthly Treasury Average and there are others like the Cost of Funds Index and so on. All of these indexes are all heavily influenced by the actions of the Fed. So as you can imagine, they have all gone up significantly during the past two years. In 2003, the Prime Rate was at 4.00%. Today, it's at 7.5%. In 2003, the LIBOR and MTA indexes were both around 1.00%. Today, they're at 5.3% and 4.7% respectively.

The Prime Rate and all these various indices govern the interest rates of all variable rate loan products. For example, a home equity line of credit is a variable rate product and is generally tied to the Prime Rate. There are also a lot of loan products these days that are fixed for the first few years, but that become variable after that. Once the fixed period expires, they are tied to one of the indices like the LIBOR or the MTA. Anyone who has a variable rate product has seen their payments go up significantly over the past two years.

We started this discussion by saying there are two primary sources of mortgage money. The first is from bank deposits. The second comes from a wide variety of "investors" who provide money through Wall Street. But don't think these are just a bunch of super wealthy individuals. They're actually Money Managers that are managing our own money. Most of us have investment accounts like Insurance Funds, Pension Funds and various Retirement Funds. Many of the accounts that contain all these funds end up housing huge amounts of cash. You can imagine the Pension Fund for General Motors or some other Fortune 500 company. Think about Insurance Companies like New York Life or State Farm. These companies manage immense sums of money; money they have accumulated from all their contributors - people like you and me.

These huge funds are managed by professional Money Managers. They are always trying to maximize the return they get on this money so they look for good places to invest. For the most part, they end up putting the cash into three main areas. They buy equities; stocks of various companies that trade on the stock exchanges - shares of General Electric or Google or Starbucks Coffee. They also buy corporate and government bonds. That's the second choice. And they buy what's called "mortgage-backed securities". That's the third choice. Well, those are mortgages! They're bundled mortgage loans that are bought and sold on Wall Street every day.

Essentially, these various Money Managers approach the mortgage business and say, "all right, you can lend out our money as long as you follow these guidelines". The guidelines they're referring to are the underwriting guidelines Mortgage Brokers have to follow when helping someone apply for a loan. The interest you pay becomes the return on investment for these Money Managers. So that's where much of the money comes from. Now, within certain limits, many of these loans are insured by Fannie Mae or Freddie Mac as long as they meet their underwriting guidelines. As you can imagine, most investors have guidelines that closely resemble the Fannie Mae or Freddie Mac standard underwriting guidelines. The Fannie Mae and Freddie Mac guidelines are the benchmark for the entire industry.

Today, there's so much money out there, money that has accumulated from Baby Boomers putting money aside for their retirement during the past 25 years, that a lot of investors have widened their guidelines beyond the standard Fannie Mae or Freddie Mac requirements. This is happening through the competitive process. There's a lot of money out there. An economist might say, "there's excess capital" out there. And what happens when there's excess capital? Well, you can bet on two major results. First, you can bet that interest rates will get bid down as various investors compete for the business. Second, you'll start seeing more and more innovative loan programs out there.

You have all seen this in your own lives. You've seen interest rates get bid down lower and lower with the bottom just behind us, back in 2003. Interest rates are now slowly on the rise again and you can bet they'll start rising faster when all the Baby Boomers start retiring in a few years and start drawing money out of those huge pools of investment capital. You've also seen a flood of innovative loan programs. First came all the different Adjustable Rate Mortgages, or ARMs. Then came the Interest Only options. Now, they have these Negative Amortization loans. You know the ones: the loans that start with an interest rate of just 1%. Interest rates were never that low and they never will be. These loans allow borrower to make payments that are not even enough to pay the interest. So the loan balance actually gets bigger each and every month. We've all seen these phenomena play out right in front of our eyes.

On the surface, it looks like all these mortgages come from a few large well known players; companies like Countrywide Mortgage, Wells Fargo, Chase or Bank of America. Yes, these guys are huge players in the mortgage business. But that doesn't mean the money is all theirs. Of course, Wells Fargo and Bank of America have all kinds of regular banking business but their mortgage divisions are generally in the business of packaging and servicing loans. They package the loans and sell them on Wall Street. In many cases, you may not even know because they continue to "service" the loans themselves. That means they do the customer service, they collect your payments and they pass them on to the investor that holds the actual loan, less an administration fee of course.

So again, this is all a direct result of excess capital. There's a lot of money out there and they're all competing for your business; your mortgage. So they're all offering different perks to try and get you to pick them. A lower rate. Looser guidelines. Flexible new loan programs. It's all marketing, trying to get you to borrow their money rather than somebody else's.

Reviewing, there are two sources of mortgage money and both sources come indirectly from you and me. Your bank deposits get recycled and lent back out to the community. Your investment, insurance and retirement funds also get recycled and lent back out. It's all a big circle from our savings to our debts. Obviously, there are some very wealthy people out there who have huge savings and few debts. Others have huge debts and very little savings. But in the aggregate, it's the entire community that lends money to itself and it's the total amount of savings in the community that determines the interest rates within it.

If there's lots of money available, interest rates are low. If there's a shortage of money, interest rates rise. So the fact that we've enjoyed steadily dropping interest rates in recent years is a sign that the economy is healthy and that there's lots of money available. And the fact that rates are now slowly rising is a sign that the pool of investment capital is slowly shrinking. The soon-to-be retiring Baby Boom generation will definitely shrink that pool of money and we can expect interest rates to continue rising as a result. In the meantime, it's still a great time to borrow money and we should all take advantage of it while it lasts.

US Home Mortgage Trends

The US home mortgage trend and the fluctuation of home mortgage rates are important benchmarks of the overall economy. While there are other other economic factors interest rates are largely tied to the decisions made by the Federal Reserve Bank. Interest rates are adjusted by the Fed according to financial matters in the US such as GDP growth, export and import numbers, and the inflation rate.

Mortgage rates are used to help control the economy. If the movement of the economy is considered to be too fast, higher rates are imposed so that individuals and corporations would be less willing to apply for loans. Conversely if the economy seems to be rather slow or stagnant, rates are lowered so that people would be more enticed to engage in additional business transactions. Thus home mortgage trends will generally move up or down as the economy contracts or expands.

Trend in Home Mortgage Rates:

It is interesting to observe that mortgage rates have been lower than 8.5% since the year 1996, with the lowest rates of about 5.5% seen in the middle of 2005. While individuals might see an extremely different mortgage rate at a particular time due to other factors that affect rates (their salaries or credit histories), the lower trend has generally been observed to be generally consistent throughout the US economy.

The fall of interest rates from higher levels prior to 1996 allowed more people to buy their homes, purchase lands, or trade up to larger houses. Perhaps this reflects an effort to speed up the economy from that time until now. However this year, mortgage rates are rising probably because of some unwise lending decisions made during a time of too easy money and rates held at extremely low levels by the Federal Reserve Bank for too long of a time period. A vicious correction is now underway with mortgage markets highly unsettled.

Current Home Mortgage Rates:

Mortgage rates in the year 2008 are generally higher than that of the previous year with rates of about 6.5 percent for 30-year fixed rate mortgages (FRM). The difference between interest rates this year and last year are not really significantly high as it would entail only a few hundred dollars increase in yearly payments. This probably would not stop many people from getting mortgages, however if the rise continues, you would expect that more people would become hesitant to apply for home loans.

The problem with the current trend in home mortgage rates is not so much an increase in rates but an unwillingness of leaders to lend, even to people with good credit histories. The trauma and losses to lenders caused by the ongoing sub prime mortgage debacle starting in 2007 has left many lenders with weak balance sheets and they are operating in a panic mode. A record level of foreclosures in 2008 is causing a sharp contraction in home mortgage lending activity.

With probably a few hundred billions of mortgage and derivative instrument write downs still to take place by mortgage lenders the trend for new home mortgage lending will probably remain down for some time to come. However, that is not all bad news for those looking for a new home. People who have cash to work with and a good relationship with their bank can probably find super deals on homes by working directly with stressed out lenders who have an excessive inventory of foreclosed homes on their books.

In fact, if you have significant cash on deposit with a bank or financial institution you may not even have to use it for your home purchase. Even with the home mortgage trend down lenders that have non performing loans on their books will be eager to work with those who have capital on deposit and may make deals that will require very little if any of the cash rich home buyers cash to be used as an extra inducement to get foreclosed homes off their books.

Mortgage Lenders and First-time Buyers Stall While the Market Worsens

The mortgage market has hit something of a standstill and it is having knock on effects. Patrick Collinson and Rupert Jones said it best when writing for the Guardian: “Britain's mortgage market appears to be in meltdown, with first-time buyers going on strike and lenders joining them.”

Where many first time buyers are holding onto their deposits and waiting, many banks are taking the same tack. A First Direct mortgage which was on the market a week ago for 5.49% rose to 6.15% in just one week. Banks are desperate to make money and fearful of lending it to irresponsible spenders. Resultantly, mortgages are being denied to those with the slightest blemish on their credit records. Predictions are that house prices this year might fall by record numbers and many houses are already £25,000 cheaper this month than they were last month. This isn’t encouraging first time buyers to take the plunge though. Many first time buyers are scared of buying a home now in case it is worth even less in a year’s time.

Experts have predicted that it could now be the time that the credit crunch loses its grip on the markets and many are saying that margins are improving, but various statistics are indicating that is little more than optimism. Banks are not happy lending and mortgages are drying up which prevents the markets from growing at all, instead they are stagnating. With rising food and fuel prices moral and financial confidence is low, people are more concerned with making ends meet than with buying new homes.

With the last parentally guaranteed 100% mortgage product now off the market, it is predicted that 95% mortgages will be next to go, followed closely by other low deposit deals. According a Guardian article which refers to the Council of Mortgage Lenders, “New buyers now need an average deposit of 13%. As the average first loan is around £113,490, that means buyers have to stump up a deposit of almost £17,000.”

The same enlightening Guardian article also comments: “Many borrowers are opting for the once-ignored standard variable rate: there are no fees and they are free to switch to better rates when they appear. But lenders are getting wise: Abbey is the latest bank to ban new customers from its SVR.”

Because of the financial instability in the markets and the skittish behavior of the banks The Council of Mortgage Lenders have said that they expect more property repossessions to occur this year than last year and their predicted figures show an increase of 18000 repossessions, not including second charge secured loans. Northern Rock and Bradford and Bingley have both been noted as repossessing more homes now than they were before the credit crunch began.

Increasing by two thirds over the past year and a half, arrangement fees now cost more than any first time buyer would expect to pay. This was criticised by the Chancellor of the Exchequer Alastair Darling, but experts in the mortgage industry said that this was a realistic reflection of the challenges banks face in this financial climate and they called Darling’s concerns and agitations ‘naive’.

Why Freedom Loan From Benchmark Lending is the Most Popular

When you think of mortgages that enable thousands of people to acquire homes every year, you are thinking of the Benchmark Lending group which has provided much needed finances to get new homes or refinance the existing homes to many families for over ten years. They offer tailor made mortgages to suit the needs of customers ensuring that you can afford it. They make this happen by considering the cash flow of every customer. They also consider the repayment period, investment opportunities and your equity plans. The Benchmark lending group was founded by Barney Aldridge in 1995 as a primary mortgage lending bank and it continues to grow. Customers can expect no hassles and there are no middlemen. The headquarters are located in Northern California and their culture is to provide a good service with dedication and passion.

When you need to apply for a loan, the company assures you that the process is easy and, you do not have to worry about complications. You will have a loan officer guide you through the whole process briefing you on all vital issues on credit until you have a satisfactory end. At Benchmark lending group, the management consists of people who have mastered the industry and proved that they can deliver what it takes to progress the business. It consists of the President who is the Chief Executive officer. His name is Jason Ehrlicher and he began as a loan officer in the company and years have seen him become capable and able to lead owing to his rich experience and dedication to the company since it began.

The others in the management team include the Director of Human Resources, Vice President of Sales and the Sales Manager. The first kind of loan they offer is the Fixed Rate Loan where the rate does not change and one can get a loan to repay in 10, 15, 20 and 30 years. People who go for such a loan must be planning to keep their house for more than 10 years and, for those who do not plan to use their home equity for the period of the loan. The other kind of mortgage the Benchmark Lending group offer is the adjustable rate mortgage. This loan is for people who plan to keep their house for up to 10 years or less. The duration for this kind of mortgage is usually 3, 5, 7 and 10 years.

A freedom loan from Benchmark Lending is the most popular because it is an adjustable loan that enables you to choose from 4 different payment methods according to your convenience every month. The loan is tailor made for people who do not have a regular or stable cash flow and for people who want to make other investments. Another loan suitable for people with fluctuating incomes is the Better Half loan and, it will help people with unstable monthly income realize their dream of owning a home. There are very many other options to choose from and, you can even apply online on their site. There are other resources that you will find very helpful. Before you take any mortgage, it is good to consider your income and your flexibility and ability to repay given the many options of repayments. Get a good system that will help you realize your dream for a good home.

Fixed Rate Student Loans: Higher Education not a Big Deal

Pursuing higher studies in this era has become an uphill task for middle class and lower class students. Though education loans are there to protect them like an umbrella in the rain of economic inadequacy, the rise and fall of interest rates became a tight spot for getting education loans. There is no point in worrying about insufficiency of funds in making your dreams come true. Fixed rate student loans are there to help you in these sorts of problems. Fixed rate loans are those for which the rate of interest is fixed and doesn’t change with the changing market rates.

Fixed rate student loans also allow a borrower to have a review on the fixed rate for certain period of time. The fixed rate makes you tension free about the change of rates, but the borrower doesn’t get the benefit of fall of interest rates.

Types

The most economical fixed rate student loans can be applied both as secured and unsecured loans.

For getting secured fixed rate loans the student is required to place some collateral to the lender or to the bank, whatever it may be. Collateral includes any of his or her own property. Being a student you will be not having any personal property. In this scenario parents of the student can take loan on the name of student keeping their property as collateral.

An unsecured loan doesn’t need any collateral. The rate of interest will be a bit high compared to secured fixed rate loans. Amount that can be granted through unsecured loans will be less.

Benefits

Fixed rate student loans offer you funds that are urgently required to fulfil the needs like paying tuition fee, buying stationary goods and all the expenses to complete your education. With the credit market booming with respect to the various economic spheres, student loans from private lenders are gradually becoming easier to get. Uncountable lending agencies are going in for offering student loans UK after taking care of every odd problem a borrower may have.

Home Loan Rate - Do You Need Fixed-rate or Adjustable Type?

Are you looking to buy a home? You are actually at a great advantage now, despite all the horror stories on the news every night. The astounding number of foreclosures across the country has forced the government to find ways to stimulate the economy. One of the major benefits for buyers in the market today is the low 30-year fixed rate.

Recently, 30-year fixed rates dropped to the lowest level in the last four years. The average fixed mortgage loan rate in the final weeks of January 2008 was 5.48%, marginally above 2004's low of 5.40%. This marks the third consecutive week that 30-year fixed rates were below six percent.

In a battle to combat a recession, the Federal Reserve implemented key interest rate cuts. This has been one of the main factors in the drop, along with a further weakening of the economy. It is hoped such a large drop in rates will spur more people to buy homes, whether new or existing.

For current homeowners looking to refinance, the current low 30-year fixed rate is the perfect opportunity. With so many in foreclosure peril from adjustable rate mortgage loans, homeowners are looking to save money and lower payments.

The advantages of a 30-year fixed rate are obvious. While the payments initially may be more than an adjustable rate mortgage, the fixed nature of the mortgage will keep payments steady. When adjustable rates balloon, as they have recently, the fixed rate will remain the same. Also, the early payments of a 30-year fixed rate loan are primarily interest, which is tax deductible. Monthly financial planning is easier when you know what each payment will be.

One of the cons of a 30-year fixed rate is higher interest. With a 15-year mortgage, payments are much higher but interest is significantly lower. Also, without a down payment, mortgage insurance is usually required. This adds a small amount onto each payment until a percentage of the principle has been paid, usually twenty percent. After this the private mortgage insurance (PMI) is no longer required. If you have PMI in your mortgage payments, be sure to notify the lending institution when you have paid off that percentage of your property. Otherwise they may continue to charge you for it.

Though there are some slight drawbacks associated with a 30-year fixed rate mortgage, they are generally a homeowner's best bet. Some studies have shown homeowners saving money on adjustable rate mortgages, but these are rare cases. Especially with the current economic uncertainty, a 30-year fixed rate is a reliable constant.

Lending institutions have varying interest offers. Many Websites report on the current rates offered by large lenders. A good site has no direct connection or interests attached to any of these companies. Be mindful of any sites that offer advertising for any financial institutions.

Want to make this loan slightly more advantageous? Consider the interest only 30 year fixed rate loan. With this product, you can make interest only payments for the first ten years. After the first ten years, the loan amortizes out over the remaining 20 years. Financing a home in this manner will expand your purchasing power by an extra 20% with the same mortgage payment as a straight 30 year amortizing loan.

With smart shopping, it's a great time to find a home with the current 30-year fixed mortgage rates. The housing situation will recover, and the rates will go up. So take advantage of this time to buy your dream home or refinance your existing property.

30 Year Fixed Rate Mortgages Modernized

30 Year Fixed Rate mortgages are now thought of as old fashioned. We use the words "standard" or "classic" or even "conventional" to describe one of the most popular loans in history. You may be surprised to know that the history of the 30 year fixed rate mortgage is not too long, and in fact its popularity a relatively recent affair. In fact, the 30 year fixed rate mortgage was introduced during the New Deal of President Franklin Delano Roosevelt's administration through the creation of the FHA, or Federal Housing Administration.

Prior to the new deal, mortgages were primarily of the "balloon" variety, similar in concept to an auto lease. You could make payments each month for 20 years and still owe the bank a large lump sum at the end of the loan. More disturbingly, mortgages made prior to the advent of the 30 year fixed often had a "call" provision. You may have heard the expression of a bank "calling" a loan before, even if it was in an old movie. What this means is, unlike the fixed rate mortgages of today which have a definite end date, a bank prior to Roosevelt's FHA could demand immediate payment at any time, regardless of how many years were left on the loan. If the borrower could not refinance, they would lose their home to the bank in a foreclosure. And lose them they did, by the hundreds of thousands at the very height of the Great Depression.

Roosevelt's administration devised a new concept in banking, a loan which had a fixed period of time, called a term, during which a fixed amount of principal and a fixed or variable amount of interest would be paid back. In full. This new "fully amortizing" loan consisting of principal and interest was a major innovation in banking, and resulted in the explosion of home ownership that we have had in the USA since World War II.

The availability of cheap, safe home loans with no surprises may seem old fashioned today, but when we look at today's market conditions, where interest rates rise daily and the mortgage industry roils under the burden of hundreds of thousands of bad loans, old fashioned 30 year fixed rate loans don't seem like such a bad choice do they?

The problem most borrowers run into when they look to refinance into a 30 year fixed rate mortgage is that their payments look like they are going up. And in many cases this can be true, because not all borrowers qualify for the best rates, and qualifying for mortgages is harder today than it was five years ago as lending standards tighten. Whereas 30 year fixed rate mortgages used to be considered affordable by comparison to their competition, over the past 20 years they have become increasingly expensive compared to Adjustable Rate Mortgages.

A newer issue that affects many borrowers seeking to refinance into the security of a 30 year fixed rate is that they would have to give up some of the flexibility of their current Adjustable Rate home loan. This particularly affects borrowers who are currently in Cash Flow or Payment Option ARM mortgages, which allow borrowers to defer interest in exchange for home equity to obtain a dramatically lower minimum payment each month.

30 year fixed loans are good for a lot of things, but flexibility has traditionally not been one of them. Until now that is. New programs have been introduced over the past several months which combine the safe, secure dependable 30 year fixed rate mortgage with the powerful cash flow options of ARM mortgages. The result? The 30 Year Fixed Cash Flow mortgage. Low payments, Fixed Rates, and if you want to hold on to it for 30 years you'll own the home at the end. They are incredible loans, allowing you to pay as little as $1100 a month as the minimum payment on a $500,000 mortgage, while maintaining a fixed rate for the life of the loan. No nasty surprises, no nightmares about your mortgage. Just a smart choice made more affordable, and surprisingly easier to qualify for. Provided that you have been paying your mortgage on time and have at least 20% equity in your home, these loans are generally available with no minimum credit score requirement, and certain lenders don't even charge an appraisal fee upfront, making refinancing into a30 year fixed rate mortgage with a cash flow option one of the easiest, most effective ways to avoid the high payments you may face if your adjustable rate mortgage's introductory rate is about to expire.

Bringing old fashioned sensibility to the creative financial options of today's modern mortgages is a great fit for borrowers from nearly any walk of life, however it is important to note that only a handful of lenders currently offer this program. If your mortgage company cannot help you obtain a 30 year fixed cash flow refinance, feel free to contact us and we'll try to steer you in the right direction. As always, our phones and our emails are open to your questions. Until next time, Live Smart.

Three Bad Reasons For Needing A Mortgage Lender

Everyone tells you you're going places, and of course, you believe them. You're 26. You're a supervisor at a multi-national marketing company. You get a six-digit pay monthly. What's more, it looks like you're headed for greater and bigger things in the company hierarchy. Do all these mean you should get a house?

Mortgage lenders would be the first to tell you owning a house is good, and it is - in principle. In fact, owning a house is a great way to build wealth over time. What mortgage lenders don't tell you, however, is that this does not mean everyone should be a homeowner. Homeownership entails a lot, not just monthly payments. You'd have to be dedicated to home improvements, for example, and you'd have to faithfully discharge your debts on time to your mortgage lender. So, if any of the following is your reason for wanting to buy a home, do not contact your mortgage lender just yet. Sit down, lean back, and read on.

1. A house is a solid investment.
Yes, a house is a great way to build wealth over time; and yes, you put your money to good use when you buy a house. However, if it's only good investment you're after, there are better ways of doubling - even tripling - your money's worth. Stocks, for example, have an average appreciation that exceeds the inflation rate by at least seven percentage points.

Then, too, as mortgage lenders know, the value of homes could seesaw along the dollar scale. For example, real estate value nosedived in the 1990s. It took ten years for Los Angeles homes to regain their valuation. If you just bought a home and this happened, you could end up owing a bigger mortgage than your home could be sold for.

2. Paying rent is akin to throwing money away.
Is it? Rent is the money you pay for a place to stay. It's way cheaper than monthly house payments. In some cities, in fact, rent is so cheap there seems to be no point in owning a house. If not wanting to pay rent is your only reason for buying a house, you've no business calling your mortgage lender. Many people stretch their finances too tautly to buy houses. They end up getting loans with exotic terms from predatory mortgage lenders. Then, as the real estate market takes a heavy beating, what had once seemed like reasonable payments become onerous. Finances are shot in the foot, and you end up not just delinquent with the payments to your mortgage lender, but also faced with the possibility of losing your home. It's true renters are confronted by the rising cost of rental and belligerent landlords. Homeowners are not spared these problems, however. They have rising taxes, maintenance costs, and difficult neighbors.

3. I need a tax deduction.
This is the silliest reason among all reasons you could come up with for needing a mortgage lender. True, the tax break is nice, and you also need somewhere to live. But crunch the figures carefully before deciding you need a mortgage just to avail of write-offs. Here's the real deal: your write-off is directly proportionate to your tax bracket. If you're in the top federal tax bracket, every dollar you pay in mortgage interest only saves you 35 cents in taxes. Clearly, getting a house from a mortgage lender just to get a tax break is akin to giving someone a dollar in exchange for 35 cents or even less - if you belong to the 25% tax brackets or lower!

Homeownership is a good way to grow money and roots at the same time. Just because almost everyone you know wants to be a homeowner doesn't mean you should be one, too.

Mortgage Broker Or Mortgage Lender: Which Should You Use?

It is recommended that you work with a mortgage broker or a mortgage lender before you shop for a house. You don't want to end up falling in love with a home and then finding out you can't afford it. Getting pre-qualified or pre-approved for a loan can help you decide what price range fits your situation. So what's the difference between a mortgage broker and a mortgage lender?

A mortgage broker is basically a retail seller of a loan. They get paid a commission from the lender and a service fee from you. The service fee can include an origination fee, a processing fee, a closing fee, and/or points on the loan. The fees will be listed on the documents you sign at the title company, on the day of closing. The advantage of using a mortgage broker is that they have information on a wide range of lenders and loans that can fit your needs. A mortgage broker's obligation to his/her customer is to find the best rate possible and make sure all the documents are prepared by the closing date. To do otherwise could cause the mortgage broker to lose customers and tarnish their reputation with other real estate professionals.

A mortgage lender is the actual institution servicing your loan. A lender could be a bank, a credit union, or a quasi-government company like FNMA or "Fannie Mae". Sometimes a lender will sell the loan to the open market, but still continue to service it. The fee of a lender is typically less than that of a mortgage broker. The mortgage broker, however, might find you a better rate because they are not bound by the policies of one institution. It is, therefore, debatable that going directly to the mortgage lender for a loan will save you money.

Then who should you use? The answer is easy. Find the one who gives you the best deal. All mortgage brokers and mortgage lenders should tell you their fees upfront, so shop around. It is also a good idea, in some instances, to use a lender referred to you by your realtor. Realtors work with lenders all the time and yours might have a good feel for one that is reliable and honest. In the end, though, you should use the mortgage broker or mortgage lender that is right for you.

Mortgage Lenders Explained

For most individuals, a house is the most expensive acquisition that a person makes in his lifetime. More often than not the house is purchased on money borrowed from professional lenders. It is therefore imperative to know exactly what one is in for when one is getting their first mortgage.

Broadly speaking, the mortgage lender lends you the money that you require for your house and expects you to pay back the same within a specified time along with interest. There are two basic types of players in the mortgage market: lenders and brokers. You have the option of going directly to an authorized lender, or you could approach a mortgage broker who helps you obtain the mortgage from any of the several lenders in the market. It is a jungle out there and it might be helpful to have someone who can help you navigate in it. But remember that the fee that the mortgage broker charges may be higher than what the authorized money lenders charges. Also be aware of the fact that most of these brokers are not licensed and hence are not bound by any regulation.

What do mortgage lenders look for?

Mortgage lenders are mainly concerned about your credit report. In a credit report they scrutinize your debt ratio which is an indicator of your earnings and how much you owe, as well as over all credit rating. Proof of earnings is another key criterion to decide whether the lender will finally approve your loan amount or not. This information is generally obtained from tax returns and pay stubs submitted by you. In order to get the mortgage without much hassle, it is important to keep your records clean and unquestionable. But what if you have a not so perfect credit report? - Well in that case there are several other lenders who can still give you a loan, by charging you a higher rate of interest.

Why do mortgage lenders sometimes turn down mortgage request?
This may be due to factors such as bad credit report, low annual income or even when they are not satisfied with the house that you plan to buy.

How much of a mortgage loan can you reasonably expect from these lenders?
A kind of thumb rule states that you can get a loan amount that is 4-5 times your annual income. So the more you earn, the bigger the mortgage you are eligible for.

What is the process of obtaining a mortgage?
You can either approach the lender to get a fair assessment of your situation and ask them how much they are willing to give you, and then look for a house in that budget. You can even select a house and then apply to the lender for payment. Whichever way you go, you have to first obtain an ‘Agreement in Principle' which states the amount the lender is willing to pay for your house. This document is valid generally for a period of 3 months or so. After this you are expected to complete the ‘Mortgage Application' and submit the same with required documents pertaining to your financial stability and creditworthiness. The house is then inspected by a qualified valuer.

After your mortgage application is found to be satisfactory the lender will issue a ‘Mortgage Offer', or an ‘Offer of Advance'. This document will also state the conditions on which the lender is offering you the mortgage.

What are the fees associated with mortgage application process?
One is generally required to pay an ‘Administration or Application fee' for setting up the mortgage. A separate ‘Valuation Fee' may sometimes also be charged.

How to Choose the Right Mortgage Lenders?

Are you on the ultimate quest? The one to locate the type of mortgage loans that benefit the buyer, as well as the lender? Let us take you on a trip through chosing the right mortgage loan lender.

Mortgage lenders must have the following features to take the mortgage lead in the market.
• Good management and customer services.
• Proper database for storing the data with backup in order to avoid any loss.
• Financial instrument must be there to analyze the interest rates.
• Mortgage lenders should make them visible in the market through advertisements and electronic media is the best option for them.

Mortgage lenders can help determine whether you will benefit from a fixed rate loan

or an adjustable mortgage. They can outline a home equity loan that can help reduce credit card debt. The advantages of online mortgage lenders are plentiful and just a few clicks away.
Paying for mortgage should be a fulfilling responsibility and not a burden. Companies that offer good deals to help people pay-off in time are the ones to look for.

Mortgage lenders are qualified experts in the mortgage and financial world. They are able and willing to help you obtain the best loan terms. Mortgage lenders may also be affiliated with state or federal agencies that provide funds or guarantee real estate loans such as HUD and Freddy Mac.

Mortgage lenders have begun to react to the call to pass on yesterday's interest rate cut, with several of the UK's largest providers announcing price cuts, including the government-owned Northern Rock. Mortgages are big business, and it doesn’t make sense for a lender to be involved in bad business.

Lenders will not get off your back; instead they will require you to pay more each time you pass your due dates. Mortgage lenders may also be affiliated with state or federal agencies that provide funds or guarantee real estate loans such as HUD and Freddy Mac. Different lending institutions will quote you different prices; therefore borrowers should always contact several home mortgage lenders to make sure you're getting the best deal. By providing us a small amount of information about your home and the debt you want to eliminate.

There are also specialty mortgage lenders for borrowers with bad credit or for those who have gone through other types of financial hardship, such as bankruptcy. We can put you in direct contact with the mortgage lenders for bad credit. At the same time, mortgage lenders are more stringent than ever due to painful losses due to delinquencies and foreclosures, so it is important to write purchase offers on houses that can hold up to mortgage company and appraiser scrutiny.

Mortgage lenders are in the business of lending people money to put them in a home. While this helps homeowners, the lenders do not do this out of the goodness of their heart. You also must understand that this is a business and the lender needs to make money. This means that you will be charged an interest rate to borrow the money; you will be required to keep insurance on the home; and you will be required to pay closing costs associated with borrowing the money