Fed Observed Preserving Stance on History Very low Tuesday, April 2, 2013

WASHINGTON -- The Federal Reserve on Wednesday is anticipated to take care of its resolve to help keep borrowing prices at report lows despite increasing indications which the economic climate is strengthening.

The Fed will conclude a two-day assembly which has a policy assertion and up-to-date financial forecasts. Afterward, Chairman Ben Bernanke will maintain a news convention. Most analysts believe policymakers will admit the economy's advancements but depart the Fed's stimulative guidelines unchanged.

Bernanke has claimed in latest months the career current market, especially, includes a great distance to check out comprehensive well being and nonetheless requires the Fed's amazing guidance.

The unemployment price, at seven.seven per cent, stays very well previously mentioned the 5 p.c to six % array connected using a balanced economic system. The Fed has claimed it strategies to maintain short-term costs at record lows at least until unemployment falls to six.five percent, provided that the inflation outlook stays delicate. And it foresees unemployment remaining above 6.5 per cent right until at least the top of 2015.

Economists think Bernanke will choose note of your economy's gains. But most foresee no pullback within the Fed's tactic of holding short-term prices at document lows and of buying $85 billion a month in Treasurys and home finance loan bonds to help keep long-term bank loan premiums down.

"Even though the economy has enhanced, it has not enhanced adequate to switch program," states Diane Swonk, chief economist Mesirow Fiscal. "We never have unemployment very low enough but."

The overall economy slowed to an yearly advancement fee of just 0.one p.c from the October-December quarter, a near-stall which was thanks mostly to temporary aspects that have largely faded. Economists assume growth has rebounded from the January-March quarter to an yearly price about 2 p.c or even more. Essentially the most recent knowledge guidance that watch.

Us citizens invested much more at merchants in February inspite of larger Social Protection taxes that shrank most workers' paychecks. Producing attained solidly in February. And businesses have long gone on the four-month employing spree, introducing a mean of 205,000 employment per month. In February, the unemployment fee, though nonetheless large, achieved its cheapest stage in additional than four yrs.

The brighter information has prompted speculation that the Fed might be planning to dial back its easy-money insurance policies. These types of considering continues to be fed by fears voiced by a couple of Fed regional financial institution presidents with regards to the low-rate guidelines.

Inflation Fears

These include things like fears that the Fed has pumped a lot of income into your financial state that it could eventually ignite inflation, fuel speculative asset bubbles or destabilize markets when the Fed needs to start off increasing charges or unloading its record $3 trillion financial commitment portfolio.

Minutes of the December and January coverage conferences confirmed that some officials instructed which the Fed might should at the least cut back its $85 billion-a-month in bond buys. Even now, the low-rate guidelines been given solid backing in 11-1 votes. And economists see no signal this assist is eroding.

When he gave the Fed's twice-a-year economic report back to Congress in February, Bernanke defended the low-interest fee systems. And whilst he acknowledged the fears of critics, he downplayed them. He struck precisely the same notice in a speech into a conference in San Francisco. There, Bernanke explained it might be "quite costly" on the U.S. economic climate in the event the Fed pulled again far too before long.

At their last assembly Jan. 28-29, Fed officials reaffirmed their choice in December to maintain short-term premiums at super-lows at the very least assuming that unemployment stays previously mentioned six.five per cent. The Fed's benchmark price for overnight lender lending has remained in a report low around zero due to the fact December 2008. The Fed also repeated its plan to hold acquiring bonds to reduce long-term premiums till the job current market had improved "substantially."

One particular reason for the Fed's reluctance to cut back its stimulus will be the background on the past a few yrs. In each and every with the a few, financial prospective customers appeared promising as the yr started. Still in every single situation, the economic system stumbled.

In 2010, U.S. growth was harm by turmoil from Europe's debt disaster. In 2011, a spike in gasoline price ranges and supply disruptions due to Japan's earthquake and tsunami dampened development. As well as in 2012, greater gasoline prices minimize into purchaser spending.

However the economic climate has brightened this yr, it nevertheless faces threats, which include across-the-board authorities paying out cuts that took effect March one and therefore are anticipated to induce furloughs and layoffs. All those paying out cuts, coupled with the Social Protection tax raise and higher taxes on top earners, are envisioned to cut progress in half this year, based on the Congressional Spending budget Office. The CBO predicts which the drag will gradual development by 1.5 percentage factors, to one.five percent.

David Jones, main economist at DMJ Advisors, expects the Fed's procedures to stay intact this 7 days and at its April conference. But he says policymakers may sign at their June assembly that they are thinking about some improvements within their bond-buying application.

"I assume the June assembly would be the one which really counts," Jones says. "At that time the Fed could contemplate at least tapering its $85 billion in bond buys to some smaller sized level."
Posted by at 13:20:50

National mortgage rates for March 21, 2013 Monday, March 25, 2013

Mortgage rates receded this week as investors kept their eyes on the debt crisis in Cyprus and sought safety in U.S. mortgage and Treasury bonds.

The 30-year fixed-rate mortgage fell 7 basis points to 3.78 percent. A basis point is one-hundredth of 1 percentage point.

The 15-year fixed-rate mortgage fell 6 basis points to 2.97 percent. The average rate for 30-year jumbo mortgages, or generally for those of more than $417,000, fell 5 basis points to 4.13 percent.

The 5/1 adjustable-rate mortgage fell 11 basis points to 2.71. With a 5/1 ARM, the rate is fixed for five years and adjusted annually thereafter.
Posted by at 13:37:04

Lender Paid Mortgage Insurance = Good Thing Tuesday, March 19, 2013

As FHA mortgage insurance have increased and 5% down conventional loans are as easy to approve as ever, you will see a huge jump in LPMI conforming loans. The reason is that there is no monthly mortgage insurance. The rate is slightly higher than FHA, but the payment is consistently 5-7% less every month.
Posted by at 23:46:16

Are ARMS a better way to go for my home loan? Tuesday, March 19, 2013

I am fifty eight. I have an 8-year-old adjustable-rate house loan with an interest-only possibility. The rate of interest for my bank loan is 3.5 %. I am creating added principal payments just about every thirty day period to pay from the house loan in twelve years. We decide to retire and downsize prior to that, in about seven years. Our home is probably valued at approximately $175,000 and maybe as much as $200,000.

Would it not seem sensible to halt producing the principal payments and commit much more right into a 401(k), somebody retirement account, or something else to acquire a completely new, lesser home?

Today, we are focusing our retirement housing money in a single basket: the equity inside the recent home. I count on in seven decades the existing dwelling may be worth $250,000 or maybe more, but I could also accumulate a whole new property fund applying stock cash to build funds to purchase a brand new household. What would you suggest?

Many thanks

The everyday interest-only adjustable-rate property finance loan, often called an "I-O ARM," turns into an amortized loan at yr 10. If that is accurate of your financial loan, you have got just two many years ahead of month-to-month principal payments develop into required. You will see the month-to-month mortgage loan payment maximize by quite a bit as the personal loan will be amortized about twenty years rather of 30. Your spending plan ought to be equipped to go over it, since you make more principal payments now.

In the event you have more than enough fairness in your house to avoid the price of personal mortgage insurance coverage, or PMI, I might propose which you search into refinancing. Bankrate's nationwide normal for a 15-year fixed-rate property finance loan is two.ninety six % and a pair of.68 p.c for your five-year ARM.

I haven't got a estimate for yourself with a seven-year ARM, but that can be your best option because you intend to provide the house in seven a long time.

You've got presently created an expenditure in your home. Now, you are selecting the amount of leverage you'd like in that financial commitment. Considering the fact that you might be planning to sell your current house if you downsize, you can expect to have that fairness to put toward the purchase of your respective retirement property. I don't assume you may need to take on the extra threat of buying the stock sector to get your desire retirement bungalow. This is a sensible intention to try to own your house paid off prior to retirement. Which means paying out down principal.

1 exception I'll make to that may be, in the event your employer matches all or element of your contributions to its 401(k) approach, then you can no less than choose to add approximately the limit with the corporation match.

If the inventory market does nicely, owners choose to give thought to how they may be improved off whenever they utilised their home's fairness to invest while in the inventory market. That's a person cause to acquire an interest-only home loan. Though that can be real, a couple just 7 yrs absent from retirement shouldn't depend on the inventory industry staying a greater expenditure than their house.
Posted by at 13:34:16

Are shares a much better bet than my mortgage loan Tuesday, March 12, 2013

I'm fifty eight years old and i have an 8-year-old adjustable-rate home loan with the interest-only possibility. The rate of interest for my personal loan is three.forty five %. I am making more principal payments every single thirty day period to pay from the home finance loan in 12 several years. We plan to retire and downsize right before that, in about 7 years. Our home is possible valued in between $175,000 and $200,000.

Would it not seem sensible to stop making the principal payments and invest a lot more right into a 401(k), somebody retirement account, or something else to buy a new, smaller property?

Today, we're focusing our retirement housing cash in one basket: the fairness in the present-day household. I expect in seven yrs the present residence may well be really worth $250,000 or maybe more, but I could also accumulate a new residence fund using stock money to build cash to purchase a completely new property. What would you recommend?

The everyday interest-only adjustable-rate house loan, also referred to as an "I-O ARM," will become an amortized bank loan at yr ten. If which is legitimate within your personal loan, you have got just two yrs prior to regular principal payments develop into obligatory. You will notice the regular monthly mortgage payment improve by quite a bit because the loan is going to be amortized over 20 years as an alternative of thirty. Your funds needs to be in a position to include it, given that you're making extra principal payments now.

For those who have ample equity in your home in order to avoid the expense of private property finance loan insurance, or PMI, I would recommend that you simply glance into refinancing. Bankrate's national ordinary for just a 15-year fixed-rate mortgage loan is two.ninety six % and 2.68 % for any five-year ARM.

I don't have a estimate for you personally on the seven-year ARM, but that can be the only option because you intend to sell the home in 7 decades.

You've previously created an expense in your home. Now, you're selecting exactly how much leverage you wish in that financial investment. Considering that you happen to be intending to market your latest household any time you downsize, you can expect to have that fairness to place toward the acquisition within your retirement home. I do not think you will need to take on the added hazard of investing in the stock marketplace to obtain your desire retirement bungalow. It's really a reasonable aim to try to have the house paid off in advance of retirement. That means shelling out down principal.

Just one exception I will make to that is, in the event your employer matches all or component of your contributions to its 401(k) prepare, then you will at the least want to lead approximately the restrict from the firm match.

In the event the inventory market place does perfectly, householders love to take into consideration how they may be superior off should they made use of their home's fairness to take a position from the inventory market place. That's a person explanation to possess an interest-only property finance loan. Although which can be real, a couple just seven decades absent from retirement shouldn't count on the stock marketplace staying an even better expense than their house.

Source:- http://www.bankrate.com/finance/mortgages/stocks-better-bet-than-mortgage.aspx
Posted by at 12:51:27

Mortgage Rates are Falling as the Hopes for Fiscal Sunday, December 23, 2012

As the 10 Year yield rose to 1.8% over the last few weeks it fell again during the week ending 12/22/2012 to 1.76%. The reason is simple: The fiscal cliff talks are going nowhere and it is assumed by most that we are going over it. Clearly, Obama and Boehner aren't going to bend until the pressure is much greater.
Posted by at 23:22:01

MF GLobal's John Corzine Ordered The Money Transfe Sunday, March 25, 2012

Jon S. Corzine, MF Global Holding Ltd. (MFGLQ)’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in a brokerage account with JPMorgan Chase & Co. (JPM), according to a memo written by congressional investigators.

Edith O’Brien, a treasurer for the firm, said in an e-mail quoted in the memo that the transfer was “Per JC’s direct instructions,” according to a copy of the memo obtained by Bloomberg News yesterday. The e-mail, dated Oct. 28, was sent three days before the company collapsed, the memo says. The memo does not indicate whether that phrase was the full text of the e-mail or an excerpt.

Enlarge image
Jon S. Corzine, former chairman and chief executive officer of MF Global Holdings Ltd. Photographer: Andrew Harrer/Bloomberg



Play Video
March 23 (Bloomberg) -- Jon S. Corzine , MF Global Holding Ltd.’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co. accounts in London, according to an e-mail sent by a firm executive. Bloomberg's Julie Hyman reports on Bloomberg Television's "Street Smart." (Source: Bloomberg)



Play Video
March 23 (Bloomberg) -- Bloomberg News reporter Phil Mattingly, Jay Pelosky, consultant at J2Z Advisory, Bloomberg View columnist William Cohan, Robert Brusca, president of Fact & Opinion Economics, and Bloomberg Television markets correspondent Joshua Lipton talk about a Bloomberg News report that Jon S. Corzine, MF Global Holding Ltd.’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co. accounts in London, according to an e-mail sent by a firm executive. They speak with Pimm Fox on Bloomberg Television's "Taking Stock." (Cohan is a Bloomberg View columnist. The opinions expressed are his own. Source: Bloomberg)

The account could have contained both client and company funds, the memo notes. Whether the transferred funds were those of the company, its clients or both is not known.

“If client funds were transferred at his direction, it raises new questions,” Seth Berenzweig, managing partner at Berenzweig Leonard LLP, a law firm in McLean, Virginia, said in an interview with Bloomberg Television. “This is a new storm cloud that is now headed for Jon Corzine and it raises a lot of issues.”

O’Brien’s internal e-mail was sent as the New York-based broker found intraday credit lines limited by JPMorgan, the firm’s clearing bank as well as one of its custodian banks for segregated customer funds, according to the memo, which was prepared for a March 28 House Financial Services subcommittee hearing on the firm’s collapse. O’Brien is scheduled to testify at the hearing after being subpoenaed.

‘Funds Were Safe’
“Over the course of that week, MF Global (MFGLQ)’s financial position deteriorated, but the firm represented to its regulators and self-regulatory organizations that its customers’ segregated funds were safe,” said the memo, written by Financial Services Committee staff and sent to lawmakers.

Steven Goldberg, a spokesman for Corzine, said in a statement that Corzine “never gave any instruction to misuse customer funds and never intended anyone at MF Global to misuse customer funds.”

Vinay Mahajan, global treasurer of MF Global Holdings, wrote an e-mail on Oct. 28 that JPMorgan was “holding up vital business in the U.S. as a result” of the overdrawn account inLondon, which had to be “fully funded ASAP,” according to the memo.

$200 Million Transfer
“On the afternoon of Friday, October 28, MF Global transferred $200 million from a segregated customer account at JPMC to cover a $175 million overdraft in one of MF Global’s JPMC accounts in London,” the memo says. “Ms. O’Brien wrote in an e-mail that the transfer was ‘Per JC’s [Jon Corzine’s] direct instructions’.”

Barry Zubrow, JPMorgan’s chief risk officer, called Corzine to seek assurances that the funds belonged to MF Global and not customers. JPMorgan drafted a letter to be signed by O’Brien to ensure that MF Global was complying with rules requiring customers’ collateral to be segregated. The letter was not returned to JPMorgan, the memo said.

Corzine, 65, in testimony in front of the House panel in December, said he did not order any improper transfer of customer funds. Corzine also testified that he never intended a misuse of customer funds at MF Global, and that he doesn’t know where client funds went.

‘Never Intended’
“I never gave any instruction to misuse customer funds, I never intended anyone at MF Global to misuse customer funds and I don’t believe that anything I said could reasonably have been interpreted as an instruction to misuse customer funds,” Corzine told lawmakers in December.

In his statement, Goldberg said Corzine did not specify which funds should be used to replenish the JPMorgan account.

“He never directed Ms. O’Brien or anyone else regarding which account should be used to cure the overdrafts, and he never directed that customer funds should be used for that purpose,” Goldberg said. “Nor was he informed that customer funds had been used for that purpose.”

The bankruptcy trustee overseeing the liquidation of the company’s brokerage subsidiary has estimated a $1.6 billion shortfall between customer claims and assets available.

Lawmakers and investigators from the Commodity Futures Trading Commission, Securities and Exchange Commission and Department of Justice have been reviewing events leading up to MF Global’s bankruptcy filing. Executives including Corzine, a Democrat who served in the Senate from 2001 to 2006 and as governor of New Jersey from 2006 to 2010, gave testimony on the collapse at three congressional hearings last year. Corzine was co-chairman of Goldman Sachs Group Inc. (GS) before entering politics.

Congressional Report
Representative Randy Neugebauer, a Texas Republican and chairman of the Financial Services oversight and investigations subcommittee, is preparing a final report on his investigation into the firm’s failure.

“One of the goals of our investigation is not only to find out where the money went but to identify what went wrong in order to prevent this from happening again,” Neugebauer said in a statement.

O’Brien is scheduled to appear before lawmakers with Christine Serwinski and Laurie Ferber, two other MF Global executives named by Corzine as being involved in the transaction, according to the memo. Henri Steenkamp , the firm’s chief financial officer, is also scheduled to testify, as is a representative from JPMorgan who has not yet been identified.

European Bet
MF Global and its brokerage sought Chapter 11 bankruptcy after a $6.3 billion bet on the bonds of some of Europe’s most indebted nations prompted regulator concerns and a credit rating downgrade. Corzine quit MF Global Nov. 4.

During his testimony, Corzine identified O’Brien as someone with knowledge of a transfer of funds from customer accounts before the firm sought bankruptcy protection Oct. 31.

Reid H. Weingarten, O’Brien’s lawyer, did not respond to a phone call and e-mail seeking comment.

The memo’s account of the e-mail exchanges aligns with what Terrence Duffy, the executive chairman at CME Group Inc. (CME), told lawmakers during a December congressional hearing. Auditors at CME, which had authority to oversee MF Global, learned from an employee of the brokerage that Corzine knew about the loans involving a European affiliate, Duffy told committee members.
Posted by at 09:02:13

Mortgage Rates Should Go Lower Friday, March 16, 2012

Mortgage rates are the lowest on record. But by a key historical measure, they should be even lower.

Over the past year, a wide gap ripped open between the mortgage rates house hunters see and a benchmark interest rate investors demand to buy bonds backed by home loans.

In normal times, this obscure metric would only be of interest to bankers, brokers and traders of mortgage-backed securities. But with housing still dragging on the economy, the spread is potentially slowing the recovery—and important to everyone from top Washington policy makers to strapped homeowners who could use a few extra dollars each month.

[More from WSJ.com: Buying After a Short Sale]
For months, a key interest rate on mortgage-backed securities—known as the current coupon yield—has tumbled faster than average U.S. 30-year mortgage rates.

In recent weeks, the difference between the two has flirted with levels seen in the aftermath of the financial crisis.

Some say the wide spread shows the large banks that dominate the mortgage market are flexing their muscle by keeping prices relatively high. Others argue the gap reflects increased regulatory costs, risks and new realities of mortgage making.

Either way, the spread is wide. Tuesday afternoon, it was 0.96 percentage points—almost double its average over almost 30 years. It has been as high as 1.20 percentage points this year.




"To me what it tells us is that traditional monetary-policy measures to help get the housing market rolling again…are weaker than they normally would be," said Columbia University's Frederic Mishkin, a former Fed governor.

The effort by the Federal Reserve and others to boost housing depends on the mechanics of the banking system to pass along savings and benefits to consumers. The wide spread between the mortgage rates and mortgage-backed bonds suggests the gears of that mechanism are gummed up.

"This is not a rounding error, this is something to take note of," said Susan Wachter, a professor of real estate and finance at the University of Pennsylvania's Wharton School.

[More from WSJ.com: Some Wine With Your White Castle?]

To be sure, consumers are seeing the lowest rates in several generations already. The 30-year fixed mortgage rate averaged 3.87% for the week ended Thursday, down from 5% the previous year. That is the lowest in Freddie Mac's survey data, which stretches back to 1971.

If history is any guide, it should be a lot lower. With yields on mortgage-backed securities at these levels, the 30-year fixed rate mortgages would be roughly 3.40% if the spread was around its historical average of 0.50 percentage points.

That rate would save a U.S. homeowner with the average outstanding loan balance of $155,000 about $41 in mortgage payments each month, versus the current rate.

Over the seven-year period someone usually holds a 30-year mortgage, that translates into a roughly $3,446 difference, according to numbers provided by trade publication Inside Mortgage Finance.

Wider spreads generally translate into better margins for banks and brokers. And some lenders have seen profitability on mortgage origination improve as the spread has widened.

[More from WSJ.com: For Women, Is Home Really So Sweet?]

Some mortgage-finance observers suggest that increased concentration among the large banks that dominate the mortgage market better helps explain the wide spreads. They argue that because there are fewer banks doing the bulk of the mortgage lending than in years past, it is easier for them to capture market share without offering rock-bottom prices.

"It's a lack of competition. We really haven't seen a competitive marketplace since 2008," said Guy Cecala, publisher of Inside Mortgage Finance.

In 2011, the top five banks had a hand in 59% of the mortgage loans packaged into government-guaranteed mortgage-backed securities, up from 45% in 2004, according to Inside Mortgage Finance. Recently, major banks have cut down on their mortgage business sharply.

Bankers push back against any notion of oligopoly.

"The mortgage business is extraordinarily competitive," said Franklin Codel, head of mortgage production at Wells Fargo Home Mortgage.

There are other factors at work. For one thing, fees charged to lenders by government-controlled mortgage-finance companies Fannie Mae and Freddie Mac are set to rise this year. The increases paid for the payroll-tax break passed by Congress in December.

[Also see: How Your Age Affects Your Car Insurance Rate]

Analysts stress it is difficult to disentangle how much of the spread is due to pricing power from banks with more control of the market, and how much might represent structurally higher costs of doing business in the U.S. mortgage market reshaped by the crisis.

Banks and mortgage lenders point out that costs of underwriting loans—conducting the detailed scrutiny of financial statements and employment background—has gotten more expensive and time consuming.

In part that reflects the experience of some banks, which have been forced by Fannie and Freddie to buy back loads of loans that soured, making them more cautious. Others say Fannie and Freddie have grown much tougher over the documentation they accept on loans.

Posted by at 00:24:58

Definition of Accrued Interest Saturday, April 23, 2011

Accrued Interest: The amount of interest earned on a note, but not yet received in payment. An example would be a straight note (no payments). At the end of the first year the balance owed would be the original principal plus one year’s accrued interest.

Add-On Interest: The interest rate is applied to the loan amount to get yearly interest. This is multiplied by the number of years. This total interest is added on to the loan balance. The monthly payment is calculated by dividing this number (principal plus add-on interest) by the number of payments. This method contrasts with charging interest on the remaining principal balance.

Adjustable Rate Mortgage (ARM): A mortgage or other real estate loan wherein the interest rate and payments that correspond to the interest are adjustable from year to year according to some index such as the rate paid by the government on Treasury Bills.

Algebraic Logic: The calculator logic of putting the operation sign (plus, minus, times or divided by) before the number is entered.

All-Inclusive Deed of Trust: A note secured by deed of trust that “wraps around” a smaller senior loan. The debtor pays the holder of the wrap who in turn pays the included senior lien. See also “Wraparound Mortgage.”

Amendment Of A Note: Changing the interest, payment schedule, or due date on an existing note without without writing a new note.

Amortization: The payments on an amortized loan are established to contain both principal and interest so that the loan will be paid off in full by the end of the amortization period.

Annual Percentage Rate (APR): The true cost of a loan to a borrower as required by the Truth in Lending Laws.

Arrears: 1) Behind in making payments, as in “The payments were 3 months in arrears.” 2) Later than earned, as in “Loan interest is paid in arrears. The interest for May is paid in the June payment.”

Assignee: The person acquiring a note from a previous holder. Assignment: Transfer of the rights of a note from one holder to another. Assignor: The person giving up ownership of a note to a new holder.

Balloon Payment: A large payment on a note, usually due at the end of the payment schedule. There can also be partial balloon payments during the note term.

Beneficiary: The person entitled to receive the payments on a note.

Blended Rate: The overall interest rate when two or more loans are on a property. It is higher than the rate on the lowest rate loan and lower than the rate on the highest interest loan. Also called Overall Rate (OAR).

Boiler Plate: Slang for standardized legal language or template format writing often used in loan forms, real estate closings, and legal contracts.

Buy Down: In order to reduce the interest and payments on a loan for the buyer, the property seller may pay the lender some money up front to “buy down” the interest and payments for a certain period of time. Example: The seller buys down a 30-year loan at 14% interest so that the buyer of the property only pays 11% interest for the first 2 years.

“Carry Paper”: For a property seller to take part or all of the sale price of the property in the form of a secured note. Example: The seller carried $20,000 in paper to facilitate the sale of his property.

Cash Flow Diagram: A graphic representation of a series of cash flows, in or out or both, showing how much and their timing.

Clear: Remove previous instructions and data from the calculator so they will not interfere with the next calculations. You can clear the program, the financial registers, the storage registers, and the display.

Closing: Completion of a transaction, including details like preparation and recording of legal documents, procurement of applicable insurance coverage, and transfer of funds.

Closing Costs: The various fees and charges involved in closing a transaction.

Collateral: Property pledged as security for performance of an obligation.

Collection Service: A neutral third party, other than the borrower or lender. The collection agency or collection service collects the payments due on a note and forwards the proceeds to the proper recipients.

Compounding: The situation where interest accrues and then gathers interest. Example: A $310,000 straight note (no payments) with 12% compound monthly interest earns $91,200 the first year. Adding that to the original principal gives the next year starting balance of $401,200. This sum will earn 12% interest. The process repeats each year.

Compound Interest: See Compounding.

Constant (Loan Constant): The yearly payment on a loan divided by the remaining principal balance. As amortized loans are paid down, the Loan Constant increases.


Contract For Deed: A form of security instrument and debt contract wherein the owner of the property gives the buyer legal title only after the obligation has been paid in full. See Land Contract.

Courthouse: Place where deeds and real estate paper are recorded. See also Recorder’s Office and Registrar of Deeds.

Credit Report: The report on a person’s credit standing issued by a credit information bureau such as Experian. It shows what credit a person has been granted and what their payment record is.

Creditor: The person to whom money is owed.

Current: Payments are current when they are up to date.

Current Principal Balance: The balance currently owed on a note, which may be smaller or larger than the original principal balance.

Commercial & Business Loan Definitions D-F by test author



Dead Equity: Equity in property, not earning interest, not being used to acquire more property.

Debt: An obligation owed by a borrower to a creditor.

Debtor: One who owes money to another.

Debt Service: The monthly payments required to keep the loans on a property current.

Decimal: The period between numbers designating the difference between whole numbers and parts thereof. Example: 1.1, wherein the first 1 is a whole number and the second 1 represents 1/10th. In this case there is one number to the right of the decimal.

Deed of Trust: A security instrument which utilizes a neutral third party called a Trustee to foreclosure in the event of default. This makes it generally faster and easier to foreclose on a Deed of Trust than on a Mortgage.

Default: Violation of the terms and/or conditions of a note and security instrument.

Delinquent: When payments are overdue, they are said to be delinquent.

Delta: A Greek symbol shaped like a triangle, which stands for change between two numbers. Example: Delta % from 100 to 125 is 25% increase.

Discount: A purchase price less than the remaining principal balance of a note.

Discounted Paper: Real estate paper bought or sold at a price less than the principal balance.
Discounting: The practice of adjusting the price of a note to compensate for other factors such as term, payments, interest rate, security, and needs of the seller. The discount raises the yield to the buyer.

Discount Points: A point is one percent of the principal amount.

Double Escrow: Two separate but related escrows or closings, each contingent or dependent on the other. Example: You are buying a note and reselling it immediately for profit. The buy and resale escrows are contingent on each other and close at the exact same time. See Simultaneous Closing.

Effective Interest Rate: The overall yield earned on an investment, taking into account the discount and all existing loan terms.

End Buyer: The person who purchases the real estate note you find.

Enter: Putting a number or other information into the calculator. An entry starts in the display and then is entered into the calculator inner workings for use.

Equity: The amount left over after subtracting the loans from the value of the property.

Equity Cushion: The margin of safety over and above a specific loan on a property. A $100,000 property with $65,000 in loans would have a $35,000 equity cushion to protect the loans.

Escalation: Rising loan payments as time goes on.

Escrow: A neutral third party stakeholder that receives the instruments, contracts, documents and funds in a transaction as needed from both parties. Escrow sees that the terms and conditions of the contract are fulfilled according to the escrow instructions.

Escrow Instructions: Written instructions to an escrow officer, signed by both parties to a transaction. This tells the escrow officer exactly what to do to complete the transaction.

Escrow Officer: The person responsible for administration of the transactions in an escrow office.

Execution: The legal signing of a document. In order to record an instrument, a Notary Public must witness its execution.

Existing Financing: The financing on a property before making any changes. Example: When looking for a property to buy, you arefirst interested in the existing financing. See also Proposed Financing.

Extension Agreement: A written agreement giving a debtor more time to pay on an obligation.

Face Amount: The original principal balance appearing on the face of the note. Be sure to check the current principal balance of a seasoned note because it may be drastically different than the face amount.

Financial Calculator: A calculator designed for dealing in computations involving money, loans, payment and time.

First Loan: (Note, Mortgage, Trust Deed): The first loan to be recorded as a lien against a specific property (first in time and seniority).

Flipping: Slang for referring a note to an investor and making a quick cash profit.

Foreclosure: A judicial foreclosure is the means of enforcing one’s right to payment under a Mortgage. The judge orders the property to be sold at auction and the proceeds used to pay the creditor. A Trust Deed can be foreclosed by having the Trustee auction the property via Trustee’s Sale.

Free and Clear: Property that has no loans on it whatsoever is free and clear.

Fully Amortized: A loan whose payments include both interest and principal and will eventually be paid in full during its terms with no balloon payment.

FV: Future Value. The balloon payment of a loan or the loan balance as of some future date.

Commercial Lending definitions G-L by test author



Green Note: A note that is created in the sale of property for the specific purpose of immediate resale to a prearranged investor. In this case it might be construed to be a direct loan of money from the investor to the property Seller, and therefore subject to usury and truth in lending laws. See also Usury and Truth in Lending.

Hard Money: New money loaned against a property without a change in ownership. Example: A property owner puts a new second loan on the property to get cash. This is a hard money loan. Hard money loans generally involve personal liability in addition to the lien on the property. See also Purchase Money.

Hard Paper: Paper that has good strong terms and commands a good resale value in the paper marketplace. It would sell for a relatively small discount.

Holder: The current owner of a note.

Hypothecation: Pledging assets for a loan. In the case of a real estate loan, the property is pledged or hypothecated as security for the loan. When you borrow against a note you own, you assign the note to the lender as security for the money you are borrowing. The income from the note you assigned pays the payments on the money you borrowed. When the lender is paid in full, the note is assigned back to you.

I: The interest rate or yield on a note.

Imputed Interest: In seller carry-back financing, when the interest is below a certain rate determined by the IRS, the IRS imputes or charges the property seller tax on the highest rate of interest. (See your tax advisor on this).

Imputed Principal: In seller carry-back financing, when the buyer of the property gets an interest rate below a certain rate specified by the IRS, the IRS may impute or declare that the actual property sales price was lower than stated in the purchase contract. (See your tax advisor on this).

Installment: One of a series of payments on a note.

Installment Note: A note that is payable in several individual payments called installments.

Instrument: The legal document used as evidence of debt, title, lien, etc.

Interest: “Rent” paid on a debt. See also Add-On Interest, Compound Interest, and Simple Interest.

Interest Extra: The loan payment terms wherein the payment goes to principal and not to interest.

Interest Included: The loan payment terms wherein the payment goes to interest first and any surplus goes to reducing the principal.

Interest Only: The loan payment terms wherein the payment is exactly equal to the monthly interst, not more and not less.

Internal Rate of Return (IRR): The yield or rate of return, used when working with a series of uneven cash flows; as contrasted to regular uniform payments.

Junior: Recorded at a later date (than the senior loans). The security instrument recorded next after the first loan would be a second. It is junior to the first.

K Factor: The Loan Constant. See Constant.


Land Contract: A security instrument wherein the seller (Vendor) gives the buyer (Vendee) possession of the property, but retains legal title (the deed) as security for a loan until specific payment has been made. The buyer of the property gets “equitable title” and the right to use and enjoy the property and tax benefits prior to actually receiving the deed.


Late Charges: Fees or penalties owed to a lender when payments are late.

Less Than Interest Only: The loan payment terms wherein the payments are less than the monthly interest. This means the total debt grows with time. See Negative Amortization.

Level Payments: The loan payment terms wherein payments stay the same each period, neither increasing nor decreasing with time.

Leverage: Buying property with other People’s Money (OPM). This allows one to acquire much more property by putting as little down payment on each piece as possible. High leverage means low equity.

Liabilities: Debts and obligations owed on.

Lien: An encumbrance or charge recorded against a property. Recorded loans are liens.

Line of Credit: A prearranged loan from a lender wherein when you want the money, all you have to do is write a check. The check is deposited with the lender and becomes a loan at that time. Instant loan!

Liquidate: Go out of title, or turn into cash.

Loan: The granting of the use of money or equity in return for payment. The loan includes the right of one party to collect from another according to the loan agreement or note. There are existing loans (already there) and new loans (ones just being created).

Loan Constant: See Constant.

Loan to Value Ratio (LTV): The measure of the security of a given loan. It is calculated by taking the amount of the loan and any senior loans and dividing that by the property value. The standard “safe” ratio is 80%.

Loan Value: The maximum of loans that most lenders would lend on a property. Assuming an 80% loan to value ratio, the Loan Value on a $100,000 property would be $80,000.

Long-Term: In private party carry-back notes, long-term depends on the viewpoint of the parties, but generally, long-term would be over 3 years for discount paper.

Commercial Lending Definitions M-N by test author



Marketable: A note is marketable when there are a larg number of potential buyers for it, based on note size, security, yield, and terms.

Market Value: What a normal buyer would pay and a normal seller would sell for in terms of price.

Maturity: The time when an obligation becomes due and payable in full.

MLS: A database of real estate listings for sale. The MLS (Multiple Listing Service) is commonly used by realtors to research what properties are available. Each property listed in the MLS is assigned an eight-digit ID number. The MLS can be useful for finding simultaneous close owner financing note deals.

Moratorium: A suspension of payments and possibly interest.

Mortgage: A security instrument, which pledges a property to insure payment of a note. In case of default, it is foreclosed in the courts.

Mortgage Broker: A party who joins borrowers and lenders for loans, earning a placement fee. Also, an intermediary who buys and sells secured notes.

Mortgage Deed: See Deed of Trust.

Mortgagee: The party who is the beneficiary of a mortgage. The seller of the property who receives the monthly payment and holds the mortgage contract as security.

Mortgage Release: A release of a mortgage by the lender when the loan has been paid in full.

Mortgagor: The party who has pledged the property as security for the mortgage and note. The owner of the real estate. Also the borrower making monthly payments to the mortgagee.

Negative Amortization: A loan payment that is less than interest only. This means the obligation grows with time.

Negative Cash Flow: Cash going out, outflow of money.

Negotiable Instrument: A document such as a personal check or note. It must meet certain legal requirements that allow it to be transferred (negotiated) from one holder to another.

Net Present Value (NPV): The value of a series of uneven cash flows discounted to a present value figure.
Nominal Interest Rate: The interest rate stated in a note. This may be quite different from the yield to an investor who buys the note at discount.

N: the number of payments or compounding periods on a loan.

Note: A written promise to pay, with all the terms and conditions of the obligation signed and in the proper legal format. A note can be secured or unsecured.

Note Holder: The person currently in ownership and possession of a note and entitled to collect all its remaining payments. The holder might not be the original beneficiary.

Note Owner: See Note Holder.

Note Payment Book (Record): A simple record of all payments made on a note showing how much was paid each payment. It breaks each payment down to principal and interest and shows the current principal balance.

Nothing Down: Acquiring property with no cash out of pocket by the buyer. This does not mean that the seller and/or real estate agent did not receive cash. Cash comes from more places than just the buyer.

Notice of Default: A written legal notice to junior lien holders from a senior lien holder, notifying them that the senior lien is foreclosing.

Notice of Trustee’s Sale: Notice published in the newspaper, stating that property in foreclosure is to be sold at auction.

Novation: Rewriting an old document and replacing it with the new one.
This article was published on Friday 22 June, 2007.

Business Loan Definitions R-S (no "Q's") by test author



Rate of Return: See Yield.

Real Estate Paper: Notes secured by real estate and held by private parties; not banks, professional loan finders, or real estate agents in the business of dealing in notes for profit. Real estate paper can include: Mortgages, Deeds of Trust, Security Deeds, and Land Contracts.

Recall: Retrieving data stored in the calculator memory.

Recast: To decide new terms for an existing loan. This may be associated with the situation wherein a debtor cannot pay according to the original terms, but can pay some other way.

Reconvey: When a trust deed is paid off, the trustee reconveys his title back to the property owner and releases the lien from the property. It means to convey title back to the owner of the property.

Reconveyance: See Reconvey.

Recordation: The formal recording (filing) of a legal document such as a security instrument. Recordation with the County Recorder’s Office or other appropriate governmental office serves constructive notice to the world that the document exists.

Recorder’s Office: The local governmental agency responsible for maintaining official records of documents filed therein, such as deeds and security instruments (real estate paper). See Courthouse, Registrar of Deeds.

Recourse: When signing (endorsing) a note from one party to another, you do so either with or without recourse. With recourse means that you still have contingent liability to the buyer of the note. In the event the maker doesn’t pay as promised, you have to pay. See Without Recourse.

Redemption: In a foreclosure situation, redemption means the right to pay off the loan in full plus foreclosure fees and either stop the foreclosure while it is in progress or get the property back after it has been sold. See Redemption Period.

Redemption Period: The period of time during a foreclosure when the debtor has the right to make payment in full and stop the proceedings. Also a period after the property has been sold through foreclosure in which the foreclosed owner can pay the loan amount plus applicable charges and get the property back. This varies according to state law.

Refinance: Paying off an old loan on the property by putting a new, usually larger loan on it. Any remaining funds go to the property owner. See also Hard Money, Personal Liability.

Registers: Storage pockets in the calculator memory. You can store information in the appropriate register and recall it later.

Registrar of Deeds: See Recorder’s Office, Courthouse.

Reinstatement: In the beginning of a foreclosure, the debtor has the right to catch up the payments plus foreclosure fees and reinstate the loan. This means to make it current and stop the foreclosure, just as it was before. During reinstatement it is not necessary to pay the loan in full unless the loan was due anyway.

Reinstatement Period: The period specified by local law, within which the debtor has the right to catch up the payments plus foreclosure fees and stop foreclosure.

Release of Liability: The appropriate documentation from a creditor to a debtor, releasing the debt and any liens associated with it.

Release of Mortgage: A written instrument releasing a mortgage lien from a property. Also called a Certificate of Discharge.

Renegotiate: To change the terms and conditions of an existing note by mutual agreement of Payor and Payee. Either party can ask the other to renegotiate. Asking for a discount for early payoff is a form of renegotiation.

Request for Reconveyance: An instrument executed by a trust deed holder, directing the trustee to convey his title lien on the property back to the Trustor (property owner) The Request for Reconveyance is usually printed on the back of the trust deed.

Reverse Polish Notation (RPN): Calculator logic or way of thinking in which the number is entered before the operation (plus, minus, times, divided by). The Hewlett Packard HP 12c uses RPN.

Risk: A determination of how safe or dangerous something is. An unsecured note generally involves more risk than a well-secured note.
Rollover Note: A relatively short-term (5 year) note that renews each time at some new interest rate pegged to the cost of money at that time.

Rule of 72: A banker’s interest computation invention that allows for greater than normal interest in the early part of the loan. Also a rule of thumb for determining how long it takes to double your money at a certain interest rate. Divide 72 by the interest rate and this close to the number of years it will take to double the money.

Satisfaction of Mortgage: Completion of the terms of repayment and release from liability on a mortgage.

Seasoned Note: A note that has been in existence for a while and has a proven record of satisfactory payments being made. Seasoned notes are typically safer investments than newly created notes. See Green Note.

Second: The lien immediately junior to the First. Recorded second in time.

Secured Loan: A loan (note), which has specific collateral, pledged to secure its payment. In the event payment is not made, the collateral will be sold to provide funds to pay the note.

Security Deed: See Deed of Trust.

Security Instrument: The official legal document which, when properly recorded, places a lien on the property to secure the payment on a note. The most common security instruments are mortgages and trust deeds.



Seller Carry-Back Financing: When the seller of a property takes a note secured by the property as part of the payment. See also Owner Financing.

Seniority: The order in time in which documents are recorded. The first lien recorded is the “First,” the next is the “Second,” etc. Recording, not when notes were created, is what counts. In the event of foreclosure, the lien foreclosing is paid first and the leftover funds, if any, go to the juniors. Senior liens are more secure than junior liens.

Senior Lien: A lien recorded before others. A lien can be senior to some and junior to others. Example: A second is a senior to a third but junior to a first.

Short-Term: In private financing, a note having 3 years or less remaining.

Sign: The plus or minus sign before a number as used in mathematics of addition or subtraction. Also indicating whether a cash flow is positive (in) or negative (out).

Signature Loan: An unsecured personal loan from a bank or credit union.

Simple Interest: Interest based on the principal balance of the loan only. It doesn’t add on to the principal. It does not compound. It is less than compound interest.

Simultaneous Closing: Two transactions or two parts of a transaction that are completed at the same time. Such transactions are often dependent and contingent upon each other. One cannot happen without the other. See Double Escrow.

Soft Paper: Paper with low interest, a long term, low or no payments, and perhaps questionable security. It has little or no marketability for cash and is used mainly in trade. One would like to borrow on soft paper and sell on hard paper.

Stop Date: The date of the last payment on a note. It may be fully amortized or there may be a balloon payment. Also referred to as Call Date.

Storage: Placing a number in a register of memory unit of the calculator for later recal and use.

Straight Note: A note having no payments during its term, with a balloon payment at the end. It may have either simple or compound interest.

Commercial Lending Definitions T-Y by test author



Term: The length of time a loan runs. Example: A 5-year term.

Terms: The main features of a loan: principal amount, interest rate, payment schedule, and due date.

Trust Deed: Or Deed of Trust. A deed given by the borrower to a trustee to be held tending fulfillment of an obligation. This is the security instrument, which pledges the property to insure payment on the note.

Trustee: One who holds property in trust for another to secure the performance of an obligation. An example of a trustee would be a title company or attorney.

Trustor: The person who conveys property in trust. One who deeds his property to a trustee to be held as security until he has performed under the terms of a deed of trust.

Truth in Lending Laws: Legislation that pertains to fair dealing and full disclosure in making new loans. It does not apply to the sale of existing notes.

Uneven Payments: The payments of a loan vary from time to time. They are said to be “uneven” payments. Example: $100/month the first year, then $200/month the second year, and then $300/month thereafter. See IRR

Unmarketable Note: A note which has such soft terms that it cannot be sold for cash. It might be used in trade as part of the down payment on real estate, however.

Unsecured Loan: An unsecured note or personal note. It is secured only by the maker’s written promise to pay. No specific security has been pledged to back up the promise to pay.

Unsecured Note: See Unsecured Loan.

Usury: There are “usury” laws, which specify the maximum rate private parties can charge each other on loans. Above that rate, it is “usury” and the loan would be “usurious.” This involves stiff legal penalties. There is absolutely no limit as to how much yield a person can get when they buy a note at discount, however.

Value: What one party is willing to pay for something. There are as many values for something as there are parties considering owning it. When there is widespread agreement of value, we have a market value (generally agreed-upon price such as the price of gasoline). On the other hand, notes have a less well-defined market. Therefore, negotiation has a large part in determining value or price.

WAC: Weighted Average Coupon – this formula is used to weigh the average yield on a portfolio of two or more notes. To calculate WAC, multiply each note’s coupon (interest) rate by its individual remaining balance; add the products; then divide the result by the total remaining balance. That gives you the approximate existing yield for a package of notes with varied interest rates.

WAM: Weighted Average Maturity – Allows you to calculate the overall maturity rate of a note portfolio, reflecting a truer measure of where the weight falls on a time line. More accurate than an average maturity calculation when dealing with many notes, or where you have the bigger notes for longer terms and a couple of smaller notes on real short terms. A simple average would be extremely distorted in bias toward the low side in remaining months to maturity.

Walking Backwards: A note whose payments are less than Interest Only. This means the amount owed increases with time. See also Negative Amortization, Straight Note.

Without Recourse: The way of endorsing a note to an assignee. This protects the assignor from any further liability on the sale, even in the event the Maker fails to pay on the note. This is the way to sell a note to protect yourself. See also Recourse.

Wrap-Around Contract: A Land Contract that wraps around earlier existing financing. See Wrap-Around Mortgage.

Wrap-Around Mortgage: A larger mortgage that “wraps around” a smaller senior lien. The debtor pays to the holder of the “Wrap-Around” and the holder of the “Wrap” pays on the included senior lien.

Yield: The true rate of return on investment on a note bought at discount, taking into account the actual amount invested and the remaining payments and their timing. The yield is often greater than the interest rate specified in the note itself when the note is bought at discount.

Posted by Commercial Lender at 21:38:45

Understanding Bank Loan Covenants Saturday, April 23, 2011

There's more to a bank loan than the interest rate. If you're securing a loan for your business from a bank, be sure to consider carefully the covenants in the loan agreement. Put in place to safeguard the bank, loan covenants can stipulate everything from financial ratios that the borrowing company must maintain to salary caps for its executives. What's more, any violation of an agreed-upon covenant can signal to your banker that something might be awry at your company, and you run the risk of having the loan called in.
Understanding loan covenants before you sign on the dotted line can help you better comply or, perhaps, prepare to negotiate more realistic covenants.
The following five steps should help you navigate the loan-covenant jungle and put you in a better borrowing position:
1. Find out whether your prospective bank plans to retain your loan or sell it.
In the latter case, there's probably less room for maneuvering over covenant issues.


2. Inquire about the bank's expertise in – and funding experience with -- your industry.
covenants from industry specialists are often more realistic.


3. Ask to see a sample list of covenants before the date of the closing, so you can avoid a
situation in which desperation for funds -- or a lack of careful analysis – persuades
you to simply sign anything. Make certain that you can live with the bank's terms
about the consequences of going out of compliance.

4. Do a computer run of your company's past performance during the most recent one
-two-, and three-year periods to see if you could have complied with all loan
covenants, especially key ratios, if you loan had been in place before now.

5. If those results indicate future problems, schedule a visit with your banker and suggest
more realistic covenants.

Or……. Give One-For-The-Money a shot at handling your financing. There are no covenants to worry about. Your loan will be based on the appraised value of the real property and on “common sense” underwriting by using either the DTI (Debt to Income)
approach or the DSCR (Debt Service Coverage Ratio)
This article was published on Friday 08 June, 2007.

Small Business Seller Financing by test author



Small Business Seller Financing

Offering seller financing allows small business owners an opportunity to earn more substantial profits in the long run for the sale of his small business.

Consider how you can maximize your profits and minimize our taxes on the sale of your small business property worth $180,000. The balance on your underlying loan is $101,400 at 9.5% fixed, with 225 monthly payments remaining. The buyer has $20,000 cash to work with.

You agree to a sales price of $183,800 for your small business, accepting $19,000 cash down and $1,000 to cover closing expenses. You will carry back a wrap-around mortgage for $161,000 at 10.5% interest, amortized over 360 months all due in 12 years.

Your buyer agrees to give the realtor a small note for $3,800 as additional consideration toward the purchase price of your small business -- part of his commission. After paying the remaining $7,000 due the realtor and our $2,000 share of closing costs, you net $10,000 cash at close. Your unrealized net capital gain after closing on the sale of your small business is $69,600.

Structuring the deal this way the small business buyer is able to get in with a low down, lower costs and more attractive loan terms than he would achieve through traditional lending sources. So, we were able to sell a $180,000 property for $183,800 with the attractive terms.

After making the loan payment on the underlying first mortgage you realize a net monthly cash flow from the small business transaction of $505 per month on your remaining $59,600 equity. You will also receive a net payment of $85,033 from the balloon due in 144 months after paying off the underlying first loan.

Your do the math -- your $59,600 equity in the "wrap" mortgage has grown to $85,033! You received $10,000 cash at close and another $72,720 in net monthly payments over 144 months -- yet you still have an additional profit of $25,433 coming to you from the balloon payment!

The net result is that we achieved an effective rate of return on our equity investment of 11.8%, and most of it is tax deferred. That's the way you like it – you get yours now and Uncle Sam waits for his.

Not too shabby for a small business seller financing deal!

For small business owners, this is a great way to market your small business for a quicker sale. Many owners shy away from carrying back any paper on the sale of their business, and in doing so they not only increase the average time it takes to sell the business, but also deprives them of a healthy profit and an additional stream of income.

Posted by Commercial Lending at 21:35:16

Beware the Shadow Office Space Thursday, April 14, 2011

Last summer I did some reporting on shadow office space, which is leased space, like individual offices, cubicles or entire floors, that was vacated during the recession. This shadow space was adding as much as 7 percent to office vacancy rates in Los Angeles and over 6 percent in Chicago, according to CoStar Group.

Now that the office market appears to be taking a turn for the better, that shadow space will start to fill up, and in most places it will have to fill well before the company looks to take on additional space. Today Grubb & Ellis, a commercial real estate services and investment company, put some numbers to the scenario.

"Grubb & Ellis expects that shadow space vacated during the recession will accommodate about one-third of all net new demand in 2011 and about one-fourth in 2012; this activity will not be reflected in the published statistics," writes Bob Bach, chief economist, in his "U.S. Office Market First Look: 2010-Q4"

Bach goes on to say that the "still-tepid rate of hiring," combined with this shadow space, will keep the office market "struggling to keep up with prior recovery cycles."

Office buildings gained 2.5 million square feet of occupied space in Q4 of 2010, the first increase since the end of 2007, according to Reis, Inc., a commercial real estate analysis firm, but the 17.6 percent vacancy rate still represents a 17-year high.

That doesn't seem overly concerning to investors in the office market. Pricewaterhouse Coopers surveyed 200 real estate executives, including investors, lenders and brokers, and found more than 70 percent believe the commercial real estate recovery is real. 32 percent say they are looking to invest in the office sector this year, second only to 45 percent who say they would opt for the apartment sector.

Mortgages.

Yes, 28 percent of office property mortgage loans will mature in 4Q '11, or about $6.8 billion, according to Fitch, in a still healing liquidity situation. But Fitch also reports that the pace of commercial loan modifications is quickening.

"Loan modifications continue to dominate as a resolution method," writes Managing Director Stephanie Petosa. "Servicers will resolve loans with increase velocity as liquidity returns to the CMBS market."

As more jobs are created and fewer are lost, the office sector is heading toward recovery. Investors should be careful, however, to take shadow space into account when looking at specific properties and consider distressed properties, as office loan default rates remain high.
Posted by Diana at 01:44:53

Robo-Settlement Snags Thursday, April 14, 2011

Word was last week that federal banking regulators, not the state attorneys general, were going to announce some kind of "enforcement action" against 14 big banks/servicers in the so-called "robo-signing" foreclosure paperwork mess today or tomorrow.

Now I'm told that may be a bit delayed, and now I'm reading the state attorneys general's expected punitive monetary "settlement" is also in question.

The regulators are all about fixing and tightening the process of processing foreclosures. The AGs need to appease their constituents a bit more by getting something back from the big banks, which they claim got homeowners into this mess in the first place and then proceeded to mess it up even more when they couldn't handle the outcome of their wrongdoings, i.e. foreclosures.

The controversy among the AGs is largely over principal forgiveness. Some have proposed a $20-25 billion fund that the banks would pay into that would go to lower the balance of troubled borrowers' loans. A report today from three professors and banking experts, Charles Calomiris of Columbia Business School, Eric Higgens of Kansas State U and Joseph Mason, of the Wharton School of Business, argues that a settlement involving principal write down "would generate significant unintended negative consequences for housing and financial markets."

Here's the gist of it:

"The settlement would be counterproductive in its overall effect because it would drive up the number of defaults and servicing costs. We estimate that even a small increase in strategic defaults in response to the settlement could increase the foreclosure inventory by $297 billion; the proposal would slow new home construction and consumer spending, and reduce access to credit; and the increased costs imposed by the settlement could increase mortgage interest rates by 20 to 45 basis points per year. In light of all of these considerations, we conclude that the settlement would serve to extend, rather than end, the foreclosure crisis."

As regulators and law enforcers battle this out, banks are ramping up foreclosures with increasing speed. A new report from ForeclosureRadar, which measures some of the most distressed markets out West, shows a big jump in March foreclosure sales, the final stage of foreclosure. Total foreclosure sales were up 35 percent in California from February. In Arizona, sales back to the bank (REO) were up over 60 percent and in Nevada bank repo's were up 160 percent.

Granted, March has more days than February, and that juiced the numbers a bit, but the daily averages were also way up.

What this tells me is that the banks want to get these properties through the system and fast; they don't want to wait for a settlement that will slow the process or force them to forgive principal on these troubled loans, which even with reduced balances will likely end up back in foreclosure anyway.
Posted by Lisa at 01:42:14

Fed to stick with low rates, despite oil price ris Tuesday, April 12, 2011

Reuters – A signboard displays the price of gas in the town of Paia, in Maui, Hawaii, April 8, 2011.
Play Video Energy & Oil Video:Going greener with natural gas cars AFP Play Video Energy & Oil Video:Time to Lock-in Oil Profits? CNBC Related Quotes Symbol Price Change
^DJI 12,263.58 -117.53
^GSPC 1,314.16 -10.30
^IXIC 2,744.79 -26.72

AdChoices

By Pedro Nicolaci da Costa Pedro Nicolaci Da Costa – Mon Apr 11, 3:30 pm ET
NEW YORK (Reuters) – Two of the Federal Reserve's most powerful officials said on Monday the U.S. central bank should stick to its super-easy monetary policy, arguing inflation is not a threat and unemployment remains too high.

Underlying U.S. inflation trends are subdued and long-term price expectations are contained, despite rising commodity costs, Janet Yellen, the Fed's influential Vice Chair, told the Economic Club of New York.

She argued the recent run-up in energy prices was more of a damper on consumer spending than an inflation risk, saying broad-based price increases are unlikely without substantial gains in wages, which have been largely stagnant.

"I anticipate that recent increases in commodity prices are likely to have only transitory effects on headline inflation," said Yellen, echoing remarks from Fed Chairman Ben Bernanke last week.

"This accommodative policy stance is still appropriate because unemployment remains elevated, longer-run inflation expectations remain well anchored, and measures of underlying inflation are somewhat low," Yellen said.

New York Fed President William Dudley struck a similar note, saying the Fed shouldn't be too enthusiastic about tightening monetary policy soon because the economy continues to operate well below its full potential.

Oil prices could push up headline inflation, Dudley said, but central bankers shouldn't overreact as the rise is likely to be temporary and could lead to a monetary policy mistake, he said in Tokyo. U.S. crude prices fell on Tuesday but remained near $110 a barrel.

"If inflation expectations became unanchored, the Fed would have to respond. I don't see any signs that expectations are becoming unanchored," Dudley said.

Their comments, which echo remarks by Fed Chairman Ben Bernanke last week, suggest the Fed is committed to completing its $600 billion bond-buying stimulus program as scheduled, and that growing market chatter about possible policy tightening may be premature.

The European Central Bank by contrast last week raised rates for the first time since the end of the recession and hinted at the possibility of more. Many emerging economies, including China, have also been attempting to tighten lending conditions, fearing years of rapid growth may be turning inflationary.

NO V-SHAPE IN SIGHT

Fed policymakers are trying to distinguish between increases in "highly visible" prices like food and gasoline and a broader, more entrenched trend of cost rises that would warrant higher interest rates.

A number of more hawkish presidents of regional Fed banks have begun to argue that rate hikes might be needed before the end of the year.

Yellen's remarks, however, emphasized a number of lingering weaknesses in the economy, including a battered construction sector.

"A sharp rebound in economic activity -- like those that often follow deep recessions -- does not appear to be in the offing," Yellen said.

She argued that there was reason to be skeptical of the sharp recent decline in the jobless rate to 8.8 percent in March from 9.8 percent in November.

"The decline that we've seen partly reflects a drop in labor force participation," she said. "While the labor market has recently shown some signs of life, job opportunities are still relatively scarce."

Yellen dismissed the notion that structural factors beyond the reach of monetary policy accounted for a very large proportion of the rise in joblessness during the recession.

She said markets had already priced in the end of Fed bond purchases in June, and should take the end of the policy in stride.

In a research paper published on Monday, Chicago Fed President Charles Evans also argued commodity price gains should not be mistaken for a harbinger of inflation.

"If commodity and energy prices were to lead to a general expectation of a broader increase in inflation, more substantial policy rate increases would be justified," Evans said in the paper, which was co-authored by Chicago Fed researcher Jonas Fisher. "But assuming there is a generally high degree of central-bank credibility, there is no reason for such expectations to develop."


Posted by Mike at 15:38:35

We Have A New Client Monday, February 7, 2011

Jason Brooks of Emery Federal Credit Union of Greater Los Angeles has joined the CheckRates.com network! http://www.checkrates.com/Mortgage/Rates/California/Los-Angeles
Posted by Jason Brooks at 20:31:20

2011 FHA Loan Limits Friday, December 17, 2010

2011 FHA Loan Limits will remain the same as or be higher than the current 2010 Loan Limits
FHA Mortgagee Letter announced the FHA maximum loan limits for 2011. For all counties, the loan limits for 2011 will either remain the same as or be increased over the 2010 limits. Please refer to the following site to review the 2011 loan limits by state and/or county; note that you must select as the Limit Year: https://entp.hud.gov/idapp/html/hicostlook.cfm
As a result, the maximum mortgage caps that were being applied to the select counties listed will no longer apply
Posted by Michelle at 11:50:45

Fed Meeting 12/14/2010 Tuesday, December 14, 2010

Current Trend Direction: Lower

Risks Favor: Very Cautiously Floating into the Fed

Current Price of FNMA 4.0% Bond: $99.31, +6bp

Fed Day is upon us once again, and at 2:15pm ET, the Fed will release their Interest Rate Decision and Policy Statement. We expect no change in rates, and also believe the Statement will not likely have any material changes. It wouldn't surprise us to hear the Fed highlighting the weakness of the economy in defense of Quantitative Easing 2…remember people have called QE2 "clueless" and a "deal with the devil"…so Mr. Bernanke and his team will probably use the Statement to defend the Fed's position.
However, what will be most interesting to us in the mortgage business is what the Fed may say about the spike higher in interest rates since QE2 was announced...especially considering the Fed said the program would lower interest rates. It is far too early to tell if the program is successful in its goals of spurring the economy in general, but it has been successful so far in raising Stock prices and inflation expectations - hence the main reason for Bond's poor performance during the past few weeks.
Later today, the Senate is expected to vote through an approval for the tax cut extension, and the bill would then go to the House for approval, prior to being signed off by the President. Even after all the political banter from both parties, it appears as though the package will go through...maybe even this week. This is good news and should help our sputtering economy - and bear in mind that an improving economy will most assuredly help the housing market recovery gain traction, but will also bring higher rates over time.
Rising energy costs pushed wholesale inflation higher in November - today's Producer Price Index (PPI) rose by 0.8%, well above the 0.5% expected. This also represented the biggest gain since March, and was double last month’s number of 0.4%. The Core PPI, which excludes volatile food and energy, still rose 0.3% to its largest gain since July, and higher than the 0.2% anticipated. Year-over-year PPI fell to 3.5% after the previous read of 4.3%, while the Core fell to 1.2% from 1.5%. What do all these numbers mean? Costs seem to be on the rise for producers, but it remains to be seen if the price increases that wholesalers are dealing with will get passed on to consumers. The Consumer Price Index coming tomorrow will tell that story. But all told, the Bond market shrugged off this hotter than expected monthly read on inflation, as Traders prepare for the Fed announcement later today.
Retail Sales for November rose by 0.8% versus the 0.5% expected…although this is down from the 1.7% seen during the previous month. But when stripping out autos, sales climbed by 1.2%, well above the 0.6% expected. This reports suggests that deal-seeking consumers kicked off their holiday shopping in November - particularly on Black Friday and Cyber Monday - and also signals that consumers are feeling good about the economy…enough to go out and spend generously for the holidays.
Bonds have made a nice bounce off their lows of yesterday, but in order for prices to go much higher, the Fed must do some heavy "jawboning" to help the Bond market. We are not sure if the Fed's comments will help Bonds. And if traders and investors hear any concerns about inflation, the level of the US debt, or fears of a US credit downgrade…it may be difficult for prices to make sizable gains.
With that said - we will start the day by Floating and we would like to do so into the Fed Meeting, hoping to see a bid for Bonds. However, be prepared to Lock should market conditions dictate, and be mindful that prices are already off the best levels of the day.
Posted by Ben at 08:56:31

How do you determine the CAP rate? Friday, December 3, 2010

The CAP rate is determined by taking the NOI divided by the asking price plus average repair costs. This allows compairing apples to oranges, by first converting the orange to an apple. Any property in disrepair must first be brought up to like-new condition, and that expense is factored into the cost of aquisition. The NOI is determined by taking the GMI (gross monthly income), subtracting 5% vacancy rate, to get the GOI (gross operating income). Then taxes, HOA fees, .9% of aquisition costs for insurance, 10% of GOI for management, and 10% of GOI for maintenance is deducted from the GOI to arrive at the NOI. Management cost is always included, even if the owner manages the property themselves as a personal decision to increase profits. If the owner must move or falls ill, management must still take place and must be outsourced.


Posted by L Pippett at 00:00:48

What to do when the bank won't approve your loan m Thursday, December 2, 2010

For the past year and a half I have tried to modify my loan with Chase and have sent in four packages to them. They always approve my initial modification with trial payments but then they lose my paperwork or reject me. I keep trying but I want to know what is the method of getting an approval with them? Anyone know how to get a final modification?
Posted by Don at 23:29:35

Credit, Liquidity Programs and the Balance Sheet Sunday, August 8, 2010

This section of the Board of Governors' website is an additional step following several that the Federal Reserve has taken in recent years to enhance transparency of monetary policy. Other actions have included: the issuance by the Federal Open Market Committee (FOMC) of a statement announcing and explaining its monetary policy decision immediately after each of its meetings; the FOMC's release of detailed minutes of its meetings three weeks after each meeting; the FOMC's publication of quarterly summaries of policymakers' economic forecasts; and, pursuant to the Emergency Economic Stabilization Act passed in October 2008, the Federal Reserve's issuance of regular reports to the Congress on each of its lending programs that rely on its authorities under section 13(3) of the Federal Reserve Act.

More recently, the Federal Reserve has begun publishing a monthly report on Credit and Liquidity Programs and the Balance Sheet.

In light of improved functioning of financial markets, many of the new policy tools described in this section have expired or been closed. These include the Money Market Investor Funding Facility, the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility. The temporary liquidity swap arrangements between the Federal Reserve and other central banks were also terminated, in February 2010, but in May 2010 the dollar liquidity swap lines were re-established with some central banks, in response to the re-emergence of strains in short-term U.S. dollar funding markets.

Related

Federal Reserve System Purposes and Functions
The Structure of the Federal Reserve System
Federal Reserve Act
This section serves, in particular, as a resource for describing the new policy tools that the Federal Reserve has implemented to address the financial crisis that emerged during the summer of 2007. Greater public understanding of these tools and their use can increase understanding of the measures implemented by the Federal Reserve--and the rest of the federal government--to strengthen financial markets and institutions and encourage a resumption of economic growth.

The Federal Reserve considers transparency about the goals, conduct, and stance of monetary policy to be fundamental to the effectiveness of monetary policy. The Federal Reserve Act sets forth the goals of monetary policy, specifically "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." Financial stability is an important prerequisite for achieving those goals.

Transparency about monetary policy also helps promote the accountability of the Federal Reserve to the Congress and the public. Such accountability is especially critical when nontraditional policy tools--which are less familiar to the public than traditional policy tools--are employed.

This section of the site brings together information on the various Federal Reserve liquidity and credit facilities and greater background on the Federal Reserve's balance sheet. The links at the top of this page group this information as follows:

Crisis response provides information about the Federal Reserve's strategy since the beginning of the financial crisis.
Federal Reserve's balance sheet discusses the Board's weekly H.4.1 statistical release, "Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks," which contains the Federal Reserve's balance sheet and related information.
Federal Reserve System financial statements include annual financial statements for the individual Reserve Banks, the Board of Governors, Maiden Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC, and the Commercial Paper Funding Facility LLC.
Federal Reserve liabilities discusses the key liabilities on the Federal Reserve's balance sheet, including currency and reserve balances.
Recent balance sheet trends provides a graphical depiction of selected assets and liabilities of the Federal Reserve.
Open market operations discusses this traditional policy tool, including its evolution during the financial crisis.
Central bank liquidity swaps discusses the use of reciprocal currency arrangements with other central banks, in response to the global nature of the financial crisis.
Lending to depository institutions discusses the primary, secondary, and seasonal credit facilities as well as the Term Auction Facility.
Lending to primary dealers discusses the Primary Dealer Credit Facility and securities lending programs.
Other lending facilities presents information about the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, and the Term Asset-Backed Securities Loan Facility.
Support for specific institutions discusses special lending arrangements with specific institutions, including those with Bear Stearns and the American International Group.
Collateral and rate setting provides details on eligible collateral for a number of lending facilities and a summary of the terms and conditions of the Federal Reserve's lending facilities.
Risk management explains how the Federal Reserve manages the risk associated with various liquidity programs, and provides details on the rapid expansion of its balance sheet.
Longer-term issues discusses some of the challenges the Federal Reserve will likely face in the future as the financial crisis evolves.
Posted by Joe at 22:41:08

When to Refinance Sunday, August 8, 2010

Have interest rates fallen? Or do you expect them to go up? Has your credit score improved enough so that you might be eligible for a lower-rate mortgage? Would you like to switch into a different type of mortgage?

The answers to these questions will influence your decision to refinance your mortgage. But before deciding, you need to understand all that refinancing involves. Your home may be your most valuable financial asset, so you want to be careful when choosing a lender or broker and specific mortgage terms. Remember that, along with the potential benefits to refinancing, there are also costs.

When you refinance, you pay off your existing mortgage and create a new one. You may even decide to combine both a primary mortgage and a second mortgage into a new loan. Refinancing may remind you of what you went through in obtaining your original mortgage, since you may encounter many of the same procedures--and the same types of costs--the second time around.


Why consider refinancing?

Lowering your interest rate

The interest rate on your mortgage is tied directly to how much you pay on your mortgage each month--lower rates usually mean lower payments. You may be able to get a lower rate because of changes in the market conditions or because your credit score has improved. A lower interest rate also may allow you to build equity in your home more quickly.

For example, compare the monthly payments (for principal and interest) on a 30-year fixed-rate loan of $200,000 at 5.5% and 6.0%.

Monthly payment @ 6.0% $1,199
Monthly payment @ 5.5% $1,136
The difference each month is $ 63
But over a year's time, the difference adds up to $ 756
Over 10 years, you will have saved $7,560


Adjusting the length of your mortgage

Increase the term of your mortgage: You may want a mortgage with a longer term to reduce the amount that you pay each month. However, this will also increase the length of time you will make mortgage payments and the total amount that you end up paying toward interest.

Decrease the term of your mortgage: Shorter-term mortgages--for example, a 15-year mortgage instead of a 30-year mortgage--generally have lower interest rates. Plus, you pay off your loan sooner, further reducing your total interest costs. The trade-off is that your monthly payments usually are higher because you are paying more of the principal each month.

For example, compare the total interest costs for a fixed-rate loan of $200,000 at 6% for 30 years with a fixed-rate loan at 5.5% for 15 years.

Monthly payment Total interest
30-year loan @ 6.0% $1,199 $231,640
15-year loan @ 5.5% $1,634 $ 94,120


Tip: Refinancing is not the only way to decrease the term of your mortgage. By paying a little extra on principal each month, you will pay off the loan sooner and reduce the term of your loan. For example, adding $50 each month to your principal payment on the 30-year loan above reduces the term by 3 years and saves you more than $27,000 in interest costs.


Changing from an adjustable-rate mortgage to a fixed-rate mortgage

If you have an adjustable-rate mortgage, or ARM, your monthly payments will change as the interest rate changes. With this kind of mortgage, your payments could increase or decrease.

You may find yourself uncomfortable with the prospect that your mortgage payments could go up. In this case, you may want to consider switching to a fixed-rate mortgage to give yourself some peace of mind by having a steady interest rate and monthly payment. You also might prefer a fixed-rate mortgage if you think interest rates will be increasing in the future.

Tip: If your monthly payment on a fixed-rate loan includes escrow amounts for taxes and insurance, your payment each month could change over time due to changes in property taxes, insurance, or community association fees.


Getting an ARM with better terms

If you currently have an ARM, will the next interest rate adjustment increase your monthly payments substantially? You may choose to refinance to get another ARM with better terms. For example, the new loan may start out at a lower interest rate. Or the new loan may offer smaller interest rate adjustments or lower payment caps, which means that the interest rate cannot exceed a certain amount. For more details, see the Consumer Handbook on Adjustable-Rate Mortgages.

Tip: If you are refinancing from one ARM to another, check the initial rate and the fully-indexed rate. Also ask about the rate adjustments you might face over the term of the loan.

Getting cash out from the equity built up in your home

Home equity is the dollar-value difference between the balance you owe on your mortgage and the value of your property. When you refinance for an amount greater than what you owe on your home, you can receive the difference in a cash payment (this is called a cash-out refinancing). You might choose to do this, for example, if you need cash to make home improvements or pay for a child’s education.

Remember, though, that when you take out equity, you own less of your home. It will take time to build your equity back up. This means that if you need to sell your home, you will not put as much money in your pocket after the sale.

If you are considering a cash-out refinancing, think about other alternatives as well. You could shop for a home equity loan or home equity line of credit instead. Compare a home equity loan with a cash-out refinancing to see which is a better deal for you. See What You Should Know about Home Equity Lines of Credit.

Tip: Many financial advisers caution against cash-out refinancing to pay down unsecured debt (such as credit cards) or short-term secured debt (such as car loans). You may want to talk with a trusted financial adviser before you choose cash-out refinancing as a debt-consolidation plan.


Back to top
When is refinancing not a good idea?

You’ve had your mortgage for a long time.
The amortization chart shows that the proportion of your payment that is credited to the principal of your loan increases each year, while the proportion credited to the interest decreases each year. In the later years of your mortgage, more of your payment applies to principal and helps build equity. By refinancing late in your mortgage, you will restart the amortization process, and most of your monthly payment will be credited to paying interest again and not to building equity.

Amortization of a $200,000 loan for 30 years at 5.9% [d]


Your current mortgage has a prepayment penalty
A prepayment penalty is a fee that lenders might charge if you pay off your mortgage loan early, including for refinancing. If you are refinancing with the same lender, ask whether the prepayment penalty can be waived. You should carefully consider the costs of any prepayment penalty against the savings you expect to gain from refinancing. Paying a prepayment penalty will increase the time it will take to break even, when you account for the costs of the refinance and the monthly savings you expect to gain.

You plan to move from your home in the next few years.
The monthly savings gained from lower monthly payments may not exceed the costs of refinancing--a break-even calculation will help you determine whether it is worthwhile to refinance, if you are planning to move in the near future.


Are you eligible to refinance?

Determining your eligibility for refinancing is similar to the approval process that you went through with your first mortgage. Your lender will consider your income and assets, credit score, other debts, the current value of the property, and the amount you want to borrow. If your credit score has improved, you may be able to get a loan at a lower rate. On the other hand, if your credit score is lower now than when you got your current mortgage, you may have to pay a higher interest rate on a new loan.

Lenders will look at the amount of the loan you request and the value of your home, determined from an appraisal. If the loan-to-value (LTV) ratio does not fall within their lending guidelines, they may not be willing to make a loan, or may offer you a loan with less-favorable terms than you already have.

If housing prices fall, your home may not be worth as much as you owe on the mortgage. Even if home prices stay the same, if you have a loan that includes negative amortization (when your monthly payment is less than the interest you owe, the unpaid interest is added to the amount you owe), you may owe more on your mortgage than you originally borrowed. If this is the case, it could be difficult for you to refinance.


What will refinancing cost?

It is not unusual to pay 3 percent to 6 percent of your outstanding principal in refinancing fees. These expenses are in addition to any prepayment penalties or other costs for paying off any mortgages you might have.

Refinancing fees vary from state to state and lender to lender. Here are some typical fees and average cost ranges you are most likely to pay when refinancing. For more information on settlement or closing costs, see the Consumer’s Guide to Settlement Costs.

Tip: You can ask for a copy of your settlement cost papers (the HUD-1 form) one day in advance of your loan closing. This will give you a chance to review the documents and verify the terms.

Application fee. This charge covers the initial costs of processing your loan request and checking your credit report. If your loan is denied, you still may have to pay this fee.
Cost range = $75 to $300

Loan origination fee. The fee charged by the lender or broker to evaluate and prepare your mortgage loan.
Cost range = 0% to 1.5% of the loan principal

Points. A point is equal to 1 percent of the amount of your mortgage loan. There are two kinds of points you might pay. The first is loan-discount points, a one-time charge paid to reduce the interest rate of your loan. Second, some lenders and brokers also charge points to earn money on the loan. The number of points you are charged can be negotiated with the lender.
Cost range = 0% to 3% of the loan principal

Tip: The length of time that you expect to keep the mortgage helps you determine whether it is worthwhile to pay points up front to reduce your interest rate. Unlike points paid on your original mortgage, points paid to refinance may not be fully deductible on your income taxes in the year they are paid. Check with the Internal Revenue Service to find the current rules for deducting points.

Appraisal fee. This fee pays for an appraisal of your home, in order to assure the lenders that the property is worth at least as much as the loan amount. Some lenders and brokers include the appraisal fee as part of the application fee. You are entitled to a copy of the appraisal, but you must ask the lender for it. If you are refinancing and you have had a recent appraisal, you can check to see if the lender will waive the requirement for a new appraisal.
Cost range = $300 to $700

Inspection fee. The lender may require a termite inspection and an analysis of the structural condition of the property by a property inspector, engineer, or consultant. Lenders may require a septic system test and a water test to make sure the well and water system will maintain an adequate supply of water for the house. Your state may require additional, specific inspections (for example, pest inspections in southern states).
Cost range = $175 to $350

Attorney review/closing fee. The lender will usually charge you for fees paid to the lawyer or company that conducts the closing for the lender.
Cost range = $500 to $1,000

Homeowner’s insurance. Your lender will require that you have a homeowner’s insurance policy (sometimes called hazard insurance) in effect at settlement. The policy protects against physical damage to the house by fire, wind, vandalism, and other causes covered by your policy. This policy insures that the lender’s investment will be protected even if the house is destroyed. With refinancing, you may only have to show that you have a policy in effect.
Cost range = $300 to $1,000

FHA, RDS, or VA fees or PMI. These fees may be required for loans insured by federal government housing programs, such as loans insured by the Federal Housing Administration (FHA) or the Rural Development Services (RDS) and loans guaranteed by the Department of Veterans Affairs (VA), as well as conventional loans insured by private mortgage insurance (PMI). Insured loans and guarantee programs generally apply if the amount you are borrowing is more than 80% of the value of the property. Both government and private mortgage insurance cover the lender’s risk that you will not make all the loan payments.
Cost ranges: FHA = 1.5% plus ½% per year; RDS = 1.75%; VA = 1.25% to 2%; PMI = 0.5% to 1.5%

Title search and title insurance. This fee covers the cost of searching the property’s records to ensure that you are the rightful owner and to check for liens. Title insurance covers the lender against errors in the results of the title search. If a problem arises, the insurance covers the lender’s investment in your mortgage.
Cost range = $700 to $900

Tip: Ask the company carrying your current title insurance policy what it would cost to reissue the policy for a new loan. This may reduce your cost.

Survey fee. Lenders require a survey, to confirm the location of buildings and improvements on the land. Some lenders require a complete (and more costly) survey to ensure that the house and other structures are legally where you say they are. You may not have to pay this fee if a survey has recently been conducted for your property.
Cost range = $150 to $400

Prepayment penalty. Some lenders charge a fee if you pay off your existing mortgage early. Loans insured or guaranteed by the federal government generally cannot include a prepayment penalty, and some lenders, such as federal credit unions, cannot include prepayment penalties. Also some states prohibit this fee.
Cost range = one to six months' interest payments

Back to top
What is "no-cost" refinancing?

Lenders often define “no-cost” refinancing differently, so be sure to ask about the specific terms offered by each lender. Basically, there are two ways to avoid paying up-front fees.

The first is an arrangement in which the lender covers the closing costs, but charges you a higher interest rate. You will pay this higher rate for the life of the loan.

Tip: Ask the lender or broker for a comparison of the up-front costs, principal, rate, and payments with and without this rate trade-off.

The second is when refinancing fees are included in (“rolled into” or “financed into”) your loan—they become part of the principal you borrow. While you will not be required to pay cash up front, you will instead end up repaying these fees with interest over the life of your loan.

Tip: When lenders offer a “no-cost” loan, they may include a prepayment penalty to discourage you from refinancing within the first few years of the loan. Ask the lender offering a no-cost loan to explain all the fees and penalties before you agree to these terms.


How do you calculate the break-even period?

Use the step-by-step worksheet below to give you a ballpark estimate of the time it will take to recover your refinancing costs before you benefit from a lower mortgage rate. The example assumes a $200,000, 30-year fixed-rate mortgage at 5% and a current loan at 6%. The fees for the new loan are $2,500, paid in cash at closing.

Example Your numbers
Your current monthly mortgage payment
$1,199
Subtract your new monthly payment
- $1,073
This equals your monthly savings
$ 126
Subract your tax rate from 1
(e.g. 1 - 0.28 = 0.72)
0.72
Multiply your monthly savings (#3) by your after-tax rate (#4)
126 x 0.72
This equals your after-tax savings
$ 91
Total of your new loan's fees and closing costs
$2,500
Divide total costs by your monthly after-tax savings (from #6)
$2,500 / 91
This is the number of months it will take you to recover your refinancing costs
27 months


Tip: Calculate the financial benefit of refinancing in one, two, or three years. Does the benefit compare with your plans for staying in your home?

If you plan to stay in the house until you pay off the mortgage, you may also want to look at the total interest you will pay under both the old and new loans.

You may also want to compare the equity build-up in both loans. If you have had your current loan for a while, more of your payment goes to principal, helping you build equity. If your new loan has a term that is longer than the remaining term on your existing mortgage, less of the early payments will go to principal, slowing down the equity build-up in your home.

Back to top
Refinancing calculators

Many online mortgage calculators are designed to calculate the effect of refinancing your mortgage. These calculators usually require information about your current mortgage (such as the remaining principal, interest rate, and years remaining on your mortgage), the new loan that you are considering (such as principal, interest rate, and term), and the upfront or closing costs that you will pay for the loan. Some may ask for your tax rate and the rate of interest you can get on investments (assuming you will invest your savings). Refinance calculators will show the amount you will save compared with the costs you will pay, so that you can determine whether the refinancing offer is right for you. The National Bureau of Economic Research has an example of a refinancing calculator .


How can you shop for your new loan?

Shopping around for a home loan will help you get the best financing deal. Shopping, comparing, and negotiating may save you thousands of dollars. Begin by getting copies of your credit reports to make sure the information in them is accurate (go to the Federal Trade Commission's website for information about free copies of your report).

The Mortgage Shopping Worksheet--A Dozen Key Questions to Ask - PDF (33 KB) may help you. You can also use our In-Depth Mortgage Shopping Worksheet PDF (34 KB). Take one of these worksheets with you when you talk with each lender or broker, and fill out the information provided. Don’t be afraid to make lenders and brokers compete with each other for your business by letting them know that you are shopping for the best deal.


Talk to your current lender

If you plan to refinance, you may want to start with your current lender. That lender may want to keep your business, and may be willing to reduce or eliminate some of the typical refinancing fees. For example, you may be able to save on fees for the title search, surveys, and inspection. Or your lender may not charge an application fee or origination fee. This is more likely to happen if your current mortgage is only a few years old, so that paperwork relating to that loan is still current. Again, let your lender know that you are shopping around for the best deal.


Compare loans before deciding

Shop around and compare all the terms that different lenders offer--both interest rates and costs. Remember, shopping, comparing, and negotiating can save you thousands of dollars.

Lenders are required by federal law to provide a “good faith estimate” within three days of receiving your loan application. You can ask your lender for an estimate of the closing costs for the loan. The estimate should give you a detailed approximation of all costs involved in closing. Review these documents carefully and compare these costs with those for other loans. You can also ask for a copy of the HUD-1 settlement cost form one day before you are due to sign the final documents.

Tip: If you want to make sure the interest rate your lender offers you is the rate you get when you close the loan, ask about a mortgage lock-in (also called a rate lock or rate commitment). Any lock-in promise should be in writing. Make sure your lender explains any costs or obligations before you sign. See the Consumer’s Guide to Mortgage Lock-ins.

Get information in writing

Ask for information in writing about each loan you are interested in before you pay a nonrefundable fee. It is important that you read this information and ask the lender or broker about anything you don’t understand.

You may want to talk with financial advisers, housing counselors, other trusted advisers, or your attorney. To contact a local housing counseling agency, contact the U.S. Department of Housing and Urban Development toll-free at 800-569-4287, or visit the agency online to find a center near you.


Use newspapers and the Internet to shop

Your local newspaper and the Internet are good places to start shopping for a loan. You can usually find information on interest rates and points offered by several lenders. Since rates and points can change daily, you’ll want to check information sources often when shopping for a home loan.
Be careful with advertisements

Any initial information you receive about mortgages probably will come from advertisements, mail, phone, and door-to-door solicitations from builders, real estate brokers, mortgage brokers, and lenders. Although this information can be helpful, keep in mind that these are marketing materials--the ads and mailings are designed to make the mortgage look as attractive as possible. These advertisements may play up low initial interest rates and monthly payments, without emphasizing that those rates and payments could increase substantially later. So get all the facts and make sure any offers you consider meet your financial needs.

Any ad for an ARM that shows an introductory interest rate should also show how long the rate is in effect and the annual percentage rate, or APR, on the loan. If the APR is much higher than the initial rate, that is a sign that your payments may increase a lot after the introductory period, even if market interest rates stay the same.

Tip: If there is a big difference between the initial interest rate and the APR listed in the ad, it may mean that there are high fees associated with the loan.

Choosing a mortgage may be the most important financial decision you will make. You should get all the information you need to make the right decision. Ask questions about loan features when you talk to lenders, mortgage brokers, settlement or closing agents, your attorney, and other professionals involved in the transaction--and keep asking until you get clear and complete answers.

Posted by Joe at 22:39:38

50 largest American banks Tuesday, May 6, 2008

ABN AMRO North America • Associated • Bank of America • Bank of New York • BancWest • BB&T • BOK Financial • Capital One • Charles Schwab • Citigroup • Citizens Financial Group • Colonial • Comerica • Commerce Bancorp • Commerce Bancshares • Compass • Fifth Third • First BanCorp • First Citizens • First Horizon National • Fulton • Harris • HSBC Bank USA • Huntington • JPMorgan Chase • Key • M&T • Marshall & Ilsley • Mellon • National City • New York Community • New York Private Bank & Trust • Northern Trust • PNC • Popular • Regions • RBC Centura • Sky • State Street • SunTrust • Synovus • Taunus • TD Banknorth • U.S. Bancorp • UnionBanCal • W Holding • Wachovia • Webster • Wells Fargo • Zions Bancorporation
Posted by Colin at 01:15:55

US Bank robs money with fraudulent "fees" Tuesday, March 4, 2008

I opened a business account with Colorado National Bank, which then became Central Banks of Colorado, which then morphed into Minneapolis based US Bank. I had the account for over 10 years before I decided to keep the account dormant and leave $500 in there.

Prior to doing that I called to verify that there weren't going to be any fees. I was told that they would remove a status that charged an analysis fee of roughly $16 per month, and move me to a free account status.

Then I neglected to read my statements,(who has time to read everything?) because some months later my account was moved back into the status where fees were charged every month. They also began charging a inactivity fee of $8 dollars.

Long story short, my account was completely drained of the $500 and was now negative $86 and accruing fees of $40 per day.

So I called the bank's number of 303-585-8585 which I have named the "US Bank go screw yourself hotline" and was told to contact the branch. I was given the wrong number that led to a different branch who could not help me. I finally was able to get to the right branch and that the US Bank Park Meadows Branch. I then spoke with a lady who said I need to speak with the manager, Joseph because she can't make refunds that large. I was placed on hold and then hung up on 10 minutes later. I called back and the manager was at lunch.
Posted by Seth at 17:32:40

Wachovia lost data, sold to identity thi Thursday, February 14, 2008

A New York Times article titled "Corporate Profits, From Data Sold to Thieves"[20] published on May 20, 2007 described Wachovia's negligence in screening on taking action against companies connected to identity theft. These companies used stolen identities to remove funds from personal Wachovia bank accounts via unsigned checks. The article goes on to say "In all, Wachovia accepted $142 million of unsigned checks from companies that made unauthorized withdrawals from thousands of accounts, federal prosecutors say. Wachovia collected millions of dollars in fees from those companies, even as it failed to act on warnings, according to records." Furthermore, the article adds "In a lawsuit filed last year, the United States attorney in Philadelphia said Wachovia received thousands of warnings that it was processing fraudulent checks, but ignored them."
Posted by joe cook at 02:58:57

WAMU ABSOLUTLEY SUCKS Thursday, February 14, 2008

My problems with WaMu actually started with Fleet Mortgage. I found that Fleet was charging me the wrong interest rate, misapplying payments, etc. I did resolve my problems with Fleet Mortgage but only by suing them. During our litigation they had their (first) lawyers (the Weston Adams Law Firm in Columbia SC) to threaten to "put me in jail" and other ugly things that they had no right to do (I did file a complaint with the bar against them). They actually foreclosed on my house at one point without even serving me with papers (I found out about it by accident), fortunately the Judge saw things my way and "vacated" the Judgment after he discovered that they had lied about serving me with the foreclosure papers. They then served me with the foreclosure papers which contained totally false allegations about my account (which fortunately I was able to disprove with my canceled checks and other documentation), and at various times they presented to the court and to myself (this was over a time period of several years) numerous sets of "doctored" accounting each alleging different facts. They also changed attorneys (the Weston Adams Law Firm was totally incompetent) and the second set of attorneys tried to play some of the same games with me but they too were not too "swuft". The fact is that Fleet was never cooperative with any of it's own attorneys and had never told them the truth or given them accurate accounting. I only briefly was represented by lawyers (both lawyers quit on me after I instructed them on how to handle the case - it seems that both attorneys were somewhat intimidated by the fact that I had learned more about foreclosure law than they knew). Fleet did many things to harass me during this time. Fleet called my real estate agent and harassed her, Fleet contacted my insurance company and informed them that they should cancel my insurance (and they did so). One of Fleet's attorneys told the Judge that I had approached him in a threatening manner at the courthouse (absolute lie, I did not even know who he was, he saw me waiting outside the court room and he walked up to me and said "are you Mr. Donnelly" and I said "yes"). I assume that the attorney was trying to make me look like I was hostile or something. Fleet's attorneys also attempted to make me look bad when they told the Judge that I had been tape-recording my conversations with Fleet and also with Fleet's attorneys, but when they did so, it kind of back fired on them when the Judge responded "You are an attorney, you know that Mr. Donnelly has every right to do so. If you do not know that you need to go back to law school". Also they attempted to get sympathy from the Judge by telling him that I had been posting information about the case on various internet sites. He did not seem to care about that either. During the years of litigation I attended many hearings. At first it seemed like my case would be a "slam dunk" simply because I knew that I was right and they were wrong and I had all the documentation to prove that they were wrong plus the Judge ruled in favor of me during my very first hearing. But the case just got stretched out longer and longer. Eventually I realized that the Judge was under the assumption that I was in "the wrong", nothing in particular, just little statements and remarks that he made. At one point Fleet had requested that a court date be delayed and I objected to the date being delayed. The Judge then said "that is the first time that I have ever had someone to object to delaying the foreclosure of his house" - I quickly responded that "my house will not be foreclosed on because my defense and counterclaim has merit" - the Judge responded "well, uuu, we are not discussing the merits of your case today". He granted the delay. Then one day, when I had requested a hearing for a court order compelling Fleet to comply with my Discovery request for HUD documents, the Judges attitude changed. He started the hearing by asking if the issue of me requesting a jury trial had been resolved. I explained that I was under the impression that I would be receiving a jury trial because I had that right, Fleet responded by stating that I had not requested a jury trial during the time limitations set forth by the Rules of Court. The Judged jumped in and stated "I can not believe that you would even make that allegations. I read all the pleadings and Mr. Donnelly made that request in his very first pleading over six years ago." The attorney kind of shyly said "well, that is just my clients position." The Judge ruled in my favor. Then Fleets attorney stated that she had brought the documents that I had been requesting and that they were complete except for a three month period in which she stated the Fleet had no contact with HUD concerning my loan. I quickly realized that this was the same time period in which I had requested a HUD investigation of my account. I presented to the Judge the letters which I had received from HUD which were all dated within that same time period. The letters discussed the fact that HUD had been in contact with Fleet and that Fleet had denied my allegations. Ha! I had caught them in a red faced lie! The Judge then asked Fleets attorney again if Fleet had these documents, and she even more sheepishly replied "It is Fleets position that no such documents exist". The Judge then told me that he could not make Fleet produce what they claim they do not have, and he then recommended me to contact HUD for copies of my entire file. I actually did that but HUD said they would not do that without a federal supina (sp?). All of a sudden, Fleet who's only previous offer to settle out of court for me to pay them money, all of a sudden was offering to pay me money. After six years in litigation they basically wore me down (or did I wear them down) and we settled out of court by them giving me my equity in the house ($11,200) and they agreed to clear my credit (which they did). I gave them the house in exchange. Then Fleet went out of business (they had developed too bad of a reputation and no one would borrow money from them anymore - I actually had a Fleet representative to contact me and tell me that my comments on the internet was hurting Fleets business and he asked that I remove them - I responded that my comments on the internet were intended to hurt Fleets business and that I could not remove them because I did not own the sites that they were posted on). When Fleet went out of business WaMu purchased all of Fleets assets which included Fleets buildings, furniture, employees, computer systems, and other assets including loans. So essentially WaMu is the same as Fleet in my eyes. WaMu is so screwed up that they never bothered to see if I actually still had a loan with Fleet, they just assumed that I did because I was obviously somewhere in Fleets computer system. So WaMu reported to all three credit bureaus that I was six years delinquent on my mortgage. But understand, at that point I had no mortgage. As a matter of fact by that time neither I nor Fleet/WaMu owned that house. It took me 3 months and thousands of dollars to correct this -- which entailed, a few calls to Fleets old attorney, several hundred e-mails, 40-50 phone calls, and finally, 6 straight hours of faxing. I actually think that it was the hundreds of pages of faxes that I sent to them that finally got their attention. They did then have their lies removed from my credit reports. So yes, for the time being my complaints are resolved -- but I fully expect that at some time in the future they will ruin my credit again or maybe even attempt to foreclose on that house (which I do not own or owe on). Actually I am looking forward to it. Basically, I would highly recommend that you never have anything to do with WaMu. I get 80-100 visitors a day on my website and many of them write me and tell me there horror stories (although most of them for some reason will not give me permission to publish their letters). WaMu has to be the worst in customer service ever. Scott
Posted by Scott at 02:55:58

Garage Door Parts LLC Thursday, February 14, 2008

Attention homeowners. There is a fraudulent company www.garagedoorparts.com called "garage door parts, LLC" out of New Jersey. They are frausulent!! Do not do business with them!! They will take your order and payment and will never ship the product. Then they never answer the phone. They will also never respond to your emails. When you try to get your money back on paypal, his account will be empty. It is owned by a guy named ricardo aquino. They stole $250 from me. His Email is [email protected] and the addres of the company is New Garage Door Parts [email protected] Aquino, Ricardo 127 Columbia Avenue Passaic, NJ 07055 US 973-458-9414 Stay away!!! Bad business!!!
Posted by ST at 01:23:21

What happened to the 30 year fixed mortgage? Friday, February 8, 2008

Buying a home and having the ability to make the payments sounds simple enough. Up until a few years ago, lenders actually seemed to be concerned about this simple rule. Opening almost any newspaper, one is going to find disturbing trends happening today and it is always caused by breaking this simple rule. Before you take out a loan it is very important to ask what the highest payment could be after all adjustments and caps have been accounted for. Your mortgage broker should be able to calculate this for you if you can't do it yourself. However, if you can't calculate this yourself, you probably shouldn't do the ARM at all because you should never sign anything that you don't understand. This is where the fixed rate becomes a viable choice. The rate never changes, therefore the payment never changes.
Posted by Joecavello at 00:03:27

Bring on the bad credit! Thursday, February 7, 2008

I wish the bears understood how important subprime lending is to the thesis about the market going higher. But then again, if they did, they would be forced to cover everything. For as long as I have been at this game, it has taken a crisis for the Federal Reserve to move. The Fed is always reluctant to move because it needs the crisis as a cover so it doesn't look like it's soft on inflation. Maybe you think we have good growth in this country; I think we just have easy retail comparisons because of nat gas and gasoline bills being down but that in reality we're in a slump that the international portions of our great businesses are saving. That's not enough for the Fed to cut on. That's not obvious enough. Ah, but if all of the subprime lenders pull out of that market and if Merrill(MER - Cramer's Take - Stockpickr) and Bear(BSC - Cramer's Take - Stockpickr) and Lehman(LEH - Cramer's Take - Stockpickr) -- big subprime lenders via acquisition -- start saying "it's a crisis" and New Century(NEW - Cramer's Take - Stockpickr) goes belly-up or Accredited Home(LEND - Cramer's Take - Stockpickr) takes down a big part of its book value or Countrywide(CFC - Cramer's Take - Stockpickr) leaves the business -- then we'll have a crisis that can justify not one but maybe three or four cuts. When you have the housing industry building a fraction of the homes it was building and credit hard to come by, you are giving Benanke the crisis cover he needs. Some of my friends who read RealMoney are freaking out about the negative columns that are being written about how dangerous this subprime crisis is. I'm taking those columns very seriously, which is why I am growing more bullish by the day. The fact that the Fed chairman bought into it today in front of the House of Representatives shows me that the Congressional drumbeat -- remember, prime is Republican, subprime is Democrat -- could be building and building fast.
Posted by Prestonmortgage at 22:11:41

Bank of America lost my money Wednesday, January 23, 2008

I did a wire transfer using Bank of America in Baltimore, MD to my own account in India using SWIFT codes. I was told that India is a slow to pay country and it takes about 3 weeks and no investigations would be done till then. It has been 2 and a half months and it hasn't gone through. My bank in India has not received any information regarding this from Bank of America and Bank of America is not willing to help. Every time I contact them, they tell me that they are sending e-mails to the bank in India to find the status and that the money is in India and nothing can be done about it and it is possible that I might lose my money. I have no clue as to how to go about it. Please help! I had sent all the money from my first pay-check to my parents for Diwali. It is a huge amount for me coming from a lower middle class Indian family. It is emotionally traumatizing to see the callous attitude of the Bank of America Customer service and investigations department. I don't know what to do.
Posted by Bevi at 00:22:03

Wells Fargo dropped the ball Wednesday, January 23, 2008

They have completely ####ed up my escrow account situation. The first year of my mortgage, I paid my county taxes and they sent me a check for the balance in my escrow account. The second year, we both paid my property taxes and they instantly started to bill me for the $5600 in taxes in which I had already paid. I called them up and said "you paid my taxes, which were already paid...it's not my fault." Months later they continue to try and collect from me by adding an extra $1000 to monthly mortgage. I called and was informed that they cannot collect a refund from the county, the individual has to do it. Not much I could do but go down and file for my refund, which I did. Once I got the refund, I paid off my escrow balance and told them to just cancel my escrow account. By this time, they said my account had moved into "past due" status and they couldn't remove the extra escrow amount (now $550/month) from my account. I probably had 15 calls with them stating they we had set a precedent in the first year when I paid my own taxes and that this situation was entirely their fault. I am basically ####ed now as they continue to charge me an extra $550/month. As soon as the time is right, I'm refinancing with someone else and will never do business with them again.
Posted by Scott at 00:17:24

Millions lose homes, lender CEO gets 88M Sunday, January 13, 2008

Angelo Mozilo, the co-founder and public face of troubled mortgage giant Countrywide, is eligible for tens if not hundreds of millions in compensation and perks on the sale of the company to Bank of America. During calendar 2006, the latest period available for review in Securities and Exchange Commission filings, Mozilo took home $48.1 million in compensation. An early analysis of SEC filings by the Los Angeles Times suggests he could get upward of $115 million when he leaves after the sale is complete, despite the fact that the company tanked during the recent subprime mortgage crisis. In December, Countrywide reported a record number of foreclosures and delinquencies in its loan portfolio. The value of shares has fallen more than 84 percent since mid-May of last year. Bank of America today confirmed that Mozilo will stay on with the company through a "transition period." Countrywide wouldn't comment on Mozilo's pay. His long tenure with the firm — he has been there since its beginning in 1969 — and extensive employment agreement gives him the right to a significant payout when he leaves. Immediately upon a change in control, Mozilo would get $13.3 million in accelerated vesting of stock grants, according to the terms of his 2004 compensation agreement, included in the company's latest proxy statement. Should he leave the company after the firm's buyout, Mozilo would get a one-time cash payment of $88 million.
Posted by Steve at 23:59:48