Wednesday, July 29, 2009

Borrowers Protection Laws Part II

Borrower Protection Laws are put into place to protect you from any harm while you are trying to conduct any type of financial action. It is important to know these laws so you are not taken advantage of.

Here are 3 more laws:

The Expedited Funds Availability Act
This 1987 law specifies when banks must make funds deposited by consumers available to them, and requires banks to inform customers of their funds availability policies.

The Fair and Accurate Credit Transaction Act of 2003
This law was enacted as an amendment to the FCRA in order to assist consumers in combating identity theft and other matters that negatively affect their credit rating. It also allowed consumers to exercise greater control over the type and amount of marketing solicitations they receive, restricted the use and disclosure of sensitive medical information, and established uniform national standards in the regulation of consumer reporting.

The Fair Credit and Charge Card Disclosure Act of 1988
This law regulates credit card offers directed to consumers, and comes into effect whenever a consumer is presented with a credit card application (i.e., through the mail, the Internet, a bank, or a retailer). It requires credit applications to contain information about key terms of the account.

Friday, July 24, 2009

Borrowers Protection Laws

The federal government has enacted numerous statutes, rules, and regulations designed to protect consumers from unscrupulous lenders and other financial entities. These laws govern nearly every financial transaction a consumer might encounter.

Lending institutions, creditors, collection agencies, and other businesses that are regulated by these laws are all required to follow them, but that doesn’t mean that all of them do. As is often the case, what you don’t know can hurt you, and many companies take advantage of consumers’ ignorance of the laws that were enacted to protect them.

What follows is a very brief summary of some of these laws, what they do, and who has to follow them.

The Consumer Leasing Act of 1976
This law requires finance companies to disclose the cost and terms of automobile and other consumer leases.

The Electronic Fund Transfer Act (EFTA)
Enacted in 1978, the EFTA governs the manner in which consumers and financial institutions utilize electronic fund transfer services, such at ATMs, POS (point-of-sale) terminals, and preauthorized transfers directly from one bank account to another. This law comes into effect whenever you withdraw funds from an ATM machine, use your credit card, or pay bills online.

The Equal Credit Opportunity Act
Congress enacted this law in 1974 to prohibit discrimination in credit transactions on the basis of sex, age, race, religion, color, national origin, and other grounds. It requires creditors to grant credit to qualified individuals without requiring signature by spouses, and to inform unsuccessful applicants in writing why they were denied credit.

Over the next few weeks, I will be posting more laws and how they are designed to protect you.

Monday, July 13, 2009

Advantages of Home Mortgage Refinance Loans

There are many great reasons to consider a home mortgage refinance loan.

If you are considering mortgage refinancing but are not sure on how to get started then here are several tips which will help you to decide if it is a right kind of loan.

Every financial situation is different and not all would require a mortgage loan or refinancing. If the property value is increased in the recent time, then there probability of qualifying for a better interest rate with a new home mortgage refinance loan. Interest rate coupled with the repayment period will determine the monthly payment. Extending the period of repayment would offer a lower interest rate and helps in adjusting the monthly bills to be paid promptly.

Advantages of Home Mortgage Refinance Loans
There are lots of benefits left untapped by most of the borrower.

  • Tax-deductible Debt consolidation can offer discounts on the amount of tax paid. But it is important to counsel with the appropriate department.
  • Lower mortgage payments
  • Lower mortgage interest rates will reduce the burden on the borrower to pay a high monthly payment.
  • Borrowers can stop paying private mortgage insurance.
  • Options to switch to more advantageous term length
  • Ability to switch over to Fixed mortgage interest rate

It is important to collect as much information as possible to select the right kind of plan. This research works will prevent the borrowers from overpaying the monthly payments and saves money.

Tuesday, July 7, 2009

Options You Have to Avoid Foreclosure

If you are like many people, you may have found yourself in a situation that is leading down the road toward an impending foreclosure. There are several steps that you can take to halt this process:

  1. REFINANCE - While this is a legitimate option, it is fairly unrealistic in the light of this economy where more and more homeowners are finding out that their homes are now not worth what they owe on the mortgage. But for some people, it might work!
  2. REPAYMENT PLAN - This is where the borrower is allowed to catch up on any missed payments by perhaps doubling up on the payments until the account is brought current. Again, while this is an option, it is not very realistic because most people are facing foreclosure because they can't afford even one month's payments let alone doubling them!
  3. FORBEARANCE PLAN- With this option, the borrower may be allowed to roll the missed payments onto the end of the loan term thereby extending the length of the loan. Sometimes this is what the bank does for its loan modification programs. Again, while an option, it is not very realistic because the borrower still has to make the same monthly payment which they couldn't make before. It is definitely more doable if the hardship was just a temporary glitch.
  4. LOAN MODIFICATION- Borrowers are seeing more of these being done and it may definitely help out some of you who are facing a hardship! Many banks are now willing to change the original terms of a borrower's promissory note. Some are reducing the interest rate. Some may extend the length of the loan to 40 years. Some include a combination of the two! Most, however, will not reduce the amount of principal owed.
  5. BANKRUPTCY- This is a court-approved reorganization plan where the borrower's loan may be changed from the original terms based on a loan modification. This is a major hit on a person's credit score and should be the absolute last option to be considered! Some people have even found that after filing for a bankruptcy, they also end up with the foreclosure on their credit score as well! A double whammy!
  6. DEED-IN-LIEU OF FORECLOSURE- This allows the bank to take back the property without all the expenses incurred in a full foreclosure process. This has slightly less of an impact on one's credit score than a bankruptcy. The bank is unlikely to suggest it to a distressed borrower since they already have plenty of non-performing assets on their books right now!
  7. SHORT SALE- This may be the best option for many distressed borrower's out there! There must be little or no equity in the property. Wow! Almost everyone facing foreclosure falls into that category. And the homeowner has to have a legitimate hardship. Well, with unemployment rates rising and home values going down who's not in hardship. Now, if you've gone out to buy a new speed boat or Lamborghini, forget it! You were not being financially responsible. But dare I say, not many people would fall into that category. As more and more people are falling into default, the banks are granting more and more short sales because they already have a whole boatload of REO's on their books. These are known as non-performing assets and affect the bank's ability to lend out money for loans and make money from the interest rates they charge. This means that banks are really trying to get rid of the properties they already own and don't want yours!

Friday, July 3, 2009

Affordability is Key

The U.S. economy has entered a recession and will contract for the next three quarters. The recovery, beginning in the second half of 2009, will be slow.

Despite these challenging economic times, existing home sales will be rising. Why? The answer, in a word: affordability.

With home prices falling in many parts of the country affordability conditions have markedly improved. Even with rising unemployment, nearly 93 percent of households will have jobs. These 93 percent of the working households respond to home buying incentives. Measures such as the recently enacted first-time homebuyer tax credit and a larger number of mortgage loans that qualify for purchase by Fannie Mae and Freddie Mac and through the FHA program will further bring homebuyers to the marketplace.

New home sales will be a different story. There is an overhang of inventory and homebuilders are being forced to cut back sharply. New housing starts have fallen by about 60 percent from their peak activity three years ago. That isn’t necessarily all bad news – since so few new homes are being built, the inventory of vacant new homes on the market has fallen. The total housing inventory – new and existing combined – still remains elevated so further reduction in building by builders will be welcomed. Because of low housing starts, new home sales will continue to be soft.

For the rest of the “indicators” we look at, yes, there will be some pain before we have gain. Look for growth in the U.S. gross domestic product (GDP) to contract for two consecutive quarters, in the fourth quarter of this year and the first quarter of 2009, before expanding in the latter part of 2009 as the housing market begins a steady improvement.

Affordability Will Continue to Improve

The best news out of our forecast is that affordability will continue to improve. NAR’s housing affordability index is expected to average 18 percentage points higher this year than in 2007. That is good news for potential home buyers and good news for the economy. And even though sales are expected to rise, the increase would be more certain – and more robust -- with an additional stimulus to boost home buying. Removing the repayment feature of the homebuyer tax credit and raising the loan limit higher could help achieve that. Once housing gets moving, then the economy can get moving as well.