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.

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.

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!

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.

Why Refinance?

Most people would like to get mortgage refinancing because of one or a couple of reasons. But the fact of the matter is, there could only one main reason why people would like to get mortgage refinancing. And sometimes it is not an easy decision to do. You may need a lot of research or due diligence on your part or ask family members for ideas or options if you are in some situation whereby as refinance is the focus of attention.

If you have a home and a mortgage, and you are thinking about refinancing, first you must know both what you want out of your new mortgage and what your different options are, so that you can pick the refinancing plan that best fits your needs.

But if you think about it, there are numerous reasons why you would like to opt for a mortgage refinancing. Mainly they are to reduce the home loan interest rate, home renovation, debt consolidation, educational needs and expenses, medical expenses and mounting debts and loans.

Home renovations and improvements can sometimes be the reason why you will get into doing a refinance. For instance, your need a deck at the back of your house and you do not have the cash on hand to do it, then you can use this alternative. This you can do if you have equity on the house.

Reducing the interest on your home loan is always a key in paying off your home loan. For most people, whenever they have the opportunity to get their interest rates down, they will do it in a heartbeat so they can reduce their mortgage payments.

For individuals who have accumulated debts and loans to the max, mortgage refinancing is another option of getting all your debts into single monthly payment through debt consolidation. Such situation is when you have too many different types of bills to pay; you can consolidate them into one loan and then pay one single monthly payment. This would ease your burden of managing too many different lenders and or creditors.

You may also like to do this option when you have medical expenses that are getting too much to handle for you. People can quickly get into huge indebtedness when heir medical insurance cannot cover for the most part of their hospital bills and medications. So this can be a viable option if you are this situation.

Another thing is your children who would like to go to university or college and you do not have the money on hand to finance their education. This is another reason that is commonly seen when people approach their local bank or lender for help.

With all these reasons on why people get a mortgage refinancing, you now know that you are not alone when you contemplate on getting refinance.

Remortgage or Mortgage Refinancing is very commonly done to get or facilitate the borrowing of money to ease some problems or get advantage of a situation. But you have to remember that you have to have a plan for these types of borrowing so that the money will not to waste or unplanned spending. You ought to have the main reason on why you are getting remortgaged.

Foreclosure Fix Expanded To Cover Second Liens

This week, the Obama administration announced that it will expand its $75 billion foreclosure prevention effort to cover second mortgages.

Many delinquent borrowers complained after the modification plan was announced in February that they were being left out because their home values had dropped. The administration moved to address the concerns by tweaking the original modification plan, which calls for adjusting eligible borrowers' loans so monthly payments are no more than 31% of pre-tax income.

Loan servicers recently started taking applications. Servicers covering 75% of the nation's mortgages are now participating in the program, which enables some homeowners with little or no equity to refinance. The plans are expected to help up to 9 million homeowners to avoid foreclosure, according to a senior administration official

Up to 50% of at-risk borrowers carry second liens, a popular option during the housing boom that enabled borrowers to put little or nothing down when buying a home. These loans have complicated the modification process, adding to delinquent homeowners' debt loads. Mortgage investors also have balked at reducing payments on first mortgages when the second loan was left intact.

Under the new plan, the interest rate on second mortgages will be reduced to 1% on loans where payments cover interest and principal and to 2% for interest-only loans. The government will subsidize the rate reduction, with the money going to the mortgage investor.

Servicers will be paid $500 for each modification and an additional $250 annually for three years if the borrower stays current. Borrowers can receive up to $250 per year for five years to pay down their first mortgage.

Investors also can receive a payment in exchange for extinguishing the second lien. They would receive 3 cents on the dollar for loans more than 180 days delinquent and between 4 cents and 12 cents for less delinquent loans, depending on the borrowers' debt levels.

Servicers who join the new program must modify second loans when a borrower's first mortgage is adjusted. It likely will take a month to implement, but it should not slow down the modifications of primary mortgages, the administration said.

Real Estate Outlook: Indicators of Recovery

You may not be quite ready to accept the idea that housing on a national basis has moved beyond bottoming out and is now in recovery mode.

But think about this: Even if you're bearish on the market, you've got to notice that some extraordinarily positive signs are popping up that point to recovery.

• New mortgage applications last week for home purchases and refinancings were up 77 percent from the same week in April 2008, according to the Mortgage Bankers Association. That's a statistic that's hard to ignore!
• Mortgage rates continue to average well below 5 percent -- 4.7 percent last week on average for 30-year fixed-rate loans and 4.5 percent for 15 year loans. Rates like these are a major factor pushing applications way up, no question, but sharply lower housing prices in many markets are an important part of the equation as well.
• Nearly 600,000 homebuyers have already claimed either the $7,500 tax credit from last year, or the $8,000 credit for this year, according to IRS data cited by the National Association of Home Builders.
• Many of these buyers are true first timers, but plenty of others are people who are now jumping back into real estate after not owning for a few years, drawn in by today's much more affordable prices and financing.
• The rebound underway in mortgages is even creating a mini hiring boom! The Bank of America has just announced that it will be adding 5,000 new positions around the country -- just to deal with its red hot mortgage business, which closed nearly 400,000 new loans during the first quarter. Other big lenders are hiring loan officers and processors again too.
• Hard-hit local housing markets continue to roar back with sales gains. On Florida's west coast, in the Sarasota and Bradenton areas, sales were up 28 percent in March over last year, and pending sales -- pointing to more purchases in the pipeline but not yet closed -- were up 27 percent.
• Inventories of unsold houses in the Sarasota-Bradenton area are down 31 percent, to the lowest level since December 2005, according to a report from Trendgrafix.
• Nationally, house prices have begun moving up again after many months of declines. According to the Federal Housing Finance Agency, prices rose by seven tenths of a percent on average last month - after falling by six and a half percent during the previous 12 months.

There is no other way than to read these signs for the best. The market is turning itself around, and nothing but good can come from now.