A new government tax break for those with mortgage insurance means you might be eligible for a rather sizeable tax break! Those paying for mortgage insurance are now able to write off the full amount if they make under $100,000 or part of the amount if they make over $109,000. Unfortunately, this only applies to mortgages that have originated between 2007 and 2010, but it still provides incentive for people to take on mortgage insurance. A great move by the government who wants to reduce the risk of mortgage securities in order to help the market recover!

From BusinessWeek:
Homeowners with a new mortgage that is covered by insurance can claim a tax break on the insurance this year. The break, called the qualified mortgage insurance deduction, lets taxpayers with an adjusted gross income of less than $100,000 write off the full cost of mortgage insurance. Folks who earn less than $109,000 can take a write-off for part of it. To qualify, the mortgage must have originated between 2007 and 2010. The deduction can be taken for insurance on a principal residence or a second home.

It now looks like there will be even more trouble ahead for consumers as additional credit card companies pile on loan loss provisions for an increasing number of deliquences. American Express led the pack last week but now at least two other credit card companies have added their names to the list - most recently Capital One. The problems are affecting all people too: Capital One's modest incomes to Amex's affluent incomes. And we have also already begun to see the effects of the crunch during the December shopping season...

From Forbes:
What's in your wallet? If you're a Capital One credit-card customer, it might be plastic but not cash. The credit-card company said Thursday that its 2007 earnings will fall short of previous expectations due to loan delinquencies and additions to its reserves during the fourth quarter. The company said it is reserving $1.9 billion for loan losses in the fourth quarter, approximately $1.3 billion of which are charge-offs.

Countrywide reported a record number of foreclosures in December that marks a continuation of the subprime mortgage crisis that plagues the US economy. Now, many analysts are speculating that the mortgage giant may be forced into bankruptcy if things get any worse. This could spell bad news for consumers who will find it more difficult than ever to obtain new home loans as liquidity for mortgage securities declines substantially and lending standards increase due to more government oversight.

From Reuters:
Countrywide Financial Corp, the largest U.S. mortgage lender, said on Wednesday that foreclosures and late payments rose in December to the highest on record, sending its shares tumbling for a second day to their lowest in nearly 13 years. Analysts attributed Wednesday's drop to deteriorating credit quality reflected in Countrywide's monthly operating report, and renewed concern the lender might not survive the housing crunch and could seek bankruptcy protection. On Tuesday, Countrywide rejected bankruptcy rumors.

Recent earnings numbers put out by credit card companies are quickly confirming what many analysts have already seen coming: American consumers are quickly finding themselves in a pile of debt that may be extremely difficult to escape. Subprime mortgage defaults combined with a consumer credit crunch have led to a substantial increase in defaults. Capital One is the first such credit card issuer to report the decline in credit quality as it raised its loan loss reserves. It appears as if credit card companies may have been just as careless when loaning to individuals as the mortgage sector.

From MarketWatch:
Credit-card shares were among the top decliners in the financial sector Thursday after Capital One Financial Corp. lowered its earnings outlook and raised its loan loss reserves, with increasing clarity that the credit crisis sparked by careless home lending has spread to the consumer sector.

American consumers continue to take on more debt despite major problems in the credit and mortgage markets. The Federal Reserve released a report showing credit card balances increasing at the fastest pace in years with the biggest gain in outstanding debt since August - a 7.5% annual rate! Perhaps consumers should take a hint from corporations who have taken a conservative approach and kept as much cash as possible on their books. It's time for consumers to get the help they need and start reducing their debt and increasing their savings.

From MarketWatch:
U.S. consumers took on more debt in November, increasing their credit-card balances at the fourth fastest pace during the six-year expansion, the Federal Reserve reported Tuesday. Total seasonally adjusted consumer debt increased by $15.5 billion, or a 7.5% annual rate, in November to $2.51 trillion after a revised 1% rise in October, the Fed reported. It was the biggest gain in outstanding debt since August.

There has been a lot of speculation that Countrywide could go bankrupt amid the mortgage crisis and it has a lot of consumers wondering how it may affect them. The first thing that consumers' will notice is a much more difficult loan application process that involves much more strict lending guidelines. New government regulations are making it very difficult for subprime borrowers who do not have a huge income to justify a home mortgage payment. Home sales will also fall further as mortgage financing becomes even more rare. Fewer mortgages means fewer buyers, meaning more homes will stay on the market and prices will fall with increased supply. Combined, this only means more hurt for a company has exhausted many of its extraordinary financing options - maybe it will happen.

From FoxBusiness:
Countrywide Financial, the nation's largest mortgage lender, is on a collision course with bankruptcy, with potentially severe impacts on the ability of U.S. consumers to refinance their homes or get new mortgages, according to Weiss Research analysts Mike Larson.

The IRS is finally considering at refund loans and whether they are being used by tax cheats in order to game the system. Many middle-class Americans are taking advantage of the system by falsely identifying their income in order to qualify. These loans are traditionally available to the working poor in order to help them attain temporary assistance but now many others are taking advantage of the program as a "free" loan opportunity. Clearly, this is a practice that has to stop and the IRS is definitely taking the right steps...

From Baltimore Sun:
Last week, the Internal Revenue Service said for the first time it will be looking at refund loans and whether they encourage cheating among tax preparers, as some critics claim. Sounds hopeful, though at this point the agency only is seeking public comment ... A refund loan is an advance on your tax refund - minus fees. The loan is repaid when the IRS deposits your refund in the bank ... Millions of tax filers likely will take out refund loans this tax season. Don't be one of them.

It appears as if the credit crisis is not only limited to people defaulting on home loans, it's now affecting the rich as well. Many millionaire investors around the world have begun pulling out a significant amount of money in order to reduce risk. Unfortunately, this is causing a lot of pain for money managers and those who manage cash for the rich. So much money being pulled out is also causing damage to the markets themselves, which continue to feel the effects of a lack of liquidity.

From The Guardian:
As the credit crisis drags on, not even the world's millionaire investors are immune from its effects, and the private banks which manage their money could be next to feel the pain. Rich investors are reducing leverage on their portfolios, robbing wealth managers of a lucrative income stream just as difficult financial markets cast a shadow over their results. As the credit crisis eats away the value of their assets, millionaires are paying back cash they borrowed for investment purposes to reduce risk, private bankers say.

Credit card companeis have been known to institute seemingly random rate increases for some time now and the practice was finally beginning to be brought to attention during 2006. However, the subprime meltdown along with a host of other problems buried it in the newsmedia. Perhaps it's time to bring this back to the public attention so that the Senate takes the time to continue their inquisition into this unfair practice...

From FWDailyNews:
In the midst of all the reports of home foreclosures and credit failures in 2007, an investigation that could affect anyone who has a credit card slipped under the radar. Spearheaded by Michigan Senator Carl Levin, the U.S. Senate Permanent Subcommittee on Investigations Hearing: “Credit Card Practices: Unfair Interest Rate Increases” met twice this past year, in March and December. While the senator doesn’t have another hearing scheduled soon, the investigation isn’t over, an office aide in Washington told me Thursday. What this is about is what Levin describes as arbitrary decisions by credit card companies to increase the rates on consumers’ cards, on what often seems like an inexplicable whim. The problem is, you agree to this whim when you get your credit card (read the fine print in your cardholder information packet).

Many residents of the UK are set to overpay on their credit cards and the same holds for many Americans. Credit card companies offer residents in both countries many opportunities to loan money with 0% interest for a certain time, yet many people are set to continue to make minimum payments and accrue interest. If you are one of these people, it is important to check into low interest credit cards at websites like CreditCards.com: http://www.creditcards.com/balance-transfer.php.

From TimesOnline:
NEARLY 7m people will pay over the odds for credit card debts they built up over Christmas, in the latest worrying sign for the Britain’s beleaguered economy. Research by Moneyexpert.com, a financial website, found that 6.6m people are not planning to switch to a cheaper credit card deal, despite the fact that they are paying an average 16.8 per cent interest, compared with 0 per cent on the best transfer deals.

Free balance are a great way to reduce your credit card payments by lowering your interest rates and a record number of credit card users are expected to make them during the first three months of 2008. Keep in mind, however, that balance transfers will still cost you money. The best ones will charge around 2.5% in order to transfer your balance - but this is still far better than paying the higher interest rates! Also, remember that the 0% interest rate is typically for a promotionally period only until it resets to a higher rate - so it is very important to get the card paid off during this time period.

From Motely Fool:
If you splashed out over the Christmas period, you could find yourself saddled with a large debt on your plastic. The New Year has arrived so now is the perfect time to get your finances back into shape which means switching to a 0% balance transfer credit card. That way you can put a temporary stop on your interest while you get to grips with your debt. Voila!

The evidence is piling up that American consumers are in deep trouble with credit. This latest report showed that deliquences across all consumers loans are at their highest rate since 2001 when we were in a recession. The highest number of deliquencies were present in housing and auto loans as home equity lines of credit have dried up; however, we are likely to see a continued rise in credit card problems despite more lenient financing terms.

From Mercury News:
Late payments on a cluster of consumer loans, including those for autos, home improvement and certain home equity loans, climbed in the summer to their highest point since the country's last recession in 2001. The American Bankers Association reported Thursday that the delinquency rate on a composite of consumer loans increased to 2.44 percent in the July-to-September quarter. That was up sharply from 2.27 percent in the previous quarter and was the highest late-payment rate since the second quarter of 2001, when the economy was suffering through a recession.

No, it's not a scam letter you received in the mail! Millions of Visa and Mastercard users are eligible for a cash refund of illegal transaction fees that they paid during overseas transaction. The original lawsuit was filed because these fees were largely seen as hidden from consumers and therefore illegally imposed. So, how much do you get? Consumers who spent a short time overseas are eligible to receive $25 with minimal paperwork. Those that spent longer than a week or spent more than $2,500 are eligible for a larger refund if they fill out the paperwork for it. You can find more information and a link to the forms here.

From USNews:
Tens of millions of credit card users received letters in the mail over the past couple of months informing them that they may be eligible for a refund of the currency conversion fees paid during overseas transactions. The settlement was the result of a lawsuit alleging that Visa, MasterCard, and Diners Club did not disclose the 1 to 3 percent fees they charged on foreign transactions.

Many consumers who overextended themselves during Christmas may unload their debts onto the public by declaring bankruptcy. Sadly, many people continue to ignore the warning signs of debt and push their bills off during the holiday season. These bills will begin to surface again during the first three months of the year when many of them will become due. Unfortunately, many of these people will face insolvency as their only way out of debt. This is particlarly true given the issues faced in the credit and housing markets, which has substantially limited consumers' ability to repay their debts.

From Reuters:
Excessive spending over Christmas will fuel personal bankruptcies in the first three months of the year, a report says. Chartered accountant Grant Thornton predicts that 28,000 people will become insolvent in the first quarter of 2008, a third of whom are expected to file for bankruptcy as a direct result of debt racked up over the festive period.

Most Americans count their house as their single largest asset as it is used to back loans and build equity. However, a new trend in so-called "reverse mortgages" may be changing that fact. Now, mortgage companies are targeting seniors who are willing to part with their house in exchange for a monthly stipend (reverse mortgage). Under this arrangement, a senior is able to slowly sell their house over time until they die, at which time the house becomes property of the bank. The problem with this is that these mortgage companies are not only taking away a large asset (that is usually passed down to future generations) but also charge high fees for the loan that can result in homeowners receiving substantially less than they deserve.

From Kansas.com:
As living expenses--particularly health care costs -- rise while incomes remain stagnant, seniors are increasingly finding reverse mortgages a way to remain in their homes and make ends meet. There are downsides, including the costs--which can be as high as $8,000 to $9,000 for a $150,000 loan, for example--and the fact that consumers essentially give up what for most people is their biggest asset.

It appears that the consumer credit crisis that we have been predicting for some time is now finally beginning to hit the market. The housing boom has seen many consumers utilize their home equity lines of credit in order to pay off unsecured credit card debts. Now that that resource has dried up, many Americans are beginning to default on their credit cards. This has caused strain on banks that are now raising their interest rates in order to try and offset the higher defaults. Unfortunately, this will only compound the problem by making it even more difficult for Americans to get out of debt which will force more into default. In the end, someone's going to take the hit - whether it be consumer's with debt or U.S. banks (which are already beaten down) with debt when consumers declare bankruptcy.

From MarketWatch:
Faced with mounting account delinquencies, major U.S. banks are penalizing credit-card customers late on payments by hiking their accounts to maximum default interest rates of 30% and more -- even those with good credit records ... The decline in Americans' home equity due to slumping real-estate values is limiting cardholders' ability to pay off higher-interest credit-card debt with home-equity loans. As that resource becomes unavailable to more borrowers, experts say, lenders are taking aggressive measures to limit their exposure on unsecured credit-card debt.