Tuesday, June 24, 2008
Credit Cards Get More Personal
Credit card issuers that were burned by defaulting consumers are now making their credit checks a bit more personal. Spotless credit records are no longer enough to ensure a line of credit; instead, banks are now taking a look at your job and even the city in which you live. Credit card executives insist that the heightened focus is directed especially at residents of states hit hardest by the housing slump, like California, Florida and Nevada. Meanwhile, card holders who work in the construction or financial industry are also seeing their credit tighten up.

The increased scrutiny reflects lenders' attempts to slow the rising number of delinquencies and losses from their consumer businesses. Companies like Washington Mutual have seen their credit card losses rise from 9.5% to 10.5% this year compared to just 6.9% last year. Other companies like JP Morgan are experiencing similar problems. In fact, some 30% of all banks are taking actions to tighten their lending standards, according to a Federal Reserve survey. This compares to just 10% of those companies surveyed in January.

In the end, credit card issues are caught in between a rock and a hard place when making these types of decisions. They have to limit their exposure in order to protect themselves, but if they are too aggressive, they may end up tarnishing their reputation and brand. It will be interesting to see just how much more these standards are tightened and if they end up working to reduce the issues that many are facing.

6/24/2008 4:21:05 PM UTC  #    Comments [0]  |  Trackback
 Monday, June 23, 2008
How Are You Spending Your Rebate Check?
Many Americans are excited to spend their rebate checks on that new electronic gadget or fashionable piece of clothing, but it may be wiser to save it or use it to pay off interest-collecting debts. The government is handing out $105.7 billion in rebate checks - up to $600 per working individual and $1,200 per married couple plus $300 per child. Nearly half of the checks have been sent out as of this week and taxpayers are now swimming in nearly $57 billion of additional funds.

Surprisingly only 40% of people are planning on spending their checks and most are plotting a practical strategy. Vehicle, gas and travel-related expenses are often #1 on the list followed by home-related expenses, and then a combination of buying food and paying off debt. Others are using the check to catch up on rent or pay off backed mortgages as the housing market continues to experience a steady stream of problems.

Americans can relax a bit too- Obama stated recently that he will push for a second round of rebates next year regardless of whether or not the stimulus package can be labeled a success. Good news for consumers and companies, but it could be bad news for the government that continues to run at a huge deficit.

6/23/2008 4:22:28 PM UTC  #    Comments [0]  |  Trackback
 Monday, June 09, 2008
The Perfect Time to Refinance

Mortgage rates are back on the rise now after the dollar has begun to strengthen, but it is not too late to refinance your house and save a bundle. Interest rates on 30 year mortgages are above 6%, but the end of low interest rates may be just over the horizon. Perhaps it's time for you to look at refinancing your home.

The key driver behind low interest rates is inflation. Many analysts believe that the Federal Reserve will begin to raise interest rates again later this year to fight the growing threat of inflation. They were lowered in the first place to spark the purchase of credit by increasing the yield, but that threat is now mostly past us.

Now is a great time to seek a refinancing as rates are still at historical lows. Getting in your things now means you will beat the wave of applications that generally flood the market when rates dip slightly. By preparing your bank statements and tax returns right now, you can keep one step ahead of the rest.

Many people are afraid that their house will be appraised lower than they thought now that the housing market has turned. However, there are some steps you can use to make sure you get a fair valuation. First, make sure that your lender doesn't use automated valuation models, but rather sends an actual appraiser to your house.

Secondly, make sure you get a full appraisal that involves someone coming to your house and asking questions. If you have a good credit score, the lender is more likely to use a "drive-by" appraiser because they don't need to take full stock of your collateral.

Finally, seek out the lender who you have your current mortage though as it could save you a lot of paperwork right off the bat. Also, search for lenders are a bank or credit union rather than using a broker as it could save you a lot of money in the long run. A recent study showed that these savings could be significant.

6/9/2008 8:49:40 PM UTC  #    Comments [0]  |  Trackback
 Thursday, May 22, 2008
What are Life Settlements?

Life settlements are financial transactions in which a policy owner possessing an unneeded or unwanted life insurance policy sells the policy to a third party for more than the cash value offered by the life insurance company. The purchaser then becomes the new beneficiary of the policy at maturation and is responsible for all subsequent premium payments after the policy acquisition.

Life settlements are typically offered to high net worth policy owners, aged 65 or older, by financial advisors or accountants. The option is perfect for those who are possess duplicate policies or an unneeded policy as it allows them to convert it into much needed cash while avoiding any future premium payment responsibilities. The strategy is especially effective for term life insurance policies that are set to expire anyway – this option may provide you with “free” money.

Do all life insurance policies allow this? Well, a supreme court ruling (Grigsby v. Russell) established a policy owner’s right to transfer an insurance policy. The argument was that since life insurance possessed all the ordinary characteristics of property, it should be considered an asset that a policy owner can transfer without limitation. The process became streamlined in 2001 when the National Association of Insurance Commissioners (NAIC) released the Viatical Settlements Model Act, which defined guidelines for avoiding fraud and ensuring sound business practices.

In general, you should consider life settlements if: Your policy is no longer needed; investment projections have not materialized; premiums are too expensive; medical or longterm care is required; charitable or family giving is desired; employment status changes; bankruptcy; and any other instance where it may be advisable. It is important to consult a financial advisor before making any decisions.

5/22/2008 5:47:53 PM UTC  #    Comments [0]  |  Trackback
 Wednesday, May 21, 2008
Top 5 Reverse Mortgage Questions

Reverse mortgages are becoming increasingly popular in the United States. The U.S. Department of Housing and Urban Development (HUD) created one of the first federally-insured reverse mortgage programs that can help seniors achieve greater financial security. However, those considering reverse mortgages should be careful to make sure they act prudently.

  1. What is a reverse mortgage? A reverse mortgage is a special type of home loan that lets a homeowner convert some or all of the equity in their home into cash. Unlike traditional home equity loans, this money does not need to be repaid until the borrow no longer uses the home as their principal residence. Most often, this occurs when the homeowner passes away.
  2. How do I qualify for a HUD reverse mortgage? The HUD Federal Housing Administration requires that borrowers are 62 years of age or older, own their home outright (or have a low mortgage balance), and must live in the home. Those interested in obtaining a reverse mortgage must also contact a HUD-approved counselor for a brief consultation. Call 1-800-569-4287.
  3. What types of homes are eligible for a reverse mortgage? Single family dwellings and two-to-four unit properties that you own and occupy are automatically eligible for reverse mortgages. Moreover, some townhouses, detached homes, condominium units, and manufactured homes are also eligible.
  4. Can the lender take the home away if the loan is outlived? No, you do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home’s value.
  5. How are payments sent? There are five options for receiving reverse mortgage payments: (1) equal monthly payments, (2) unscheduled payments via a line of credit, and (3) a combination of scheduled monthly payments and a line of credit.

5/21/2008 5:20:11 PM UTC  #    Comments [0]  |  Trackback
 Thursday, May 15, 2008
Getting Started with Home Improvement Loans

Home improvement loans are home loans used to finance improvements on your house or property. These improvements can include repairs, a new bathroom, a new kitchen, any extensions or simply general improvements. Interestingly, these loans were also the original home-equity loans before they grew into a limitless line of credit. The theory is that any improvements made on the house will increase its value and enable you to pay back the loan.

The key questions to ask when evaluating such a loan is:

  1. Are the improvements you plan to make increasing the value of the home to a greater degree than the loan amount?
  2. What will the monthly payments be and are they affordable given the existing mortgage?
  3. What are the tax implications and are there any potential tax deductions available?

It is important to get quotes from contracts before approaching lenders as well since they will require this information. It is also important to estimate the value from these improvements in order to assure the lender that you’ll be able to pay back the loan. The loans themselves come from five main sources:

  1. First Mortgage
  2. Second Mortgage
  3. Refinancing Solutions
  4. Unsecured Loans
  5. Grants

In the end, home improvement loans can be a great way to leverage your house in order to increase value in the same way that a stock investor can borrow money to invest in stocks in order to increase his/her return. This can pay off in the long term as long as your are sure that the value will be realized.

5/15/2008 7:45:11 PM UTC  #    Comments [0]  |  Trackback
 Thursday, May 08, 2008
What's Fueling Higher Food Costs?
High costs at the gas pump may be a pain when you drive, but now it's becoming a burden at the grocery store as well. Few people take the time to consider that the foods they eat are not grown locally; rather, they are flown in from around the world and combined. The costs to transport these food products are rapidly rising due to the increased cost of fuel. This has directly caused higher food costs for consumers as a result.

There is also another way that energy is involved. Government incentives designed to increase the usage of ethanol have led to tons of farmland being converted to meet the demand for corn. This is land that may have been previously used for growing wheat or other edible crops (ethanol corn is not the same as human edible corn). Currently, ethanol crops account for around 7% of the corn crop, but this percentage is only growing.

In the end, it is clear that rising fuel costs have contributed to rising food costs. The cost of transportation for food products have skyrocketed and forced manufacturers to raise their prices. Meanwhile, high oil costs have led to government incentivizations to produce ethanol. This has caused a reduction in the number of farm acres used for human-edible food products. This is all bad news for the consumer pocketbook!

5/8/2008 6:33:43 PM UTC  #    Comments [0]  |  Trackback
Gas Prices Climb to Record Highs
Gas prices climbed 3 cents overnight to hit a new national record of $3.65 per gallon, while oil prices paused for the day on profit-taking by traders. A survey by AAA and the OIl Price Information Service showed that regular gas nationwide rose 2.7 cents to a reocrd $3.645 while deiesel prices matched the record average at $4.251 per gallon.

Gas prices tend to lag oil futures prices, so crude oil's move higher is bad news at the pump. Crude contracts hit a record $124 per barrel yesterday, which means that the average price of gas may soon rise to over $4 per gallon. In fact, if the move continues, few can argue that it will be possible for gas to stay under $4 per gallon.

Things will only get worse with analysts at some investment banks predicting $150 to $200 per barrel oil prices within two years. These forecasts were issued just days after oil hit record highs and are backed up by economic forecasts showing consumption in China and other developing nations on the rise.

Many other analysts insist that trader speculation is the only reason that oil prices so high. In fact, some say that there is little reason for oil to be above $60 per barrel.These are the same analysts that insist that the dollar's decline is the real reason behind the spike in oil and an upcoming rebound could relieve oil prices quickly.

So, how high will gas be over the next few months? That remains to be seen...

5/8/2008 6:15:13 PM UTC  #    Comments [0]  |  Trackback
 Friday, April 25, 2008
Consumer Confidence Hits a New Low
The consumer confidence survey from the University of Michigan found that consumer confidence is now at its lowest level in 26 years. The survey found that high food and fuel prices, combined with shrinking incomes and falling home values have caused many consumers to save their money rather than spend it. The indicator fell to 53.3 in April, which marks a 6.9 point decline from the previous month.

The economic stimulus rebates due to begin arriving in mailboxes next week should help boost spending temporarily, but a continued rise in food and gas prices will continue to cause consumers to spend less money. Moreover, the survey found that only 30% of consumer plan to spend their upcoming tax rebates, while the rest said they would use it to  pay off debt or put it into savings.

The survey also noted that 90% of consumers believed the economy was in a recession and 75% believed the economic problems will persist for another year. Finally, a third of those surveyed said that they were reigning in spending because of uncertainty about unemployment and income.

In the end, this is bad news for the economy that continues to struggle with a variety of problems.

4/25/2008 6:05:33 PM UTC  #    Comments [0]  |  Trackback