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Friday, January 9, 2009

Fixed Rate Possibly Better than Adjustable in Reverse Biz

By Matt Vanrock

At this time last year, if a senior was to ask me which was a wiser option, the fixed interest rate or the one that adjusts, my response to him would (in almost all cases) have been the latter.

Cut to the present and that isn't so much the case anymore. This is because the banks dealing in reverse mortgages keep striving to increase their take on the deal.

The margin that banks and their investors needed was at approximately 1% at this time last year. Go ahead and liken the "margin" to "profit margin". It is the profit in the loan.

To help you understand in a real life example. Let's say a year ago a borrower used an ARM with it's index equaling 1%. The lender adds on 1% for its margin. Add the two together and you arrive at an actual interest rate of two percent.

Well, margins are on the rise since this time last year. By March they went to one point five percent and by October one point seven-five percent.

Well, it's on the move again. It appears Fannie Mae is telling us preemptively that the expected margin next week will raise up about one half point next week.

I won't get into a litany of reasons why the adjustable is a better all around reverse mortgage than the fixed. It is, but certain circumstances make the fixed more attractive right now.

One example is if the borrower cashes out all or the vast majority of the total a possible loan immediately.

If the lender is willing to lend $100,000, if the borrower needed all of it immediately the fixed may be a better choice. The reason is, with the new margin increase, the average 15 year interest rate for the adjustable is now higher than current fixed rate.

Right now the ARM is very attractive because it's squatting down extraordinarily low. It's teasing people, but this won't last forever and it will come up to meet the average.

Another thing is the amount of money a reverse mortgage lender would lend to a borrower using an adjustable rather than a fixed was more pronounced than it is today.

Formerly, the adjustable gave the senior much more money. No longer. It's almost a wash now. With the new higher margins the fixed might even get the borrower more than the adjustable.

We'll have to see, but the adjustable has lost a bunch of its punch.

UK Payday Now

By Mishell Novell

This article looks at the way banks exploit customers with NSF and overdraft fees. It contrasts this with the alternative of using fast online payday loan and proposes that these are in fact cheaper than bank fees. It goes on to show how banks lobby aggressively against the payday industry fearing cuts in there fees. The findings are based on a US study by the federal government and is freely down loadable.

This is an independent agency part of the federal government - created in 1933, just when thousands of banks failed. The 1920s and early 1930s saw thousands of banks fail. The FDIC is managed by a five-person Board of Directors, all of whom are appointed by the President and confirmed by the Senate, with no more than three being from the same political party.

In 2006 legislation allowed banks to apply automated overdraft programs - much to the detriment of consumers. This is a system where the bank honors customers obligations using computer rules to determine non-sufficient qualification for overdraft coverage. Data and information were gathered through a survey of a sample of institutions representing 1,171 FDIC-supervised banks, and a separate data request of customer account and transaction-level data from a smaller set of 39 institutions.

The Federal Deposit Insurance Corporation (FDIC) published the results of a two year study on the use of overdraft programs operated by FDIC-supervised banks. The study found that a typical NSF check can result in overdraft fees and interest in excess of 3,500 percent APR. Customers in low income areas were more than likely twice as certain to incur these fees.

This study confirms the argument made by the payday industry. That is short term payday loans are much less expensive than using a bank and incurring bank overdraft fees. The other major difference is than banks are automatically enrolling customers in programs that carry APRs and other fees that are in fact far more expensive than a payday loan. Namely 75% of banks did this.

The study concluded that a typical customer would incur fees of $27- for each $20 overdraft over a 2 week period. A $60- ATM overdraft in 2 weeks would incur an APR of 1,067 percent. A customer repaying a $60 ATM overdraft in two weeks would incur an APR of 1,173 percent and a customer repaying a $66 check overdraft in two weeks would incur an APR of 1,067 percent. Oddly enough the faster one pays down the overdraft the higher the APR turned out to be.

Some consumer advocacy groups like the CRL are lobbying to ban payday loans. This leaves customers with no option than to pay overdraft fees to the banks. CRL and others recently led the charge to pass HB 545, a law effectively banning payday lending in Ohio . In 2006, Ken Compton, CEO of Advance America, said, "Contrary to the CRL's spin, responsible uses of the payday product provides consumers firm footing to overcome unexpected financial circumstances".

Some key findings;

Over 90% of banks completed overdraft fees without informing the customer.Less than 8 percent of banks inform consumers that funds are insufficient before transactions are completed, offering the customers an opportunity to cancel the NSF transaction and avoid a fee.

Bank customers complaints about overdraft fees were received by twelve percent of banks.

Almost 9 percent of consumer accounts had at least 10 NSF transactions during a 12-month period. Nearly five percent of customers have 20 or more NSF transactions. Customer accounts with 20 or more NSF transactions were charged $1,610 per year in NSF fees on average.

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Refinance with a Leading Arizona Mortgage Company

By Brent Mackelprang

There's no need to wait! You can refinance today for less than you might think! Mesa Mortgage a leading Arizona mortgage company asks; what's preventing you from refinancing now? Even with all the talk of a damaged economy and concerns about finances, now is actually the best time to refinance. You may ask; why is this the best time to refinance? The answer is simple; because as a well established Arizona mortgage company, Mesa Mortgage has the opportunity to both help you with your refinancing and give you rates that are always lower than the national average! Other companies simply are not able to offer this kind of security in unpredictable times.

Since Mesa Mortgage first opened its doors it has aimed at becoming one of the most respected and trusted Arizona mortgage companies! Mesa Mortgage has been able achieve this by setting the standards of the industry by providing unsurpassed commitment to customer service. Mesa Mortgage is determined to make sure all of your mortgage and refinancing needs are always and properly attended to.

Often home owners feel refinancing is the only option they have and sadly, there are some Arizona mortgage companies who view this as a chance to persuade people to refinance even if it is not necessary. At Mesa Mortgage, our goal is to answer your questions and assess your situation to make sure refinancing is really your best option. And if refinancing is the best option, Mesa Mortgage, as an established Arizona mortgage company can do it for less.

Many times individuals permit themselves or others to talk them out of refinancing when refinancing is really the best choice. Whether its worries about monthly payments, interest rates, a lack of steady income or some other concern, it may become tempting to choose not to refinance even if it is the best option available. Mesa Mortgage can help you determine if refinancing is right for you.

As a leading Arizona mortgage company, Mesa Mortgage is able to help potential home buyers get into their new homes faster and more affordably. Among the reasons to choose Mesa Mortgage you'll find that they offer low rates and low payments. Additionally, their loan program identifies the loan that is perfect for you and your needs.

Mesa Mortgage makes applying for a loan or refinancing simple with their online application. By applying online you are guaranteed quick processing with up to date information available. Along with the online application, you'll find that Mesa Mortgage has rates that are considerably lower than many Arizona mortgage companies and rates that are always lower than the national average!

There are a variety of loan program available from Mesa Mortgage, programs that truly distinguish them from other Arizona mortgage companies, including Challenged Credit loans, Second Mortgage loans, Jumbo loans, investor loans and more.

With the wide variety of loans available at Mesa Mortgage, some of which other Arizona mortgage companies are not able to offer, you'll also find Investor loans, FHA Mortgage loans, VA Mortgages, Construction loans and more. And at Mesa Mortgage you'll get the most competitive and appealing rates on all of their many loans.

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Buying a Home with Reverse Mortgage WAS a Great Deal

By Veagure Vanrock

A few months ago, HUD announced 2 wonderful things regarding reverse mortgages. The first attention-grabber was that a home can be bought using the reverse mortgage.

Before this, refinancing the existing house was the only thing that a reverse loan could be used for.

Borrowers are taking much pleasure in this. They can now apply the reverse mortgage in the same way as a typical mortgage, and come out in the end not having to compensate the lender monthly.

The second great thing I read nearly took me off my seat; it was how they would figure the loan. The appraised value of the home would be the factor detemining the actual loan amount, not the actual sale price.

As it stands for reverse mortgage refinances, there are several different things the banks look at when determining loan amount, but the value of the home is number one.

The mortgagee letter stated basically the same thing for home purchases. What you should understand is home purchase mortgage loan to values are normally based upon the sale price or the appraised value, whichever is lower.

Of course there would be more to it than the loan amount being based on worth, just like that.

Here's how it could play out. Say a borrower scrounges around and finds an amazing house really cheap. Its on the market for almost half of what it should be. In this circumstance, at closing the senior might not have to front anything out of pocket.

HUD is kind of old fashioned in their ways. Their regular loan programs are flexible and give some slack when it comes to credit, but they still want something from the senior. This something is the down payment.

Well guess what? HUD agrees with me. It is too good to be true. They eliminated that clause and have reverted to traditional lending practices.

It's interesting HUD takes seemingly forever to put out their mortgagee letters to us lenders. You'd think they have teams of lawyers working day and night making sure the thing is right the first time.

And yet, I received this just a couple of months before the change took place.

Reverse mortgage loans used for purchases are now based upon the sale price or appraised value, whichever is lower.

How to Capitalize On Your Time with a Credit Counselor

By Steve Collins

Seeking the services of a credit counselor is a smart way to find a solution to your financial problems. An experienced credit counselor has a full arsenal of suggestions and strategies to help you in making the most of your income and modify your spending habits as you work towards reducing and eventually eliminating your debts.

A key to exploiting your time with a credit counselor is to have certain pieces of information in hand prior to your first meeting. Being ready will help you both avoid wasting time on activities that could have easily been done on your own such as making a list of your expenses and income.

The first thing a credit counselor will ask you is how much you make and how much you spend. The answers need to be exact so that your counselor can help you work out a budget that is actually achievable. As any good credit counselor will tell you, its easy to underestimate how much money youre actually spending every month, so dont simply estimate it. Take a moment to look over a few months worth of bank savings and checking account statements and all of your credit card and store card statements. Try to use the average of at least the last three months to get as accurate a picture of your true spending habits as possible. This is precisely the kind of information your credit counselor will bank on to give you the best help he or she can.

If your income fluctuates because youre self-employed, work on commissions, or get bonuses from time to time, find an average for the last 6-12 months. Again, this is a more accurate picture of your true income numbers, which will greatly improve your chances of maximizing your time with a credit counselor. Having this information in hand before your first meeting with the credit counselor will mean you can move on to the advice portion of the meeting much faster.

Finally, it is a good idea to write out any and all questions that you may want to ask the credit counselor the night before your meeting so that its still fresh in your mind during your session. Remember " there is no such thing as a stupid question when it comes to finding ways to improve your financial situation!

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Foreclosures: Real Estate Investing The Smart Way

By Tomasheus Privetsky

If you were a real estate investor watching the real estate boom of early 2000s closely, you could have predicted the foreclosure investing opportunities that would become available today in virtually every real estate market in the country.

There have been many foreclosures and most of the sub-prime lenders are now out of business. There are many opportunities here for the real estate investors who can keep ahead of their competition.

Will You Be Able to Turn a Profit with Foreclosure Investing? It seems like a simple enough proposition to just obtain a list of properties, which are in default and contact the owners of these homes. Following this, you might be able to close a deal before the bank swoops in and repossesses the home. You could do some repairs on the home and resell it, or keep the home and rent it, and thanks to the built in equity, youre making a profit from the get go, right? Well, not always.

You may be able to make a lot of money in foreclosure investing; enough to support yourself and your family, even pay for luxuries. However, foreclosure investments could also turn into a money pit which could take up all of your time and your money.

There are few people who consistently turn a profit on their foreclosure investments. Why is this? They are in a competitive, crowded market and are going about things the wrong way.

How Will You Differentiate Yourself in a Crowded Foreclosure Investing Field? To say it's crowded is a huge understatement. The field of foreclosures is probably the most competitive area of real estate investing. It routinely gets more attention from mass media. So more people flock to pursue it. Hundreds of investors in your metro area are mailing to homeowners facing foreclosure. They're even harassing homeowners on the phone and knocking on doors.

In short, if a homeowner is behind on payments, you can be prepared for a major fight for his attention. Just imagine for a moment that person sitting at his kitchen table plowing through a pile of letters from lawyers, bill collectors and investors. Your mailing piece is just one of many that goes straight to the garbage can. You must find a way to differentiate yourself from the investment crowds. Here's an idea that will put you ahead of the competition.

Take An Ethical Approach To Deal with Sellers Facing Foreclosure. People who are facing foreclosure are not exactly going to be eager to speak with you about selling their home. In fact, most see real estate investors as scavengers swooping in to profit from their troubles.

The way to get these homeowners to contact you is to offer them something none of the other investors are, the opportunity to remain in their homes.

Three-Step Highly Profitable Foreclosure Investing Strategy That Stars With An Offer To Keep Homeowners Facing Foreclosure In Their Home. First, trying to help a family in financial trouble is the ethical thing to do. You'll be preserving the American Dream.

Yet another reason is, you'll actually make money doing it. You can help them negotiate a repayment plan with their current lender (the process is called loss mitigation) and collect a fee for your service. There're several companies nationwide with an in-house list of Loss Mitigation department contacts for literally every lender in the country that will do all the work for you. So, even if you never buy a single home, with tens of thousands of foreclosures in your hometown, offering loss mitigation services could turn into a lucrative income stream by itself.

To wrap it up, this approach to investing in foreclosures is the most profitable one to use. More often than not youll end up right where you started " on your foreclosure investing track, as many homeowners will not get their repayment plan approved. Once they realize that they really have no other option but to sell, they are most likely to sell to you, the educated and considerate foreclosure investor, since you have tried to work with them to keep their home.

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Do you Know when Credit Repair is Needed?

By Rob Kosberg

When we first start to use credit, we tend to be very careful about how we use it. We might have an apartment, a credit card, and perhaps a car. Then we move ahead in the world and our financial world increases and widens. We become more involved with credit. Some of us are able to survive and thrive in this world; some of us are not. It's possible that we permit our difficulties "sneak" up on us.

Someday we wake up and have the "aha" moment that lets us know that we are in some serious difficulties. Our clue may be the sense that something is financially wrong. The clue could also be a close look at our credit balances. It is also possible that a financial crisis is the tipping point for us to realize something has to change. You need credit repair.

We need to examine our financial habits to find out where we are not being financially savvy and develop our plan for fixing the situation. The first thing you want to learn is if you are actually spending more than you make. Many of us are living "above our means" in varying degrees. This might not sound plausible, but it happens. We use credit, borrow savings, loans. You can go on doing this for awhile, but you will end up in a financial "black hole." Now what?

Often, we might actually be using financial manipulations such as using credit or loans to pay utility bills, phone bills and others for which we should be using money. You need credit repair.

In addition, some of our other manipulations might be to use credit for everyday things like food, clothes, gas when , again, we should be paying cash. If we think about it, a lot of these things are going to be gone before we get the bill. This pattern is not good especially if we don't pay the balance every month. Credit repair is needed.

Some people will actually use credit when they have the cash available. Perhaps they just like having cash in the pocket. However, this can also lead to rather lackadaisical credit card payment patterns. It's possible that before they know it, credit cards are maxed out. You might start to juggle payments, paying some and not others. Now what?

There are people who use cards to pay other cards or extending themselves with loans. There are costs for card balance transfers and loan costs. Nothing is really solved and it's back to the black hole.

Do you recognize yourself and your habits? If so, you need to examine your debt and spending habits and develop your plan to reverse the mess. Credit repair is needed.

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Pros And Cons Of Credit Card

By Darren Cason

According to 2004 data, the average credit card debt per household was over $5000? Even worse, the average interest rate was over 17 percent. With this amount of debt, it is tough for anyone to get ahead financially. However, if you understand how credit card debt works, there are ways to get out of it.

Interest is the fee you pay for the ability to spend other people's money. This is the price you pay for convenience, and clearly many people take advantage of it, perhaps too much. Total consumer debt hit $2.5 trillion in 2008. Because of this, it is especially important to understand the effect of interest on your debt.

Increasing your payments can have a dramatic effect on your total debt. Paying just $10 on top of your minimum monthly payments with a $2,000 balance and 20 percent annual interest rate can decrease the total amount you pay on that debt by almost $1,000. The lesson here is that every little bit counts when paying down your credit card. It can drastically reduce the time it takes to pay it off.

However, it is even better to not carry a balance at all. By paying off your credit card every month, you are guaranteed to save yourself from losing up to 20 percent that you would have paid in interest.

However, many investors do not pay down their credit cards, choosing instead to put their money in savings accounts or other investments. While there are many factors that may influence this decision, the underlying reason is often that many people tend to have mental accounts. In other words, they place different meaning on different accounts and on the money in each account. However, you should remember that a dollar is a dollar, no matter which account it is in, and you should look at your accounts as a whole.

Holding a credit card balance negates any investment gains, because the interest rate charged is nearly always higher than the return on any investments you could make. Investing instead of paying off credit card debt is a sure way to lose money.

On the other hand, paying off your credit card guarantees that you will not be paying the interest payments you normally would. So if you have money in your savings or investment accounts, you should pay off your credit card. Once you have eliminated this high-interest debt, then you will have more money due to the lack of credit card payments, and your investments can truly grow.

Overall, carrying a balance on your credit card can be very costly. You should pay off the entire balance whenever possible. If you have to carry a long-term balance, pay if off as soon as you can, even if it means pulling money from your savings account. Paying the high interest rates of credit cards, even if you own a low-apr card, does not make any sense if it is at all avoidable. Even if you can't pay it all off, increasing your payments over the minimum can reduce the repayment time and interest amount.

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?Retiring From the Civil Service ??" Calculate your Benefits

By William Blake

When retiring from the civil service there is a system for figuring what your retirement benefits will be. The Civil Service Retirement System can be complicated to understand. There is a program available that allows you to plug in your personal information, such as total number of years service and your pay rank and it will calculate what you can expect in retirement benefits.

Just as with any retirement calculator, the civil service retirement calculator can not determine precisely what you annuity payments will be. But it can give you a close estimate on what you can expect and can give you information on survivor benefits and annuity with survivor benefits that may apply in your case.

An explanation of how the federal government formulates their calculation

There is a method of determining retirement benefits for those in civil service. The government has a formula that they follow called the CSRS. The formula is complex and not very easy to follow. A civil service retirement calculator can be a big help. This calculator simplifies the figures and gives a very close estimate of what retirement benefits will be. The calculator even takes into consideration any unused leave you may have and adds that to your years served. The calculations are based on a work year of 261 days not on the standard calendar year.

If you are married your spouse has benefits under the Civil Service Retirement System as well. These survivor benefits are just over half of the annuity payments received by the retiree. This program is designed to care well for the spouse of those in Civil Service. The goal is to offer the best survivor benefits possible to the spouses.

The figures in the civil service retirement calculator are based on the average of the highest earnings over 3 years - normally your last three years of employment. Your highest 3 rates of pay are totaled together and averaged out for a basis of your retirement calculations in the civil service retirement calculator.

The most important information you need to have for proper civil service retirement calculator results is your expected age of retirement, your high-3 salary, your unused sick days and years of service. As long as you have these four details, then your calculations will be perfect. When you finally have these four items, you can go to an online calculator and input the information and you will be given a calculation immediately.

Civil Service employees are urged to look to age 60 as their year for retirement. If you are nearing that age start looking into what your retirement will be. The government has provided a calculator online so that you can easily plug in your information and see where you stand.

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Home Buddies Credit "Help Your Credit Score with Rapid Rescoring"

By Cliff Pape

Too many people have been losing loans or just paying too much interest because of some inaccurate information that has been reported by the credit bureau on their credit report. You may be able to get your credit score recalculated in a few days by a company who specializes in rapid credit rescoring and who has a special relationship with the three major credit reporting agencies.

The rapid rescoring company can only be accessed by mortgage lenders and brokers and not by the general public. This means that if you want to have your credit report rapidly rescored you must ask your loan officer or mortgage broker to do it for you. Those rescoring companies usually charge a fixed fee for each item they fix.

It is always better to repair the credit issues several (six) months prior to applying for a loan. If your score is under 680, experts still say that you might want to shoot for a rapid rescore if you are intending to apply for a loan within one month.

There are things Rapid Rescoring can accomplish for you and things it can't:

1. You can't communicate with a rapid credit rescoring service:

Reporting agencies are the middlemen between the bureaus and lenders and the smaller ones offer the rapid rescoring. And since they are relatively small, they don't have the capacity for handling direct communication with the public.

2. These services make no promises:

This is something I talk to all of my clients about. In some cases, deleting "derogatories" can actually harm your score. This is more than likely not the case for you but it is worth noting.

3. They can try to help you get some errors fixed, but they cant remove a true negative item that is in dispute:

Proof of an error is necessary. If the credit bureaus have already reviewed your dispute then it will not be included.

4. They can help with errors only if you have proof

The best plan is definitely to repair (or restore, or whatever you want to call it) your credit FIRST because the services require that you have the approved dispute in writing. Otherwise, the usually short turnaround time for a "rapid rescoring" takes much longer - but they may still be able to get the proof for you.

A rapid rescorer can only improve your credit score if the creditor admits to a mistake or agrees to remove specific information. For example, you might owe a big balance on a credit card that is negatively affecting your ability to get a lower mortgage interest rate. You can pay off the credit card electronically today and have a rapid rescorer get your credit score recalculated within 72 hours instead of waiting for your payment to show up on your credit report a month later.

Best of Luck.

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