August 2, 2011 8:57 pm
Freddie Mac released the results of its second quarter refinance analysis showing homeowners who refinance continue to strengthen their fiscal house.
Freddie Mac discovered the following:
• In the second quarter of 2011, 77 percent of homeowners who refinanced their first-lien home mortgage either maintained about the same loan amount or lowered their principal balance by paying-in additional money at the closing table. Of these borrowers, 51 percent maintained about the same loan amount, and 26 percent of refinancing homeowners reduced their principal balance.
• "Cash-out" borrowers, those that increased their loan balance by at least five percent, represented 23 percent of all refinance loans; the average cash-out share during the 1985 to 2010 period was 46 percent.
• The median interest rate reduction for a 30-year fixed-rate mortgage was about 1 percentage point, or a savings of about 18 percent in interest rate. Over the first year of the refinance loan life, these borrowers will save over $1,550 in interest payments on a $200,000 loan.
• The net dollars of home equity converted to cash as part of a refinance of a conventional, prime-credit home mortgage was an estimated $7.5 billion in the U.S. during the second quarter, similar to the first quarter level but substantially less than during the peak cash-out refinance volume of $83.7 billion during the second quarter of 2006. Taken together over the first two quarters of 2011 and adjusting for inflation, the amount of equity cashed-out was at the lowest level in 15 years, since the second half of 1996.
• Among the refinanced loans in Freddie Mac's analysis, the median value change of the collateral property was a negative 7 percent over the median prior loan life of five years. In comparison, the Freddie Mac House Price Index shows about a 25 percent decline in its U.S. series between March 2006 and March 2011. Thus, borrowers who refinanced in the second quarter owned homes that had held their value better than the average home, or may reflect value-enhancing improvements that owners had made to their homes during the intervening years.
"This is primarily a 'rate-and-term' market, meaning that the typical homeowner is looking to cut their interest rate or shorten their loan term. More than three-in-four borrowers are keeping their loan balance about the same or reducing their loan balance when they refinance," says Frank Nothaft, Freddie Mac vice president and chief economist.
"Savvy homeowners are taking advantage of some of the lowest fixed-rates in more than 50 years to lock in interest savings. Over the first half of 2011, fixed-rate mortgage rates hit a low during June, with 30-year product averaging 4.50 percent and 15-year averaging 3.68 percent over the last four weeks of June, according to our Primary Mortgage Market Survey."
For the latest information from Freddie Mac's Office of the Chief Economist, visit http://twitter.com/FreddieMac.
August 1, 2011 8:57 pm
The National Association of Home Builders commends the U.S. Environmental Protection Agency for rejecting a proposal to add third-party clearance testing to the Lead: Renovation, Repair and Painting Rule (RRP).
“We’re pleased that the EPA listened to the concerns of remodelers about the extreme costs the proposed clearance testing would have imposed,” says Bob Peterson, NAHB Remodelers chair and a remodeler from Fort Collins, Colo. “Homeowners are saved from spending a great deal of money on lead testing. If remodeling is more affordable, homeowners will be able to hire an EPA-certified renovator to keep them safe from lead dust hazards during renovation.”
At NAHB’s request this regulation was selected for review by the EPA under the Presidential Executive Order for Regulatory Review (Improving Regulation and Regulatory Review, 76 FR 3821 issued on Jan. 21) concerning the impact of federal rules on small businesses and job creation.
The lead rule applies to homes built before 1978 and requires renovator training and certification, following lead-safe work practices, containing and cleaning dust, and record keeping.
Under the lead paint rule contractors have been required to wipe down the project area after completing remodeling or renovation work and match the result to an EPA-approved card to determine whether lead paint dust is still present—a process that EPA says is “effective at reducing dust lead levels below the dust-lead hazard standard.”
The proposal would have required contractors to hire EPA-accredited dust samplers to collect several samples after a renovation and send them to an EPA-accredited lab for lead testing. Because of the cost of this as well as the waiting period for test results and the limited number of accredited labs nationwide, professional remodelers were very concerned about homeowners’ willingness to undergo the process.
“The EPA has maintained its common sense approach to keeping families safe during renovation,” says Peterson. “Hiring trained professional remodelers to contain dust, use lead-safe work practices, and clean up has been shown to successfully minimize lead hazards and protect individuals from lead exposure.”
Several problems with the rule still remain, however. The EPA has yet to recognize an efficient, low-cost lead test kit that meets the requirements of the regulation. And last year the agency removed a key consumer choice measure—the opt-out provision—which allowed homeowners with no children or pregnant women in residence to waive the rule’s requirement. In this down economy, consumers are still balking at the extra costs of the rule and often choose to reduce the amount of work done on their homes, hire uncertified contractors, or endanger themselves by attempting the work themselves.
For more information, visit www.nahb.org.
August 1, 2011 8:57 pm
Since the introduction of cash back credit cards many years ago, credit card providers are using any means necessary to gain new members and encourage the loyalty of their existing ones. In March of this year, Bankrate.com released the results of its annual credit cards survey and the findings were quite revealing.
Details such as the annual fees, introductory bonuses, reward rates and expiration periods for the rewards were taken from 32 top providers and compared against the previous year’s data. Some of the more revealing results of the findings include the fact that in spite of incentives and bonuses added to some programs, the average cash back payout remains at 1%. Still, it is heartening to know that 19% of providers offer tiered reward rates which increase with increased spending. Examples of these providers include Chase Freedom and Discover More who offers 5% cash back in certain categories and American Express who offers 5% cash back on all purchases once cardholders surpass $6,500 in purchases annually.
For consumers who don’t mind having their payouts delivered to Fidelity IRA, 529 or brokerage accounts, investment themed cards deliver 2% payouts.
Annual fees have been a thorn in the sides of consumers and the survey reveals that credit card providers are sitting up and taking notice. Only four of the surveyed issuers charge annual fees, one of them being the American Express True Earnings Card offered through Costco. The fee is promptly waived if the cardholder takes out a Costco membership.
Another important finding in the survey deals with the redemption of rewards. Fifty percent of the credit card providers surveyed do not impose expiration dates on the rewards earned and a whopping 31% give cardholders up to five years to redeem their rewards. In any case, cash back rewards are generally redeemed frequently so this is not too big an issue in most consumers’ minds.
Jessie Wills, a financial analyst from CashBackRewardCreditCards.net, firmly believes that cash back credit cards are still a good deal for consumers because they can fit into every lifestyle. She explains, “With cash back rewards, consumers can get something back for their everyday spending, but there is catch; they must pay back the balance on time. It’s like getting free money!” When asked about making the most of these types of cards she offers the following advice, “Start by choosing the right card, don’t settle for any card that offers less than one percent cash back. Second, charge all your daily expenses to that one card, but remember to use your cash to pay off the balance so that interest rates don’t consume your cash back earnings. Finally, before you are set to receive your payout at the appointed time, make a plan to put it to good use. Depending on your household budget you can earn as much as $4,000 over a three year period. That’s a lot of money, especially if all you did to earn it is pay your bills!”
For more information, visit www.bankrate.com and www.cashbackrewardcreditcards.net.
August 1, 2011 8:57 pm
Even though it has been years since the height of the subprime mortgage crisis, many Americans continue to receive fraudulent offers of foreclosure and refinancing assistance, both in the mail and online. Consumers should know how to protect themselves from these financially detrimental loan scams.
“Too many Americans are still being targeted by scams that promise to help them avoid foreclosure or refinance their mortgage to a lower rate,” says Sal Marranca, a CEO and banker from Michigan. “The best protection is good information. Community bankers want to be sure that consumers know the warning signs that they may be dealing with a scam artist and how to protect themselves so that they don’t wind up in an even worse financial situation.”
First, if you are having financial troubles, you should contact your mortgage lender immediately. By taking the direct approach, you will be less likely to be taken in by those pitches offered by way of unsolicited phone calls, emails or letters that appeal to your worst fears.
Consumers should be wary of any company that does the following:
• Guarantees to stop the foreclosure process—no matter what your circumstances.
• Instructs you to not contact your lender, lawyer or credit or housing counselor.
• Collects a fee before providing you with any services.
• Accepts payment only by cashier’s check or wire transfer.
• Encourages you to lease your home so you can buy it back over time.
• Tells you to make your mortgage payments directly to them, rather than your lender.
• Tells you to transfer your property deed or title to them.
• Offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale.
• Offers to fill out paperwork for you.
• Pressures you to sign paperwork you haven’t had a chance to read thoroughly or that you don’t understand.
If you think you have been the victim of a loan scam, you should contact your state attorney general’s office to file a complaint and learn the next steps to repair any damage incurred as a result of the scam.
“Community banks are here to help our customers with legitimate programs and loan options that are tailored to each individual’s situation,” Marranca says. “We never take a cookie-cutter approach. That’s the last thing people need when they’re facing financial difficulties.”
July 29, 2011 8:57 pm
Summer is in full force and there are many ways for people to get out and enjoy the weather. What can a family or organization do to make sure that they are protecting the environment while they are having fun? In an effort to make this easier, here are a few tips and tricks to help make the most of this season of sun and fun:
Fill a few hours on a summer afternoon or plan an all-day outdoor adventure by having a green picnic. An ideal green picnic combines healthy foods, a great location, and environmentally-friendly paper products and picnic supplies. Consumers should make sure that eco-friendly paper products are Green Seal certified, as this takes the guesswork out of the green evaluation process for the purchaser.
Before setting out on a green picnic with eco-friendly paper products, families and organizations should choose reusable picnic baskets such as cloth grocery bags or even an old fashioned picnic basket. Choose organic food from farmers markets—this is better for both the earth and the environment. Also try to include whole foods like fruits, vegetables, and other similar food items that don’t require any additional packaging in order to stay fresh.
Environmentally conscious picnic-goers should choose recycled or recyclable picnic products. Biodegradable dishes, corn cutlery, cloth napkins, and Green Seal certified paper products are ideal for green picnics. Even though the picnic products are eco-friendly, picnic-goers should still remember to leave the site cleaner than it was found. Garbage—no matter how biodegradable—is not a natural part of any picnic site.
The right biodegradable eatery can make any picnic Mother Nature’s dream.
July 29, 2011 8:57 pm
Any changes to the mortgage interest deduction now or in the future could threaten recent progress toward stabilizing the housing market, critically erode home prices and values, destroy middle-class wealth accumulation and hurt economic growth.
That was the message delivered by National Association of REALTORS® NAR Chief Economist Lawrence Yun during this last week's Rethinking the Mortgage Interest Deduction forum, where he joined a panel of experts to debate the future of the MID. The event was hosted by the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institute, and the Reason Foundation.
“As the leading advocate for housing and homeownership, NAR firmly believes that the mortgage interest deduction is vital to the stability of the American housing market and economy,” says Yun. “The MID facilitates homeownership by reducing the carrying costs of owning a home, and it makes a real difference to hard-working middle-class families.”
Yun argued that now is the worst possible time to discuss changing the tax laws, which could further impair the housing market’s fragile recovery and a broader job market recovery.
“One thing that is indisputable is that eliminating the MID will lower the homeownership rate in the U.S.,” he says. “While we must ensure that the conditions that led to the artificially inflated homeownership rate of the bubble years do not resurface, we also need to create the conditions for sustainable homeownership, which has been shown to provide myriad social benefits for families and communities.”
During the debate, Yun challenged recent proposals calling for changes to the tax code, stating that it’s a misplaced argument to say the MID was a cause of the housing market bubble and is suddenly part of the deficit problem, when it’s been part of the federal tax code for more than 100 years.
Reducing or eliminating the MID is a de facto tax increase on homeowners, who already pay 80 to 90 percent of U.S. federal income tax. Yun said the share could rise to 95 percent if the MID is eliminated.
“Doing away with the MID shouldn’t be thought of as removing a tax break for homeowners, but rather increasing taxes on the middle class,” he said. “Furthermore, housing equity has been a major source of funds for small businesses, and any change to the MID will greatly hamper their ability to create jobs.”
Yun also asserted that it’s a misconception that only the wealthy benefit from the MID, when in reality it benefits primarily middle- and lower-income families. Almost two-thirds of those who claim the MID are middle-income earners and 91 percent of people who claim the MID earn less than $200,000 per year.
For more information, visit www.realtor.org.
July 29, 2011 8:57 pm
“The U.S. debt crisis is likely to cost home buyers at least $122 per month,” says Gibran Nicholas, chairman of the CMPS Institute, an organization that trains and certifies mortgage bankers and brokers. “Bonds issued by Fannie Mae and Freddie Mac will probably lose their AAA status if the US credit rating is downgraded." This means that mortgage rates will likely go up. The monthly payment on a $200,000 30-year mortgage would increase by a whopping $240 per month if mortgage rates go up slightly from 4.51% to 6.43% like they were just 3 short years ago. Even if interest rates only go up by 1% it would cost an extra $122 per month.
If you have an adjustable interest rate tied to LIBOR or US Treasuries, your mortgage rate will probably fluctuate a little over the next few months as banks, investors and money market funds figure out what to do with the temporary loss of a AAA credit rating for US Treasuries.
“Many investment funds are only allowed to invest in AAA rated investments," Nicholas says. "This means they will have to either (1) change their bylaws in order to keep their US Treasuries and mortgage bonds; or (2) sell their US Treasuries and mortgage backed securities. This will cause Treasury and mortgage bond yields to fluctuate considerably over the next few months, adding even more uncertainty to an already fragile mortgage and housing market.”
So how bad can this debt crisis get? Do you think it would be too risky to get a $150,000 mortgage if you were a homeowner making $150,000 per year? Most people would agree that you wouldn’t be over-extending yourself in that situation. In fact, your lender would probably consider you a very safe credit risk and be very eager to lend you the money.
“That’s exactly what the U.S. debt burden would be like if the debt ceiling was increased,” says Nicholas. “Our country generates around $15 trillion dollars per year in economic activity, and all we are asking for is a total ‘mortgage’ or debt burden of around $15 trillion. If this was such a high risk proposition, nobody would be loaning us money and we’d be paying much higher interest rates on our debt.”
Now, switch hats for a minute and go back to the homeowner making $150,000 per year. How would the scenario change if they suddenly were at risk of no longer generating $150,000 in annual income? What if their debt was simultaneously growing by about $15,000 per year (meaning they’d owe $165,000 next year, $170,000 the year after, etc.)?
“That’s what the current crisis is all about,” Nicholas says. “The U.S. debt burden is growing by about $1.5 trillion per year and our elected officials are jeopardizing even the $15 trillion in economic activity that we do have as a nation. That’s why the rating agencies are probably going to temporarily downgrade our credit rating. The bottom line is that we don’t have a ‘debt crisis’, we have a ‘credibility crisis.’ There will be some temporary negative consequences because of all this even if the debt ceiling is increased at the last minute.”
For more information, visit www.cmpsinstitute.org.
July 28, 2011 2:57 pm
Many Americans are using the hot summer months as an excuse to travel and break out some brand new styles. For those heading off on planes, trains or automobiles, check out the following suggestions to help stay comfortable and look stylish while en route to your end destination.
Look for a bag that has space for travel essentials: a water bottle, inner pockets for a cell phone and other gadgets, room for reading material, a sweater or wrap, and a few deep outer pockets to tuck boarding passes and other important travel documents. Air travelers should look for a bag about 11 inches tall, so it will sit upright under a standard airplane seat. A tote or structured bag is preferred for travel, so it won’t slouch and let the contents fall out.
Layers are always a good idea for traveling. A wrap or cardigan can ward off air from a chilly vent or act as a makeshift pillow. Sprayed lightly with a favorite scent, it can work as a discreet barrier against undesirable airplane odors. Cardigans purchased in a neutral color or coordinated with other items of clothing are among the most versatile clothing items a traveler can have in the wardrobe.
Easy-on, easy-off shoes are a must, especially if summer travels involve flying or hitting the road for a family vacation. Kids can help keep the car clean by taking their shoes off after rest stops, and slip-on flats make that easy. Airport security is a breeze in comfortable sandals or Velcro-closure sneakers.
Be practical when packing for your next summer hotspot. With these helpful travel tips, your journey can be a smooth one.
For more information, visit Zappos.com.
July 28, 2011 2:57 pm
By Zoe Eisenberg
There is nothing like the warm evenings of summer to set the mood for a great party. Ideally, a party should be a time for you to catch-up with your friends, eat delicious food and enjoy yourself. However, planning a party often becomes more stressful than it needs to be. The following tips will ensure a hassle-free summer party that both you and your guests can enjoy.
Setting the right mood for a party is vital. Decorate with brightly colored tablecloths, plates, glasses and cloth to create a vibrant atmosphere. Keep guests cool in the daytime by offering a shaded tent or covered porch, and for evening affairs, create subtle lighting with candles and torches. If outside, create conversation spaces around the yard using outdoor furniture, blankets and bistro tables so you don’t wind up having everyone crowded around the grill. Have enough seating for at least half the guests to sit at any given time.
The Guest List
Don’t over-invite—You want to have a good time, too. Invite members from different social circles who haven’t had a chance to connect yet, but who you think would really hit it off—like friends from your office and your buddies from book club or some of the parents of your children’s friends. Most importantly, make sure you have enough room for all guests indoors, in the chance a sudden summer shower may occur.
In the summer, it’s a good idea to keep party fair fresh and light. Burgers, kebabs, grilled veggies and pizzas are all great choices. To avoid having a crowded fridge and empty wallet post-party, think about food costs and quantities. Hosts usually purchase too much food, so be sure to think about portions to people. If you are offering hot dogs, hamburgers and barbequed chicken, the average party-goer is not going to have one of each.
To keep stress at bay, do as much cooking as possible ahead of time. Or, even better, let your guests do some of the work themselves. Allow them to build their own skewers, personal pizzas or handle their own burgers on the grill, giving the food an interactive focus. Add a few simple, seasonal side salads for variety, like sweet corn and black bean with avocado, or garden tomato and fresh mozzarella.
Keep dessert simple and light, so guests have more energy for mingling and dancing. Try serving sliced seasonal fruit with fresh, home-made whipped-cream or your favorite local ice-cream.
A summer fiesta isn’t the same without a selection of cool beverages, alcoholic or not. First, decide whether you want to keep it simple or go all out. Making a delicious punch available (spiking optional!) with an assortment of beers and chilled wines is a perfectly acceptable, low-maintenance beverage idea. If you want to get fancy, hire a bartender or enlist the help of a neighborhood college student home for the summer. And don’t forget the details—find festive glasses and freeze fruit or mint leaves in ice cubes for a fresh finishing touch.
Do as much prep-work as you can ahead of time—set tables, prepare food and make sure everything is clean and clutter free. Place trash and recycling receptacles around your home and yard so you don’t end up cleaning tons of trash after the party has ended. Create a festive playlist and turn on the music before the guests are scheduled to arrive, so they walk into a party atmosphere and not a quiet house. To make your party memorable, end the evening by sending guests home with a thank-you gift—like a jar of home-made jam, locally made honey or a candle with a summery scent.
July 28, 2011 2:57 pm
Back to school shopping can be overwhelming for many budgets, but Stephanie Nelson of CouponMom.com says there are ways to strategically take advantage of special deals and coupons this year if consumers plan and research before they shop.
“The key to saving is planning,” Nelson says. “Before you even leave your house to start buying new school clothes, backpacks and supplies, sit down and plan what you need to buy with your student.”
Nelson suggests that parents take an inventory of their children’s clothes to prevent overbuying. “Go through drawers and closets to inventory your child’s current wardrobe, and sort out the items that are too small or never get worn and donate them to a local charity,” she says. “Older children’s acceptable outgrown clothes can go to a younger sibling, if possible. After determining the number of acceptable outfits you already have on hand, make a realistic list of specific items you need to buy.”
Here are some of her strategies for back to school savings:
-Buying shoes with free coupons: The back to school season is the busiest time of year for shoe sales. As a result, stores have many special promotions to get buyers' attention including buy one, get one free. Check in your newspaper circular and online for special shoe deals.
-School supplies—stock up at 90% off: Take advantage of price matching for school supplies. Basic school supplies are at their lowest price at this time of year (50-90% off)—some items are as low as 10 cents each. Watch for sale prices of up to 90%, and stock up for the entire year. Look at ads for grocery stores, drugstores, big box discount stores, and office supply stores. Bargains will continue starting now through September. At the end of August/early September, watch the clearance sections at discount stores for even lower prices if they have items left.
-Backpacks: For younger children, the backpacks on sale at discount and drugstores may be all they need. As students get older, it may be worth investing in a higher quality backpack to last several years. You can expect a good backpack to last a few years and provide the necessary support and padding for heavier books.
-Buy school clothes later in the year and find free coupons. Wait until a few weeks into the school year to stock up on new clothes, to take advantage of later-in-the-season sales and to give your child time to see what new styles they like.
-Look for advertising circulars in the newspaper for your stores. Many will have generous coupons in addition to sale prices.
-Check your store websites for coupons and promotions. Sign up for their email newsletter.
-Check coupon code websites for printed coupons or online codes at your favorite retailers.
-Check sites and print free coupons from outlet mall websites (example: http://www.premiumoutlets.com). Printing one free coupon could save $20 at your favorite store.
-Subscribe to the email newsletter of your local mall. You will be sent information and free coupons for special promotions.
-Take advantage of tax-free holidays in some states to save the cost of sales tax. See www.taxadmin.org/fta/rate/sales_holiday.html for more information.
By following these tips, parents can save a significant amount of money when shopping for back to school supplies. A little planning goes a long way.
For more information visit www.couponmom.com.