Archive for September, 2007
Panic infects other mortgage lenders as fears grow about exposure to crisis
Shares in some of Britain’s most popular mortgage lenders plunged yesterday amid fears that other banks would be hit by similar problems to Northern Rock.
Hundreds of customers again thronged to Northern Rock’s 76 branches to demand the return of their savings, while others inundated the bank’s website with requests to transfer their cash to other banks.
Customers have withdrawn more than £2 billion from the Newcastle-based bank since Thursday night, when it emerged that Northern Rock had applied to the Bank of England for an emergency loan to keep it in business.
The panic among Northern Rock customers forced Alistair Darling, the Chancellor, to promise yesterday that the Government would protect the estimated £28 billion in deposits still held by the bank. There were growing fears that banks with similar business models might also ask the Bank for a lifeline.
Alliance & Leicester (A&L) saw the value of its business slashed by a third yesterday, shares falling 273p to 600p each. Bradford & Bingley’s (B&B) share price slid 15 per cent to 279p each. In comparison, shares in high-street banks such as Royal Bank of Scotland fell by 4 per cent and Lloyds TSB by less than 2 per cent.
Like Northern Rock, A&L and B&B borrow from other financial institutions as well as using retail deposits to fund their mortgage lending. This way of doing business has been damaged by the collapse in the American sub-prime mortgage market, which made banks reluctant to lend to each other except at very high interest rates.
Banking analysts said that unless inter-bank lending went back to normal within a few months, A&L and B&B would suffer the same fate as Northern Rock. Northern Rock’s shares have more than halved in value since it went to the Bank.
Alex Potter, an analyst at Collins Stewart, said: “If the current irrational behaviour of the wholesale market doesn’t normalise by early next year, you’re looking at similar kinds of problems for these two banks.” The banks were also hit when analysts at Citigroup said that earnings at A&L and B&B would be lower than expected in the next two years. Citigroup said that B&B would be particularly badly affected if rising interest rates meant that more people defaulted on their mortgages, because it had a high proportion of customers who self-certified their wages when applying for a loan.
But financial advisers said it was too early to panic about Northern Rock’s rivals. Brian Dennehy, of Dennehy Weller & Co, the independent financial adviser, said: “Alliance & Leicester has borrowed more from the markets than many other lenders, but it is still nothing near as much as Northern Rock. Borrowers and savers should not panic, there is nothing to suggest that their money isn’t safe.”
Mortgage brokers warned customers that they may face a penalty charge if they moved their Northern Rock mortgage to another lender. James Cotton, of London & Country, said: “Most borrowers are locked into specific deals which the lender is duty-bound to honour. Borrowers who pull out of a home-loan deal early could be forced to pay high penalty fees, which is another reason to stay put.”
An A&L spokeswoman insisted that the bank had no intention of applying to the Bank of England for an emergency loan. A&L, which has a 4.2 per cent share of the mortgage market, recently reported a strong set of interim results, with half-year profits up 10 per cent to £295 million.
Northern Rock hopes that its temporary, unlimited line of credit from the Bank will allow it to keep selling mortgages while finding a buyer for the business. Lloyds TSB cast an eye over Northern Rock more than a week ago but was put off by uncertainty in the global credit markets, as well as the fact that the Bank of England loan would not have come with Northern Rock if it was taken over.
Northern Rock said it was not in talks with bidders, but that its board was “actively considering all strategic options”. The bank reiterated that the Government had guaranteed the safety of its accounts. “The Chancellor’s statement makes it clear beyond any doubt that all savings in Northern Rock are safe and secure,” the bank said.
Previous reassurances have, however, failed to deter customers from withdrawing their savings. The bank’s branch in Moorgate, in the City of London, said that it was able to see 20 customers an hour and would stay open for an additional hour until 6pm but by 4pm a line of about 60 customers, mostly pensioners, was still waiting.
At the Houndsditch branch in east London, George Payan, 72, queued to withdraw £83,000. He said: “When you have large savings in an account that is unreliable, you want to get it out.”
Musical Beds in the Home Mortgage Loan California Scheme
The Home Mortgage Loan California scheme was a housing solution for about 500 young families. The mortgage terms offered were easy, the chance to get to California was magnetic, and the houses that were to be built by the Home Mortgage Loan, California Company were attractive. So we signed, we paid our deposits and we prayed that Home Mortgage Loan, California was genuine and that we wouldn’t lose our boots. It turned out to be the best thing we had ever done. It was bit like living on Wisteria Lane, or Peyton Place, as it was known at that time, and the most popular game in Home Mortgage Loan California housing project was musical beds, but everyone was included, the pace of the game outran greased lightning, and the casualty list was short. After it was over, California had not lost any residents and there was little, if any, defaulting on the mortgages.
Take a drive over to the Home Mortgage Loan California project today and you will see a well established suburban development with pretty gardens, white picket fences and shiny cars standing in the driveways. When I think of the early days, I have to pinch myself - was it real or all a dream?
Greenspan warns on interest rates and house prices
Greenspan reportedly warns on rate cuts
“Former Federal Reserve Chairman Alan Greenspan said his successors at the U.S. central bank should be cautious about cutting interest rates because of inflation risks, and he forecast home prices will drop further”
“Greenspan said the U.S. housing slump is likely to deepen more than many analysts expect, with home prices falling by at least a “large single-digit” percentage amount and perhaps by a double-digit percentage”
Bad Credit Secured Loan
Bad credit secured loan is a uniquely designed loan for those people who are having a bad credit record. Most of the lenders are scared of giving loans to these people for the fear that they will not get their money back. But, in bad credit secured loan the lenders are secured. In bad credit secured loan, the borrower has to promise one of his assets to the lender to get the loan. The lender does not have any physical possession of the collateral unless the borrower fails to pay his money back timely. And to pay the money back in due time is not at all troublesome for the borrower because the repayment terms are long enough.
The lenders of bad credit secured loan offer this loan with lower rate of interest as well as with longer repayment terms. You can use a bad credit secured loan to combine and pay off all of your existing debts, credit cards, store cards or whatever sort of loan it may be.
The repayment is really easy in bad credit secured loans since here you are pledging your collateral for the Bad credit secured loans. Your asset playing as the security of the lender’s money assures good return to you too. In return of your collateral, you will be getting benefits of easy and long repayment terms as well as low and attractive rates of interest. The amount you can grab form Bad credit secured loans ranges from £ 3000 to £ 25000 while the loan tenure ranges from 6 months to 30 years.
Besides improving your credit performance bad credit secured loan can be used for home improvement, car purchase, holiday and wedding expenditure. To locate lender one must seek help from internet. It will give you all necessary information of all the facts of bad credit secured loan.
Bad credit secured loans are available online also which contributes a lot in their availability at cheap rates and fast pace. Online, a large chunk of lenders of bad credit secured loans remain flocking which makes the competition tight among them and thus, results in cheap rates.
Mortgage Refinancing Tips Video
If you are thinking of refinancing your mortgage, you may want to consider these tips from Andrea Coombes of CBS Marketwatch.
Bob Roscoe, Mortgage Marketing Associates, Minneapolis, Minnesota
Mortgage Rate Floatdown
Are Mortgage Brokers Evil?
By: Mark Goldstein
In the 1990’s everyone was crying about how evil lawyers and contractors are. Lawyer jokes were common tales told around cocktail tables and functions. At the turn of the decade, mortgage brokers were added to the list and they too are under a lot of scrutiny and the pun of many jokes.
Are mortgage brokers evil? The answer is simple no. Are there shady mortgage brokers that will try to con you out of your hard earned money? Off course! Every profession has bad apples! Are these bad apples the majority? No, let’s discuss why.
1) Mortgage brokers want your business - Most mortgage brokers work on commission and rely heavily on word of mouth advertising to generate clients. Furthermore, 50% of a good mortgage brokers business is repeat customers; mortgage brokers have an incentive to service their customers properly and keep them in the long haul.
2) The competition keeps them honest - Given the influx of many new mortgage brokers in the last couple of years, the mortgage business is a very competitive field. There are a large number of brokers competing for a small base of customers. Brokers will almost always give you their best rate in order not to loose your business. Remember, brokers don’t get paid until they fund the loan. This is also a good reason to speak to at least four different brokers from different companies, let them compete for your loan and you will almost always shine at the end.
3) The law is there to protect you – God bless America! We have many laws in this country that govern mortgage brokers and let me tell you that the lending laws are not very forgiving in this country. Mortgage brokers will take a lot of heat when they do shady deals and all it takes is one simple complaint. Make sure you get everything in writing from your broker and you will be protected, simply as that.
The Bad about Mortgage Brokers
Mortgage brokers do not fund your loan themselves; they use wholesale lender and banks to find you the right loan and save you money. The problem arises in how they are compensated. Wholesale lenders do not set interest rates, nor do the brokers. The going interest is dictated by the secondary mortgage securities market. How rates are dictated is a discussion by itself, which is unimportant in our discussion.
Lets simple assume the going “par rate” for a 30 year fixed mortgage is 6%. If the mortgage broker funds your loan at 6% the mortgage broker makes zero in commissions. The higher the interest rate they close your loan with, the more commission they receive. Moreover, if they charge you an interest rate below 6%, they have to pay money out of their own pocket to fund the loan, or charge the client what is called a “discount point” to get the rate they want. Luckily the law has a cap on how much of a commission a broker can make on a particular loan. Nonetheless, your goal should be to lower the interest rate as much as possible.
What is the lesson to be learned here, when mortgage brokers quote you a rate, they have room to lower it; unless they gave you par pricing, which is not likely. Given our example above a broker might quote you 6.5%, where the broker makes $2,000.00. If you are a good negotiator you can get the broker to lower the interest rate, where the broker only makes a $1,000.00 on the deal, you will save big bucks!
Be Careful Of the Fees
By law, a mortgage broker is permitted to charge you a fee for finding you the right loan. When negotiating, don’t neglect these fees. Find out what they are and make sure you talk to them about it. Fees are negotiable; don’t let anyone tell you otherwise. The thing to ask yourself for when looking at fees is, what am I paying this fee for, is it for an appraisal, notary service, processing etc? Is the fee there because something must be done to fund the loan and is nessesary or is the broker just trying to make some money off of me? Remember, the broker makes his money on the interest rate spread between what he charged you and what the “par rate” is. Fees outside of that are considered “Junk Fees” and should be avoided if possible. If the broker, charged you a super low rate, give him a little, they need to make money somewhere.
Pounding Your Mortgage Broker For The Best Rate
To successfully get the best rate on your loan with a broker, keep in mind that the broker needs to make a living. If you grind them too much, chances are they will not take you seriously and simply not want to do the loan. Be reasonable, let the broker make money off of your loan and they will work hard to get you the lowest rate. The broker can go back to the wholesale lender and grind them for a lower rate, but if there is no money in it for the broker, there is no incentive.
What I suggest is to speak to a couple of different brokers and let them compete. This has been a very daunting task up until recently; luckily there are many good mortgage lender website online that will analyze your needs and match you up with four of the best lenders according to your situation. What would take days to do flipping through the yellow pages now takes 60 seconds online.
rticle Source: www.iSnare.com