According to a report released by the Federal Reserve Bank of New York, American household debt delinquency rates declined last quarter—for the first time in about four years. Here’s a look at some of the specifics in the report and what they might mean about the economy.
According to the report, delinquency rates had increased steadily since the first quarter of 2006, when they hovered at slightly less than five percent of household debt. It seems that, once the housing bubble burst and the stock market began to tank, household delinquency shot up.
Sources suggest that the decrease in delinquencies is the result of two major moves by consumers:
Perhaps unsurprisingly, the Fed’s report indicates that both the total household debt and the percentage of that total occupied by mortgage debt have increased significantly since the beginning of 2004. Data from the last two years suggest that both totals are beginning to inch downward, but are still significantly higher than they were before the housing boom began.
So what might these numbers mean for the larger economy? It may be too early to say. As mortgage debt has risen (both in total and as a percentage of all debt), so have mortgage delinquencies, showing a serious upward leap began in 2006 and peaked in the first quarter of 2009.
But it’s still too soon to say whether that 2009 high will remain the top of the graph—in the quarters since then, the total amount of mortgage debt has fluctuated enough to leave doubt about whether it’s on a steady decline.
Tenant loans are designed for individuals who are seeking a loan but do not own any property, home or other forms of real estate that can be used for collateral. In many ways, tenant loans are similar to credit cards where individuals can get an unsecured loan do whatever they want. However, tenant loans should not be confused with credit cards as the loan amount is not revolving and they must be repaid in their totality within a specific period as determined by the creditor.
When applying for a tenant loan, there are some important points that must be understood so that the debtor can know exactly what they are getting into. These include:
In the eyes of many financial institutions, tenant loans are considered as high risk. This is because applicants are most likely renting their present abode and are thus classified as not have a permanent address.In addition, many applicants of tenant loans suffer from bad credit and are forced to utilize this service as a last resort. Considering the risks involved, financial institutions attach comparatively high interest rates to recoup any potential losses.
Although some institutions may enquire about the purpose of the tenant loan, in general most are more concerned about its repayment than how it is spent. As a result, tenant loan debtors are allowed to use their tenant loan for whatever purpose they see fit. Many tenant loan recipients use these loans to pay for school, medical procedures, vacation or start a business.
The amount of money that is made available to an individual in the form of a tenant loan depends on the individual’s available income. This proves to the creditor that you will be able to meet your financial obligation. In general, tenant loans range from $7,500 to $500,000.
Depending on the loan amount, recipients of tenant loans can get extended periods in which to repay their tenant loan. Records show some institutions allowing up to ten years for full repayment.
Each client must negotiate the terms of their tenant loan. This will entail amount of monthly payment, interest rate, life cycle of the e loan and conditions for late payment and default.
Early payments are welcomed on tenant loans. Tenant loan creditors have no restriction or fines for individuals who choose to settle their debt early. Actually, what most institutions will do is calculate the outstanding balance and adjust your interest rate accordingly.
While most institutions may offer this benefit by default, it is important to discuss this with your creditor. This option provides peace of mind to many tenant loan recipients as their credit will not be affected if they should fall ill, lose their job or experience some accident.
Applicants of tenant loans can rest assure that their application will be kept in the strictest confidentiality. There will be no contact with their employers, bank or other third party without your approval.
I was privileged to attend an insider’s breakfast briefing with guest speaker Congressman Ed Royce of the 40th District a couple weeks ago. This event was hosted by the Fullerton Chamber of Commerce. When Congressman Royce spoke about the impact of economic reform and healthcare, as it relates to small business here in California, he mentioned that businesses were hoarding capital and not spending because of the uncertainty in Washington. We all know that the economic recovery is primarily dependent upon spending, but most Americans are still working on paying down their debt. Adding to the lack of consumer spending is the national jobless rate holding at 9% and here in California, we rank third with 12.3% unemployment rate.
Ironically, as Mr. Royce was speaking, his colleagues in the Senate blocked a bill to aid small business. The problem with most bills though, is the cost of such legislation. We can all agree that government spending must end and the private sector needs to pick up the slack, but with political rhetoric at an all-time high and legislation costing trillions of dollars, paid for by cuts in Medicare and increased fees; the Congressman explained that this would have erected a new entitlement program.
Congressman Royce explained that Healthcare and taxes are the two major expenses to small business in America. The hoarding of capital by American businesses is due to the long range rule changes creating uncertainty in Washington. Congressman Royce explained, “We must eliminate uncertainty first, then small business will begin to spend capital.” We need to eliminate our debts and the uncertainty in Washington, along with the toxic mortgages. This is a marathon recovery, not a sprint to the economic finish line.
Homestead protection in bankruptcy gets complicated when there are non-resident co-owners of the debtor’s homestead. An example is when parents help an adult child buy a home and insist on placing their names as co-owners of their child’s house.
A caller from south Florida asked me how a Chapter 7 bankruptcy would affect his homestead owned jointly with his parents free and clear. His parents purchased a house in Florida for their son. The house was titled jointly in the names of the son, who lives there, and the two parents. All three family members have credit card problems and are considering bankruptcy. The son asked me whether his Chapter 7 bankruptcy would affect is parents’ interest in his house. The house qualifies for unlimited homestead protection under the bankruptcy rules.
If the son files Chapter 7 only the son’s partial interest in the house is at issue. The Chapter 7 trustee has no interest or rights relating to what the parents own including the parents’ interest in the house (if any). The son’s ownership of the house would be exempt as homestead because the house is his primary residence.
The result is more complicated if the parents file Chapter 7. The parents’ Chapter 7 trustee may have a claim against the parents’ interest in their son’s house because the parents do not reside in the home as their own homestead.. The trustee could not force the sale of the home as long as the son resided there. The trustee could place a lien on the parents 2/3 interest which would be payable upon the sale or refinance, and the trustee could sell the lien on proceeds to an investor or to the debtor himself.
The parents could argue in their bankruptcy that they have no equitable interest in the house subject to their bankruptcy estate because they intended to transfer all beneficial interest in the house to their son. This position may be viable if the son has been paying all taxes, mortgage payments, and other expenses and if the son exclusively uses the property. The parents’ filing of a gift tax return or other written evidence of their intent to gift the property to their son would substantiate this position. It is possible for the parents to have part of the bare legal title without them having any equity interest subject to their own bankruptcy trustee, but that position depends on the facts.
This is another example of why parents should not jointly own assets with their children for estate planning or any other reason.
There’s been a fair amount of discussion lately about the ups and down of credit card balance transfers and whether they’re effective debt-elimination tools, particularly in light of some of the changes taking place thanks to the Credit CARD Act. Here’s a look at the basics of understanding balance transfers and determining whether one might work for you.
Actually, it’s pretty much what it sounds like: when you transfer the balance you owe on one credit card to another card. In other words, you apply for a new card, use that card to “pay off” the debt on the old card and then make payments to the issuer of the new card.
Credit card issuers have attracted transferees by offering them low introductory rates and (in some cases) minimal fees to transfer a balance. If you’re trying to pay down your debt, transferring a card’s balance to a card with a lower interest rate might make financial sense.
This is where the issue gets tricky. There’s no set-in-stone answer; the truth of the matter is that you have to do some number crunching in order to determine whether or not a balance transfer could save you money and help you eliminate debt. If you’re pondering this question, start with these steps:
These numbers are key to answering the question of whether or not to transfer your debt. And the next factor is essential, too: Will you be able to pay off your debt within the promotional period?
If investing is something new for you, it is best to follow a guide by those who have done and done it successfully. It can be complicated, but it really doesn’t have to be. By following this guide, you can determine your investment budget, know when to buy, and put your money to work for you.
A good investment strategy depends on how much money you want to start with investing.
Starting off with one mutual fund is great for most new investors, for it is a wonderful option if you don’t have a big lump sum to invest. Consult a mutual fund company to help you decide which mutual fund to invest in. Some mutual fund companies can help a beginner like you to put your investment into a one-fund solution, which they are the owners of it.
Some funds are designed for your desired retirement age. A Fidelity Freedom 2030 (FFFEX) fund puts more of your money in stocks now and puts more of your money in bonds as you get closer to retirement.
A T. Rowe Price is a safe way to invest money, for you can invest as little as $50 a month. All you have to do is add $50 more each month.
Although you are a beginner, you can start a portfolio. You can choose 5 mutual funds, covering your investment bases. Invest in companies of different sizes and in various parts of the economy and invest in other parts of the world.
It is better to build a portfolio on funds. Look for one with consistent performance, lower fees, and an investor-friendly mutual fund management company behind it. You can start a portfolio with $10,000.
Just follow these steps for a beginners guide to investing. Make the most of your savings and start planning for your future or the future of your kids.
Bankruptcies were up 32% across the nation in 2009, leaving no doubt that the embers of the recession are still burning and small businesses are at risk from unpaid invoices. In fact, it may be argued that the collective financial health of its customers forms the foundation by which a small company is protected from – or made vulnerable to – financial disaster.
Generally, goods sold on a line of credit become a security for the creditor. In other words, if a mechanic declares bankruptcy, the tire supplier has rights to the unpaid tires setting on the shelves. What happens, though, if the goods in question are lost to a manufacturing process or, in some other way, are unrecoverable?
When a mom and pop operation declares bankruptcy, how do its vendors, often small businesses themselves, keep from getting lost to the mudslide as well?
Being a secured party creditor to high-risk customers offers peace of mind. A secured party creditor offers credit in exchange for a lien on personal property. Personal property, in this sense, means any property that is not real estate, usually property pertaining to the business. The lien does not have to be on the goods that the creditor sold to the debtor, making this arrangement particularly advantageous for the raw material supplier.
In the event of bankruptcy, secured party creditors have certain advantages over those vendors whose loans are unsecured. In any bankruptcy proceeding, grantees have a window of time in which to file a proof of claim. This proof of claim sets forth in writing the details of the debt. If this claim is incorrectly executed, then it could make it vulnerable to dismissal.
Even worse, if this proof of claim is not filed within the time frame set forth by the bankruptcy court, then the creditor will likely lose any chance of recovering funds from the bankruptcy. Secured creditors who have filed the Uniform Commercial Code UCC-1 form correctly do not have to file a proof of claim. The pre-bankruptcy lien is sufficient to have a claim in the court proceeding.
Protection from the proof of claim process is not the only reason it is a good idea to be a secured creditor. In bankruptcy proceedings, there is only a finite amount of funds available for distribution. Secured creditors take priority over unsecured loans. The Uniform Commercial Code UCC-1 form, once filed, will give the creditor “priority status” over unsecured loans. In fact, being the first secured creditor on file for a piece of personal property will offer protection against subsequent lien filings.
Bankruptcy makes creditors vulnerable to the same fate. However, entrepreneurs who wisely take advantage of the Uniform Commercial Code UCC-1 form preemptively protect themselves from the losses that backfire from default borrowers…
The dream of buying your own home, repaying it as soon as possible and living out your retirement is one which is not as applicable as it was to your parents or to their parents, who probably lived through the Great Depression when security in property meant security for your family. However, we have lived through our own economic crisis and we still are and it is important to learn the lessons relevant to our generation and our property needs.
Repaying your home as fast as possible doesn’t always make the best financial sense. Often cash flow, capital growth and freedom from debt are more important in maintaining stability and security for your family, than owning your home outright right now. Therefore, consider the top five reasons people refinance their homes, and how you can use mortgage refinancing to set your family up with the modern version of security through property.
The reality is that most of us have a credit card or two with an outstanding balance we just can’t shift. One of the greatest barriers to getting rid of any sort of personal debt – credit cards, personal loan, store cards or student loans – is the interest rate, and the compounding interest which just keeps being added to your balance and increasing your repayments.
As a result, consolidating debts into your home loan is a popular reason for refinancing because home loans are the form of borrowing with one of the lowest interest rates. To refinance your loan to consolidate debts you will need to be able to show your lender capital growth, and an accumulation of equity which you can borrow against. Your principal loan amount can then be refinanced, subject to approval as your borrowing capacity will be reassessed, to include your existing home loan amount, plus the amount of equity you need to access to repay your other personal debts.
Debt consolidation is only a good reason to refinance if you keep your consolidated debts and your original home loan amount split, so you can still focus on repaying your personal debts sooner; if you don’t you will end up paying more interest on your personal debts because you are paying them off over a much longer term.
Lower mortgage repayments can ease the pressure on your cash flow situation and free up funds for other investments, lifestyle changes such as a holiday or a private school for your child, or to direct more funds to your 401K for your retirement.
If your refinance your home loan to one with a lower interest rate, even a discount of half or three quarters of a percentage point can lower your monthly commitments. However, for this to be of a true benefit, you need to make sure you plan to stay in your home and keep your new loan for long enough that you break even – that is, the costs of refinancing are outweighed by the savings you have made.
If you can’t find a better interest rate deal you can choose to lower your repayments by refinancing your loan to a longer term. If you have a loan with a 15 or 20 year term, refinancing to a loan which spreads your repayments over 30 years can reduce your monthly commitment. Just make sure that in 30 years you will still be able to cover your repayments, and that you’re not heading for retirement and a reduced income.
You can also make lower repayments by making interest only repayments on your loan. This type of refinancing can also be one of the most affordable as you can often change your repayment structure with your existing lender. Therefore, instead of paying the interest and a portion of your principal each month, you are paying just the interest which has accumulated. Keep in mind this doesn’t reduce your loan amount and your repayments may go up at the end of an interest only period – usually up to 10 or 15 years – to keep your principal repayment on track within the term of your loan.
Choosing a fixed interest rate to see you through the term of your loan can be restrictive, especially if interest rate have dropped, or you’re able to pay more off your loan but can’t with a fixed rate product. Therefore, you may consider switching to a fixed-period adjustable rate mortgage (ARM) which is also known as a hybrid ARM. These loans will give you both a fixed and an adjustable rate on your mortgage, where a 3/1 ARM for example would have a three year fixed rate and would adjust once a year after that. Plus, the fixed interest rate for the initial period is lower than the fixed rate on a 15 or 30 year fixed mortgage so you are saving money from the beginning.
While you can access the equity in your home to repay personal debts, you can also use cash out refinancing for whatever you choose. The equity in your home is the difference between the value of the home and the amount remaining on your loan. You can apply to refinance and access that equity in a lump sum payment for a new car or a family holiday.
Alternatively you can refinance to a home equity line of credit and have your loan amount approved up to your available equity amount, and draw down on those preapproved funds when you choose, for a home renovation, a party or to pay unexpected bills. With a line of credit you don’t have to make repayments until you have reached the limit of available credit, and you are only accumulating interest on the amount of the credit you have used.
When you took out your loan, the features of the product may have been perfect for you. However, lenders are always making changes to the features offered and the loan structures used, that there may be a better way to structure your loan.
For example, if you took advantage of a balloon program when you applied for your home loan, you would have received lower interest rates and lower initial repayments. However, if you are still living in your home at the end of the fixed rate term – which you may have chosen from 5-7 years – your entire mortgage amount is now payable. Luckily, you can easily refinance to a new adjustable rate mortgage, or a new fixed rate mortgage.
Or, if you didn’t provide a deposit when you applied for your loan you will have been able to secure your dream home without using funds of your own, but you would have paid private mortgage insurance (PMI) because you purchased your home with less than 20% down. The PMI you are paying protects your lender if you default on your loan but if you have been repaying your mortgage for some time, the value of your home has increased and your loan amount has decreased, so by refinancing you may be eligible to remove the PMI costs from your loan as you can provide that equity as security.
Author Resource:
Alban is a personal finance writer at Home Loan Finder, where he helps people to compare home loans online.