Indianapolis - The fund designed to help Indiana's unemployed is bankrupt, and it's a problem that must be fixed. That effort is underway right now.
Earlier this year, the Indiana House of Representatives passed bill number 1379 to help pay for the fund that issues checks to unemployed Hoosiers. But now a summer study committee is reporting that there is a problem. The federal government says part of the bill which requires compliance centers is non-conforming. That means Indiana must adjust its plan before the law goes into effect next year.
The state has already borrowed $1.1 billion to meet payments. By the end of 2010 it will be up to $2.7 billion.
"Federal law provides that we would continue to pay benefits as we go into bankruptcy. We would borrow a loan from the federal government and Indiana right now is at $1.12 billion. That's the current drawdown that we've got on the fund. That number has pretty much been steadily increasing the borrowing with the exception of a short time where I think it ticked up barely when we saw the first quarter tax receipts. It's the largest tax receipt of the year so we wouldn't expect that to happen again," said Josh Richardson, Indiana Workforce Development.
The Indiana Department of Workforce Development said Wednesday that the state had been expected to stop borrowing from the federal government by 2012. But newer, less optimistic unemployment projections predict it will now be 2015 before the state can stop borrowing, and then it will take several more years to pay back the federal loans. The state wouldn't start paying interest on the loans until 2011.
"The picture is much worse," Richardson said.
Indiana has been paying out hundreds of millions of dollars more in jobless benefits than it has been taking in through taxes. The tax increase on employers is expected to raise about $300 million in additional money each year to help turn the fund around.
But the federal government plans to begin charging interest on the state's loans in 2011, and can begin raising federal taxes on employers that year that would compound annually until the loans are repaid.
State Rep. Russ Stilwell, D-Boonville, said the unemployment bill passed this year was not designed to fix the problem immediately.
"It's a fix that stops the bleeding and hemorrhaging, and it's still going to bleed," he said. "We were very clear about that. It's a long-term black hole."
Indiana is not alone. Currently 21 states and territories including Indiana are borrowing from the federal government. The current debt is $14.3 billion. By the end of the recession it is anticipated that 33 states will borrow at total of $50 billion.
source: http://www.wthr.com/Global/story.asp?S=11099200
The lowest mortgage rates in 3 months had US consumers clamouring for home loans last week even as the government said on Wednesday it expected millions more foreclosures.
The Treasury Department followed up with a report saying only 12 per cent of US homeowners eligible For loan modifications under the Obama administration's housing rescue plan have had their mortgages modified.
Survey shows US recession may be over
US job openings fall to lowest level in 9 years
But aside from the mixed picture on housing, the Federal Reserve said the overall economic situation was improving in spite of weakness in the housing and labor markets, while Treasury Secretary Timothy Geithner added that the economy was starting to grow again.
The housing market has been showing signs of stabilization in recent months, with sales on the increase and home price declines moderating in many regions of the country. In fact, home prices in some areas have risen.
Mounting foreclosures could mean another leg down for home prices and perhaps send the sector into a vicious cycle, analysts say.
The Treasury said 360,165 people had their monthly payments reduced through August, up from 235,247 through July, but a senior Treasury official conceded much more must be done to soften the impact of a severe and prolonged housing crisis.
"The recent crisis in the housing sector has devastated families and communities across the country and is at the center of our financial crisis and economic downturn," Michael Barr, assistant Treasury secretary for financial institutions, told a House of Representatives Financial Services subcommittee.
But the housing crisis is showing signs of easing. The Federal Reserve's Beige Book survey said most regions reported some improvement in hard-hit residential real estate markets.
And US mortgage applications surged last week to their highest since late May as consumers sought to take advantage of the lowest interest rates in months, data from the Mortgage Bankers Association showed.
The MBA said rates on 30-year fixed-rate mortgages tumbled to a 3-month low, spurring a surge in demand for home refinancing loans. Applications to buy a home, a tentative early indicator of sales, also climbed, hitting their highest since early January.
Low mortgage rates, high affordability and the government's $US8000 tax credit -- part of the economic stimulus bill -- for first-time home buyers have helped pave the way for stabilization.
"CAUTIOUSLY POSITIVE"
The Fed report said half of Federal Reserve districts saw evidence the US economy had improved by the end of August, although labor markets remained weak and retail sales were flat overall.
"Most districts noted that the outlook for economic activity among their business contacts remained cautiously positive," the Fed said.
But it also said there was still downward pressure on housing prices, and that business people in some areas believed recently higher vehicle sales levels were likely not sustainable after the government's "cash for clunkers" incentive program lapses.
Geithner, however, said the government's efforts to help the financial sector were paying off and helping the overall economy.
"The economy is now growing again. We've seen the cost of credit start to come down. Banks are repaying the investments the government had to make in them with a significant... return," he said during a speech at Syracuse University in New York.
"We are going to keep at this until we fix it --- until we get it back on track," he added.
source: http://www.businessday.com.au/business/world-business/us-home-loan-demand-rises-despite-foreclosures-warning-20090910-fhux.html
CNN Money reports today that 12% of eligible borrowers have been placed into trial loan modifications, up from just 9% a month ago. This comes from the second progress report issued by the government, which also says that 360,165 homeowners — who were at least two months behind in payments — received assistance through August. The goal of Obama’s Making Home Affordable Loan Modification program is to have 500,000 loan modifications under way by November 1.
The loan modification initiative was announced in February, began accepting applications in April, and is projected to help up to 4 million homeowners. The plan calls for servicers to reduce monthly payments to no more than 31% of a mortgage holder’s pre-tax income.
There are now 47 servicers participating in the program, and, though the performance of the providers has been all over the map, Bloomberg News reports banks are stepping up loan modifications. The administration is releasing monthly servicer performance reports in an effort to hold the institutions responsible for their performance and so the public will be able to see which institutions are lagging. Many borrowers have complained that servicers are not responding to their calls and applications, and that they are denied without explanation.
Even with all the efforts to refinance, the number of people falling behind on their payments continues to mount as unemploument rises.
source: http://www.zillow.com/blog/obama-loan-modification-plan-gets-closer-to-the-goal/2009/09/09/
Last week I got my first peek at the new Good Faith Estimate all lenders will be required to use by the Department of Housing and Urban Development after January 1st, 2010. It is a tremendous improvement over what we have now. They're not even in the same ball park! It is so good, in fact, that I predict the quiet rumblings of criticism I've heard within the industry will grow louder. Why? Because this is one of those rare, government mandated documents that actually and truly helps the people it purports to help: the borrowers! This is not good for those lenders that rely on borrowers' gullibility and ignorance as a crucial aspect of their business model.
A quick overview: the new Good Faith Estimate is three pages long. Within those three pages borrowers will find these helpful sections:
* Important Dates showing how long the rate and terms of the offered loan are valid and the terms of the rate lock.
* Summary of your loan including term, rate, amount, whether it is adjustable, negatively amortizing, subject to a prepay penalty and so on.
* Escrow Account explanation and information.
* Summary of Loan Charges in plain black and white.
* Origination Charges revealing fees charged directly by the lender.
* Other Settlement Charges making clear third party fees not quoted by or given to the lender.
* Instructions clearly explaining which charges cannot increase at closing as well as any limits on increases for those charges that can change at settlement.
* Trade-off Table wherein the lender compares how the payment (rate) and closing fees move in opposite directions for the same loan as the rate moves higher or lower than that quoted.
* Shopping Cart giving borrowers an organized way to compare lenders.
This new Good Faith Estimate is transparency on steroids! Take a look again at those last two items: a Trade-off Table and a Shopping Cart. Lenders like Brian Brady and myself have been providing this kind of understanding for years. We've spent hours explaining the concept of rates vs. costs to borrowers who are often misled by other lenders and even the industry in general. I can not count the number of times I've heard a client remark to one or both of us, "Gee, no one's ever told me this before." I guess we can expect to hear that a lot less often.
I also expect an even greater share of business to come our way. For a number of lenders out there, this new Good Faith Estimate means their model for doing business is going to change. That benefits the borrowers (obviously) but it also benefits those of us who have been doing this all along. As a matter of fact, I am going to start using this new Good Faith Estimate now, along side the older one. Why wait until January 1st, 2010? This is the clearest explanation of fees I've seen yet and it will only serve to educate our customers. As Brian is fond of saying: "An educated customer is our best customer."
source: http://delmar.typepad.com/brianbrady/2009/09/new-good-faith-estimate-debuts-january-1st-2010-but-why-wait.html
Over the past few weeks, a full-blown price war has erupted in the home-loan sector. Right from the moment one bank reduced its home loan rates to about 8 per cent, others have been forced to follow suit. So where does this leave you, the borrower?
Well, in a fairly comfortable position really, because who doesn’t want to benefit from cheaper home loan rates. However, while these low rates are tempting, we would caution borrowers to understand all aspects of cheap home loan rate schemes and the process associated with it, and suggest a few useful tips to think about when considering a home loan.
First of all, remember that these recently announced low rates are only for new loans, and not for existing loans. But whether you are a fresh borrower or an existing one, you want to take advantage of the new lower-rate environment. So let’s take each of these two cases starting with existing borrowers.
If you are an existing borrower
If you took a home loan in the last few years, chances are that you pay a rate close to 10 per cent. Now that rates have fallen to close to 8 per cent you are probably wondering what you can do to save money. Most rational people would like to “refinance” their more expensive home loan to something cheaper, as long as it makes economic sense to do so, i.e., the cost of the refinance is not expensive.
This process of refinance is known as balance transfer — you transfer your outstanding home loan balance from one lender to another. The way it works is that the new lender pays your old lender the money outstanding on your loan. Your obligation for repaying the outstanding amount is now towards the new lender.
source: http://www.indianexpress.com/news/what-lies-beyond-the-teaser-rate/513712/
Half of all fixed rate mortgages now charge arrangement fees which are based on the amount of money customers borrow, research showed today.
The proportion of providers charging a percentage fee has risen by 14% during the past year to 49% of all fixed rate deals, according to financial website MoneyExpert.com.
The fees vary from just 0.4% of the mortgage size to as much as 2.5%, with an average fee of 0.89%, or £1,335 on a typical mortgage of £150,000.
But for people borrowing larger sums the fees can run into thousands of pounds, with a homeowner taking out a £250,000 mortgage with a 2.5% fee paying £6,250.
Only 4% of fixed rate mortgages with a percentage fee have a cap on the amount borrowers have to pay.
Among lenders who levy a fixed fee regardless of the amount being borrowed, the average amount charged has fallen during the past year, dropping from £860 to £790.
However, the reduction is largely due to lenders introducing low fee or fee-free mortgage ranges, which offset the lack of an arrangement fee by charging higher interest rates.
Only one mortgage had a fee of between £100 and £200 12 months ago, but today 49 different products have a fee of this level.
But the highest fixed fee charged has soared by 25% during the past year, rising from £1,999 in September 2008 to £2,499 now.
Pierre Williams, head of research at MoneyExpert.com, said: "Borrowers looking for a mortgage focus on rate, but fee has to be a consideration particularly when these can run into thousands of pounds. All too often we forget about the fee by rolling it straight into the loan.
"Fees are often linked to loan to value ratios and anyone without a significant amount of equity in their house can expect to pay a hefty fee."
Meanwhile, research by financial information group Moneyfacts.co.uk found that the average cost of a two-year fixed rate mortgage has increased by 0.31% to 5.15% since March, when the Bank of England base rate was cut to a record low of 0.5%.
The rise comes despite swap rates, upon which the deals are based, falling during the same period.
But the average cost of a two-year tracker deal has reduced slightly during the same period, dropping by 0.14% to 3.72%.
There has also been an increase in the number of different mortgages available for people with smaller deposits, with the number of 90% loan to value loans rising by 17 to 106, while there are 80 more 75% LTV deals, giving a total of 509.
Competition appears to be slowly returning to the mortgage market, with a number of lenders reducing the cost of their mortgages during the past week.
HSBC launched a discount mortgage of just 1.99% last week, which went straight to the top of the best buy tables, while Cheltenham & Gloucester, part of the Lloyds Banking Group, and Barclay's lending arm the Woolwich also reduced some of their rates.
They were followed yesterday by first direct, which launched a market leading offset tracker mortgage of base rate plus 2.29%, giving a current rate of 2.79%, and nationalised bank Northern Rock reduced the cost of some of its fixed rate deals by up to 0.4% and introduced a two-year tracker.
Michelle Slade, spokeswoman for Moneyfacts.co.uk, said: "All is not lost for borrowers as competition slowly seems to be returning to the mortgage market.
"The number of mortgages available is slowly increasing and the launch of the sub-2% HSBC deal will hopefully spur other lenders on to reduce rates and bring much needed competition back to the market."
source: http://www.24dash.com/news/Housing/2009-09-08-Half-of-all-fixed-rate-mortgages-charging-arrangement-fees
| 29% |  | Up |
| 50% |  | Down |
| 21% |  | Unchanged |
Will rates rise or remain relatively unchanged? Experts and Bankrate analysts provide their insights.
This week (Sept. 3 - Sept. 9) the experts say: Rates probably are headed down. This week, half the panelists believe mortgage rates will fall over the next 35 to 45 days. Another 29 percent think rates will rise, and the rest believe rates will remain relatively unchanged (plus or minus 2 basis points).
| Experts' comments | Panel |
Inflation fears are overblown. While it is true that the Fed is printing an extraordinary amount of money, that extra money won't cause inflation until it is borrowed (new credit is created). Credit is being destroyed faster than the Fed can print money because consumers have neither the ability nor the inclination to take on additional debt. As these facts become more and more evident, deflationary concerns drive mortgage rates lower. If you missed out on the low rates of earlier this year, get ready, because this fall we may approach the lows in mortgage rates reached earlier this year. Michael Becker, mortgage consultant, Green Pastures Mortgage & Finance, Lutherville, Md. | down |
The economy just can't seem to stabilize regardless of the fact that many experts have declared the recession over. Rates are now nicely under 5 percent but who can qualify? One third of all homeowners are upside down on their mortgages and we have a very understated national unemployment rate in the 9 percent range. Jeff Lazerson, president, Mortgage Grader, Laguna Niguel, Calif. | down |
The daily tech has run its bullish course (higher prices, lower yields) and we should see higher Treasury yields and mortgage rates for 15 to 20 days. We may see a "bouncing along the ceiling" for a week or so as the techs top out and prices stay flat. Presumably that would happen if consequent to erosion in equity prices. This is not the end because the weekly remains bullish, as we should get another dip when the daily gains its bullish steam in about six weeks. Dick Lepre, senior loan officer, Residential Pacific Mortgage - SF, San Francisco | higher |
Seasonal trends push mortgage rates down. Dan Green, TheMortgageReports.com, Waterstone Mortgage, Cincinnati | down |
After sounding like a broken record for months now saying that rates would stay the same, we're starting to see some improvement. As the stock market struggles, we're seeing mortgage-backed securities testing new highs, and if they can remain at this level, we'll see improved mortgage interest rates. If you've been unable to refinance due to decreased property values, touch base with your mortgage adviser to see if one of the new 125 percent RefiPlus loans might work for you. David Kuiper, mortgage planner, First Place Bank, Holland, Mich. | down |
The 10-year is currently trading at 3.34 percent, which is down 35 basis points from two weeks ago. The inflation component is currently at 1.7 percent, which is also down from almost 2 percent earlier this year. ADP said the private sector lost 298,000 jobs -- 85,000 more than expected. It is now becoming clear to everyone that while things are evening out we are still a long way from real improvement as opposed to lessening bad news. Remember, we need job growth to get this all moving again. Mitch Ohlbaum, loan officer, Bank of America, Los Angeles | down |
Without notable market news or government intervention this week, consumers may turn to market analysis regarding the future direction of rates. Currently, the average mortgage rate is only 0.05 percent away from the record low of 5.19 percent. However, the high end of that scale is now slightly lower than before, at 5.53 percent. As we appear to have hit a resistance level within those numbers, we can expect rates to move up within that range between now and Sept. 23. Cameron Findlay, chief economist, LendingTree.com, Charlotte, N.C. | higher |
Even though rates are very low, I'm cautiously paying attention to how the market will react with the concerns of unemployment. If anything, there is a greater potential for rates to slightly increase from today's average. Mark Madsen, mortgage consultant, Raintree Mortgage, Las Vegas | unchanged |
I say unchanged, and one would tend to think that would equate to stability in pricing. I am not saying that. Last year in the month of October, we saw four runs in mortgage-backed securities pricing in excess of 400 basis points, up and down. This translates into rate swings of over 1 percent off the highs and lows. While I am not expecting a repeat, the fact that it happened cannot be lost on consumers that rates can change quickly. Lock when rates make sense and short term, these rates make a lot of sense. Jim Sahnger, mortgage consultant, Palm Beach Financial Network, Stuart, Fla. | unchanged |
| Bankrate's analysts | Panel |
Mortgage rates have pulled back, even as better economic news mounts. Don't wait too long to lock in. The recovery will be weak but the mortgage markets remain very dependent on the Fed's checkbook. Greg McBride, senior financial analyst, Bankrate.com | up |
I expect more of the same -- small changes on a week-to-week basis Holden Lewis, senior reporter, Bankrate.com | unchanged |
source: http://www.bankrate.com/finance/mortgages/mortgage-rate-trend-index8-132129.aspx