Mortgage Rate News

Two more national banks have failed. The Federal Deposit Insurance Corp. (FDIC) shut down First National Bank of Nevada and First Heritage Bank. Since these banks were FDIC insured, the money they contained was safe, and will be accessible to most account holders. The FDIC sold the accounts to the Bank of Omaha.

But this probably isn’t the end for bank failures. Bank failures are starting to come faster (but it is worth noting that none are as large as IndyMac). There are also some estimates that 100 banks will fail in the next year. However, reports BloggingStocks, 100 banks may be a rather optimistic number:

But, those estimates may be low. Bill Gross, an extremely prominent investor and head of Pimco, recently wrote that total losses related to the housing market will hit $1 trillion. About $450 billion of those write-downs have made it through the system. That leaves a potentially massive burden on the banking system going forward.

It is true that there is a massive burden on banks right now, but a lot of has to do with the downright speculative practices they have been involved in. Many of the banks failing at this time were involved in making questionable mortgages to people who might not have been able to really afford them.

But, on a whole, our banking system has a looooong way to go until it hits a place of complete failure, and we aren’t likely to get there. After all, even the wildest estimates don’t put this crisis as worse than the savings and loan disasters of the 1980s.

The key is to avoid panic. Double check to make sure your bank is FDIC insured. Then look at your accounts. The FDIC will guarantee your money up to $100,000 per deposit account ($200,000 if there are two depositors) and $250,000 per retirement account. If you have more than the insured amount in an account, consider moving some of that money to another bank. But withdrawing it all as part of a “run on the bank” policy will only make matters worse.

Tags: banks fail, FDIC, home mortgage loan, mortgage lenders,
mortgage loan blog, IndyMac, bank accounts

Even as some wonder whether the housing market has reached bottom, there is evidence that it might not have. Information regarding Quarter 2 housing numbers show that foreclosures are on the rise. CNN Money reports on foreclosures that are on the rise:

“Most areas of the country are seeing at least some increase in foreclosure activity,” said James Saccadic, CEO of RealtyTrac, an online marketer of foreclosed homes. “Forty-eight of 50 states and 95 out of the nation’s 100 largest metro areas experienced year-over-year increases in foreclosure activity.”

The information represents an increase of 14% from the first quarter of the year, and a gain of 121% since the same time last year. Here are the homeowners that are lumped into numbers reflecting foreclosures:

• Lost a home to foreclosure.
• Received a notice of default.
• Received a warning of a pending auction.

And, of course, this also means that projections for total foreclosures are on the rise. Last year, in October, the prediction was that there would be 2 million foreclosures by 2009. However, halfway through 2008, there are 1.4 million foreclosures. This means that there is a strong likelihood that there will actually be close to 3 million foreclosures by the end of the year, unless the pace slows up.

The implication is also that Federal programs to help homeowners, such as Hope Now, isn’t doing a whole lot to stem the rising tide of foreclosures. It appears that with falling home values and continually resetting mortgage interest rates, homes are just getting beyond the reach of many of the people who them. On top of that, a faltering economy in which jobless claims are on the rise aren’t much help, either. Also, food and transportation prices are also cutting into available money for mortgage payments.

Tags: foreclosures, mortgage payments, home mortgage loan, mortgage loan blog,
Hope Now, jobless claims, economy

One of the important considerations that mortgage lenders look at when deciding whether you will get a loan, and how much they will lend you, is your debt-to-income ratio. This ratio expresses what percentage of your income goes to paying off your debts.

For example, if your monthly income is $4,500, and your total debt payments amount to $1,300, you figure your debt-to-income ratio by dividing 1,300 by 4,500 and then multiplying the result by 100. In this case, the debt-t0-income ratio is 28.89%. Most will round it up to 29%.

Student loans and debt-to-income ratio

If you have student loans, your debt-to-income ratio will be affected. If it is too high, then you could be denied the mortgage loan you want. Helping pay down your student loans can help you improve your chances with the mortgage lenders. And, happily, there are some student loan forgiveness programs that can make this even easier.

Blueprint for Financial Prosperity offers insight into a variety of grants that can help you reduce your student loan amounts:

• Public Service Loan Forgiveness Program for those who work in a public service job for 10 years.
• Grants for teachers who work in certain areas (low income or rural, for example).
• AmeriCorps.
• PeaceCorp.
• VISTA.

I know that my mother is benefiting from a program that allows partial student loan forgiveness for those who teach in rural areas. Even though my mom already owns a home, having the student loan forgiveness will help alleviate the fact that she took them out later in her life to finish her degree.

Just as there are specific programs that can help you pay for schooling through scholarships, there are also programs that can help you pay off the debt you have incurred after you are done. Look around for opportunities to help you pay down your student loans. It’s one of the best ways to improve your debt-to-income ratio.

Tags: student loan forgiveness, student loans, home mortgage loan, mortgage loan blog,
debt-to-income ratio, mortgage lenders, public service jobs