Mortgage Rate News

One of the questions that I have been asked a lot lately is this one:

How likely am I to get a home equity loan?

As with most personal finance questions, it really does depend on your personal situation. And what a mortgage lender is willing to for you (which is increasingly less and less). But there are ways to get a shrewd idea of how likely you are to get approved for a home equity loan.

Mortgage lenders are wary of giving out risky loans again. Gone are the days when you could get a second home mortgage for 90% of your home’s equity. Some mortgage lenders, believing that the real estate market would just continue appreciating at a rapid rate, were offering home equity loan options that amounted to 125% of a home’s available equity.

New expectations for home equity loans

Mortgage lenders now expect a little more in terms of the people they lend money to now. Bad credit home equity loans are becoming scarcer as mortgage lenders want borrowers with less risky credit scores. Many lenders want a credit score of at least 650 (which is lower than what many mortgage lenders will accept for a first home mortgage loan).

Additionally, many mortgage lenders want to make sure there is plenty of equity in the home. With home values dropping, lenders want to make sure that the homes used for collateral aren’t going to suddenly take a nose dive and be worth less than you owe on the home.

Finally, mortgage lenders are becoming more prone to verify income. Many mortgage lenders, who used to fudge income numbers in the past, as well as let some documentation slide, are tightening up requirements.

So, if you have plenty of equity in your home, and if you have sufficient income and good credit, you are likely to get a home equity loan.

Tags: home equity loan, home equity, home mortgage loan, home equity second mortgage,
second mortgage, home values, reader question

Citigroup Inc. got its fair share of hits, thanks to the mortgage market and credit market messes. Subprime mortgage writedowns, as well as other credit related writedowns, totaled more than $7 billion. So for quarterly earnings, Citi is reporting a $2.5 billion loss.

And this is good news.

New stock market conventional wisdom: “not that bad” is the new “good”

The news of Citi’s loss of “only” $2.5 billion is having a rather positive effect on the stock market. All around the world, stock exchanges are getting a bit of a boost as they contemplate the fact that Citi didn’t lose as much as analysts forecast the company to lose.

When mortgage lenders and others who deal with borrowers first started sustaining heavy losses as the mortgage and credit markets imploded, all sorts of dire warnings were made and all sorts of losses predicted. As a result of all the gloom and doom, snything that comes up “better than expected” or “not that bad” is considered a victory for that stock. And the stock market derives “confidence” that the worst of the crisis might be over. (Forgetting that this same thing happened last quarter, and things got worse.)

But, in the end, Citi needs to actually start making money. Posting gains and what-not. So BloggingStocks reports on the plans Citi has to do that thing the company was started for in the first place:

What will Citi do to start making money? It plans to cut $15 billion in costs in the next two to three years– It canned 6,000 people in the quarter — it will sell $400 billion in what CEO Vikram Pandit calls “legacy assets” and it will strive for 9% revenue growth.

Meanwhile, Citi has had some luck strengthening its capital base. It raised $13 billion in common and preferred stock during the second quarter which left it with a strong capital position — a Tier 1 capital ratio of 8.7% — well above its 7.5% target.

Tags: credit market, writedowns, home mortgage loan, mortgage loan blog,
subprime mortgage, subprime writedowns, loss Citi

One of the rising trends that is resulting from an increase in foreclosures is with regard to school districts and their efforts to verify kids’ addresses. In order to prevent children from attending school in a district that they no longer live in, some officials are employing private investigators to track down addresses. Some school districts, reports the Wall Street Journal, even offer “tip lines” that parents can call when foreclosures force kids in the neighborhood to move.

The idea is to try and prevent overcrowding in some districts and underfunding in others. However, the tactic may not be legal. The Wall Street Journal reports that children can’t be chased out of schools because of foreclosures:

Schools can get it wrong when they attempt crackdowns, because of unreliable public records or ignorance of education law. The McKinney-Vento Homeless Assistance Act, an updated version of a 1987 law, says school districts can’t deny enrollment to children who are homeless because of foreclosure or other economic hardship.

“No district should be chasing people away because of foreclosure, but we know they are,” says Laurene Heybach, director of the Law Project of the Chicago Coalition for the Homeless.

If the reason for forcing some kids to switch schools has to do with foreclosures, parents may have recourse. But that could end in even more funding difficulties for school districts due to lawsuits. Maybe the school districts should back off a bit.

It is already distressing enough for a child to be forced from his or her home. Kicking kids out of school — in the middle of a school year in some cases — and forcing another emotional upheaval by taking them away from their friends adds another layer to an already painful situation.

image credit: PRA, via Wikimedia Commons

Tags: foreclosures, foreclosures increase, home mortgage loan, foreclosures school districts,
mortgage loan blog, foreclosures kids