Mortgage Rate News

Despite all the hoopla about investor confidence returning on the back of the new mortgage rate freeze, many feel that a recession is coming. And that means that you need to start making sure that your financial house is in order. MarketWatch is offering some great ideas to help you get through the recession:

1. Emergency fund. MarketWatch points out that the best emergency fund will get you through three to six months. That can seem like a daunting task to many. I can’t just put three months’ worth of salary aside right now. What MarketWatch doesn’t say is that you can build this up gradually. Put aside what you can, and keep adding to it. Even some emergency fund is better than no emergency fund.
2. Blue-chip stock funds. When a recession is coming, it is important to make sure your investments are solid. Blue-chips may not offer sexy returns, but they generally do offer returns, no matter how modest. And when the wild ride is over, if you invest now, while the market is down, you will be happier later.
3. Get out of debt. Try to pay down your debt. MarketWatch points out that building credit card balances, especially from holiday debt, can really start to eat into your finances. I recommend aggressive debt reduction, in which you do what you can to get out of debt as fast as possible.
4. Get help from a financial adviser. MarketWatch recommends this especially if you are close to retirement. But it doesn’t hurt anyone to sit down and talk with someone who can help you map out your future and your asset allocation. But try to find a fee-based adviser — someone who charges hourly, and doesn’t get commissions for recommending certain investments.

No one wants to say it, but there is a recession on. And this means that you have to be extra-careful to guard your financial viability.

Tags: tips recession, mortgage rate freeze, home mortgage loan, stock funds,
investing, get out of debt, aggressive debt reduction

Cash-out home equity loans are falling out of favor. The number of people using home equity loans to get some cash is falling as lenders tighten standards and as home values decrease. Declining home values mean that there is less equity available for borrowers to use. Reuters reports on who is likely to get cash out home equity loans in the current climate:

“Borrowers we are likely to see refinance will be those with resetting adjustable-rate mortgages and those who have had their homes long enough that recent house price declines are not a serious threat to equity,” Frank Nothaft, Freddie Mac’s chief economist, said in a statement.

However, this may signal some problems in the wider economy. Many people use cash-out home equity loans for debt consolidation, hoping that easier terms will help them get out of debt faster. Additionally, cash-out home equity loans are responsible for some of the economy’s liquidity overall, as those with cash out loans spend the money on home improvement, vacations and other items.

These issues beg the question: Are we too dependent on debt as an economic driver? As foreclosures mount and as the economic stall, many will begin to ask themselves whether or not an economy that depends so much on Americans having a great deal of debt is a good thing.

While cash-out home equity loans can help those in debt by providing lower payments and interest rates, and provide tax advantages, one might wonder if more debt is really the solution to debt. And in many cases, debt continues to pile up, even after the home equity loans. Add this to the fact that it is harder now to get loans, and a bigger crisis may be looming for the economy.

Tags: home equity loans, home equity, mortgage blog, mortgage trends,
second mortgage, debt consolidation, home equity line of credit

A government report is predicting that there will be 2 million foreclosures by 2009. This is expected to produce serious effects across the country, reports Investment News:

“The current tidal wave of foreclosures will soon turn into a tsunami of losses and debt for families and communities,” said Sen. Schumer, according to a statement.

RISMedia reports that many are mobilizing to try and fix the mess caused by subprime lending practices:

Lawmakers and the White House have proposed a slew of policies to deal with the worsening subprime problem, and Treasury Secretary Henry Paulson has called housing the biggest risk to the U.S. economy. Paulson recently called for more loan servicers to modify their terms with borrowers in an effort to help families stay in their houses.

But if you want to avoid foreclosure, it is time to start planning now. Your options may be limited, and this could cause you problems in a variety of financial areas. Talk to your mortgage lender about the possibilities for your home mortgage at least six months ahead of the reset date.

Also, realize that new legislation, including a predatory lending bill and changes to FHA loans, you may have to make changes as well, in terms of adjusting your budget in order to cut expenses and make more room for higher mortgage payments.

Losing a home to foreclosure is not a fun prospect, and if you have an adjustable rate mortgage, including a subprime mortgage, now is the time to start planning ahead. You might be able to refinance to a fixed rate if your home has enough equity and your credit score is high enough. Or, if you give yourself enough time, you might be able to sell your home, or downsize and find renters who can foot the mortgage payments.

No matter what you do, though, if you want to avoid foreclosure, it is time to start making plans.

Tags: 2 million foreclosures, avoid foreclosure, home mortgage loan, mortgage loan blog,
mortgage lender, adjusting your budget, higher mortgage payments