Smart Borrower Blog

Archive for June, 2009

HUD Requests a $798 Million Credit Subsidy

Recently, the Department of Housing and Urban Development (HUD) released its 2010 budget.  In their budget, they asked for a $798 million credit subsidy for the reverse mortgage program that is handled by the FHA.  HUD has never requested a subsidy of any kind.  It begs the question is the Home Equity Conversion Mortgage (HECM) actually working as it should?  In a report by ReverseMortgageDaily.com, the author consulted  the Congressional Justification Report to determine the reasoning behind the request. According to this report, HUD estimates that 121,000 new mortgage loans will be endorsed in 2010.  In 2009, HUD estimates that... more »

Bad News For Lenders of Student Loans

With the ever soaring cost of higher education, student loans have been an almost indispensable tool when trying to put the kiddies through college.  Tuition has reached a level of $50,000 a year in some private colleges and universities.  At that rate, a graduate can expect to be in debt for a quarter of a million dollars. Over the years there have been three kinds of loans available.  Federally guaranteed loans are made by private lenders and guaranteed by the government, Direct loans are made by the federal government and of course there are unsubsidized private loans.  Guaranteed loans have... more »

Weak Small Business Rescue Plan Unlikely to Deliver Relief

Where is the government’s promised help for small businesses, some of the hardest hit entities of this economic downturn? According to the Small Business Administration, the newly created “America’s Recovery Capital Loan Program” went into effect on June 15, offering interest-free loans for as much as $35,000 to qualified businesses. This new loan program, made possible as part of the original stimulus billed passed by Congress in February, seems doomed to failure, however, from the very beginning. First, only a limited number of loans will be offered – 10,000 to be exact. Try to match that up with the more... more »

Fannie & Freddie Tighten Lending Standards

According to the Wall Street Journal, Fannie Mae, in efforts to provide some stability in the mortgage market, have said that they will no longer guarantee mortgages on condominiums that are in buildings where fewer than 70% of the units have been sold.  Representatives Barney Frank, D., MA and Anthony Weiner, D., NY, have written a letter to the chief executives of Fannie and Freddie, warning them that the 70% sales threshold is detrimental to the market and could lead people interested in buying a condo away from new developments. In all truthfulness, you must look at both sides of... more »

Sallie Mae In Financial Trouble

Sallie Mae, formerly known as SLM Corp., makes student loans.  Recent news from Forbes indicates that the Obama administration unveiled on Thursday a new budget proposal that would make the government the sole provider of federally backed loans for students.  This spells bad news for Sallie Mae, whose shares tanked on the news. According to Forbes, the fiscal budget for 2010, which goes in place on October 1, should save the government more than $4 billion by slicing entitlements for companies like Sallie Mae.  Beginning in 2010, new student loans would be originated through the direct student loan program. If... more »

Obama Unveils Plans for More Lending Regulation

In order to make sure all financial industries are behaving well, President Obama announced plans today for a new regulatory commission – the Consumer Financial Protection Agency or CFPA. This body would be in charge of overseeing the practices of mortgage lenders, credit card companies, and insurance and investment banking corporations. Here’s why Obama thinks this is a good idea:  “This agency will have the power to set standards so that companies compete by offering innovative products that consumers actually want — and actually understand. Consumers will be provided information that is simple, transparent, and accurate. You’ll be able to... more »

Mortgage Rates Once Again On The Rise

A recent article in Newsweek tells us that it’s a known fact that the Federal Reserve has been working to keep a mortgage rates down.  They have been buying treasury debt in an effort to keep mortgage rates low.  Although that has seen some light at the end of the tunnel, many economists are warning that now rising mortgage rates will put a stop to any rebound that the Fed had worked hard for. Moody’s, in its weekly  credit outlook released on June 8 said that The Economic Cycle Research Institute’s (ECRI) leading index showed that although the recession may... more »

A Look At Alt-A and Pay Option ARM’s

If there is one thing I learned, it is that you cannot make any assumption without the proper data.  One of my favorite websites is  Doctor Housing Bubble.com.  His data is so good that I follow him on Twitter.  Although most of the data is centered around Southern California, he often shows the bigger picture.  I read his post from yesterday on his blog, where he addressed nationwide distressed property information.  I wasn’t surprised to learn that only four states make up 50% of all foreclosures and distressed properties action. The four states are of course California, Florida, Arizona and... more »

Auto Loans Still Hard to Come By

Even though many banks receiving federal bailout money promised to make more money available for auto loans, it appears that not much has changed lately in terms of how hard it is to get car financing. For example, a recent CNN article reported that GMAC bank announced plans last December to earmark $5 billion for new car loans that could be offered to even to those with low credit ratings. So far, the company has only made $3.4 billion in loans during the first quarter and many auto dealers say very few of those are being made to those with... more »

Kiva Brings Non-profit Microlending Model To U.S.

When banks tightening credit in the last year, small businesses have had to struggle to get financing.  Enter Kiva.org, an innovative Silicon Valley non-profit that has garnered plenty of buzz and goodwill microlending  to poor entrepreneurs in the developing world.  Kiva will now begin a pilot program in U.S. to allow individuals to make small loans to  low-income entrepreneurs. Kiva facilitates peer-to-peer lending by citizen lenders to very small, often very poor entrepreneurs, by vetting the businesses and and tracking the payment histories.  Kiva loaned $4.5 million in April alone and has given out $75 million to 180,000 entrepreneurs since... more »