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post #1 of 48 (permalink) Old 02-25-2008, 05:54 AM Thread Starter
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Lenders cut off the home-equity tap

Lenders cut off the home-equity tap

Thousands of homeowners are getting notices that their lines of credit have been frozen, and it's harder to get new second mortgages. Here's what your bank is doing and whether you're at risk.

For more than a decade, banks encouraged homeowners to tap their equity for everything from paying off credit cards to covering college tuition.

Now lenders are abruptly shutting off the spigot.

More than 100,000 homeowners at one lender already have been told that their home-equity lines of credit have been frozen and that they can't use them to borrow more money. Others have seen their credit limits abruptly lowered.

Meanwhile, lenders are tightening standards so that getting a home-equity loan in many markets is more difficult, even when the value of your home is still well above what you owe on it.

Loan experts predict many more homeowners will find themselves cut off from home-equity loans and lines of credit as lenders flee the so-called second-mortgage market.

"I don't think the worst is over," said mortgage expert Dick Lepre. "I think there are going to be more (lenders) who will stop originating second mortgages and more who will be sending people notices that they're no longer able to draw on their existing lines of credit."

A grim reminder about risk
Home-equity loans and lines of credit are known as second mortgages because they are loans made after a primary mortgage has been granted. If a homeowner defaults, the proceeds of the home's sale go first to the lender that holds the primary mortgage. The second-mortgage holder gets whatever is left over, if anything.

Declining home values and spiking default rates in recent months have reminded once-enthusiastic second-mortgage lenders of the risks of these loans. The biggest home lenders are scrutinizing how much their borrowers owe in relation to those declining values, as well as examining any deterioration in their customers' credit scores or payment habits.

Here's what they're doing:

Countrywide, the United States' largest home-equity lender, notified 122,000 homeowners in January that their home-equity lines had been frozen because their homes had lost "significant" value. Countrywide lost billions because of spiking defaults in mortgages made to people with troubled credit and recently said it was experiencing higher delinquencies in its portfolio of prime home-equity loans, made to people with good credit. Countrywide is in the process of being acquired by Bank of America.

Wells Fargo has stepped up "case-by-case reviews" of home-equity accounts and has "seen an increase in the number of borrowers affected," although spokeswoman Mary Trigg declined to say how many customers' home-equity lines have been frozen. She said the reviews "may include a variety of factors such as credit scores, debt levels, payment history, property-value changes and others."

Chase is reviewing customer accounts but so far has not shut down large numbers of credit lines, spokesman Tom Kelly said. It has, however, reduced the percentage of home values that borrowers can tap with new home-equity lines of credit. Previously, homeowners in some cases could get a line of credit on top of their mortgage that equaled 95% of their home's value; today, the percentage is usually capped at 85% and may be as low as 65% in some rapidly declining markets, such as in Nevada.

Bank of America is "reviewing all home-equity lines of credit to ensure our credit exposure is commensurate with current market conditions and to assess the value of the collateral securing our home-equity lines of credit," spokesman Terry Francisco said. "In areas of the nation where home values have declined consistently, Bank of America has begun contacting customers to inform them about changes in their ability to access existing lines of credit due to the decline in property values."

Washington Mutual, another large home-equity lender, did not return calls for comment but is believed to be conducting similar reviews.

Cut off and in a tight spot
The notices have been coming at a bad time for some borrowers. One woman received a notice from Countrywide shortly before she planned to tap her line of credit for an international adoption. Others were in the middle of remodeling projects or planning to use the money to pay children's college tuition bills in the fall.

Sandy V. of Las Vegas used her home equity to buy other properties in Nevada, and now all her real estate is losing value. She got a letter a week ago from Bank of America saying that her nearly tapped-out $130,000 line of credit had been frozen. She estimated that between the line of credit and her $200,000 mortgage, she owes $30,000 more than her house is now worth.

Before receiving the letter, Sandy had paid down the credit-line balance by $5,000. "Now I wish I had that money back," she said.

Many borrowers with frozen lines of credit have few options because, like Sandy, they now owe more on their homes than the homes are worth. They typically can't refinance into other loans.

But not everyone affected is trapped.

How flexible are you?
Sarah Ordonez of Whittier, Calif., said she had received a notice from Countrywide in November, well before the mass mailing. The lender said it was freezing her line of credit, which had a $24,000 balance, after she was 10 days late making a payment. The payment wasn't late enough to show up on her credit report or affect her credit scores, but it was enough to trigger the freeze.

"They said if I made my payments on time for six months, they'd reinstate" the ability to tap the line, Ordonez said.

Unlike some other borrowers, though, Ordonez still has plenty of equity left in the home she bought five years ago. She owes about $265,000 on her first mortgage, and homes in her area are still valued at $400,000 to $500,000. So she's planning to refinance both loans into a single, larger mortgage.

Ordonez is in a good position precisely because she didn't drain every dime of equity from her house as its value rose during the boom. I've never been a fan of using your home as a piggy bank, and I believe it's always smart to leave at least 20% of its value untapped.

If you haven't been so cautious, however, consider taking the following steps:

Try to estimate the current value of your home as well the general trend for home prices in your area. Zillow.com is one place to check, although it's far from a foolproof resource; a chat with an experienced local real-estate agent can help fine-tune your figures. Sharply falling home prices may put you more at risk of home-equity-line freezes.

Total what you owe. If the combination of your primary mortgage and your home-equity borrowing exceeds your home's value -- or comes within 10% or so -- consider yourself at high risk of having your line of credit frozen. If home values are falling fast in your area or your credit scores have declined, you might be at risk even if you have a pad of equity in your home.

Consider your next steps carefully. You shouldn't borrow just to borrow; you'll have to pay interest on any money you tap. But if you had planned to pull out equity for a legitimate purpose -- fall tuition bills, for example, or to complete an in-progress remodel -- you might want to do it sooner rather than later, as long as you can make the payments.

If your line is in danger of being frozen, you also may want to hold off on paying down its balance unless you're planning to sell your home soon. That may seem counterintuitive, but if your line is frozen, you won't be able to tap any of the credit you free up with extra payments. You may be better off paying down credit card debt or putting the money into savings instead.

Lenders cut off the home-equity tap - MSN Money
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post #2 of 48 (permalink) Old 02-25-2008, 07:38 AM Thread Starter
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Shoppers warned bigger bills on way

Shoppers warned bigger bills on way

When William Lapp, of US-based consultancy Advanced Economic Solutions, took the podium at the annual US Department of Agriculture conference, the sentiment was already bullish for agricultural commodities boosted by demand from the biofuels industry and emerging countries.

He added a twist – that rising agricultural raw material prices would translate this year into sharply higher food inflation.

“I hope you enjoy your meal,” Mr Lapp told delegates during a luncheon. “It is the cheapest one you are going to have at this forum for a while.”

His warning that a strong wave of food inflation is heading towards the world economy was met by nods from agriculture traders, food industry executives and western’s government officials at the USDA’s annual Agricultural Outlook Forum.

Larry Pope, chief executive of Smithfield Foods, the largest US pork processor, warned delegates of a wave of “real food inflation” just at the time central banks were under pressure to cut interest rates.

“I think we need to tell the American consumer that [prices] are going up,” he said. “We’re seeing cost increases that we’ve never seen in our business.”

The comments highlighted one of the conference’s main concerns – that rising agricultural prices have reached a stage at which the impact will be felt not only on fresh food but will also filter through the supply chain and raise the cost of processed food.

Tom Knutzen, chief executive of Danisco, one of the world’s largest ingredients companies, said rising vegetable oil costs made it more expensive to produce preservatives, colourings and flavourings.

“Our products are based on vegetable oil. “Our input cost has gone up so we are increasing prices,” he said in an interview in Brussels. He added that preservatives, colourings and flavourings made up only 1-2 per cent of the cost of food but there would be a ripple effect as they were present in almost all the food sold worldwide.

US agriculture officials forecast that food inflation will rise this year at an annual rate of 3-4 per cent, warning that the risks were skewed to the upside. Last year, food inflation rose 4 per cent, the highest annual rate since 1990.

Joseph Glauber, the USDA’s chief economist, said in an interview that until now some companies had absorbed the rise in commodities prices, but that trend was about to change.

He said that wheat prices had previously moved from $3 to $5 a bushel without significant pain for consumers. “But now the wheat price has jumped to nearly $20 a bushel. These large increases will show up [in consumer prices].”

Some people hope a slowdown in the US or global economy would push down agricultural commodities prices. But Mr Glauber said that would have a limited impact on agriculture commodities prices. “I am more concerned about higher prices than lower prices.”

However, Simon Johnson, chief economist at the International Monetary Fund, said in an interview that for most agricultural commodities and metal markets the global slowdown would push prices down.

“The commodities market believes in the decoupling of developing countries’ growth,” Mr Johnson said. “The IMF does not believe in decoupling to that extent.”

But even if commodities prices do slow down, other forces could still push consumer prices higher, food industry executives said.

Companies until now have moderated consumer price increases thanks to large inventories and financial hedges in the commodities market futures. But during the course of this year those mitigating factors would vanish, executives said.

“The final result will be higher prices,” Mr Lapp said. The global economy is “at the beginning of a period in which consumer will face higher food prices”.

FT.com / In depth - Shoppers warned bigger bills on way
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post #3 of 48 (permalink) Old 02-25-2008, 08:46 AM
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B F D !

Don't believe everything you think
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post #4 of 48 (permalink) Old 02-25-2008, 09:04 AM Thread Starter
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Congratulations Jay, you are correct it is a BFD, you are finally waking you and smelling the coffee...........
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post #5 of 48 (permalink) Old 02-25-2008, 11:52 AM
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1. Fucking greedy banks that pimped this shit idea in the first place and now got burned.

2. Fucking stupid Homeowner sheep that bought into it and used their home equity like an ATM card for buying a lot of $hit they didn't need or could not afford.

Jim
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"I swear to god, it's like I live in a trailer of common sense, and stare out the window at a tornado of stupidity." >'='<
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post #6 of 48 (permalink) Old 02-26-2008, 12:44 AM
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Those folks should have never gotten the credit in the first place.
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post #7 of 48 (permalink) Old 02-26-2008, 04:07 AM Thread Starter
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Another BFD.................

January foreclosures up 57%

Filings saw yet another big jump last month, compared to levels a year ago; 45,327 homes were lost to bank repossessions.


NEW YORK (CNNMoney.com) -- If there's one thing to count on these days, it's that every month the foreclosure crisis will get worse.

January was no exception. Filings of all types, including default notices, auction notices and bank repossessions, soared by 57% compared with last year, according to RealtyTrac, an online marketer of foreclosure properties.

A total of 233,001 homes were affected, 8% more than in December. Of that total, 45,327 homes were lost to bank repossessions during the month. The only good news was the comparatively modest month-to-month increase in total filings.

"It could be that some of the efforts on the part of lenders and the government - both at the state and federal level - are beginning to take effect," said James Saccacio, RealtyTrac's CEO.

"The big question is whether those efforts are truly helping homeowners avoid foreclosure in the long term, or if they are just forestalling the inevitable for many beleaguered borrowers," he said.

Many mortgage-assistance efforts simply give borrowers a chance to pay off missed payments, rather than lowering monthly payments, which effectively just delays foreclosures. But now lenders claim they are restructuring more mortgages by lowering or freezing interest rates and reducing balances. These solutions are much more likely to help people save their homes.

Nevada, California and Florida had the highest foreclosure rates in the nation. During the housing boom, all three states recorded big price run-ups, and saw a large proportion of homes sold to investors. In Nevada, one of every 167 homes was in some foreclosure stage last month.

California had the largest total number of foreclosures among the states. There were more than 57,000 foreclosure filings there in January, one for every 227 homes. Florida trailed well back in total foreclosures with 30,000, but its rate of one for every 273 households was only slightly behind its West Coast rival.

Several states recorded massive jumps in foreclosure activity in the last twelve months. In Rhode Island filings rose 279%; in Maryland they spiked 430%; and in Virginia they leapt 634%.

Las Vegas tops foreclosure list
All three of those states had fairly modest rates to begin with. In Virginia, for example, even with that whopping increase, the rate, overall, was one in every 617 homes, about a quarter the rate in Nevada.

Eighteen states substantially improved since last January. In Pennsylvania, foreclosure filings fell 55% to just 1,683, one for every 3,226 households. West Virginia recorded a drop of 54% to a miniscule 53, one for every 16,667 households. And Vermont's total dropped in half, from two to one.

Foreclosure and lending laws vary greatly from state to state, and that can have a huge impact on foreclosure rates. But most places have been recording ever-higher foreclosure numbers as home prices stagnated, and the effects of many of the non-traditional mortgages issued during the boom years took hold.

Subprime, hybrid adjustable rate mortgages, with interest rates that reset to much higher, often unaffordable levels after a two or three year period of low rates, caused many borrowers to default.

Even more exotic products, such as interest-only loans, where balances don't shrink, or, worse yet, option ARMs, where balances grow, also contributed to foreclosure problems.

Those products have just about disappeared from the marketplace today and that should, eventually, lead to healthier foreclosure statistics in the future. But, before that happens, real estate markets will have to improve and, according to many experts, that's not likely to happen much before the end of 2009.

Merrill Lynch, for example, is forecasting home prices will fall by 15% in 2008 and another 10% in 2009. That will likely continue to fuel high foreclosure rates.

January foreclosures up 57% - Feb. 26, 2008
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post #8 of 48 (permalink) Old 02-26-2008, 05:02 AM
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The root cause of all this is GREEDY OIL COMPANIES! The trickle down effect!
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^^^^Now that is a bit of a stretch............
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post #10 of 48 (permalink) Old 02-26-2008, 06:35 AM
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No I think you are dead wrong! ^^
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