Mortgage rates DIP in this weeks survey!!

This week, Freddie Mac’s Primary Mortgage Market Survey showed that the 30-year fixed-rate mortgage (FRM) averaged 6.34% (with an average of 0.7 points) for the week ending March 16, 2006. This average is LOWER from last week; which was at 6.37%.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.93% for the week ending March 16, 2006 (with an average of 0.7 points). This average is DOWN from last week when it averaged 6.03%.

One-year Treasury-indexed ARMs averaged 5.37% this week (with an average of 0.8 points). This average is DOWN from last week when the average was at 5.45%.

Frank Nothaft, Freddie Mac vice president and chief economist, explained “Financial markets, hedging against the potential build up in inflation, pushed mortgage rates higher last week” “However, market indicators this week seemed to point to less of a threat of inflation, and that allowed rates to drift a little lower” “Housing starts fell in February as expected, but were still stronger than had been forecast, while January figures were revised upward. This is a good sign that housing activity, although slowing from record levels set in the past few years, will continue to remain healthy this year.”

Looking at this report if you have an interest-only loan or an option arm, you should think about refinancing now rather than later. Also if you are thinking about buying, you should be getting all your information ready so you can make this purchase. This year is turning out to be the “year of the buyer” as many predicted. No market bubble bursting but it is definitely a buyers market.

March 17th, 2006 · Filed Under Keeping an Eye on the Market

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Long term mortgage rates RISE!!

This week, Freddie Mac’s Primary Mortgage Market Survey showed that the 30-year fixed-rate mortgage (FRM) averaged 6.37% (with an average of 0.6 points) for the week ending March 9, 2006. This average is HIGHER from last week; which was at 6.24%.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.03% for the week ending March 9, 2006 (with an average of 0.7 points). This average is HIGHER from last week when it averaged 5.97%.

One-year Treasury-indexed ARMs averaged 5.45% this week (with an average of 0.8 points). This average is HIGHER from last week when the average was at 5.34%.

Frank Nothaft, Freddie Mac vice president and chief economist, explained “Stronger than expected gains in the manufacturing and service industries – coupled with higher labor costs – ignited inflation concerns, which led to the rise in mortgage rates this week,” “Financial markets are beginning to think that the Fed will hike rates three more times this year, instead of two, putting upward pressure on mortgage rates” “Although the signs are mixed, the housing industry is now beginning to shift into slower gear, and higher mortgage rates will only strengthen that change. However, we see no signs of a housing bubble bursting, but rather a return to a more normal pace of activity”

I suggest you start thinking about refinancing and try to lock on a long-term ARM loan or if you qualify a 30-year fixed loan NOW!!

March 14th, 2006 · Filed Under Keeping an Eye on the Market

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You Have Credit Card Complaints? Where Should You Go?

If you have a problem with your credit card, try following these steps, if one doesn’t work try the next step down:

  • Try to resolve the problem directly with the store or credit card company
  • File a complaint with the local Better Business Bureau (you can also do it online) where the company’s headquarters is located, not where you live.
  • File a complaint with your state’s attorney general or banking agency.
  • File a complaint with the federal agency that enforces consumer credit laws for your credit card company as follows:

March 9th, 2006 · Filed Under Credit Information

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Credit Cards: The Devil is in The Detail, The Small Print (Part 2 of 2)

Now that you have read on the previous post about the history of how credit card companies became so profitable I will resume the rest of the show title “Secret History of the credit card”. The following will explain some of the “secrets” or information many consumers are unaware and credit cards companies want it to stay that way.

Many consumers said “I cant say I love my credit card but I would hate to live without it” “I take advantage of the miles and it’s nice to be able to spend what you don’t have” “Americans love to consume, its in our blood.” These are similar views to millions of Americans and that is one of the reasons why the credit card industry is one of the most profitable around the globe.

Actor Ben Stein (from the Visine commercial) carries a “big” wallet with LOTS of credit cards. He uses them to pay for everything. It would appear that Stein is the ideal customer, wouldn’t you think? Stein, like other 55 million other Americans, pays off the balance every month; therefore he incurs no fees on interests or any fees. The credit card industry calls him and others like him “deadbeats” because they CANT make money off of them.

On the other hand, 90 million Americans that do not pay off their credit card debt every month, also called “revolvers” by the industry, are at the center of the credit card industry’s profit pool. Edward Y, incoming president of the American Bankers Association, said revolvers are “the sweet spot” of the banking industry.

The industry’s success has also been shaped by the ideas of financial innovators like Andrew K. He introduced the idea of changing the minimum payment requirement from 5% to 2%. This would entice more people to apply for higher credit lines and spend more.

In the late 90’s Andrew K. came up with more “innovative.” Ideas like offering “0%” introductory rate, millions were and still are attracted to this marketing operation. Andrew says, “People will believe what they want to believe.” What many consumers don’t know is that as soon as they make one mistake, like miss a payment or incur high balances all bets are off and they can be charged a much higher interest rate and it is all very legal.

Credit card contracts are very, very long, difficult to understand and contain difficult to understand technical words. The contracts enforce terms that are viewed by many as “tricks.” One of them is the “universal default.” It explains in the fine print that if you miss a mortgage payment, car payment, credit card payment, ANY payment to a creditor they can change the terms and conditions (interest rates) at any time for any reason with 15 day’s notice. You don’t even have to miss a payment; if you incur a high balance debt, and are now viewed as an “overextended” cardholder, they can do the same because you are NOW a “riskier customer.”

Elizabeth W., a Harvard Law Professor, said the credit card companies are misleading consumers, “These guys have figured out the best way to compete is to put a smiley face in your commercials, a low introductory rate, and hire a team of MBAs to lay traps in the fine print.”

When you miss a payment on a mortgage loan, the mortgage lender cannot double your interest rate but if you miss any type of payment with any creditor, the credit card company can double it and there is no one thing you can do about it. Do you think this is dishonest??

In 1996, another Supreme Court decision lifted the restrictions on the limit a credit card company could charge on fees. This decision is called the “Smiely vs Citibank decision”. Since this decision, the industry has doubled their profits on fees.

The Office of the Controller of the Currency (OCC), part of the treasury department, regulates national banks like Chase, Citibank, MBNA. They are supposed to ensure banks don’t fail, ensure integrity of the banks’ operations; ensure banks deal fairly and honestly with customers. They also have the ability to enforce action.

Pat W. from the Bay Area Better Business Bureau, state regulators from California and other states believe the OCC has done little to regulate fraudulent operations from banks. The OCC has sometimes challenged state regulators because they claim to have jurisdiction over the banks and state regulators do not. In January 2004, the OCC declared itself the “exclusive” regulator of all national bank effectively immunizing the credit card issuers from most consumer protection laws.

The OCC alerted national banks on unacceptable credit card marketing and account management practices like offering “0%” introductory rate and universal default. They have acknowledged these practices are very troubling but they have NOT stopped them. They believe that they don’t have the basis to conclude the banks are involved in unfair or deceptive practices.

Pat W. comments that whatever the OCC is doing, the credit card industry is still number one out of one thousand industries they keep track off in receiving complaints. Pat W. says the credit card industry has more complaints than any other industry nationally.

Perhaps there would be fewer complaints if the industry disclosed that the cost of minimum payments was that they would still be paying yesterday’s trip in 35 years. This would encourage people to pay more than the minimum. Edward Y, incoming president of the American Bankers Association, disagrees. He says it would be a hyper technical expensive disclosure that nobody would understand and that would be wrong 99% of the time. Andrew K, Credit card industry consultant, says that more disclosures would be useless because consumers don’t want to know this information.

Wouldn’t you like a small sentence in your monthly bill telling you “If you make the minimum payment of $xx, it would take you xx years an xx months to pay this off,”?? I think everybody would.

Senator Christopher D, from Connecticut, has tried introducing bills that would regulate the industry on disclosures. Some other bills introduced before were minimum payment disclosure, interest cap rates, remove marketing to college students. Senator Christopher D. is not very optimistic on the passing of the minimum payment bill because like other bills mentioned, will be blocked by the industry. Edward Y., from the American Bankers Association, says that they will continue blocking these bills because their belief is these bills are bad for the consumer……????

http://video.google.com/videoplay?docid=-9048007397539880204

March 9th, 2006 · Filed Under Credit Information

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The Secret History of Credit Cards (Part 1 of 2)

I remember watching a very informative show on PBS titled “Secret History of the Credit Card” last year. PBS replayed this show again recently and I used my so beloved TiVo to recorded. This report explained the history as follows:

The big “Monster,” credit card industry, got free from many restrictions staring a quarter of a century ago in Sioux Falls, South Dakota. Times were hard in South Dakota, there was a nation wide recession, and banks residing in this state were issuing very few loans of any kind. The price of money (interest rates) banks had to pay to get money and make loans were much higher than the rates they were allowed to offer their clients, a clear way to lose money and go broke. There were Usury Laws restricting the interest rates banks could charge their customers so South Dakota decided to remove their Usuary Laws (1979) to stimulate the economy in this state.

Citibank based in New York looked into South Dakota’s new Usury Laws and saw profits. They brought credit card operations to South Dakota and thousands of jobs; which helped the state tremendously but at the same time gave birth to the “monster” credit card companies are now.

An obscure Supreme Court decision called the “Marquette bank decision” basically allowed banks based in any state to export their business to any other state. A bank based in a poor or no Usury Law state like South Dakota could charge any interest rate to anyone across the country with very high cap limits. Soon other states followed like Delaware and were allowed to charge higher interest rates to riskier customers. This also allowed for these riskier customers to switch from small banks that were charging them 30% interest rates for their liability to credit card companies offering them 19% and an annual fee. Deregulation of interest rates enabled more people to get credit and made the credit card industry very profitable.

**On the next post which continues with this story you will see the PBS video report**

March 6th, 2006 · Filed Under Credit Information

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Interest rate for 30-year mortgage drops slightly!

This week, Freddie Mac’s Primary Mortgage Market Survey showed that the 30-year fixed-rate mortgage (FRM) averaged 6.24% (with an average of 0.6 points) for the week ending March 2, 2006. This average is slightly LOWER from last week; which was at 6.26%.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.97% for the week ending March 2, 2006 (with an average of 0.6 points). This average is slightly HIGHER from last week when it averaged 5.96%.

One-year Treasury-indexed ARMs averaged 5.34% this week (with an average of 0.8 points). This average is HIGHER from last week when the average was at 5.32%.

Frank Nothaft, Freddie Mac vice president and chief economist, explained “Consumer confidence slipped in February to the lowest reading in three months, but manufacturing activity appears to have strengthened last month. On net, the latest economic news had little effect on mortgage rates this week,” “Over the past five weeks, mortgage rates have remained within a narrow range of 0.1 percentage points around this week’s averages. Our forecast calls for rates on 30-year fixed-rate mortgages to increase about one-quarter of a percentage point by the end of the year” “Even though house prices grew at a double-digit annualized pace during the final quarter of 2005, according to Freddie Mac’s CMHPI, house price growth should slow to single-digit figures, which is consistent with historical periods”

With that last statement made, I suggest you plan and analyze how much help those dangerous loans really are helping you because NOW you should not be counting on your growing equity to offset those loans. Do the right thing now and get a fixed rate loan NOW!

March 3rd, 2006 · Filed Under Keeping an Eye on the Market

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