Continue reading Home Purchase Loan Demand Slumps to 13-Year Low

Home Purchase Loan Demand Slumps to 13-Year Low originally appeared on BloggingStocks on Wed, 09 Jun 2010 16:30:00 EST. Please see our terms for use of feeds.

Thursday morning, Citigroup (C) announced that it will participate in the government's 2MP plan. This plan will help borrowers with troubled second liens (i.e., home equity loans) hold on to their homes.

Citigroup's CEO Vikram Pandit stated that it is Citi's "priority and commitment ... to help homeowners in need." Pandit added that the "2MP program will further improve the affordability on mortgages and help families facing financial distress stay in their homes."

Continue reading Citigroup to Paricipate in Second Lien Modification Program

Citigroup to Paricipate in Second Lien Modification Program originally appeared on BloggingStocks on Thu, 25 Mar 2010 11:30:00 EST. Please see our terms for use of feeds.

Continue reading Loans: There is more capital than courage -- or good sense

Loans: There is more capital than courage -- or good sense originally appeared on BloggingStocks on Thu, 18 Dec 2008 17:50:00 EST. Please see our terms for use of feeds.

This week I received a long rant from Dan, one our very astute readers. I extracted the following from what he wrote:

Yesterday I received an offer to "Cut My Indebtedness" by shifting over to a bi-weekly mortgage payment, tied to my paydays. The "offer" goes on to show how much I will save over the term of the loan by enrolling in their plan. The kicker is (& here is a reference to an old Country song I remember from years ago, "The Large Print Giveth, What the Small Print Taketh Away") the small print. There is a $9.00 per month "participation fee". A fee to participate? ...my rant. THEY CAN"T STOP YOU FROM MAKING ADDITIONAL PRINCIPAL PAYMENTS.

This has happened to me as well, and if you have lived in your home for a few years or more, it is likely you received a similar offer. Dan raised many valid points in his longer version, but the three main points are that you should focus on the small print, there should not be a fee for paying down your loan, and finally if you have a loan that allows prepayments of the principal amount you can make interim principal payments any time you want.

One feature of bi-weekly payments that Dan overlooks or fails to distinguish, and that homeowners should recognize, is that they reduce the amount of interest you pay over the life of the loan without additional "monthly" principal contributions. That is a real savings, and the bank feels the service of processing this has a cost to them and a value to you. On most loans, the savings of many thousands of dollars would greatly exceed the fee, and the fee does not increase on larger loan amounts. Perhaps it is their presentation of the offer that appears deceitful.

Here is a detailed explanation of bi-weekly payments. The example they give you indicates a savings of almost $58,000 interest on a $75,000 loan. Fees or no fees it provides substantial benefit tothe borrower.

Happy Mothers Day

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.

Sunday Funnies: Loan offers with small print and big consequences originally appeared on BloggingStocks on Sun, 11 May 2008 14:10:00 EST. Please see our terms for use of feeds.

Continue reading Good time for Mexico's real estate market

Good time for Mexico's real estate market originally appeared on BloggingStocks on Mon, 21 Jan 2008 14:10:00 EST. Please see our terms for use of feeds.

In today's New York Times, Paul Krugman offers an explanation for the cause of the mortgage meltdown. While I think he comes close to the mark, he misses an important point: bankers will respond to incentives.

I would love to have the talent that warrants the platform Krugman has -- to opine on economic and political matters on the pages of the New York Times. Krugman uses that platform to suggest that the reason for the bad mortgage loans is that bankers "haven't been forced to give back any of the huge paychecks they received before the folly of their decisions became apparent."

My view differs from Krugman's. There is no way bankers will give back their paychecks after they've negotiated their contracts just because Krugman wants them to. In my view, the real issue is that bankers are like any other person and they will respond to incentives. If their pay was linked to both the costs and benefits of the loans they made, then they would care about the risk that the loan might not be repaid.

Continue reading Paul Krugman fails to explain the reasons for the mortgage meltdown

Paul Krugman fails to explain the reasons for the mortgage meltdown originally appeared on BloggingStocks on Fri, 23 Nov 2007 16:18:00 EST. Please see our terms for use of feeds.

Although Countrywide Financial (NYSE: CFC) the bank, has gone on record as stating it is not in danger of going bankrupt and has plenty of liquidity to continue to operate and meet its current obligations, that could change. The bank is no doubt referring to the immediate future, like today or this week. Those who have expressed concern are thinking about next week, next month or six months out. I have no idea what the truth is, or if there are multiple truths, or if the company is dancing on the head of a pin.

• "Countrywide Home Loans is expected to service debt maturities beyond 2008 without additional debt issuance," the company said. Earlier Tuesday, a Countrywide representative told The Wall Street Journal that speculation the company may file for bankruptcy is 'absolutely false.'"

The company stock started off the year around $45 per share -- shares now trade around $9 per share. Here is a point that may be lost on the average investor: Even if there was no problem whatsoever with subprime mortgages and even if not one single mortgage holder was foreclosed on, Countrywide's business is down perhaps 80% and it is losing money -- profits are not to be found.

If people are not buying homes and condos and are not seeking traditional loans or any other kind, then Countrywide has to move fast to shrink its enterprise to match the customer demand level (which it has indeed been doing), and then start growing when the market picks up again. That means it has to be lean and mean, which means in turn that the company has to have the wherewithal to survive in a tough market for several years, not just this month.

Continue reading Countrywide says bankruptcy not a threat - do you buy it?

Countrywide says bankruptcy not a threat - do you buy it? originally appeared on BloggingStocks on Wed, 21 Nov 2007 16:45:00 EST. Please see our terms for use of feeds.

SLM Corporation (NYSE: SLM), a leading provider of saving and paying for college programs, is recently down $1.91 to $44.36.

SLM says that the J.C. Flowers, Bank of America Corporation (NYSE: BAC), and JPMorgan Chase & Company (NYSE: JPM) buyers group does not expect to consummate the acquisition of SLM. SLM call option volume of 98,356 contracts compares to put volume of 68,654 contracts. SLM October option implied volatility was at 91 according to Track Data, suggesting larger price movements.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Option update: SLM Corp (SLM) volatility spikes as deal won't be completed originally appeared on BloggingStocks on Wed, 26 Sep 2007 16:34:00 EST. Please see our terms for use of feeds.

H&R Block suffering with loan unit originally appeared on BloggingStocks on Thu, 15 Mar 2007 17:43:00 EST. Please see our terms for use of feeds.