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Student loan rates may rise soon.  The reason: the sub prime mortgage crisis.  Some states, including Utah, securitize student loan funding in an effort to raise the capital necessary to provide loans for all the students desiring them without having to raise taxes.   UHEAA, provider of loans to students in Utah, has long held a AAA bond rating, meaning it has one of the highest credit rankings around, providing for a low interest rate payout on the bonds.  This low interest rate is passed along to students, lessening their overall financial burden to receive a higher education.

This, historically has been a fantastic idea, but the problem is the bonds are insured by a company called AMBAC, which has in recent years taken into insuring subprime mortgage bonds.   Their balance sheet is now comprised of about 70% subprime mortgage bonds.  The fear is that the shakey subprime industry with out of control foreclosures may soon cause a cash flow problem for AMBAC, causing them to lose their AAA credit rating.

Such a drop in the credit rating would cause the Student Loan interest rates to rise considerably.   Nearly every facet of the economy has been affected by the subprime mortgage crisis, and now the crisis may affect the long term economic outlook with marginally fewer people finishing their education.

I did a little searching and found a chart showing when many sub prime ARM loans will reset. The chart shows that in about 6 months we should see a reprieve in the number of loans going into foreclosure and we will all start trying to put this crisis behind us. Life probably won’t be much easier for those of us with homes going into foreclosure already. For those of you waiting to buy a home, this may be an indicator of when the market will be the most saturated with homes in foreclosure. For those of you who have had your home value slashed due to foreclosures in the area, this should show the point which abandoned houses quit appearing in your neck of the woods. Continue Reading »

According to FoxNews.com, there have been reports that we are entering the worst new housing market in nearly 20 years.  If you want a more staggering number, new house starts are down over 38% from the previous year. This amount to a great amount of homes not being built. One of the statistics that strikes me odd is the month to month changes we are coming across. If you are down 10% one month, the next month you are down 8%, these are compiling numbers. So in essence (if I do the math right) say there are 100,000 homes built in December, January there are 90,000, and February there are 82,800 homes being built (8% less, but 17.2% less that December) and it continues in a downward spiral. Not a good thing.

 Numbers can be confusing, but one thing is very obvious right now, the market is in horrid shape, and there is no sign for change anytime soon. There is news of Bush trying to infuse the market with money, basically giving us a rebate for taxes paid, and cutting payroll taxes on a temporary basis. The market/ economy is not strong, and even when there are signs of good market health, there is a huge drop off or correction shortly following.  Expect a follow up article on that issue in the next couple of days.

For those of you already up to your necks in trouble, this post is not for you. The federal reserve has put together a piece of regulation to prohibit lenders from offering loans that consumers will have troubles paying off. This regulation is in the commenting phase, after which we’ll assume a few minor changes are made and the regs are implemented. I have included the highlights of the regulation and the link to the Federal Reserve site.

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Snow is typically not a reason for a lack of recent posts. So we’ll claim its the holidays. Hope everyone had a Merry Christmas and a very promising new year.

 Back to the post. The new construction housing market actually spent more this month than the month previous, ok so it was just .1% more, but anything at this point is a positive. The previous month recorded a .4% drop. The increase is due in large to an increase of monumental size projects such as schools, power plants, and factories according to bloomberg.com. At this point in time I would imagine that moderately priced new construction will begin to pick up to make way for the spring season. Where this article resides from  (Belvidere, IL), there has been a recent increase in land/ lot sales, and construction companies building quite a few spec homes, or homes that are speculated to sell upon completion.

Now there isn’t much room for error with these newly constructed homes, in fact, this time last year as I was looking for a new home to purchase on the “good” side of the city, the new construction was reasonably priced at $199,900. This year the prices have indeed dropped. The same house with the same amenities is now $187,900. Whether the materials are actually less expensive is a mystery, but somehow they have managed to pull out about 7% of the value of the home and lower the price to entice growth and home sales. ALSO….. Continue Reading »

President Bush signed a bill into law yesterday (Dec. 21) to give a little bit of wiggle room for folks facing a foreclosure.  The bill allows the debt forgiven by lenders to be counted as a loss to the lenders and is no longer considered taxable income to the borrower.  The bill is in effort to not pour salt on the wounds of borrowers who are facing rising mortgage costs from resetting ARM interest rates.

If you do end up having your home foreclosed on, at least you wont have the IRS breathing down your neck. Here is a video of the news story from CCTV.

In  a piece of not so nice news, Fannie Mae has begun to raise its fees.  Freddie Mac may follow close behind.  A 0.25% fee has been added to all new mortgages bought or guaranteed, due up front.  This means an extra $1000 fee on a $400,000 home.  Tough luck for those already feeling the credit crunch and looking to refinance before their ARM rates increase.

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So many Adjustable rate loans are on the verge of resetting. The onslaught of foreclosures can send the economy in a downward spiral yet again, but the real story concerns you and me personally. While we care about the economy as a whole, we care even more about keeping our homes and providing shelter for our children.

The fed recently lowered the short term borrowing rates a quarter point this week to help to try and do its part to relieve the subprime crisis. Lowering this rate is good for some, who seek to refinance, but is it good for you?

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