Posts from — December 2007

A college education may be the most important investment in a child’s life and has become one of the most costly, too.

The publicly reported tuition charged by private colleges and universities for the 2007-2008 can reach $50,000 a year. The trends are alarming, too. And while tuition at public universities is generally lower, costs there have been growing even more steeply in recent years as government support has lagged. Full Story.

The Feds are touting a temporary freeze on teaser rate loans which are scheduled to reset soon. Full Story. However, the proposed plan excludes those home loans that piggy-backed a second to cover the missing down payment.

Also excluded are the no-doc loans where evidence of income was not required. Excluding these two categories will leave much of the sub-prime loans in jeopardy.

The home loan industry will agree, in principle, to go along with whatever plan is put forth. But in reality, few re-sets will occur.

What’s really needed is strong federal regulation of the financial sector beginning with credit cards and extending to home mortgages.

Past history including the Savings and Loan industry melt down and now the sub-prime problem demonstrates that without federal oversight, Wall Street will do what ever it takes to make a fast buck.

Under the tentative plan, adjustable interest rates would be frozen for some homeowners facing foreclosure before their loans become fixed at a higher level.

Under such a scenario, the investors who bought mortgage securities tied to these sub-prime loans likely would get lower returns than they had bet on. Full story

Many consumers who already have lost their home to foreclosure are dismayed at the government action now to freeze mortgage rates to avoid massive defaults on home loans. One man interviewed in a Reuter’s story put it this way, “They’re trying to keep the you-know-what from hitting the fan until after the election,” he said. “The rhetoric is ‘We’ve got to help homeowners,’ but the reality is it’s designed to help the fat cats, Wall Street. It’s bailing out the lenders.” Full Story.

Of course, the man is right. This is not about helping the little guy, it’s about protecting those who have already made a fortune on an ill conceived mortgage shell game. The culprits hope to avoid scrutiny from State Attorney Generals looking for potential fraudulent activity.

Reports from Reuters show demand for home loans surged as 30-year fixed-rate mortgages, excluding fees, averaged 5.82 percent, down from the previous week and its lowest since the week ended September 16, 2005. Full Story.

With the sub-prime mortgage melt down threatening a larger credit crisis, the Federal Reserve is searching for ideas to lessen the blow to the economy.

One idea being floated is to freeze the teaser rates on the “2 and 28 mortgage loans and extend the initial low rate for 5 to 7 years - discussed in billpayersguide.com, Chapter 4.8.

No doubt there will be many forces resisting this move, not the least of which are the lenders holding the bag on some of these loans that were obtained by no-doc applications. The freeze may require ignoring the underlying mortgage fraud issue.

The problem is huge: “Estimates of mortgage resets vary. Federal Reserve officials estimate that 2 million mortgages face resets and as many as 500,000 of these could lose their homes” (from Reuters News service)

If you have a student loan, you have questions.

When does the payment period begin? What is the interest rate? Are student loans dischargeable in bankruptcy?

Check this web site for answers to these and other questions.

Senator Chris Dodd has proposed amending the current Bankruptcy law to allow homeowners to “cram down” the unsecured portion of their mortgage debt. Full story.

For example, John and Mary have a $500,000 mortgage on their residence. The home’s fair market value is only $400,000. The $100,000 difference is technically unsecured debt.

Under present bankruptcy law, John and Mary could abandon their home and owe nothing, but they couldn’t stay in the home unless they honored the entire $500,000 mortgage as secured debt.

Under Senator Dodd’s proposal, the couple could, in bankruptcy, reduce the mortgage to $400,000 and discharge the remaining $100,000. The Senator has several other suggested changes that are viewable on line at the Senator’s web site.