Home Equity Loan Lowdown

Rural creditors propose expansion into home equity loans

Home Equity loans have long been offered almost exclusively by private lenders.  But with the popularity of refinance and home equity loans in particular, credit bureaus are now getting into the game.  To no one's surprise this is causing a bit of tension in the lending industry.  For you the consumer, however, competition is always a good thing.  And when competition comes in the form of a non-profit lender, it is a VERY good thing.  Now on to the story...

The Banking Industry is overtly miffed with the Farm Credit Council proposal to move from rural lending into home equity loans and thereby enter into competition with private banks. The FCC said that most farmers nowadays rely heavily on the equity in their land and that there is a sea change in the needs of the rural community and the prevalent system does not cater to these needs.

John Blanchfield, director of the ABA's Center for Agricultural & Rural Banking, said the Farm Credit System, which already enjoys certain tax advantages similar to credit unions, is about to launch a campaign to try to get Congress to expand the reach of the farm lending network. However, Ken Ault, CEO, Farm Credit Council said the council has not yet endorsed specifics and that the so-called Horizon Project is a more general framework that emphasizes the need to broaden lending because of changes in the way farms operate these days.

Read: Agricultural lenders are looking beyond the farm

Cashing Home Equity for Hollywood Dreams

Southern Californians are materializing their dreams of making a Hollywood movie, buying fancy cars, boats, second homes and even living on their home equity. Loan providers are warning borrowers from using home-equity money on idealistic acquisitions like luxury cars, which have long-term payoffs.

Only a lack of imagination or really bad credit stands in the way of funding the next hit at Sundance or a new Porsche Boxster to drive to the premiere. Borrowers who want the money for items such as college tuition are advised to get home-equity loans, which feature set interest rates and payments that are amortized over a longer span.

Read: Home equity: Owners see it as a gold mine

Home equity loan to the rescue of obese siblings

Only a pound separated the siblings Cyrus, who weighed 578, and Sheila who weighed 579 pounds. The only recourse for the Tehrani siblings was to refinance the house they had inherited from their father to shed the weight and take back their life. Cyrus' health insurer refused to cover the weight-loss surgery and Sheila had no insurance. So they went in for a home equity loan and underwent gastric by-pass surgery. It has been six months since the surgery and at their most recent appointment, early in December; Cyrus had lost 146 pounds and Sheila, 101.

The Tehranis say they don't mind paying $730 more each month for the next 30 years to pay off the $100,000 home-equity loan they took out to pay for their transformation and the surgery they may need in the future to cut off the folds of de-fatted skin. It's amazing how much more energy I have now, I've lost a whole person, says Cyrus Tehrani.

More on this human interest story: Here

Tips for the cash-poor and house-rich elderly

New federal loan limits enable older homeowners to tap into a larger portion of their home-equity with a reverse mortgage. The elderly need not give up or sell the title and the best part is that the loan need not be repaid till the owner moves, sells or dies. When the loan is repaid, any remaining equity is distributed to the borrower if he or she is alive or to the late borrower's estate. In addition, the repayment amount never can exceed the value of the home.

Elderly borrowers can resort to any kind of home loan and take up fixed monthly payments, lump-sum payments, line of credit or a combination of these. Another advantage is that as the money received is a loan it cannot be called taxable income nor will it affect your Social Security or Medicare benefits. The only apparent catch in this is that the amount of money you borrow depends on your age, current interest rate and other loan fees. Also a factor is the newly appraised value of your house and mortgage limits set in your area by Federal Housing Administration

Cash there for elderly homeowners: gives more details.

Countrywide Financial claim records

A 27 percent increase in mortgage loan funding helped set a new company record announced Countrywide Financial, while November alone touched $42 billion. Their quarter's fundings reached $133 billion up 40 percent and the whole year number is $491 billion, according to Countrywide Financial, and the highest reported ever by any U.S. residential lender.

While production margins declined in 2005 compared to levels seen earlier in the refinance boom, Countrywide established numerous funding milestones during the year with the continuation of relatively low interest rates throughout the year, as well as Countrywide's market share growth, the company generated record mortgage loan production volume of $491 billion. This amount surpassed Countrywide's prior record set in 2003, and also appears to be a new industry record, said Stanford L. Kurland, President and Chief Operating Officer.

For all the details go to: Countrywide posts record sales in November

Is the U.S. economy hanging on developments in housing market?

Economy watchers maintaining a close watch on the housing market in the U.S., as it was the only sector growing steadily with a five-year-roll. It all began with low interest rates that made more people buy new homes. Rising house prices meant more money to cash-in, by using home-equity. Homeowners utilized their home-equity to buy consumer goods and consequently added to the advance in economy, which led to more jobs.

Then when interest rates were raised, it in turn, increased the demand for dollar-denominated securities, and the economy went on steadily. But, when interest rates reached 13% ,the housing market started slowing, and sales of new U.S. homes fell 11.3 percent in November - the biggest decline in nearly 12 years. So, after 13 interest rate hikes, and with at least one more expected, analysts say slower demand for housing is reducing consumer spending and eroding demand for dollars. Interest rates on home equity loans have risen to 7 percent from 4 percent over the past 18 months.

All is not grim for the economy according to Joe Quinlan, Chief Market Strategist with Banc of America Capital Management - I think the housing market will hold up this year, supported by good employment growth. So dollar bears looking for weaker than expected U.S. growth via the housing market may be in for a surprise.

Read: Currency players keep wary eye on housing

Top Home Equity Sites Ranked

Change Sciences Group has released the list of top ranking 42 home equity web sites taking the perspective of people looking for a new loan into consideration. The top five sites are Capital One, Quicken Loans, Wells Fargo, Fifth Third Bank and Citizens Bank.

Competition in the online lending space is heating up, with a number of regional players working hard to make their web sites as good as the traditional leaders. The gap is widening between large regional banks working to take advantage of the online channel and those which are not, said Steve Ellis, Partner, Change Sciences Group.

Find rankings on all 42 sites: Here

Understand LTV or no equity loans

If you are on a quest to find out about home equity loans, chances are that terms like "125% LTV Loan" or "No Equity Loan" have confused you. LTV indicates the "loan to value ratio" between the market value of a home and the percentage of that value that is owed by the owners to mortgage lenders. The 125% is the percentage of your home-equity you can borrow. "No-equity" loans (another name) have made it possible for homeowners to borrow more than their home is actually worth.

These loans are aggressively marketed and makes enough cash available to pay off credit cards and other installment debt, such as auto or student loans. The interest rates on LTV loans tend to range from 13% to 16% and in some cases more than double the rate of normal 30-year fixed mortgages much higher than the more conventional home equity loans.

LTV loans came as an offshoot of the government-insured home improvement loans in the early 1990's and were mainly used for home improvement projects to increase the value of the property. However, now the 125% LTV loan is most often used for debt consolidation, which is not comforting.

Fees for LTV loans are also higher than for the traditional home equity loan and this together with the interest rates can be steep. This loan is a cross of secured and unsecured loans and also puts your home at risk. Another paradox is that it is the truly cash-strapped who are opting for this particular loan.

By the way, interest paid on any portion of the loan above the home's fair market value is not considered mortgage interest, and will not be deducted at tax time. It would be cheaper to combine a traditional home-equity loan with an unsecured personal loan rather than getting a no-equity loan.

More on LTV loans: Here

No let-up in re-financing in 2006

Re-financing was the mantra last year, interest rates fell to record lows, and borrowers made lower monthly payments. Now interest rates are moving up but the fascination follows into 2006 as refinancing accounted for as much as 40 percent of mortgage applications last month, the Mortgage Bankers Association reported.

Freddie Mac is forecasting that when the numbers for 2005 are tallied, homeowners will have converted $204 billion of equity into cash, up from $142 billion in 2004. If you need a new roof or a more energy-efficient furnace, a cash-out is a cheaper way to access credit to do home improvements, said Frank Nothaft, chief economist for Freddie Mac.

Read more on the popularity of refinancing in 2006 here.

Cash-in on your home-equity for a small business

If starting a small business is your dream and you are a homeowner you could find your capital in your home equity. Lenders using your house as collateral offer home equity loans and that means you risk losing your home. Therefore, before, you embark on a venture keep in mind that if your business fails you lose both home and business!

Home equity loans are popular because of low interest rates and tax advantages on interests. Lenders also offer large amounts after deducting the mortgage amount due from the new appraised value of your home. There are different types of home equity loans offered according to your business venture’s requirements. Some loans require huge balloon payments at the end of the term of loan and others have high monthly payments which if defaulted could leave you homeless. There are others, which require up-front fees and closing costs or annual fees.

Read more about using Home Equity Loans to Finance Your Small Business: Betting the ranch on a dream