Home Equity Loan Lowdown

Home Equity Credit Lines Are No Longer Cool, Refinancing Is!

Imagine refinancing your home mortgage to get a higher interest rate – this is supposed to be the newest rage with people willing and eager to pull out buckets of cash! Unlike in the good ol’ times, when you refinanced to a lower rate of interest, today almost nine of 10 homeowners who refinanced, cashed out additional money -- often tens of thousands of dollars. And matching the trend are refinancers who are today opting for larger replacement first mortgages with rates averaging about one-half of a percentage point higher than on their old loans.

So, what is the reason for this change in trend? Quite a few: Firstly, short-term interest rates no longer hover near 4 percent. And the worst part is that home equity lines of credit no longer seem a good option. The adjustable rates, which were their strong point, are now racking up bigger monthly costs. Moreover, thirty-year fixed-rate first mortgages no longer are less than 6 percent. Now the prime rate is 8.25 percent and could move higher. Washingtonpost.com reports:

Say you also have lots more than $100,000 sitting untouched and frozen in home equity. Rather than signing up for a home-equity credit line tied to a jumpy and unpredictable prime rate plus 1 percent, you instead choose a fixed-rate cash-out refinancing.

Read more: Refinancing To Get Cash, Not Save It

Not too many takers for home equity loans

If the loan is not beneficial and the rates are not as good as they used to be, what should you do? Stop taking these loans. That’s exactly what residents in Sacramento have done – they have reduced their use of home-equity loans at twice the rate of Californians as a whole in the early months of 2006, according to a new report. Cbs13.com reports:

The company examined property records in eight counties in the Sacramento area, with the most extreme borrowing decline taking place in Sutter County -- a drop of 41.7 percent from early 2005 to early 2006.

Read more: Sacramento Residents Reducing Home-Equity Loan Use

30-year Home Equity Loan from DeepGreen

Cleveland-based DeepGreen Financial recently launched a 30-year home equity loan. This move is aimed at expanding its menu of fixed-rate products. Banknet360.com reports:

The Cleveland-based company began offering the new loan last month in response to the increasing demand for fixed-rate second mortgages instead of adjustable-rate home equity lines of credit, said Sy Naqvi, chief executive of the online lender.

Read more: DeepGreen Launches 30-year Home Equity Loan ($)

DeepGreen Financial launches 30-yr home equity loan

DeepGreen Financial, an online home equity lender, recently launched a 30-year second mortgage. This new loan allows borrowers to lock in fixed-rates during a rising rate environment and make low monthly payments because of the 30-year amortization schedule. Banknet360.com reports:

Rates for the loans start at 7.375%, with a maximum loan limit of $250,000. The loans also have no lender fees, annual fees, or closing costs.

Read more:DeepGreen Launches 30-Year Home Equity Loan

Chase Adds No Closing Cost Option to Fixed-Rate Home Equity Loans

Chase recently added a No Closing Cost option for new home equity loans. This option, which is offered on both amortizing and balloon loans, expands the financing options brokers can offer their customers. The No Closing Cost fixed-rate home equity loan is available to borrowers who meet standard Chase underwriting guidelines except in NC, SC and other states where Chase Home Equity does not currently offer loans. Rismedia.com reports:

“By offering borrowers a fixed-rate home equity loan without closing costs, Chase-approved brokers can offer both peace of mind and potential cost savings to their customers. In a competitive market, that’s very significant,” said Kimberly Salvo, national sales manager of B2B Home Equity for Chase.

Read more:Chase Adds No Closing Cost Option to Fixed-Rate Home Equity Loans

Homeowners become more money-savvy: Survey

Now that we’ve spoken a lot about the sad situation of the housing sector and of how the financial situation is quite bad, you’d think consumers were quite pessimistic about the future. Fact is most of them are quite optimistic. Well not over the top kind of optimistic but they believed that while the national scene may not be so good, on the local front, it wasn’t so bad.

According to most experts, while the scene is not so bad as it seems, it’s still not the best of times. What I mean by that is that they don’t think there will be a bursting of the ‘housing bubble’ but there will definitely be a lowering in values in some areas. This means your home’s equity could take a fall, which in turn can lead to a fall in the home equity loans available. An Experian-Gallup poll conducted recently also revealed some interesting facts. According to the survey, one-third of homeowners today have a home equity loan or line of credit. Most of them take the loan to finance home improvements and only 10 percent said that they took the loan to consolidate their debts.

Bank of America is No.1 Home equity lender

Bank of America recently became the nation's leading home equity lender. The bank credits its record growth to the introduction of its no-fee home equity line of credit offering. Finanzen.net reports:

The increase in home equity financing is also attributable to Bank of America's unmatched distribution network, including the largest banking center network in the industry, phone and online channels.

Read more: Bank of America Becomes Nation's #1 Home Equity Lender

Home equity loans change with the times

When in need for cash, Americans still prefer to fall back on their trusted homes and like to borrow against the equity in their homes. While people have no qualms about using their homes as piggy banks, their method of doing it has changed and now most people steer clear of the once popular variable-rate lines of credit. Sfgate.com reports:

More borrowers are taking out fixed-rate home-equity loans or refinancing their homes with a new fixed-rate loan and borrowing more than their old balance -- known as a cash-out refi.

Read more: Real estate a handy piggy bank

Are rising home equity loan rates affecting the economy?

Interest rates are hitting the skies – especially in the case of home-equity loans. So, what impact do these rising interest rates have on the economy? According to some experts, interest rates act like a throttle on economic expansion because they make it more expensive to borrow money. Sfgate.com reports:

Some experts say the pace of increases has been so measured and the economy is so strong that the impact will be minimal. Others see high interest rates as the prologue to a slowdown or even a recession.

Read more: How rising rates could affect economy

Home-equity loan hearings in the offing

Federal Reserve Board Governor Susan Bies said recently that the U.S. central bank planned to hold hearings on home-equity lending this summer. These hearings are supposed to be the first step to a review of mortgage disclosure rules she explained. Today.reuters.com reports:

"One of the issues that will be explored at the hearings is likely to be the adequacy of the existing disclosures for nontraditional mortgages, such as interest-only loans and payment option ARMs (adjustable-rate mortgages), as well as 40-year mortgages and reverse mortgages," she added.

Read more: Fed to hold home-equity loan hearings

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

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

Former Marketing Executives Indicted in Home Equity Loan Fraud Case

Two former executives of marketing firms operating out of Boston, Canton and Attleboro, Massachusetts, were indicted for operating a fraudulent pyramid scheme involving home mortgages. The two accused were involved in duping approximately 400 people in more than 15 states, primarily ethnic Cambodians, living in the US.

The two were charged with eleven counts of mail fraud. The victims had unwittingly mortgaged their homes for a secure financial future. 

Read the press release here

2006 – A New Dawn for Home Equity?

Each year has its own perils and advantages regarding each industry. So is the case for the Home Equity business. The industry old timers are expecting rising interest rates for the current year 2006. Americans are looking forward to rising interest rates after seeing the historic lows in 2005. The market on the other hand is sending up warning flares to homeowners who bought or refinanced their equity loans in the last year.

If they have used the interest-only adjustables or other brave new mortgages, they might be in a soup this year. The ideas that seemed swell last year might not still be good this year. Long-term and short-term loan rates are still the same. But the home mortgage rates are still hovering near the 6% rate. The home equity line of credit rates are certainly rising. Homeowners with esoteric loans might still act smart and grab a 30-year mortgage and lock in on the lowest interest rates!

Equity-Release Loans to Cost More

Elderly people, post-retirement depend on their savings and pension. They tend to use equity-release loans to raise money for their retirements. These loans cost four time more than the original loan amounts.

The interest on a home mortgage, which would be around Pounds Sterling 30,000, would be dearer after say 25 years. Hence it is always better to play safe when it comes to investing in home-based equity release schemes.   

Read the press release here

J P Morgan Chase Strengthens Home Equity

The home finance division of J P Morgan Chase announced the release of two features. The company said, they have added two enhancements to their home equity loan products. The two enhancements are as below:

1) The Chase EquilineSM Platinum Visa Card – This allows homeowners in many states to access their home equity line-of-credit from every place where Visa cards are accepted. This should ideally bring a sigh of relief. Well, the caveat is that you should be holding a Visa card first. This feature enhances the borrower’s experience and helps build a competitive advantage for brokers and correspondents.

2) A Fixed Rate Lock option – As a borrower, you can “lock in” a portion of their lien of credit with a fixed rate. Meanwhile, they can keep their remaining equity balance readily available for other needs. The company said, the borrowers may have up to five “locks” outstanding at any given point of time. They can also customize their equity into fixed and variable rate segments, based on their individual needs and repayment preferences.

Kimberly Salvo, of B2B Home Equity, said, “We work hard to help Chase-approved correspondents become successful.”

Read the press release here

The French Home Equity Connection

The French government has announced a series of reforms to the country’s equity situation. A press release said that the home mortgage legislation would allow homeowners to borrow money against the value of their homes.

Prime Minister Dominique de Villepin would sign the proposals in January, and were initially announced in 2005. The reforms are aimed at spurring consumer spending. 

Read the story here

Stability predicted for 2006

Economists predict that the housing boom will be over for the year 2006, while others analyze that the housing market might just be taking a one-year breather. This might stabilize the incredible high that home equity loan market experienced last year, which also had lead to aggressive marketing practices that saw people getting into loans that were really not affordable.

The nation's housing boom is over, and frankly, that's a healthy thing, since we were running into affordability problems in many areas. Another market to take a beating would be the mortgage market which will also shrink this year, predicted, Paul Merski, chief economist for Independent Community Bankers of America

Read more:

PNC in deal with First Horizon to process its home equity loans

Pittsburgh-based PNC Financial Services Group Inc. has reached an agreement with First Horizon Corp. to process First Horizon’s home equity loans and lines of credit that originate from online inquiries.

PNC Financial Services Group Inc. will process the applications and create loan documentation packages and coordinate loan closing, while First Horizon Corp. will market the home equity products via the company’s website and internet advertising or use an online application at a site managed by PNC. According to the agreement, all loans will be closed in First Horizon’s name and will be underwritten to First Horizon’s credit policy.

GE Money to invest Rs 450 m in India; launches first ever TV commercial

GE Money is expanding its branch presence in India and is targeting to reach over 200 branches in 2006 with an investment of Rs 450 m. The company has also launched its first ever television commercial in India.
The TV commercial is for GE Money personal loans and features children to demonstrate simplicity, ease and innovation, with the core message being that GE Money is a 'can-do' brand that has the ability to say ‘Yes’ to people in need, even when others are saying ‘No.’
Sunil Kapoor, vice president, personal loan, GE Money India said, “GE Money has a personal loan product for everyone, affluent, middle and mass segments. We have innovative products designed to meet varying needs as well as special product surrogate programs for self-employed individuals. This first-ever TV commercial by GE Money in India reflects our commitment to make it simpler for people to fund their aspirations.”
GE Money is the new name for GE Countrywide. Since September 2005, all existing GE Countrywide products, which include Auto loans  (New & Used Cars), Consumer Durable Loans, Two Wheeler Loans, Personal Loans and Home Equity Loans against Property, have been consolidated under the GE Money umbrella brand.

Shearson Home Loans secures $4 m equity commitment

Shearson Home Loans, a fast growing mortgage banker/broker and subsidiary of Consumer Direct of America, has executed a $4 m equity commitment term sheet from Crusader SEDA Fund LLC in New York. The SEDA, or Standby Equity Distribution Agreement, allows Shearson to draw down capital from the fund periodically over the next two years up to a total of $4 m. The expected closing date of the agreement is scheduled for December 16.

Michael A. Barron, Chairman & CEO, Shearson Home Loans said in a company release, "We are pleased with our existing relationship with Crusader and this equity commitment will allow us to expand the Shearson brand and add numerous new branches to our mortgage network. We have several acquisitions in mind and a financial resource like this gives us a real market edge as we consolidate branches."

HSBC launches special offers on home loans

With everyone in the holiday mood, HSBC has found it the perfect time to offer special deals on its home loans, flexicredit loans and credit cards.

HSBC will not be charging any processing fees and will also defer the first three months' repayments for those taking out a new home loan or flexicredit loan between now and January 31st. The HSBC home loans offer also includes maxicredit loans. A new credit card customer, on the other hand, will not have to pay any bank fees for the first year.

HSBC's Chief Executive Officer, Mr Shaun Wallis told online service di-ve,

"Over the next two months, HSBC is offering a number of Christmas discounts on various products, giving our customers the opportunity to make that 'longed-for' purchase this Christmas and during the January sales."

Read online service di-ve's report

UK govt, lenders in agreement to offer subsidised home equity loans

The UK government now claims it can help an additional 20,000 people into home ownership. This comes after UK Chancellor Gordon Brown confirmed that an agreement has been reached with three of Britain’s biggest mortgage lenders to provide subsidised mortgages to first time buyers. According to this agreement, buyers will take out a mortgage for 75 per cent of a property's value and the government and the lenders would provide an interest-free loan for 25 per cent.

The three lenders, HBOS, which includes the Halifax, the Nationwide and Yorkshire building society, have signed up to the scheme, which is known as ‘Open Market HomeBuy’. The open market HomeBuy equity loans scheme is set to run on a pilot basis in October next year.

The scheme would be open to key public sector workers, social tenants, those on the housing register and other first-time buyers identified as priority cases by regional housing boards. However, details of exactly how it will operate, and the precise eligibility criteria, are still being worked out.

Britain’s Housing Minister, Yvette Cooper, said,

“There are plenty of families who want the chance of home ownership and have the steady income to support it, but cannot keep up with rising house prices. That's why it is so important to promote more shared equity schemes to give them a chance to get their first foot on the housing ladder.”

Read a UK Telegraph report

Poland to mull curbs on forex home loans

Polish banking authorities are set to consider measures to curb the risk posed by foreign currency home loans to consumers and banks. Forex loans, mainly Swiss francs, are the most popular mortgages in Poland, with interest rates as low as 2 per cent; they make up nearly two-thirds of total mortgage lending.

Despite the obvious concerns that authorities feel about the threat from forex lending, they, nonetheless, rejected a proposal made by the country’s leading bank association, the Polish Banking Association (ZBP) to impose a ban on forex home loans.

A statement from the Central Bank, which overseas the banking inspectorate said,

“After analyzing all possibilities, banking regulators will propose further actions…possible solutions include limits for foreign-currency lending in proportion to a bank’s capital or total assets.”

Read more about National Bank of Poland and Polish Banking Association

Home Equity Loan applications on a downslide

Spiralling rates have made their impact felt, which has led to a significant drop in home sales. As a result, mortgage applications have touched an all time low in the past six months. In a survey conducted by real estate consulting firm, Real Trends, it was found that the number of home-purchase contracts signed last month dropped 8 percent from a year earlier with the study sample including 48 large real estate brokerage firms scattered across the country.

With rates indicating an upward trend, borrowers who need a mortgage or have an ARM that is nearing its adjustment date are likely better off if they move quickly to take out a new mortgage.

A 30-year fixed-rate mortgage is still relatively attractive. To shave a bit off their rate, borrowers should consider hybrid ARMs, some analysts suggest. Hybrid ARMs carry a fixed rate for as long as 10 years.

Read More: Mortgages get more expensive

Ameriquest Mortgage to offer $2 billion in asset-backed securities

Ameriquest Mortgage is one of the biggest U.S. mortgage lenders specializing in refinance loans, home mortgage loans, and new home purchases. It has disclosed its plans to offer $2 billion of asset-backed securities supported by home equity loans.

A team led by JP Morgan Securities and Barclays Capital will be underwriters for the offering that include Deutsche Bank and RBS Greenwich Capital

Read More: Ameriquest Mortgage to set $2 bln home equity ABS

Bank of America Announces Hurricane Wilma Relief

After Hurricane Katrina and Hurricane Rita, Hurricane Wilma has caused widespread damage in America. Bank of America announced that it has instituted its disaster relief programs to assist customers affected by Hurricane Wilmain Collier, Lee and Monroe counties. Under the program, qualified Bank of America customers affected by Hurricane Wilma in those counties can access a special Bank of America home equity loan program and incur no fees. They can also increase the credit limit on an existing home equity line of credit. They will get the benefit of preferential pricing below the current rate.

The new relief program allows them to avoid bank withdrawal penalties on time deposits and existing Bank of America Individual Retirement Accounts (IRAs). They can also receive emergency credit line increases on their existing Bank of America Visa(R) card and MasterCard(R). For assistance with existing consumer, home or small business loans, credit cards or for more information about the special home equity loan program, conusmers can call on 1-800-831-5586. prnewswire.com reports:

The loans are subject to credit approval and normal credit standards apply. These offers cannot be used in combination with other offers, and certain restrictions may apply.