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

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