Personal Finance

The American Bankers Association reported the percentage of home equity loans in default was the highest among consumer loans, The New York Times reported Thursday.

For many lenders, chasing the lost funds is an exercise in futility, as legal action often ends up with payments of 10 percent of the loan.

Out of every dollar, "People got 90 cents for free," said Christopher Combs, a real estate lawyer from Phoenix, Ariz.

One debt collector, Utah Loan Servicing, will not pay more than $500 for the loans it buys from banks. "Anything over $15,000 to $20,000 is not collectible," said the firm's Chief Executive Officer Clark Terry.

Some borrowers are kicking themselves for the loose lending during the housing boom. "We would love to change history so more conservative underwriting practices were put in place," said ABA Chief Economist Keith Leggett.

Phoenix lawyer Marc McCain, said 85 percent of his 300 clients had indicated default was a likely outcome to their loans and that unforced payment was unlikely.
Borrowers have said the banks needed to share the unforeseen burden of home prices falling -- the collateral on which the equity loans were based -- especially, the newspaper said, since banks were bailed out by the government.

Copyright 2010 United Press International, Inc. (UPI).

In the second quarter, 22 percent of consumers who refinanced first-lien mortgage loans went to the closing with cash on hand, the third-highest percentage since 1985, when Freddie Mac began keeping records of borrowers who"cash-in" at the closing.

In the first quarter of the year, 19 percent or refinancing borrowers lowered their principal on the day of the closing.

Headed in the other direction, 27 percent of refinancing in the second quarter included borrowers who increased their balances by at least 5 percent, Freddie Mac said. From October 2009 through June 2010, a record was set for the lowest three-quarters of "cash-out" activity.

The cash-out activity was lower due to declining home prices and tighter lending policies, Freddie Mac said in a statement.

"If you pay down your mortgage balance you save the interest you would pay on the loan, about 4.6 percent at today's rates, over the life of the loan versus earning a percentage point or less in certificates of deposit and money markets," said Frank Nothaft, Freddie Mac vice president and chief economist.

The savings is also guaranteed -- in contrast to "the riskiness of stock market investments," Nothaft said.
Its acts like these that people are looking for insurances services like super visa medical insurance.

Copyright 2010 United Press International.

The Fed raised its discount rate from 0.5 percent to 0.75 percent, a move that is not expected to affect interest rates for consumer or business loans, as would a raising of the federal fund rate, which remains at zero to 0.25 percent.

"The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy," the Fed said.

However, the Fed said it was raising the discount rate "in light of continued improvement in financial market conditions."

The move is intended to prod banks to "rely on private funding markets for short-term credit and to use the Federal Reserve's primary credit facility only as a back up source of funds," the Fed said.

Copyright 2010 United Press International