I was not a big fan of the President Bush's $700 billion plan to bail out Wall Street and the banks but virtually all of this money has been repaid to the U.S. Treasury so on balance, the move probably kept the economy from falling off the cliff. On the down side, it made it easier for President Obama to launch his trillion dollars stimulus. People became inured to these huge sums.

Banks have recovered from the disaster of 2008 but their stocks remain near historic lows.

Ben Bernanke, a conservative capitalist, tends to get rave reviews from liberals and criticism from conservatives.

We learned that Texas governor Rick Perry was not ready for prime time when he went after Ben Bernanke during his first day on the campaign trail for the Republican nomination for president.

The Los Angeles Times reports:

WASHINGTON — American banks have made significant strides in boosting their financial health since the recession, but the same cannot be said of their lending activity, especially for home mortgages, Federal Reserve Chairman Ben S. Bernanke said.

In a speech Thursday, the Fed chairman gave America’s banking system a generally clean bill of health, citing stronger capital and leverage ratios, better credit quality and improvements in a number of "key systemic risk measures."

"Overall, they present a picture of a banking system that has become healthier and more resilient," he said in prepared remarks delivered by satellite to a conference in Chicago.

So why aren’t banks making more loans?

Apart from "navigating an economic recovery that has been halting at times," Bernanke said, banks have imposed tighter lending policies while demand for loans has been weak and credit quality of potential borrowers remains impaired.

Why are mortgage rates so low? Because demand is so weak for mortgages. With economic prospects uncertain, fewer Americans than is normal are in the market for a mortgage, so it is in lender's interest to make their mortgages as tempting as possible.

Low mortgage rates are not boosting home buying in terms of a drastic uptick in home prices and buying, but they've stopped the housing market falling deeper, home prices declining more steeply and demand falling off the cliff.

The USA Today reports: Cheap mortgage rates have made home-buying and refinancing more affordable than ever for those who can qualify.
Mortgage buyer Freddie Mac said Thursday that the average rate on 30-year loans ticked down to 3.83%. That's the lowest since long-term mortgages began in the 1950s. And it's below the previous record rate of 3.84% reached last week.

Mortgage pros make their money from the ignorance of those who aren't in the mortgage industry. It is in the pros interest to keep mortgages as complicated as possible and filled with as many mysterious fees as possible.

I'm a capitalist but I have sympathy for Elizabeth Warren and the Obama administration and Obama's consumer protection bureau and its efforts to simplify the mortgage process and to help consumers avoid shady fees.

In the current mortgage process, it makes little sense to comparison shop among different loan offerings because each mortgage loans has its own special deals and fees. By simplifying the mortgage process, it will be easier for consumers to compare offerings and to choose the best one for them.

The public is welcome to comment on these proposed changes. mortgageloanorgination@cfpb.gov and email to your heart's content.

The Los Angeles Times reports:

The preliminary proposals, unveiled Wednesday, also would prohibit incentives to steer consumers into higher priced loans.

"We want to bring greater transparency to the market so consumers can clearly see their options and choose the loan that is right for them," said Richard Cordray, the agency's director.

The 2010 financial reform law that created the consumer bureau mandated that it address mortgage fees and qualifications of mortgage originators.

One proposal the agency is considering would require flat origination fees so that consumers could more easily compare mortgages. The amount of work required to originate a mortgage doesn't vary with its size, so agency officials argued that the origination fee shouldn't either.

If you’re getting ready to apply for a home loan for either a purchase or refinanced, the best way to get the best rate is to make sure your credit score is as high as they can be. The most commonly used credit score is the FICO score, named for the Fair Isaac and Company credit scoring company that developed the scoring system. Your FICO score ranges from 350 for the worst credit to 850 for the best.
The most effective way to improve your score is to begin by knowing what your credit reports are saying about you.

Years ago, it was nearly impossible for a consumer to get a copy of their credit reports from any of the three major credit reporting agencies. But today, anyone can get the reports and take the steps they need to take to correct errors and improve spending and payment habits to achieve a higher score. Getting your reports is especially critical for anyone hoping to obtain a home loan. In the U.S., every consumer is entitled to one free report every 12 months from each of the three major reporting agencies – TransUnion, Equifax and Experian. If you’ve already received your free credit reports during the past 12 months, you can still obtain your reports by paying a relatively modest fee.

When you get your reports, carefully go over everything – from current and past addresses to credit lines and public records – to make sure there are no errors. Your credit report will have an amazing amount of information about past payment behavior, including a complete list of both on-time and late payments for every credit and loan account that reports to the credit bureaus. Make sure any late payments that have been reported are correct, and if you find any errors in any information, be sure to dispute it with the agency to have it removed or corrected. Most disputes can be handled online by visiting the credit agencies’ websites.

Once you’re sure your reports are free of errors, it’s a good time to take a look at your payment history and see if there are ways you can improve your habits. If you want a home loan in a hurry, there’s not much you can do to quickly improve a payment history. But if you have some time before applying for your loan – say a few months to a year – be sure to make every payment on every account on time so your reports show you are a responsible consumer and a good loan “risk.”

Another way to improve your credit standing and get better loan rates is to pay down as many of your debts as you can. When considering you for a loan, lenders will look at the total amount of money you owe and compare that figure to the amount of money you earn. That figure is called your debt-to-income ratio. If your ratio is high, lenders will not offer you the best loan rates. Paying down your debt can improve your debt-to-income ratio and help you qualify for the best rates for your home loan.

In addition to your overall debt, lenders want to be sure you are not relying too much on credit, so they will look at how much you owe on each card or loan you have outstanding. Look at how much you owe on each of your credit accounts and compare that amount to the total line of credit you have on that account. Ideally, you want the amount you owe to be under 20 percent. What that means is that if you have a credit line of $10,000 with one card, make sure you owe no more than $2,000 on the card. Some experts say it’s best to keep your lines to below 10 percent of the total line of credit.

While it’s relatively simple to get a copy of your credit reports, getting a copy of your FICO score is much more difficult. In some cases, your lender may share it with you. You can obtain scores online that follow the FICO score, but these are not "true" FICOs. However, online scores can be very helpful for monitoring the direction your score is headed. In addition to FICO, each credit agency has its own proprietary score and you can obtain these from the agencies for a fee.

No matter which type of score your lender uses – and many use more than one – the best way to improve any score is to keep your expenditures low and pay all your accounts on time, every time. These steps can help you qualify for the best rates when you apply for your next home loan.

Sarah Sentor writes:

Though we would have hoped otherwise, the first quarter of 2012 did not bring any stability to the fluctuating interest rates of the real estate market. The mortgage interest rate actually dropped to an all time low as the economy continues to falter and, the Federal Reserve has yet to taken any concrete action.

The current economy is showing more signs of decline than growth and, is a clear indication that a hope for a future increase in economic progression is all one can expect anytime soon. Though the decline in interest rates is only a point or so lower than before, that it fell at all is what is disappointing to investors.

The low interest rates are helping household finances stabilize but, there is only so much they can do.

Mortgage Trackers on Mortgage Interest Rates

Fixed Rate Mortgage: According to finance companies like Freddie Mac, long term interest rates [fixed rate mortgages or FRM’s] have remained below 4% in the first quarter of the year. Though there are predictions of a slight rise after May the mixed data coming in stops anyone from giving a firm statement either way.

Adjustable Rate Mortgages: Short term interest rates [adjustable rate mortgages or ARM’s] are influenced by the Federal Funds and, those home owners who have ARM’s have seen rising rates. This means, if consumers at this time, decide to refinance their mortgage they may be able to save some money in the long run.

Difference between ARM’s and FRM’s: As noted above the second quarter of the year 2012 started with a drop in rates; so that the rates fluctuated between 4-5%; ending at lower than 4%. Thus, the difference between ARM’s and FRM’s became quite narrow. The consumers with a short term mortgage of less than 10 years thus saw their ARM at times equal to the FRM.

This suggests if the consumers who intend to keep their mortgage for more than 3-5 years became proactive and, had their ARM refinanced to a FRM they would avoid a spike in their rate, when the ARM rises. According to the Federal Reserve this could happen as early as the end of May.

June Olsen writes: In the current economic climate, homeowners often feel the need to have substantial cash reserves available for medical expenses, remodeling projects, or to pay off consumer debt. Others may look to lower their mortgage payments in light of cash flow issues. These homeowners often rely on refinancing their mortgages to accomplish these goals. While many homeowners attempt to use refinancing as a tool to remedy these problems, the practice is not without its pitfalls. These pitfalls were disregarded when taught in accredited mba courses and as a result helped fuel the sub-prime mortgage crisis.

Why Do Homeowners Refinance Mortgages?

The Federal Reserve web site offers some options on why homeowners may choose to refinance their mortgages.

Lower Interest Rates

Market conditions can lead to lower interest rates. Since mortgage payments are tied to interest rates, homeowners can reduce their payments by refinancing.

Adjust the Mortgage Term

Some homeowners may want to shorten the term of their mortgages to pay off the home sooner. Others may want a longer term with lower payments.

Equity Cash-Out

Homeowners can also “cash out” some or all of the equity they have built up during the course of the mortgage by taking out a new mortgage higher than the home’s value.

What are Sub-prime Mortgages?

The US Department of Housing and Urban Development (HUD) defines “sub-prime lending” as “loans (that) are for persons with blemished or limited credit histories.” In most cases, these loans have higher interest rates and less favorable terms than those for borrowers with a better credit rating. As a consequence, loans from sub-prime lenders have a higher default rate than those from prime lenders.

What are the dangers of a refinanced mortgage?

Switching to an Adjustable Rate Mortgage

Some homeowners seek to take advantage of lower interest rates by converting their fixed-rate mortgage into an adjustable rate mortgage (ARM). However, when interest rates rise again, so do the monthly payments on an ARM.

Lengthening the Mortgage Term

While stretching the term of a mortgage (e.g. from a 20-year loan to a 30-year loan) will reduce the monthly payments, the borrower will pay more interest and less principal over the longer term. With lower principal payments, the borrower’s equity will also be lower.

“No Cost” Refinancing

Homeowners who choose to roll the closing costs of their new loan into their monthly payments may face a higher interest rate than those who pay the closing costs separately. Also, no-cost loans come with high penalties for early payoffs so that lenders can recoup the interest they would have gained if the loan had gone to term.

How can I prevent a foreclosure?

The best way to prevent a foreclosure is to examine every aspect of the refinancing, from loan term t interest rate fluctuations to closing costs. Also, finding a lender that is willing and able to communicate the potential hazards of refinancing while educating a borrower on the benefits of a home loan can also be beneficial.

Refinancing can be a useful tool for homeowners seeking to work through financial difficulties. As with any tool, a working knowledge of how best to apply refinancing can be the difference between a successful project and a devastating foreclosure.

Britney Danila writes:

The term ‘bad credit’ carries with it a negative connotation. People have been attributing bad credit to the ongoing recession. This is not the case. There were people with bad credit before the economy dwindled. The impact only intensified once the recession took hold. The problem with having a bad credit is that lenders are unwilling to give you a loan. If you have a bad credit history, you may feel that securing a mortgage would be impossible.

Getting an instant loan or an open door loan is much easier. While it is true that it is challenging for a person with a bad credit history to get a mortgage, it can be done. You need to know the best ways in which you can get recognized for a mortgage loan with a bad credit history.
Find the Right Lenders

It seems odd, but you have to find the right lenders to get the mortgage you want. Technically, it should be the other way round. Lenders should go looking for prospective borrowers to lend money to. However, since you are in no position to argue, you will have to do the dirty work. There are some lending companies who offer mortgages to people with bad credit history. Their aim is to help people sort their financial positions out. Find the lenders willing to give you the mortgage.

For this purpose, you may consider hiring a broker to help you out. The brokers know the best lenders according to the needs of the borrower. In this situation, they will guide you towards the lenders who offer mortgages to people with bad credit. The brokers will provide to you a list of the best lenders for your purpose. It is your job to select the right one.

There are some tips you can follow to find the right lender.

· Look up on the website and check the certifications and licensing. A lender has to be certified in order to be legitimate. There have been countless cases where a criminal posing as a lender conned his customers. You can never be too careful, especially when it comes to dealing in the financial market. If possible, check out the reviews provided on the website to judge the quality of services.

· Ask your friends and family to refer you to a lender who offers mortgages to people with bad credit. When you ask the people you trust, you can be sure that they are going to point you in the right direction.

· Compare the interest rates on offer. The lower the interest rate is, the easier it will be for you to pay it. Hence, try and find the lowest interest rate on offer. However, don’t compromise on quality because the interest rate is low.

In the meantime, put off the temptation to opt for an open door loan or an instant loan. If you follow the tips, you will find the right lender in due time.

Improve Your Credit Rating

Following the tips listed above will help you find the lenders who are willing to offer you a mortgage despite your bad credit history. The least you can do is to take some concrete steps towards improving your credit rating. Not only will it help you in the future, it leaves a strong impression on the lending company. They are likely to offer you a better plan and be flexible with the repayment schedule if you get your finances back on track.

The first step you can take is to reduce your living expenses. You have to go down to the bare bones. Eliminate all the expenses you can live without. Unfortunately, most of them will be related to things you like, such as recreation and eating out. However, this is a sacrifice you have to make in order to get the mortgage you want.

Conclusion

These are the ways in which you can get recognized for a mortgage loan with a bad credit history. Typically, people are apprehensive about even applying for a mortgage or loan if they have bad credit. This is because of the general perception that bad credit means no mortgages are available to you. As you can see, this is not the case. You have to follow the right method to get the mortgage loan you are looking for.

Imogen Reed writes:

Since the mortgage and housing collapse, mortgage brokers have developed a poor reputation. A lot of people singled out mortgage brokers as a major cause for the sub-prime crisis of 2008, which resulted in a whole host of regulations and laws aimed at curbing the abuse committed by some brokers.

Of course, the vast majority of brokers were completely innocent in the housing collapse and acted with complete probity, but a small minority was responsible for blatant fraud. Their actions resulted in record mortgage defaults and foreclosures that led to misery and pain for so many American families and caused a rise in the number of people out on the streets or ending up in addiction treatment centers.

Regulation

The federal government’s was swift and punitive. Independent mortgage brokers now need to pass criminal background checks as well as sit licensing exams (those working for large lenders are exempt from many of these regulations), but the biggest effect of the sub-prime scandal was to the industry’s reputation, with even President Obama referring to it as, “toxic.”

However, despite this, the number of mortgage brokers seems to be on the rise again. According to analysts, third party mortgage originations were up 11 percent at the end of the last quarter of 2011. While brokers are still bearing the brunt of blame for the economic turmoil, it seems more and more people are forgiving their misdemeanors and returning to their services to help secure a mortgage deal, but is this a good idea?

Why use a Broker

Mortgage brokers are just intermediaries. They speak to the lenders on your behalf, with an aim of getting you the best deal. Of course, they have to earn money somewhere down the line, so it begs the question, why use a broker at all, especially as their reputation is so tainted. Well, brokers do have their place and using an independent mortgage broker can have plenty of benefits for the mortgage hunter.

Independence

The first major benefit of an independent mortgage broker is in the title: independent. As they are not tied to one lender, they can give you non-biased advice. Brokers for big money lenders will only be able to sort you the best deal from their company’s various packages, but an independent broker will have access to a large number of lenders and can come back with the best product to suit your needs. This is especially useful if your situation is non-standard, such as having a property with problems that would make it difficult to secure money from a traditional lender.

Time and Effort

Finding the best deal can take time. Banks and lending companies have a various packages, all with advantages and disadvantages, so figuring out what is best for you can take a lot of time and effort. Meetings with banks can suck hours out of a busy working day, while ringing round all the various lenders could take weeks.

Once you’ve told a good independent broker you specific details and criteria, they will know who to chase and where to find the best deal to suit your needs. A good mortgage broker will work for you and will give you the best advice they can, and be able to answer your questions or make adjustments if your circumstances change during the process.

How to Avoid Trouble

Many people are still reticent about using the services of a mortgage broker, and after the housing collapse, it’s no surprise, so it is worth asking a few questions to give yourself peace of mind. Firstly, ask if they are members of the National Association of Mortgage Brokers (), which will mean they are abiding by not only federal rules, but also those laid down by the association. This will also give you an extra avenue of complaint if things go wrong.

Imogen Reed writes:

The Bank of America has announced a pilot scheme which will allow homeowners in danger of foreclosure to stay in their homes as tenants, with their outstanding loans written off by the bank. The scheme is initially a small one, limited to 1000 homeowners in Nevada, New York and Arizona, who will be selected by the bank. Those who are at least 60 days behind with their mortgage payments, and are underwater (that is, they owe more than their home is worth) to be eligible. They must also be considered to be at serious risk of foreclosure. They’re likely to be people who have ignored attempts by the bank to contact them, or who have tried to negotiate other ways of dealing with their arrears and failed.

Homeowners would be asked to hand over the title deeds to their homes to the Bank of America. For their part, the bank will offer one-year lease agreements with the option of renewal. It’s not clear yet how they will deal with the minutiae of becoming a landlord, dealing with broken boilers and landlord insurance claims. Rents would be set at what the bank determines to be at or below market level, and tenants would have to demonstrate that they would be able to pay the rent being asked for. For some, this may lead to a reduction in monthly payments. The Wall Street Journal gives the example of a $250,000 dollar home with mortgage payments of $1600 per month, having a rent of $900 per month set for it. How this actually works in practice remains to be seen.

An alternative to foreclosure?

There have been calls from consumer groups and others for banks to try and find alternatives to foreclosure. In neighborhoods with high foreclosure rates, communities have been severely damaged. Could this scheme be the answer to that problem? It sounds like a good idea on paper, but it may not be as good as it sounds. It is important to remember that the Bank of America isn’t considering this option altruistically. They presumably think that there is something in it for them. While the scheme could allow people who would otherwise have to move to stay in their homes, what happens after the one year lease is up? If market conditions improve it may be that the bank decides to sell homes on at that point, making the scheme simply a delay in the inevitable, rather than a long term solution to people’s housing needs.

Another difficulty is that many of those who cannot afford their mortgage payments will not be able to afford to pay market rents either. If someone is several months in arrears on their payments, as they need to be to qualify, they’re probably in deep financial trouble. Those with a temporary problem might only have a single missed payment and would probably be willing to co-operate with the bank to arrange paying it back. Those people don’t fall under the scope of this scheme. Local market conditions will affect whether those eligible can actually pay rent on their homes, as will the purchase price of the home. In areas with high rents, someone who bought before the market peaked might be paying less per month on their mortgage than they would in rent.

Finding solutions

While for those in financial difficulty, this scheme might seem to provide an easy solution, it would be a good idea for those approached to be part of it to take care before agreeing. The option of remaining in your home, without having to suffer the indignity of foreclosure, is an attractive one for those having problems. However, it may be worth trying to hang on as a homeowner for as long as possible, to see if the market improves in the mean time. The foreclosure document forgery scandal has meant that it is harder than before for banks to foreclose. Part of the bank’s motivation for bringing in this scheme is, no doubt, to give them an easier way to deal with bad debt without having to go through the foreclosure process.

This could be a beneficial scheme for some, but overall, there are some substantial problems associated with it, especially doubt over whether those in danger of foreclosure will actually be able to pay rent for their homes.