Should the Fed Cut Interest Rates?

 

Is it time for Fed chair Ben Bernanke to take a page from his predecessor's book and lower interest rates to soothe a very nervous market?

 

Or will the news that the Fed recently injected $38 billion into the U.S. banking system be enough?

 

What do you think?  We'd love to hear your feedback and opinion on this sensitive market question.  Click the comment link below and tell us what you think.

 

 

Bankruptcy Should Be Your Last Resort

 

While the option of bankruptcy may be crossing your mind these days, you need to be aware that it is not as easy an option as it once was, and in reality, bankruptcy should only be used as your last resort.

 

Bankruptcy will continue to haunt you for 7 to 10 years on your credit report.  When bankruptcy is seen on a credit report for someone applying for credit, this is a huge red flag to them and many thoughts start to go through their minds.  Is this person not responsible with credit?  Does this person not understand that credit is really "renting money" and cannot be considered "free money"?  Is this person trying to lead a champagne lifestyle on a beer budget?

 

The reality is, nobody goes into debt thinking that bankruptcy will cure all their problems if they get in over their head.  The act of filing bankruptcy will mark you as a "leper" for many years, which is why all viable options and alternatives should be thoroughly investigated before you consider filing for bankruptcy.

 

There are many options to bankruptcy that many people don't consider, or they don't think of them until they are too far down the bankruptcy path to change direction.  Even if you are laden with debt, it is still possible to get a debt consolidation loan from many lending institutions.  A debt consolidation loan can pay off your outstanding debts and give you some much needed breathing room while you get your act together again.

 

On the positive side of a debt consolidation loan, you will have avoided filing for bankruptcy and all the credit report negatives that go with it.  On the downside, you need to be aware that you will still need to pay your outstanding debts, which after a debt consolidation loan, may only be one large payment.  The downside here is that since you are so far in debt, the debt consolidation loan will very likely be at a much higher interest rate than you could have gotten if you had excellent credit.  Granted, the overall amount of interest you are paying each month is almost certainly less, but it is still not an overly attractive interest rate.

 

The biggest downside to a debt consolidation loan is that you may then consider yourself to be free of all that debt.  Nothing could be further from the truth.  You still have the debt.  The strong temptation will be, since your credit cards now have a zero balance, to charge them to the hilt again, which will only get you back to the same place you are now, except you will also have responsibility for paying the debt consolidation loan.

 

Make sure you have a PLAN for how you are going to manage your finances, even if you do need to file bankruptcy.  If your debt obligations exceed your monthly revenues, then you're going to have a problem and no amount of financial juggling can change that fact.  Most people think that more income is the answer, but more often than not, the reality is that less expense is a much better long term option, since you are probably making payments on things that are not absolutely critical to the revenue-producing part of what you do.

 

Talk with a qualified bankruptcy lawyer who is familiar with the bankruptcy laws in your state.  You can get a free evaluation from a bankruptcy attorney who is local to you to discuss your situation and determine your best course of action.  Bankruptcy may be an option, but it is certainly not your best or only option most of the time.

 

Mortgage Defaults: Who Should Pay?

 

Thousands of homeowners are on the brink of disaster.  Yes, because of risky/aggressive lending practices of the past few years many of these people are one or two payments from a mess.  One jump in the Prime rate or other indexes and these people are out of luck.

 

Perfect timing for the political season.  On the right, President Bush has said it is not the Government's job to bail out homeowners who got in over their head.  On the left, Hillary Clinton said the Government SHOULD step into help these people.

 

Either way, we as American tax payers are the one taking it on the chin.  If the Government does not help, we pay. If the Government helps, we pay.

 

Who should take it on the chin?   We'd love to hear YOUR opinion.  Leave us your comment on this subject below.

 

 

Housing Gets Mixed Outlook from NAR

 

The National Association of Realtors predicts the pace of U.S. home sales will fall further this year than earlier expected, but prices will drop less sharply than previously thought. 

 

NAR trimmed its sales forecast for the sixth straight month but pared back its predicted drop in existing home values.

 

Existing-home sales should hit a pace of 6.04 million units this year, down from the 6.11 million units it predicted last month.

 

Prospective homeowners have faced tougher lending standards in recent months as investors have pulled funding from the once-hot mortgage finance market.

 

The median new-home price will probably fall 2.3 percent to $240,800 this year according to NAR's monthly economic outlook.

 

 

Home Buyers: Sitting on the Sidelines and Waiting?

 

Everyday brings new revelations about soaring foreclosure rates, billion-dollar losses and lenders shutting down, leaving borrowers in the lurch and thousands out of work.  Yet, through it all, interest rates remain surprisingly affordable.

 

If you’re in the market for a mortgage, here’s what you need to know about the current crisis:

 

Banks and finance companies obtain most of the money they loan for mortgages from two government-chartered companies – commonly referred to as Freddie Mac and Fannie Mae – or large private investors such as retirement plans, mutual funds and insurers.

 

Investors have lost incredible amounts of money over the past several months because so many homeowners are defaulting on loans made from 2004 through 2006 — particularly on ARMs given to borrowers with poor credit.

 

Almost everyone blames this mess on lax lending standards and a screwed up system of rewarding mortgage brokers for pushing loans that borrowers had little or no chance of repaying. 

 

As a result, home buyers will now be expected to meet more stringent standards than if you’d applied just a few months ago.  Even borrowers with good credit need a larger down payment, higher income, fewer debts and the ability to fully document all of that.

 

But taking a longer term view, home loans remain surprisingly affordable.  Today’s rates are lower than the 7% or 8% we were paying during the mid- to late-'90s, and the double-digit rates we were charged throughout the '80s and early '90s.

 

Where will all this lead?

 

Economists at Freddie Mac originally predicted 30-year fixed rate loans would average 6.2% this year and 6.4% in 2008.  Now they’re saying rates will remain around 6.7% the rest of the year.

 

Has all the negative news lately about mortgage companies caused you to back away and sit on the home buying sidelines?  If so, talk to us.  Now COULD BE the best time in decades for you to consider buying a home, with inventory at all time highs, and interest rates still amazingly low, all things considered.