More Mortgages Because of Low Interest Rates

There are an increasing number of people getting new mortgages because of the current low interest rates in the market. Moreover, this is a result of the desire of homeowners to lessen their payments and shorten the term of their loans.

The Mortgage Bankers Association expects almost $20 billion increase in new mortgages for the current year, with the majority of them refinancings.

According to Mike Fratantoni, the vice president of research of MBA, there has been an appearance of situations that could cause rates to drop and refinancings to increase, particularly because of Europe’s market crisis.

The MBA forecasted that interest rates will be lower this year because of the decreasing debt situation in some places of Europe and slow global economic growth.

Based on a Thursday report from Freddie Mac, the government-owned mortgage buyer, there was a slight increase in interest rates this week, particularly, the average rate for a 30-year loan was 3.71 percent, which is an increase from the 3.67 percent in the previous week.

According to Derrick Wynkoop, the president of Walden Savings Bank, there has been a 60 percent increase in closed loans in the first five months of 2012 compared to the same time one year earlier. Moreover, almost 55 percent are refinancings and 45 percent are new purchases.

Robert Michaud, senior vice president of Mid-Hudson Valley Federal Credit Union, said that they have encountered an extremely high demand for refinancings.

There is also an increase in single-family home sales, but still less than those in the early part of the decade. According to Wynkoop, savings for deposits and closing costs have been eroded because of unemployment and underemployment. Moreover, potential buyers have been hesitating because of strict standards to become eligible for a loan.

Michaud said that there have been more denials compared to the past and the majority of these denials are because of collateral, income qualifications or credit.

Low Interest Rate Loan Not Accessible to Small Businesses

Although banks are currently offering credit loans and different support packages at low interest rates of 14 percent annually, a lot of small and medium businesses are having trouble to get bank loans in order to avoid bankruptcy.

To assist small businesses get back from the economic crisis at present, the State Bank requested banks to decrease loan interest rates from 15 percent in the previous month to 14 percent. Unfortunately, credit is not accessible to the poor.

According to Tran Quoc Manh, the general manager of Saigon Trade and Production Development Corporation and vice president of the Handicraft and Wood Industry Association located in Ho Chi Minh City, the loan with a 15 percent interest rate every year is not available to all businesses. Because banks favor big companies rather than small, struggling ones, strong businesses can simply get this low interest rate loan while those who need it more cannot.

While it’s unreasonable to only blame banks, they do have preferences and are very picky when approving loans.

Tran Phuong Binh, president of Dong A Bank, a lot of banks will experience losses in the future since the existing capital raising rate is at 11 percent per year while treasury bills are sold at a lesser rate of 4 percent per year, along with a low inter-bank lending rate.

In spite of the desire to increase credit growth, banks are very careful in approving loan applications in order to keep away from bad debts. They are competing for potential customers, which results in a situation where strong companies are given a variety of choices while small businesses still cannot get a loan and are forced to borrow money at a higher interest rate.

According to an economic guru, banks are commercial organizations as well, so they are cautious in the decisions they make and desire profits for themselves. However, the issue here is that banks have already made profits while the rest have no support at all. Thus, small companies are facing bankruptcy lately.

Poor Kids Get Robbed of Private School Credit

The credit loan for poor children supplied by the federal government is being abused by some affluent families. The New York Times has unmasked this sully reality of breach in the tax education credit. The main intention of the credit was to supposedly provide for the less fortunate citizens to allow their children to avail private education. However, it has been a proven fact that it is now an avenue for parents of children who had availed private education to get the benefit for their children.

Only kids who have enrolled in public schools and the law were specifically crafted to differentiate “enrolled” and “attended”. According to the State Representative of Georgia, Mr. David Casas the law specifically used the word enrolled and not attending so that the scholarship could be availed by private school students.

In one of the meetings, parents were dubious of the idea and raised the idea as a scam. Once, a concerned parent questioned the law if it would qualify a student that has been attending a private school but also he enrolls in a public school just to avail the benefit. The child will be enrolled in two schools but he is attending the private school, the law only required the recipient to be enrolled in a public school and it said nothing about attending.

Though Mr. Casa reassured the parents that the program was not a scam, it is very clear that this requirement is a terrible idea and will blow up in the company’s faces in the near future. Currently, there are many programs like this that is operating across eight different states in the United States. The program costs $350 million of the states’ funds which has been paying for the education of students who attend religious schools and scholars for football.

The headmaster of the Covenant Christian Academy based in Cumming, Ga, Mr. Jonathan Arnold shares his dismay as he reviewed the names of current students who availed the scholarships.

Store Credit: Not Always A Bad Idea

High interest rates poses to be the disadvantage of store credit cards, this is according Consumer Reports Money Adviser in their May issue. However, if the card you got is from a retail store you shop in often then you can actually gain from the rewards.

First you have to know the difference of a debit card and a credit card, you should know what kind of card you are going to get. In some stores offer a credit card that is intended to aid in making costly purchases. Be firm with your decision; if you know that you will not need a credit card do not let the counter convince you into opening an account.

Once you get a card, you have to stick to it and pay off every monthly balance. These cards have high interest rates so if you have problems in paying off your current monthly bills then it would be wiser to just decline a card if it would just require you to struggle in even deeper debt.

Next, get a store card that meet you’re shopping needsfor example, the APR in Kohl’s card is lesser than that of Macy’s but it will not be very beneficial if you shop in Macy’s store more frequently. Some cards have rewards that great rewards but you have to be aware of other downfalls, like for example Costco and American Express’s  True Earnings Card that gives you 3% cash back for the first $3,000 purchases you make, then you will only get 1% cash back.

There are cards that also offer rewards and a sign-up bonus like the Amazon Rewards Visa Card. You get a $30 Amazon.com gift card that is accumulated in your Amazon account, and you get a lot of other perks like the three points for every dollar spent on Amazon.com. So always check the card thoroughly if it will really benefit you.

Cards can also help build credit for some people with the help from their credit financial intermediaries and banks. However, do not be unwise as to apply for a dozen credit cards by impulse. Opening many accounts at once could post a really bad deal in your credit score.

It’s is enough to get one card and focus on it, pay off its monthly balance, and take advantage of the perks and rewards. If you are successful in taking care of the credit card account then for sure you can be ensured that you will benefit from your entire store card.

Guaranty Bank Facing Guaranteed Loss

The ninth largest bank the Guaranty Bank has been facing a challenge with their financial status for five years now. The amount of their losses accumulates to about $20 million; this is according to their annual monitoring data.

By the end of the first quarter of this year, the bank had another loss of about $ 5.7 million. Furthermore, its capital which protects the bank from loss from its loans is quickly slipping away.David L. Donihue, a consultant from the bank said that they are currently facing a very hard phase.

But Doug Levy, the chief executive of Guaranty says that they are progressing into a better loan portfolio, and the bank is looking for more investors to uplift and recapitalize their finances.

The largest loss of the bank was back in September 2009 when many Americans were falling into the recession and there was massive unemployment. The losses amounted to about $ 52.3 million this is according to their Federal Deposit Insurance Corp. records. The bank has belonged to the Levy family for decades and so far no one has set their eyes on purchasing the estate from them.

During their second set or mortgages a major loss has been inflicted in the bank’s portfolio. The bank has about 160 branches in Wisconsin, Georgia, Michigan, Illinois and Minnesota. Most of the branches across these five states are found in grocery stores and operate in lengthy hours, which according to Donihue is expensive for the bank.

The Guaranty has increased another $10.6 million to its loan-reserves in order to cover for their doubtful-debt accounts.

Levy says that the bank still expects to eventually regain its loss from their loans. The recession and the financial crisis have made it compulsory for banks to have more capital.The chief executive said that Guaranty has been making efforts to retrieve their old status in their financials. They are dedicated in trying to make these efforts work, though Donihue admitted that it’s not going to be easy.