Mortgages & Refinancing

Home Equity Market Continues to Grow

Home equity, the largest segment
of the non-mortgage consumer lending space, continues to be a leading loan
product for many consumers.  TowerGroup estimates that the U.S. home equity
market could reach $1 trillion in value by year-end 2005.  This growth is
driven not just by overall market factors of rising home values and low
interest rates over the past decade, but insightful strategies executed by
financial services players dedicated to the category.
    Driven by the low interest rate environment of the past five years,
homeowners have looked increasingly toward home equity lines as "free money"
-- and have actively applied home equity loans to a broad array of purposes
beyond home repairs.  For many of these uses, the low interest rates and
potential tax deductions offered by home equity represent a better option than
using other forms of credit, tapping into savings, or simply not making a
given investment.
-from TowerGroup report titled, "Home Equity: What's Going Up, What's
Going Down, and What To Do About It"

Real-time HELOC & Loan Info

Informa Research Services, Inc., today announced an agreement to provide Metro Mortgage Guide (www.rateupdate.com) with a real-time feed of mortgage lending product data. Under the agreement, Informa Research Services will create and host a turnkey portal solution for Metro Mortgage Guide with live rate and product information on mortgage loans, less-than-perfect-credit loans, home equity loans, and home equity lines of credit.

Mortgages: The unlikely case for fixed-rate loans

WSJ's Mortgages: The unlikely case for fixed-rate loans

Thursday, February 24, 2005
By Ruth Simon, The Wall Street Journal

A surprising shift in interest rates is reshaping the landscape for home buyers and borrowers.

As the Federal Reserve has boosted short-term rates, it has become more expensive to take out adjustable-rate mortgages and home-equity lines of credit. Usually when short-term interest rates go up, long-term interest rates go up as well. But confounding many experts, rates on 10-year Treasurys -- the benchmark for long-term, fixed-rate mortgages -- have been edging downward or moving sideways.

The upshot is that ARMs are getting costlier while fixed-rate mortgages have been getting less expensive. And that means ARMs _ which can offer big savings over long-term fixed-rate mortgages _ are losing some allure. Currently, rates on one-year ARMs average 4.36 percent, just 1.35 percentage points below the 5.71 percent rate on 30-year fixed-rate mortgages.

As recently as last July, one-year ARMs were averaging more than two percentage points below 30-year fixed-rate loans, according to HSH Associates, financial publishers in Pompton Plains, N.J.

Some lenders are starting to see a shift in borrower preferences, as people begin to trade in short-term ARMs for fixed-rate loans or adjustables with longer fixed periods. At Wells Fargo & Co., the proportion of borrowers choosing fixed-rate loans has risen to levels not seen since last March. More borrowers are also opting for adjustables that are fixed for the first 10 years. Countrywide Financial Corp. says refinancing activity has been "exceptionally strong."

If long-term rates edge down much further, some mortgage analysts predict a refinancing boomlet. As many as 65 percent of borrowers could profitably refinance if long-term rates drop to 5.40 percent, says Dale Westhoff, head of mortgage research at Bear Stearns Cos.

.....

Usually long-term rates move up when short-term rates increase. Instead, just the opposite has been occurring. Rates for 30-year fixed-rate mortgages have been closing in on last year's lows of about 5.53 percent, though they rose slight last week.

....

Home-equity lines of credit, while still popular, are also losing some luster because they, too, are tied to rising short-term rates. Lou Barnes, a mortgage broker in Boulder, Colo., says he started getting calls from anxious borrowers just after Christmas. "People who got into a home-equity line 18 months ago with a 3 percent rate are now staring at 5.5 percent," he says. Home-equity lines of credit are typically tied to the prime rate, which has climbed to 5.5 percent from 4 percent in June.
(see wsj for full article)

NASD Alerts Firms About Liquefied Home Equity Concerns

Notice Reminds Firms That Using Home Equity for Investments Not Always Suitable

WASHINGTON, Dec. 8 /PRNewswire/ -- Concerned about the increasing number
of investors who are turning home equity into cash to make investments, NASD
today reminded regulated firms of their obligation to perform a careful suitability analysis before recommending such a strategy to an investor.
"Many homeowners have become wealthier -- at least on paper -- because of
escalating home values. And more of them than ever before are tapping into
their increased home equity to purchase securities," said NASD Vice Chairman
Mary L. Schapiro. "But turning equity into cash to make financial investments
isn't an appropriate strategy for many investors. That strategy poses
significant and unique risks, and failure to understand those risks could cost
them their biggest asset -- their home."
NASD spelled out its concerns and its recommendations to regulated firms
in Notice to Members 04-89: Liquefied Home Equity. In March, NASD issued an
Investor Alert on the subject, Betting the Ranch: Risking Your Home to Buy
Securities. In May, NASD issued a related Investor Alert on the risks
associated with pledging securities in lieu of a mortgage down payment, 100%
Mortgages: The Low Down on No Money Down.

The concerns outlined in the Notice to Members issued today include:

* The increasing use of home equity for investments. In addition to its
own observations, NASD cites a Federal Reserve Board study that found
that during the most recent period it reviewed -- 2001 through the
first half of 2002 -- 11 percent of the total funds from mortgage
refinancings were used for stock market and other financial
investments. That's up from less than two percent during the previous
period studied, 1998 through the first half of 1999. The average
amount of cashed-out home equity individuals used for investments also
increased substantially -- from "relatively small amounts" in the
1998-1999 period to more than $24,000 in 2001-2002. The average
amount used for investments was greater than nearly all other
categories, including home improvement.

* An investor may lose his or her home if the return on investments is
not sufficient to cover the new mortgage or line of credit
obligations. Or, if the value of an investment decreases, the
investor may need to sell his or her investments to protect his or her
home and limit further losses.

* Investors may fail to recognize potential conflicts of interest, such
as a broker's interest in generating commissions or fees on
investments from the cash proceeds of a refinancing or home equity
line of credit -- or the firm's interest in generating compensation
for itself or an affiliate for originating and/or servicing the new
mortgage or line of credit.

* Cashing out home equity may undermine the asset diversification
benefit of home.

The Notice to Members issued today recommends that, in addition to the
factors typically considered as part of a suitability analysis, regulated
firms also consider the amount of equity the investor has in his or her home;
the level of equity being liquefied for investments; how the investor will
meet his or her increased mortgage obligations; whether the new mortgage or
home equity loan is at a fixed or variable rate; the investor's risk tolerance
with respect to the funds being invested; the investor's overall debt burden,
and the sustainability of the value of the investor's home.
NASD's Notice to Members also includes "best principles" for disclosing
relevant risks and conflicts, including: the potential loss of one's home; the
fact that unlike other potential lenders, the recommending firm has an
interest in having the proceeds of the loan used for investments that may
generate commissions, mark-ups or fees for the firm; the recommending firm or
its affiliate may earn fees in connection with originating and/or servicing
the loan; the impact of liquefied home equity on the ability to refinance a
home mortgage, and the possibility that a change in home value could result in
negative equity in the home.
The Notice to Members also recommends that firms consider whether to
establish general standards for when a recommendation to invest home equity
proceeds should be prohibited -- for instance, when an investor wishes to use
home equity for particularly risky investments, or wants to withdraw home
equity above a specific threshold.
Investors can obtain more information about, and the disciplinary record
of, any NASD-registered broker or brokerage firm by using NASD's BrokerCheck.
NASD makes BrokerCheck available at no charge to the public. In 2003, members
of the public used this service to conduct more than 2.8 million searches for
existing brokers or firms and requested almost 180,000 reports in cases where
disclosable information existed on a broker or firm. Investors can link
directly to BrokerCheck at http://www.nasdbrokercheck.com. Investors can also
access this service by calling 1-800-289-9999.

Still Time to Get Tax Deductions

With mortgage rates remaining at 40-year lows, Goodrich said homeowners with large credit card bills may want to consider securing a home equity loan.

''If you have a lot of credit card debt, you might want to use a home equity line of credit to pay that off,'' she said, ''because that interest is tax deductible.''

The average 30-year fixed mortgage rate as of Tuesday was 5.38 percent, according to bankrate.com.
The one caveat to all these deductions is that taxpayers must be able to itemize their returns.

Taxpayers should always consult their tax adviser before making any tax decisions.

Home Equity Lines of Credit Stats

ARLINGTON, Va., Nov. 10 /PRNewswire/ -- About half (48%) of home equity lines of credit change when the prime rate changes, while others are adjusted on a monthly basis, according to the Consumer Bankers Association's 2004 Home Equity Loan Study, released today. Most (78%) line of credit rates are based on the prime rate as published in the Wall Street Journal, plus a spread over that index.

The average amount outstanding on lines of credit was $36,427, based on data as of June 30, 2004, virtually unchanged from $36,602 a year earlier. A .25% increase in the prime rate will increase the monthly payment on a $36,000 balance by $7.50 per month. The spread over the pricing index continues to shrink, to .59% from .85% a year earlier
More respondents (44%) report offering home equity lines with the ability to fix drawn portions, the "loan in line" feature, compared to 29% last year. That feature allows consumers to draw down a portion of their line at a fixed rate, for instance, for the purchase of a vehicle.
The average size of new home equity line of credit approvals increased to $77,526, a 12% increase over last year's average of $69,513, according to the study.

Home Equity Credit Line That Increases in Value

Very interesting concept - if you have any experience with this new home equity line of credit let us know about it in the comments.

U.S. Bank Rewards Customers with Home Equity Line That Increases in Value and Honors Loyalty
MINNEAPOLIS--(BUSINESS WIRE)--Oct. 21, 2004--U.S. Bancorp (NYSE:USB)

U.S. Bank is rewarding customers for creating long-term relationships with the bank by introducing a home equity line of credit that increases in value and is portable so customers don't lose that value if they move or refinance their mortgage.

"The U.S. Bank EquiLine Rate Reward is in stark contrast to the way banks have presented home equity products in the past. It truly breaks new ground in building customer relationships," said Trent Spurgeon, vice president of consumer credit at U.S. Bank. "We're starting with a low rate that gets even lower with time. No other bank is as focused on creating long-term value for the customer as U.S. Bank."

The customer opens the line of credit with an interest rate as low as prime. Every six months that rate decreases one quarter of one percent, up to one full percent below prime. If the customer ever needs to close the line, the reward that he or she has earned can be applied to a new home equity line at U.S. Bank. The U.S. Bank EquiLine Rate Reward program is available to customers who apply for a home equity line of credit now through November 12, 2004. Some restrictions apply.

The U.S. Bank EquiLine Rate Reward is available at all U.S. Bank locations, on the Internet at www.usbank.com or by calling 1-800-USBANKS.

Bank of America Disaster Equity Credit Line

Posting another Press Release, this one from Bank of America - they have a disaster relief program that may help by providing additional Home Equity Credit or Home Equity Line of Credit:

Bank of America Contributes to Relief Efforts for Hurricane Ivan
Friday September 24, 4:29 pm ET

Bank continues customer disaster relief program

CHARLOTTE, N.C., Sept. 24 /PRNewswire/ -- The Bank of America Charitable Foundation today announced a $150,000 contribution to the American Red Cross Disaster Relief Fund to assist victims of Hurricane Ivan.

"When disasters such as these recent hurricanes occur, the American Red Cross is there providing emergency shelter, food and counseling," said Andrew Plepler, Bank of America Charitable Foundation president. "We're pleased to help the American Red Cross meet the acute needs our communities are facing at this time."

With this contribution, Bank of America Charitable Foundation has contributed $515,000 to the America Red Cross Disaster Relief Fund to assist relief efforts in the aftermath of Hurricanes Charley, Frances and Ivan, and Tropical Storm Gaston.

Bank of America banking centers nationwide continue to accept from the public financial donations for the American Red Cross Disaster Relief Fund. Bank of America Disaster Relief for Customers:

Under its customer disaster relief program, Bank of America customers in Florida who have been affected by Hurricanes Charley, Frances and Ivan may be able to qualify for several product or loan programs. In addition, Virginia customers impacted by Tropical Storm Gaston residing or owning businesses in the city of Richmond, or Chesterfield, Hanover or Henrico Counties, may also use these programs.
* Borrow from $5,000 to $25,000 at preferential pricing below the current
rate and incur no fees or points with a special Bank of America home
equity loan program.

* Increase their existing Bank of America home equity line of credit up
to $25,000.

* Avoid bank withdrawal penalties on time deposits and existing Bank of
America Individual Retirement Accounts (IRAs).

* Qualified customers may receive emergency credit line increases and
special assistance on monthly payments on their existing Bank of
America Visa or MasterCard.

* Small businesses can enjoy similar benefits on both business and
personal loans.

* Customers needing assistance on existing consumer, home loan, or Small
Business Loans 1.800.831.5586, information about new business loans
1.800.360.5080 and information about the special home equity loan
program 1.800.900.9000.

The above loans are subject to credit approval and normal credit standards apply. These offers cannot be used in combination with other offers, and certain restrictions may apply. This program is available through October 31, 2004. Additional tax penalties may still apply to IRA withdrawals before age 59.

Texas Home Equity Line of Creidt (HELOC)

Interesting info about Texas Home Equity Line of Credit (HELOC) from this Wells Fargo Press Release:

Survey Shows Texans Using Home Equity Lines of Credit as Strategic Finance Tool; Still Many Need More Information About Home Finance Options

AUSTIN, Texas, Sept. 10 /PRNewswire/ -- September 13 marks one year since Texas voters passed Proposition 16, offering Lone Star state homeowners another option for access to and management of their finances through a home equity line of credit. To celebrate this important anniversary, Wells Fargo commissioned a survey of Texans on their knowledge and use of available home equity options.

The result of the survey, which included Texas homeowners with home equity line of credit accounts, showed that most respondents are using their home equity lines of credit to make home improvements (35 percent) or to consolidate bills (22 percent). When asked why they chose a home equity line of credit over a home equity loan, a majority (65 percent) said they did so either because of the line of credit's flexibility or lower interest rate

While home equity lines of credit have become a popular tool for some to pay for ongoing or unexpected expenses, a significant number of the Texas homeowners polled were unaware of some of the provisions that are unique to the state regarding home equity lines of credit.

"This research reinforces the importance of providing information to consumers on the many available home equity options," says Chip Carlisle, president for Wells Fargo in Texas. "Current and future homeowners could benefit from a better understanding of how to manage one of their largest assets -- their homes."

The study found that homeowners view home equity as a valuable financial resource. Survey participants were given a series of statements to which they were asked to rate on a scale of 1 to 10. Top mean responses included: "Utilizing the equity in one's home can be more economical than other forms of borrowing," "Home equity products provide a way to make smart use of one's own money," and "A home equity line of credit provides peace of mind."

Texas homeowners are conscientious about how they use their home asset, according to the survey. Almost all respondents (95 percent) said they would only use their home equity line of credit for major purchases and -- if they had the choice -- would never consider using it for everyday items such as gas or groceries.

While a majority of survey participants were aware of Texas legislation requirements regarding home equity lines of credit, a significant portion were not knowledgeable on some of the specific details. For example, nearly 40 percent of respondents were unaware that the maximum amount Texas homeowners can borrow under a home equity line of credit is 50 percent of the fair market value of their home or the amount of "available equity," whichever is less. (Available equity is 80 percent of the home's value less the balance of outstanding loans such as a mortgage balance.)

"As Texas homeowners become more educated on the options available to them, they will be better able to make important decisions regarding home financing," says Carlisle. "We know from talking with our Texas customers that consumers would like more information from their financial services companies to help guide them to which products can specifically meet their needs."

Home equity loans vs. home equity lines of credit

Home equity lines of credit can be a wise choice when compared to home equity loans, depending on how Texas homeowners will use the money. Traditional home equity loans are best for major one-time purchases such as a large remodeling project or a car, boat or recreational vehicle. Home equity loans feature a fixed interest rate and term, and are funded in one lump sum, therefore interest is charged on the full loan amount.

A home equity line of credit, which features a variable interest rate, is ideal for ongoing expenses such as education and medical costs, and home improvements. Because the funds are revolving, they can be drawn from the credit line at any time, up to the available credit limit without the need to reapply. A home equity line of credit is ideal for these types of expenses because it allows borrowers to use the amount they need, when they need it. Interest is charged only on the amount that is used.

HELOC, Home Equity Loans, Home Equity Line of Credit

Home Equity Loan Disaster Relief Program

Charles Schwab Bank Offers Hurricane Frances Disaster Relief Program

SAN FRANCISCO, Sept. 7 /PRNewswire-FirstCall/ -- Charles Schwab Bank today announced that it has made its Home Equity Line of Credit (HELOC) disaster relief program available to assist individuals and families affected by Hurricane Frances.

"We at Charles Schwab Bank want to provide immediate assistance to the families affected by Hurricane Frances," said Richard Musci, chief lending products officer. "Floridians have suffered a great loss, and at Schwab Bank we want to help those affected pick up the pieces of their lives and begin rebuilding as quickly and easily as possible."

The disaster relief program will offer up to $25,000, as either a new line of credit or an increase to an already existing line of credit. The HELOC is available on a primary or secondary residence, including residences that have sustained storm damage that normally would disqualify the property for a line of credit. The same program is being offered to victims of Hurricane Charley.

To apply for the Charles Schwab Bank HELOC disaster relief program, or to get more information, affected persons should call 1-866-375-6663.

In addition to credit underwriting requirements, the some criteria must be met by applicants in order to qualify for the Charles Schwab Bank HELOC disaster relief program.

HELOC, Home Equity Loans, Home Equity Line of Credit