Mortgage Finance- Pending Risk Retention Rules

Back in October 2010, rumors began that there must be some way for the banks and brokers alike to share some of the risk retention liability for home loan financing i.e.; mortgage origination. There seems to have been little disagreement when the Dodd-Frank Bill was laid out during that time.  Regulations needed to focus on the seriousness of making all players in mortgage lending more responsible.  The retention liability has been stated as at least 5 percent share of each loan originated to be held with the institution originating the mortgage loan.  This gives them more incentive to originate performing loans with more emphasis on risk associated factors.

                        

It seems to have been some confusion in interrupting this Bill and those who hear these words: Regulation of Risk Retention should be very careful to read section 941 of the Dodd-Frank Bill (page 516).  This is from the MBA Summary:

Section 941 "Requires federal banking agencies and SEC to jointly prescribe rules requiring securities to retain economic interest of at least five percent of credit risk of assets they securitized. Regulations must include separate requirements for different assets classes, and may allocate the retention amount between originator and securities. HUD and the Federal Housing Finance Agency must participate in the rule making process for residential mortgage-backed securities (MBS) risk retention requirements."

That said the definition of what will make a loan qualify for the title of “qualified residential mortgage must be defined by the group of Federal Banking agencies, the commission, Secretary of Housing and Urban Development and the Director of the Federal Housing Finance Agencies; jointly. The agencies will take into consideration:

1) documentation and verification of financial resources used to qualify the mortgage      applicant

 2) what standards with regard to: residual income after all mortgage obligations, debt in relation to gross income, housing debt versus income

3) the shock of payments to income level on ARM loans where the interest rate will increase eventually 4) mortgage insurance requirements

5) loan types such as balloon, interest only, negative amortization, prepayment penalties and other features that present an added risk potential for default.

Now March 2011, FDIC has announced a set date of March 29, 2011 as a meeting to clarify exactly what a ‘Qualified Residential Mortgage’ is. Other agencies will follow to include the OCC, the Fed, HUD, SEC and the FHFA. Once all have issued their pass to the definition and who will be exempt from this rule; the final decision will be posted in the Federal Register.

Our final questions might be; will this really be of benefit to protect consumers or will there be some loophole which will be used by the entities to avoid retaining the 5 percent requirement?  Will this lead to the banks actually servicing parts of their portfolio when there is a specific need, as they already do? I guess at this point, we will just have to wait and find out exactly what the rules will be for the Pending Risk Retention Bill for mortgage financing after FDIC gives their definition of ‘Qualified Residential Mortgage.’

What is Whole Life Insurance?

Whole life insurance is a type of insurance that many people choose because part of the money you pay in premiums is invested and available for you to borrow against. It remains in effect as long as you pay your premiums, and once the amount is set, it remains the same for the life of the policy. You can also withdraw the money that is accrued. Keep in mind that it's probably best to withdraw the money only if it's really needed. If you take it out for unnecessary items, it won't be available when you truly need it.

                        

Different than Term Insurance

Whole life differs from term insurance. With term insurance, the policy runs for a specific period of time. When that term is up you have to renew the policy. If your health changes you may not be able to take out a new policy, or if you can, the price may be greatly inflated. Your premiums also rise as you age. A whole life policy is in effect until you pass away.

Better Value

For those just starting out, a term life insurance policy may be less expensive, but keep in mind when the term runs out you'll have to renew--you will not be covered. If your health hasn't significantly changed, you should be able to get a new policy, but more than likely the premiums will be higher. As you get older, the payments will go up accordingly, and if your health has deteriorated you may not be able to renew at all. That's why many people consider a whole life policy to be the better value in the long run. Once you're locked into a premium, it won't change for the duration of the policy. The whole life premium may be more at the beginning but as you and the policy mature the premiums remain the same while term insurance premiums will more than likely become higher than whole life payments.

Multiple Options

One reason a lot of people select a term life insurance policy is that there are few options to choose from. With a whole life policy there are a lot of alternative choices. If you're considering a whole life policy you should consult with a knowledgeable insurance agent. Have them go over your options in detail. If you don't understand what they're saying, ask them to explain again, and again, if necessary. It's your money and your life. Before signing a whole life policy, make sure you fully understand everything that's contained in the document. A good agent will work with you to ensure you're aware of what you're getting into.

Types of Whole Life Insurance

Among the types of whole life insurance are non-participating, participating, indeterminate premium, economic, limited pay, single premium and interest sensitive whole life. The names of these types of whole life policies may vary from company to company, and there are variations within each category. As you can see, it is a complicated selection of choices and that's why you should have professional help in determining what would be best for you. You may also want to consult with an accountant or tax attorney to see if there are any tax benefits from a whole life policy.

Reasons to Buy a New Car: From Deals to Tax Breaks

Very rarely does anyone actually need a reason to buy a new car, although changes in family size or occupation may sometimes be the exception to the rule. However, when you come down to it, people buy a new car because they want one, but if they can find a reason to justify it, they’ll certainly use it. Here are some of the most common reasons for replacing your current vehicle with a newer model.


                     

Tax Breaks

You may remember that in 2009, people who purchased new cars were given a tax break. For 2010-2011, this will apply to business equipment purchased between September 8, 2010 and December 31, 2011, and put into service within this same time. This includes cars, so if your car purchase qualifies as a business expense, you can receive a tax break. Your accountant or tax preparer can explain this in more detail.

If you don't fall into the above category, you can still find good reasons to buy a new car. These includes wanting to take advantage of the many deals that are being offered. These can range from rebates to discounts to other ways of lowering the price of your new car.

Taking Advantage of Deals

Other people may be taking advantage of financing opportunities, such as 0.0% interest for "well-qualified buyers" (as the advertisements word it), extended lease periods, longer loan terms, or other car deals. Any or all of these can be a valid reason for buying a new car.

Milestones

Commemorating milestones such as high school or college graduation, a job promotion, marriage, or any significant event can be another good reason for buying a new car. Children who are going off to college may really appreciate a good car, especially if they have a long commute, while those graduating from college may enjoy having received a new car to replace the one that served them faithfully all through high school and college.

Lifestyle Changes

As mentioned, a change in family size can warrant the purchase of a new car. This does not necessarily have to be an addition; "empty-nesters" may enjoy finally being able to get rid of "the bus," "the taxi," or whatever they have chosen to call the car that saw countless carpool and other chauffeuring duties and buy a smaller, even sportier, car.

A change in one's job can also be another reason. This does not necessarily have to come about just because you will be getting a salary increase; for many people, a promotion or other position change may mean a longer commute and it is just more economically feasible to buy a fuel-efficient car. If the commute is long enough, the savings in gas alone just might equal the car payment.

CONCLUSION

No matter what your reason is for buying a new car, you still want to do your research and determine exactly which car is right for you. After all, this may be the last time for a very long time that you get to buy a car, so make sure you’re happy with the one you buy.

Resource: Some great car deals are available here: http://www.edmunds.com/car-reviews/top-10/top-10-deals-of-the-month-cars.html

Some Tax Advice for Newlyweds

Tax season has started up, and now everyone is doing their best to get their financial records in order in time to send in their taxes. If you're a newlywed, however, this time of the year can be a little extra stressful, as you've got a new financial situation that you have to figure out before you send in your taxes. Here are a few bits of advice that could help you if you're one of the lucky couples out there!

                         
Talk it Over

After you get back from your honeymoon, it's important that you talk over your new financial situation. This is an important conversation to have because you need to understand how both of your financial histories will combine into one, especially if one of you has a bit of debt, like unpaid student loans for example. It's important that you both understand your financial goals as a couple, and it's important that you both agree on a financial plan. Whatever plan you arrive at will determine your approach to filing taxes this year.

Reassess Your Withholding Status

Next you and your new spouse should reassess your withholding statuses on each of your W-4 forms. You can shift the status from single or to married, or married but withholding at the single rate. How much you withhold will depend on more than simply what your marriage status is; other factors, such as your earnings or how many jobs you both have will affect your status. Be sure to follow up with a tax professional to help you with the specifics of this form. The important thing is that you have to reevaluate your W-4.

To File Jointly or Separately

This is probably the most important question you'll have to answer once it's time to send in your taxes: should you file jointly or separately? Even if you're married, you're still allowed to file separately; however, you should know that there are advantages and disadvantages to either option. For example, remember those unpaid education loans? If you file jointly, you might be able to take an education tax credit. Likewise, if your new spouse already has a child, you could receive tax credit as well if you file jointly. Before you make a decision, consult a tax professional if you can; he or she might be able to help you figure out the specifics.

Of course, these are relatively basic tips; you should definitely research further into each of them so you can get a better handle of your taxes. In any case, good luck and congratulations!

This guest post is contributed by Lauren Bailey who particularly enjoys writing about online colleges. Questions and comments can be sent to: blauren99 @gmail.com.

Some Debt Reduction Tips to Manage your Finances

In this economy, it's not uncommon to be struggling financially. Regardless of your financial status, there are things you can do to change your situation. By applying the following tips, you'll be on the right track to debt reduction and financial success.

                                       

1. Be honest with yourself.

Find out exactly where you stand financially, no matter how scary this seems. Write everything down on a piece of paper from how much you owe to your monthly expenses. Once you see everything on paper, it seems a lot less overwhelming.

2. Use cash.

Instead of using exact change when paying for things, break a dollar. Save the change in a glass container or milk jug. Place it where you can see it everyday, you'll be surprised how fast it adds up.

3. Have only one credit card.

Stop getting further into debt by using too many credit cards and applying for new ones. Use just one with a low limit and set this one aside for only emergencies.

4. Set a budget.

Put aside a certain amount of money each month for all of your expenses. Don't go over the budget, this includes money for groceries.

5. Stop splurging!

Cut down spending with everything from food to clothing. Don't just buy things because you have a coupon or the store is having a sale. A few dollars here and a few dollars there adds up to a nice chunk tucked away in a savings account.

6. Eliminate the unnecessary.

Sacrifices must be made to stay financially fit. Eating out, Cable TV and double-tall lattes are not necessities. If this is a challenge for you, use a calculator and add up these seemingly small expenses each month. You’ll be shocked at how much extra you are spending, money that could be saved.

7. Pay your bills on time.

Paying your bills on time prevents late fees and gives you the financial satisfaction of knowing they are paid. If you can't pay a bill on time, at least stay in contact with your creditor. These companies never refuse to take a little that day and work on a payment arrangement.

8. Get a calendar.

A calendar is an easy and inexpensive tool for keeping track of your finances. There is nothing more satisfying than seeing those giant letters reading “PAID” to remind you everyday that you are on the right track.

9. Sell some stuff. 

Clean out your closets and have a yard sale. Sell some of those never-watched DVDs you don't need. For big ticket items, set up a sale through Craig's List or Ebay. It's so rewarding to clean up the clutter that we simply don't need.

10. Stay positive.

This is so important to stay on track. Remember, even the deepest debt situations are repairable. With a positive attitude, patience and determination, your financial situation will drastically change for the better.