Posts Tagged loan
For Landlords, the Numbers Are Starting to Look Better
Posted by Tetyana Matychak in Investing on March 5th, 2010
Home prices are falling, rents are tumbling, and apartment vacancies are rising. So why are thousands of small investors becoming landlords?
Because real-estate prices have fallen much faster than rents, the math of buying a rental has actually improved substantially in most parts of the country. Money invested in an apartment complex today typically generates annual returns of 7% to 8% right off the bat, up from less than 6% at the peak of the housing bubble in 2006.
If your property appreciates in value or rents rise, you could end up with double-digit annualized returns when you sell it. But higher returns usually come with higher risks. If you overpay for a rental property or you buy in the wrong market at the wrong time, you can lose a lot of money.
In general, landlords should pick communities where real-estate prices and rents appear to have nearly bottomed out, and jobs are stabilizing. Some of the best deals are in places like Fort Worth, Texas, or Columbus, Ohio, where prices never went wild. Markets like Las Vegas and Phoenix, both plagued by overbuilding, and Detroit, hurt by auto-industry woes, still look dicey.
But other markets like San Francisco or Chicago can still be attractive for landlords who find the right neighborhoods. Fred Bertucci, 50 years old, has been investing in small apartment properties in the Chicago suburbs since 1990. In August, he and his business partner, Kevin Moriarty, 54, bought a six-unit apartment house out of foreclosure for $280,000. It brings in about $25,000 per year in net operating income, he says, or about a 9% yield on the dollars invested. That’s up from roughly a 5% yield several years ago when prices were higher, he says. Read the rest of this entry »
The worst is yet to come
Posted by Tetyana Matychak in Budget, Favourites on February 17th, 2010
Over the next few years, a wave of commercial real estate loan failures could threaten America’s already-weakened financial system. So warns a new report from the Congressional Oversight Panel as part of its oversight of the Troubled Asset Relief Program, highlighting yet one more hurdle for this country’s fragile economy.
The panel, chaired by Harvard law professor Elizabeth Warren, says it remains “deeply concerned” that commercial loan losses could jeopardize the stability of many banks, particularly the nation’s mid-size and smaller banks. Read the 183-page report for yourself here.
Worries about CRE loans — those loans taken out by developers to purchase and maintain shopping malls, offices, hotels, and apartments — have been simmering for months, as we noted in an October article. See “How Banks Will Fare in a Commercial Real Estate Crash.”
The problems now plaguing commercial real estate have no single cause, and the panel notes that the loans most likely to fail were made at the height of the real estate bubble when commercial real estate values had been driven above sustainable levels and loans.
“[M]any were made carelessly in a rush for profit,” the panel said. Read the rest of this entry »
China vows to keep “hot money” out of property market
Posted by Tetyana Matychak in Investing on February 12th, 2010
China vowed on Sunday not to let foreign speculative investment affect the property market, the latest expression of official concern that real-estate prices are racing ahead too fast.
The directive from the State Council, China’s cabinet, will serve as a guideline for local authorities and ministries, including the People’s Bank of China and the China Banking Regulatory Commission, to work out detailed policies.
“Relevant departments must enhance monitoring of loans and cross-border investment to prevent illegal inflows of capital into the property market and to avoid the impact of overseas hot money on China’s real-estate market,” the cabinet said.
It said the central bank and banking regulator should step up oversight and “window guidance” of mortgage lending.
About one-sixth of China’s nearly 10 trillion yuan ($1.5 trillion) in new loans last year flowed into the property sector.
Concerned that a property bubble could stir social and economic instability, Beijing has vowed to combat overly fast price increases, although its moves to date, such as restricting sales tax exemptions, have been relatively mild. Read the rest of this entry »
Steps you can take to build credit, get a card
Posted by Tetyana Matychak in Banks, Favourites on January 19th, 2010
Gone are the days when credit card companies barraged you like a lovestruck suitor. Today, bruised by economic losses and consumer defaults, many credit card companies are spurning the customers they once wooed.
And if you’ve got a dinged-up credit score or no credit history, getting a new credit card is next to impossible.
We know one young man – a recent college graduate with a decent-paying job and no major credit dings – who’s been turned down for a credit card repeatedly, even from department stores like Macy’s.
“Credit is still tight, so issuers are not approving as many people with no credit or bad credit as they did 18 months ago when the economy was good,” said Bill Hardekopf, founder of LowCards.com. “It is a very big challenge for them.”
Those with bad credit have long had trouble getting credit cards or finding cards with affordable interest rates. Read the rest of this entry »
Look Who’s Peeking at Your Paycheck
Posted by Tetyana Matychak in Budget, Favourites on January 13th, 2010
You may think your income is private information. But the credit bureaus may have your number.
And starting in February, your income—as estimated by the bureaus—may be used to help determine whether you get a new credit card.
Tuesday, the Federal Reserve issued its final rules related to last year’s Credit Card Act, which, among other things, will require credit-card companies to consider an applicant’s income or assets and current debts before approving credit. To provide flexibility, however, the Fed said that issuers can use “a reasonable estimate” of income or assets based on “statistically sound models.”
In hopes of such a decision, the three big credit bureaus have been updating or rolling out products that seek to estimate consumers’ incomes, based on information in their credit reports, such as the size and age of their mortgages or the size of their credit limits.
The products also are responding to banks’ efforts to tighten credit standards in order to reduce losses and risk. “We look to fill in the blanks where they need the blanks filled in,” says John Cullerton, vice president, product management, for Equifax Inc., an Atlanta-based credit bureau. Read the rest of this entry »
New and improved mortgage forms
Posted by Tetyana Matychak in Banks on January 7th, 2010
Starting Jan. 1, new rules go into effect that simplify and clarify exactly what mortgage lenders will charge for a loan.
The initiative from the Department of Housing and Urban Development (HUD)requires that a new “Good Faith Estimate” form be given to all applicants, one that makes it easier to compare true costs of loans from different lenders.
“The main purpose is to give consumers the tools to be able to compare apples to apples,” said Robert Grosser of Luxury Mortgage, a New Jersey-based direct lender. “All lenders must use a specific form and disclose fees in the same spots on the same forms.” (See the new form.)
Until now, borrowers might have focused on interest rates or monthly payments to compare mortgages options. But fees play a big part in total cost, said Vicki Bott, HUD’s Deputy Assistant Secretary for Single Family Programs.
There are generally two blocs of fees. Read the rest of this entry »
Portfolio makeover: Is our big debt doing us in?
Posted by Tetyana Matychak in Budget on January 6th, 2010
Marc and Sharon LeRoux always dreamed of opening a business together. They took the plunge in 2006, tapping home equity to buy a franchise selling pre-made meals to busy families. Alas, the business failed, and last year the couple closed it down.
Fortunately, neither had quit their day jobs - Sharon is an engineer at Hewlett-Packard, Marc owns a specialty game store. But they still have $154,000 on a home-equity line of credit from the venture dragging them down. “Our income is very good, but we’re living paycheck to paycheck,” say Sharon. “And I’m sure we’re underfunding our retirement and our kids’ college.” (They are parents of Marie, 15, Nicole, 12, and Marc, 5.)
That debt is indeed an obstacle, says Salem, Ore. financial planner Ron Keleman. It eats up $1,000 a month. In spite of that, they’ve been keeping up with retirement, managing to stash away $12,000 a year. At that pace, says Keleman, they’ll have about $1.25 million by age 65, assuming a 7% average annual return (which they may be able to get if they build more growth into their portfolio).
The good news: That amount, along with Social Security, should be enough for their modest income goals. The bad news: They’ve been unable to start an emergency fund - savings that are essential in such uncertain times. As for college, they’re aiming to have saved a year of state-school tuition for each kid . While they can probably get there, wiping out the HELOC would allow them to cover even more. Read the rest of this entry »
Why Treasury Needs a Plan B for Mortgages
Posted by Tetyana Matychak in Banks on December 8th, 2009
AFTER months of playing pretend, the Treasury Department conceded last week that the Home Affordable Modification Program, its plan to aid troubled homeowners by changing the terms of their mortgages, was a dud. The 10-month-old program is going nowhere, the Treasury said, because big institutions charged with implementing it are dragging their feet.
“The banks are not doing a good enough job,” said Michael S. Barr, assistant Treasury secretary for financial institutions, in an article published last Sunday in The New York Times.
After the government spent hundreds of billions of dollars bailing out banks, the Obama administration rolled out the $75 billion loan modification plan to show its support for beleaguered homeowners. But if the proof of the pudding is in the eating, homeowners are going hungry.
A stalled loan modification plan might not be worrisome if the foreclosure crisis were abating. Yet at the end of September, a record 14.4 percent of borrowers were either in foreclosure or delinquent on their mortgages, the Mortgage Bankers Association reported.
It’s time for the government to acknowledge the flaws in its program and create one that might actually succeed. Only then will the supply of homes for sale, and the pressure on prices associated with that overhang, be reduced. Read the rest of this entry »
GM Cuts Losses—Plans Early Loan Repayment
Posted by Tetyana Matychak in Trading Markets on November 20th, 2009
Almost 90 days after coming out of bankruptcy, General Motors is showing signs of getting healthy and moving closer to getting back in the black.
And there’s no doubt, the “new” GM is doing far better than the old GM.
Cash flow was positive $3.3 Billion
Structural costs dropped $6.7 Billion
Starting next month, GM will repay $1.2 Billion of its $8.1 Billion in loans to the U.S. And Canadian governments
All encouraging signs. But critics will point out some other troubling signs at GM.
GM lost $261 before special charges
The company will have negative cash flow in the fourth quarter due to a number of factors, including the loan repayment.
All of which brings up the question: How much has really changed at GM? Read the rest of this entry »
Russian Banks Count Pigs
Posted by Tetyana Matychak in Favourites, Trading Markets on October 28th, 2009
When Russian billionaire Alexander Lebedev’s OAO National Reserve Bank seized collateral offered against a loan from a cash-strapped borrower, a health quarantine was slapped on the security: 40,450 pigs.
“We had a court decision to take away the collateral, which is the pigs,” Lebedev, 49, said in an interview in Moscow. The borrower, a farm near Samara on the Volga river, agreed “with the local authorities to establish a quarantine” against African swine fever. The former KGB officer is still waiting to collect the pigs offered against a loan of 100 million rubles ($3.5 million). A kilogram of live pig costs an average of 78.4 rubles, the National Meat Association says.
Russian lenders are seeking to recoup losses by accepting a range of collateral, including stakes in Wild Orchid, a lingerie retailer, and food store Mosmart. The banks have been hit by a surge in non-performing loans, which Moody’s Investors Service estimates may rise to 20 percent of the total by year-end. The bad debt threatens to stall bank lending and may jeopardize a recovery in Russia’s economy, which grew 0.6 percent in the third quarter from the second, the Economy Ministry says.
“It is not a viable strategy for a bank because banks aren’t doing their core business there,” Eugene Tarzimanov, assistant vice president and banking analyst at Moody’s in Moscow, said. “They could be stuck with those assets for a number of years.” Read the rest of this entry »
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Credit-Card Fees: the New Traps
26 February 2010
Credit regulations aim to help students
23 February 2010
The worst is yet to come
17 February 2010
Afflictions of liberty
8 February 2010
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