Mortgage Refinance Levels Reach High Levels as Mortgage Interest Rates Remain at Low Levels

According to the latest records from the Mortgage Bankers Association or more famously known as the MBA as of July. 20, 2012, the applications for mortgage loans have significantly grown by 0.9 percent compared to last week.

The tool used to measure the volume of the applications is the Market Composite Index, and the final result of last week’s mortgage loans has equaled to a 0.9 increase in the results of both the adjusted and unadjusted percentages compared to the previous week. The Refinance Index however, increased to about 2 percent this is the highest it has been since the April of 2009. The only results that have decreased are the Purchase Index which is being adjusted every season. The decrease has been noted at 3 percent, which is its lowest point since June of 2012.

Other results show that the refinance share for the mortgages has increased by 1 percent compared to the preceding weeks, the adjusted-rate mortgage or the ARM share is now 4 percent of the accumulated activities compared to the previous week as well.

The 3.74 percent average contract interest for a fixed mortgage rate has remained. This is the lowest it has been since the survey had begun. The points have also slipped to 0.43 from the previous 0.45 that included the origination fee in a loan-to-value ratio loan for 80 percent. Furthermore, the 30-year fixed rate has been under 4 percent since May 4 this year and the effective rate has also fallen from the previous week.

The 30 year fixed-rate mortgage loan’s average contract interest which is more than $417,500 has risen from 3.98 to 3.99 percent and its points have fallen from 0.32 to 0.28 with the origination fee for LVT loans offered in 80 percent rate.

The average contract interest rate for a 30 year fixed mortgage according to the FHA has fallen to only 3.52 percent which is the lowest it has ever been.

The Long-term Effects of Your Short-term Loan

When the financial status in the United States started to turn for the worse, three million sensible Americans went out to get a payday loan, and now because of that they cannot avail mortgage loans.

The status of the economy has gotten harder for the citizens that they would look for any way to get their hands on a loan when they need it. Mortgage loans are the most sought for by the masses, however the lenders are starting to become tight fisted when it comes to loaning to people who had availed payday loans, even if they had settled the accounts.

If you are planning to buy land or own any establishment, it just means you have to think it through before you get a loan. Though short-term loans or payday loans as many would call them are commonly availed by many, banks still refuse to approve loans from those who engage in the business.

Payday loan stores have been supplying their data to banks since the start of the year. The financial institutions will then refuse to give mortgages to the people whose names appear in the list. Employees are just expected to reject a customer even if he or she has good credentials.

According to Marc Gander, the founder of the Consumer Action Group; consumers are being kept in the dark by the institutions because they are not informed that getting a payday loan would ruin their hopes in purchasing a house.

Meanwhile, according to Keith Osborne, it is important to think really well if you need a mortgage loan in the future before you decide on taking on a payday loan for this will make you most unlikely to get one.

The spokesman of Consumer Finance Association, Mr. Richard Griffiths says that it is a unwise decision to base a costumer’s ability to handle a mortgage loan through his decision to apply for a payday loan.

A new hope for small businesses

After the financial crisis has broken in the United States in 2008, the larger banks have held the majority of the shares over small business loan markets. According to the Small Business Administration’s data, the market shares they held is slightly over 39 percent in  2005 and rose up to 39 percent in 2009. But these past two years have not been as good for these large banks as their shares fell to 38 percent last year.

Though it is currently still too early to tell whether the drop was due to the problem in the sales of the big banks, or if the financial state of the economy is going back to the way it used to be; but it is very good news for the owners of small businesses.  With the big banks losing their grip on the sales of the industry; this means that they no longer dictate who gets a loan and who does not.

It is no secret that your bank credit is your ticket to expanding your business. Almost one-third of businessmen come to banks for loan in hopes of making their business grow, this is according to the new Census data. Though businesses seem to have increased independence on credit cards, the bank loans are still much larger compared to credit card loans.

The value of loans in smaller banks has decreased by 19 percent between 2008 and 2011, and they greatly need to re-evaluate their market shares. But it is still easier for consumers to borrow from these banks compared to large banks because they do not focus on credit scores of applicants and the businesses’ financial statements and they can be open-minded to small businesses compared to big banks.

These financial institutions according to the 2004 Journal of Financial and Quantitative Analysis study are more reliant on the character and relationships of the applicants and business owners. Though big banks may have more perks when they loan money, but business owners would turn to small banks because more often than not, they would give the amount of money the business needs.

Lender Will Reject Mortgage Applications from Borrowers with Payday Loans

Applying for a payday loan can actually hinder the possibility of getting approved for a mortgage loan. In fact, GE Money Home Lending made a decision not to approved applications from borrowers with a background on recent payday loans. On the other hand, other lenders are still vigilant towards borrowers.

Although payday loans provide credit for a span of two to three weeks, it charges high annual interest rates. For example, a £100 loan might be charged with interest rate of between £20 and £30.

GE Money Home Lending will no longer approve applications of borrowers who have a payday loan in the last three months or who have had two or more payday loans in the previous year, even those who paid off their payday loans in full and on time.

This is because a lot of lenders perceive payday loans as an indication of financial difficulties. According to the spokesperson of GE Money, they assess a variety of data in order to make cautious decisions concerning mortgage lending, and that borrowers who have a current or previous payday loan will no longer be considered candidates for loans.

David Hollingworth from London & Country, a mortgage broker in Bath, Somerset, said that since having payday loans can mean the borrower is struggling from a financial problem, they are most likely seen as higher risks by the lenders.

Moreover, Brian Cole, chief executive officer of Capital One, said that having a payday loan, even if it’s already paid off on time, causes a negative impression on your credit report.

However, according to John Lamidy, chief executive officer of Consumer Finance Association, which is the organization for payday lenders, having a payday loan is not an indication that you are facing a financial trouble. Instead, it simply means the borrower needed a certain amount of money for a short period of time.

Payday Loan Campaign Failed to Abide to Rules

Last week, the political practices commissioner in Montana has said that he believe there were numerous problems in the reporting of financials behind a campaign that started out last 2010, which constrained payday loans.

Many of the voters agreed to the interest cap rate to be only 36% for the loans. This eventually led to the termination of several payday loan businesses and agencies. However, there was one owner that filed a lawsuit against the groups. He said that these groups never revealed their work on their campaign.

Jim Murry, a Commissioner in the state of Montana believes that there was reason to believe that the groups that started the campaign in 2010 may have broken some disclosure laws.

One of the groups, Cap the Rate was unable to reveal one of its labor union’s $5,000 contributions. They even filed disclosure reports late, twice.

The Commissioner further stated that there were several other groups who filed late because they have failed to thoroughly discuss their involvement in the labor unions.

Montana’s AARP failed to put“paid for” information in their website and it is among those complainants that have failed to disclose their involvement on time. The same mistakes were found to be made by the Montana Human Rights Network, Rural Dynamics, NeighborWorks Montana, Montana Women Vote and the Montana Community Foundation and Montana Women’s Foundation.

According to the commissioner the state would only impose penalties in these cases because there is enough evidence to prove that the groups have indeed breached disclosure reports.

The Human Rights Network believes that the findings of the office of the commissioner would be a good example to similar groups that would want to file the same complaints in social media sites like Facebook in the future. However, Travis McAdam firmly states that his group was able to report its financial spending during their 2010 advocate.