Archives for May 2009

Melrose Cooperative Bank is offering some of the best CD rates available these days especially for their shorter term certificate of deposits. The annual percentage yield on Melrose Bank’s three month certificate of deposit is currently 1.75 percent, more than double the national average for a three month certificate of deposit. The APY for six month certificate of deposits is the same as a three month CD. The minimum daily balance to earn these rates is $2,500.

The APY on one year certificate of deposits is currently 2.50 percent. 18 month and 2 year certificate of deposits also have an APY of 2.50 percent. Three year, four year and five year certificate of deposits all earn an APY of 3.00 percent. The minimum daily balance to earn these rates is $500.

Melrose was founded in 1890 and is based in Melrose, Massachusetts. The bank is chartered as a FDIC savings bank. Their FDIC Cert number is 26511. Deposits are insured up for $250,000 per account until the end of 2013.

Mortgage Rates: We have all seen rates offered as APY or APR. APY means annual percentage yield and APR means annual percentage rate. The different between the two is compounding interest. 

Compounding interest can be interest you earn on-top of interest you already earned, like on certificates of deposit. The more frequently interest is compounded the higher the APY will be.

On mortgages, the rate is interest you pay, just like on deposit products, the more interest is compounded the higher the APY will be. Though in this case you’ll end up paying more for a loan that compounds more often. Banks and lending institutions usually publish the APY or APR that makes the rate of return higher in the case of deposit products and lower in the case of loans.

When you compare mortgage rates from different banks make sure you are comparing apples to apples. To make it easier for consumers to compare mortgage loan interest rates, the federal government developed a standard format called an “Annual Percentage Rate” or APR to provide an effective interest rate for comparison shopping purposes.

For mortgage loans, banks usually will quote an APR  but when you are quoted a mortgage rate be sure to ask the mortgage broker or lending institution if the rate is the APR or APY so there are not any nasty surprises when you are about to close on a loan.

Tip: Before closing on a mortgage be sure to ask the mortgage broker, bank or lending institution to provide you a  HUD-1 statement. The HUD-1 will give you a statement of actual charges and adjustments. Having this information before hand will prevent any nasty surprises at the closing.

Wells Fargo is offering some competitive auto loan rates for new cars and used cars. The annual percentage rate (APR) on a new car loan from 12 months to 36 months is 6.54 percent. New car loans for 48 month loans and 60 month loans is currently 6.84 APR. The APR A 72 month car loan is currently at 7.39 percent.

Used car loan rates are a little higher. 12 months to 36 months used auto loans currently have an APR of 6.79 percent. The APR on 48 month auto loans and 60 month auto loans is at 7.09 percent. 72 month car loans currently have an APR of 7.90 percent. Wells Fargo provides used auto loans for cars purchased directly from dealers or individuals, some banks do not provide used car loans for person to person car sales.

Wells Fargo also provides refinancing for auto loans. The APR on refinancing an existing auto loan is currently the same as the APR for used auto loans. Auto loan rates will vary depending on your credit. The rates above are for a borrower with an excellent credit history. Wells Fargo will give discounts for an automatic payment setup and if you currently have a banking relationship with them. The discounts range from 0.25% to 0.75%.

Wells Fargo also provide auto loans for less than perfect credit. Rates will be higher if you have a lower credit score. The bank also offers a rate and payment calculator to help you determine the monthly costs of an auto loan.

The bank also provides loans for a wide range of vehicles including motor homes, campers, motorcycles, boats, ATVs, jet skis, boats and yachts, golf carts and planes.

Have you been sitting on the sidelines the past couple of years waiting for the housing bubble to deflate?

Are you tempted to take the plunge because prices have come down over the past couple of years and mortgage rates are near historic lows but you are still afraid to take the plunge?

Maybe you should think about the long term benefits of home ownership and the fact that you probably can afford a house you couldn’t afford a couple of years ago when prices were a lot higher and mortgage rates were also higher.

Don’t try to time a market bottom because you won’t be able to. Take advantage of the low mortgage rates and the $8,000 tax credit (if you qualify) for buying a home before December 1st, 2009.

Some housing markets have seen declines nearing 50 percent since the market peak. Even if you think housing prices have further to decline interest rates will probably be higher by the end of this year, making monthly mortgage costs higher, which will lower the price range of  homes you can afford.

Another benefit to home ownership is the tax benefits of owning compared to renting. Mortgage interest costs are tax deductible, further lowering your housing costs compared to renting.

Mortgage rates were driven higher this past week because bond yields rose on the hope that the economy will recover in the second half of 2009. Freddie Mac reported in their weekly mortgage survey that 30-year conforming fixed rate mortgages rose to 4.91 percent from 4.82 percent the previous week. 

15-year conforming fixed rate mortgages also rose this past week. Rates averaged 4.53 percent with an average 0.7 point, up from last week when it averaged 4.50 percent. Even though mortgage ratesrose this past week rates are still near historic lows.

The Mortgage Bankers Association reported mortgage delinquencies were 12.07 percent, a record in the first quarter of 2009. The MBA delinquencies survey includes mortgage loans that are in foreclosure and mortgages that are at least one payment past due.

The last piece of bad news is the Standard & Poor’s/Case-Shiller Home Price Indices showed Prices of single family homes fell 18.7% in March from a year earlier and prices in the first quarter dropped at a record pace.

The good news is the recession might end in the next six months or less so be sure to lock in those lower mortgage rates by refinancing your mortgage now, that is if you’re in a position to do so. As for certificate of deposit rates, don’t lock in long term CDs since rates will be higher at the end of the year if the economy rebounds.

CD Rates: Finding decent CD rates is challenging these days, when you factor in the rate of inflation the return isn’t as bad as it seems.

This week, 12 month CD rates are averaging just 1.41 percent. Factor in the rate of inflation, which has fallen 0.7 percent ( Bureau of Labor Statistics’ CPI-U) over the last 12 months the rate of return is a little better.

You can find 12 month CD rates higher than the national average of 1.41 percent which makes your return even better. Search MonitorBankRates.com for the best CD rates in your area.

As long as your investment returns are higher than the rate of inflation you will be in good shape in the long run, stuffing your money under a mattress is  never a good investment. Though I have to admit, last fall during those scary times when several large banks were failing the thought of stuffing my money under a mattress was very appealing.

Since the rate of inflation is down over the past 12 months your buying power has increased this year over last. $9,904.18 buys the same amount of goods and services in 2009 that $10,000 bought in 2008 ( CPI Inflation Calculator). The 0.7 percent decline in inflation is mainly due to a 25 percent drop in energy prices. Remove energy and food from the index and prices have actually gone up 1.9 percent. Though who doesn’t use food and energy? Outside of housing costs food and energy make up a big part of expenses.

When your certificate of deposit matures and you start searching those pathetic CD rates just think about the rate of inflation and the buying power of your dollars. You’ll probably feel a little better about the rate of return.

There are reports that the U.S. Government will provide up to $50 billion in new aid to help General Motors restructure. As a result, the government (taxpayers) will own 70 percnt of the restructured company.

The Unitied Auto Workers will own 17.5 percent and bondholders will receive 10 percent. There are also reports that retiree benefits will be cut immediately.

General Motors stock price has been all over the map today, at the day’s high the stock was up almost 30 percent. As of 3:00 pm, the stock price was only up 2 percent. A bunch of GM dealerships are also going to come up on the short end of the stick in any restructuring. Over the past few weeks GM announced they were dropping several brands and closing hundreds of dealerships.

GM is offering 0% financing on lots of their autos, particularly their larger SUVs. You can find 0% financing and cash back offers on GM cars including some Cadillac models, Buick models, Chevrolet models and others.

Longer term mortgage rates were mixed last week, 30-year mortgage rates were up while 15-year rates continued to go down.  The most pronounced decrease on 15 year mortgages was the 15-year jumbo fixed rate mortgage. Rates declined from 6.01 percent to 5.87 percent.

Earlier this month, 15-year jumbo rates were at 6.19 percent. 15-year conforming fixed rate mortgage were down only .02 percent to 4.53 percent.

30-year conforming mortgage rates were up to 4.90 percent from 4.84 percent, the highest increase recently but still below the five percent which we last saw May 6th when rates were at 5.02 percent. Average rates on 30-year jumbo fixed rate mortgages were at 6.18 percent up from 6.12 percent the previous week.

Shorter term adjustable rate mortgages were also up this past week with the exception of a one year conforming ARMs, down to 4.80 percent from 4.82 percent and jumbo ARMs which were down to 5.64 percent from 5.74 percent. Average rates for conforming 3/1 ARMs were 4.77 percent up from 4.70 percent. Jumbo 3/1 ARMs averaged 5.58 percent up from 5.52 percent.

Average rates on interest-only adjustable rate mortgages also increased. 5/1 conforming interest-only ARMs averaged 4.59 percent, a big jump up from 4.45 percent. Jumbo 5/1 interest-only ARMs averaged 5.83 percent, up from 5.70 percent. 7/1 conforming interest-only ARMs averaged 5.22 percent, up from 5.10 percent. 7/1 jumbo interest-only ARMs averaged 6.34 percent up from 6.30 percent.

To find the best mortgage rates in your area use MonitorBankRates.com Mortgage Rate Tables

CD rates continued their decent this past week. From three month certificate of deposits to five year certificate of deposits all were down slightly.

Will we ever see an uptick in CD rates? It’s hard to imgine an increase in CD rates these days but yes, some day we will start to see rates go up.

Hopefully by the end of this year or early in 2010. Which is why we still recommend sticking to shorter term certificates.

12 month CD rates averaged 1.42 percent, down from 1.44 percent. There are12 month certificate of deposit rates well above the national average, right now Ally Bank is offering a rate of 2.76 percent for a 12 month CD. 24 month certificate of deposits averaged 1.78 percent this past week, down from 1.80 percent. UFB Direct is offering a 2 year CD that currently has a annual percentage yield of 2.65 percent, about the national average.

Three year CD rates averaged 2.05 percent this past week, down from 2.06 percent from the week before. Three year average rates are not that much higher than two year CDs or one year CDs. If you still are looking for a three year CD, PenFed is offering an annual percentage yield of 3.50 percent for a three year certificate of deposit.

Four year certificate of deposit rates and five year certificate of deposit rates averaged 2.43 percent and 2.48 percent this past week. Down from the prior week’s average of 2.25 percent for a four year CD and 2.49 percent for a five year CD. PenFed credit union is also offering four year CD rates above the national average, PenFed’s four year CD currently has an APY of 3.75 percent and their five year CD currently has an APY of 4.00 percent.

As for shorter term CD rates, three month CDs averaged .83 percent, down from .85 percent the previous week. Six month CDs averaged 1.14 percent, down from 1.15 percent the week before. Ameriprise Bank is offering an APY of 2.00 percent for a three month CD. AIG Bank is offering an APY of 1.91 percent for a six month CD.

Bank of America will give you $50 for opening a personal checking account. This checking account deal is good until June 30, 2009. You can open a checking account online or at a Bank of America branch location. When you open the checking account be sure to use promotional code AOU261208.

Also be sure to hold onto this offer code. MonitorBankRates.com has heard reports in the past of people not receiving their promotional money and being asked for the promotional code again months later to receive their promo money. This has happened to several different people with several different banks.

The minimum opening deposit to qualify for this offer is $100. This checking deal doesn’t apply to second or multiple checking accounts and/or existing checking customers. Student checking accounts are also not eligible for this offer. Bank of America will report the $50 to the IRS on Form 1099.

As with most checking account promotional deals, the interest rate is the worse part of the deal. The checking account interest rate is 0.05 percent.If you chase this checking deal for the $50, be sure to deposit the minimum of $100 but don’t deposit to much money because you’ll lose out on the interest rate.

Bank of America $50 checking account offer Application

Reverse Mortgages are designed for homeowners age 62 and over that allow them to withdrawal the equity in the home for any purpose. A reverse mortgage also allows them to stay in their home while receiving payments and not have to make any monthly mortgage payments on those payments received.

To qualify for a reverse mortgage both you and any co-borrower must be at least 62 and the home must be your primary residence. There are no income restrictions or credit restrictions to qualify. The home also doesn’t have to by paid off to qualify. Though loan amounts are capped based on the loan type and the county you live in.

Closing Costs on a reverse mortgage can be as much as closing costs on a conventional first mortgage. There are also fees to service the loan and Federal Housing Administration (FHA) insurance that has to be paid. Closing costs can be rolled into the loan keeping out of pocket expenses low. Though rolling the costs into the loan will also lower the amount you can take out and the monthly amount you will receive if you elect a monthly payment method.

You can receive your payments in monthly installments for a fixed number of years. You can receive a lump sum payment. You can also use the reverse mortgage as a line of credit and withdrawal funds when you need them.

A reverse mortgage is repaid when you permanently leave the home or when you sell the home. If you pass on, your relatives (estate) have the choice of repaying or refinancing the loan with a conventional mortgage or selling the home and using the funds to payoff the reverse mortgage.

A Health Savings Account (HSA) is designed to give you an alternative to the rising costs of health care. With a health savings account you can contribute all for a portion of your health plan deductible info a tax-advantaged savings account with certain limits.

Another great benefit to a HSA is your dividend earnings are tax-free and funds remain tax-free as long as you use them to pay for qualified medical expenses. Qualified medical expenses can also include medical expenses that your health care plan doesn’t cover. Distributions (withdrawals) made that are not for qualified medical expenses prior to age 65 are subject to taxes and a 10 percent penalty.

To qualify for a HSA you need to have health care coverage under a high-deductible health care plan (HDHP). You cannot be covered by another health plan, this doesn’t include dental or vision plans. You also can’t be claimed as a dependent on another person’s tax returns or be entitled to Medicare benefits to qualify for a HSA.

Funds in the HSA that are not used in a particular year can be rolled over into the following year allowing your funds to grow annually to save for future medical expenses.

The Internal Revenue Service (IRS) imposes a penalty on excess contributions made into a HSA, but under certain circumstances allow for corrective distributions to be made. You also have to pay taxes on any dividends earned on those excess funds.

If you stop participating in a high deductible health care plan you can spend any funds remaining in your HSA to pay for qualified medical expenses but you can no longer contribute any new funds into the HSA.

Federal Deposit Insurance Corporation (FDIC): Depositor insurance protection for up to $250,000 per depositor was set to expire at the end of this year and revert back to only $100,000 in FDIC insurance protection per depositor.This past week that coverage was extended until the end of 2013. They should have made the change permanent, why stop at 2013?

On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except IRAs and other certain retirement accounts, which will remain at $250,000 per depositor. The new law also gave the FDIC the authority to borrow money from the U.S. Treasury if needed. The FDIC’s reserve fund to cover deposit accounts has shrunk because of the failure of so many banks this past year.

You are not limited to only $250,000 in FDIC coverage at a particular bank. You have coverage based on they type of account. Here are the limits. 

• Single Accounts (owned by one person) $250,000 per owner
• Joint Accounts (two or more persons) $250,000 per co-owner
• Certain Retirement Accounts $250,000 per owner 

Another FDIC program, the Transaction Account Guarantee Program, provides depositors with unlimited coverage for non-interest bearing transaction accounts if their bank is a participant in the FDIC’s Temporary Liquidity Guarantee Program.

By Jeffrey Long, Allstate Personal Financial Representative

If you are tired of the rock and roll of the stock market, your IRA is maxed out, and safety and security have become your investment watchwords, then annuities may be the right financial product for you.

What is an annuity? Quite simply, it is a contract between an individual and an insurance company that promises an income stream – now or in the future – for an investment of monies.

Some Basics

There are two main categories of annuities – fixed and variable. With a fixed annuity, you will get an interest rate set by the insurance company.  With a variable annuity, you can choose among different sub-accounts, which provide a variety of underlying investment options, including stock and bond funds.

There is flexibility in how the annuity is structured – either deferred or immediate. A deferred annuity begins payout at a future time, whereas an immediate annuity begins payout immediately or within one year of issuance.  You can also annuitize a deferred annuity.

Deferred annuities have two phases – accumulation and pay out, sometimes referred to as distribution. The accumulation phase can be set up either with a lump sum or through a series of deposits over time. Moreover, annuities can be paid out in several ways: lump sum withdrawal, partial withdrawals as needed, or as a regular income stream.

Furthermore, unlike other savings plans, there is no government prescribed annual limit on contributions. This aspect may be especially helpful for people who do not have an employer-sponsored retirement plan, those who have maxed out their IRAs and workplace savings plans, and/or anyone getting a late start on retirement savings.

An important benefit of annuities relates to taxes. Currently, annuities allow the owner’s money to grow tax-deferred until it is distributed. However, distributions taken prior to annuitization are generally considered to come from the gain in the contract first.  If your contract is annuitized, a portion of each payment will be considered taxable and the remaining portion will be a non-taxable return of your investment in the contract, which is also called the “basis.” Once the investment in the contract is depleted, all remaining payments will be fully taxable. If the contract is tax-qualified, generally, all payments will be fully taxable.  Distributions prior to age 59 ½, may be subject to an additional 10 percent federal tax penalty.

Below is an overview of fixed and variable annuities. For more specific information about how annuities are structured and how they can fit into your investment portfolio, please talk to a financial professional.

Fixed Annuities – The Less Risky Alternative

The most easily understood annuity product is a fixed annuity, which – depending on its structure – can promise you a guaranteed lifetime income, regardless of how long you live. Factors including the amount of money deposited, the payout option chosen, and crediting rates will determine the payment amounts, which may or may not be enough to meet your income needs.

The main advantage of this product is its relative safety, which depends on the claims paying ability of the company you buy the annuity from. Your principal (initial contribution) will not diminish over time, unless you withdraw it. It may also provide a reliable (if conservative) rate of return over the life of the contract. These contracts generally offer a choice between various guarantee periods, with one, three, five and six year guarantees being most common.

In addition, there are fixed annuity products that can provide investors with a higher rate of return forbearing interest rate risk associated with changing interest rates, if they take withdrawals prior to the end of a guaranteed period. These are called market value adjusted annuities and generally have crediting rate guarantee periods ranging from five to 10 years. Other annuity products tie the crediting rate to external market indices, like the S&P 500 or the 5-year Treasury rate.

As you can see, fixed annuities come in many different variations to suit the diverse tastes of individual investors. While fixed annuities are considered the safer annuity product, please remember that fixed annuities are subject to the claims paying ability of the issuing insurance company.

An indexed annuity earns interest on the potential upward movement of an index, often one based on a certain basket of equities and in some cases, the treasury interest rate. Indexed annuities also typically feature a minimum interest rate. This rate serves as a “safety valve” by providing growth even when the market performs poorly. Indexed annuities are a popular option for people who want greater growth potential than that offered by a standard fixed annuity but do not want the investment risk of a variable annuity.

Variable Annuities – Little Known Benefits

If you are willing to take on more risk, then variable annuities may be right for you.

While benefits and security are not nearly as straightforward as those for fixed annuities, variable annuities still offer several benefits to investors that traditional equity products may not.

You can allocate funds between several investment options called sub-accounts, and reallocate funds periodically among sub-accounts without tax penalties. You may even be able to allocate a portion of your investment to a fixed account option. Also, like fixed annuities, earnings are tax-deferred.

Another advantage of this annuity product is that there are no initial sales charges, however, there are surrender and contract charges.  Generally, annuities are no-load investments. This allows more of your money to be invested rather than to pay sales charges.

Moreover, deferred variable annuity contracts (fund now-payout later) usually include a death benefit if the accountholder should die during the annuitzation phase of the contract.

Variable annuities can also offer minimum accumulation benefits, depending on the product’s features. However, there is a cost associated with this feature.

A prospectus is the most important source of information about a variable annuity’s investment options. It’s important to keep in mind that variable annuities are designed to be long-term investments and substantial charges may apply if you withdraw your money early.

Considering Annuities

Is an annuity right for you? The answer may depend on your individual financial situation and savings goals.

In any event, do your homework before you invest and ask for the assistance of a financial professional, who can help you match the right product to your needs.

Mortgage Rates: Earlier today Freddie Mac released it’s Primary Mortgage Market Survey showing mortgage rates mostly falling again this past week. The average rate for 30-year conforming fixed rate mortgages was down to .482 percent with an average of 0.7 point. Rates were closer to 6 percent last year at the same time.

Average mortgage rates for 15-year conforming fixed rate mortgages were at 4.50 percent with an average of 0.7 point. Down from last week’s average mortgage rate of 4.52 percent. Last year at this time 15-year mortgage rates averaged 5.55 percent.

Five-year adjustable rate mortgages averaged 4.79 percent this week, with an average 0.6 point, down from last week’s average of 4.82 percent. This time last year average mortgage rates on five-year adjustable rate mortgages were 5.61 percent.

One-year adjustable rate mortgages were the only average rates that increased this week from last. Average rates on one-year ARMs are 4.82 percent this week with an average 0.6 point, up from last week when it averaged 4.71 percent.

Freddie Mac vice president and chief economist Frank Nothaft had the following comments.

“Long-term fixed-rate mortgage rates have remained below 5.0 percent for the past 10 weeks as the U.S. Treasury and Federal Reserve (Fed) act to keep interest rates low through security purchases. The Treasury purchased $136 billion in mortgage-backed securities through April and the Fed bought $740 billion through mid-May. In addition, the Fed purchased $115 billion in Treasury bonds since March of this year.”

“Housing construction continued to decline, as total starts fell to the lowest level since the Census Bureau began its monthly series in January 1959. While single-family construction appears to be near or at a bottom, multi-unit construction continued to recede. Reflecting the apparent stabilization in single-family construction levels, homebuilder confidence rose in May to the highest level since September 2008 and represented the first back-to-back up tick since February 2008.”

Ally Bank CD Rates: Ally Bank, formerly, GMAC bank is offering a 9 month CD rate of 2.47 percent that currently has an annual percentage yield of 2.50 percent. Ally Bank’s traditional 9 month CD rate is just a little higher at 2.57 percent with an annual percentage yield of 2.60%

The no risk certificate of deposit and the traditional certifcate of deposit have some of the best CD rates around for a 9 month CD. In fact, the 2.50% APY and 2.60% APY are higher than most 12 month CD rates. Those rates also beat the average rate on a 5 year CD which is currently 2.48 percent this past week.

This certificate of deposit is it’s a no risk CD. Meaning you can withdrawal your money without incurring an early withdrawal penalty. Though you have to withdrawal your funds within the first six days of funding your account. Other features include interest that is compounded daily and the CD account can be opened with no money deposited. Though what is the point of opening an account without depositing funds into it?

Money market account rates and savings account rates are dismal these days. The average rates for all account balances are under one percent. You can find promotional money market accounts and savings account rates that are a lot higher than the average rates.

The average money market account rate - savings account rate is .70 percent for balances of $50,000 or more. Currently AIG Bank is offering an annual percentage yield of 2.06 percent. Almost three times the national average.

Average rates on money market/savings account rates for balances of $25,000 is .63 percent this week. Higher rates are available, Nationwide Bank is offering an annual percentage yield of 2.15% for balances of $25,000.

Rates on lower balance money market accounts/savings accounts are running at .54 percent for balances of $10,000 and .44 percent for balances of $2,500. Higher rates can be found for balances of $10,000, AIG bank is offering an APY of 2.01 percent and Nationwide Bank is offering an APY of 2.15 percent. For balances of $1,000, Bank of Internet is offering an APY of 2.06 percent.

Use our money market/savings account search engine to find the best rates in your area.

The credit card reform bill which was passed by the Senate yesterday is supposed to help protect credit card holders from unfair practices by banks and credit card issuers.

Now there is talk that the new bill  will hurt credit card holders who have good credit and payoff their credit card bills every month.

Banks and credit card issuers have been saying that they have to make up for lost revenue if those erroneous fees and practices are curtailed or restricted. They say they will have to cut back on rewards programs, start charging annual fees for all credit cards and perhaps even begin charing interest immediately after a purchase is made.

Hey, wait a minute, how can this be? Is Washington passing laws again that hurt consumers instead of protect consumers? Not likely! Credit card issuers were probably just throwing idle threats around trying to water down and limit the new regulations.

Considering that tax payers had to bailout the banking industry recently, banks and credit card issuers really don’t have much sway in Washington these days to limit the new laws, though they did succeed in blocking a 15 percent interest rate cap on credit cards.

Most of the threats are unlikely to come to fruition. Can you imagine anyone who pays off a credit card bill every month using a card that would incur interest charges the minute they make a purchase? Not me. I would close my account and shred that card right away.

At this point, most of my credit cards do not have annual fees. If issuers starting charging annual fees I would close several of those accounts. If you’re like me, you probably have more credit cards than you actually use. I prefer to stick with a card that offers the best rewards program, while the others sit unused in a drawer.  Closing several accounts at once could negatively impact your credit score, especially with cards you had the longest. If possible, I would gradually close accounts over time to limit the hit to your credit score.

As for rewards programs, that’s one of the ways credit card issuers attempt to differentiate their cards from other cards. Even with the new credit card laws in place, competition is still fierce for consumers with good or excellent credit. Banks and issuers make a ton of money charging merchants fees when consumers use cards. Fees can range between two percent and five percent, plus a charge for each transaction.

$8,000 First-Time Home Buyer Tax Credit for Down Payments on FHA Loans? The Department of Housing and Urban Development (HUD) account last week that first time home buyers would be able to use the $8,000 “first-time home buyer tax credit” for down payments on FHA loans through the use of bridge loans.

The Department of Housing and Urban Development posted the information on their website in HUD Mortgagee Letter 09-15. For some reason they have completely removed the information from their website. People are speculating that the program is on hold because they have decided to make changes to the program.

While no official explanation has been given, it appears that The Department of Housing and Urban Development and the Internal Revenue Service are researching the details of the program, leaving the status unknown for now.

Mortgage rates were down this past week for the most part, jumbo fixed rate mortgage rates were down less than conforming fixed rate mortgages.

Search for Mortgage Rates Here

Adjustable rate mortgages were also down, conforming adjustable rate mortgages were down more than jumbo adjustable rate mortgages. Jumbo rate mortgages are still a lot higher historically than conforming mortgages. We expected to see jumbo rate mortgages to come down more than conforming mortgages but that hasn’t happened yet.

The average rates on 30-year conforming fixed rate mortgages came down to 4.84 percent from 4.95 percent. While jumbo 30-year fixed rate mortgages were only down 0.05 percent to 6.12 percent from 6.17 percent. 15-year conforming fixed rate mortgages came down to 4.55 percent from 4.62 percent. The average rate on 15-year jumbo mortgage rates was pretty much unchanged at 6.01 percent from 6.02 percent.

Average rates on 7/1 conforming adjustable rate mortgages is now at 4.84 percent down from 4.95 percent. The average rate on 7/1 jumbo ARMs is at 6.14 percent from 6.17 percent. Average rates on 5/1 conforming ARMs is now under 4.50 percent at 4.39 percent, a big drop from 4.52 percent. Average rates for jumbo 5/1 ARMs is 5.38 percent down from 5.43 percent. Conforming 1-year ARMs averaged 4.82 percent down from 4.88 percent. Average rates for jumbo 1-year ARMs is now at 5.74 percent up from 5.70 percent.

Interest only adjustable rate mortgages were also down this past week. The average rate on 5/1 conforming interest only ARMs is now under 4.50 percent at 4.45 percent.  Average rates on Jumbo interest only 5/1 ARMs are still a lot higher at 5.70 percent. Average rates on 3/1 interest only conforming loans is at 4.81 percent down from 4.92 percent. Jumbo 3/1 interest only loans now average 5.64 percent down from 5.70 percent.

Average rates on a home equity line of credit (HELOC) was unchanged at 4.74 percent. The average rate difference between a 10-year and 15-year home equity loan is still over 3 percent. Average rates on a 10-year home equity loan was also unchanged at 4.68 percent. The average rate on a 15-year home equity loan was also unchanged at 7.81 percent.

CD Rates continued to go down this past week, all average certificate of deposit rates are paying less than the week before. The declines were small since the average rate on all CD terms are so low these days.

The average CD rate for a 5-year CD is now under 2.50 percent at 2.49 percent. You can find 5-year CD rates well above the national average at some banks, AIG is offering a 5-year CD yield of 3.31 percent.

The average 4-year CD rates declined to 2.25 percent, down from 2.26 percent. As with 5-year CD rates, you can find rates well above the national average for 4-year CD rates, PenFed is currently offering a yield of 3.75 percent. The average rate of 3-year certificate of deposits is nearing 2 percent at 2.05 percent. Discover Bank is offering a yield of 3.20 percent for a 3-year certificate of deposit.

2-year certificate of deposit rates are averaging 1.80 percent, down from 1.82 percent. Tennessee Commerce Bank is offering a 2-year CD yield of 2.85 percent. 18-month CD rates are averaging 1.58 percent. 12-month CD rates are averaging 1.44 percent. AIG Bank is offering a 12-month CD yield of 2.41 percent.

Shorter term CD rate averages were also down, though we still recommend sticking with shorter term certificate of deposits since longer term rates are also very low and you don’t want to lock into longer term CDs at these rates.   6-month CD rates are currently averaging 1.15 percent and 3-month CD rates are averaging .85 percent.

Having homeowners insurance or renters insurance is a must if you want to protect yourself from making a bad situation worse in the event of a fire, theft or some other damage to your property.

Taking inventory of the possessions in your home is essential to making sure you have adequate insurance coverage.

Inventorying your possessions is a time consuming process but once you have a list of all possessions you only need to update it every year or when you make a large purchase. It’s best to take inventory room by room and keep a categorized list of each room. The list should also include inexpensive items, you would be surprised how quickly those items add up to a big cost if you need to replace everything at once.

When you go around your home to take inventory also take photos or a video recording of all items. Make your list a very detailed list, include item sizes.  For example, 47 inch Sony LCD flat panel T.V. instead of large T.V. Be sure to include jewelry items, you can get a rider on your home owners insurance policy for these items.

The Insurance Information Institute (iii.org) offers free online home inventory software.  The “Know Your Stuff” software is easy to use and allows you to record items by room, purchase price, date purchased, serial number information and allows you to upload photos.

Now that you have a detail list with photos or video recordings don’t store the list in your home (if you’re not using iii.org) . Keep the list in another home, safe deposit box, with a family member or with someone else you feel comfortable knowing how much your processions cost you.

Are you ready to start comparision shopping for the best home owners insurance rates? You can start your search right here using MonitorBankrates.com’s home owners insurance rate tool.

Get home owners insurance rate quotes here

AirTran is offering their A+ Visa Signature Credit Card with a free round trip. All you have to do to earn the free airfare is use the A+ Visa Signature Credit Card once and you earn10 A+ rewards credits which you can use fora one-way ticket. To earn the return trip all you have to do is a balance transfer to the A+ credit card and you earn an additional 10 a+ Rewards points. Airtran defines a trip as one take-off and one landing.

Some other benefits of this credit cardis a 0% annual percentage yield on balance transfers for the first six months. Earn two points for every one dollar spent on AirTran Airways travel. One point for every one dollar spent elsewhere. One point for every one dollar in balances transferred. There is a $39 annual fee.

The A+ Visa Signature Credit Card is offered through Barclays Bank. Each 1000 points earned on the credit card is worth 1 credit with AirTran Airways. A+ Rewards credits expire two years after their posting date as indicated in the online account rewards summary.

Use our credit card search engine to serach for other airline credit cards.

Credit Card Search Engine

Bank of America is offering some of the best mortgage rates available these days. For a single family home purchase in Dallas, Texas we were offered a 30-year fixed rate conforming mortgage at 4.875 percent with one discount point. The annual percentage rate on this mortgage qoute is 5.005 percent. The total lender fees were $9,386.00.

For 15-year fixed rate conforming mortgage we were offered a rate quote of 4.625 percent, with an annual percentage rate of 4.849 percent and one discount point. Not much lower than the annual percentage rate on the 30-year fixed rate mortgage. Closing costs on this loan also amounted to $9,386.00. Even though the APR is almost the same as a 30-year mortgage the real savings is being able to pay your mortgage off in half the time. 

For a 5-year adjustable rate conforming mortgage we were offered a quote of 3.875 percent, with an annual percentage rate of 3.99 percent and one discount point. The mortgage closing costs on this loan is the same as the fixed rate mortgages. Surprisingly we were also offered an interest only 5-year adjustable rate mortgage, most banks are not offering interest only mortgages these days. The rate, APR and discount points on the interest only loan is the same as the 5-year ARM.

With an interest only mortgage your monthly mortgage payments are about $600 lower but you won’t be paying down principal which can be dangerous in the long run. We were also quoted a 3-year ARM with a rate of 4.375 percent and an APR of  4.114 percent. One point and the same closing costs.

These rates are as of 5/15/09, check Bank of America’s website for more recent rates in your area.

Credit Card reform has been a major topic in Washington this year and Congress is on the verge of passing legislation that will benefit consumers.

The banking industry has been fighting hard to limit the changes by watering down the legislation. In President Obama’s Weekly Address, he urged Congress to pass the legislation so he can sign the bill into law by Memorial Day.

A few facts about credit cards

Consumer Credit Card Debt has increased this past decade. Credit card debt has increased by 25 percent in the past 10 years, and reached $963B in January 2009. (Federal Reserve 2009)

78 percent of U.S. families have a credit card, and 44 percent of families carried a balance on their credit card. (Nielsen 2008, Federal Reserve 2008)

U.S. families have been carrying more and more credit card debt. The average amount of credit card debt among U.S.  families with a balance was $7,300 in 2007 . (Federal Reserve, 2008)

Delinquency rates have increased by more than a third since the end of 2006. The number of accounts more than 30 days late has increased from 3.9% in the fourth quarter of 2006, to 5.6% in the fourth quarter of 2008. (FFIEC, 2008)

Penalty fees paid by consumers on credit cards are around $15 billion annually, an estimated 10 percent of total credit card industry revenues. (Calculation based on GAO 2006 and Federal Reserve 2009)

One-fifth of credit card holders carrying credit card debt pay an interest rate above 20 percent (GAO 2006).

President Obama’s Weekly Address on credit card reform

“Nowhere is this more apparent than in our credit card industry. Americans know that they have a responsibility to live within their means and pay what they owe. But they also have a right to not get ripped off by the sudden rate hikes, unfair penalties, and hidden fees that have become all-too common in our credit card industry. You shouldn’t have to fear that any new credit card is going to come with strings attached, nor should you need a magnifying glass and a reference book to read a credit card application.  And the abuses in our credit card industry have only multiplied in the midst of this recession, when Americans can least afford to bear an extra burden.

It is past time for rules that are fair and transparent. That is why I have called for a set of new principles to reform our credit card industry. Instead of an “anything goes” approach, we need strong and reliable protections for consumers. Instead of fine print that hides the truth, we need credit card forms and statements that have plain language in plain sight, and we need to give people the tools they need to find a credit card that meets their needs. And instead of abuse that goes unpunished, we need to strengthen monitoring, enforcement, and penalties for credit card companies that take advantage of ordinary Americans.

The House has taken important steps toward putting these principles into law, and the Senate is poised to do the same next week. Now, I’m calling on Congress to take final action to pass a credit card reform bill that protects American consumers so that I can sign it into law by Memorial Day. There is no time for delay. We need a durable and successful flow of credit in our economy, but we can’t tolerate profits that depend upon misleading working families. Those days are over.

This economic crisis has reminded us that we are all in this together. We can’t prosper by putting off hard choices, or by protecting the profits of the few at the expense of the middle class. We are making steady progress toward recovery, but we must ensure that the legacy of this recession is an American economy that rewards work and innovation; that is guided by fairness and responsibility; and that grows steadily into the future.”

In case you haven’t heard the news, Chrysler LLC is in bankruptcy. The financial arm of Chrysler, Chrysler Financial is not in bankruptcy.

Chrysler Financial is still offering auto loans. If you already have a car loan with Chrysler Financial continue to make payments on time, Chrysler LLC’s bankruptcy filling doesn’t release you of your financial obligation. 

Some people might be nervous about buying a car from a bankrupt auto company but you can find good deals and good financing, plus the government is guaranteeing car warranties. One downside is when you need your car serviced you’ll have to travel further to do so since Chrysler is closing 25 percent of it’s dealerships, 789 dealers in all. Now back to Chrysler auto loans.

Chrysler Financial’s website is very intuative and provides tons of information on buying a car. You can also check for current incentives buy zip code, make and model of car. We found tons of cash back incentives, including $2,000 cash back for buying a Grand Caravan. The auto loan rates Chrysler Financial is offering are very competitive for 36 month auto loans, 48 month auto loans, 60 month auto loans and 72 month auto loans.

Ally Bank is offering a 12 month CD rate of 2.76 percent with an annual percentage yield of 2.80 percent. Never heard of Ally Bank? It is the new name of GMAC Bank, they changed their name. The motto is “We’re changing more than our name. We’re changing banking”. Changing banking? That remains to be seen.

Their certificate of deposit rates are the same, competitive but nothing to write home about. On the short end of CD terms, Ally Bank’s 3 month CD rate is currently 1.73 percent, with a yield of 1.75 percent. The national average rate for a 3 month CD is currently 0.85 percent. A 6 month CD rateis 2.13 percent, with an APY of 2.15 percent. Ally Bank’s longer term CD rates are some of the best CD rates available today. 5-year CD rates are currently 3.44 percent with an APY of 3.50 percent. 4-year CD rates are 3.20 percent with an APY of 3.25 percent.

If you already have an online account with GMAC  bank your user name and password is the same for Ally bank.

Mortgage rates were mixed this week, according to Freddie Mac’s weekly survey. The average rate on a 30-year fixed-rate mortgage was 4.86 percent with an average 0.6 point, up from last week when it averaged 4.84 percent. Still a lot lower than last year’s average of 6.01 percent thanks to the recession and the government programs designed to lower mortgage rates.

15-year fixed rate mortgages averaged 4.52 percent with an average 0.6 point, up from last week’s average of  4.51 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.82 percent this week, with an average 0.6 point, down from last week when it averaged 4.90 percent. One-year Treasury-indexed ARMs averaged 4.71 percent this week with an average 0.6 point, down from last week when it averaged 4.78 percent. At this time last year, the 1-year ARM averaged 5.18 percent

Freddie Mac’s vice president and chief economist Frank Nothaft said the following “Interest rates for fixed-rate mortgages were little changed this week following the release of April’s employment figures. The economy lost 539,000 jobs, less than the monthly job loss of the past five months, and the unemployment rate rose to 8.9 percent. ARM rates, however, fell slightly over the period.”

“Relatively low house prices and interest rates are clearly helping first-time homebuyers. Housing affordability for the median first-time buyer reached an all-time record high in the first quarter since the NAR index began in 1981. Consequently, first-time homebuyers accounted for half of existing home sales in the first three months of this year, the NAR reported.”

Foreclosures are more common these days, finding a foreclosed property to buy has become a lot easier than it was during the housing bubble. When home prices were increasing in the double digits annually and anyone could qualify for a mortgage , the supply of foreclosed homes was low.

Now the the housing bust has arrived in full force, the supply of California foreclosures, Florida foreclosures and Texas foreclosures has gone through the roof.  Foreclosures in other states are not that plentiful as those three states but finding one is still easy in any state.

There are several ways to find a foreclosed property, you can go to an auction, buy directly from a bank, from government entities such as Fannie Mae and Freddie Mac. The Department of Housing and Urban Development has a list of government entities that sell foreclosed homes.

Buying a foreclosure at auction can be risky because you usually have a limited amount of time you can inspect the property, sometimes you can’t inspect it at all. You have to come up with the money to purchase the foreclosure pretty quickly. You also have to bid for the property, which can be exciting but you don’t want to get caught up in the excitement and overpay for the property.

Buying a foreclosed property directly from a bank is the best option. Since foreclosures are so common these days banks are also listing foreclosures on the Realtor Multiple Listing Service (MLS), making the process even easier than contacting individual banks. Some real estate brokers specialize in foreclosed properties. When you search the MLS for foreclosed homes, look for “Real Estate Owned (REO)”, these are properties owned by banks.

Buying REO properties will take longer than buying a home from an individual, so be prepared for a long drawn out process. If you have the time, the savings on a foreclosed home directly from a bank can be substantial. It’s not uncommon to save 30% to 50% of market price since banks have so many properties on their books they want to unload.

The condition of foreclosed properties are a lot better than they have been in the past so finding a foreclosed home in livable condition isn’t hard. If you are buying a foreclosure it’s good to budget for unexpected expenses so factor in having some cash on hand affer your home purchase.

Choosing the best credit card for your needs can be a daunting task. There are tons of credit cards available these days so finding the the best card that fits your needs takes some work.

The best way to search search for a credit card online is by using a  credit card comparison tool. Credit cards are group into categories with a comparison tool, you can find a low interest credit card, balance transfer credit card, student credit cards, etc.  

Once you have found a category to choose a credit card from, you can compare cards from several different banks side by side. If you expect to always pay your monthly bill in full your best choice may be a card that has no annual fee and offers a longer grace period. Possibly even a cash back credit card will work well for you.
 
If you do carry over a balance from month to month, you may be more interested in a card that carries a lower interest rate or a credit card with a zero percent introductory offer. If you have a good or excellent credit history you can find cards at offer zero percent for a year.
 
If you expect to use your card to get cash advances, you’ll want to look for a card that carries a lower APR and lower fees on cash advances. Most, if not all credit cards charge a higher APR for cash advances than for purchases. Finding a credit card that caps the fee you pay when you take out a cash advance might be the best option for you.

Before you sign up for a credit card do some research and compare fees, annual percentage yields, grace periods, features and benefits to decide which credit card is best for you.

Getting a lower mortgage rate is possible by shopping around for the best mortgage rates. Another option to getting a lower rate is to buy points.

A point, also known as a discount point, are fees paid to the lender or broker for the loan. The more mortgage points you pay, the lower the rate will be.

A point is equal to 1 percent of your mortgage amount. Example, if your mortgage loan is $400,000, and you buy 1 point, the additional upfront costs would be $4,000 which can be rolled into the mortgage instead of having to come up with the payment at closing.

Rolling points into your mortgage loan will increase your loan amount and total costs, but you will probably still save money in the long run because your mortgage rate will be lower.

Usually, 1 point can get an eight to a quarter point percentage drop in the mortgage rate. You can use a mortgage calculator to estimate what the monthly mortgage payment will be with the lower rate and also figure out how long it will take to recoup the cost of points.

The longer you are planning to stay in your home the more sense it makes to buy down the mortgage rate you will pay. You can also ask for points to be quoted to you as a dollar amount, rather than just as the number of points, so that you will actually know how much you will have to pay for getting a lower mortgage rate.

Nationwide Bank, the banking arm of Nationwide Mutual Insurance Company, is offering a respectable rate on their money market account. The annual percentage yield on the money market account is currently 2.15 percent as of May 11, 2009. The annual percentage yield is for all account balances.

The account has a minimum opening balance of $1,000, $250 minimum opening balance for Nationwide Associate and Agency Banking Program members. There is also a minimum average daily balance requirement of $1,000.

The money market account also is like a checking account. The first order of checks is free, you also have free online banking, free online monthly statements, free ATM card when requested. Two free non-Nationwide Bank ATM transactions per month. Free money transfer between your Nationwide Bank accounts and from your accounts with other banks. 

Transactions can be done online, over the phone, at an ATM, by mail. You can also link the money market account to a checking account for overdraft protection.

Brookhaven Bank of Atlanta Georgia is offering their Elite Checking account which currently has an annual percentage yield of 4.50 percent. The rewards checking rate of 4.50 percent is for balances from one penny up to $50,000. Balances over $50,000 earn a respectable annual percentage yield of 1.25 percent.

As with all rewards checking accounts, you have to meet a certain monthly criteria to receive the rewards checking rate which we have listed below. If you do not meet the minimum requirements per monthly billing cycle the account will earn an annual percentage yield of .25 percent for that month. You can always get back on track to the 4.50 percent rate the next billing cycle, so it is important to meet the monthly requirements.

 To earn the Elite Rate for the checking account you have to perform the following each cycle:

• Make 10 Debit Card transactions (excluding ATM transactions)
• Set up 1 Direct Deposit or Automatic Payment from your account
• Receive your monthly statement electronically through free On-Line Banking

The Elite checking account also has the following features

• Free Checking
• No Minimum Balance
• Free debit
• Free Online Banking
• Free Online Bill Pay
• Reimburses all ATM fees nationwide
• All accounts automatically qualify for the first cycle

Another important reason to meet the minimum requirements per monthly billing cycle is you won’t be reimbursed for ATM fees.

Brookhaven Bank is also participating in the FDIC’s Transaction Account Guarantee Program. Under that program, through December 31, 2009, all non-interest-bearing transaction accounts are fully guaranteed by the FDIC for the entire amount in the account. Coverage under the Transaction Account Guarantee Program is in addition to and separate from the coverage available under the FDIC’s general deposit insurance rules.

Brookhavenbank.com

Longer term mortgage rates rose this past week in response to economic news that is pointing to a bottoming of the punishing recession we are in. While some shorter term mortgage products declined this past week.

Even with the longer term rates rising, mortgage rates are still near historic lows. The average rate for a 30-year fixed rate conforming mortgage is 4.96 percent, up from last week’s rate of 4.94 percent. 30-year jumbo fixed rate mortgages are still a lot higher than a 30-year fixed rate mortgages, this week’s average for 30-year fixed rate jumbo mortgage is 6.17 percent, up from last week’s average of 6.15 percent.

Rates on 15-year fixed rate mortgages declined this past week. The average rate on a 15-year fixed rate conforming mortgage is 4.62 percent, down from last week’s average rate of 4.65 percent. 15-year jumbo fixed rate mortgages averaged 6.03 percent, down from 6.08 percent. 5-year adjustable rate mortgages were down considerably to 4.52 percent from 4.60 percent. 5-year jumbo adjustable rate mortgages were down even more at 5.44 percent from 5.53 percent. 1-year adjustable rate mortgages are down to 4.87 percent from 4.91 percent. 1-year jumbo adjustable rate mortgages had the most dramatic decline of .16 percent. 1-year jumbo ARMs are averaging 5.70 percent, down from 5.86 percent.

Average rate source: Informa Research Services

Certificate of deposit rates continued to decline this past week. Continuing their decent since last year when one year certificate of deposit rates could be found over four percent, sometime as high as five percent if the bank offering the one year CD rate was in need of raising capital.

The average rate for one year CD rates is currently at 1.45 percent, down this past week from 1.48 percent. Longer term CD rates are not much higher these days, five year CD rates are averaging 2.50 percent, unchanged since last week. At this time we do not recommend locking into longer term CD rates since rates are so low. 48 month CD rates this week are averaging 2.26 percent, down from 2.27 percent last week. 36 month CD rates are unchanged this week at 2.06 percent. 24 month CD rates are lower this week, the average rate for a 24 month CD is 1.81 percent, down from last week when the average rate was 1.83 percent. 18 month CD rates are also lower this week at 1.59 percent, down from last week when the average 18 month CD rate was 1.61 percent.

CD rates will stay low for the foreseeable future at least until the economy is out of a recession or inflation starts gearing up and the Federal Reserve Bank feels a need to raise interest rates to keep a lid on inflation. We don’t anticipate CD rates going up until later this year or early next year.

Tips for Finding Appropriate Coverage for Your Company
By Jeffrey Long, Allstate Exclusive Agent

Whether you’re a business owner, a risk manager or an executive, have a large or small business or employ five people or 500, purchasing the right insurance coverage is essential to your business plan.

Insurance companies offer a wide range of coverage that may be sold separately or combined in a package policy.  Business owners will also find an extensive array of limits and deductibles from which to choose.

Generally, many businesses need four types of protection:  general liability, workers’ compensation, property, and commercial automobile. 

General liability insurance typically helps protect companies from a wide range of liability exposure such as slip and fall accidents, defective products, dissatisfaction with the work performed by the employees of the business, libel or slander suits and legal liability that may result from advertising your business.  Another coverage worth considering is Umbrella Excess Liability Insurance, which provides liability limits above what’s already available through the company’s primary liability policy.

Property insurance helps protect the buildings and contents of the business from a covered loss.  That loss may have been the result of a fire, theft or catastrophe.

Commercial automobile insurance generally provides liability, collision and comprehensive coverage for your company’s vehicles.

Optional coverage that might be important for your business to consider may include:

• Cargo Coverage, which helps protect your cargo or inventory while in transit or during storage.
• Tool and Equipment Coverage, which helps protect your tools and equipment used in your business while on your vehicle or at the job site.
• Business Interruption Coverage, which helps protect against loss of income (for up to 12 consecutive months) resulting from a covered loss.
• Crime Insurance, which helps protect against loss from burglary, robbery, and even employee dishonesty.

Because purchasing business insurance can be a complex process, it is important to speak with an agent to help you review your current coverage and discuss your insurance options.  An agent can help you design a flexible and individualized insurance package.

Allstate Exclusive Agent Jeffrey Long can be reached at (203) 855-8444 or by visiting his office at 94 East Avenue in Norwalk, CT. For more information, you can also visit www.allstate.com.

Teen and Parent Guide to Safe Teen Driving

In this country, cars kill more teenagers than cancer, gang violence, suicide, or drugs and alcohol. Hard to believe? Jeffrey Long, an exclusive agent of Allstate Insurance Company in Norwalk, CT , says the statistics prove it:
• Teens are involved in car crashes four times as often as all other age groups combined
• A teen’s chance of dying in a car crash triples from ages 13 to 15, to ages 16 to 19
• Every day, 26 people between the ages of 16 and 24 die in traffic crashes

The fact is car crashes are the leading cause of death for teenagers. Statistically, teens make up less than 7% of the nation’s licensed drivers, but they’re involved in 15% of all fatal crashes. This doesn’t mean all teen-drivers are reckless or irresponsible on the road. However, it does mean teens are at increased risk of being involved in, injured, or killed in car crashes. Increased education is vital in saving teenage lives during their years of inexperience.

“It’s summertime. This means more teenagers will be on the road. They may be going to work, summer school or to a party, but seemingly they are on the road more this time of year,” said Long. “Parents must teach their teens to drive safer and smarter.”

Long and Allstate Insurance Company recognize the potential dangers that face teens every time they get behind the wheel and offer the following tips for teens and parents:

To Teens: Drive and Arrive Safely
• Drive sober and ride with sober people
• Always wear your safety belt and insist that all passengers do the same
• Be familiar with the vehicle you’re driving
• Be a defensive driver and stay alert. Keep four seconds of following time between your car and the vehicle in front of you
• Focus on your driving. Avoid distractions such as loud music and cellular phones
• Limit the number of passengers riding in your car at any given time
• Check your rear view mirror every time your foot goes on the brake
• Follow the traffic safety rules and drive at safe, legal speeds

To Parents: Establish Guidelines
• Supervise your teen’s driving time. Give your teen practice time driving under your supervision
• Put a limit on the number of passengers allowed in the car
• Limit your teen’s driving during times of increased risk: Friday and Saturday nights and early Saturday and Sunday mornings
• Establish a house curfew
• Insist on the usage of seat belts
• Set geographic driving area limits
• Prohibit your teen from driving under the influence of drugs or alcohol
• Make car choices with safety in mind
• Be a good role model

For additional information on Teen Driver Safety, including Allstate’s Parent-Teen Driving Contract, contact Allstate Exclusive Agent Jeffrey Long at (203) 855-8444 or visit his office at 94 East Avenue in Norwalk, CT. You can also find information at www.allstate.com/teen.

When you invest in a certificate of deposit be sure you don’t need access to your money for the duration of the certificate of deposit term.

Certificate of deposit early withdrawal penalties will cause you to lose most of the interest you have earned, sometimes all of the CD interest depending on the bank.  Banks will charge either interest or simple interest, simple interest being interest earned that hasn’t been compounded, earning interest on the interest you have earned.

The early withdrawal penalities are usually determinded by the certificate of deposit term. Withdrawal penalties for certificate of deposits with terms of less than one year are usually charged a penalty of 90 days of interest or simple interest. Penalties for certificate of deposits of over one year and over are usually charged six months of interest or simple interest.

Brokered certificate of deposits are an entirely different animal when it comes to early withdrawal penalties. With a brokered certificate of deposit, you purchase a CD from an investment bank, you don’t pay an early withdrawal penalty but if you want your funds before the CD matures you have to sell it at the current market rate by requesting bids on your CD. If you sell, you’ll receive the bid price plus any accrued interest but there are no guarantees that you’ll get what you originally paid for the CD.

Again, be sure you don’t need access to your funds before opening a certificate of deposit account. If you are unsure when you will need the money stick with shorter term certificate of deposits offered directly from banks.

The United States House of Representatives just passed a mortgage reform bill. The Mortgage Reform and Anti-Predatory Lending Act which will help protect consumers when obtaining a mortgage protecting them from unfair, deceptive or abusive practices. In addition, to make sure borrowers are offered mortgages that they can reasonably afford to repay.

Mortgage loan origination standards

• Mortgage originators be qualified, when required, be registered and licenced as a mortgage originator in accordance with State or Federal law
• Diligently work to present the consumer with a range of residential mortgage loan products for which the consumer likely qualifies and which are appropriate to the consumer’s existing circumstances, based on information known by, or obtained in good faith.
• Make full, complete and timely disclosure of the costs of each mortgage loan product being offered to the consumer
• The relationship of the mortgage originator to the consumer, if the originator is or is not acting as an agent of the consumer, the costs of originating the mortgage loan and any relevant conflicts of interest
• Certify to the creditor that the mortgage originator has fulfilled all the requirements

Prohibition on Steering Incentives

• The total amount of compensation from all sources may not vary from loan to loan
• Prohibit a mortgage loan originator from steering a consumer into a mortgage that the consumer lacks a reasonable ability to repay
• When refinancing, does not provide a consumer with a net tangible benefit, has predatory characteristics or effects such as equity stripping, excessive fees or abusive terms
• Lending practices that promote disparities among consumers of equal credit worthiness but of different race, ethnicity, gender or age
• Charging excessive points and fees

There are other standards and provisions in the bill including liability provisions for violations of the mortgage standards listed above. The amount of liability cannot exceed the total actual damage to a consumer or an amount equal to 3 times of the total amount of compensation the mortgage originator received for the mortgage and reasonable attorney fees.

Some great personal finance articles.

The Federal Reserve, OCC, and FDIC released the results of the Supervisory Capital Assessment Program, also known as the “Bank Stress Test” for the 19 bank holding companies subjected to the stress test. 

The stress test was designed as a what if exercise of how the economy might be over the next two years. The first scenario is a baseline which follows the current forecast estimates for the economy. The second scenario is a more adverse scenario with a more severe recession.

The SCAP test was designed to find out which bank holding companies (BHCs) are vulnerable today, how they would fare in the future if the economy deteriorated more and if the banks needed more capital to survive. Not only the amount of capital was considered the compoisition of a bank’s capital was also taken into consideration.

The bank stress test was applied to 19 banks. All the banks are not in danger of failing but some need to raise more capital. Here is how the 19 banks fared.

• American Express: No additional capital needed
• Bank of America: Additional $33.9 billion needed
• BB&T : No additional capital needed
• The Bank of New York Mellon: No additional capital needed
• Captial One Financial: No additional captial needed 
• Citigroup: Additional $5.5 billion needed
• Fifth Third Bankcorp: Additional $1.1 billion needed
• GAMC: Additional $11.5 billion needed
• Goldman Sachs: No additional capital needed
• JP Morgan Chase Bank: No additional capital needed
• Keycorp Bank: Additional $1.8 billion needed
• Metlife: No additional capital needed
• Morgan Stanley: Additional $1.8 billion needed
• PNC: Additional 0.6 billion needed
• Regions Financial: Additional $2.5 billion needed
• State Street: No additional capital needed
• SunTrust Bank: Additional $2.2 billion needed
• U.S Bankcorp: No additional capital needed
• Wells Fargo: Additional $13.7 billion needed

The stress test results are interesting, Bank of America, Wells Fargo and GMAC are in most need of capital. Citigroup’s common stock which was under a dollar last fall only needs an additional $5.5 billion. It will be interesting to see how these banks respond to the test.

Mortgage rates rose this past week on positive economic news and the possibility we are nearing the end of the recession said Frank Nothaft, Freddie Mac vice president and chief economist.

A 30-year fixed-rate mortgage averaged 4.84 percent with an average 0.7 point for the week ending May 7, 2009, up from last week when it averaged 4.78 percent. Last year at this time, the 30-year fixed rate mortgage average was over 6.00 percent at 6.05 percent.

A 15-year fixed rate mortgage rose above 4.50 percent this week, the average was 4.51 percent with an average 0.7 point, up from last week when it averaged 4.48 percent. Last year at this time the 15-year fixed rate mortgage averaged 5.60 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.90 percent this week, with an average 0.6 point, up from last week when it averaged 4.80 percent. A year ago, the 5-year adjustable rate mortgage averaged 5.67 percent.

One-year Treasury-indexed adjustable rate mortgages averaged 4.78 percent this week with an average 0.6 point, up from last week when it averaged 4.77 percent. At this time last year, the 1-year adjustable rate mortgages averaged 5.29 percent

BP and JP Morgan Chase are offering a Visa cash back credit card. The gas-cash back credit card earns 10 percent cash back on all purchases at BP locations for 60 days. The gasonline credit card also earns 4 percent rebates on all travel and dinning for the first 60 days and a 2 percent rebate on all other purchases.

After the first 60 day period has ended the cash back credit card earns 5 percent cash back on all purchases at BP locations, 2 percent on travel/dinning and 1 percent on all other purchases.

You can earn up to $50 cash back each billing cycle for the first 60 days. After the initial 60 day period you can earn up to $25 cash back each billing cycle.

You can elect to receive your cash back in $25 BP gift cards, checks made out to you or you can donate the rebates to The Conservation Fund.

There are several restictions on the gas cash back credit card, :

• Purchases made at locations where competitive gasonline is sold
• Fast food restaurants
• Specialty stores
• Superstores
• Warehouse clubs
• discount stores

Online and catalog purchases are not eligible to receive the 2% base or bonus rebate unless the merchants have correctly identified and billed the transactions.

BP/JP Morgan Chase Bank Visa

Allstate Offers Safety Tips As Motorcycle Season Nears
By Jeffrey Long, Allstate Exclusive Agent

The rumble of the engine. The snap of the wind. The call of the blacktop. Motorcycle season is right around the corner, and with it comes the annual reminder to stay safe while enjoying the freedom only riding can provide.

According to the National Highway Safety Traffic Administration (NHSTA) and the Fatality Analysis Reporting System (FARS), the number of motorcycle fatalities rose each year in the decade from 1998 (2,294 deaths) through 2007 (5,154 deaths). Connecticut accounted for 36 of those deaths, the 2nd highest total in New England.

The 2007 national numbers represent a nearly 113% jump in fatalities over that 10-year period, and represent the highest fatality total since 1975. Motorcycle deaths accounted for 12.6% of all U.S. motor vehicle traffic crash fatalities in 2007, up from 5.5% in 1998.

The data also showed that from 2006 to 2007, fatalities increased across all age groups.  Nearly two-thirds (63%) of the fatally injured motorcyclists in 2007 were not wearing helmets in States without universal helmet laws.

“Motorcycle enthusiasts can’t wait to take their bike out of the garage when warmer weather returns,” says Allstate agent Jeffrey Long. “But before riding season begins, it’s important to remember that safety starts at home, not on the highway.”

To ensure bikers enjoy the freedom of the open road for many years to come, Allstate recommends the following motorcycle preparedness safety tips:

• Test your lights, brakes, turn signals and horn
• Check the oil and fuel levels
• Check tires for any punctures or slick spots
• Make sure your mirrors are positioned correctly
• Make sure your cables are not worn or frayed
• Lubricate and adjust the chain as recommended by the manufacturer
• Inspect your safety clothing; including helmets, suits, jackets and gloves
 

Before riders hit the highways, we encourage them to visit their local Allstate agent for a free Good Hands Coverage Checkup. Allstate’s motorcycle policies – and extended coverages for custom bells and whistles – are designed with a biker’s needs in mind. Allstate recommends the following coverages:
• Liability Coverage: Typically helps protect you for damages to others if you’re at fault in a covered accident
• Guest Passenger Liability Coverage: Typically helps protect you for bodily injury to a passenger on your motorcycle, if you’re at fault in a covered accident
• Medical Payments Coverage: Typically provides payment for reasonable and necessary medical treatment for you or another insured person after a covered accident
• Underinsured/Uninsured Motorists Coverage:  Typically protects you for covered damage caused by drivers who don’t have insurance or don’t carry enough insurance

For more information on all things motorcycle, please contact Allstate Exclusive Agent Jeffrey Long at (203) 855-8444 or visit his office at 94 East Avenue in Norwalk, CT. You can also visit www.allstategarage.com. This fun, interactive site offers a range of activities from “building” your own custom bike to mapping out the best course for a cross-country journey.

The Allstate Corporation (NYSE: ALL) is the nation’s largest publicly held personal lines insurer. Widely known through the “You’re In Good Hands With Allstate®” slogan, Allstate helps individuals in approximately 17 million households protect what they have today and better prepare for tomorrow through approximately 14,800 exclusive agencies and financial representatives in the U.S. and Canada. Customers can access Allstate products and services such as auto insurance and homeowners insurance through Allstate agencies, or in select states at allstate.com and 1-800 Allstate®. Encompass® and Deerbrook® Insurance brand property and casualty products are sold exclusively through independent agents. The Allstate Financial Group provides life insurance, supplemental accident and health insurance, annuity, banking and retirement products designed for individual, institutional and worksite customers that are distributed through Allstate agencies, independent agencies, financial institutions and broker-dealers.

Most people do not have the financial resources to pay their mortgage off early but for those who can payoff their mortage does it make financial sense?

That depends on your investments, age and interest rate you are paying on your mortgage. Surprisingly there are pros and cons to paying off your mortgage early.

Let’s start with the Pros:

• The biggest pro to paying off a mortgage early is the interest rate savings. Have you ever used a mortgage calculator and compared the amount of interest you would pay on a 30-year mortgage to a 15-year mortgage? The savings run up into the tens of thousands or even hundreds of thousands depending on the loan amount.
• Another pro is being freed from what is probably the largest loan most people will ever have. Imagine the relief of not having to worry about a monthly mortgage payment?
• Now that you don’t have the monthly mortgage payment you can invest that money in your future or your retirement.

Now for the cons of paying off your mortgage early:

• Have you enjoyed that fat tax return every year? The reason why most people get a big refund year in and year out is you’re able to deduct all the mortgage interest you pay. Without the mortgage interest tax deduction you will pay more income taxes.
• All the money you’re pouring into your house could be earning you money in other investments. This is especially painful when you are watching your home decline in value every day like we all have been doing the past couple of years.

As you can see, there are good reasons to pay off your mortgage early but there are cons one needs to take info consideration. The best course of action to figure out if paying off your mortgage early is right for you is to sit down and crunch numbers or talk to your financial advisor.

Insurance companies have historically charged women higher insurance premiums for heath insurance.

As a result, Senator John Kerry has introduced the “The Women’s Health Insurance Fairness Act”. The act will improve health care benefits for women in the individual market by preventing insurers from charging them more, denying or limiting coverage based on their pregnancy status or delivery method, and ensuring comprehensive maternity coverage.

Sen. John Kerry said “The disparity between women and men in the individual insurance market is just plain wrong and it has to change.With Mother’s Day around the corner, there’s no better gift to American women than discrimination-free, affordable and accessible insurance that meets their health needs.”

The Women’s Health Insurance Fairness Act:

• Will prevent insurers in the individual market from charging women higher premiums than men
• Prevent insurers in the individual market from denying or limiting coverage based on a current or past pregnancy or past or future method of delivery (such as a Cesarean section)
• The act will require all insurance policies offered on the individual market to provide comprehensive maternity coverage for the full scope of maternity services from preconception through postpartum
• Provide the Secretary of Health and Human Services with the authority to monitor compliance with the requirements of this Act and assess fines of at least $10,000 against any health insurance company that fails to submit the required data
• Direct the Government Accountability Office to issue a report by December 31, 2010 about problems remaining for women on the individual insurance market in all 50 states and DC following enactment of this Act.

This legislation is also supported by the American College of Obstetricians and Gynecologists (ACOG), Children’s Defense Fund, Consumers Union, Families USA, National Partnership for Women & Families, OWL - The Voice of Midlife and Older Women, and the Physicians for Reproductive Choice and Health (PRCH).

By Jeffrey Long, Allstate Personal Financial Representative

We all may think we don’t have much, but after a natural disaster or theft, we realize just how much our little bit means.

The best way to protect yourself from the serious financial impact of such occurrences is to have enough homeowners’ or renters’ insurance to cover a loss.  However, another crucial step, one that most forget, is to take inventory of everything you own in your home.  Having this information will help speed your claim settlement.

Jeffrey Long, an exclusive agent of Allstate Insurance Company in Norwalk, CT recommends you take the following precautionary steps:

• Make a list.  Make a list of the contents of your home on paper.  After a storm, it’s virtually impossible to remember all the things you’ve bought over the years, particularly when you’re upset about a loss
• Videotape or photograph all the items that you own.  It would be helpful to describe on the videotapes or on the back of the photographs the items and their prices
• Keep your videotapes or photographs in a place separate from your home, such as at your workplace or a bank safe deposit box
• Save receipts for major purchases.  Pictures and videotapes are supplements to receipts.  Receipts are especially important for big-ticket items such as computers and large appliances
• Update your inventory periodically.  How often you need to refresh it will depend on when you make new purchases

Allstate Personal Financial Representative Jeffrey Long can be reached at (203) 855-8444 or by visiting his office at 94 East Avenue in Norwalk, CT. For more information, you can also visit www.allstate.com.

Option adjustable rate mortgages (ARMs) give you the option of making different mortgage payments each month, including the traditional payment of principal and interest, an interest only payment or a minimum mortgage payment which can be less than the amount of interest due that month.

The last payment option can be dangerous of not used properly because the amount of any interest you do not pay will be added to your mortgage balance, increasing the total amount you owe and increasing your future monthly mortgage payments. This process is called negative amortization.

The interest rate on a option ARMs are usually very low for the first few months or first year, sometimes this rate is referred to as the “teaser rate”. Your monthly mortgage payments are also lower during the initial period because the mortgage rate is lower. After the initial teaser rate period has ended, the interest rate rises to an interest rate closer to the market rate for mortgages at the time and your mortgage payments also rises.

Option ARMs were originally created for people who expected their income to increase in the future, making it possible for them to afford a larger home now instead of waiting until their income increased in the future. Unfortunately, over the past few years, option ARMs were also marketed and written for people who couldn’t afford payments when the initial interest rate period ended. This practice extended the housing boom but has also make the housing bust even worse than it would have been. In fact, some real estate professionals say another wave of foreclosures is on it’s way because of option ARMs.

CD Rates continued to go down this past week. 3 month CD rates are still under one percent at 0.88 percent with an annual percentage yield of 0.89 percent. 6 month CD rates are just over one percent at 1.19 percent with an annual percentage yield of 1.21 percent.

One year CD rates are averaging 1.48 percent with an annual percentage yield of 1.49 percent. 18 month CD rates are at 1.61 percent with an annual percentage yield of 1.62 percent. Two year CD rates are at 1.83 percent with an annual percentage yield of 1.84 percent.

Three year CD rates are averaging 2.06 percent with an annual percentage yield of 2.09 percent. Four year CD rates are averaging 2.27 percent with an annual percentage yield of 2.29 percent and five year CD rates are averaging 2.50 percent with an annual percentage yield of 2.53 percent.

Mortgage rates remained steady the past week, no big changes in rates. Fixed rate mortgages are still at historic lows. 30-year conforming mortgage rates went up to 5.02% from 4.96%. 15-year conforming mortgage rates went up to 4.79% from 4.72%

Jumbo mortgage rates also went up this past week. 30-year Jumbo mortgage rates went from 4.96% to 5.02% and 15-year jumbo mortgage went up even more to 6.19% from 6.02%.

The annual percentage rate on a 5-year conforming adjustable rate mortgage is now at 4.17% down from 4.215% last past week. The annual percentage rate on1-year conforming adjustable mortgages stayed under 4%, the average 3.98 percent this week up from 3.92 percent last week.

Rates on a home equity line of credit is still under 5 percent, at 4.73%. The rate on a 10-year fixed rate home equity loan inched up to 7.69% and the rate on a 15-year fixed rate home equity loan is at  7.81%.

By Jeffrey Long, Allstate Personal Financial Representative

Life insurance ownership has been slowly declining for several decades. According to a survey of U.S. residents in 25 major U.S. cities conducted by Allstate in conjunction with LIMRA International (a leading life insurance marketing association), the average amount of life insurance coverage respondents have is $175,000.  As a multiple of household income, this means the average respondent indicates that they have individual life insurance coverage equal to about four times their household income.

However, according to a recent LIMRA report, the average recommended life insurance need is about $459,0001.  Inadequate coverage can put a financial burden on dependents of those who die prematurely.  A general rule of thumb is to buy an amount that is equal to seven times your salary.  However, each family is different.  The age of your children, the amount of your mortgage, debt and living expenses, and other factors, should all be carefully evaluated as you determine the amount to buy.

Allstate’s survey also revealed that one fourth (25 percent) of respondents felt they needed more life insurance coverage.  But why would people need more life insurance?

With the right amount of coverage, a spouse and family can maintain their current standard of living after the passing of a loved one; funds can be used toward a child’s education and the proceeds can cover mortgage payments, debt payments or funeral expenses.

If your employer provides life insurance coverage, keep in mind that it may not be enough for your family to maintain their standard of living and fund their future financial goals.  And you may not be able to take your life insurance policy with you if you change jobs.

Life insurance can be a cornerstone of a solid financial future.  Now that you know how important having life insurance can be; what steps can be taken to help build financial security?

Help protect what’s yours
One way to think about your financial needs is to picture a pyramid that you build from the bottom up.  Life insurance can play an important role in helping protect your loved ones and to make sure they can have the future you’re working toward – no matter what.

The foundation of any financial strategy should be protection against loss, starting with your car and home.  As you build your assets, it’s important to update your policies and further help protect yourself from unexpected events.  This is where auto and homeowners insurance comes in to play.

Help protect those you love
Consider what your family’s financial future would be without you or your income.  Even if you already have life insurance coverage through work, is it enough to help provide for their entire financial future? Individual life insurance and disability or extended care insurance should be considerations.  Also keep in mind the financial impact of an unexpected death of a spouse who does not earn income, but provides care to either children or a sick or older family member.

Reviewing your life insurance coverage each year is a good idea as well.  Allstate’s survey found that 37 of respondents claim they “never” review their current life insurance coverage against their current situation.  As your life changes, your insurance coverage should change with you. 

Prepare for tomorrow
Once you’ve helped protect your family and what you have, an important next step is to determine your goals for the future and how your investments can meet those needs. For example, do you have kids who are college bound? Have you started saving enough for retirement? Do you have an emergency fund?  The earlier you start saving, the more your investments can grow and compound interest over time. 

Pass it on
After a lifetime of working hard to build your wealth, life insurance as a wealth transfer tool is something to consider if you want to make sure as much possible goes to your loved ones.

When thinking of your family’s financial security, life insurance shouldn’t be confusing. Buying the right amount of life insurance coverage should be one of the first steps to putting you, and your family, on the right path to a bright financial future.

Allstate Personal Financial Representative Jeffrey Long can be reached at (203) 855-8444 or by visiting his office at 94 East Avenue in Norwalk, CT. For more information, you can also visit www.allstate.com.

Securities offered by Personal Financial Representatives through Allstate Financial Services, LLC (LSA Securities in LA and PA.) Registered Broker-Dealer. Member FINRA, SIPC.  Main Office: 2920 South 84th Street, Lincoln, NE 68506.  877-525-5727.

Life insurance and fixed annuities issued by Allstate Life Insurance Company, Northbrook, IL and Lincoln Benefit Life Company, Lincoln, NE. In New York, Allstate Life Insurance Company of New York.

The information provided here is for educational purposes only and is not intended as legal, investment or tax advice.  We recommend that you consult with an attorney or tax advisor regarding the tax implications of purchasing life insurance.
1 LIMRA in “The Adequacy of Life Insurance Coverage in U.S. Households” report, calculated the average life insurance need, using the Life and Health Insurance Foundation for Education’s (LIFE) Life Insurance Needs calculator, across all 36 groups, at $459,000.

By Sharat from money-au.com.au

The internet is perhaps the single greatest resource for determining the cost of buying a car. In fact, you can probably find auto loan interest rates from all over the world. In the U.S., auto loan interest rates across the nation can be found here at auto loans. If you wanted to find something as exotic as even an Australian car loan you could easily find what the interest rate would be by doing a quick web search.

Finding out what the financing options are for a new car is not where it ends when it comes to buying a car. Buyers should be looking for low interest or zero percent financing if they can get it.

Given the rapidly changing landscape of automakers, in particular, the finance units of the major automakers, zero percent is not always guaranteed, particularly for customers who do not have near perfect credit records. In fact, in this day and age, it’s probably very difficult even for the most flawless credit record.

The financial arms of automakers will probably offer buyers the best financing options in the market for their vehicles. Clearly, it is the finance unit’s objective to help deliver sales for the rest of the group, and offering attractive financing options is one way to do this.

However car buyers should not take it as a given that these units will offer the best rates to begin with and consumers should make a little extra effort in researching rates from alternative  sources of financing before walking into a dealership. Competitive interest rates can be obtained from credit unions and organizations such as AAA or USAA sometimes offer consumers access to interest rates that are simply not available to consumers who ordinarily approach banks.

Some auto finance companies approve their loans online and give their customers the ability to walk into a dealership with a blank check the very next day after application.

Capital One Auto Finance for example allows their borrowers to bring a check to the dealership without any obligation for taking a loan and then allows their customers to borrow a pre-approved amount should they see something they like.

Consumers should also be aware that they can negotiate interest rates. Dealerships who offer financing see some of that interest income, and therefore it is in the interest of the dealer to negotiate interest rates and win the customer’s business.

The most important rule to remember when buying a car is for borrowers to buy cars that they can afford and not overreach themselves. As important, once a deal has been done, the buyer should reach for the calculator and work out exactly what the car is costing, by multiplying the number of payments they have to make, with the monthly payment, adding on the down payment and the value of any trade in.

By Steve Bergman

The securitization of home mortgages or the transformation of pools of mortgages into investment instruments with bond-like characteristics has been a useful way to keep the mortgage markets liquid. Instead of carrying the home loans on balance sheets, banks could sell them, and with revenue from the sales re-circulate the capital for new mortgages.

Everybody seems to be a winner. Investors receive bonds trenched to their investment needs, banks could loan more money, more people get more loans, and Wall Street, which packages the pools of loans, creates the tranches and markets them around the world making fabulous profits.

However, there is a problem. Like HAL in the film 2001, securitization started to take on a life of its own.

As a self-perpetuating monster, the securitization market had only one demand: feed me. And the banks and Wall Street complied, throwing everything into the maw, subprime loans, loans without due diligence, loans without interest rates, loans by citizens with no credit. After a half decade of living on a steady diet of junk food, the securitization market exploded in the summer of 2007, when the subprime segment of the market collapsed. The world hasn’t been the same since.

All that beggars the question: is securitization bad or was the model wrong. The good citizens of tiny Denmark would gladly explain, if someone here in the States would take the time to listen, that it was the model that was imperfect and securitization with the proper regulations in place can function smoothly over a long period of time. The Danes can make this claim because they boast a residential securitization market for 200 years and it all that time not one mortgage bank nor one mortgage bond has defaulted. If we could only make that claim here in the States!         

In 1793, the Danish capital of Copenhagen suffered a catastrophic fire and the city needed to put in place an inexpensive means to finance rebuilding. What the city fathers came up with then is a simple, transparent, securitization system. Borrowers could go to a mortgage bank and get a loan. The mortgage bank, acting as an intermediary, would take the loans and package them into a bond, which would then be sold on the local stock exchange. At the time, the buyer of the bonds was the Royal treasury, essentially the Danish state. In 1850, the first regulations on mortgages were put into place, and over the years the Danish state has been replaced by a different group of institutional capital sources such as pension plans, insurance companies and foreign investors.

Over the years, the core of the Danish securitization process has not changed. The key structural factors remain: mortgage banks have a limited structure, granting loans and financing the loans by issuing bonds (commercial banks, some of which own mortgage banks, do all the other financing activities); the mortgage bonds are sold on the stock exchange and the monies from the sale are funneled back to the borrowers so they can purchase a house; a borrower is responsible for paying back the mortgage and not even bankruptcy lifts that demand; and most importantly, the loans remain on the balance sheet of the mortgage bank. They can never be sold away as in the United States. 

The concept behind the Danish mortgage banking system is called The Balance Principal: payments on the debtor side and creditor side of the mortgage bank must balance as a whole. This balance is achieved by issuing a bond or portfolio of bonds each time a loan is granted. “One can say that all loans today are match-funded on a loan-to-bond basis,” says Carsten Madsen, a director and senior executive vice president at BRFkredit in Lyngby, Denmark. “It’s a simple pass-through system.” In principal, the biggest risk to the mortgage bank is the credit risk, i.e., that the borrower fails to meet contractual obligations. Again, it should be noted, that over the past 200 years a Danish mortgage bank has never failed. (Mortgage banks are obliged to fulfill a solvency requirement, maintaining a capital base equal to 8% of their weighted assets.)

The mortgage bank makes money on the “margin.” In essence, the borrower pays to the mortgage banks an installment that consists of principal and interest payment on the loan, fees and commissions, and margin, which covers the expense of the loan including the cost to hold the loan on the balance sheet. That margin is not necessarily fixed, explains Niels Torslev, group managing director for Nykredit mortgage bank in Copenhagen. “If we were in a climate where the value of homes in Denmark was going down and loan losses started to occur, we have the potential to raise margins, which would affect all Danish citizens. It’s a semi-access to tax the Danish population.”

Although the economy is slowing in Denmark, there hasn’t been a need yet to raise margins. The last time that happened was in the early 1990s, when Danish mortgage banks doubled margins. There are no independent mortgage brokers in Denmark, although commercial banks can act as an agent of the mortgage banks. And this is another key difference between the U.S. and Danish systems. If a commercial bank acts as a mortgage broker, it maintains a loan-loss guarantee typically for eight years at an L-T-V of 60%. That’s very important in the value chain of the borrower to ultimate investor.

 When mortgage banks invite entities, such as commercial banks, to introduce customers, they have to maintain a presence until the maturity of the loan. Also, when the mortgage banks pay the commercial banks for doing the loan, it is not done on net present value, but on an annual basis – the banks get a portion of the margin every year.

Finally, the loan process in Denmark is very strict. Danish mortgage banks will only grant a loan when a credit assessment has shown the borrower is at minimum, able to service a 30-year, fixed-interest loan, even if the borrower chooses an adjustable-rate mortgage loan. If a situation occurs where the borrower does default, the mortgage bank will auction off the home. Then, if the proceeds from the auction are less than the value of the mortgage, the borrower remains responsible for the difference.

In Denmark, it’s almost impossible to escape the responsibility of the mortgage. Twenty years after a bankruptcy, a Danish citizen would still be responsible to pay back the mortgage bank.

Steve Bergsman’s most recent book, AFTER THE FALL: OPPORTUNITIES AND STRATEGIES FOR REAL ESTATE INVESTING IN THE COMING DECADE, was published in March by John Wiley
& Sons

Amerisave is offering a 30-year mortgage rate of 4.00%. We were quoted the 4.00% mortgage rate for a 30-year fixed rate mortgage of $400,000 on a home purchase of $500,000 ( 20 percent down payment) in the state of Florida. The annual percent rate (APR) on this loan is 4.394%. The monthly mortgage payments on this loan is $1,910.

To receive this low rate we had to buy down the rate with discount points. Points can be used to buy down a mortgage rate, each point is equal to one percent of the value of the loan. When you buy down the mortgage rate you have to pay more upfront, but the cost can be rolled into the loan. Keep in mind you might pay a higher interest rate on a mortgage or private mortgage insurance (PMI) if you exceed the 20% loan-to-value (LTV) ratio.

With this quote we would have paid $18,392 in closing costs, this amount also includes the discount points we paid to buy down the loan rate. We also received 30-year mortgage quotes for 20 different discount point options. You can also receive money at closing if you pay a higher mortgage rate, if we accepted a mortgage rate of 6.50% we would have received $11,194 at closing. If you plan to stay in your home a long time it would be better to buy down the mortgage rate to the lowest level possible, you would save a ton of money over the life of the loan.

When you receive a mortgage quote on-line from Amerisave you are given a bunch of options to chose from on a loan. In addition to 30-year mortgage rates we also received mortgage quotes for 30-year fixed FHA mortgages, 30-year interest only mortgages, 40-year fixed mortgages, 25-year fixed mortgages, 25-year fixed FHA mortgages, 20-year fixed mortgages, 15-year fixed mortgages, 15-year fixed FHA mortgages, 10-year fixed mortgages, 10-year fixed FHA mortgages and rates on all types of adjustable rate mortgages.

Another good feature of Amerisave’s mortgage quotes is their “SureFee” feature. They lay all the closing cost fees out for you and let you know if a fee is guaranteed or just an estimate.

Personal Finance Tip: All banks and lending instituitions are required to give you an estitimate of the closing costs, ask your lender for a HUD-1 statement before closing on a mortgage.

GMAC Bank if offering one of the best CD rates available today. The 12-month certificate of deposit currently has a rate of 2.76 percent with an annual percentage yield of 2.80 percent. The national average CD rate on a  12-month is currently 1.49 percent with an annual percentage yield (APY) of 1.50 percent.

Interest is compounded daily which gives you a better return than a CD that has interest compounded monthly, quarterly or annually. You can use Monitor Bank Rates’ CD Calculator to figure out what the return would be when interest is compounded daily.

You can open a CD online or by calling GMAC Bank Customer Care at 1-866-246-BANK (1-866-246-2265).

Requirements to open a CD account

• Legal U.S. resident
• Have a U.S Address
• Driver’s License
• Social Security Number

GMAC penalty for early withdrawal of a certificate of deposit

The penalty is equal to 90 days of interest that has been or would be earned on a certificate with a term of less than or equal to one year. For certificate of deposits over 1 year the penalty is equal to 180 days of interest that has been or would be earned on a certificate with a term of more than one year.

CD rates have continued to decline the past week. With rates so low these days you are better off investing in short term certificate of deposit rates instead of the longer term CD rates.  

Mortgage rates are mixed the past week. 30-year mortgage rates and 15-year mortgage have remained steady, while adjustable rate mortgages have come down the past week.

30-year Jumbo mortgages and 15-year jumbo mortgage have also come down, but the rate difference between fixed rate jumbo mortgages and fixed rate conforming mortgages are still higher than the historical norm. If you are in the market for a jumbo mortgage a better option right now would be an adjustable rate mortgage.

The annual percentage rate on a 5-year adjustable rate mortgage was 4.215 percent this past week, while 30-year fixed jumbo mortgage rates were almost two percentage points higher at 6.16 percent.

Rates on a home equity line of credit is still under 5 percent, at 4.685 percent, a lot better rate than a 10-year fixed rate home equity loan which currently has a rate of 7.678 percent and a 15-year fixed rate home equity loan currently has a rate of 7.804 percent.

Here is a list of national average mortgage rates.

Getting a mortgage from a mortgage broker has become popular over the past 20 years. Borrowers shopping for mortgages find using a mortgage broker very convenient, saving them a lot of time.

Mortgage brokers help guide home purchasers through the process of gathering all the necessary financial documents banks require for a mortgage, the entire process can be quite involved. Mortgage brokers also provide a list of current mortgage rates to borrowers.

Some mortgage brokers will even help a borrower clear up their credit report so they can qualify for a better mortgage rate, or even qualify at all. During the recent housing bubble there were many mortgage brokers writing loans for people who could not afford the payments. Some unscrupulous mortgage brokers even forged borrower documentation so the borrow could qualify for a loan, or a larger loan. Most mortgage brokers are honest and do a good job finding the best mortgage rate.

Mortgage brokers do not originate loans. They search the marketplace for the best possible mortgage deal among a lender they deal with on a regular basis. Brokers are usually paid by the lender, not the borrower, for giving the lender the business. Since the lender pays the broker sometimes brokers stear applicants into a mortgage that might not be the best deal for the borrower.

Finding a good mortgage broker might take as much time as finding the best mortgage rate and deal.  You should ask the broker for names and phone numbers of a few borrowers they recently helped.

First time home buyers have several reasons to take the plunge into home ownership these days.

Home prices have been declining for the past couple of years, some former housing bubble areas of the U.S. have seen drops 30 to 50 percent or even over 50 percent from the housing price peak. Florida, California, Arizona and Nevada have seen the worst declines. Based on income, home ownership is more affordable in some places than it ever was.

Another reason to buy a home these days is record low mortgage rates. Rates on 30-year fixed mortgages tied a record low this past week. Right now, you can get a 30-year fixed rate mortgage under five percent from most banks or lending institutions. Five-year adjustable rate mortgages (ARMs) can be found for under 4.5 percent. Though if you are planning to be in your home for a very long time we recommend a 30-year fixed rate mortgage, you might not be able to get mortgage rates this low ever again.

A third reason to buy a home is the 2009 stimulus package tax credit for first time home buyers. Qualifing buyers can recieve a tax credit equal to 10% of a home purchase up to $8,000 if they purchased a home between January 1, 2009 and December 1, 2009. A similar tax credit was passed last year but had to be paid back over 15 years, this one you don’t have to pay back. This credit starts to phase out if your AGI is over $75,000 for individuals and $150,000 for married couples.

There is also the FHA First Time Home Buyer Program which helps first time buyers who might not be ideal candidate for traditional mortgages. FHA program has the following benefits for first time home buyers.

• No minimum credit score – FHA does not have a minimum credit score requirement. The FHA underwriter will evaluate the entire credit profile to determine the borrower’s likelihood of repayment. Past credit issues may be overlooked if new credit has been re-established. Also, other compensating factors may apply.
• Bankruptcy okay – Chapter 7 bankruptcies are allowed if discharged over 2 years ago (or 1 year with extenuating circumstances). Chapter 13 bankruptcies are allowed with a minimum of 1 year of on time plan repayment and trustee approval.
• Less Money Needed - FHA loans allow the seller to pay up to 6% of the sales price toward the closing costs and only require a 3.5% down payment.
• Housing History– FHA does not require a rental or other housing history if it is not available.
• Non-occupying co-borrower allowed – FHA allows a non-occupying relative to co-sign the mortgage. The non-occupant’s income and assets can be used for qualification purposes. This is generally used for parents to help their children buy a home.
• Property types - 1-4 unit, condos, town homes, modular homes, and manufactured homes
• No cash reserves required – Unlike most conventional loans, FHA does not require you to have cash reserves on 1-2 unit properties. However, having reserves can help strengthen the overall credit profile.

Housing prices might still be declining but if you plan to stay in your home for a long time you’ll will come out a head in the long run. If you think about a home as a home and not as an investment you will have an easier time taking the plunge into home ownership. If you can afford your dream home now go for it.  Remember, you can’t really time a market bottom.

Discover Bank is offering a 2.00% annual percentage yield (APY) on their money market account. The minimum balance on the account to receive the 2.00% APY is $25,000. Balances from $2,500 to $49,999 receive a 1.75% APY.  The rates are valid as of April 28, 2009 and can change at anytime.  The rates are only for personal accounts.

You can access your funds by ATM, by check and with a Discover Card or Discover Debit Card You may make up to six pre-authorized transfers from your money market account per statement cycle, including automatic and telephone transfers. No more than three of the six transfers may be made by check, draft, debit card or similar order made by the depositor and payable to third parties.