“CALM CONTINUETH NOT LONG WITHOUT A STORM”…And these wise words dating back to 1576 sure still hold true today. Bond prices and home loan rates have been absolutely flat for the past seven trading days. Traders have not had much in the way of economic news to chew on lately, and seasonably lower volume has added to the sluggish market activity. But this quiet period could just be the calm before the storm, as an action packed economic calendar is due to get some movement stirring over the next week.

Last week did bring some news from the housing sector, in the form of New and Existing Home Sales numbers for July…and it looks like the housing market is behaving just like Fed Chairman Bernanke predicted, with an “orderly slowdown”. The number of both New and Existing homes sold came in slightly lower than expectations, and the number of month’s inventory or supply available of each rose as well. But across the board, home prices are still up over the past year…that’s good news. And here’s an interesting point – the median home price in the US is now $230,000. How does that compare to your own market?

AND SPEAKING OF STORMS, IF YOU’VE EVER BEEN THROUGH A DIVORCE OR KNOW SOMEONE WHO HAS…YOU KNOW THAT IT’S RARELY SMOOTH SAILIING DURING THE PROCESS OF MAKING TOUGH FINANCIAL DECISIONS. BUT THERE IS A VERY COMMON DECISION MADE THAT CAN UNKNOWINGLY COST A BUNDLE…DON’T MISS THIS WEEK’S MORTGAGE MARKET VIEW.

Forecast for the Week

So what’s the forecast for the week ahead that could cause some stormy seas for home loan rates? A big blast of economic news is on the horizon, including the “Meeting Minutes” or commentary from the last Fed Meeting, Consumer Confidence, 2nd Quarter GDP, the Chicago Purchasing Managers Index (PMI), the Institute of Supply Management (ISM), Consumer Sentiment and the “big boy”…the monthly Jobs Report. And whirling around in the mix is the seasons first potential hurricane headed towards the Gulf of Mexico…”Ernesto” is on the way. If the hurricane does develop, it could disrupt supply to an already jittery oil market. This would lead to higher oil prices, and more inflationary pressures…not good for Bond prices or home loan rates.

But technical factors will now give up the helm, and take a back seat to the important upcoming news events. Because Bond prices and home loan rates tend to benefit from weak economic news, and vice versa, worsen on positive economic news…this gives us some hints as to which way the wind might blow when the news starts hitting. But because Bonds would still need to power through the tough technical ceiling overhead to bring some improvement to home loan rates – it will take some dismal news indeed to see significant change for the better in rates.

The Mortgage Market View…

LOVE AND MARRIAGE, LOVE AND MARRIAGE, GO TOGETHER LIKE…Well, you know the song. But more than 50% of marriages end in divorce, and the lyrics quickly change from “love and marriage” to “alimony and child support.” Most people know their alimony payments are tax deductible and most also know alimony received is taxable income. But some innocent and seemingly harmless changes in the way alimony is paid can wipe out the deduction and make receipt of it tax free. And in an already emotional environment, more misunderstandings and legal battles are less than welcome.

According to the IRS, alimony can be claimed as a deduction in the year paid if the payment is made in cash. That’s the key point – it has to be paid in cash or by check. If it is used as part of a buyout or trade for personal items, furnishings or home equity, the deduction is disallowed. This can be a major issue, especially where home equity buyouts are concerned.

Picture a divorce situation where, after a legal battle, it is determined one spouse is obligated to pay the other alimony. And because the legal settlement took some time to reach, there is back alimony owed by Spouse A to Spouse B of $20,000. Additionally, Spouse A is leaving the marital home but has the right to half the equity in the home, which comes to $20,000 for their share of the home equity.

So…in the interest of keeping things simple and not having to take out loans or sell the marital home, the parties agree to trade the $20,000 owed to Spouse A in home equity for the $20,000 owed to Spouse B for back alimony. While this may appear to be a fair and reasonable way to settle the issue, it does not meet the IRS requirement for alimony to be paid in cash in order for it to be tax deductible. This issue is surprisingly common, and just recently the IRS Tax Court disallowed an ex-husband’s deduction for alimony (2006-122 Rocke Richard LaBozetta, Petitioner v. Commissioner of Internal Revenue, Respondent) because it was a trade of equity for back alimony and not paid in cash. Had the ex-husband known this prior to the settlement, he may have structured the settlement agreement differently to take advantage of the tax deduction.

Again, this could be a very common mistake for many individuals and could be a very costly mistake when counting on an extra tax deduction. It is important to take the time to meet with divorce and tax professionals that can help you make the correct financial decisions. If you need or know of someone who needs a referral for a tax or divorce professional, please contact me and I will be happy to recommend either to you.
The Week’s Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

It was truly a good news mixed with bad news situation when reviewing business finance developments that occurred during 2007. Many of the commercial loan trends that emerged last year have significant implications for commercial borrowers seeking either new financing or refinancing in the coming months. For business cash advance and credit card processing services, the past 12 months have been characterized by significant changes. There were many providers both entering and exiting these business activities. The fact that many poor providers have been forced to stop their role in these complex working capital services is positive news for business owners. But the bad news is that there are still many new and inexperienced companies attempting to operate in this complex field. A similar trend involving inexperience can be seen in viewing the large number of residential financing brokers now attempting to transition into business financing. Since by some estimates approximately 100,000 residential financing employees lost their jobs during 2007, there is a real possibility that thousands of unqualified brokers will be entering the business finance field during 2008 or have already started the process. During 2007 (and continuing into 2008 and 2009) there was also noticeable attrition in SBA loan providers. This is primarily a positive development, since the field has long been overpopulated with inadequate business lenders. During the past 12 months a large number of regional and local banks eliminated or reduced their business financing services. Perhaps the most negative aspect of this development is that most borrowers received very little advance notice from their previous lenders and therefore had to scramble to arrange new financing. If there is a positive aspect to this development it is probably that many borrowers confronted with the need to suddenly find alternative commercial financing sources have often ended up with much better terms by dealing with a new lender that specializes in commercial real estate financing and working capital management. A general business loan trend impacting refinancing is the reduction in loan-to-value ratios, especially when borrowers are attempting to get some of their equity out of the business in cash. Increased down payments are increasingly necessary to purchase special purpose properties such as churches and funeral homes. Although the general decrease in interest rates during the past year is a positive development, there will probably be some confusion among commercial borrowers who have adjustable rate terms when they do not see their rates reduced. In all likelihood, this will be due to a common clause applied to most commercial loan contracts that stipulate that the minimum rate for such agreements will never be less than the initial rate. With such a floor rate provision, this means that if a borrower starts with an adjustable rate set at 10% and then rates fall, the effective loan rate will remain at the initial rate. A major commercial property investment trend has been some increasing activity due to the current decline in viable residential investing options. Due to many investors who would rather avoid property ownership, the lack of real estate in business opportunity investing is an attractive aspect.

Abroad news is out about payday loans. The lenders design the loans to help people out in emergencies, yet the news tells us that the loans are sending people to bankruptcy court. People are taking out payday loans and finding it difficult to repay the loans on the term date due. Most lenders allow up to two weeks to repay loans, while others give a little more space for paying back the loans.
Still, in fifteen states payday loans are outlawed, since the state reps are angry that lenders are coming up with an idea that is causing financial difficulties. The loans are suppose to help out in difficult situations, which at times the loans will, however the loans are sending people to the bottom of poverty.
Utilities are one of the most expensive problems in the system. If utilities are
not paid the shutoff, notices start rolling in. If your lights and/or energy are shutoff, the providers will charge a fee to reconnect the services. In the middle of winter without heat and no money, thus payday loans can offer a way out. Anyway, you go, someone is going to take money from you, regardless of your situation. If you have shutoff, notices check with your state, since some options are available outside of payday loans.
Some states have agencies that will pay your utility bill to prevent shutoff notices. Social Services and some churches offer help when times are hard. Check your options and pull out some resources before applying for a payday loan.
Car troubles are a different story. If you have a mechanic in the family, or a friend that works in the mechanic industry you might have a way out. Unfortunately, many mechanic shops are expensive, charging outrageous prices, which put them in the category as payday lenders; however, repairs at times are unavoidable.
Vacations are nice, but if you feel you are lacking funds to take a trip, you might want to wait and save up the cash to go without a payday loan. Otherwise, plan a trip you know will not cost a fortune.
Bank overdrafts are in line with payday loans. The bank sharks will charge higher fees than common payday loans. Bankers are in the market for making money, as anyone else in the world, thus the bankers will charge $30-35 for insufficient funds, and daily charges for the length of time the check is not reimbursed. As you can see, the payday loans can come in handy at this point. Still, you will experience overdrafts, since if you borrow $300 you will pay $60 along with the $300 back to the lender. If you do not have the funds on the set date the money is due for repay, thus you will pay another $60 and roll over the loan amount.
One person paid over $500 on a payday loan the amount of $300, since the person could not find the funds to repay the debt. Outrageous!
Still, other people have paid lots more on payday loans. In fact, some people were threatened to jail because the funds were never available to repay the loan amount. As you can see, payday loans are high-risk loans. While the loans are short-term and unsecured loans, the advances rarely offer anything other than debt problems.
The news on payday loans continue with the remarks that payday loans is a form of loan sharking. If you think about it so are other forms of loans. Living in a no win system, payday loans can still provide an option that is livelier than other options.
In conclusion, we can think of a few options that can help you avoid payday loans. If you have low income and paying high fees for rent, consider the low-income homes. Otherwise, check with HUD, since loans are available to those with low-income with no upfront costs.
If you are struggling month to month, consider applying for a job that will pay you what you are worth. Unfortunately, we live in a greedy system where everyone is out to take the other man. Start thinking and take back what rightfully belongs to you!

After almost two years of reporting on the latest in student loan legislation, federal financial aid policy changes that affect college students or those that are college-bound, and a myriad of other topics that make life easier for students, the NextStudent Student Loan Blog will celebrate it’s two-year anniversary at the end of this year. During that time, the blog has delivered relevant content and news updated daily that keeps college students and their parents informed on current issues and such changes as student loan interest rates that affect the college experience and the planning process.

With so much confusion abounding regarding the issues, NextStudent’s Student Loan Blog is a clear voice that cuts through the chaos and explains what is happening in a succinct manner, even in the midst of hot issues that generate heated debate. In fact, the blog is a key resource for college students and their parents, helping them keep track of crucial student loan deadlines, new developments within the Department of Education, student loan consolidation information, and serves as an educational tool for the industry.

Weekly Format Explores Pertinent Issues

Each day, the focal point is a slightly different angle on student loans as follows:

Monday: “Student Loan News”

Tuesday: “This Week in Student Loans”

Wednesday: “Student Loan Legislation”

Thursday: “Student Loan Advice”

Friday: “Campus Life”

Helpful Topics Educate Students

While not just about financial aid and student loans, many postings center on helpful campus life topics such as conducting job searches, getting an ideal internship, and other savvy subjects like online social media. Some of the recent postings:

“From Classes to Cash: Landing the Gig that Pays the Bills after College”

“Student Internships: Pay to Get Paid What You’re Worth?

“Give Yourself the Best Shot at Federal Student Aid: Submit FAFSA Soon After Jan. 1”

“Failure Is for Freshmen, Success Is for Seniors: What I Learned at College”

“Should Undocumented U.S. Residents be Eligible for In-State Tuition Rates?”

“‘MyNews’ for MySpace Coming Soon”

“Starbuck’s New Record Label?”

Commitment to Education Extends to Customer Service

NextStudent believes in educating parents and students with online communication tools such as with the Student Loan Blog. This commitment to education extends to its dedication to excellent customer service as exhibited by personally assigned Education Finance Advisors who take clients through the entire financial aid and student loan consolidation process from start to finish. Whenever new clients contact NextStudent, they receive their own personal representative who will address their questions and assist them in getting the funding they need for school.

NextStudent believes that getting an education is the best investment you can make, and it is dedicated to helping you pursue your education dreams by making college funding simple. Learn more about student loans, private student loans, and student loan consolidation at NextStudent.com.

The news about the housing market has ‘not been good’ for some time now. It seems that we are bombarded on a daily basis with fresh headlines by Caty Couric or Charles Gibson about the latest woes to befall sub-prime mortgage home-owners. The sheer plethora of news on the subject is getting so depressing that I think it could actually be adding to the overall mental state of the nation, almost willing us into a recession.

The facts are undeniable. Foreclosures are up to 7.6% from 7.3% of loans past due or in foreclosure. The biggest rise in these numbers relate to what are called sub-prime mortgages. These are mortgages that were sold to lower income families where the original starting payments were set at a reduced rate. When interest rates rose, the borrowers of this type of mortgage were caught out. Instead of having to make a payment that they had been quoted when the mortgage was sold to them, they faced much higher payments in line with the higher interest rate prevailing at the time.

Now its easy to say that this is their own fault and that they should have been more careful when entering into the loan and that the duty of care is on the borrower to ask about the risks involved and the potential downside that a rise in interest rates would cause. The worrying thing is though, that many of these loans were sold to people who were novices in owning their own home and such complicated financial instruments. They came from low income households and were ‘blinded’ by a dream that most of us take for granted.

I am not the only one who thinks so. The Attorney General in Illinois is already investigating Countrywide Financial Corp for its potentially illegal targeting of minority groups for the purchase of high cost loans. This is just one of many State and Federal investigations underway.

Countrywide is also under scrutiny as its CEO Angelo R Mozilo is now being investigated for possible illegal securities transaction in which he cashed nearly $120 million dollars worth of stock shortly before his company announced bad loans of $422 million in the fourth quarter of 2007. Countrywide who are currently being taken over by Bank of America has also been named by the F.B.I. today,(9th March 2008), as one of fourteen lenders being investigated for lending practices.

As with most investment stories, when people are losing money, there is usually someone making it. It emerged in recent days that Warren Buffet may be about to step in to take a stake in Countrywide. Mr Buffet, who recently topped the world list of the richest men on the planet, knocking off Bill Gates after thirteen years, has been sitting on a cash-pile of some $50 billion dollars for some time now. His investment company, Berkshire Hathaway has reported taking a stake in Bank of America recently and rumours abound that he is looking to get involved once again in the financial & mortgage securities markets. As usual, Mr Buffet, your timing is impeccable!

Even ‘The Donald’ could be seen recently on National TV bestowing the virtues of property investment. I have to agree with Mr Trump that those who have the ability to invest in property in a depressed market are possibly the people who will profit the most. For the average man in the street though, I think the message is clear. When taking out a home loan or refinance package, get some professional advice. Check the small print and know the downside before signing the agreement.