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Increasing Number Of Home Loan Companies Taking Repossessions
There is some good news each now again in real estate. However, almost always there is some bad news to go with it. The homebuyer tax credit took any upticks in sales with it. Foreclosures were barely helped by the loan refinancing program from the government. The huge spike in repossessions suggests that a lot of individuals are not able to pay the bank loans they got to finance their homes, and banks are skipping house foreclosures. Since last year, there was a 25 percent increase in repossessions.
Ascending home repos
Repossessions are steadily increasing. Since 2009, they have exploded. RealtyTrac, a mortgage brokerage, keeps track of these trends. RealtyTrac just released a report wherein it is revealed that repossession of houses is at the highest level ever. The report for August 10, as outlined by Bloomberg, showed 95,364 repossessions. RealtyTrac has never recorded that large numerous repossessed homes in its existence. The numbers of repossessed homes, where a homeowner has to vacate the premises and also the loan business tries to resell it, have only increased. Since August of 2009, repossessions increased 25 percent.
House foreclosures reduce
However, there is some good news. Since July, foreclosures decreased. So did notices of default. As a result of difference between repossessions and home foreclosures, that should be taken with a grain of salt. There is a whole legal process that has to be followed for foreclosures. A homeowner in default, if the home gets sold, is responsible for making up the difference in purchase price, should the home be sold for a loss. Repossessions are just when the financial institution or finance company kicks a delinquent homeowner out but doesn’t start any legal proceedings, and just resell the home.
Inventory is increasing
You will find a lot of houses sitting there. These residences are available at great prices too. If a person can qualify for financing they can do well, but it will never be the case that properties can be sold for a small loan cash. As it stands today, one in each 381 properties in America has received a property foreclosure notice.
Additional reading
Bloomberg
bloomberg.com/news/2010-09-16/bank-seizures-of-u-s-homes-reach-record-for-the-third-time-in-five-months.html
Commercial Loan Lender Online Database
what are some good federal and private loan lenders?
say you need a federal loan and some more from a private loan to cover the cost of education. what lenders have a good reputation, and low/ fixed interest? Also, they say you start to repay after grad. does that mean after undergrad? what if you need a masters degree for your job? do you need a separate loan for that?
Natalie:
The best known site for comparing loan rates, all in one place, is bankrate.com – they’ve been around a long time, and they do have a separate section that compares educational loans only. (Look for the tab at the top of the main page).
As you may already know, Stafford and other government lending is all fixed – banks that want to lend under those programs must agree to lend at the interest rate set by the Department of Education. You won’t see any differences in interest rate there.
HOWEVER – and this is important – what you will see are a variety of “incentive” programs that different lenders offer you as an enticement to pay your loans back regularly and on time. For example, some lenders will automatically cut 1/4 of a percent off your interest rate if you make 12 consecutive on-time monthly payments. Another lender might have a program that rewards you with a full 1% discount on your interest rate after you have made 36 scheduled payments, etc.
Those kinds of incentive programs can make a BIG difference in the amount that you’ll wind up paying back, so those are definitely things you should look for when considering a lender.
Private lending, as you’ve probably guessed, is not controlled directly by the government – every lender is able to establish their own fees and interest rates. Here, it’s definitely wise to shop around for the best rates. Like any loans, educational or otherwise, you need to look out for “origination fees” and other out-of-pocket costs that might make a loan with a lower interest rate cost more than a loan with a slightly higher rate. I
If you are not well versed in evaluating loans, I would definitely recommend that you sit down with a financial professional – an accountant, a financial advisor, a friend or family member who has lending experience, and calculate the full cost of the various loans that you are considering.
Interest rates on private loans are complicated, and most of them are not fixed rate loans – in other words, the interest that you’ll pay on the loan will be adjusted every month, every few months, twice a year, once a year – the frequency will depend on the terms of the particular loan.
Most of these “variable” interest rate loans are based on a financial market interest rate known as LIBOR (London Interbank Offered Rate), which goes up and down with the global economy. A year ago, the LIBOR rate was over 5% – today it’s only 2.5%, but it’s been on the rise recently.
You won’t pay the LIBOR rate, you’ll pay the current LIBOR rate PLUS something else. Plus what? Well, that’s difficult to predict, because the “something else” will depend on your credit history. The “something else” is called the “margin” – and that part is fixed – it will be established when you take out the loan.
For example: Suppose you have so-so credit, and a private lender offers you a variable interest rate student loan. They might tell you that they can lend to you at LIBOR plus 6.5%. Today, LIBOR is 2.5%, so if you accepted this loan today, your initial interest rate would be 2.5% plus your 6.5% “margin”, for a total of 9.0%.
In a few months, your lender will recalculate your rate – they’ll take that 6.5% margin and add on whatever the LIBOR rate is at that time. This process of periodically recalculating your interest rate will continue from the date that you receive your loan funds until the day that you make your final payment (quite a few years from now). As the rate changes each time, your payments will go up or down, depending on how the LIBOR rate is fluctuating.
After reading all of that, I think you can see why the federal government’s Stafford and PLUS loan plans are such a good deal. The lenders are required to offer you a fixed low rate of interest. Also keep in mind that government backed loans have forbearance and deferment features that private loans don’t have. If your financial circumstances require it – you can make a simple request to your Stafford lender to postpone payments for a year – private loans don’t typically have that feature.
As for your other question – the amount that you’ll borrow each year will be dependent on your demonstrated financial need. Each year’s loan is a new loan, and they’ll be treated as separate loans, all the way through the repayment process, unless you eventually decide to “consolidate” them into one giant loan (rarely a good idea, actually). For obvious reasons, most students probably elect to borrow from the same lender every year, but there is no reason you would have to. (You’d have to sign a new master promissory note and notify your school, but that’s no big deal.)
So, yes – if you wind up in graduate school, you might find yourself continuing to borrow. Keep in mind a couple of things – one is that the Federal loan programs have a “lifetime” maximum – there is only so much Stafford lending the government will guarantee for one student. The other is that graduate school is frequently “paid for”, in the sense that graduate students are offered stipends (payment) for working as a research assistant or a teaching assistant, and many graduate schools offer lots of grants and scholarships. Hopefully, you won’t wind up paying a lot of money for graduate school. (Unless you want to go to medical school, or dental school, or veterinary school, or law school – ouch. You could easily run up another $75-150,000 in debt at professional schools!)
Borrowing to fund an education is an investment in your future, but like every other investment, there are “good” investments and “bad” investments. Sometimes the investment itself is good in principle, but the cost of the investment makes it a bad deal. Borrowing for an education is like any other kind of borrowing – you should never borrow more than you can afford to pay back. You must keep a firm grasp on your educational debt, and know what your repayment terms are, and how much you will eventually be required to repay – at what rate – how much each month – and for how long. It also matters what you are training to do – a medical student can justify borrowing more than someone who is pursuing a history major, because the medical student is likely to earn a much higher income over the course of their working life.
Remember, when you’re borrowing over a long period of time, you will wind up paying back quite a bit more than you borrowed. (If you borrow $35,000 today, you could easily pay back more than twice that over the next 20 years).
Let’s see – finally – repayment of government backed student loans is automatically deferred until you finish your education – so long as you remain registered as at least a half-time student. Private loans may or many not allow you deferment options – that’s part of what you’ll want to consider when shopping for a loan.
Good rates, good reputations? Your rate on government loans will be fixed, your rate on private loans will depend on your credit history. Reputation is not really an issue for you – once the money is in your hands (so to speak), chances are that your loan will be turned over to a loan servicing company (most likely Sallie Mae) for repayment. Your repayment experience will be pretty much the same as everyone else’s. The key is to shop for a private loan by looking at the interest rates and the repayment incentives that are being offered. The concern about repayment incentives applies to the federal loans, too.
Check out bankrate.com (link below) for a quick comparison of different loan programs – and definitely check with your financial aid office – they should have a lot of information for you, too.
Good luck!