Plummeting Interest Rates Set Off A Rush To Refinance

Immediately after the Federal Reserve announced that it would buy $600 billion of mortgage bonds, the mortgage rate dropped dramatically. Our phone has been ringing off the hook. If you had been waiting for rates to drop to refinance your high interest mortgage, the future is now!! For potential homebuyers, the house you wanted to purchase a few years ago but was too expensive, might be within your means with these new low rates and falling home prices.


Happy Thanksgiving!

Today’s Rates

Conforming Loan Jumbo Loan


30-Year Fixed: 5. 500% (5.694% apr) 6.500% (6.785 apr)*

15-Year Fixed: 5.375% (5.475% apr)

All Rates Quoted at 0 points!

 Save hundreds of dollars a month on your mortgage payment
 Build up equity more quickly with lower rates
 Take cash out of your home for debt consolidation, remodeling or college.



_________________________________________________________
• Jumbo loan from $417,000 up to $3,000,000. Super Jumbo loan (650K+ requires 25% down payment)
• Rates quoted as of November 28, 08 based on 20% down and credit score of 720, primary residence.

"Underwater" Need Not Mean Foreclosure

Why Most People Who Owe More Than a Property's Worth Will Still Keep Their Homes
By KAREN BLUMENTHAL

What does being "underwater" in your house really mean? Probably not that you're drowning.
The number of underwater homeowners -- those who owe more on their mortgages than their home is now worth -- has been growing sharply since 2006 as real-estate prices have tumbled. By some estimates, between one in six and one in eight homeowners are in that position, most of them people who bought homes in the past few years or who put down small or no down payments.
This worries economists and policy makers, since owing more than your home is worth is the first step toward foreclosure. And it's a concern to the rest of us because foreclosures are roiling the financial markets and, closer to home, they drag down our neighborhoods. (Most people who still have equity, by contrast, would rather sell their houses at a loss than lose what's left of their investment.)
View Full ImageGetty Images

In response to concerns about rising foreclosure and delinquency rates, federal regulators are studying possible new programs aimed at needy homeowners. There are concerns that such programs could attract a flood of applications from those who don't truly need assistance or encourage lenders to push homeowners into foreclosure. At the same time, lenders such as J.P. Morgan Chase and Bank of America have committed to working on new loan terms for the most-distressed homeowners.
But experts who have studied previous sharp housing downturns in Texas, California, New York and Massachusetts say that being underwater, while unpleasant, doesn't lead huge numbers of homeowners to default on their mortgages and end up in foreclosure.
Christopher L. Foote, Kristopher Gerardi and Paul S. Willen of the Boston Federal Reserve Bank studied more than 100,000 homeowners who were underwater in Massachusetts in 1991 and found that just 6.4% of them lost their homes to foreclosure over the next three years, according to a paper published in the September Journal of Urban Economics. The vast majority of homeowners simply continued paying as usual because they focused on the affordability of their payments, not on what they owed, and they believed home values would eventually recover.

The economists found that homeowners typically lost their homes only after at least two things happened: Their home values dropped and they either couldn't afford the payments or stopped making payments after losing hope that prices would eventually recover.
Homeowners in California also were more likely than expected to keep paying during the deep 1990s slump, says Richard Green, director of the Lusk Center for Real Estate at the University of Southern California. More people turned in their keys in Ohio and Michigan during the difficult 1980s downturn because they lost faith in an economic turnaround.
Typically, homeowners fall behind after a job loss, divorce or serious illness. In the current downturn, foreclosures are higher than in previous cycles because more homeowners reached beyond their means to buy their homes and simply can't keep up the payments. As a result, the Boston economists project that up to 8% of underwater Massachusetts homeowners could lose their homes between now and 2010 -- a significant amount, but still not catastrophic.
So what does this all mean for you?
If you have a low-interest fixed-rate loan, you have a valuable asset that might be hard to replace in the current market, no matter what your home's value is. Keeping that mortgage current has some value, even if it means cutting other household expenses.
In addition, the penalties for defaulting are great. In most cases, walking away from a mortgage can knock a top credit score down to the cellar, says Ethan Dornhelm, a senior scientist at Fair Isaac Corp., which sells credit-scoring formulas to credit bureaus.
A person with a stellar credit score from the high 700s to the top score of 850 would see it drop more than 200 points. A person whose credit score is lower may see it fall by fewer points, but still end up with a score in the mid 500s. At that level, reasonably priced new debt, from credit cards to car loans, will be out of reach. In addition, a default could lead landlords and utilities to require more cash up front and even affect your job prospects.
If the borrower continues to pay other debts on time, the score will climb gradually, though it may take three to five years to return to "good" scores, from the mid-600s and up. Scores of 790 or more -- which are rewarded with the lowest interest rates -- won't be attainable for at least seven years, when the default blemish finally disappears, Mr. Dornhelm says.
Fannie Mae requires borrowers who have lost their homes to foreclosure to wait five years before it will accept a loan from them, though borrowers who had extenuating circumstances, such as an illness or job loss, may requalify within three years.
What's more, lenders in most states can go after homeowners for an unpaid balance on a mortgage. That's a real risk, especially if you have other assets.
The longer you stay in your house, the better the chances of making it through this down cycle. Though a return to peak prices may take five or 10 years, some housing markets may start to bounce back once credit becomes more available. Meanwhile, you'll be reducing your mortgage as you make your payments.
Lenders aren't going to renegotiate just because prices have fallen, but if you truly can't afford your payments, contact your mortgage servicer to see if you can rework your interest rate or work out new payment options. The federal Hope for Homeowners program, which began Oct. 1, is intended to provide some relief if lenders will agree to reduce the loan amount to 90% of the home's current value.
If you can't get help from your lender, try contacting a credit counselor certified by the Department of Housing and Urban Development. These counselors have direct access to lenders' loss-mitigation departments, which consumers don't, says Natalie Lohrenz, counseling administrator for Consumer Credit Counseling Service of Orange County, Calif. A list of HUD-certified counselors is available through Hope Now, a consortium of lenders and counselors. (Call 888-995-HOPE or go to www.hopenow.com.)
If you need to sell the property and can't afford to cover the shortfall, your lender may agree to a "short sale," in which you sell at a price below the mortgage amount. This is a much more complicated transaction to pull off than a regular home sale, though, and it may hurt your credit score if the lender reports that you failed to pay off the whole obligation.

Gov't launches mortgage aid program

New mortgage help program launched by government as foreclosure crisis continues

WASHINGTON (AP) -- The government kicked off a program Wednesday that aims to prevent foreclosures by letting an estimated 400,000 troubled homeowners swap their mortgages for more affordable loans.

Lenders, rather than borrowers, will decide whether to participate in the program, which requires them to take a loss on the initial loan. The $300 billion, three-year program is designed to help borrowers who owe more on their loans than their homes are worth.

To qualify, borrowers must be spending more than 31 percent of their income on mortgage payments. Loans made this year are excluded, except for those completed on Jan 1. Borrowers must have made six months of payments on their loans.

"For homeowners in trouble, this may be the help that they need," Housing and Urban Development Secretary Steve Preston said Wednesday. Officials did not have an updated estimate of how many homeowners were likely to qualify, beyond the Congressional Budget Office's projection from earlier this year that 400,000 borrowers would participate.

The program, dubbed 'Hope for Homeowners,' was passed by Congress this summer as part of a massive housing bill. It is one of several government efforts to stem the mortgage crisis.

Critics, however, call the government's actions sluggish and inadequate. Earlier action to modify loans, they say, might have prevented a $700 billion financial industry bailout now being debated in Washington.

Executives from Citigroup, JPMorgan Chase, Bank of America and Wells Fargo told lawmakers last month they have been hiring additional workers to put the new program in place.

Still, it is unclear whether the industry will embrace the plan fully. One concern is that investors in mortgage securities must take an immediate loss and can't recoup their lost money if home prices turn upward again.

Investors would rather modify loans in ways that maintain the ability to "share in future appreciation," JPMorgan Chase executive Marguerite Sheehan said in written testimony submitted to House lawmakers last month.

On Monday, a group of state banking and law enforcement officials released a report that said nearly 80 percent of borrowers with subprime loans were not on track for assistance to avoid foreclosure as of May.

The report by the State Foreclosure Prevention Working Group criticized the lending industry for making only small changes to loan terms and noted that about one in five loans that were modified over the past year became delinquent again.

"While banks and Wall Street firms continue to report record write-downs of mortgage loan portfolios and securities, the losses do not appear to be flowing down to homeowners in the form of sustainable loan modifications," Iowa Attorney General Tom Miller, a founder of the state effort, said in a statement.

What Happens to Your Benefits After Bankruptcy

Marlene Skulnik worked on Wall Street for 25 years, most recently for Lehman Brothers Holdings Inc. After the investment bank filed for bankruptcy last week, the retired corporate-bond trader had trouble getting a straight answer on whether her pension benefits were safe.

"I would like to have a confirmation that I'm not going to be a housekeeper in a motel in my 70s," says the 57-year-old Ms. Skulnik, who began her career as a secretary in 1975.

As Ms. Skulnik and thousands of other Lehman employees and retirees discovered, it can be difficult getting specific answers to questions about the fate of key corporate benefit plans -- such as traditional pensions, 401(k)s and health insurance -- in the first days after a company goes bust. Even top executives struggle to see where the dust settles. As the financial crisis threatens to consume more companies, it's an increasing concern.

Ms. Skulnik says she was eventually assured by the pension plan's administrator, Fidelity Investments, that her benefits should be safe. Indeed, retirement benefits such as pensions and 401(k) plans are generally protected under federal law in the event a company declares bankruptcy.

It's a far different story for health benefits. Whether your coverage will survive depends in part on whether the company liquidates -- a so-called Chapter 7 bankruptcy -- or continues operating under Chapter 11 reorganization.

Here's what to consider if your company is facing the possibility of bankruptcy:

Retirement plans. The Pension Benefit Guaranty Corp. -- a federal agency created under the Employment Retirement Income Security Act, or Erisa -- guarantees your pension payments, but only up to a maximum amount, which means you might have to take a cut. For pension plans canceled in 2008, the maximum monthly guaranteed payment for a 65-year-old retiree receiving regular payments with no survivor benefits is $4,312.50. The PBGC doesn't insure assets in 401(k) plans. But Erisa requires pension and 401(k) accounts to be adequately funded and kept separate from the company's business assets.

While retirement-plan assets generally won't be swallowed up when a company fails, you could still face losses. If too much of your nest egg is invested in company stock, its value will plunge along with the company's shares ahead of a bankruptcy filing.

Health-care plans. If your company files for Chapter 7 bankruptcy, your health coverage likely will disappear, leaving you few options to explore besides getting on a spouse's plan or paying for expensive individual coverage.

Under Chapter 11 restructuring, your health coverage could stay unchanged as the company reorganizes. Companies in this situation, in fact, will often continue offering benefits to forestall a mass exodus of employees. When Delta Air Lines Inc. filed for Chapter 11 protection in 2005, for example, it continued providing health-care coverage and even vacation days without interruption.

If you employer's health plan continues, but you ultimately lose your job, you could be eligible for continued coverage under the Consolidated Omnibus Budget Reconciliation Act, or Cobra. Under this law, you can buy coverage for up to 18 months if you've been laid off, assuming your company has more than 20 employees.

The catch: You have to pay the entire premium, making the coverage far more expensive. According to a Kaiser Family Foundation study, former employees last year paid an average of $373 a month for individual coverage and $1,009 a month for family coverage, plus a 2% administration fee.

Associated Press/Bebeto Matthews

If a company eliminates your health-care plan, for any reason, all bets could be off -- including Cobra coverage. "Part of the reason for reorganization [is] precisely to allow the cancellation of these types of obligations," says Phillip Phan, a management professor at Johns Hopkins University's Carey Business School.

What to do. While labor laws govern employee benefits, it remains incumbent on workers to arm themselves with information about their health and retirement plans when a company fails, experts say. "I think the most important thing is to make inquiries," says Mark Poerio, cochair of the global practice group for employee benefits at law firm Paul, Hastings, Janofsky & Walker LLP. Federal law "requires honest responses of employers. It punishes misrepresentations."

If your company files for bankruptcy, the U.S. Department of Labor suggests asking human-resources or other management officials these questions: Will your retirement and health-care plans continue or be terminated? Who will be the plans' administrators during and after bankruptcy, and, in the case of a retirement plan, who will be the trustee in charge? Will Cobra coverage be offered to those who lose their jobs? And if a health plan is canceled, how will outstanding claims be paid?

In order to protect yourself, the Labor Department also suggests asking for a "summary plan description" of your retirement and health-care plans; statements that establish employment dates, compensation and contributions to your plans; and a certificate of creditable coverage that states your past health-care coverage with your employer. The information in these documents can educate you on the particulars of your plans, so you know what to expect if they're terminated.

If you're unable to obtain these documents -- or are concerned about suspicious activity related to contributions or investments -- you can contact the nearest office of the Employee Benefits Security Administration, the Labor Department agency that enforces Erisa rules (www.dol.gov/ebsa).

If you suspect your company is in danger of failing, you should start preparing for it. Joanna Wilson, a former financial analyst at Delphi Corp., a Troy, Mich.-based auto-parts supplier, did just that before her employer declared bankruptcy in 2005.

Delphi, suffering amid a brutal downturn in the domestic auto industry, had begun cutting workers and postponing raises. They also started increasing health-care premiums. "The writing was on the wall," says Ms. Wilson. "People were jumping ship left and right."

Ms. Wilson decided to switch to the health plan at her husband's law firm. That plan was more expensive and wasn't as generous as Delphi's in its heyday, she says. But the move safeguarded her care and, as Delphi kept raising premiums, the couple decided it made financial sense. She also consulted a financial adviser about rolling over her 401(k) to an individual retirement account, which she did when she left the company soon after it filed for Chapter 11.

Bailout Negotiations Enter Evening Session

WASHINGTON -- The idea of charging large financial firms fees to set up an industry-funded rescue insurance fund was gaining momentum as key House and Senate negotiators continued to meet Saturday evening to iron out the final details of a $700 billion rescue package for Wall Street.

Lawmakers and staff reconvened their meeting around 7:30 p.m. EDT in the offices of House Speaker Nancy Pelosi (D., Calif.), hopeful they could broker a deal on the much anticipated but exceedingly difficult-to-negotiate legislation that would have the federal government buy up billions of dollars of soured assets.

Associated Press

Sen. Charles Schumer, left, Sen. Max Baucus and Sen. Jack Reed take a short break during ongoing negotiations on Capitol Hill Saturday.

The mood was said to be "optimistic" entering the evening talks, according to a Senate aide familiar with the talks, after policymakers -- including Treasury Secretary Henry Paulson -- made progress during an afternoon negotiating session. Staff predicted a long night of negotiations, however, an observation backed up by the delivery of food from sandwich shop Cosi to Ms. Pelosi's office just before 8 p.m. EDT.

Congressional negotiators have been consulting with outside experts including billionaire investor Warren Buffett amid a focus on market reaction to the plan.

"We've had Warren Buffett on the phone tonight, other experts that we've been consulting," Sen. Kent Conrad (D., N.D.) told reporters as he walked through the U.S. Capitol. He declined to identify other people with whom lawmakers have consulted.

Senate Majority Leader Harry Reid (D., Nev.), in an appearance on the Senate floor earlier Saturday, said there are only a "handful of issues still lingering" for lawmakers to finalize. He said his goal was for the Congress and the Bush administration to at the very least release an outline of the bailout plan before Asian markets open Sunday evening.

The Senate aide said a number of specific ideas appeared to be gaining traction Saturday evening, most notably the concept of creating a "financial stability" fund financed by Wall Street and styled in the mold of the deposit insurance program run by the Federal Deposit Insurance Corp. Lawmakers had considered levying a tax on some securities transactions to help offset the cost of the $700 billion rescue plan, but the idea of assessing fees on a wide swath of financial firms to help pay for current and future government bailouts had its proponents.

The aide said specific language was still being worked out, but that negotiators were deliberating whether to assess the fees on all types of financial firms -- including possibly hedge funds and other nontraditional institutions -- and whether to put the fund in place now or in the future depending on the eventual cost to taxpayers from the current rescue plan. The fees and the fund would likely only apply to larger firms over a certain asset size.

A draft of the financial stability fund language suggest it would apply to financial firms, "the failure of which would result in direct pecuniary losses to the Federal Government, due to reliance upon Federal loans, advances, or other provisions of financial instruments or securities."

Associated Press

Senate Republican Leader Mitch McConnell and Sen. Judd Gregg speak on the financial crisis Saturday.

Also gaining steam was a proposal to eliminate the tax deductions for companies on executive compensation for top officers that is above $400,000. Eliminating so-called "golden parachutes" and excessive executive pay-outs for firms that sell toxic assets to the government has been a key issue for lawmakers on both sides of the aisle in their deliberations with the Treasury Department.

Lawmakers were also said to be making headway on their insistence that the government receive mandatory warrants in firms that sell directly or auction their bad assets to the government.

"We're just shopping language right now and it's going back to have some lawyers look at the latest offer," said Mr. Conrad (D., N.D.), the chair of the Senate Budget Committee, as he was heading back into the evening session.

One issue still to be resolved was how the $700 billion authority to Treasury to buy up toxic assets will be meted out.

Lawmakers want Treasury to receive the authority in tranches, receiving $250 billion immediately and another $100 billion if needed as certified by the president. The remaining $350 billion would be subject to a Congressional vote, giving lawmakers the opportunity to vote to rescind the funds.

But a Senate aide familiar with the discussions said Treasury is pushing for a larger initial authority, likely around $500 billion.

Lawmakers appeared to have the advantage on the issue ahead of the evening talks, the Senate aide said, though no part of the deal had been completely finalized.

Congressional and Treasury staff members have been trying to resolve the various issues related to the Wall Street bailout plan all week, and staff discussions lasted all day Friday and extended into the wee hours of Saturday morning to no avail.

Rep. Roy Blunt (R., Mo.), one of the negotiators, said that progress was being made but he wouldn't discuss specifics.

The bailout negotiations took a step forward Friday, when Senate Democrats agreed to include an insurance-based scheme as an option as part of the Wall Street bailout package in a bid to win support of House Republicans, who have been the main obstacle to reaching an agreement.

Sen. Charles Schumer (D., N.Y.) said that while Democrats would allow the insurance idea to be included, he didn't think that any financial firms would choose to take part in such a scheme. "I offered on behalf of Sens. (Christopher) Dodd and Reid that we would put their proposal in as an option," said Mr. Schumer. "No one would have to use it, but it would be there as an option."

According to lawmakers on both sides of the aisle, the plan proposed by Mr. Paulson, which would see the federal government buy up to $700 billion in toxic mortgage-linked assets, will form the core of any solution.

Sen. Judd Gregg (R., N.H.), one of the lawmakers taking part in the talks to thrash out an agreement, said Saturday morning that the negotiators would stay in the meeting until an agreement is reached. "The basic understanding is once we get into that room we are going to stay there until we have an agreement," he said.

Senate Minority Leader Mitch McConnell (R., Ky.) said he hoped that if a deal could be reached Sunday, then lawmakers could vote on it Monday.

Initially there were to be four lawmakers -- one representing each party in both houses of Congress at the talks. They were Messrs. Gregg and Dodd in the Senate and Reps. Barney Frank (D., Mass.) and Blunt in the House. Mr. Frank is the chairman of the House Financial Services Committee, Mr. Blunt is the Minority Whip, while Mr. Dodd is the chairman of the Senate Banking Committee hearing, and Mr. Gregg is the ranking member on the Senate budget panel.

But they were joined by several other senior Democrats, and there are as of late Saturday nine Democrats in the room compared with just the two Congressional Republicans, and Paulson.

After an apparent agreement was announced by lawmakers Thursday, House Republicans threw a wrench into the process by saying they would not support the deal, proposing instead their own alternative plan.

That plan would be based around the idea of an industry-funded insurance pool to provide certainty to the markets, rather than a taxpayer-funded scheme.

Mr. Conrad, the chairman of the Senate Budget Committee, said the insurance proposal had come up earlier in the negotiations, but that Treasury and the Federal Reserve rejected it.

Mr. Schumer said it could end up bankrupting firms, given the premiums would be so high.

House Republicans appeared to be conceding the point that the insurance scheme wouldn't replace the asset purchase plan as they had previously insisted.

The Republicans' priority is "making sure there is an insurance program in there in the tool kit of the secretary," said Rep. Adam Putnam of Florida, the chairman of the Republican House Conference.