History tries to repeat itself

The Federal Housing Authority says it doesn’t have the resources to police predatory lenders. Officials from the Department of Housing and Urban Development say the FHA needs more staff, better technology and added legal authority if it is going to stop another wave of shady lending practices from hitting the country.

The Troubled Asset Relief Program, which so far has spend $350 billion, was put in place to aid lenders by giving them federal funds. The FHA is charged with screening people who apply for bailout money or otherwise try to get involved with federally backed loans. However, recent examples have shown the FHA is ill-equipped to do so. Too bad a payday loan can’t help.

Finding ways around the law

The first example seems to be simply of slipping through the cracks. An FHA lender in New York was debarred five  years ago. That lender was somehow able to go back into the business, and it continued using the same fraudulent practices that got its license taken away in the first place.

A lending company in Arizona had its license suspended and then filed for bankruptcy. The company promptly resumed operations by putting the company under a different owner’s name.

Evaluating evaluators

The FHA isn’t just in charge of screening lenders. It is also responsible for screening appraisers, people who assign value to homes or property. Right now the government’s list of appraisers still names 199 who have been disciplined by the states. The list also includes 3,480 with expired licenses.

As home prices continue to fall and property taxes continue to rise, homeowners are challenging the appraisal value of their property. Appraisers are being overloaded with requests for re-evaluating a home’s worth. The more appraisers are hit up with these requests, the more bogged down the FHA will become.

Get on the right track

In my opinion, it is imperative that these organizations immediately get the staff and the technology they need in order to be able to properly screen requests for federal funds. Obama has requested access to the remaining $350 billion in TARP funds. If the FHA’s problems aren’t fixed before the government starts handing out money again, Americans will be vulnerable, once again, to predatory lending practices. And this time it’ll be our own government paying those shady lenders.

The first step toward fixing these problems comes with double benefits: Hire people! If some bailout money is used to pay more staff it will have the added affect of giving jobs to part of the 7.2 percent of the population that is unemployed right now. Add that to preventing more of the same mistakes that caused the mortgage crisis in the first place, and we have a winner. I think getting the proper technology for these organizations would be a worthy investment, as well.

This article was brought to you by your payday loan source.

We’ll get to payday loans but let’s start with home loans. The key to purchasing a home is first understanding the different types of loans, and then deciding what loan best fits your needs.

There are many types of mortgages

For example, if you intend to keep your home for several years, and you are purchasing your home while interest rates are low, then a fixed rate mortgage might be exactly what you need. On the other hand, if you intend to stay in your home for a short period of time, then you might consider either an adjustable rate mortgage or a balloon loan. Be sure to fully explore the possibility that you might qualify for government assistance if you are a veteran, or you fall into a low to moderate income bracket.

The different types of loans are discussed below. Keep in mind that this is just a brief overview of each type of loan, and that you should fully understand the terms and conditions of your loan prior to signing any loan documents. Be sure to read all loan documents and disclosures provided to you by your lender. If something is vague or confusing, be sure your lender clarifies it for you. In the meantime, if you need a short term loan and don’t want your credit affected for your mortgage loan, try payday loans.

Fixed Rate Mortgage

A fixed-rate mortgage ensures that the interest rate of your loan remains the same over the life of the loan. The benefit to a fixed rate mortgage is that while interest rates may increase, your initial interest rate remains the same. If interest rates fall below the rate of your loan, you can always refinance your loan at the lower interest rate.

The typical term for a fixed rate mortgage is 30 years. The benefit to a 30 year loan term is that it provides you with maximum tax advantages with the greatest interest deduction. The 30-year fixed-rate mortgage is typically the easiest type of loan to qualify for.

If you shorten the length of your mortgage, you typically benefit by getting a lower interest rate. There is a 20-year fixed rate and a 15-year fixed rate. Another benefit to a shorter term loan is you are able to pay off your loan quickly. The downside to a shorter term loan is that it increases the monthly amount you pay. For a really short term loan that won’t increase the monthly amount you pay, look into payday loans.

Adjustable Rate Mortgage (ARM)

An adjustable rate mortgage (”ARM”) offers an initial fixed interest rate with an initial fixed monthly payment. The word “Initial” is the key to this type of loan because after a predetermined initial period, the loan is subject to change due to fluctuations in market conditions.

The benefit to this type of loan is that during the predetermined initial period of time, the initial interest rate you pay will probably be lower than a fixed-rate mortgage. The downside to an ARM is the uncertainty that comes after the initial period.

An ARM may be a good option for buyers who only plan to stay in their home for a short period of time, because if the buyer turns around and sells the home before the initial fixed-rate period expires, they may benefit from a lower rate.

With regards to how often the interest rate adjusts with an ARM depends on the terms of the loan. If you are considering this type of loan, you need to pay close attention to the length of the predetermined initial period. For example, a 5/1 ARM means that your interest rate remains the same for the first five years and then adjusts to reflect fluctuations in market conditions starting on the sixth year. A 3/3 ARM would offer an initial fixed rate for three years and then would adjust every three years starting at the fourth year.

If the loan is an ARM, the lender must provide the borrower with a written disclosure describing how the loan works. If the loan contains an adjustable rate, the lender is required to supply the borrower with the “Consumer Handbook on Adjustable Rate Mortgages,” and the borrower must sign a form confirming that they received the handbook.

Balloon Loan

The balloon loan is a short-term, fixed-rate loan that allows borrowers to make small payments for an introductory period of time, typically five, seven or ten years. After the introductory period, the borrower must either refinance the loan or pay off the remaining balance in one lump-sum (”balloon”) payment.

Government Loans

There are three types of government loans. There is the FHA, the VA and the RHS loan.

A loan insured by the Federal Housing Administration (“FHA”) is available to qualified homebuyers. There are limits to the amount of FHA loans, but they are typically enough to cover most moderately priced homes. One of the benefits of an FHA loan is that it typically offers a low down payment.

A loan guaranteed by the Department of Veterans Affairs is known as a (“VA”) loan and is a long-term loan offers a low or no-down-payment. It is insured by the VA and is only available to qualified military veterans who have obtained a certificate of eligibility from the Department of Veterans Affairs.

The Rural Housing Service (RHS) loan offers low interest rates with no down payment. It is available to households with low to moderate income located in rural areas or small towns.

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