- Last Week In Review
“THERE IS ALWAYS SOMETHING TO BE THANKFUL FOR. IF YOU CAN’T PAY YOUR BILLS … BE THANKFUL YOU AREN?T ONE OF YOUR CREDITORS.” ANON
And although last week’s trading schedule was shortened due to the Thanksgiving holiday, Bonds finally made some moves to be thankful about, helping home loan rates improve by about .125%. The most notable news of the week was the release of the Federal Reserve’s last set of “meeting minutes”, the play by play of discussion during the last Fed meeting. It appears that more than a few members of the Fed feel that inflation is controlled, and the cycle of rate hikes may be coming to a close soon. These comments found thankful ears in both Stock and Bond Traders, and brought an across the board rally on the news.
“I’D GLADLY PAY YOU TUESDAY FOR A HAMBURGER TODAY” … BUT DID WIMPY REALLY EVER PAY POPEYE BACK? OR DID POPEYE SOMEHOW GET OUT OF MAKING THE LOAN IN THE FIRST PLACE? IF YOU’VE EVER HAD A FRIEND OR FAMILY MEMBER HIT YOU UP FOR MONEY, YOU KNOW IT CAN BE AWKWARD. READ THIS WEEK’S MORTGAGE MARKET VIEW FOR SOME TIPS ON HOW TO HANDLE THOSE APPEALS.
- Forecast For The Week
So Bonds finally made some moves in the right direction, helping home loan rates to improve. Take a look at the chart below, which clearly shows Bonds have at least stepped off the brutal “Down Escalator” for the time being. But the question remains…can they stay off, and perhaps even improve further…or will they be sucked back on to the ride?
This week will be an important one in determining the next trend for home loan rates. On the news front, the economic calendar plumps up with a fat schedule of high impact reports, including Friday’s big Jobs number, which has been known to influence trading for days or even weeks. On the technical side, just take a look at the chart…it’s easy to see the first of many “ceilings.” Bonds will have to power through to gain much improvement.
- Bottom line
If the economic reports this week come in weak and wimpy, it just might be enough for Bonds to gain the momentum needed to muscle higher through the ceilings of resistance overhead. On the other hand, strong and positive economic reports could easily shove Bonds right back onto the nasty Down Escalator. Keep tuned to the outcome of the news as this battle begins to unfold over the course of the week.
On the other hand, strong and positive economic reports could easily shove Bonds right back onto the nasty Down Escalator. Keep tuned to the outcome of the news as this battle begins to unfold over the course of the week.Chart: Fannie Mae 6.0% Mortgage Bond (Friday November 25, 2005)
- The Mortgage Market View?
Ever have a friend or family member ask for a loan? It can be awkward, and for many the knee-jerk reaction is to just pull out the checkbook. But having the funds available to extend a loan is not the point when it comes to lending money … it’s knowing when or if you will ever receive your hard earned funds back.
According to a Federal Reserve survey, over 8% of Americans have loans that have been extended to friends and family. By some estimates, these loans total a whopping $89 billion and an eyebrow-raising default rate of 14%, versus just 1% for those who borrow from a bank. So before you decide to play banker with your friends and family, consider the steps below to help avoid a potentially ugly situation.
First, when asked for a personal loan, don’t commit to an answer right away, especially if the sum of money is large. It has been said that “quick to borrow is always slow to pay”. So while you want to show compassion for the friend or family member and tell them you would like to help, explain that you need a few days to review your financial situation and make a decision. Perhaps another solution will come to them in the meantime.
And if possible, try to “just say no”. Statistics would say that the risk of not getting repaid is very high, which could be damaging to your relationship. But before you blurt out a blunt “NO”, consider the amount requested, provide an explanation that will not hurt your relationship, and offer to help in a non-financial way. Or consider giving a smaller amount as a gift, with no expectations of repayment. This allows you to be generous on your own terms, and removes the potentially heated issue of non-repayment.
If you do decide to extend a loan, sit down with your friend or family member and set expectations. And don’t beat around the bush … be very specific about the term of the loan, interest rate, payment plan, even the penalty that will be incurred should a payment be missed.
Always put the terms in writing. Seven out of ten personal loans are not put in writing … but again, consider the markedly higher default rate of non-documented loans. A written agreement reinforces that you are serious about the repayment terms discussed, and prevents any potential misunderstandings. Promissory notes can be purchased online at www.nolo.com for approximately $10. If the loan is large or complex it may be most beneficial to have an attorney draw up an agreement. Make sure the loan papers are filed away in a safe location, and then keep good records and issue receipts for all payments.
If keeping track of the payments and issuing receipts is too cumbersome, visit www.circlelending.com. For a modest fee, Circle Lending will keep track of the transactions and issue year-end tax statements. One important note, if the loan is in excess of $10,000 or the money will finance income producing activities, the IRS expects you to charge a certain amount of interest. To find the current rates, visit www.irs.gov and search for AFR (Applicable Federal Rates). You can also contact your trusted CPA for advice - or if you don’t have one, ask me - I may be able to provide a referral.
- 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.
Economic Calendar for the Week of November 28 - December 2
The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is not without errors.
Craig S. Higdon
President
Excelsion Mortgage
www.RealEstateFinancingBlog.com
The Copyright to all audio, video, images, and text are held by C. S. Higdon, Inc. and licensed under a Creative Commons License.
