Bush mortgage plan freezes subprime rates for 5 years

By William Neikirk and Mary Umberger Tribune staff reporter
12:56 AM CST, December 6, 2007
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WASHINGTON - Faced with a wave of costly home foreclosures, the Bush administration and financial institutions on Wednesday agreed to a five-year freeze on interest rates for certain Americans who face default on their subprime mortgages.The unprecedented accord, to be announced Thursday by President Bush, is aimed at curtailing the economic damage from the bursting of the housing boom during which many marginally qualified borrowers used easy credit to buy homes and now can't afford the mortgage payments.The freeze would enable eligible mortgage holders to pay only their initial, lower "teaser" interest rate for the next five years so that they will not face sharply higher payments when their interest rate is "reset" to a higher rate. More than a million such loans are scheduled to be reset over the next year.
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With more than an estimated $1 trillion worth of subprime loans outstanding, the U.S. housing industry is facing a crush of defaults in 2008. The Center for Responsible Lending estimates that 1 in 5 subprime mortgages made in 2005 and 2006 will end in foreclosure.But not every homeowner with a subprime mortgage would qualify, only those who are current with their teaser-rate payments and can't afford a higher interest rate.Those who have been delinquent on their current loans would not be eligible for the freeze, according to a source briefed on the plan. These loans would be worked out with lenders on a "case-by-case" basis, but many would likely end up in default. Another source said that borrowers with a 60-day loan delinquency would not be eligible for the freeze.The freeze would apply to adjustable-rate mortgages originated between Jan. 1, 2005, and July 31, 2007, which would reset between Jan. 1, 2008, and July 31, 2010. The program is designed to help those with two-year or three-year low teaser rates on their mortgages.It would only affect borrowers living in their homes, not those who purchased housing for investment purposes. According to the source briefed on the plan, those who have a 3 percent equity stake or more in their property also would not be eligible for the freeze.Under the reasoning of federal officials, those who currently have financial wherewithal to make their payments but would struggle to pay a higher reset rate could qualify for refinancing.The Bush administration is expected to seek authority to enable state and local governments to use tax-exempt bonds to fund these refinancings, an idea floated by Treasury Secretary Henry Paulson in a speech on Monday.The voluntary agreement caps a lengthy negotiation between the government and key players in housing finance, including lenders, loan-servicing companies, investors and trade associations. The government wanted investors, chiefly bondholders, to go along with the plan on the grounds that some return on their investment is better than none.Sen. Charles Schumer (D-N.Y.), chairman of the Joint Economic Committee of Congress, singled out investors as the biggest problem."The loan freeze is a good first step, but the $64,000 question remains: Will investors who might balk at going along with this be able to maintain legal roadblocks and prevent the plan from going into effect?" Schumer asked.Lyle Gramley, a former Federal Reserve member and formerly chief economist for the Mortgage Bankers Association, said financial institutions who collect loan payments would need "legal assurance that bondholders are not going to sue them."According to one source, the Bush administration will give its blessing to a bill by Rep. Mike Castle (R-Del.) that would provide such protection.Rep. Judy Biggert (R-Ill.), a member of the House Financial Services Committee, helped write a letter to those involved in the negotiations urging that "to the maximum extent possible, we want to rely on market-based solutions to this [housing] problem and limit the use of government funding to address this need."The administration carefully sought to avoid the charge that it was bailing out the industry, since no government money would be involved. But the key role played by Paulson gave the plan a strong government flavor.Sen. Hillary Clinton (D-N.Y.) and former Sen. John Edwards (D-N.C.), both presidential contenders, have proposed similar plans to deal with the housing crisis.Jim Shilling, a finance professor at DePaul University, questioned the value of the plan, saying studies show that a high percentage of those having trouble making mortgage payments ultimately default.Geoff Smith, research director of the Woodstock Institute in Chicago, which has studied the effects of foreclosure in the region, said, "We've been very supportive of this idea in general -- the idea of some sort of systematic loan modification. Working with borrowers on a case-by-case basis is not efficient."Characterizing the program as "a start," he estimated that it could affect 10 percent of subprime adjustable-rate borrowers who are facing reset troubles."For us, that 10 percent seems low, and we would hope that [the program] would cover a larger number of people," Smith said. "But I think it's an appropriate kind of program to help borrowers who are not yet in foreclosure. It makes a lot of sense to us."But Dan Lindsey, supervisory attorney for the Home Ownership Preservation Project of the Legal Assistance Foundation of Greater Chicago, said he was skeptical of the voluntary nature of the program because his group has encountered resistance from lenders in working out terms to stave off foreclosure for individual borrowers."It's hard to express the frustration we experience, the incredible gulf between what we hear high-level people say at a meeting about what their companies are able to do [to help borrowers in trouble] and, when they have a live human being in this situation, they become unwilling," Lindsey said."There is a chasm between the policies that are set at the top and what homeowners actually experience on the front lines," he said. "If it's voluntary, I have not much hope. I think it will help some people at the margins, but I think it needs to be mandatory."Paul Leuken, president of the Illinois Association of Mortgage Professionals, based in Lombard, said he expected the plan to be helpful."Anything—whether it's government or investors or banks—anything they can do to try to help the consumer is a good thing," Leuken said."Some people feel, well, they made their bed and they can sleep in it, but what people don't realize is that if the average home buyer who has good credit is going to fail, it's going to hurt everybody," he said. "We need to figure out a solution, not just let them sink or swim."

30% of Mass. Agents Expect to Lose Auto Business under New Managed Competition

Massacusetts insurance agents dealing with the switch to managed competition are expecting a lot of business movement as a result of the competitive system, with almost one-third (30.7%) predicting they will lose accounts as a result.
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A sizable 78.1% said they disagree with a statement that managed competition will have a minimal effect in the marketplace because most consumers will stay with their current agencies and insurers.
The results are from an online survey by Insurance Journal completed by 76 Massachusetts agents.
Agents were asked about how they think the managed care system slated for next April might affect their business. While 42.7% are uncertain about what will happen, 30.7% expect to lose accounts, 18.7% expect to gain business and 8% see things staying the same.
A good number (39.7%) also think the change could help their homeowners insurance business.
Most agents anticipate they will confront added competition with 77.6% predicting additional agency carriers entering the market and 81.3% believing additional direct writer or captive carriers will enter the fray.
As for the effect on auto commissions, 38.7% expect commissions to go down under managed competition, the same percentage that is uncertain about what will happen to commissions. A minority (10.7%) see commissions increasing or not changing (12%).
While there is some uncertainty about commissions, agents are rather convinced (78.7%) that managed care competition will mean higher expenses for them.
A slight majority (54%) anticipates obtaining a new agency appointment as a result of competition. Of the 76 agencies completing the survey, 61.6% currently have two to five carriers for private passenger auto, 12.3% have six to 10 and 21.6% have one.
Even though a majority (56%) supports the move to a managed competition system, there is some anxiety over the time frame and technology needed to make the transition. A majority (52.7%) said more time should be given for the transition.
"For such a significant change in our market place, implementation time lines are very short to properly assess the technology issues and detail to competently move to a managed competition system in Mass. Bottom line, there will be confusion in the distribution system during 2008 an in turn causing our clients unnecessary concern and upset. In addition, without a common insurance carrier delivery system, the added expense in enormous," offered one agent.
"I would feel much better if I knew that the technology was in place to do our rating on April 1. Also, it would be nice to know that the companies are ready and at this point it doesn't seem like they are," added another.
But agents are actively working to adapt to the coming change. To prepare, nearly two-thirds (75.3%) say they are reviewing their marketing plans and preparing for increased expenses. About half (50.7%) are upgrading their web sites, seeking additional company appointments (50.7%) and boosting their advertising (54.8%).
More than half (52.8%) plan to provide consumers with competitive quotes both online and over the phone.
In terms of location, 68.9% of the agencies said they are suburban, 20.3% urban and 10.8% rural. About one-third (33.8%) have six to 10 employees, 27% have one to five, 24.3% have 11-25 employees, 9.5% have 26 to 50 and 5.4% more than 50.
For a complete report on the results from the agents' survey, see the Dec. 3 issue of Insurance Journal magazine.

How To Save On Your Auto Insurance Like George Bush

Written by David Maillie
Saturday, 07 July 2007
The price of gas just keeps on going up and has no apparent relief in site (probably due more to George Bush's close personal ties to big oil and the middle east than anything else). This in turn is driving up inflation and the cost of almost everything we buy or need including auto or car insurance. Here's how to turn the tables in your favor and save money on your auto insurance like George Bush would if he had to pay for it.
We've all seen the commercials and mailings for Progressive and Geico telling us to get online and compare auto insurance companies and get competing quotes. There is a good reason for this - it will save you money. In most cases, shopping for auto insurance quotes online will save you big money (the average online auto insurance shopper pays 38% less). Get online and shop your auto or car insurance. You will save money.
It also helps to drive defensively and safely. According to the National Foundation for Highway and Traffic Safety, aggressive drivers cause 90% of all accidents and pay 30 - 70% more in car insurance premiums. Take a defensive driving course. Many technical and community colleges offer these courses and they may also reduce points on your license and DMV record. That leads to another important way of saving money on car insurance - get points removed from your license. You get points for things like speeding, not stopping for a stop sign, running a red light, etc... These points cause immediate rate increases to your insurance. Most states offer free or nearly free courses that will reduce the points on your license for most infractions (except for drunk driving and driving under the influence - you have to have a powerful name like Kennedy or Bush and then you get driven home).
Another way to save money on auto or car insurance is to increase your deductible and assume more risk.. You will save money by, for instance, going from a $250 deductible to a $1000 deductible. One word of caution, do not drop uninsured and under insured motorists coverage. Due to George Bush and his lenient policy in the past with illegal aliens in our country from Mexico we now have over 20 million illegal and uninsured motorists in America.
Another great way to save money on auto or car insurance is to drive a vehicle with a low theft rate. It is a proven fact that insurance companies charge higher premiums based on car brand and model theft rates. Since George Bush did practically nothing to stop these illegal aliens from Mexico we now have millions of them and they love to steal cars as some have found it easier than purchasing and they love Honda Civics and Accords. We don't hear of many of them tooling around in a Mazda or a minivan. Maybe if George Bush invoked trade restrictions with Mexico this would change and jobs would come back to America?
Joining professional groups like AAA. AARP, etc... can also save you money on car or auto insurance as you may be entitled to group rates. There are many other ways also. Now you know how to save money on your car or auto insurance and why we are earning less and executives at big oil are earning more and more. Also, I don't know if it's a republican thing, but lets think before we put a Bush in a political office in the future. If you haven't yet had the opportunity, please watch Farenheit 9/11 and learn more about George Bush and his brother in Florida.
About the Author:David Maillie specializes in automotive safety products and information. He holds numerous patents and awards for his patented headlight cleaner and restorer. For more information, tips, and money saving products for your auto please visit mdwholesale.com
From: http://www.articlesbase.com/autos-articles/how-to-save-on-your-auto-insurance-like-george-bush-41369.html

Mortgages Rates Rise for Second Week

By MARTIN CRUTSINGER AP Economics Writer © 2007 The Associated Press
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WASHINGTON — Mortgage rates around the country rose for a second straight week with 30-year mortgages hitting the highest level since late February.
In its weekly survey, mortgage giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages averaged 6.22 percent this week.
That was up from 6.17 percent last week and put the 30-year rate at the highest point since it was also 6.22 percent the week of Feb. 22.
Analysts attributed the increase to the government's release of better-than-expected job numbers for March with the unemployment rate dipping to 4.4 percent, matching a five-year low, while 180,000 jobs were created, the strongest showing in three months.
That unexpected strength pushed interest rates higher as financial markets believed it is less likely that the Federal Reserve will feel the need to cut rates anytime soon.
"Interest rates in general ticked up following the release of the March employment data, which showed stronger job growth than what the market expected," said Frank Nothaft, Freddie Mac's chief economist.
Nothaft said that even with the slight rise in rates in recent weeks, mortgage refinancing activity remains strong. He said a large number of the refinancing applications are coming from homeowners who want to get a new mortgage before their current adjustable-rate mortgage resets to a higher rate.
In its latest forecast, the National Association of Realtors said Wednesday that the median price of an existing home is likely to decline this year by 0.7 percent from the 2006 level, which would be the first time on record that prices have fallen for the entire year.
The Realtors also forecast that tighter lending standards in the wake of rising delinquencies will depress sales this year further than had been expected. The Realtors projected that existing home sales will drop to 6.34 million in 2007, down 2.2 percent from 2006, which had been the first year that sales had fallen after setting sales records for five straight years.
Other mortgage rates also rose this week, Freddie Mac said in its nationwide survey.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, rose to 5.90 percent this week, up from last week's 5.87 percent.
Five-year adjustable rate mortgages averaged 5.93 percent, compared with 5.92 percent last week. One-year adjustable mortgages edged up to 5.47 percent this week from 5.44 percent last week.
The mortgage rates do not include add-on fees known as points. Thirty-year and 15-year mortgages both carried a nationwide average fee of 0.4 point. Five-year and one-year adjustable mortgages each carried an average fee of 0.5 point.
A year ago, rates on 30-year mortgages stood at 6.49 percent while 15-year mortgages were at 6.14 percent. Five-year adjustable-rate mortgages averaged 6.13 percent and one-year adjustable-rate mortgages were at 5.61 percent.

Mortgage rates rise on employment data

Mortgage rates were pushed up this week due to stronger-than-expected March employment data, according to Freddie Mac.
Freddie Mac said Thursday the average 30-year fixed-rate mortgage grew to 6.22 percent this week, up from 6.17 percent last week. The mortgage rate is still down from this week last year, when it averaged 6.49 percent.

One-year adjustable-rate mortgages also increased, to an average of 5.47 percent.
"Interest rates in general ticked up following the release of the March employment data, which showed stronger job growth than what the market expected" said Frank Nothaft, Freddie Mac vice president and chief economist. "This brought interest rates on 30-year fixed-rate mortgages (FRMs) back up this week to match the first quarter average.

How much life insurance do I need?

By The Gosline Insurance Group Pease Insurance Agency Austin Childs


WEST ROCKPORT (March 28): How much life insurance do I need?
In most cases, if you have no dependents and have enough money to pay your final expenses, you don’t need any life insurance.
If you want to create an inheritance or make a charitable contribution, buy enough life insurance to achieve those goals.
If you have dependents, buy enough life insurance so that, when combined with other sources of income, it will replace the income you now generate for them, plus enough to offset any additional expenses they will incur to replace services you provide (for a simple example, if you do your own taxes, the survivors might have to hire a professional tax preparer). Also, your family might need extra money to make some changes after you die. For example, they may want to relocate, or your spouse may need to go back to school to be in a better position to help support the family.
You should also plan to replace “hidden income” that would be lost at death. Hidden income is income that you receive through your employment but that isn’t part of your gross wages. It includes things like your employer’s subsidy of your health insurance premium, the matching contribution to your 401(k) plan, and many other “perks,” large and small. This is an often-overlooked insurance need: the cost of replacing just your health insurance and retirement contributions could be the equivalent of $2,000 per month or more.
Of course, you should also plan for expenses that arise at death. These include the funeral costs, taxes and administrative costs associated with “winding up” an estate and passing property to heirs. At a minimum, plan for $15,000.
Other sources of income
Most families have some sources of post-death income besides life insurance. The most common source is Social Security survivors’ benefits.
Social Security survivors’ benefits can be substantial. For example, for a 35-year-old person who was earning a $36,000 salary at death, maximum Social Security survivors’ monthly income benefits for a spouse and two children under age 18 could be about $2,400 per month, and this amount would increase each year to match inflation. (It drops slightly when the survivors are a spouse and one child under 18, and stops completely when there are no children under 18. Also, the surviving spouse’s benefit would be reduced if he or she earns income over a certain limit.)
Many also have life insurance through an employer plan, and some from another affiliation, such as through an association they belong to or a credit card. If you have a vested pension benefit, it might have a death component. Although these sources might provide a lot of income, they rarely provide enough. And it probably isn’t wise to count on death benefits that are connected with a particular job, since you might die after switching to a different job, or while you are unemployed.
A multiple of salary?
Many pundits recommend buying life insurance equal to a multiple of your salary. For example, one financial advice columnist recommends buying insurance equal to 20 times your salary before taxes. She chose 20 because, if the benefit is invested in bonds that pay 5 percent interest, it would produce an amount equal to your salary at death, so the survivors could live off the interest and wouldn’t have to “invade” the principal.
However, this simplistic formula implicitly assumes no inflation and assumes that one could assemble a bond portfolio that, after expenses, would provide a 5 percent interest stream every year. But assuming inflation is 3 percent per year, the purchasing power of a gross income of $50,000 would drop to about $38,300 in the 10th year. To avoid this income drop-off, the survivors would have to “invade” the principal each year. And if they did, they would run out of money in the 16th year.
The “multiple of salary” approach also ignores other sources of income, such as those mentioned previously.
A simple example
Suppose a surviving spouse didn’t work and had two children, ages 4 and 1, in her care. Suppose her deceased husband earned $36,000 at death and was covered by Social Security but had no other death benefits or life insurance. Assume the surviving spouse is 36.
Assume that the deceased spent $6,000 from income on his own living expenses and the cost of working. Assume, for simplicity, that the deceased performed services for the family (such as property maintenance, income tax and other financial management, and occasional child care) for which the survivors will need to pay $6,000 per year. Assume that the survivors will have to buy health insurance to replace the coverage the deceased had at work, and that this will cost $12,000 per year.
Taken together, the survivors will need to replace the equivalent of $48,000 of income, adjusted each year for an assumed 4 percent inflation.
Thanks to Social Security, the survivors would need life insurance to replace only about $1,700 per month of lost wage income (adjusted for inflation) for 14 years until the older child reaches 18; Social Security would provide the rest. The survivors would need life insurance to replace about $2,100 per month (adjusted for inflation) for three more years when the non-working surviving spouse has only one child under 18 in her care.
The life insurance amount needed today to provide the $1,700 and $2,100 monthly amounts is roughly $360,000. Adding $15,000 for funeral and other final expenses brings the minimum life insurance needed for the example to $375,000.
What’s left out?
The example leaves out some potentially significant unmet financial needs, such as
The surviving spouse will have no income from Social Security from age 53 until 60 unless the deceased buys additional life insurance to cover this period. It could be assumed that the surviving spouse will obtain a job at or before this time, but she could also become disabled or otherwise unable to work. If life insurance were bought for this period, the additional amount of insurance needed would be about $335,000.
Some people like to plan to use life insurance to pay off the home mortgage at the primary income earner’s death, so that the survivors are less likely to face the threat of losing their home. If life insurance were bought for this goal, the additional amount of insurance needed is the amount of the unpaid balance on the mortgage.
Some people like to provide money to pay to send their children to college out of their life insurance. We may assume that each child will attend a public college for four years and will need $15,000 per year. However, college costs have been rising faster than inflation for many decades, and this trend is unlikely to slow down. If life insurance were bought for this goal, the additional amount of insurance needed would be about $200,000.
In the example, no money is planned for the surviving spouse’s retirement, except for what the spouse would be entitled to receive from Social Security (about $1,200 per month). It could be assumed that the surviving spouse will obtain a job and will either participate in an employer’s retirement plan or save with an IRA, but she could also become disabled or otherwise unable to work. If life insurance were bought to provide the equivalent of $4000 per month starting at age 60 until 65 and $3,000 per month from 65 on (because at 65 Medicare will make carrying private health insurance unnecessary), the additional amount of insurance needed would be about $465,000.

Car insurance: beat the price hike

Friday March 2, 2007Guardian Unlimited
Is your car insured with Norwich Union, the AA, Admiral or Quinn? Then it may be time to ring round when the renewal notice lands on your doormat.
Figures obtained by Guardian Money reveal they are pushing premiums up, while the best deals are being found at More Th>n, Zurich, the RAC and Swiftcover.
The range of premiums quoted by companies vying for your business has never been wider. Some motorists could easily save £200 or more by shopping around, while others will miss out by simply renewing, say industry experts.

Price differentials are widening because three of the largest insurers (between them they dominate 50%-60% of the market) are all trying to up prices.
Last September, Norwich Union announced it was looking to hike premiums by an average of 16% - with young motorists looking at possible increases of up to 40%.
The RBS group, which includes the Direct Line, Tesco and Churchill brands, followed a few weeks later by saying it was looking to increase rates by 5%-6%. Royal & Sun Alliance has talked in similar tones - although it owns More Th>n, which is currently the cheapest provider according to search engines which compare thousands of insurance quotes every day.
All three said they are raising premiums to cover the increased cost of claims.
A few months on, drivers who have enjoyed almost static premiums in recent years are wondering whether those days are over. "Companies are relying on what has become known as the 'boiling the frog' principle," says Richard Mason, head of insurance at Moneysupermarket.com.
The theory is that a frog will immediately jump out of hot water, but will sit there until it dies if the water temperature is slowly increased. Consumers should be aware that several insurers are adopting similar tactics.
"Companies have realised that if they hit buyers with a massive increase at renewal time, they will jump out of the pan. The hope that by pushing through a small increase, consumers will decide they are too busy to shop around," says Mr Mason.
Moneysupermarket, which processes 26,000 car insurance quotes a day, says a buyer who has been claim-free for the previous year should still be able to reduce their premium by around 5% by switching supplier.
"The UK market always has companies trying to gain market share and, as a result, quoting competitive rates. The companies doing so at the moment (which should be worthy of a quote as a result) are the Post Office, Barclays, Quinn Direct and Swiftcover. Liverpool Victoria should be added to that list - it recently said it wanted to become a top-five insurer within five years," says Mr Mason.
Fellow insurance aggregator, Confused.com, tells a similar story. It has analysed its quotes received over the last six months.
The table (above) shows the companies that are trying to grab market share by lowering prices - and ones that are trying to up the heat. Debra Williams, Confused's managing director, is predicting that premiums will be forced to rise by a minimum 10% to cover the fact that some companies are paying out £109 in claims for every £100 generated in premiums.
"While some insurers have steadily increased premiums over the last six months, others have decreased prices. Whether this is the industry's usual dynamic pricing activity, or a sign of things to come, remains to be seen.
"Specialist brands are thriving, as policies are increasingly being tailored to target segmented areas of the market, such as the elderly or women-only. We are also witnessing the emergence of value-add incentives, used as bait to entice customers away from existing, or similarly-priced, insurers, eg £50 cash-back (Post Office), handbag cover (Diamond), free MOT (Kwik-Fit)."
A spokeswoman for RBS, which deliberately does not allow its brands to be compared by the comparison sites, says: "In addition to controlling claims costs, over the past three months RBS Insurance has been required to increase new business prices by 5% across our key brands, in order to mitigate the impact of claims inflation.
Our approach is to introduce increases on a progressive basis, rather than presenting customers with an excessive and unpalatable one-off increase at renewal."
James Harrison, chief executive of the comparison service insurancewide.com, says his company has noticed some groups of drivers are being asked to pay more at renewal time.
"The increases aren't across the board, but it's clear that underwriters are targeting some groups more than others. Young drivers have been hit over recent months - quotes overall seem to be rising around 3%," he says.
He disagrees with Richard Mason that competition will be enough to keep premiums down. "The difference between this, and other years, is that there is no one company trying to grab enough market share by coming in with dramatically low prices. Last year it was Swiftcover; this year I can't see it happening in the same way, and premiums will have to start rising as a result.
"The message is clear you have to shop around at renewal time - even if you want to stay with your existing company. It gives you a price to start haggling with," he says.
Meanwhile, if you can't be bothered to seek out cheaper quotes, Barclays will "beat the cost of your current car insurance quote, and, if not, we'll refund the difference by up to £100 and give you £50 when you switch." The Post Office has a similar deal.
Here are some examples of the car insurance premiums on offer
Married female teacher, 35, living in Manchester, driving a Ford Focus (1.6, 53 registration) 10,000 annual mileage, full no claims. Price range: £396-£456. Lowest premiums: Lancaster, Endsleigh, Kwik-Fit. Single male banker, 26, living in London, driving a BMW 3 series (54 registration), full no claim years, 10,000 annual mileage. Price range: £560-£619. Lowest premiums: Kwik-Fit, Swiftcover, Endsleigh. Married female artist, 55, living in Surrey, driving a Citroen Xzara (99 registration), 10,000 annual mileage, full no claim years. Price range: £233-£264. Lowest premiums: Motor Quote Direct, Swiftcover, its 4 me, Direct Choice.