Posts from the "Uncategorized" category
HUD Changing rules to encourage consumers to comparison shop for mortgages
The department of Housing and Urban Development (HUD) has published a review of the rules outlined in the Real Estate Settlement Procedures Act, and is proposing changes that will ensure consumers do not accept overpriced loans and hidden fees, among others. Read the full story over at Inman News…
My take on this, is it’s a good thing… Specifically for consumers, but also for lenders because those that are transparent and accountible will rise to the top, while the deceitful and dishonest will probably go out of business. The article does mention the possibility of it giving big banks an advantage and pushing away smaller institutions, but as we’ve seen on Smarthippo.com, smaller banks usually have the best rates and reviews, so I’m not sure if it would really hurt that much.
I am, however, pretty skeptical of whether or not this will be effective as from the sounds of it, it’s not *exactly* enforced and those who break the guidelines don’t seem to be reprimanded, so for now I think it’s a thought in the right direction and hopefully will lead to better things. Would love your opinion on it though. Leave a comment.
Kelly Rusk Joins SmartHippo as our New Community Manager
I’d like to officially welcome Kelly Rusk to the SmartHippo team. Kelly’s career has included positions in PR and email marketing, but her real passion is web 2.0 and social media, which is why as of today she is the new community manager for SmartHippo.
What does a community manager do? Chris Brogan has an excellent rundown in his post, Essential Skills of a Community Manager. In short, a community manager is part of the conversation and spends a lot of time listening (and a bit of time talking).
As we continue to build this great community which is SmartHippo, she’ll serve as an internal advocate for our users, as well as a point of contact for those with questions, comments or suggestions concerning SmartHippo in particular, or online finance in general.
You can connect with Kelly through her blog, on Twitter as krusk and SmartHippo, or LinkedIn. And you can pretty much expect to see her anywhere and everywhere there’s a conversation surrounding the problems, solutions and changes impacting people’s financial lives.
So whether you’re a banker, a broker, a consumer, or just plain curious about the world of finance and how you can make it work for you, please introduce yourself to Kelly, or post a comment below this post.
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IndyMac Goes Bankrupt - What You Should Do Now
By now, most of you have heard that the FDIC has taken over IndyMac Bank. IndyMac made its name in the industry by offering mortgages to consumers who were not able to document their income, and as loan defaults kept piling up, the bank was no longer able to stay afloat. The FDIC will continue to operate the bank under the name IndyMac Federal Bank for a transition period and then sell it back to the private sector.
If you had money at IndyMac:
- If you had $100,000 or less in the bank, your money is fully insured and you can withdraw it via check, ATM or at the branch.
- About 10,000 customers had more than $100,000 in their accounts. If you are one of these people, the first $100,000 is safe, and the FDIC is advancing half of the remainder until a final settlement. Whether you get more depends on how much the FDIC can get for the bank’s assets when they return it to private hands.
If you didn’t have any money at IndyMac:
The FDIC maintains an internal watch list of some 90 banks that are in a precarious situation. They keep this list confidential, since publishing it could trigger a run on these banks which could them force them to go under.
So use this as an opportunity to take what happened with IndyMac as a lesson and never keep more than $100,000 at the same institution.
Ed McMahon, Evander Holyfield at Risk of Foreclosure
The mortgage crisis spares no one, or so it seems.
First came news that pitchman Ed McMahon had defaulted on his $4.8 million mortgage with Countrywide. He explained his situation to CNN’s Larry King this way:
If you spend more money than you make, you know what happens. You know, a couple of divorces thrown in, a few things like that. And, you know, things happen.
![Holyfield: \"Not broke, just not liquid.\"](http://blog.smarthippo.com/wordpress/wp-content/holyfield_evander.jpg "Holyfield: \\"Not broke, just not liquid.\\"")
Then came news that heavyweight champion Evander Holyfeld was also at risk of foreclosure due to his defaulting on a $10 million loan from Washington Mutual.
In the case of McMahon, being famous does have its advantages, however. He claims to have been trying to sell his home for two years with no takers. But after news broke of his ordeal, interest in purchasing him home — asking price $6.25 million — is up. In case you’re in the market, Trulia has details regarding the property.
Can’t Save? Blame Your Brain
The average American consumer has a negative savings rate — meaning they spend more than they earn. Why?
Fascinating new research is brought to light in a recent article in Money Magazine:
When you imagine choosing between making a quick buck or growing rich later, you know the right answer: Be patient and hold out for the bigger gain. But as soon as you face a real rather than an imaginary choice, the fast money seems irresistible.
New discoveries in neuroscience labs are helping to explain why it’s so hard to resist the allure of instant gratification. It turns out that your brain is much more aroused by $1 today than by $1 tomorrow. And $1 six months from now barely registers.
The article goes on to quote one of the study’s authors, Carnegie Mellon University’s George Loewenstein, as saying there may be an evolutionary component to our behavior when it comes to spending versus saving. It turns out that during hunter-gatherer days, people faced scarcity and learned to consume when they had the opportunity.
When it’s time to close a mortgage, many of us don’t always go with the option that offers the best long-term financial gain. For instance, we may choose to pay a higher interest rate over the entire term of a mortgage in order to save a small amount of costs at closing.
Now we have an excuse. We can blame our brain.
Home Equity Falls to Lowest Level on Record: Federal Reserve
According to an Associated Press report, home equity has now slipped to the lowest level since the Federal Reserve began tracking the statistic in 1945.
Homeowners’ percentage of equity slipped to a revised lower 49.6 percent in the second quarter of 2007, the central bank reported in its quarterly U.S. Flow of Funds Accounts, and declined further to 47.9 percent in the fourth quarter — the third straight quarter it was under 50 percent. That marks the first time homeowners’ debt on their houses exceeds their equity since the Fed started tracking the data in 1945.
The total value of equity also fell for the third straight quarter to $9.65 trillion from a downwardly revised $9.93 trillion in the third quarter.
Home equity, which is equal to the percentage of a home’s market value minus mortgage-related debt, has steadily decreased even as home prices jumped earlier this decade due to a surge in cash-out refinances, home equity loans and lines of credit and an increase in 100 percent or more home financing.
How much equity do you have in your home? How are you coping? Post your story in the comments.
A Subprime Primer - A Humorous Look at How Things Went so Terribly Wrong
This “story” has been making the rounds on the Internet. It offers a hilarious (yet somewhat accurate) view of how we got into the mortgage crisis. If you know who the original author is, please let us know so we can credit them appropriately.
Tip: If you’re having trouble reading the text due to its small size, click the “expand” icon in the lower right hand corner immediately below the graphic.
Caution: This animation contains language some may find offensive.
Fannie Mae, Freddie Mac: Appraisal Rules About to Get Stricter
Fannie Mae and Freddie Mac, the two largest buyers of mortgages on the secondary market, will be toughening up their home appraisal standards as of January 1, 2009.
What did appraisal standards have to do with the mortgage crisis? Up until now, the relationship between a loan officer or broker and a home appraiser has been pretty snug. In many cases, loan officers would pick individuals who would create inflated appraisal reports, making it easier for a consumer to qualify for a bigger loan.
Under the new rules, employees involved in issuing mortgage loans can no longer be involved in the appraisal process, and an independent organization will be set up to monitor appraisal practices.
New York Attorney General Andrew Cuomo, who had been investigating inflated mortgage appraisals, will now close the file.
SmartHippo launches closed beta
Today, we sent out the first invitations to individuals to join the SmartHippo beta.
SmartHippo is the first ever web site that allows individuals to use the power of a community to save money when shopping for rates on financial products and services.
The old model is broken and has been a major contributing factor in the recent sub prime market fiasco. Consumers with the same lending and risk profile often get different rates on the same loan. SmartHippo allows any individual to post information and feedback on the rate they received, and to compare rates with other members of the community with similar profiles.
If you’re interested in what we’re doing, please visit the site and sign up to request an invitation to join the beta.
