Monthly Archives: April 2013

Home Loan Modification?

In 2009, prompted by a continued decline in the prices of houses, coupled with increasing number of bankruptcies, the Congress decided to pass the Making Home Affordable Plan. Because of continued economic downtrend, rendering hundreds and thousands of people jobless, many prospective homeowners failed to make timely payments of their mortgages. Now, they may be eligible for availing modification of their home loans. With this new plan, the banks can amend rates of interest or the period for paying back loans, enabling the borrowers to make revised reduced payment to avoid foreclosure.

Modification Programs

The new program called HAMP, abbreviated form of the Home Affordable Modification Program, allows people, patronizing the Federal Housing Finance Agency, also called Fannie Mae or Freddie Mac for their mortgages, to be eligible for a separate program. Mind you, this program is valid only for FHFA borrowers. Most of the big lenders like Bank of America, Citigroup, J.P. Morgan, Nationwide and others have their respective modification programs. You may contact your lender to know for which program you are qualified for taking financial assistance. If that doesn’t solve your purpose, you may visit website of Making Home Affordable and make an online application to HAMP.

Types of Modification

The objective of home modification is to allow you to retain your house by finding an affordable payment program for you.  The lenders would basically make two kinds of revised offers to allow you to pay mortgages. Option one is to reduce the rate of interest and see if the revised payment plan suits you. The amended rate of interest could be as low as just two percent! When the borrower is unable to pay despite the revised interest rate, the lender would offer to extend the duration of the loan, meaning if you were to pay the amount over thirty years as per the original program, now you may be asked to pay it over forty years.

Who is eligible?

To avail of home loan modification, you need to prove that with your present financial status, you are incapable of paying your mortgage. Before you approach the bankers and request any amendment, you should collect all information and data concerning your income and other payable debts. HAMP stipulates that your present mortgage payment has to be more than 31% of your gross income. Additionally, the mortgage for which you are seeking amendment must be for your main residence and you must have availed your original loan of not more than $729,750 before Jan. 1, 2009.

Other Options

Still, if you are unable to pay your mortgages, you get another option, provided your credit score is good. You could get your house refinanced, paying lower rate of interest or get an extension of time for paying back your loan, in place of home loan modification. If you don’t afford to pay mortgage due insufficient income, despite a reduced rate of interest or extension of time for paying back the same, you may be eligible for the Home Affordable Foreclosure Alternative program. You can seek help from HAFA for selling your house through a short sale and assist you in finding a house that you can afford to pay for. In place of a sale, HAFA discusses with your lender to persuade them to accept the house as is, without insisting for foreclosure of property. You can’t rule out the possibility of getting some money in the process, enabling you to relocate!

Resolve your tax debt – Save your dollars and avoid being harassed by IRS

Dealing with your tax problem is usually a big issue as there is a big difference between owing debt to the IRS and to the other financial institutions. The conventional lenders will take steps to sell off your accounts to the debt collection agencies or even harass you but the IRS will straightaway repossess your property or even garnish your wages. If you don’t want to be under the gun of the IRS, you have to ensure taking the best debt relief steps through which you can put an end to your soaring tax debts. While there are DIY steps, there are steps that you can take with the help of a tax professional too. Which one you will choose will entirely depend on your present financial situation and the way you can manage things. Here are some steps that you can take when you want to get out of IRS tax debt.

  • Guaranteed installment agreements: How much do you owe on your IRS accounts? If the amount is $10,000 or less than that, the IRS might allow you to repay your debts through an installment plan, known as the guaranteed installment agreement. However, you shouldn’t have filed late or paid late for the last 5 years, all your tax returns should be filed and your monthly installment payments should pay off the balance in 36 months or less. The grand total of your total outstanding balance divided by 30 will be the minimum monthly balance that the IRS will accept when you pay off your debts through the guaranteed installment agreement.
  • Streamlined installment agreements: If your balance is $25,000 or less than that, you can repay your IRS tax debts easily through the streamlined installment agreements. You have to agree to repay the balance in 60 months or less. If the balance expires within the 5-year period due to the statute of limitations on collections, then the IRS will require full payment. As with guaranteed agreements, all the tax returns should be filed and you agree to file your tax returns and pay your taxes in the right time in the near future.
  • Partial payment installment agreements: If the minimum amounts of the guaranteed and the streamlined installment agreements don’t follow your budget, you can even opt for partial payment installment agreement. The monthly payment will be based on what you can actually afford after taking consideration of your living expenses that you need. You can set up a longer repayment term and the IRS will file a federal tax lien to safeguard the interests on the debts.
  • Offer in Compromise: Just as you settle your credit card debts, you can also settle your IRS tax debt through OIC. The IRS will take into account your present financial condition before accepting this offer. A portion of your amount will be waived off by the IRS and you’ll be left with an amount that is much less than what you owed. However, the IRS will also take into account your everyday financial changes in order to check whether your situation has uplifted to be able to repay the debts.

So, when it comes to saving money and repaying your debts, you have to ensure taking the above mentioned steps so that you don’t become a victim of harassment by the IRS.

 

Real Estate Procedures Act – Mortgage Escrow Laws!

RESPA

The Federal Real Estate Settlement Procedures Act of 1974 (RESPA) restricts loan providing companies and mortgage lenders from demanding more than minimum required escrow payment from home buyers. Further, money lenders are required to give an annual statement of account showing funds in reserve to home buyers. The idea at the back of these laws relating to escrow account is to enable borrowers compare closing costs and to keep an eye on bribes, superfluous referral fees and overcharging for closing services.

So, how do prospective home buyers calculate escrow money? It’s not all that complicated as they imagine it to be. Here is the simplest way:

1. Find out your annual tax payment. Consider your preceding tax bill or the tax bills of owner or seller and divide the amount by 12 to get that estimated monthly amount payable in the escrow account for property taxes.

2. Work out your insurance payment and divide the annual fee of your homeowner’s insurance by 12. This gives your monthly deposit towards insurance.

3. In case you paid less than 20% down payment for the house, you’ll need to pay for your private mortgage insurance (PMI.) Divide your annual premium by 12 to get your monthly PMI payment.

4. Add the above three amounts to finally arrive at the amount you will need to pay every month in your escrow account. However the amount may change, deepening on variations of property taxes and insurance premiums.

For finer details check with the U.S. Department of Housing and Urban Development (HUD).

How RESPA comes into picture?

RESPA debars mortgage holders or lenders from retaining the contributions of homeowners in escrow account. They can’t charge more than the minimum monthly amount when the mortgage falls due. They may charge full amount only if the taxes need to be paid immediately or within 60 days of closing.

The Annual Escrow Disclosure Statement (AED)

At the time of closing you get something called Initial Escrow Deposit (EID). This is nothing but an estimate of what you may guess to be coming into or going out from the account during the period for which you’ll be paying mortgage. The factual AED figures will be provided by the lender/mortgage holder by way of an annual account statement at a fixed date, once every year, at the discretion of the lender. Law makes it obligatory for the lender to provide such statements. Excess amount if any, should be refunded and shortages are to be charged from the homeowners. Whatever be the case, they must amend the monthly sum to accommodate any inaccuracy in calculations. Escrow deficits can be responsible for declaring a mortgage default.

Are Mortgage Escrow Accounts Required by Law?

It’s worth mentioning that a mortgage escrow account is not required by law but lenders can ask for that under certain conditions that they decide. Further, the lenders are not obliged to pay you interest on the fund held in an escrow account. That prompts some borrowers to deposit their escrow money in their saving bank account, enabling them to earn interest and pay insurance and taxes on their own.

Forex Broker – How To Choose A Good Forex Or Futures broker?

In case you are considering going ahead with Forex or future market, you must have a good broker. You have quite a few options choosing a broker. The FOREX market is a huge network of traders, betting on foreign currency exchange rates. This vastness of market offers a wide range of options for choosing an appropriate broker. Your selection of a broker is governed by many factors.

You may ask other investors known to you to provide references of good brokers or the broker they patronize. Perhaps, you would prefer visiting online forums as there are many of them on Forex trading. A simple search on the Internet should suffice to get information about numerous brokers. It is vital to select a safe and dependable broker. Before you deposit any funds with the broker, you should go through the online reviews posted about the broker you intend patronizing. The information provided on the reviews tells you about the reliability of and the fees charged by the broker. As trading currencies is already risky, don’t make it still more risky for yourself by selecting a fly-by-night broker.

Here are some features you should essentially look for when selecting a broker:
Make sure the broker offers the Forex pairs you would like buy and sell. Some offer a very limited choice of pairs. Many Forex traders engage in other markets too. You may consider this aspect when exploring broker options. If you wish to trade futures, a usual match to FOREX trading, patronize only such brokers that operate over different financial exchanges. Some may provide access to the stock market, enabling you to cover all activities using a single account. Be sure to know their commission schedule beforehand.
Is there provision for downloading a Forex trading program and using the same or do you require a web based trading program! The latter is helpful when you are operating from home or some such location where you are unable to install software.
In case of market makers, compare their spreads with others. There is variation of spreads during news time. If you lack time to learn intricacies of Forex trading, you would do well to have a managed Forex account. But such accounts expose you to the risks of cheats and bad brokers who are incompetent in their job.
Look for Forex brokers providing their own software for trading. Such active platforms allow you to buy or sell during very short-term trading plans that profit from very small changes of exchange rates. You can also sign up for a demo account to test various broker options, using fake money all the time. This enables you to practice your trading skills without taking any monetary risk. Also, find out if the broker allows deposits and withdrawals without any charge.
Ideally, you should open small accounts with a number of dealers and compare them, though it would require enough funds. You can compare their spreads during news time. Some brokers are more efficient during day trading sessions while others prove better for longer trading sessions. You should check how long have they been in business.

Corporate Bond Risk – How To Evaluate Corporate Bond Funds?

Investors get quite a few options for investing in bond funds. Many prefer to invest in government bond funds for the benefits they offer while others fancy corporate bond funds. Novice investors may find it difficult to comprehend the different characteristics of corporate bonds in particular, and thus decide the ones that best answer their investment objectives. You need to adhere to certain fundamentals of investing for making the most appropriate investment. Here are some important aspects that you should not overlook while making investments:

1. At the outset you should be clear of your objectives of investing. Unless you decide your objects, you can’t really evaluate a fund. If you intend getting the maximum income, you should probably invest in high yield bond funds or junk funds as they are popularly called. In such cases your funds are invested in high risk bonds which are naturally expected to pay higher yield. Your risk taking capacity and the tax bracket to which you fall also needs consideration while selecting bond funds. Also, do not lose sight of how a particular bond will affect you overall portfolio while evaluating a bond fund.

2. Examine fund expenses. Every mutual fund has operational expenses that are listed in its prospectus as expense ratio. At times it may be worthwhile opting for funds with higher expense ratio, as in the case of an actively traded international fund having high performance, but most often you should look for funds having minimum expenses.  You should appreciate that expense ratio has a direct bearing on your profits. The more is the expense ratio, the less are your earnings. You should also check if you are liable to paying any fees for selling or buying your preferred fund.

3. It is legally obligatory for fund operators to pay all capital gains to shareholders, and the latter must declare such gains in their taxes. Now, the problem is that funds distribute such gains once a year. So, depending on which part of the year you bought fund, you may become liable to pay huge unexpected tax.  Though it implies that you won’t have to pay tax in future while selling your fund, you have to make arrangements for paying taxes for the current year and that could largely change the amount of payable tax and your financial plans.

4. Take time to study the prospectus of the fund to know all the necessary details about the fund. You’ll know who are the managers, what are the chargeable expenses of the fund and what kind of purchases the fund is permitted to make. Many funds are misnomers of the funds they invest in. Many investors realized that some high quality corporate bonds had invested nearly thirty percent of their resources in speculative violent bonds! Look into the bonds that the intended funds possess and also the bonds that it is permitted to buy to ensure that these are as per your investment objectives.

Best Debt Investment?

Despite the availability of a large variety of bond funds in the market, it should not be difficult to select one that fulfills your requirements.  Bond funds may be mutual funds or closed end funds. The purpose in any case is to derive income. Normally, they carry the option of getting dividends or reinvestment of the same. You get bond funds specializing in particular types of bonds like government bonds, municipal bonds, high yield corporate bonds and taxable or tax free bonds etc. On conducting a comprehensive research and following the steps noted below, it becomes easy to select a bond fund that perfectly suits your requirements:

1. At the outset you should define the reason of investing in bonds and be clear of your goals. You may choose to invest in such funds for the income they provide. At the same time if your income falls in higher tax bracket, you may consider investing bonds that provide tax relief. Keep in mind that there is no fixed date for maturity of such bonds and there is no assurance of principal.

2. You should also decide beforehand the time for which you can afford to stay invested. That better prepares you to assess your tolerance to market fluctuations. You may be looking forward to make savings for buying a house and thus may not find it very appropriate to invest in long term funds. The usual tenure of a short term bond is three years and bonds having intermediate term last for five to eight years whereas long term bonds last for ten years or even more.

3. Know your risk taking capacity. It helps you deciding the amount to be invested and the extent to which you can stomach market variations. Bond funds are associated with these risks: income, rate of interest, index sampling, credit and the management of your chosen fund. The risk in interest rate arises with the likelihood of bond prices coming down due increasing interest rates. Obviously, with interest coming down, there is the risk of falling income.  Index sampling risk arises due inappropriate selection of securities which affect the anticipated performance of the fund. Credit risk is caused due inability of the issuer to make payments towards interest and principal in time and the resultant drop in the price of bond. Risk of management of fund refers to the inapt choice of investments made by the fund manager, resulting to under performance of the fund, compared to other funds having similar investment goals.

4. You should keep reviewing your portfolio lest you should invest a bit too much in a particular group of similar funds. That makes you more vulnerable to risks, while depriving you of a diversified portfolio.

5.  Look at the costs. Be informed of the penalties and fees you are liable to pay for making early withdrawals. Find out the expense ratio and sales charges applicable, if any. The lower such costs, the more is your earning from investment.

Debt Funds – Fundamentals of Bond Funds?

Bond funds, also referred to as income funds, are basically mutual funds that offer steady income to investors.  These can be among the safest forms of investment but are often among the most conservative too, meaning that the returns can be low. A comprehensive study of the features of bond prepares investors to choose the most appropriate bonds to suit their investment objectives.

How to evaluate bond funds

Bond funds can be evaluated on the basis of the kind of bonds they comprise of, the dates of maturity of bonds contained in the portfolio and various fees charged by the fund managers for running the fund. While some bond funds may invest in only one category, others may have a more diversified portfolio.

Investors may buy bonds from companies or governments. The investors loans their money to the bond issuer to get cash distributions based on an existing interest rate. At the expiry of the contract, issuer pays back the loan equal to the face value of the bond.

 

Some bonds, termed as high yield bonds, are comparatively risky, though these are designed to produce more profits, compared to traditional bonds. These have a higher risk of default. Bonds issued by state or local governments are different in the sense that the interest paid by such bonds is free from centralized income tax and probably state income tax. This aspect should not be overlooked while evaluating such bond funds.

Though bonds with longer maturity term generally deliver a better yield, compared to short term bonds, their prices are more vulnerable to bigger fluctuations due changing rates of interest. The value of bonds is inversely proportional to rates of interest, meaning the higher the rates of interest, the lower the value of bond fund. Naïve investors of bond funds tend to choose funds having long term maturity, giving higher yields and suffer losses with an increase in rate of interests.

Like any other mutual fund, bond funds also mention operating cost for running the fund. While investing in bond funds, investors should not overlook operation expenses as they directly influence their earnings. The more these expenses the less is the yield to investors.

Selection Criteria

Naturally, the most important factors for selecting a bond fund are its yield and safety. Funds offering maximum yield have non-investment-grade bonds having long maturity dates and these may be responsible for causing substantial loss of principal.

Investors looking for maximum safety would better invest in government sponsored bonds or bonds of companies with AAA rating and having a maximum tenure of five years.

Bond funds with a maturity period of five to ten years could offer better yield without increasing the risk substantially.

Investors of high yield junk bonds should certainly expect a higher yield to substantiate the risk associated with low rated securities. It is recommended to invest only a part of your resources in such bond funds.

Here is an illustration to explain the effect of expenses on the yield of funds. Let’s say two funds offer earnings of five percent, with one having an average expense ratio of 1.1 percent while the other has an expense ratio of just 0.4 percent.  So, the yield from the first fund will be 5-1.1= 3.9%, whereas that from the other will be 4.6 5!

Will I Make Money – How To Make Money Online With Zero Investment?

An ever increasing number of people are getting encouraged to “make money online”, using various methods. There are quite a few benefits of making money through online options, of which there are numerous. For one, you can do it anytime of the day or night from any place, including your home, as long as you have a computer with an Internet connection. Your investments include your time and skills. If you are prompted, here are some popular ways of making online money.

Affiliate marketing                                                                                            

Affiliate marketing is among the best home business opportunities. What prompts people to opt for affiliate marketing is that it can be started rather easily, without investing funds.  Affiliate marketing is a profit sharing venture between a merchant on the web and their affiliates. An affiliate is paid commission for selling products of the merchant through the Internet. The main advantage here is that you don’t have to invest for developing a product.

Before venturing into affiliate marketing you need to decide the areas that you find interesting. Find out the products about which you know the most and could sell easily. Other than that, a good affiliate marketer should have patience, perseverance and determination.

As an affiliate marketer, you should effectively market your website, enabling you to draw a lot of visitors that transform to more sales. Though you can use websites of others, for long term affiliate marketing that gives you substantial money, you need to have your own website.

Personal website/blog

Many a time, while surfing the net you would have come across online blogs or journals, wherein people convey their opinions and feelings about any chosen topic. Blogs enable you to share your ideas with others at a global level.

Blogs are getting popular by the day as they are search engine friendly. When you keep them posted regularly, search engines pick them up and often index them because of their fresh content.  Moreover, it is the fastest way to making a website. People keen to build a website but lacking knowledge about HTML and how to create website, can surely have a blog. Blogging significantly enhances marketing reach.

You may not be an excellent writer, yet you can certainly try blogs. Once you are consistent with your blogging, you’ll appreciate its importance for internet marketers.

You can provide links to your affiliate products and services to people visiting your blogs. You may sell space to others for advertising through banners or provide text links. The easiest way of making money through your blog is to incorporate Adsense in your blog.  Every time someone clicks on those ads, you make money.

On searching the net, you’ll find numerous ways allowing you to “make money online.”  Many of those don’t necessarily require any investment, but you’ll need to spend a lot of time and efforts.  Your earning will largely depend on your skills and the amount of time you can spend. Yes, it’s true that there are people who manage to make a living that way.

Money Market – Money Market Investments?

A “money market investment” refers to the funds that financial institutions, including banks, invest in short term debts to government and top rated companies. The idea is to insure utmost security of funds, though the return is quite modest.

Prospects:

The average yield of money market investments varies from 2-5 percent per annum. This humble return is because the funds are invested in short-term traditional debts. Typically these are invested in securities like papers, certificate of deposits, treasury bills and such debt obligations for small periods of time.

Benefits

The most helpful feature of “money market investment” is that your investment has relatively low risks. But that doesn’t mean you would never lose your money, though the chances are very rare. You stand to lose your money if the company you choose for the purpose of investment goes broke.  If the rate of interest falls lower than the rate of inflation, money markets can’t find buyers. Generally, investments in money market are not insured by FDIC, meaning investors are basically dependent on the quality of the investments of their funds. Investors also have the option of investing in money market mutual funds, which again are not straightway guaranteed by the Treasury, but these funds primarily comprise of Treasury bills and government securities which are guaranteed by the government. So, investors get indirect guarantee from the government, which won’t default on paying these debts under normal circumstances. Another benefit of such investments is that such investments are considered open ended, meaning that investors can add or withdraw funds at any time without, paying any penalty.

Significance

Since long money market investments have continued to be among the safest forms of investments. They form the most widely accepted form of securities for holding surplus cash for short periods. Money markets frequently attract gains from bonds, stocks, mutual funds and other investments.

Function

A “money market investment” demands larger amounts as initial deposits, compared to savings bank accounts.  The usual minimum amount needs to be $1000-$5000 and it has to be maintained at all times. That is what makes it all the more worthwhile to invest in money market through money market mutual funds. A mutual fund company collects money from investors and invests in the kind of securities already mentioned. Any money market mutual fund would try its best to keep its share price constant at one dollar. It means for every dollar that money market fund collects, it has to issue another share of the fund at dollar one. So, investor is sure to get back $1 as long as the fund keeps working in that manner. Investors also earn interest on shares held from the investments made by the fund.

Considerations

Investors should note investments in different money market funds are not the same as different funds opt to invest in diverse securities, resulting to different rates of interest payable to investors. That makes it imperative to evaluate the performance of different funds. Though past performance of a fund doesn’t guarantee future returns, it is a reasonably good yardstick for measuring the performance of a money market fund. Also, there is a frequent change in the rates of interest.