Home Equity Lenders with the Best Equity Loan Rates & More

The Payroll tax cut is going to be paid by borrowers who refinance or purchase a home through one of the government finance vehicles like Fannie Mae, Freddie Mac or FHA. Just about everyone in Congress and the Obama administration say they would like to wind down the government’s near-monopoly of the mortgage market, but it’s hard to see that happening as both parties increasingly use Fannie Mae and Freddie Mac as a fiscal policy tool.

After a bloody political fight, Congress agreed Friday to finance a two-month extension of the payroll tax cut and unemployment benefits by raising the guarantee fee that Fannie and Freddie charge loan originators by at least one-tenth of a percentage point. Most mortgage lenders will pass this fee along to borrowers by raising the interest rate –likely by one-tenth of a percent – on new loans. The bill also will raise the annual insurance premium borrowers pay on Federal Housing Administration loans by one-tenth of a percent.

Congress has long used them to advance goals such as increased homeownership and affordable housing. What’s different now is that they are being used to pay for programs that have nothing to do with housing. “It becomes a honey pot where you can create money and use it to pay for whatever” you want, says Ed Pinto, a resident fellow with the American Enterprise Institute.

Democrats had proposed paying for a one-year extension of the payroll tax cut and unemployment benefits with an income tax surcharge on income over $1 million, among other things. Republicans wanted to pay for it by cutting the federal workforce and freezing its pay.

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One of the biggest obstacles for homeowners has been finding a mortgage that enables them to refinance their underwater loan. The Government rolled out the first phase of the HARP mortgage a few few years ago that allowed people to refinance up to 125% if they had a mortgage owned by Fannie Mae or Freddie Mac.  Since then they have eliminated the Loan to Value requirements all together. In the past no equity loans required very high credit scores but that is not the case any more.  Mortgage refinance and home equity rates have dipped to a record point this year so now may be the best time to get approved.

You саn оnlу refinance undеr Home Affordable Refinance Program іf уоu аrе current оn уоur home loan аnd іf уоu hаvе nоt fallen 30 days bеhіnd оn payments durіng thе lаst 12 months. Υоu must refinance frоm аn adjustable-rate loan tо а fixed-interest loan оr frоm а fixed-rate loan tо аnоthеr fixed-rate loan wіth а lower interest rate. In order to qualify for the refinance loan, уоur debt-to-income ratio (DTI) саnnоt exceed 31%. Υоur DTI shоws уоur monthly debt payments аs а percentage оf уоur gross income. Ѕоmе lenders offer sіmіlаr refinance options tо people whо sееm lіkеlу tо default оn thеіr mortgages аs а result оf financial hardship, but HARP represents thе mоst wіdеlу аvаіlаblе no-equity refinance program.

Mortgage Debt Forgiveness

In sоmе instances, lenders аnd mortgage servicers help struggling homeowners reduce thеіr monthly payments bу agreeing tо write оff а portion оf thе mortgage debt аs раrt оf thе refinance process. Undеr federal tax laws, уоu must pay tax оn thе amount оf уоur mortgage debt reduction bесаusе thе Internal Revenue Service rеgаrds thе money saved аs taxable income. То prevent debt forgiveness frоm causing mоrе problems thаn іt solves, іn 2007, thе federal government announced thе suspension оf taxation оn mortgage debt forgiveness untіl 2013. Ноwеvеr, single tax payers stіll must pay taxes оn debt forgiveness іn excess оf $1 mіllіоn, аnd joint tax filers must pay tax оn аn amount іn excess оf $2 mіllіоn.

Credit card debt can feel overwhelming and impossible to get out from under.  One of the main reasons for this is the extremely high interest rates and the revolving calculation of interest that makes it very difficult to actually pay off large amounts of debt.  Many home owners are realizing that eliminating revolving debt can help raise your credit score.  Getting a second mortgage for debt consolidation offers a chance to move high interest, revolving credit card debt to a fixed rate 2^nd mortgage loan secured by the value of the home or property.   Consolidating credit card debt with a fixed home equity loan moves overwhelming debt to a tax deductible, simple interest loan, resulting in a lower monthly payment.  More payment money goes to the principle of the loan with a fixed 2^nd mortgage rate can be paid down more quickly than high interest debt.

Maximize Homeownership and Refinance Credit Card Debt into a Tax Deductible Equity Loan

The fact remains that in most cases, fixed interest rates on 2^nd mortgages are usually much lower than credit card rates.  A 2^nd mortgage loan is a simple interest loan rather than a revolving calculation.  The lower monthly payment resulting from eliminating revolving debt can help raise your credit score.  Consolidating credit card debt with fixed second mortgage rates also helps out at tax time because 2^nd mortgage interest is tax deductible.  For people with large amounts of debt that keep growing due to sky-high rates, 2^nd mortgage for debt consolidation may be the first step to financial freedom. 

When considering 2^nd mortgage for debt consolidation, home owners should weigh the cost of a fixed rate second mortgage and fees involved in transferring to a simple interest loan.   A 2^nd mortgage loan is usually an excellent addition to a debt management plan, with a lower monthly payment and tax deductible interest.  Eliminating revolving debt can help raise your credit score and achieve financial freedom when coupled with a solid budget.  Consolidating credit card debt with an equity loan is simply what it sounds like.  If you already have a 1^st mortgage, a 2^nd mortgage is a loan secured by the value of your home.

There is some risk involved in the event of a default.  However, defaulting on all your high interest credit card loans also poses a risk to your home.  Eliminating revolving debt can help raise your credit score and get a lower monthly payment with a simple interest loan and tax deductible interest.  2^nd mortgage debt consolidation with a fixed second mortgage loan is a way of consolidating credit card debt with a second mortgage.  A debt management plan with a 2^nd mortgage loan can lead to true financial freedom.

One of the most popular purposes for taking out a home equity loan is to finance home repairs, construction and remodeling.  One of the best ways to raise your property’s value is to finance home improvements.

• Improve Curb Appeal
• Remodel Your Kitchen
• Install a Solar Energy System

Homeowners have the luxury of taking out a home equity line or a home improvement loan for installing a pool and upgrading the home with solar energy.  The government has been offering loans with discounted home equity rates to homeowners that finance energy efficiency.  Many homeowners have eliminated their energy bills and are now actually getting paid by the local gas and electric companies for generating solar energy. 

Related Home Equity Articles Recommended for Reading > How to Refinance a Home Equity Line of Credit

The U.S. government announced a FHA home equity loan program that cost-effectively finances energy efficient appliances and solar energy installation.  Home equity rates have declined to record lows as the cost of money continues to be cheap because the Federal Reserve has kept the discount rates at nearly zero.  Most second mortgage programs require equity, but the new FHA equity loans do not require the amount of home equity that is required with traditional 2^nd mortgage liens.

HUD Announces Power Saver Program Offering FHA Home Equity Loans up to $25,000

The Federal Housing Administration received support from HUD and the Obama Administration last week when they announced a new initiative called the FHA PowerSaver. This is a FHA second mortgage that enables eligible homeowners to get access to $25,000 for financing energy-efficient windows and doors, heating and ventilating systems, solar energy panels, geothermal systems, insulation and additional green energy retrofits. 

What You Need to Qualify for FHA Second Mortgage

Like most refinance loans today, you will be required to document that you are a worthy of the bank taking a risk with little equity. FHA lenders are setting the benchmark with a minimum credit score of 660 and total household monthly debt-to-income ratio may not exceed 45%. There is no specified equity requirement, but FHA has made it clear that underwater mortgages are not allowed either.  For example if you owe $270,000 on your mortgage and your property is appraised at $300,000 then you would be eligible for a $25,000 fixed rate home loan because your combined loan to value( 1^st mortgage balance plus the 2^nd mortgage amount) does not exceed 100%.  In this example, having the $5,000 cushion would be enough.  So with today’s tight mortgage climate, this would be considered an aggressive equity loan as FHA is allowing the PowerSaver second mortgage to be financed up to100 % of the home’s appraised value.

Upgrade Your Home with Solar Energy Systems That More than Pay for Themselves

The average solar energy system costs almost $30,000 and the Federal government is granting a 30% tax credit that is not capped. You may have heard stories about homeowners that have shredded their energy bills because generating solar energy is now generating revenues as many local gas and electric companies are incentivizing energy efficiency.  The bottom line is that homeowners are seeing a very quick return on investment by installing solar energy panels that are financed by a second mortgage loan or a home equity line of credit. When the homeowner is receiving a check from the energy company monthly that is greater than their home equity loan payment, they know they made a wise financial decision that save them money and does something good for the environment.

Related Home Equity Articles Worth Reading

• Home Improvement Loan Helping People Raise Property Values  
• Finance Solar energy with a Green Mortgage from FHA
• FHA 203K Loan for Financing Home Improvements

Americans have been blessed with record low mortgage rates for almost five years now.  With food and energy costs rising, it will be difficult for the Federal Reserve to keep the rates low. It may be as good a reason as any to believe that current mortgage interest rates can’t remain below 5% for much longer. There are several substantive reasons to expect the rise of the home loan rate. Many loan originators expect conforming, home equity and FHA mortgage rates to continue to rise through 2012.

1. The end of Freddie and Fannie. There are many different views on how to reform government mortgage companies Fannie Mae and Freddie Mac, but there is a growing consensus that allowing them to continue to operate as private, for-profit entities with a government safety net for their mistakes is a formula for disaster. By helping to finance home loans written by private lenders, Freddie and Fannie have made those lenders more willing to write mortgages. It will take a long time to unwind Freddie and Fannie, but as reforms are put into place, expect lending standards to tighten, and home loan rates to rise.

2. Inflation is rising. When 30-year mortgage rates first dropped below 5%, in April of 2009, year-over-year inflation was actually negative. Now inflation is over 2%, and rising. Meanwhile, current mortgage rates are still below 5%. Something’s got to give, and it doesn’t look like it’s going to be inflation.  When inflation was negative, banks and mortgage lenders could afford to reduce home equity rates below 5% because they weren’t giving up any of that interest to inflation.

3. History. Financial history does not always repeat itself in an orderly manner, but part of making responsible financial decisions is understanding what is normal and what is not. From a historical perspective, current mortgage rates are clearly not normal. 30-year mortgage rates have averaged 8.88% over time. They have been under 5% in just 17 of the 479 months on record – or about 3.5% of the time. Just a return to the lower 25th percentile of all-time home loan rates would see 30-year rates rise to 6.92%.  Read the original Fox article.

If high interest on various kinds of debts have you worried, now may be the time to look into consolidating debt with a second mortgage or a home equity loan—the two terms are identical in meaning, but a difference arises when you select a home equity line of credit.  A fixed rate second mortgage will allow you to pay off your high interest credit cards and other bills while allowing you to focus on simply paying off the more affordable debt consolidation loan.  Taking a moment to step back and finance debt with a home equity loan can save you thousands of dollars’ worth of interest on your debts.  Home equity loans are the still the best way to consolidate credit card debt.

If you are considering consolidating debt with an equity loan, you must know the qualifications required to be able to refinance debt with a fixed home equity loan.  The first is that borrowers will typically need to have good credit scores needed to qualify.  That means, if you sense an issue with paying your credit cards, you should act to secure a debt consolidation loan and refinance the adjustable rate interest sooner rather than later.  This will prevent your score from plummeting.  It is also the case that you find most lenders requiring 10 to 20% equity in home to be eligible for an equity loan with a fixed interest rate.  This is important for you to know if you want to qualify.

Use Your Home Equity to Get Out of Debt

Instead of going the traditional route of consolidating debt with a mortgage, you might decide to choose between fixed rate loan and variable rate line of credit that you can draw from.  The interest rates you will pay are tied directly to the prime rate.  A fixed rate second mortgage will remain the same and not allow you to draw out funds.   The rate of a variable debt consolidation loan could change monthly or even more frequently based on your contract.  If you have difficulty with the need to choose between fixed rate loan and variable rate line of credit, you should speak with a knowledgeable representative.

Whatever you decide for your means of consolidating debt with an equity loan, you will be glad to pay off hh interest credit cards with little harm done to your credit score.  You will need to make continual monthly payments on your debt consolidation loan to be rid of this debt soon as well.  Remember that most lenders requiring 10 to 20% equity in home will be able to give you a great interest rate if you fulfill good credit scores needed to qualify.

According to CoreLogic, the number of homeowners whose home loans are underwater edged up in the fourth quarter as dropping home prices continued to reduce the amount of home equity borrowers have to work with. Whether you are looking to get cash out of your home, qualify for a refinance or simply sell your home for a profit, times are tough. The real estate data company released a report that indicated that 11.1 million homes, or 23.1% of all residential properties with a mortgage, had negative home equity at the end of the fourth quarter, up from 10.8 million, or 22.5% of homeowners, in the previous quarter. Negative equity means borrowers owe more on their first and second mortgages than their homes are worth.

Another 2.4 million borrowers were at risk with less than 5% equity on their homes in the fourth quarter.   Nevada had the highest negative home equity rate with 65% of its mortgaged properties underwater, followed by Arizona and Florida with 51% and 47%, respectively.  Nevada also reported the highest average loan-to-value ratio at 118%, followed by Arizona at 95% and Florida at 91%.   The only problem is that high LTV loans are difficult to find in 2011.

Another expected result of the Dodd-Frank mortgage reform act passed last year could also unintentionally hinder some first time homebuyers. Under a rule that would make mortgages with 20% down payments cheaper to originate, some states with lower loan-to-value ratios would be adversely affected as repeat homebuyers struggle to afford the down payments with so much of their equity tied up in a previous property.

Home prices are expected to fall another 5% to 10% this year, which would push underwater-mortgage rates up another 10 percentage points at most, the researcher said. Assuming that scenario, New York, North Dakota and Hawaii would stay at the “safe end of the spectrum” with very low shares of at-risk loans, while Colorado, Tennessee and North Carolina face the greatest risks.

Whether you are shopping around for a more flexible equity line or looking for options regarding home equity refinancing, you will likely find fixed rate second mortgage options to be more appealing, at least in these economic times.  Before you decide to combine your home equity loan and first mortgage together or refinance variable rate credit line into a fixed loan, you should speak with a knowledgeable home equity lender to help you decide what is right for your situation.  After all, refinancing an equity loan is not beneficial in every situation, so do not get ahead of yourself before seeking professional advice. 

Compare Home Equity Loan Programs:

• Fixed Second Mortgage Refinance
• Home Improvement Loans
• Interest Only Home Equity Credit
• Home Refinance Loans

Read the original article > Refinancing a Second Mortgage.

Many homeowners have used home equity loans to consolidate credit card debt and adjustable rate loans.  It makes financial sense to refinance compounding interest debt into a fixed simple interest equity loan.  The reality is that credit card carry variable interest rates and home equity loans are second mortgages that feature a fixed interest rate for terms ranging from 15 to 30 years.  In most cases home equity loans are tax deductible up to $100,000, so that would be another reason to consolidate debt with a fixed rate home equity option.  Home equity rates are available as low as 4%.

There are several types of second mortgage or equity loans to choose from:

> Fixed Home Equity Loan Refinance

> Second Mortgage Refinance

> Interest Only Home Equity Line Of Credit

> Debt Consolidation Mortgages

Even though home equity rates are not usually as low as rates on first mortgages, they are substantially better than taking out a credit card to consolidate debts. Paying off debt can be tricky, because if you choose the wrong financing vehicle it can actually make your debt compound and the balances end up rising dramatically. 

In most cases, second mortgages do not require borrowers to pay significant lending fees. When needing cash to consolidate credit card debt, most homeowners are hesitant on mortgage refinancing to get cash out because most first mortgage companies charge $3,000 to $5,000 in closing charges and most homeowners already have a historically low rate between 4 and 5%.

• Debt Consolidation Mortgage
• Home Equity Loans

In most cases, second mortgage rates are bit higher than to prime mortgage rates available when refinancing on first mortgage liens.  However, home equity loan rates are drastically lower than credit card rates and the terms for credit cards can change without your consent. 

Read the original article > Second Mortgages for Consolidating Credit Card Debt

Home equity loan programs have certainly had more stable years with fewer defaults.  Just a few years ago millions of homeowners were using equity loans to refinance their credit card debt in what seemed to be a responsible financial move.  Once property values plummeted, so did the ability for homeowners to consolidate debt into a fixed home equity loan.  According to Freddie Mac, 22% percent of homeowners who refinanced their first- mortgage in the 2^nd quarter selected a cash-out refinance for getting access to money rather than taking out a home equity loan.  

The home equity loan delinquency rate is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association.   Many borrowers are in the process of getting approved for a home equity loan modification and most of the borrowers are at least 30-days late on their 2nd mortgage.  Home equity lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.

Home equity loan lenders wrote off as uncollectible $11.1 billion in fixed rate home equity loans and $19.9 billion in home equity credit lines in 2009, more than they wrote off on primary mortgages, government data shows. So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter.

Rob Chrisman wrote an interesting article in the Mortgage News Daily today that challenged the Federal government mortgage programs to implement a “rapid home refinance” program across the board for Fannie Mae, Freddie Mac, Ginne Mae and FHA.   Home refinance appliucations have stalled in recent weeks even as mortgage interest rates break records for all-time lows.  Refinance guidelines are simply too tight.

Morgan Stanley put out a research piece suggesting a “change” to mortgage refinancing requirements: “The Federal Reserve and the Obama Administration have pushed home mortgage rates to historic lows, yet many homeowners are unable to take advantage because they are blocked from refinancing. This problem could be addressed if the Government merely recognized its existing guarantee on the principal value of a large part of the mortgage market – the mortgages that are backed by Fannie, Freddie and Ginnie and acted to streamline the refinance process. There are 37 million outstanding home loan whose principal value is backed by the Federal government. When these homeowners apply for a home refinance loan, the application is subject to a standard underwriting process that involves an LTV test (requiring a property appraisal), an analysis of the borrower’s FICO score, and income verification. We estimate a potential average rate reduction of 125 bp on 50% of the outstanding volume of agency-backed home mortgages. In the aggregate, the savings amounts to $46 billion per year.”

One of the best benefits of being a homeowner is getting the opportunity to get cash out.  Borrowers can choose from a home equity loan or a cash out refinance loan.  The home equity loan is a second mortgage and cash out refinancing is the process of reworking your first mortgage.  If a homeowner already has a low fixed rate mortgage at 5% or lower than an equity loan can be appealing because it allows you to get a cash out second mortgage without touching the mortgage you already have.  If a borrower has an interest rate above 5% and/or it’s not a fixed rate mortgage, then cash out refinancing is an ideal opportunity for borrowers to reduce their interest rate while getting access to cash. 

The fees and closing costs on refinance loans are typically higher than home equity loans, but in today’s competitive market you may be able to qualify for a no cost home refinance, so discuss your options with your lender prior to jumping to conclusions.  Read the original Article > Cash Out Refinance Versus Home Equity Loans

Record low home equity rates apparently have not gotten the attention of homeowners nationally.  According to Arthur Nourian, finance writer for the Home Equity News Source, “Home equity lenders have made it difficult for the average homeowner to qualify for an open end  home equity line of credit or a fixed rate second mortgage, because the guidelines are not realistic in today’s tough economy.” When it comes to refinancing, Nourian said, “Borrowers are more savvy today and they the application volumes are dropping because most homeowners know that do not qualify for cash out or a simple rate and term refinance for that matter.”    

First Horizon Announced Higher Second Quarter Profits

First Horizon National Corporation is one of the largest home equity lenders in the nation.  When it was reported this week that the home equity loan company announced a profitable second quarter of this year, we had to post the good news.  As reported, the home equity loan business has been turned upside down in the last few years due to tighter lending guidelines as home equity lenders are less willing to take risks. 

First Horizon attributed their second quarter success to the improvement of credit quality.  “Second quarter’s results demonstrate that the successful execution of our strategic plan is paying off. I am extremely proud of our employees who have worked tirelessly to help position us for the future. Bryan Jordan, First Horizon CEO said, “We remain focused on improving efficiency, implementing regulatory reform and capitalizing on opportunities to grow our business.”  The slow economic recovery, diminishing equity loan demand and low home equity loan rates will present a challenging operating environment, but in those challenges, we see opportunity.

Typically in summer home equity loan application levels rise as homeowners like to get access to cash for financing home improvements and vacations.   In 2010 circumstances for these once popular second mortgage programs have changed.  Home equity loan guidelines have tightened so borrowers need more equity and higher credit scores to qualify.  According to Sean Dawson a spokesman for  Smart Home Equity, ” Home values have yet to return to 2005 levels, borrowers are finding it increasingly difficult to qualify for a home equity line of credit or even a fixed rate equity loan.”  Home equity rates remain at record lows even though the volume of home equity applications has plummeted over the last few years. 

Mortgage Bankers Association reported that the overall mortgage loan application index dropped 2.9%, adjusted for seasonal factors and the July 4 holiday, and the four-week moving average increased 1.5%. The MBA’s survey covers more than half of all U.S. retail residential mortgage applications. The mortgage refinance report dropped 2.9% last week from a week earlier as its gauge for home buying applications fell 3.1%.

Mortgage rates on 30-year fixed-rate home loans averaged 4.69%, up from 4.68%, while the average for 15-year fixed-rate mortgages rose to 4.12% from 4.11%. The one-year ARM average was unchanged at 7.2%. Adjustable-rate mortgages made up 5.5% of activity last week, rising from 5.4% a week earlier.

The mortgage industry was starting to enjoy the rising demand of loan applications as mortgage refinancing activity had seen a nice streak for rising refinance applications. The Mortgage Bankers Association yesterday released its Weekly mortgage application survey for the week ending June 4, 2010. The MBA application survey covers over 50% of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts.  Economists will continue considering this new data as consumer demand for mortgage loans.  In an era for low mortgage rates, a trend of increasing refinance loan applications implies consumers are seeking out a lower monthly payment which can increase disposable income and consumer spending. The home loan applications continue their declining trend indicating falling interest in home buying.  This is not good news for the housing or mortgage industry.

The Market Composite Index, a measure of mortgage loan application volume, dropped12.2% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 21.1% compared with the previous week. The four week moving average for the seasonally adjusted Market Index is down 0.7%.    The Refinance Index fell 14.3% from the previous week. The four week moving average is up 3.6% for the Refinance Index. The mortgage refinancing activity decreased to 72.2% of total home loan applications from 73.8% the previous week. This is the first drop for home refinancing activity in five weeks.   Also read related article > Credit Problems Hindering Mortgage Refinancing

It was another volatile day for the stock market so mortgage and home equity interest rates were all over the map. The interest rates went up and down like a roller coaster for most of the day. The market madness caused most home equity lenders to reprice for the worse, but later in the day, it allowed lenders to reprice with low rate reductions. All in all home mortgage rates are modestly improved again today.

Dear Smart Home Equity: We currently have home equity credit line with an interest rate prime plus 1.5 %. The equity line payment is small because it’s interest only, but I’m concerned that the rate will start rising and I might not qualify for an equity loan refinance, because I’m self-employed.  I may be doing some home remodeling.  Do you recommend another home equity line?  What do you anticipate home equity rates will go up to and can I still get a stated income home equity loan if I wanted to refinance the HELOC now?   
– Michael Sanchez

Thanks for your interest Michael in Smart Home Equity
As reported in the Wall Street Journal, the prime interest rate is at 3% above the targeted federal funds rate. Currently the targeted federal funds rate between 0 and 0.25% the prime rate is 3.25%.  We know the prime rate for home equity credit lines are not going to drop any more. Most mortgage insiders believe that the Federal Reserve is in no hurry to raise the targeted federal funds rate. If you are planning some home improvement projects, Ask your lender if they offer a No Cost Home Equity Credit Lines

You are wise to watch the home equity rates, because your credit line has an adjustable interest rates that  will only get higher. As far as qualifying for a no income documentation home equity loan that might be a problem.  There is nothing wrong with being self-employed, but most lenders will want you to document your income. To my knowledge, the stated income and no income home equity loans have not been available since last year when the “credit crunch” devoured the financial markets last year.  You might have more luck qualifying for a mortgage refinance that pays off your home equity loan.  There are still a few limited documentation refinance loans from a few lenders.  Your credit scores will need to be good and you need to be below 95% loan to value to qualify.  –Smart Home Equity

Thousands of homeowners have benefitted from consolidating debt with our home equity loans.  As the government cracks down on subprime mortgage lending it is inevitable that home equity loan guidelines will tighten for cash out and debt consolidation loans.  Consider these three steps below before taking out an equity loan to consolidate debt.

1. Determine how much unsecured credit card debt you have accumulated. Request a copy of your credit report from one of the main credit reporting agencies. You could also access it online via an online credit monitoring company like Experian or MyFICO.

2. Do you qualify to consolidate debt with a home equity loan? Contact a few different debt consolidation agencies. Review their qualification requirements. In most cases, you need to own your own home to qualify for a debt consolidation loan. Debt consolidation is a home equity loan and thus makes your mortgage payment larger. Other qualifications may include a minimum FICO score, steady employment, and a minimum monthly income.

3. How much you will save with an equity loan that consolidates your debt rather than simply making the minimum payment on your credit card debt. Always ask the mortgage company to give you a free quote.

Needless to say, the home equity sector of the mortgage industry has had three poor consecutive years.  With the credit crunch nearly killing all home equity loan programs across the nation, it was difficult for homeowners to access cash with a home equity line of credit or a closed end second mortgage.  2010 is showing signs of the home equity industry improving and 2011 looks bright.  With home remodeling inquiries rapidly increasing, it appears that home improvement loans will be making a strong rebound in the near future.

Declaring that the decline in remodeling activity may be reaching an end, the National Association of Homebuilders (NAHB) released the results of its Remodeling Market Index (RMI) for the first quarter of 2010.  The three part index measures remodelers’ perceptions of market demand for current and future residential remodeling projects.  Any result below 50% indicates that more respondents feel that the market is getting worse than indicate it is improving.   

The home improvement data is collected and reported to include impressions of both the current and impending market and NAHB has created a new unified index combining the two perceptions.  The first segment of the index measuring current market conditions jumped to 47% from 36.4% in the 4^th quarter of 2009.  The index of remodeler perceptions of future conditions had an even greater improvement, rising to 48.9% from 31.4%.  The unified measure was up from 33.9% in the previous quarter to 47.9%

The RMI has been consistently below 50% since the fourth quarter of 2005 and dipped into the low 20s in the fourth quarter of 2008.  This is the best showing for the index since Quarter 1 of 2006. “Although the overall RMI and most of its components are still slightly below the break-even point of 50, the recent improvements suggest that the remodeling market may soon reach its bottom and begin to grow in the coming months,” said NAHB Chief Economist David Crowe. “However, professional remodelers are still operating in a highly competitive marketplace and dealing with consumers who are uncertain about the future.”

Summary indices for future market indicators swelled substantially with calls for bids jumping to 56.3% (from 37.5% in 4th quarter 2009)) and appointments for proposals rising to 59.2% (from 34.4). The amount of work committed for the next three months expanded to 33% (from 21.9%) and the backlog of remodeling jobs also strengthened to 47.2% (from 31.9).

Builder expectations for major additions increased to 53.8 from 40.0 and for minor additions to 49.6% from 40.7%.  Perceptions of current and future work on maintenance and repair grew to 36.6% from 27.1%. The index of current conditions improved in three regions; only the West showed a continued deterioration in builders’ perceptions, dipping to 36.6% from 41.7%.  In the Northeast the current condition index had a huge increase from 27.7% in the 4thquarter to 45.8%. The index increased from 37.5% to 37% in the Midwest and 40% to 49.0% in the South. 

For over two years home values plummeted to 2002 levels as most Americans lost their home equity. The Federal Reserve took significant measures in 2009 to restore the housing sector with historic low mortgage rates that spurred mortgage refinance activity once again.  Now, housing markets within the country are showing the first signs of stabilizing.  The Home Affordable Refinance Program is helping stabilize the housing sector because this government loan is extending refinance loans up to 125% loan to value.  So borrowers with no equity still may qualify for a fixed rate refinance if they have a Fannie Mae or Freddie Mac mortgage. 

According to the latest results from the Standard & Poor’s Case-Shiller Home Price Indexes, which were released last week, 19 of the 20 metropolitan areas show an improvement in their annual rate of return, and 17 of the 20 metropolitan areas saw price increases in August over July. In September, existing-home sales increased to 5.57 million units, up 9.4% from August, according to the National Association of Realtors.  “We’ve already seen immediate signs of a housing recovery,” says Ross DeVol, the director of regional economics at the Milken Institute, an independent economic think tank that tracks the housing market. “But things were so depressed that coming off a low bottom could take a long time.”

Helping to speed up the housing recovery are national policies including the first-time home buyer’s tax credit and relatively low mortgage rates. Should the tax credit get extended Senate Democrats reached a compromise last week and it will continue boosting home sales, says Mark Zandi, the chief economist at Moody’s Economy.com.  Meanwhile, the Federal Reserve, which has been keeping mortgage rates artificially low, is scheduled to end that effort by March, which could temporarily increase demand for homes between now and then.  Of course, each housing market is regional and varies greatly from the other. Still, there are indicators home owners can rely on to see whether their home values are about to rise. Here are six.

The Unemployment Rate

It’s quite simple: Without a job, you can’t buy a home.  And as the unemployment rate rises, fewer individuals are capable of buying a home and qualifying for a home loan with the tightened credit standards. That decreases the demand for homes, which drives prices down.   To find a city’s unemployment rate, and whether it’s rising or falling, visit the Bureau of Labor Statistics’ web site. The most recent report, from Oct. 28, breaks down the unemployment rates in each state’s major metropolitan areas and compares those numbers to the previous year.  Also, see if local businesses are hiring and if large corporations are moving into the area. More jobs leads to more employees who end up increasing demand for real estate in the area.

Rising incomes

House hunters who want to dig a little deeper can look at the average or median change in income among households in a particular neighborhood. At a minimum, confirm that incomes are being adjusted for inflation.  Homeowners who have stagnant or decreasing salaries may not have much cash left over after they pay their mortgage; as a result, they might not maintain their homes or stay on top of repairs, which could lower a home’s value and even its neighboring homes’ values, says Zandi.

The Bureau of Economic Analysis  offers some insight on personal income. Click here and choose “Per capita personal income” and “All Metropolitan Areas” to see how an area’s personal income compares to others and to previous years. A big drawback is that the data released this year ends with 2007 figures. For state data, click here; the numbers are more current and show changes in personal income on a quarterly basis.  

The use of second mortgage liens grew during the housing boom as homeowners extended themselves with home equity loans to consolidate debt and finance as much as 100% of the original purchase price. Administration officials estimate that modifying home equity loans could help as many as 1.5 million homeowners.  An Obama official said that “by bringing the 1st and 2nd lien together, we can reduce monthly payments for borrowers and make it more likely they can stay in their houses.”

Twelve mortgage servicers, covering more than 75% of mortgages, have signed contracts to participate in the first mortgage program, government officials say. Some of them also expressed support for the home equity loan program. Kevin Moss, executive vice president of Wells Fargo Home Equity Group said the new loan modification guidelines balance “the needs of all shareholders, the borrowers, the investor and the loan servicing companies nationally.” Laurie Goodman, a senior managing director with Amherst Securities Group said the latest announcement “certainly goes a long way towards alleviating investor concerns,” said.  The latest FHA mortgage program, Hope for Homeowners “is very important,” she said. “It appears that large numbers of delinquent borrowers would qualify for this modification program for their equity loan.”

Some investors still have concerns about pending legislation that would protect mortgage servicers from lawsuits over loan modifications. “The way the investor community will be comfortable with this is if there is no servicer safe harbor,” said one investor. An administration official said that “we don’t feel like we need safe harbor for our program to be successful.”

The revised program requires mortgage servicers to determine whether a borrower is eligible for the Hope for Homeowners program and includes financial incentives to encourage the mortgage refinance loans. Many investors say they would be willing to take a principal write-down in exchange for getting troubled mortgage loans off their books. But so far, just 51 loans have been refinanced under the Hope for Homeowners program, the Department of Housing and Urban Development says. 

Last week, the Federal Reserve announced they would issuing a new proposal this week under its Truth in Lending Authority that would provide for re-designed disclosures and rule changes for closed-end first and second mortgages and home equity lines of credit (HELOCs), Fed Governor Elizabeth Duke wrote in prepared comments for her testimony scheduled this afternoon before the House Financial Services Committee.  The Fed’s proposal will also include new rules governing mortgage originator compensation, Duke said. She noted that the Fed is currently engaged in ‘discussions’ with the Department of Housing and Urban Development (HID) about using such protocol for combined Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) disclosures.

Elsewhere in her testimony, Duke recommended that Congress ‘formally codify’ consumer protection as a core mission of the Fed, similar to monetary policy and banking supervision. ‘This would provide a clear and ongoing understanding that consumer protection matters should be viewed as an integral part of the Federal Reserve’s overall mission,’ Duke said.   She suggested that Congress could require the Fed Chairman to report periodically on the state of consumer protection in a manner similar to that of his semiannual report to Congress on monetary policy.   Duke noted that the Fed plans to conduct periodic reviews of consumer regulations and policy and will arrange for public hearings held every two years to gather information relating to consumer issues and risks. ‘As we envision this process, the Federal Reserve’s Consumer Advisory Council would assist in preparing the agenda and its members would participate in the hearings, as appropriate,’ she said.  Read the complete article online >

The Obama administration has projected that 4 million to 5 million borrowers with home loans they can’t afford would be helped. A Treasury official Tuesday said that the figure applied to those who would be eligible, not necessarily those who would participate.  Administration officials do not have an updated figure of how many people would be eligible or participate now that the criteria has been widened.  The recent rise in home loan prices has blunted the plan’s benefit, as well.

The Federal Reserve has been buying bad credit mortgage-backed securities and long-term Treasurys in an effort to lower rates.   It worked for a while. Rates hit a low of 4.84% on April 28, but are now at 5.45%, according to HSH Associates.

Since mortgage rates have been in the 6% range in recent years, refinancing to the mid-5% range may not be worth it, said Keith Gumbinger, vice president at HSH Associates. A homeowner with a $200,000 mortgage at 6% would see a savings of about $64 a month if he refinanced at 5.5%, and that’s before closing costs.  “Are interest rates for home equity loans and mortgage refinancing low enough to warrant getting into the process?” he said.  The administration’s announcement comes on the same day as an industry group reported that the demand for refinancing dropped 30% last week. In addition to higher rates, rising unemployment is contributing to the decline.

Borrowers with Freddie Mac loans who refinance through their current servicer can apply right away, but those who want to go through a different lender must wait until Oct. 1. Those with Fannie Mae mortgages can’t use a different lender and they’ll have to wait until Sept. 1 to refinance if their home loans are more than 105% of their home’s value. Unfortunately for thousands of homeowners struggling with rising home equity line rates, second mortgage liens are not eligible for this government mortgage program.