Devoted to interest rates, loans, and lending institutions

Unfortunately, Know More Media, the network that hosts (and owns) the Lending Leaves blog is discontinuing its business. While I could continue writing this blog, I feel that it is time to pursue other opportunities.

I have enjoyed writing about mortgage financing, and about mortgage industry news. I will be sorry to end this chapter in my blog writing career, but I am also hopeful for the blogging industry in general, and excited about my new prospects.

My best to my readers, and I hope to see you around the blogosphere. 

The controversial housing relief bill is now law. President Bush signed it yesterday, and it is full of bailout programs for mortgage lenders Fannie Mae and Freddie Mac, as well as help for about 400,000 people facing foreclosure.

However, time will tell whether this piece of legislation will really help the housing market problem, or whether it is just so much wasted paper and money. 

Home prices are still falling, reports CNN Money. According to the S&P/Case-Shiller Home Price Index, May home prices were down 15.8% from the same period last year. The index looks at 20 cities across the country.

Of course, home prices are largely local; prices in my Utah home town have barely dropped. But if you are in an area that has been hit by the housing market crisis, you might look around to see if you can find a good deal.

However, it is still important to look beyond the home prices. Consider the quality of the home, as well as its location. You want something that you will be able to re-sell if the time comes.

image credit: sxc.hu

Over the weekend, the Senate went ahead and passed the housing relief bill that has been making its way through Congress over the past few weeks. The final deal-closer for the bill, which President Bush repeatedly threatened to veto, was the addition of aid for Fannie Mae and Freddie Mac.

While the housing relief bill is meant to help 400,000 people avoid foreclosure, there are some things that are cause for worry, reports Wisebread:

• Underwriting standards are loose for those in trouble. This is worrying because already shaky situations are going to be further supported, while the inevitable creeps up on them. Then, when the failure does take place, taxpayers are on the hook.
• Treasury allowed to do whatever is deemed necessary -- extend credit, offer loans, buy equity -- to keep Fannie Mae and Freddie Mac afloat. This could easily result in large expenses for taxpayers.
• Congress raises the limit on national debt. Not sure why we even have a limit. As *need* arises, Congress will just keep raising the limit, in turn raising our interest payments.
• PayPal and credit card transactions all need to be reported to the IRS. This is sort of just in there. The government is obviously looking for more revenue, but there are definite privacy issues here as well.

What do you think, overall, of the housing relief bill?

One of the rising trends in retirement planning right now is the reverse mortgage. A reverse mortgage is essentially another type of home equity loan -- but instead of you making payments to the bank, the bank makes payments (or a lump sum) to you. Trees Full of Money points this out about the advantages of a reverse home mortgage:

The loan is repaid when you die (from your estate), sell your home, or no longer live there as your principal residence.

As an added protection the Federal Housing Administration (FHA) guarantees you will never owe more than the selling price of the "mortgaged" house.

While a reverse mortgage can be quite helpful for many retirees who need the cash flow, and can't afford the home equity loan payments, it is important to realize that it is not for everyong. And the fees can erode the money you get from your home. Some of the fees that come with a reverse mortgage include:

• Origination fees.
• Appraisal fee.
• Credit report fee.
• Flood certification fee.
• Pest inspection.
• Monthly account service fee.
• Mortgage insurance.

Before you make such a decision, carefully consult with a third party and decide whether a reverse mortgage would be best for you.

image credit: sxc.hu

Tomorrow, July 24th, a new federal minimum wage standard goes into effect. Instead of $5.85 per hour, the new rate will be $6.55 per hour. And next year, the federal minimum wage will head up to $7.25 an hour.

For some folks, especially those in rural states like where I live, this will mean a pay raise. (In many cities and in some states, wages are already trending above even next year's increase.) But with inflation, it may not really provide as much as one could hope. Food inflation and energy prices might ensure that this move is little more than a cost-of-living increase. 

This brings up an important point. The legislators that voted this minimum wage increase in regularly vote themselves pay raises so that they can keep up with their "cost of living." What about the rest of us? Every now and again they throw us a bone, but the average American is largely the subject to the whims of inflation, watching as earning power is eroded.

Is the federal minimum wage law outdated? Do you think a law should be enacted in order to ensure cost of living increases for the American public?

One of the financial terms you might have heard recently is this one: mortgage pool. This term is being seen more as mortgage backed securities continue to make headlines, thanks to IndyMac, Fannie Mae, Freddie Mac and investment bank issues. Investopedia offers this definition of mortgage pool:

A group of mortgages held in trust as collateral for the issuance of a mortgage-backed security. Some mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae are known as "pools" themselves. These are the simplest form of mortgage-backed security.

image credit: US government

The subprime mortgage lending mess just got a little more interesting.

Turns out that the FDIC, the federal government's insurance agency for banks, has done its part in the current subprime mess, contributing to the number of loans that are in foreclosure right now.  It's a result of continuing subprime lending practices of a bank, Superior Bank FSB, that the FDIC took over in 2001.

Indeed, the FDIC did what many subprime lenders were doing at the time: giving out subprime mortgage loans (some of them to borrowers that were obviously unqualified), and then selling them to other mortgage lenders. The Wall Street Journal reports on FDIC subprime mortgage loans:

Hundreds of borrowers who took out Superior subprime loans on the FDIC's watch -- some with initial interest rates higher than 12% -- have lost their homes to foreclosure, data on the loans indicate.

While there haven't been any major revelations about how the FDIC was running other banks it took over, one has to wonder whether or not this sort of subprime lending was going on in other institutions as well. 

So it's not just the fault of greedy lenders and homebuyers as regulators claim; the government was involved in the subprime mortgage lending mess just as much.

I really enjoyed this parody of a Donald Trump financial seminar on Frank TV.

Happy Friday!