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THERE has been so much written in the past few months about payment protection insurance it has all become a little confusing. Most of what has been written has been very negative, indeed dangerously negative ? witch-hunt proportions even in some quarters. A mortgage magazine even ran a campaign to have single premium accident, sickness, unemployment banned.

Amid all the chest beating and promotion, some clarity is desperately needed. Without relevant PPI being offered to customers, there is an even greater risk of one of the fundamental objectives of the FSA not being met ? and that is protecting consumer interests.

The PPI witch-hunt has also lumped together mortgage payment protection insurance and single premium ASU. These products are, of course, all very different. Most of the Office of Fair Trading?s concerns re- volved around the potential mis-selling of PPI related to consumer and revolving credit sales, not mortgages.

In November 2005, the FSA published a report detailing its findings about the sale of PPI. This was backed up with mystery shopping of various firms involved in the sale of PPI ? that goes beyond mortgages to other companies that offer revolving lines of credit, store accounts and unsecured loans. It was much broader than the mortgage industry alone and, given the mortgage industry has been regulated by the FSA for some time now, it has taken a disproportionate amount of flak.

Experience

It does strike me as odd that people who have very limited experience in the mortgage market ? and more specifically experience in the sub-prime mortgage market ? have been pontificating about the so-called evils of single premium ASU.

The mortgage industry as a whole needs to assess the risks and benefits ? yes, benefits ? of single premium ASU with calm heads, because things have moved on.

Fact one. Sub-prime clients cancel their monthly ASU policies. Some major insurers have even withdrawn the product from sale because the persistency levels are so low. That is what sub-prime clients do. It is the same reason they cancel their life policies. That does not mean we should stop writing life business because we would be leaving customers and their families exposed.

There is a fundamental issue here. Why sell a client a monthly policy when he has a demonstrated history of not being able to meet his monthly commitments?
And guess what? Fact two: sub-prime clients will cancel their monthly ASU policy at the time when they need it the most. The potential ramifications for the IFA/mortgage broker are dire should he be unable to demonstrate that he offered his client the option of either monthly or single premium ASU and it has subsequently gone pear shaped for his client.

Some brokers detail the costs and benefits of ASU in the suitability letter and document in that letter if the client has chosen not to take it up. Some go even further. For clients who cancel their policies downstream, some brokers send a disclaimer ensuring they know what they are cancelling and detail the ramifications of having no cover.

It is cheaper to do that than risk the potential of attracting a lawsuit, and worse still drawing bad press to our business and brand.
There is no doubt that single premium ASU policies have come in for some major flak because of their poor flexibility and TCF unfriendliness.

Commission

Agreed and rightly so. One of the key issues at play here is the seemingly large commission payments made for single premium ASU.

Let us look at that issue in another context. What if a motor insurer offered a three-year product and guaranteed not to change price over the term with no inflationary creep? What if you got a further discount for paying that policy upfront as a lump sum? Of course, the selling broker would be paid his share of the total premium.

Single premium ASU is not really that different; it is just that a lot of commentators have got all bent out of shape about the commission payment and not the cover itself.

This problem has been further magnified by lots of people throwing their twopence into the ring when, to be frank, objectivity is needed and recognition of what has changed. There is a place for single premium ASU, but not as we used to know it.

What if the mortgage industry had a single premium ASU product that had the following features:

- provided no quibble pro-rata refunds if it was cancelled;
– where Read more…

Some of us just haven?t been lucky enough to have perfect credit scores, and some of us have been unluckier than others when it comes to credit. However, all?s not lost. Did you know there are ways to increase your scores? When you know all these little ?how to?s? you can sometimes increase your credit scores by 100 points.

A lot of people think that paying off old, delinquent accounts will improve their credit, and the collection agencies certainly want you to keep thinking so. But paying a charge off or a lien after it?s over two years old can actually hurt your credit score. Although a charge-off will severely affect your credit, the software that scores your credit looks at the last activity on the credit report to determine what effect it will have on your score. The collection agency will update your report as ?Paid Collection? whenever you pay off the account, making the software pick it up as ?current?. If you?re going to pay off an old account, the best way is to insist that the collection agency send you a letter that they will delete the account from your credit if you pay it. Some collection agencies will and some won?t, but it will increase your score and is definitely worth the effort.

Past due amounts, however, will totally destroy your score. Any amount in the past-due column on your credit report needs to be paid, or, if it?s not owed, contact the creditor and get them to take the amount off. In fact, I would suggest that you pay off any past due amounts before paying a collection agency once your account has reached the charge off stage. Then the software can?t pick up any past due amounts. You can call your creditors that have reported late payments, and ask them to remove the late payments in ?good faith?, but remember politeness is the key. If you?re antagonistic toward them, they won?t lift a finger to help you, and you want your credit score to increase.

If your credit limit is not being reported, make sure the credit bureau has that information, because an account being reported with no limit gets scored as though the account is at its maximum amount. And, furthermore, Read more…

Whether you are Working at Home, a salaried Professional, are Older and Wiser, or at any stage of your life, your credit can be good, or bad.

No matter what you think it is, i.e. you pay your bills on time so you think it’s really good, you should know as much as you can about it and how it can affect you.

Seventy percent of Americans have never seen their own credit report or credit score.

Do you know that you have a credit score?

It’s usually referred to as a FICO score.

Being a Mortgage Consultant, Mortgage Broker, I’ve seen many credit reports and I am often surprised by the fact that my clients either don’t really know they have a credit score, or they don’t realize how much it can hurt them if they were inattentive to the numerous factors that make up a Credit Score.

The FICO score is a summary of your credit history. In other words, it’s a financial history of your life.

That score impacts a surprising cross-section of life, in fact it impacts many things you knew about. Such as;

? Lenders use it to evaluate your eligibility for mortgages.

? Landlords use it to gauge the likelihood you’ll pay the rent.

? Car dealers utilize it in arrange financing for you.

? Credit cards are, or aren’t, given to you because of it.

Now, for some things you may not have been aware of,

? Insurance companies may base your premium on it.

? Potential employers often use it to assess your character and they may base there hiring decisions on it.

The FICO score reflects hundreds of parameters in one’s financial history.

? Score 700-850 – smooth loan process; best interest rates

? Score 550-699 -medium risk; higher interest rates

? Score 300-549 -sorry, no loans or credit cards

These hundred of variables are included in the calculation of your credit score, but I only mentioned the bigger ones here.

Just paying your bills on time, as important as that is, may not rescue you from other credit pitfalls.

Bills, mortgages, your monthly rent, credit cards, long overdue or overlooked, can show up as a blotch on your credit.

? A cable, or credit card bill, that didn’t make it to your new address, or you Read more…

In today?s ever-changing world, people need more and more flexibility when it comes to borrowing and mortgages. With this in mind, more and more lenders are offering what they term as ?flexible? mortgages. However, the term ?flexible? can mean a lot of different things. If you are unsure about which mortgages are flexible and what the benefits of a flexible mortgage are, then this article might be helpful to you.

What does flexible mean?

Although there are a lot of mortgages that claim to be flexible, there are some things that define a truly flexible mortgage. There are four main characteristics you should look for when determining if a mortgage is flexible. These are:

? Being allowed to overpay
? Being allowed to underpay
? Being able to take payment holidays
? Interest is calculated daily

Overpayments

One of the best features of flexible mortgages is the ability to overpay. With traditional fixed repayment mortgages, there is no easy way for you to pay more than your fixed repayment each month. If you have a flexible mortgage, then you will have the ability to pay as much as you can each month. This means that during the good months you can speed up the process of paying your mortgage back. If you regularly overpay then you can save yourself thousands of pounds in interest payments.

Underpayments

Underpayments are another useful feature of flexible mortgages, but they should be used sparingly. If you are unable to make the repayment in a given month, then you can just pay as much as you can, effectively underpaying on your mortgage. Although this is good as it stops you from defaulting, there are penalties involved. The more you underpay, the longer the mortgage will last or the higher your repayments afterwards will be.

Payment holidays

Payment holidays are similar to underpayments, but they let you completely halt payment for a period Read more…

If you have only been able to rent property in the last few years due to poor credit, you may feel the time is right to buy a property using an adverse credit home loan. However, buying a home can be a daunting prospect, especially if you have had credit problems in the past. This should not deter you though, because even with poor credit you can still find the house that you want. All you need to do is find and secure the right adverse credit home loan.

Before looking for a property you should find out more about securing an adverse credit home loan. It pays to know about how much you can borrow before house hunting, because otherwise you will face disappointment when you find the house of your dreams but you are unable to afford it. However, if you follow a few simple steps then finding an adverse credit home loan can be much less troublesome than you might think.

Finding a lender

The very first step on the path to finding an adverse credit home loan is to find yourself a lender who is willing to offer you a loan. This may seem like a near impossible task to you, but in fact there are a fair number of lenders who might be able to help you. Property is an attractive item for lenders because if they need to take possession then it will be relatively easy to sell. Take the time to look around to find a lender you are happy with.

One of the best ways of finding a lender is by using the Internet. This saves you the time of travelling to lenders who cannot help you, and also allows you to search specifically for those lenders who specialise in offering adverse credit home loans. As well as searching online you should visit mortgage lenders and banks in your area. The more research you do, then the more likely you are to find the first adverse credit home loan for your needs.

Getting pre-approval

Once you have found the lender you think is right for you, then you need to get Read more…

Financial traders in the City are expecting interest rates to rise by half a percent by the end of this year. These days the Bank of England prefers to make a series of small changes to interest rates rather than one large change, so watch out for the first 0.25% rise around August time

Mortgage rates are already reacting with the rates for fixed rate mortgages rising. The best rates for two year fixes are now in the 4.15% to 4.48% range and for three year fixes, 4.49% to 4.64%. The rates on credit cards and loans are usually variable, so these aren’t likely to rise until the Bank of England moves ? but you can bet your bottom dollar that when the time comes, they’ll move quickly.

Only a month ago economists were talking about further falls in interest rates, so why has everything changes?

It’s all because inflation is coming back under pressure. The governments’ target for inflation is 2% per annum but with energy prices high, and likely to soar even further, we are beginning to see the knock on effect of energy inflation across the economy. And despite fuel bills siphoning money from drivers, new car registrations are up 7% on the year to March, industrial orders rose more than 13% and business confidence improved again in April. Even America, the world’s largest consumer of oil, the economy is experiencing surprising levels of activity.

In many ways this is good news for Britain’s economy. The annual rate of exports is growing at the rate of almost 20%, a rate virtually matched by imports. And the major quarterly survey of the economy suggests that growth will remain strong.

For the man and woman in the street, economic figures are all well and good, but it’s the housing market that is perhaps their key barometer. Here the current news is good for existing homeowners, but perhaps less good for those trying to get a foot on the housing ladder.

Currently, the housing market is buoyant. In the first three months of this year the Halifax reported house prices up by 1.6% and the Nationwide reported prices up 2.3%. But these are averages. Read more…

An often overlooked cost of buying a new home is private mortgage insurance, usually simply called PMI. The basic idea behind PMI is simple. When a home buyer buys a house with less than 20% of the home?s value as a down payment, the mortgage lender assumes a larger risk. In most cases, the lender will require that the buyer ? that?s you ? purchase private mortgage insurance that will pay off your mortgage if you default on it.

Because PMI is an added expense for the consumer, the federal government has a number of regulations regarding PMI. There are specific rules that mortgage lenders must follow if you signed (or will sign) a mortgage after July 29, 1999. That?s when The Homeowner?s Protection Act of 1998 (HPA) went into effect. In addition, many states have their own laws regarding private mortgage insurance that are designed to protect homeowners and save them money.

Like many other things about buying a new home, the rules surrounding private mortgage insurance can be confusing. Here are some answers to commonly asked questions about PMI to help make it a little clearer.

Who has to pay PMI?
Most lenders require private mortgage insurance from home buyers who put down less than 20% of the total value of their home ? or conversely, who borrow more than 80% of the total value of their home. This isn?t a hard and fast rule, though. Many lenders are loosening their requirements for PMI to buyers with good credit, or who meet other requirements.

How much does PMI cost?
Usually, the premiums on private mortgage insurance are about .5 percent of your loan total. If you take out a mortgage for $100,000, the PMI premium for the first year will be around $500. On a $200,000 mortgage, you?ll pay about $1,000 for the first year?s premium. Usually, your premiums will be lower each year, since it?s based on the amount that you owe on your mortgage.

When do I have to pay the PMI premiums?
Most lenders require that you pay the first year?s premium at closing, so don?t forget to add it in when you?re figuring out your closing costs. For subsequent years, you?ll pay it along with your monthly mortgage payment.

Do I have to pay for PMI until my mortgage is paid off?
No. The length of time you have to maintain PMI varies from state to state and lender to lender, but you can generally cancel your PMI when you have between 20% and 25% equity in your home. The actual PMI percentage depends Read more…

Money?based on my observations over the years I have learned that it pays dividends when considering large purchases like cars, homes, education and the like, to get your facts and financing together first. Nothing can be worse than purchasing large ticket items while you are carried away on an overwhelming whirlwind of emotion, which often accompanies these big-ticket purchases. The best way to minimize purchasing mistakes and errors in judgement is to get your financing together first. Let?s take a quick look at a few of these purchases and how they can be best approached.

Buying a home-if you are planning on buying or refinancing a home take the time to learn about the details about various loan programs on the market by talking to several lenders including both banks and mortgage brokers. There are a wide variety of conventional and governmental home loan programs (including FHA and VA loans) that may be more tailored to your short, medium and long range needs.

One of the best things you can do is ask a bank for a free HUD booklet, which explains the fundamentals of home loans and how they impact you. Learn the ?financial speak? and don?t sign ANYTHING unless you (really) know what you are doing. Always be sure to talk to at least three loan officers and take notes, read loan literature, get pre-qualified for financing and understand exactly what you are doing BEFORE you look at homes. Doing so makes you a smarter buyer and less likely to make mistakes.

Buying a car-it doesn?t make any sense to me to buy a new car and lose thousands of dollars within minutes by driving it off the car lot. It makes more financial sense to buy a nice pre-owned car at a far less price? of course, you want to have it professionally inspected by a third party (licensed mechanic) before you buy it. And the key is the time of year you buy the car. In my opinion the best time of the year to buy a car is January or February of each New Year. Here?s why: A used car may be selling for $10,0000.00 on December 31 of a given year but on January 1 (the next day/the new year) it will not be worth as much as the day before because of the calendar change (.) Used cars tend to sell slower during this period of the year and your negotiating strength is highest. I like to think of this strategy as being ?prudent? not ?cheap?.

Buying education-colleges are in the business of selling education. They have classes to fill and representatives to help steer students into those classes. Many people who go to school seem to ?follow the follower? by chasing trends. Remember the ?rush? to get a computer programming degree during the 80?s? Everybody ran off to be a programmer only to find out (after they graduated) that much of the employment demand had been filled by the glut of computer graduates. Trends are like that? by the time you hear about a ?hot job market? and run off to get educated for it, the market is filled. Read more…

We have all heard the stories of financial institutions exploiting consumers with shady practices such as exorbitant interest rates, hidden fees, and the like. These accounts anger us and, rightfully, those that practice these deeds should be exposed. Fortunately, not all reports are bad as evidenced in the way many companies are treating their customers in light of recent disasters such as Hurricanes Katrina and Rita. Let?s take a look at how some companies are responding in the wake of disaster.

1. Disaster Relief Programs. If you live in an area designated by the Federal Emergency Management Agency [FEMA] and own property, you may be eligible for relief depending on your financial institution and the program they have in place. One well known bank, for example, is automatically deferring mortgage and home equity loans for as long as ninety days, or three payments. In addition, this same bank is not assessing late charges for that timeframe, nor are they reporting negative information to affected consumers credit reports.

2. Payment Holidays. Similar to disaster relief programs, several credit card companies are allowing their customers to not make credit card payments for a two or three month time period. Two institutions have stated that they will not collect late fees, but in each case it is not clear whether customers will still be charged interest on their unpaid balances.

3. Loan Extensions. The financial arms of several automakers are allowing customers in affected areas to defer loan payments for up to three months. Essentially, these institutions are extending Read more…

Following on from recent moves in the credit card industry (see Cashzilla ?Rate tarts losing ability to cherry pick?) to reduce the number of people switching from one financial provider to another, mortgage lenders are now looking to follow suit.

Abbey is the latest High Street mortgage lender to notify its customers that they are increasing the costs associated with switching from their mortgage to ?225, this fee is over and above any other penalties levied for leaving early, and represents an increase of 25%. Abbey is however only the most recent in a list of 53 mortgage providers announcing similar steps within the last year.

Michael Coogan, Director General of the Council of Mortgage Lenders, said, “All lenders are having to look at their fees much more closely now”. The recent financial reviews were attributed to the slowing of the housing market whilst administration costs have continued to rise, however David Hollingworth of mortgage brokers L