Mortgage news.

More reasonable lending guidelines for borrowers over 59 ½ years old.

 

IRA income.  For many years, lenders have not included IRA income unless there was a two year history on the tax return.

We are now  including IRA income with a one or two month history of withdrawals as long as the account is set up for future withdrawals and the borrower is at least 59 ½ years old.  This is incredibly good news for the recently retired home buyer.

 I have two loans which should close soon and which were turned down by other lenders.   I suggested to the borrower that they start withdrawing from their IRA.  Now one of them is able to buy her dream home and the other client is able to refinance her loan in order to lower her interest rate and payment.

 As with any loan, each loan is subject to underwriter review, but these new guidelines are significantly more lenient than they were previously.

Posted by Tim Lampe, written by Steve Peterson.

 

Economic News:


The next week looks--on the surface, at least--as if it has all the makings of the most intense drama we've seen in the financial markets since money was invented. For that reason, this Contrarian is inclined to think the week will pass with very few sparks or thunderstorms. The big issue is this: No one knows what will happen. We've had a lot of predictions, but they are speculation, not the voice of experience.

So it is best to stay light on our feet for the time being, and to not make any assumptions. The debt ceiling fiasco may pass quickly and easily. It may also roil the markets if any unexpected problems arise.  We will watch very closely...and report in a week on the deadline for action.

 

Commentary ~

July 27, 2011

None of us has lived through a default—or, perhaps more accurately, a potential default—of the American debt before. We don’t quite know what to expect. We do know that—even if the two Houses of Congress manage somehow to pull a last-second agreement out of their hats, raising the debt ceiling—there may still be a lasting effect from the chaos we’ve been witnessing. Specifically, it’s likely that the major credit rating firms will chip away at America’s AAA rating, leaving the nation’s gilt credit standing somewhat sullied.

Is that a big deal? We don’t really know, but as this is written, we’re already seeing interest rates rise slightly and stock market indices decline a bit. Certainly nothing to raise our concerns as of yet…but in this wobbly economy, if interest rates climb only a few basis points higher, investors are likely to respond more fearfully than in more normal times.

What might have been expected by now, though, is a lower credibility and greater dismay over the continuing lack of accord among politicians. Rates, one would think, should have risen further already than they have. World investors should be more concerned, one would think, that the U.S. is not taking its position as the home of the premier world currency more seriously. Oil purchases the world over, after all, are denominated in dollars. Most world trade involves dollars. And most lending globally references Treasury securities rates as the benchmark for other interest rates.

One might expect a bit more panic among world investors. Or maybe the whole point here is a bit more complex. If investors begin to run from the dollar, their alternatives are slim. (We’ve been reading a lot about the Swiss franc recently—but that the currency, though strong and conservative, is not about to become the benchmark for world trade and lending.) If not to the dollar, the world seems to be saying, where then do we turn?

Thus, the markets seem to remain relatively calm, though panic is brewing beneath the surface. And this may also suggest that investors over the world cannot and will not believe at this point that the U.S. will let its debt fall into some sort of default. Surely we would not be so foolish as to do that. Or would we?

The jury is out as these words are written. We could be on the verge of damagingly higher interest rates. We could see a rather harsh fiscal medicine starting the difficult process of healing our nation’s imbalances. We could even potentially sail through this without many lasting effects. We could learn a great deal about our ability to control the accumulation and alleviation of debt. Time will tell. And it will be fascinating to watch.