Strong Consensus Among Rate Watchers: U.S. Prime Rate Will Increase to 8% Tomorrow

Tomorrow, the Federal Open Market Committee (FOMC)--the interest rate setting body within the Federal Reserve system--will hold their third monetary policy meeting of 2006. This is just a quick note to remind everyone that a 0.25 percentage point increase to the Prime Rate is fully expected by a wide range of rate watchers, so you can bet your bottom dollar that the Prime Rate will go from the current 7.75%, to 8% after tomorrow's FOMC meeting adjourns.


Prime Rate Forecast

Many economists are predicting a cooler U.S. economy in the coming months; earlier today, the National Association for Business Economics published a survey indicating that the economy will experience a slowdown this quarter. Of course, the Fed will pay close attention to the latest government reports on the economy, and if the Fed divines that economic activity is indeed cooling-off, then some economists believe that the FOMC may choose to pause their rate-raising regimen at the June 28-29 monetary policy gathering.


The Fed is looking to get to what's called the "neutral rate" for the Federal Funds Rate: the neutral rate can be described as a Fed Funds Rate that neither stimulates nor inhibits U.S. economic growth. The Prime Rate can be expressed as:

U.S. Prime Rate = (The Fed Funds Rate + 3)

Fed Funds Futures traders now have odds at about 40% (according to current pricing) that the FOMC will raise the benchmark Fed Funds Rate by another 25 basis points after the June 28-29 monetary policy meeting adjourns. Four days ago, Fed Funds Futures traders had odds at 48%.


Hang onto your wallets and purses, folks: borrowing is about to get more expensive.


The odds on future Prime Rate increases will most likely change when the FOMC--as usual--releases a statement when tomorrow's monetary policy meeting adjourns, so stay tuned for the latest odds.

How to Avoid Becoming A Victim of Predatory Mortgage Lenders

Thanks to consumer-friendly interest rates, the U.S. housing market has been hot these past couple of years. Lots of Americans have been getting some excellent mortgage and mortgage refinance deals from reputable companies, but the hot market has also been a boon for predatory lenders.

In today's mortgage-related press release, the good folks at Great Financial Mortgage offer some tips on how to avoid being scammed by lenders who employ bait-n-switch lending practices, e.g. you should always ask a lender for a good faith estimate. Further details below:

"When shopping for a new loan or simply needing to refinance, then be aware – be very aware of whom you do business with, warns Gavin Fenske, president Great Financial Mortgage, Inc., www.greatfinancialmortgage.com. What is promised to save you hundreds of dollars can end up costing thousands.

The housing bubble hasn’t burst, the market is still hot and predatory lenders are finding easy prey on innocent consumers looking for the best rate either on a new home loan or to refinance. Fenske describes how one client who came to him after a horrifying ordeal with a nationally known lender; the client thought she was getting a good deal, but when it came time to sign the loan documents she got a real shock: the paperwork came, the fees were a lot different and the payment was no where near what had been discussed initially...It was about $1,000 more a month. Not only that, the fees skyrocketed to nearly 10,000 dollars more. Fenske explains that the client was a victim of bait and switch and--it’s happening all too often.

Here’s an example of how it works: the lender baits by saying you’re getting a 30 year fixed-rate loan at 6.5% with no points, no pre-pay penalty, and no fees. Then somewhere in the process, either at the very end or right before the end when you're ready to sign paperwork, the loan is switched for something else. You’re now faced with an 8% loan and you're paying 1 point, along with other 'administrative' costs, which makes the monthly payment more expensive than what was originally quoted. In many cases, this precludes homebuyers from qualifying or for those refinancing, to think twice. But with unscrupulous agents, it doesn’t end there. To make it worse, should you decide to proceed, you are most likely unaware that you will have to pay five thousand or more just to get the loan. And since there is a pre-payment penalty, you cannot re-finance until the pre-determined time, without paying a hefty penalty. This could cost you thousand and thousands of dollars.

There are no hidden cameras to catch these predators in action. So how do you protect yourself from such lenders? Fenske says it’s imperative that everyone get a good faith estimate - in writing - from the lender right at the beginning of the process. He notes that a good faith estimate is going to show how many points you're paying for the loan, how much the escrow fees are and how much the title fees are. 'It's basically a summary of all the fees and it should within plus or minus $500 of what the final figures are,' he explains. 'But even before the estimate be sure and research the different types of loans, be wary of low rate deals, shop around and always know whom you are doing business with. It doesn’t hurt to check up on companies through the Better Business Bureau.'

To learn more about Bait and Switch protection, please contact Great Financial Mortgage at www.greatfinancialmortgage.com.

About Great Financial Mortgage:
Great Financial Mortgage is based in Fullerton, California. A top originator of mortgage loans, Great Financial Mortgage offers a wide range of home lending services to homeowners and prospective buyers throughout the state of California via person-to-person attention and its website, www.greatfinancialmortgage.com."

The IRS Makes It Harder for Some to Find That All-Important Down Payment

We all know that finding or saving enough cash for a down payment on a mortgage is the hardest part of acquiring the American dream of homeownership. Well, according to a press release issued by mortgage expert Chip Cummings today, the IRS has recently made it even more difficult for some to find the cash needed for the down payment on a mortgage. Further details below:

"A recent ruling by the IRS against several major 'non-profit' agencies will eliminate them from participating in providing down-payment "gifts" for FHA loan home buyers.

'For most new homeowners, the largest obstacle in getting into a home is the down payment itself,' says Chip Cummings, CMC, a 23-year mortgage industry veteran and best-selling author. 'Without the tax-exempt status, these organizations will no longer be able to provide funds directly to borrowers – keeping them from realizing the dream of home ownership.'

Over the last 5 years, more than 625,000 home buyers have taken advantage of the availability of gift-funds to purchase a new home. Now that these agencies will no longer be able to provide these funds for FHA-insured loans, there will be a scramble to try and fill the gap. Here are some other ways that potential homeowners can still obtain assistance for the down-payment and other required closing costs:

• Gifts from family members, relatives, churches, and other non-profit organizations can be used to finance up to 100% of the required funds.
  
  
• Several conventional programs allow for up to 100% financing on a home, even with marginal credit scores.
  
  
• Many lenders are combining first and second mortgages up to and even exceeding 100%, with an attractive 'blended' interest rate.
  
  
• Several state and local governments have programs that provide 'forgivable loans' or grants.
  
  
• Several State housing development agencies provide second mortgages and special programs for low to moderate income families.
  

Chip and his new upcoming book 'The Mortgage Myth – 77 Insider Secrets That Will Save You Thousands on Home Financing' have received critical acclaim from media, industry experts and consumers from around the country. A 23-yr. mortgage industry veteran and international speaker, he has been featured on radio, TV and print media, and has authored dozens of articles. He’ll provide your audience with an 'insider look' at specific strategies for saving money and their credit, and provides an informative, entertaining look into the world of finance. To reach Chip for more details or other home buyer tips, call (616) 977-7900."