Friday, March 28, 2008
How to Qualify for Subprime Loan
Qualifications for a Subprime Mortgage Loan
Until early 2007, lenders made subprime loans to borrowers who had FICO scores of less than 620. But those ratios are rising in the heat of the subprime market shake-out. Borrowers who once qualified with a FICO of 620 have watched the FICO requirements move to 640 and up. Those applying for 100% financing could once qualify with a FICO of 580, but that number has changed to 620, coupled with almost double-digit interest rate pricing. Many lenders will not lend at all on 100% financing.
Borrowers with FICOs below 600 are finding it difficult to obtain financing at any interest rate.
Borrowers whose FICOs fall between 600 and 700 receive less favorable terms.
Major institutional lenders like to see FICO scores above 700, and those borrowers receive the lowest interest rates and terms.
Best Subprime Lenders
Largest Subprime Lenders
1. Wells Fargo
2. HSBC Household Finance [rumored to be up for sale]
3. New Century [restating '06 earnings downwards; major shareholder lawsuits]
4. Fremont
5. Countrywide
6. Option One [H&R Block; up for sale]
7. Ameriquest [owned by ACC; shut most offices, settled with 30 states over predatory lending]
8. Washington Mutual [closed 80 branches in late 2006]
9. WMC [subsidiary of GE Money]
10. CitiFinancial
11. First Franklin [acquired by Merrill Lynch from National City for $1.3bln]
12. Accredited Home
13. GMAC [Major layoffs in ResCap]
14. BNC [Lehman bros. subsidiary]
15. ChaseHome Finance
16. Novastar
17. OwnIt, 2006-12-07 [partially-owned by Merrill and BofA]
18. Aegis [recently closed two subprime operations centers]
19. MLN, 2006-12-29 [reportedly bought out by Lehman]
20. EMC
21. Decision One [owned by HSBC; rumored to be up for sale]
22. ResMAE,2007-02-13 [in bankruptcy; being funded by Credit Suisse]
23. FirstNLC
24. Fieldstone [2007-02-16, bought by C-Bass]
25. ECC/Encore [fire-sale bought out by Bear-Stearns]
List of Subprime Lenders
List of Top Subprime Lenders
Best Subprime Lenders
1. Wells Fargo
2. HSBC Household Finance [rumored to be up for sale]
3. New Century [restating '06 earnings downwards; major shareholder lawsuits]
4. Countrywide
5. Fremont
6. Option One [H&R Block; up for sale]
7. Ameriquest [owned by ACC; shut most offices, settled with 30 states over predatory lending]
8. WMC [subsidiary of GE Money]
9. Washington Mutual [closed 80 branches in late 2006]
10. CitiFinancial
11. First Franklin [acquired by Merrill Lynch from National City for $1.3bln]
12. GMAC [Major layoffs in ResCap]
13. Accredited Home
14. BNC [Lehman bros. subsidiary]
15. ChaseHome Finance
16. Novastar
17. OwnIt, 2006-12-07 [partially-owned by Merrill and BofA]
18. Aegis [recently closed two subprime operations centers]
19. MLN, 2006-12-29 [reportedly bought out by Lehman]
20. EMC
21. ResMAE,2007-02-13 [in bankruptcy; being funded by Credit Suisse]
22. FirstNLC
23. Decision One [owned by HSBC; rumored to be up for sale]
24. ECC/Encore [fire-sale bought out by Bear-Stearns]
25. Fieldstone [2007-02-16, bought by C-Bass]
Rules for Subprime Loans
Feds Issue Final Subprime Rules
by Broderick Perkins
Federally regulated banks started the week with new rules governing how they write subprime loans.
Critics consider the rules too-little too-late because they don't apply to mortgage brokers and lenders that are not federally regulated. Also an estimated 2 million homeowners, many of them saddled with subprime loans they can't afford, are already in or destined for the foreclosure pipeline.
Effective immediately, the "Statement on Subprime Mortgage Lending" is the work of the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of Thrift Supervision and the National Credit Union Administration, federal monetary system regulators.
The new rules were spawned by waves of failing subprime mortgages.
Subprime loans are generally more expensive than prime loans, but they are intended for borrowers who pose a greater risk to lenders, typically because of the lack of credit or previous credit problems. Without the subprime segment, some borrowers would be locked out of the American Dream.
Unfortunately, in numerous documented class action suits, state-filed cases and other claims, too many subprime loans became predatory with exorbitantly high costs, penalties and other financially abusive features often directed at specific groups, including single women, minorities, older, low-income borrowers and others who can least afford the added cost.
Other studies revealed members of those same groups could qualify for prime loans but were steered toward subprime mortgages instead.
Read More
Source:
http://realtytimes.com/rtpages/20070703_fedissue.htm
What Is a Subprime Loan?
How Do Subprime Loans Work?
A subprime loan is a loan that is given to people with a bad credit record. The interest rate on a subprime loan is likely to be a lot higher than an interest rate you would expect on a loan from a bank.
A type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans. Quite often, subprime borrowers are often turned away from traditional lenders because of their low credit ratings or other factors that suggest that they have a reasonable chance of defaulting on the debt repayment.
Subprime loans tend to have a higher interest rate than the prime rate offered on traditional loans. The additional percentage points of interest often translate to tens of thousands of dollars worth of additional interest payments over the life of a longer term loan.
Many people will use a subprime loan when they cannot get credit to help repair their credit rating. There could be many reasons why a person would fall behind on their credit payments. An unexpected job loss, an illness or just bad debt management can start a downward spiral of late debt payments. Once a few payments have been missed, the interest can start escalating at a frightening rate.
Once you have a bad credit history you may find it hard to open new accounts, gain credit or be accepted for a mortgage. The subprime loan lender will take into account how severe the bad credit history is. From the credit rating he will calculate the amount of interest, depending on how good or bad a risk the borrower is.
One very important factor for the borrower when considering a subprime loan is to remember not to take the first loan offered. Shop around and get the best quote you can. There are plenty of reputable loan companies out there willing to offer a subprime loan. To counterbalance the good companies there are also bad ones who will milk the interest rate to the limit.
There is a also a degree of negotiation available when considering a subprime loan. Lenders of this type of loan usually finance the loan through a third party, so the lending rules are slightly more flexible. Try and negotiate, if you can, for the best interest rate.
Also consider the repayment timescale you wish to pay the loan back in. This type of loan is good for repairing credit records but you may not wish to repay the loan over a long period. You might take out a loan over 5 years and then circumstances may change and you can pay it back sooner. If you think this may be the case, ask what the lenders early repayment rule is.
Tuesday, March 25, 2008
Warren Buffett Invests Like a Girl
By LouAnn DiCosmo
For as long as I can remember, adding the phrase "like a girl" to the end of whatever you were saying was a put-down, an insult, something to come to fisticuffs over. Little boys the world over hated being told that they, for example, "threw like a girl." I'm not defending the statement, and as a member of the fairer sex, I certainly don't agree with its intent, but hey, that's been the case from the playground on up.
When it comes to investing, though, you could do a whole lot worse than learning to "invest like a girl." And that's why I'd bet Warren Buffett, chairman of Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), wouldn't get offended if I told him to his face that he invests like a girl. In fact, he'd probably thank me (and perhaps slip me a box of See's Candies). Hang on to see why -- and stay tuned for our soon-to-be published book on this very topic.
What makes Buffett Buffett
What is it that makes Warren Buffett such a consistently phenomenal investor? Is it that he's zigging and zagging along with the market's every move? Is he trading all the time, buying this and selling that, racking up taxes and commissions all the while?
No, no -- what makes Warren Buffett the investor whom every investor wants to be like is that he approaches investing differently from the way most men do. He's patient and does thorough research. He waits for the right price to buy. He seeks to never sell the companies he invests in. He's the anti-trader, if you will.
Yep, you heard it here -- Warren Buffett invests like a girl. And that's a very good thing.
Women and investing
So how exactly do women invest? Check out these characteristics of female investors that distinguish them from their male counterparts.
Women spend more time researching their investment choices than men do. This prevents them from chasing "hot" tips and trading on whims -- behavior that tends to weaken men's portfolios.
Men trade 45% more often than women do, and although men are more confident investors, they tend to be overconfident. By trading more often -- and without enough research -- men reduce their net returns. But by trading less often, women get better returns and also save on transaction costs and capital gains taxes.
A study by the University of California at Davis found that women's portfolios gained 1.4% more than men's portfolios did. What's more, single women did even better than single men, with 2.3% greater gains.
Women tend to look at more than just numbers when deciding whether to invest in a company. They invest in companies they feel good about ethically and personally. And companies with good products, good services, and ethics tend to have better long-term prospects -- and face fewer lawsuits.
These are some of the traits that make female investors more like Buffett and less like frazzled, frenetic day traders, with their ties askew, hair on end, and eyes bleary. Patience and good decision-making help set women apart here.
Trend-spotting
Women also have a keen eye when it comes to identifying companies poised for greatness. They typically look beyond the shiniest, newest bio-techno-gadget and focus instead on retailers meeting their needs, on products that they can't live without, and on consumer goods they buy in their day-to-day lives. And that type of insight can pay off. Buffett's long-standing investments in Coca-Cola (NYSE: KO) and Gillette (now owned by Procter & Gamble (NYSE: PG)) meet this standard of easy-to-understand investments with competitive advantages.
Legendary fund manager Peter Lynch has famously credited his wife with discovering pantyhose maker Hanes, which at one point was Fidelity Magellan's largest holding. And he's also written about watching the shopping habits of his then-teenage daughters to discover investment ideas.
Shoot, even our own Bill Mann has told us that his wife shone the light on Swedish clothing phenom Hennes & Mauritz (OTC BB: HMRZF), better known as H&M, which went on to be a great performer for him.
Look at a company like recent Motley Fool Stock Advisor recommendation Coach (NYSE: COH), which started turning around several years ago thanks to fresh designs that drew customers in like moths to a flame. The stock's stumbled over the past year and remains beaten down today because of ongoing fears about the economy and the "strength of the consumer," but the fact remains that it's a solid, well-run business with desirable products and a growing market. I'll bet you could have talked to any number of female shoppers early on who could have clued you in that the company's products were much improved -- and that the financials couldn't be far behind.
So what if you're not a girl?
It's possible, dear reader, that you're of the male persuasion, but don't fret. By focusing on the traits that created superinvestor Warren Buffett -- patience, the willingness to dig deep, the ability to wait for the right price, and the desire to buy and hold instead of trade, trade, trade -- you can awaken the feminine side of your investment psyche. Consider it. Your portfolio will thank you for it.
Source: http://www.fool.com/investing/value/2008/03/20/warren-buffett-invests-like-a-girl.aspx
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