Rules for Subprime Loans

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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

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What Is a Subprime Loan?

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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.

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Warren Buffett Invests Like a Girl

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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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Why You Must Own International Stocks

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By Bill Mann

It wasn't long ago that I opined that American investors didn't need to invest overseas. After all, the United States is the most diverse economy on the planet, the driver of global growth, and the country with -- by and large -- the best shareholder protection framework. You could (and can) get a ton of international exposure by holding U.S.-based companies like McDonald's (NYSE: MCD) and Caterpillar (NYSE: CAT).

I wrote these words. I believe them to be true. So why did I sign on to be the advisor for The Motley Fool's international investing service, Global Gains?

Because my own investing track record would be dramatically poorer had I not made the choice from the beginning of my investing career to comb foreign markets for great investing ideas. No, you don't need to invest overseas. But I firmly believe that everyone should own at least one international stock.

But Bill, isn't foreign investing risky?
After all, that's the message we get from the weathervanes on financial television. One person will say "I am taking my allocation in international up to 30%," and another will say "Wow! That's really aggressive!" The implication is that the more money one allocates outside the United States, the higher the absolute risk level.

What utter rot.

The thought that America Movil (NYSE: AMX) is riskier than Sirius Satellite Radio (Nasdaq: SIRI) just because the former is based in Mexico rather than New York City is absurd. America Movil generates billions in free cash flow each year, while Sirius followed up its $500 million cash-from-operations drain in 2006 with a $300 million cash drain in 2007.

As a group, international stocks are no more risky than U.S. stocks. Foreign companies offer substantial diversity in the same exact way that U.S. companies do, from the massive cash flow-rich Novartis (NYSE: NVS) to the riskier Chinese medical company American Oriental Bioengineering (NYSE: AOB) to the high-technology giant Nokia (NYSE: NOK).

In fact, they may be less risky. Over the past five years, people who invested heavily in overseas companies have seen a powerful benefit from diversification as the U.S. dollar has dropped in value against nearly every major currency. That means earnings denominated in pounds, dinars, rupees, or won are worth more for people who invest in dollars.

The fact that so many money managers pooh-pooh foreign investing as being "riskier" is the exact reason why you should look here. Think about it: The foreign markets in aggregate exceed the size of all U.S. stocks, yet a 25% allocation to foreign stocks is considered "aggressive." Hmmmmm. Sounds to me as though most investors underallocate to foreign companies. I'd be perfectly comfortable putting 100% of my money overseas. If anything, the types of industries available are more diverse than what's available in the United States.

Yes, it is risky -- but probably less than you think
All investing has an element of risk to it. But the U.S. market has underperformed many international markets for the better part of this decade, for the very reason that capital invested in China, India, even Brazil has generated higher returns. I don't expect this condition to reverse itself long-term, and with the recent savaging of markets around the globe, we're seeing some pretty intriguing bargains from Taiwan to Finland to Canada.

Source:
http://www.fool.com/investing/international/2008/02/19/why-you-must-own-international-stocks.aspx

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NYSE Timeline

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NYSE Timeline

~1792 - Twenty-four brokers and merchants gathered on Wall Street to sign the Buttonwood Agreement. The NYSE is born!

~ 1792 - Bank of New York becomes the first listed company on the NYSE.

~1903 - April 22, the NYSE moved into 18 Broad Street. (This building is still in use today.)

~1918 - The pneumatic vacuum tube system is made for sending tickets to and from different departments.

~ 1929 - October 23: Black Thursday.
October 26: Blue Monday (Market loses $26 billion in value.)

~ 1939 The NYSE opens its trading floor gallery to the public.

~ 1953 - October 10: Trade volume on the NYSE reaches
900,000 shares, this marks the last day that the daily volume of the NYSE is under 1 million shares.

~ 1967 - NYSE admits its first woman member.

~ 1976 - NYSE lists first Non-US member.

~ 1987 - October 19: Black Monday (Market drops 508 points, the largest one-day drop in history.)

~ 1992 - May 17: the NYSE celebrates its 200th anniversary.

~ 1996 - May 7: The highest price ever paid for a membership is $1,450,000

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Don't Believe Everything You Hear

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By Sham Gad

Between February and October of 1945, the Dow Jones Industrial Average advanced 21.3%. Must have been a time of prosperity or a bubble, right?

Nope. Would you believe that this performance occurred during a recession? With the "recession" buzzword floating around these days, it's worth reflecting on what that uncharacteristic behavior can teach us.

A recent BusinessWeek article reveals the stock market performance both during and one year following several American recessions.

Recessions aren't "bad"
Contrary to popular media opinion, not every single recession is bad for the investor. In the 1945, 1953-1954, and 1980 recessions, stock market returns behaved as if they were in a period of prosperity. As mentioned, during the recession of February to October 1945, the market actually jumped 21.3%.

Investors who are quick to head for the exits simply because there is a recession looming are forgetting one very important fact: The principal goal of an investor is to focus on acquiring strong businesses selling at attractive prices -- regardless of the market environment.

While you might experience a little volatility or find yourself waiting a period of months before any capital appreciation, that's the nature of the markets. Markets go up, markets go down, and markets go nowhere.

Market timing is useless
Before researching this article, I was not aware of the strong performance that occurred during some of these recessionary periods. Of course, the advancing markets were outnumbered by declining ones, but the notion that recessions simply destroy returns is not necessarily the case.

Sure, some companies behind consumer luxuries may be squeezed. If the economy is tough, penny-pinching consumers might cut back on their Starbucks (Nasdaq: SBUX) trips, or they may delay buying an iPod or iPhone from Apple (Nasdaq: AAPL). Indeed, that's part of the reason why these stocks have been hurt over the past few months.

The economy, though, still needs to function at some level. People will still need to eat, do laundry, brush their teeth, buy medicines, etc. This bodes well for dividend-paying consumer-staples powerhouses such as Procter & Gamble (NYSE: PG), Johnson & Johnson (NYSE: JNJ), and Kraft Foods (NYSE: KFT). Even Wal-Mart (NYSE: WMT) is a candidate to weather a recession; with consumers paying closer attention to their pocketbooks, the retailer's "everyday low prices" give it a leg up.

Recessions develop over time. There is no set formula that reveals to us when a recession begins and when it ends. By some accounts, we are currently in a recession. Others are predicting an upcoming recession. Waiting for the "end" will often lead to waiting until it's too late and missing out on a great buying opportunity. So the key, again, is to buy quality issues for cheap and be patient.

Invest in the company first, not the market cycle.

It's not the end of the world
What's most important about recessions is at some point, they cease and things pick up. You'd never guess that during a recession -- there's too much noise pronouncing doom and gloom.

But the facts speak for themselves. Not only do they end, but investors who exhibit patience are rewarded in the following year. Those who wait it out on the sidelines -- until the headlines provide a cheery consensus -- later come to realize that they joined the party shortly before midnight.

Source:
http://www.fool.com/investing/value/2008/02/06/dont-believe-everything-you-hear.aspx

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Stocks under a Dollar

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List of Stocks under a Dollar ($1)
Stocks Traded in NYSE (Stock Price as of 22 Dec 2007) Click on Link for Latest Price


Name
Symbol
Last Traded $

Conseco, Inc.
CNOWS
0.03
Emrise Corporation (Listed NYSE Arca - Tier II)
ERI
0.62
Impac Mortgage Holdings, Inc.
IMH
0.59
Scottish Re Group Limited
SCT
0.76
Zarlink Semiconductor, Inc.
ZL
0.68

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