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December 5, 2011

Ноw tо Qualify for Todays Low Ноmе Mortgage Interest Rates

Category: Home Loan Guidelines,Mortgage Lender Tips – admin – 8:28 am

Getting a low rate on your home mortgage loan seems paramount to being a homeowner, but the reality is that many qualified borrowers are paying a higher interest rate on their home loan than they should be.  Who does not want a low home loan interest rate? Of course all consumers want to obtain the best home mortgage rate, but most don’t know how to actually qualify for the lowest rates online. Today’s record low mortgage rates саn save you a substantial amount of money so consider mortgage refinancing if your interest rate is above 5%.  Think about it the home mortgage rate can have а serious impact tоwаrds thе cost оf уоur total hоmе loan. Тhrоughоut thе borrowing period, уоu аs homeowner must expect tо settle а sіgnіfісаnt amount оf money tо thе lending company аs thе interest fоr thе loan. Well, eventually, thіs іs thе mоst dominant aspect оf dоіng business аs thе lending company. Hоmе loan rates dо nоt hаvе tо bе as excessive as you think. Sure thе lending institution needs to make a profit but let the lender make their money from volume, not your specific home loan.

You will find whеn уоu аrе qualify fоr а hоmе mortgage loan уоu саn lock іntо оnе оf thе option оf low interest rates thе company offered. Υоu mау decide уоu wаnt а lower monthly payment аnd tаkе оut а 30 year mortgage wіth а great interest rate, оr уоu mау wаnt tо gо wіth higher payments оn а 15 оr 20 year loan. Еvеn wіth low mortgage interest rates mоst оf уоur monthly payment will gо tо pay thе interest оn thе loan, аnd а small amount will bе applied tо thе principal thаt уоu borrowed.

One оf thе factors tо pre-qualify fоr a residential loan іs lооk аt уоur credit rating оr credit history. Today is it is difficult to secure mortgages with bad credit, but with a a 10% down-payment or more, there are loan potential government loan programs available from the Federal Housing Administration.  Most first time home buyers start out with a FHA loan because they only require 3.5% down and FHA rates are great as well. However when a borrower has poor credit, FHA will often want ato see a higher down-payment to be considered as a compensating factor. Ѕhоuld уоur record іs clean thаn уоu hаvе nоthіng tо worry аbоut, hоwеvеr іf уоu hаvе аnу charge-offs, оr bills thаt gо thrоugh tо collection аnd officially reported tо thе credit bureau, thаn уоu hаvе nо choice thаt уоu nееd tо clean thаt mishap fіrst bеfоrе trу applying fоr а loan.

Another іmроrtаnt key factor thаt соuld gіvе you a better chance of qualifying for a low rate mortgage іs bу having ready а sizable dоwn payment in case your offer gets accepted. Оnе оf thе wау іs tо save money еасh month іs bу automatically deducted аn amount оf money frоm уоur paycheck іntо а dedicated savings account. А 20%down-payment іs considered a solid еnоugh fоr dоwn-payment for most mortgage lenders to extend you a loan approval. Wіth thіs money, thе lender will usе thеm tо secure thе loan wіth insurance, fоr аnу chance thаt уоu mау meet hard times аnd default оn уоur loan settlement. Ву documenting the ability to make a significant dоwn-payment уоu will be showing home loan lenders that you are a serious borrower who intends to repay the mortgage.

If buying а hоmе аt mortgage rates today іs sоmеthіng уоu wаnt tо dо, іt mау bе tо уоur advantage tо tаkе а lіttlе time аnd prepare. Ву dоіng уоur homework ahead оf time whіlе уоu аrе house shopping, уоu саn аlsо bе shopping fоr thе best аnd lowest mortgage package thаt уоu саn qualify fоr. Gо оn lіnе аnd check thе dіffеrеnt websites powered by competitive lending companies аnd of course you should compare and contrast the thеіr loan programs, product availability and rates оf interest.

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August 26, 2010

Credit Qualifications for Home Mortgages

Over 30% of US Consumers Do Not Qualify for Home Loans

Since the subprime home loan market crashed in 2006, lenders and banks have been tightening loan guidelines for refinance a purchase mortgages.

  • Credit scores need to be higher
  • Income needs to be greater
  • More equity is needed to refinance
  • More money is required for down-payments

Government loan products like the FHA and VA loan have emerged as the most flexible mortgage for borrowers who are struggling to qualify for a refinance loan. The FHA and VA streamline refinance have helped a lot of American homeowners refinance in a pinch. The FHA streamline does not allow borrowers to finance closing costs in the loan, so borrowers typically have to come out of pocket for lending costs like appraisal, title and escrow.

According to research from Deutsche Bank, the number of consumers in the United States with credit scores below 600 has increased to 26 percent from only 15 percent prior to the start of the recession.  This increase in bad credit scores could be attributed to late mortgage payments, credit card debt settlement or a bankruptcy.  Examining credit data further reveals that 9 percent of all U.S. consumers have a credit score in the 600-649 range.  Today most conventional and jumbo mortgage loan products require credit scores of at least 680.

Based on current loan guidelines and the credit score requirements for a home loan approval, any applicant with a score below 600 is almost certain to be turned down by a banking institution.  Borrowers in the 600-649 range are also considered “weak” candidates with a high turn down rate, especially if the credit score is below 620.

Based on the total number of Americans with a credit score of 649 or lower, up to 35 percent of all Americans are effectively locked out of the refinance or purchase mortgage market for the foreseeable future.  With foreclosures and default rates constantly increasing, it is conceivable that credit standards could be tightened even further by lending institutions.

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June 7, 2010

Home Refinancing Tips

Mortgage Refinancing Buzz posted another article offering home refinance advice to consumers shopping for a refinance loan online.  The article looks back a few years to the mortgage crisis and chronologically leads up to 2010 and the lowest refinance rates that our country has seen in 50-years.  They reminded us how we got here with thousands of lending companies and banks going out of business and the federal government deciding to take on a larger role in home loans.  Yes mortgage lenders continue to tightened refinance guidelines because foreclosures and loan defaults continue to mount across the country.  Mortgage Refinancing Buzz noted that a few of the with government loan programs continue to take risks.   Mortgage refinancing tips are available online so go to the MRB blog to get the insight.  Read the original article > Mortgage Refinancing Advice for 2010

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May 14, 2010

Lead Planet Reports Surge in Refinance Lead Volumes

For most of the year, loan companies have been searching for refinance leads with better conversion ratios.   U.S mortgage demand increased again last week, led by a rebound in refinancing applications as mortgage rates hit the lowest levels of 2010.   Bryan Dornan, the founder of  the mortgage lead company, the Lead Planet said, “Mortgage-marketing has been difficult in 2010 for lenders and brokers that focus solely on home  refinancing, because lending guidelines have tightened to a very uncomfortable level.” Finding a homeowner who qualifies for a refinance is ten times more difficult than it was just 3 years ago.

In the article, Lead Planet indicated that refinance lead volumes surged almost 20% last week.  Apparently their lending partners utilized the increased lead volumes and new loans submitted into process increased tenfold.  A spokesman for the Lead Planet said Purchase lead volumes rose 5.75% even though nationally home loan applications had come to a screeching halt.

Overall, mortgage demand increased 3.9% on a seasonally adjusted basis. Unadjusted, demand increased 3.4% from the week before.  30-year fixed-rate mortgages dropped from 5.02% to 4.96%, while rates of 15-year fixed-rate mortgages fell to 4.32% from 4.34%.  Interest rates on one-year adjustable-rate mortgages decreased from 7.03% to 6.86%.  Read the original article online > Lead Planet Reports Big Jump in Mortgage Refinance Lead Volumes

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January 8, 2010

New Mortgage Underwriting Guidelines and Credit Rules

Mortgage industry insiders continue to talk about the new underwriting guidelines and credit rules offering several new alternatives, but mortgage lenders are likely to extend consumers with notices including their credit scores, a bar graph allowing them to see where their scores rank against other consumers, the name and contact information for the credit bureau that provided the information, key factors that might have lowered the score, and guidance on how to correct mistakes in credit files. Most people know by now that bad credit bank loans are not easy to find anymore.

During the coming months, mortgage loan shoppers should ask competing lenders how they handle pricing when scores come in low. Ask whether the lender will inform you if something in your files is dragging down your scores and raising your fees and rates. We recommend that you request a free credit report in advance to submitting home loan applications. Start by visiting annualcreditreport.com and requesting a free credit report. It is more important than ever, because in 2010 because virtually all major mortgage sources including Fannie Mae and Freddie Mac have raised their credit-score cutoffs for the best rate quotes and lowest fees. > Go online  and read the complete credit repair article.

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December 29, 2009

Revised Good Faith Estimate for Mortgage Brokers, Lenders and Loan Officers

Mortgage professionals will have to get used to a new “Good Faith Estimate” to be disclosed in 2010. The U.S. Department of Housing and Urban Development (HUD) has updated and re-released “Shopping for Your FHA loan: HUD’s Settlement Cost Booklet.”  A large share of content in the 49-page publication, which helps consumers comparison-shop mortgages, addresses the standardized Good Faith Estimate (GFE) and HUD-1 settlement statement forms that lenders must start using on Jan. 1, 2010.

HUD estimates that consumers could save almost $700 in costs and fees per mortgage loan on average as a result of the new requirement, which is one of several changes to the Real Estate Settlement Procedures Act (RESPA).  In addition to the updated literature, the agency has set up a RESPA “FAQ” section and other information on a dedicated RESPA page so that consumers, settlement service providers and lenders can gain a better understanding of the new rules.

Here is the location of the .pdf of the booklet that you can save or print out for your reference. http://portal.hud.gov/portal/page/portal/HUD/documents/Settlement Booklet December 15 REVISED.pdf

Mortgage lenders are now required to provide loan applicants with the following:

- Good Faith Estimate—provided at the time of application to borrowers to outline the home loan terms and Total settlement costs.

- HUD-1/HUD-1A Settlement Statements—to inform borrowers of final costs at settlement.

- Servicing Disclosure Statement—to inform the borrower whether another financial institution may be servicing their loan.

- Settlement Cost Booklet—provided within three days of application to inform the borrower of fees involved in home purchase settlement.

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December 14, 2009

FHA Guidelines Being Revised for Refinance and Purchase

Category: FHA Mortgage,Mortgage Lender Tips,Mortgage News – admin – 6:06 pm

HUD announced they were making changes to the guidelines for with FHA mortgage products.  The Federal Housing Administration still has money, but its loan reserves are depleting to dangerously low levels.  FHA’s capital reserves are supposed to be 2% of outstanding loans. According to the actuarial review for fiscal year 2009, the reserves are a mere 0.5%. By the time you read this, FHA loan reserves might have disappeared entirely, thanks to the increasing number of FHA home foreclosures.  All FHA borrowers pay a mortgage insurance premium. These premiums go into the FHA’s capital reserves fund and are used to pay for home loans that are foreclosed upon. As FHA loan refinance and purchase mortgages have become much more popular, and the unemployment numbers have risen, more of these loans have gone bad, requiring more payments from the capital reserves.

Unlike the Federal Deposit Insurance Corporation , which recently proposed that banks pay three years of insurance premiums at once in order to replenish the FDIC’s reserves, FHA can’t require current borrowers to pay more. But it can change the rules going forward that will make it more difficult to qualify for an FHA loan.  According to a senior official at the Department of Housing and Urban Development , conversations are ongoing to determine what will make the most sense.  “Nothing will be taken off table,” the official said. “Everything needs to be assessed through the lens of the FHA core mission as well as the broad economic policies of the Administration with regard to stabilizing housing.”

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August 14, 2009

Mortgage Brokers Network for Net Branch Recruitment

Mortgage Brokers Network understands net branching, recruitment and lead generation.  As an industry leader in loan officer recruiting for the banks and net branches, Mortgage Brokers Network provides the largest network of loan officers and active net branches in the country.  MBN helps loan professionals find the lender or bank that best suits their needs and financial goals.

*    Mortgage Training and Loan Officer Education
*    Continuing Education for Loan Officers

*    Mortgage Lead Generation
*    Recruiting for Net Branches
*    Virtual Branch Locators
*    Loan Modification Companies
*    FHA, VA, Reverse, Conventional Lenders

Visit Mortgage Brokers Network online at http://mortgagebrokersnetwork.com  or call them at 815 -230-9867 to get more information.  Read the original MLV Article online > Mortgage Brokers Network for Leads and Recruiting.

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July 28, 2009

Foreclosures May be Better than Loan Modifications for Mortgage Lenders

Recent government initiatives to stem the nation’s looming home foreclosures are hampered because banks and other mortgage lenders in many cases have more financial incentive to let homeowners lose their property in a foreclosure than to work out a loan modification agreement, some economists have concluded.   Policymakers often say it’s a good deal for home loan lenders to cut borrowers a break on mortgage payments to keep them in their homes. But, according to researchers and industry experts, foreclosing can be more profitable.   The problem is that loan modifications is profitable to banks for only one set of distressed borrowers, while home loan lenders are actually dealing with three very different types. Loan modification plans make economic sense for a bank or other lender only if the borrower can’t sustain payments without it yet will be able to keep up with new, more modest terms. A second set are those who are likely to fall behind on their home loan payments again even after receiving a loan workout and are likely to lose their homes one way or another. Mortgage lenders don’t want to help these borrowers because waiting to foreclose can be costly. 

Finally, there are those delinquent borrowers who can somehow, even at great sacrifice, catch up without a modification. Lenders have little financial incentive to help them.   These financial calculations on the part of lenders pose a difficult challenge for President Obama’s ambitious efforts to address the mortgage crisis, which remains at the heart of the country’s economic troubles and continues to upend millions of lives. Senior officials at the Treasury Department and the Department of Housing and Urban Development have summoned industry executives to a meeting Tuesday to discuss how to step up the pace of loan relief. FHA has already added a new mortgage loan modification alternative to the traditional FHA refinance loans, for borrowers whose mortgages are greater than the value of their property.  The administration is seeking to influence lenders’ calculus in part by offering them billions of dollars in incentives to restructure mortgages and home loans. Still, foreclosed homes continue to flood the market, forcing down home prices. That contributed to the unexpectedly large jump in new-home sales in June, reported yesterday by the Commerce Department.   “There has been this policy push to use modifications as the tool of choice,” said Michael Fratantoni, vice president of single-family-home research at the Mortgage Bankers Association. But “there is going to be this narrow slice of borrowers for which modifications is the right answer.” The size of that slice is tough to discern, he said. “The industry and policymakers have been grappling with that.”   The effort to understand the dynamics of the mortgage business comes as the administration is begging additional mortgage refinance lenders to help borrowers under its Making Home Affordable plan, which gives lenders subsidies to lower the payments for distressed borrowers. According to RealtyTrac about 200,000 homeowners have received modified loans since the program launched in March, while more than 1.5 million borrowers were subject during the first half of the year to some form of foreclosure filings, from default notices to completed foreclosure sales.

No doubt part of the explanation is that lenders are overwhelmed by the volume of borrowers seeking to modify their mortgages. Rising unemployment and falling home prices have added to the problem.   But a study released last month by the Federal Reserve Bank of Boston was downbeat on the prospects for widespread modifications. The analysis, which looked at the performance of loans in 2007 and 2008, found that lenders lowered the monthly payments of only 3 % of delinquent borrowers, those who had missed at least two payments. Lenders tried to avoid modifying the loans of borrowers who could “self-cure,” or catch up on their payments without help, and those who would fall behind again even after receiving help, the study found.   “If the presence of self-cure risk and re-default risk do make renegotiation less appealing to investors, the number of easily ‘preventable’ foreclosures may be far less than many commentators believe,” the report said.

Nearly a third of the borrowers who miss 2 payments are able to self-cure without help from their home loan lender, according to the Boston Fed study. Separately, Moody’s Economy.com, a research firm, estimated that about a fifth of those who miss three payments will self-cure.

When Adrian Jones fell behind on the mortgage payments for her Dallas home earlier this year, her lender asked her to cut other expenses. Jones said she eliminated movies and coffee breaks. She turned to family members for loans. When that failed to raise enough, she sold her second car.   “It hurt, but it also made sense. The debt was my responsibility,” Jones said.   But six months later, after catching up on the mortgage, Jones is again feeling pinched after her hours as an office assistant at an architecture firm were cut. This time, she’s not sure she can fix the problem herself.   “I am going to try, obviously,” she said. “But it is getting harder and harder.”   Like Jones, those who are most determined to meet their obligations are often unlikely candidates for loan modifications.   “These are the people who will get a second job, borrow from their family to keep up,”

Mortgage lenders also worry that borrowers may re-default even after receiving a home loan modification. This only delays foreclosure, which can be costly to the lender because housing prices are falling throughout the country and the home’s condition may deteriorate if the owner isn’t maintaining it. In some cases, lenders lose twice as much foreclosing on a home as they did two years ago, said Laurie Goodman, senior managing director at Amherst Securities.  

American Home Mortgage Services, based in Texas, was willing to modify Edward Partain’s mortgage on his Tennessee home last April after business at his beauty salon slowed and a divorce stretched his budget. But after months of negotiating with his lender, Partain said he was surprised to learn that it would only lower his payments by $90 a month, instead of the $250 decrease he expected.   “At $250, I would have had a chance, but after they added in late fees and payments, I couldn’t do it,” he said.   Partain soon fell behind on his payments again and went back to American Home Mortgage Services seeking a more affordable payment. Partain said he was told that he was ineligible for another modification because it had been less than a year since his last. A foreclosure sale was scheduled for late July. After American Home Mortgage Services was contacted by The Washington Post about the case, the company said Partain would be considered for the federal foreclosure-prevention program and it delayed the sale by three months. Partain is relieved but anxious about the details. “You want to wait and see what figures they come up with,” he said.   Administration officials have not said publicly how many borrowers they expect to re-default under Obama’s program.   But the experience of a separate program run by the Federal Deposit Insurance Corp. could be instructive. After taking over the failed bank IndyMac last year, the FDIC began modifying troubled mortgages held or serviced by the company. Richard Brown, the FDIC’s chief economist, said the agency expects up to 40 % of those borrowers to re-default.   Even at that rate, he said, the modification program is more profitable than doing nothing. “The idea that 30 to 40 % re-default is a failure to a program is false,” Brown said.

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June 4, 2009

Home Refinancing with Home Affordable Refinance Program

Do You Qualify for the hottest mortgage loan, HARP?

FHA refinance loans are not always attainable for self-employed borrowers looking for fixed rate refinancing, because HUD requires full income documentation.  Loan modification plans can be nearly impossible for borrowers in high cost regions like California, New York and Florida who have jumbo mortgage loans.  Mortgage relief is often easier said than done.


When the stimulus package passed, millions of homeowners felt they were dissed. While the new mortgage relief program focuses on homeowners in foreclosure, it offers nothing for the homeowner who is responsible and current with their home loan payment. To compensate for this oversight, the U.S. Department of Treasury recently launched the Home Affordable Refinance Program (HARP). “HARP was created specifically to provide access to reduced-cost home refinancing for responsible homeowners with no equity in their home. Millions of Americans have lost their home equity due to the decline in home prices,” said Joe Engle, president of Loan Smart, Inc. in Thousand Oaks, California.

 

Presently, millions of homeowners find themselves in the unsettling predicament of having to sit on high mortgage interest rates that are not affordable or about to rest to a higher payment that will tip the budget negatively.  Most good borrowers are unable to refinance their homes and take advantage of historically low interest rates, because of the declining home values.  

Through the Home Affordable Refinance Program 4 to 5 million responsible homeowners will have the opportunity to refinance their homes, even if they owe more than 80% of their property’s value. “With low fixed rate mortgage refinancing, many families could see a reduction in their mortgage payments by thousands of dollars per year,” said Engle. Unfortunately, not everyone qualifies for Home Affordable Refinance Programs. This refinance program only benefits homeowners with home mortgages owned or guaranteed by Freddie Mac and Fannie Mae, which are Government Sponsored Enterprises. “At Loan Smart, we can assist homeowners with determining if they qualify for HARP by researching to find out if their loan is owned by either Freddie Mac or Fannie Mae,” commented Engle.   Engle points out that HARP will offer a huge advantage to homeowners with first and second mortgages. HARP will allow for refinancing of the first mortgage up to 105% of the current home value, with the second mortgage remaining in place.

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February 10, 2009

Banking and Subprime Mortgage Crisis with Charlie Lyons

Charlie Lyons elaborates further on the opportunity available for investors to purchase defaulted home mortgages and the roots of the foreclosure crisis.

The housing crisis came as a result of the sub-prime mortgage meltdown and subsequent banking crisis.  FHA loan companies have been trying to help homeowner recover with FHA loan programs like FHA Secure and Hope for Homeowners, but they have not been able to slow the loan delinquencies and sliding home values.

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February 3, 2009

Fed Offers Mortgage Relief to Revive Economy

Category: Financial News,Mortgage Lender Tips,Mortgage News – admin – 11:55 am

The Federal Reserve signaled Wednesday that it stands ready to use new unconventional tools, or expand existing ones, to spur lending and consumer spending that could help lift the economy out of a painful recession.  The Fed also agreed to keep the targeted range for the federal funds rate between zero and 0.25% for “some time” to help brace the economy. Economists predict the Fed will keep the funds rate, the interest banks charge each other on overnight loans, at that record low level through the rest of this year. 

Fed Chief Bernanke Endorses Stimulus Package

View the Analysis and Discussion with Former Fed Governor Lyle Gramley.

With its key lending rate to banks already near zero, the Fed pledged anew to use “all available tools” to revive the economy.  Specifically, the Fed said it is “prepared” to buy longer-term Treasury securities if the circumstances warrant such action. At its previous meeting in December, the Fed said it was merely evaluating that option. Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, was the sole dissenter on this point. He wanted the Fed to move forward on buying the securities.  Doing so would help drive down mortgage rates and provide help to the stricken housing market, economists said.  Mortgage lenders continue to report interest rates in the 5% range for 30-year fixed home loans.

For example, many thirty-year mortgage loans featuring fixed interest rates are targeted to the 10-year Treasury note. If the Fed were to buy that security, it would push down rates on bad-credit mortgages connected to it. The same logic would apply to other Treasury securities.  “So many consumer rates are pegged to Treasury rates — homes, cars,” said Joel Naroff, president of Naroff Economic Advisors. “If the economy is to recover, consumers need to borrow and need to borrow at reasonable rates. The Fed made clear that it is prepared to make that happen.”  The Fed also said it “stands ready” to expand another program aimed at providing relief to the crippled mortgage market.

Under that program, the Fed is buying up to $500 billion in mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. It also has agreed to buy up to $100 billion of Fannie and Freddie debt.  Mortgage interest rates have fallen since the program’s announcement late last year. The Fed said it could buy more of these bad credit mortgage securities or extend the length of the program.

The Fed on Tuesday took measures to stem home foreclosures as required by a 2008 law. The relief would apply to mortgage assets the Fed is holding because of last year’s bailouts of Bear Stearns and insurer American International Group. Distressed borrowers could see the amount they owe on their home loan lowered or their interest rate reduced, among the options for help.  But borrowers have no way of knowing whether their mortgage loans are held by the Fed, because their loan payments are collected by other companies, known as loan servicers.

The central bank also will be launching a program aimed at bolstering the availability of consumer loans. Under the program, which is expected to start in February, up to $200 billion will be made available to spur auto, student and credit card loans as well as loans to small businesses. To do that, the Fed will buy securities backed by those different types of consumer debt. The Fed also hopes that action will lower rates on those loans.

The Fed said Wednesday that it will assess whether the program should be expanded in size or scope. Fed officials previously have mentioned the possibility of expanding the program to provide financing for other types of securities, such as those backed by commercial mortgages.

Fed Chairman Ben Bernanke and his colleagues are battling a three-headed economic monster: crises in housing, credit and financial markets that — taken together_ haven’t been seen since the 1930s. Despite the Fed’s aggressive rate-cutting campaign, a string of radical Fed programs and a $700 billion financial bailout program run by the Treasury Department, credit and financial markets are still stressed and far from normal. “Conditions in some financial markets have improved, in part reflecting government efforts to provide liquidity and strengthen financial institutions; nevertheless, credit conditions for households and firms remain extremely tight,” the Fed said. Homeowners need quick mortgage relief with loan modification programs that guarantee homeowners affordable home loan terms.

Warning that the nation is at a “perilous moment,” President Barack Obama made a fresh plea to Congress Wednesday to enact a $825 billion package of increased government spending and tax cuts to stimulate the economy. The recession, now in its second year, could turn out to be the longest since World War II.   The nation’s unemployment rate bolted to a 16-year high of 7.2% in December and could hit 10 % or higher at the end of this year or early next year. A staggering 2.6 million jobs were lost last year, the most since 1945, though the labor force has grown significantly since then. Another 2 million or more jobs will vanish this year, economists predict.

Against that backdrop, the Fed raised the specter of deflation but didn’t use the word. The Fed saw a risk that “inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.”  With jobs disappearing, home values tanking, foreclosures soaring and nest eggs shriveling, consumers have sharply cut spending. That, along with the housing collapse, has played a big role in causing the economy’s backslide. Many economists predict data will show the economy contracted at a pace of 5.4% in the final three months of last year when the government releases the gross domestic product report Friday. If they are correct, that would mark the worst performance since a drop of 6.4% in the first quarter of 1982, when the country was suffering through a severe recession. The economy is still contracting now at a pace of around 4%, according to some projections.

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