| TWENTY PERCENT OF ALL BAD CREDIT MORTGAGES WILL END IN ...
Bad debts are adding up to a $164bn black hole for American banks. And Britain's banks are caught up in it, reports Heather Connon... Federal investigations, corporate collapses, borrowers who never manage to make any loan repayments, soaring bad debts ... sub-prime lending to riskier borrowers in the US has all the hallmarks of an industry in crisis. The Centre for Responsible Lending predicts that one in five of all sub-prime loans written over the past two years will end in foreclosure, the US term for repossession: that's 2.2 million loans and a cost of $164bn (85bn). One British bank has already become embroiled: HSBC's bad debt charge rose by 35 per cent to more than $10.5bn in 2006, a fifth of which came from its sub-prime mortgage servicing business.
WAR, ENERGY, BANKS & USDOLLAR
On the eve of the next war front to explode in the Persian Gulf region, some thoughts on the energy sector seem appropriate which attempt to tie some factors together. In the last two to three years, the biggest challenge to analysts is not so much identification of certain relevant effects, as it is integration of analysis on a several simultaneous patently clear crucial factors for correlation. To friends an assessment has been often used by me, This is five dimensional chess, and at any one time, three dimensions are dominant. All are linked increasingly and with more complexity. The challenge is to finger the most important pairs of factors. That covers it in my opinion. The tight relationship between the crude oil price and the USDollar valuation is historically well known, firmly in place for over three decades.
What’s the best option for financing your automobile?
If you're financing the purchase of a car with the equity in your home, that is exactly what you could be doing — paying for a car over 10 or even 30 years.The use of home equity loans, lines of credit and cash-out refinancing to purchase an automobile grew in the last decade as interest rates dropped and property values soared.It also has become popular as lenders hyped the fact that interest on a home loan is tax-deductible, unlike on a vehicle loan.In 2006, about 24 percent of homeowners used a home equity line of credit to purchase a car or truck, according to Synergistics Research Corp., a financial services consumer market research company based in Atlanta, Ga. About 8 percent of homeowners took out a second mortgage specifically to buy a vehicle, says William H. McCracken, chief executive of Synergistics.But is buying a car or paying off your remaining auto loan balance with the borrowed equity from your home a good financial move?“I issue a note of caution on this," says Don Taylor, a columnist for Bankrate.com and an associate professor of finance at The American College in Bryn Mawr, Pa.“If you don't have the discipline to do more than the minimum payments on these loans, then this is not a good idea."The assumption people make is that the home equity loan is cheaper than a traditional car loan because of the mortgage interest tax break.However, if you don't make extra payments or pay the loan off early, you end up paying more in interest over the life of that loan than you would with an auto loan, erasing any savings on your taxes.Plus, because the car money is rolled up in a home mortgage, you could still be paying on a loan for a vehicle you've long since sold or traded in.I asked Taylor to run a few financing scenarios to compare the total cost of four types of auto borrowing: a 60-month car loan, a 10-year home equity loan, a 10-year home equity line of credit and a 30-year cash-out mortgage refinance.To view the full results or to plug in your own loan figures, income tax rate and interest rates, go to www.bankrate.com/compare.So let's look at one example of an auto loan versus a home equity loan in which you finance $30,000.
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