More on Regulation Z and your heloc loans

More on Regulation Z and your heloc loans

I was surprised at the large response to the last post about regulation z of the fair lending practices set forth by the FDIC and as such decided to add a few more details to how it directly protects you regarding Helocs.

Under section 226.5b of the fair lending guidelines, you will find provisions for heloc loans. Section F is probably the most interesting to consumers given the current the housing market:

(f) Limitations on home equity plans. No creditor may, by contract or otherwise:
(1) Change the annual percentage rate unless:
(i) Such change is based on an index that is not under the creditor’s control; and
(ii) Such index is available to the general public.
(2) Terminate a plan and demand repayment of the entire outstanding balance in advance of the original term (except for reverse mortgage transactions that are subject to paragraph (f)(4) of this section) unless:
(i) There is fraud or material misrepresentation by the consumer in connection with the plan;
(ii) The consumer fails to meet the repayment terms of the agreement for any outstanding balance;
(iii) Any action or inaction by the consumer adversely affects the creditor’s security for the plan, or any right of the creditor in such security; or
(iv) Federal law dealing with credit extended by a depository institution to its executive officers specifically requires that as a condition of the plan the credit shall become due and payable on demand, provided that the creditor includes such a provision in the initial agreement.
(3) Change any term, except that a creditor may:
(i) Provide in the initial agreement that it may prohibit additional extension of credit or reduce the credit limit during any period in which the maximum annual percentage rate is reached. A creditor also may provide in the initial agreement that specified changes will occur if a specified event takes place (for example, that the annual percentage rate will increase a specified amount if the consumer leaves the creditor’s employment).
(ii) Change the index and margin used under the plan if the original index is no longer available, the new index has an historical movement substantially similar to that of the original index, and the new index and margin would have resulted in an annual percentage rate substantially similar to the rate in effect at the time the original index became unavailable.
(iii) Make a specified change if the consumer specifically agrees to it in writing at that time.
(iv) Make a change that will unequivocally benefit the consumer throughout the remainder of the plan.
{{12-31-07 p.6652.03}}
(v) Make an insignificant change to terms.
(vi) Prohibit additional extensions of credit or reduce the credit limit applicable to an agreement during any period in which:
(A) The value of the dwelling that secures the plan declines significantly below the dwelling’s appraised value for purposes of the plan;
(B) The creditor reasonably believes that the consumer will be unable to fulfill the repayment obligations under the plan because of a material change in the consumer’s financial circumstances;
(C) The consumer is in default of any material obligation under the agreement;
(D) The creditor is precluded by government action from imposing the annual percentage rate provided for in the agreement;
(E) The priority of the creditor’s security interest is adversely affected by government action to the extent that the value of the security interest is less than 120 percent of the credit line; or
(F) The creditor is notified by its regulatory agency that continued advances constitute an unsafe and unsound practice.

Section 3vi A-F, provide the details as to when a bank can make changes to your heloc credit line. In summary, short of any government intervention, your property has to have a material change in value or you have give reason that your ability to repay the loan is no longer secure.

While these guidelines are in place, they fail to define what “material” is. Given today’s market, banks will be stretching “material” as far as possible and that is what the FDIC is concerned about.

If you find yourself arguing with your bank, it is up to them to tell you how they define “material”. They must prove to you they are within the guidelines, so use that to your advantage. Be persistent and a pain in the ass. Make them pay for appraisal, credit reports, and any other information they claim. Ask them to prove their guidelines are within reason. These guidelines are the only thing you have to protect you, so use them the best you can.

While many abuse home equity lines, they still do play an important roll. A blanket tightening of un-used equity lines could further damage the fragile housing market.

Please comment with any strategies you know to help home owners facing a reduction in home equity lines by their banks.

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In an effort to reduce risk in this uncertain market, many banks are sending notices to home owners that their line of credit on their home has been frozen or reduced. In a letter to the banks from the FDIC, banks are urged to take a reasonable and systematic approach. A blanket reduction of equity lines could further aggravate the current credit crunch.

The FDIC also warns that banks must comply with truth in lending regulation Z. Here is an excerpt from the Letter:

Regulation Z generally prohibits lenders from changing the terms of home equity lines of credit; however, there are exceptions. For example, Regulation Z expressly permits lenders to prohibit additional extensions of credit or reduce the applicable credit limit “during any period in which the value of the dwelling that secures the plan declines significantly below the dwelling’s appraised value for purposes of the plan.” To use this exception, lenders must determine that a “significant decline” occurred.

The term “significant decline” is not defined within the regulation itself. However, the Federal Reserve Board’s Official Staff Interpretations (Official Interpretations) to this provision of Regulation Z includes an example indicating that, while a “significant decline” will vary according to the circumstances, such a decline has occurred if the unencumbered equity is reduced by 50 percent. According to the Official Interpretations, a lender is not required to obtain an appraisal before suspending credit privileges, but there must be a significant decline in value. Although full individual appraisals need not be obtained, institutions should have a sound factual basis for determining that a property has experienced a significant decline in value. For example, automated valuation models or local tax assessments may be used, taking into account the issues described in the Home Equity Guidance regarding the validity of those values.

Other grounds for a reduction in line of credit include a material change in your credit or ability to repay the loan.

You can read the full letter here from the FDIC.

If you have received a reduction in your home equity line, you should contact your bank. They have to provide you the reason why they reduced your loan. If it is due to property value, be prepared as they may want to have your home appraised unless you can show why your home is valued more than they claim. If it is due to material change in your ability to re-pay the loan, make sure to ask why they believe this to be the case and again be ready to show them otherwise.

Most importantly, you should check the status of your loan before you make a purchase that will not be honored.

With all the Low APR deals, I thought it might be time to review how much does 0% APR save you and is it worth worse gas mileage.

Lets take a look at Ford’s offer of 0% APR for 72 months on 2008 F150’s. To determine what this means in savings all you have to do is determine how much interest you would have paid over a similar term under normal circumstances. For a 72 month loan, your normal APR would be somewhere between 6-8% for average credit, lets call it 7%.

To determine the total interest, you can use excel and calculate your own formulas, or simply visit this handy tool from Bankrate and enter your information and then view the Amortization schedule. Scroll to the very bottom and in the last month you will see the total interest paid.

So try this, assume 7% for 72-months on $25,000 (as that seems to be the mid-level price after discounts on the F-150).

With the 0% APR, your interest expense is $0.
With 7% APR your interest expense is $5,688.21.

There you have it, the 0% financing saves you $5,688.21 Vs. a loan for the same period at 7% interest. However, since most people do not get a 72-month loan, it is more accurate to compare the offer against the normal loan you would get. If, for instance, you normally buy cars on 48-month loans, than just use the lower number for your comparison. The savings goes down for ever year you decrease the time you would have normally bought the car. You should also adjust the interest to what you think you could qualify for.

Other compares you can do!

0% APR can be great offers, but remember, if you are looking to save money due to gas then make sure to compare the total cost of the car over the time you plan to own it including fuel costs. Many of the really good offers are on trucks or less fuel efficient cars. On the surface, they may look like the better route, but with fuel cost so high you will quickly lose those savings.

In the example above, the Ford F-150 would cost $4,421.53 in fuel base on $4.79 per gallon gas and 12K miles per year. A more fuel efficient car could save you 50% or more on that cost. Over a six year time, a car that cost 50% less fuel will save you $13K. This may be enough to justify a more expensive hybrid truck or a hybrid SUV if you need the large car. If you don’t need the large car, then you better be saving at least $13K off your deal before you take the truck over a more fuel efficient car. Keep in mind this savings assumes fuel will remain constant and that you only drive 12K miles per year. Adjust anyone of those numbers and you will get different results.

Point is, before you rush to buy a car based on the desperate measures automakers are taking, do the math to see if makes sense on the model you are looking at. If savings is your goal, you have to factor in fuel costs before you can make a good choice.

Steps to compare total cost:

1. Start with the price you will pay for the car after rebates and incentives.
2. Determine the interest expense on the loan you will be going for using the tool above from bankrate.
3. Determine the number of miles you drive per year and divide that by the average MPG of the car. Multiply the number by the gas cost in your area. Now you have the yearly fuel cost.
4. Multiply the yearly fuel cost in step 3 by the number of years you plan to keep the car. (must be the same for each car you are comparing).
5. Add the results from 1, 2, 4 to arrive to your estimated total cost of the car (this excludes maintenance, registrations, and other factors assumed to be the same for all cars in your comparison. If you are comparing a BMW to a Civic, you will have to adjust these numbers as a BMW has more expensive ownership costs).

That is it, this will give you an idea of what car is less expensive when you factor in fuel, rebates, and special financing.

Good Luck!

On July 1st, Nikon announced the D700. As far as their lineup is concerned, the D700 falls in-between the D3 and the D300 in terms of features, however, at $2,999 it is a full $2,000 less then the D3 and about $1,200 more than the D300.

The D700 basically comes with the larger FX sensor found in the D3, but has the size that is similar to the D300. You also get improved low light performance over the D300.

One downside is the viewfinder only has 95% coverage whereas the D3 and D300 have 100% and for sports it is still not as fast as the 9FPS of the D3.

For some in-depth reviews follow these links:

Major Features (Per Nikon’s Press Release)

Large image sensor, developed by Nikon; 12.1 effective megapixels

The D700 employs an FX-format CMOS image sensor with an area of 36.0mm (h) x 23.9mm (v). It provides superior picture quality throughout a wide ISO sensitivity range, with advantages that include a large pixel size to ensure a higher signal-to-noise ratio and wide dynamic range, and improved circuit layout to efficiently increase the strength of the electrical signal from pixels. High-speed, 12-channel readout enables fast continuous shooting of high-resolution images at up to 8 frames per second (with Multi-Power Battery Pack MB-D10 and Rechargeable Li-ion Battery EN-EL4a/4 or eight AA-size batteries).

Wide sensitivity range

The D700 offers an extremely wide sensitivity range of ISO 200 to 6400. It delivers extraordinary image quality at low sensitivity settings, while also delivering outstandingly low-noise characteristics at ISO settings as high as 6400. Furthermore, sensitivity can be increased to HI 0.3, HI 0.5, HI 0.7, HI 1 (ISO 12,800 equivalent), HI 2 (ISO 25,600 equivalent), or decreased to Lo 1 (ISO 100 equivalent), Lo 0.7, Lo 0.5 and Lo 0.3, to expand shooting versatility.

High-speed performance

Features a startup time of approximately 0.12 second, and a shutter release time lag of only 40 ms* - both equivalent to the flagship Nikon D3. The continuous shooting speed is up to 5 frames per second with the included Rechargeable Li-ion Battery EN-EL3e, and up to 8 fps when using the optional Multi-Power Battery Pack MB-D10 and Rechargeable Li-ion Battery EN-EL4a/4 or eight AA-size batteries. The Nikon D700 is also compliant with the next-generation high-speed UDMA CompactFlash cards, that will enable 35-Mbyte recording speed.

* Based on the new CIPA guideline established in August 2007.

EXPEED image processing

Nikon’s state-of-the-art EXPEED digital image-processing incorporates remarkable intelligence and technologies accumulated and optimized throughout our long history. It makes possible a diverse range of functions that ensure superior picture quality and high-speed image processing.

Scene Recognition System

Improvements to the exclusive 1,005-pixel RGB light sensor have allowed information from the sensor to be utilized for auto exposure, auto white balance and autofocus. 3D-Tracking in AF, for example, achieved by using the Scene Recognition System, tracks subject position and automatically shifts the AF points used to match the subject’s movement within the frame. This system also contributes to higher accuracy of auto exposure and auto white balance detection.

Picture Control System

Nikon’s Control System enables users, from novices to professionals, to create the pictures they envision by making specific selections and adjustments to image sharpening, tone compensation, brightness, tone and saturation. Even with different cameras, when the settings are the same, you get the same picture tone. Picture Control System offers four fundamental setting options - Standard, Neutral, Vivid and Monochrome - for easy customization of image parameters.

Active D-Lighting

Active D-Lighting lets photographers choose from various intensities - Auto, High, Normal, Low or OFF (Unchanged) - prior to shooting. Instead of employing the conventional compensation method of simply expanding dynamic range, localized tone control technology is utilized to ensure proper contrast and eliminate flat images with lost highlights and shadows.

AF system with high-density 51-point AF

The D700 incorporates a Multi-CAM 3500FX autofocus sensor module featuring 51 AF points. Fifteen cross-type sensors located in the center enable subject detection with lens apertures as small as f/5.6. The functioning of the AF points is linked to the Scene Recognition System, to deliver superior subject detection and focus tracking performance. A single AF point can be selected from the 51 or 11 focus points. In Dynamic-area AF mode, you can select from either 9, 21 or 51 AF areas. The 51-point option offers 3D-Tracking mode, which automatically shifts the focus point to match the subject’s movements. Auto-area AF mode gives greater priority to the subject’s position when selecting AF points.

Choose from two Live View modes

Live View allows shooting while confirming the subject on the 3-inch, 920,000-dot color LCD monitor. In Handheld mode, which lets you recompose the frame prior to actual shooting, ordinary TTL phase-detection AF is activated, using all 51 AF points including 15 cross-type points. Tripod mode is designed for precise focus accuracy with still subjects and tripod stabilization. It enables focal-plane contrast-detect AF on a desired point within a specific area. Remote view, focusing and shooting can also be controlled from a PC (via connection or wireless) using optional Nikon Camera Control Pro 2 software.

DX cropping mode

The Nikon D700 lets you select from either FX format (36 x 24) or DX format (24 x 16). At the default setting of [Auto DX crop], the camera will automatically select DX format when a DX NIKKOR lens is attached.

High-definition, 3-inch VGA, TFT LCD monitor with wide viewing angle

The ultrahigh-definition [920,000-dot VGA (640 x 480)], 3-inch LCD monitor with tempered glass provides a 170° viewing angle. The large monitor is remarkably effective when confirming the focus with enlarged playback images. The wide viewing angle enables easy recomposing of the frame in Hand-held mode with Live View.

Viewfinder provides 95% frame coverage, 0.72x magnification in FX format

The viewfinder features an eye-level pentaprism with high refraction index and provides 95% frame coverage with 0.72x magnification. Fifty-one AF points and a framing grid are superimposed on the finder screen. The eyepoint is 18 mm (at -0.1 m^-1), and the diopter can be adjusted within a range of -3 to +1 m^-1.

Image Sensor Cleaning

Vibrations at four different resonant frequencies remove dust from the optical low-pass filter in front of the image sensor. This function is automatically activated each time the camera is turned on and off, and can also be activated on demand by the photographer.

Built-in flash with wireless commander function

With a guide number of approximately 17/56 (m/ft., ISO 200, 20°C/68°F) and 24mm lens coverage, the high-performance built-in flash enables i-TTL flash control that evaluates flash exposure with greater precision for exceptional results. Compatible with the Nikon Creative Lighting System, the built-in flash controls up to two groups of remote units as a master/commander in Advanced Wireless Lighting.

Engineered durability

A magnesium alloy is used for the exterior cover, rear body and mirror box to reduce weight and provide rugged durability. O-ring sealing where connections are made gives you valuable protection against dust and moisture. The shutter unit developed and manufactured by Nikon employs shutter blades made of a new material (a hybrid of carbon fiber and Kevlar). Tested on fully assembled cameras, the D700’s shutter unit has been proven through 150,000 cycles under demanding conditions. The self-diagnostic shutter constantly monitors and maintains shutter precision.

Multi-Power Battery Pack MB-D10 (option)

The optional Multi-Power Battery Pack MB-D10, which uses one Rechargeable Li-ion Battery EN-EL4a/4/3e or eight AA-size batteries, is equipped with a shutter-release button, AF-ON button, multi selector, and main- and sub-command dials. When attached, it enables high-speed continuous shooting of 12.1-megapixel images at a rate of up to 8 fps*. * When using EN-EL4a/4 or eight AA-size batteries.

Exclusive Wireless Transmitter WT-4/4A (option)

The WT-4/4A supports both wired LAN (10BASE-T, 100BASE-TX) and wireless LAN (IEEE 802.11b/g, 11a), and incorporates a thumbnail mode. A PC allows wireless connection of up to five cameras, for display of thumbnail images and downloading of selected images. Using Camera Control Pro 2 (option) and the Live View function, wireless remote view/control shooting is also possible.

Fine tuning for AF

The focal point in AF for the current CPU lenses can be fine-tuned and registered. A certain level of adjustment set for up to 12 lens types is applied when a lens of the same type is attached. When using a lens that has not been registered, the same level of adjustment can be applied.

Improved Function button feature

In addition to the exclusive Function button, this feature can be assigned to the Preview button and the AE/AF Lock button, for optimum flexibility. Furthermore, NEF copy recording together with JPEG image can be assigned to the Function button.

HDMI output (High-Definition TV) supported

The D700 complies with HDMI (High-Definition Multimedia Interface) Ver. 1.3a for the transfer of global-standard video and audio signals. A Type C mini connector is provided.

Info display

Various shooting information is displayed on the LCD monitor, including shutter speed and aperture. Character color can be adjusted to match lighting conditions - black for light locations, white for dark locations. Auto switch mode can also be set.

My Menu

A variety of setting options can be customized under My Menu, then added to, deleted and reordered.

Electronic Virtual Horizon

Using a sensor incorporated in the body, the inclination of the camera is detected and displayed in the LCD monitor.

ViewNX/Nikon Transfer image-management software included in Software Suite CD-ROM

The ViewNX viewer application offers quick display of images; Nikon Transfer enables simple transfer of taken images to a computer.

Last night I was online getting ready to buy some Polk Audio Speakers for my living room from Crutchfield.com.  I had done some quick research last week on the speakers and was ready to pull the trigger when to my suprise the price had jumped almost $100 dollars.  Last week the price was $179 for the pair of RC801 in ceiling speakers, last night they were $249, and now this morning they are $149 ($100 discount).

However, I had compared prices with Circuit city and their price was $229 last week and $329 this week.  I thought maybe it was just those speakers, so I checked the price on a set of Boston Acoustics I was looking at last week.  Circuit City had them for $179 last week and they are now listed for $269.

Just a word of caution, prices may have been raised this weekend for non-sale items to make up for the big sales on other products.