Savings and Loan Banks – Still an Option Today

Savings and LoanSavings and loan banks are also known as savings and loan associates. These are building associations, banks homestead associates, cooperative or partnership of American and other countries financial worlds. Now they are cross between a commercial banking institution and credit union which accept deposits and make loans mainly for real estate or be a mutual association or stock associates.

The original savings and loan bank is set to help persons that could not use more conventional banking resources to obtain purchases such home or a house. The function is to raise funds from depositors to invest in a long term residential mortgages and other types of mortgage investment where in the bank can also fund refinancing, or repair residential units and construction. Savings bank is a type of bank where in it specialized in savings and checking accounts which are made available to the public. It is typically some kind of lend out the deposits in the form of mortgages to its clients.

Posted in Savings and Loan.

What Is The Savings and Loans Crisis?

Savings and Loans associations (or S&L’s), also known as a thrifts, are banking organizations that specialized in savings accounts and writing mortgages and other loans. These banking organizations came about after the Great Depression to help give individuals a chance to own homes and get out of everlasting debt. Prior to the Great Depression, mortgages where not from banks, but instead by insurance providers. These insurance company backed mortgages differed a little from the loans we know today. Many were short term loans with some sort of “balloon” transaction at the end of the term, or interest only mortgages in which none of the monthly installments went toward the most crucial of the mortgage. These were also seen as being a major contributor to the 2008 Financial Crisis. This type of mortgages caused many individuals to live in a constant cycle of re-financing their house, or face the loss of their house through property foreclosure when they were unable to make the increased payments at the end of the loan term. Savings and Loans Associations were created when the legislature approved the Federal Home Loan Bank Act in 1932. This was done to provide banks, more over savings and loans associations, the financing needed for them to offer long lasting, amortized mortgages for house purchases. Find more info savings and loans associations here http://www.privatalan.com.

dv2078007The story of the Savings and Loans crisis is a two part story. The first consists of the events that brought on the S&L’s trouble, the second part is the events that created the major crisis and cost Americans money. The initial trigger of the S&L crisis was inflation in the 60′s and stagflation the 70′s. A quick economics class, Inflation is the steady raise in the prices for goods and services. Inflation is calculated as an annual percentage increase. As inflation increases, your money will buy a smaller amount of a good or service. As an example, if the inflation rate is 2% annually, then in theory a $1 pack of gum will cost $1.02 in a year. After inflation, your dollar can’t buy the same goods it could beforehand. Stagflation is the same as inflation with the added bonus of high unemployment and a stagnate economy.

The Savings and Loans Associations struggled during these inflationary periods. Remember that the Savings and Loans Associations depended on residential mortgages and savings account deposits for income. The trouble with this business model was that the mortgage rate went from 7.25% in 1971 to a staggering 17.5% by 1981. As you can imagine the increase in the interest rate made it more “expensive” for people to borrow money. These rates along with the slow economy and high unemployment rate made it almost impossible to qualify for a mortgage.

Inflation and Stagflation were the causes to the failing of many savings and loans association. However these did not cause the savings and loans crisis, the crisis was a consequence of political figures, lenders, and lobbyist responding badly to the economical circumstances of the time. Of course these responses were nothing new in the 1980′s and we saw them in another disaster in the 1990′s and of course in the 2008 financial crisis.

The guidelines that came about to “help” the savings and loans crisis were:

  • Lending requirements were relaxed.
  • Federal Deposit Insurance was brought up from $40,000 to $100,000.
  • Enforcement of the law by banking regulators was reduced.
  • Implementation of the remedy was late until the market itself couldn’t possibly pay for it and tax payers were once again handed a bill.
  • Politicians interrupted investigations of failing thrifts on part of certain S&L owners.

The significant lessons to be taken from the savings and loans crisis is that bad economical policies and an inadequate and improper regulating program can cause a wide spread disaster. This disaster along with the crisis of 2008 display that there is a large need for risk-adjusted profitability in the financial market and that badly managed lenders will hide their true level of risk and return. In reaction to this crisis the structure and control of the US financial market was generally improved if only for a few decades, however more should have been learned from it. But one significant problem that came out off this crisis was that bankers and bankers now realized that they were “too big to fail” and this was only the beginning!

Posted in Crisis.

95% No Genuine Savings Home Loan: Can I Get a Mortgage With No Deposit of My Own?

During the global financial crisis, banks in Australia tightened up their lending policy with most requiring a 10% deposit minimum before they would lend. The deposit needed to come from a genuine source – that is, saved up or held in a bank account for 3 months minimum before the bank would lend.

Recently though, policy has started to relax and home loans with no genuine savings are available from a variety of lenders at normal interest rates to good quality applicants.

What are Genuine Savings?

Genuine Savings Home LoanGenuine savings is defined as funds or equity held or saved up over a 3 month period. Genuine savings would include;

1. Shares held in personal name for a minimum of 3 months,

2. Equity in real property (ie, another home you own),

3. Cash savings saved up in a bank account over a minimum 3 month period,

4. Cash deposited in an account and not touched for 3 months (ie, proceeds from the sale of a car or gift placed in a bank account for 3 months will be considered genuine savings)

Are there options if I do not have any genuine savings?

In recent times some lenders have started to relax their policy slightly and will now lend to good quality applicants with clean credit history and good employment history for properties in good areas, even if they do not have 5% genuine savings. Therefore, the 5% deposit can now come from;

Non-refundable Gift,

Sale of an Asset,

First Home Owners Grant,

Savings,

Borrowed (ie, from a personal loan)

Builders boost or other government grant,

HPAS (defence grant)

What other requirements do I need to satisfy to qualify for a non genuine savings home loan?

If you do not have genuine savings, then there are strict criteria that needs to be satisfied before the banks will lend. You will need:

1. Good employment history which is generally defined as 1 year in current job, or 2 years in the exact same line of work,

2. Clean credit history free from defaults (1 small default for a telephone or electricity account may be accepted),

3. If self employed, will require 2 full years financials and tax returns,

4. No probation periods.

How much can I borrow?

Up to 95% with Lenders Mortgage Insurance capitalised on top (ie, you don’t have to pay for the Mortgage Insurance upfront). This means that a very basic property in Queensland for a first home buyer would only require approximately $7500 of their own funds for a $250,000 purchase.

What products, features and interest rates are available?

Fixed or variable rate home loans are available which can include full features like redraw and an offset account.

Can I use a Personal Loan as the Deposit?

Yes, providing the loan still services – that is, you can afford the repayments on both the home loan and the personal loan.

Summary:

No genuine savings home loans are now available from a variety of lenders. There are no interest rate loadings or higher fees payable if the deposit is from a non genuine source. With interest rates at a reasonably low level, many will find repayments on a home are similar to rent payments.

Posted in No Deposit.