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The Federal Home Loan Banks provide stable, on-demand, low-cost funding to American financial institutions for home mortgage loans, small business, rural, agricultural, and economic development lending. With their members, the FHLBank System represents the largest collective source of home mortgage and community credit in the United States. The banks do not provide loans directly to individuals, only to other banks. On January 8, 2009, Moody's said that only 4 of the 12 FHLBs may be able to maintain minimum required capital levels and the U.S. government may need to put some of them into conservatorship.[1] | Contents [hide] - 1 Ownership
- 2 Financial Results and Condition
- 3 History
- 4 See also
- 5 External links
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[edit] Ownership The 12 banks of the FHLBank System are owned by over 8,100 regulated financial institutions from all 50 states, U.S. possessions, and territories. Equity in the FHLBanks is held by these owner/members and is not publicly traded. Institutions must purchase stock in order to become a member. In return, members obtain access to low-cost funding, and also receive dividends based on their stock ownership. The FHLBanks are self-capitalizing in that as members seek to increase their borrowing, they must first purchase additional stock to support the activity. FHLBanks are exempt from state and local income taxes, but are subject to property taxes. The FHLBanks also pay an assessment of 10% of annual earnings for affordable housing programs, and 20% of annual earnings to support the Resolution Funding Corporation (REFCORP). The mission of the FHLBanks reflects a public purpose (increase access to housing and aid communities by extending credit to member financial institutions), but all 12 are privately capitalized and, apart from the tax privileges, do not receive taxpayer assistance.
[edit] Financial Results and Condition On August 13, 2008, the FHLBanks Office of Finance published the second quarter combined financial report. For Q208, the FHLBanks recorded net income of $718 million, up 14% from the same period one year before. For the six months ended June 30, total earnings were $1.415 billion, a 13% increase over the same period in 2007. Combined assets of the 12 Federal Home Loan Banks were $1,344 billion at the close of Q208. Of this total, secured loans equaled $914 billion, or about 68% of assets. Investments were the second largest component at $334 billion, or 25% of assets. Mortgage loans held in portfolio were $89 billion, or less than 7% of assets. The FHLBanks made affordable housing contributions of $176 million in the first half of 2008, up 25% from the year-ago period reflecting the increase in net income. Compared to year-end 2007, secured loans, investments, net income, capital and affordable housing contributions increased, while the mortgage loan portfolio decreased. The principal investments of the FHLBanks are secured loans to members, Federal funds sold, commercial paper, mortgage-backed securities, and GSE securities. The FHLBanks are required by regulation to hold collateral in excess of the actual loan amount for any given borrower. The FHLBanks are funded through the daily sale of debt securities in the global capital markets. All 12 FHLBanks are jointly and severally liable for the liabilities of each individual FHLBank. Since August 2006, all 12 Banks have been registered with the United States Securities and Exchange Commission and all financial statements and other filings are available to the public at the SEC web site (EDGAR). (See external links) On January 8, 2009, Moody's said that only 4 of the 12 FHLBs may be able to maintain minimum required capital levels and the U.S. government may need to put some of them into conservatorship.[2] According to Bloomberg, the FHLB is the largest U.S. borrower after the federal government.[3]
[edit] History Congress passed the Federal Home Loan Bank Act, which established the FHLBank System, in 1932, during the Great Depression. This was in order to provide funds to "building and loan" institutions, providing liquidity and making mortgages available. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) abolished the Federal Home Loan Bank Board and transferred responsibility for oversight of the Federal Home Loan Banks to the Federal Housing Finance Board. At that time the Bank Board’s previous supervisory and regulatory responsibilities with respect to thrift institutions and their holding companies were transferred to the newly created Office of Thrift Supervision, under the U.S. Department of the Treasury. FIRREA also allowed all federally-insured depository institutions to join the FHLBank System, including commercial banks and credit unions. On July 30, 2008, the Housing and Economic Recovery Act of 2008 (HERA) became law. The FHLBanks were referenced in this legislation, and the two changes were 1) the existing regulator (the Federal Housing Finance Board) was replaced with the Federal Housing Finance Agency, and 2) the Secretary of the Treasury was authorized to purchase FHLBank debt securities in any amount through December 31, 2009. After that time, the limit would return to the original $4 billion. On September 7, 2008, the U.S. Treasury announced a new credit facility for the three housing government-sponsored enterprises. This enables the Secretary of the Treasury to purchase FHLBank debt in any amount subject to the pledging of secured loans as collateral. The authority for this facility expires on December 31, 2009. On January 8, 2009, Moody's said that only 4 of the 12 FHLBs may be able to maintain minimum required capital levels and the U.S. government may need to put some of them into conservatorship.[4] |
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A home equity loan (sometimes abbreviated HEL) is a type of loan in which the borrower uses the equity in their home as collateral. These loans are sometimes useful to help finance major home repairs, medical bills or college education. A home equity loan creates a lien against the borrower's house, and reduces actual home equity. Home equity loans are most commonly second position liens (second trust deed), although they can be held in first or, less commonly, third position. Most home equity loans require good to excellent credit history, and reasonable loan-to-value and combined loan-to-value ratios. Home equity loans come in two types, closed end and open end. Both are usually referred to as second mortgages, because they are secured against the value of the property, just like a traditional mortgage. Home equity loans and lines of credit are usually, but not always, for a shorter term than first mortgages. In the United States, it is sometimes possible to deduct home equity loan interest on one's personal income taxes. There is a specific difference between a home equity loan and a Home Equity Line of Credit (HELOC). A HELOC is a line of revolving credit with an adjustable interest rate whereas a home equity loan is a one time lump-sum loan, often with a fixed interest rate. //
[edit] Closed end home equity loan The borrower receives a lump sum at the time of the closing and cannot borrow further. The maximum amount of money that can be borrowed is determined by variables including credit history, income, and the appraised value of the collateral, among others. It is common to be able to borrow up to 100% of the appraised value of the home, less any liens, although there are lenders that will go above 100% when doing over-equity loans. However, state law governs in this area; for example, Texas (which was, for many years, the only state to not allow home equity loans) only allows borrowing up to 80% of equity. Closed-end home equity loans generally have fixed rates and can be amortized for periods usually up to 15 years. Some home equity loans offer reduced amortization whereby at the end of the term, a balloon payment is due. These larger lump-sum payments can be avoided by paying above the minimum payment or refinancing the loan.
[edit] Open end home equity loan This is a revolving credit loan, also referred to as a home equity line of credit, where the borrower can choose when and how often to borrow against the equity in the property, with the lender setting an initial limit to the credit line based on criteria similar to those used for closed-end loans. Like the closed-end loan, it may be possible to borrow up to 100% of the value of a home, less any liens. These lines of credit are available up to 30 years, usually at a variable interest rate. The minimum monthly payment can be as low as only the interest that is due. Typically, the interest rate is based on the Prime rate plus a margin.
[edit] Home equity loan fees Here is a brief list of possible fees that may apply to your home equity loan: Appraisal fees, originator fees, title fees, stamp duties, arrangement fees, closing fees, early pay-off and other costs are often included in loans. Surveyor and conveyor or valuation fees may also apply to loans, some may be waived. The survey or conveyor and valuation costs can often be reduced, provided you find your own licensed surveyor to inspect the property considered for purchase. The title charges in secondary mortgages or equity loans are often fees for renewing the title information. Most loans will have fees of some sort, so make sure you read and ask several questions about the fees that are charged.
[edit] See also
[edit] External links |
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The National Credit Act No.34 of 2005 The Act was passed into law by Parliament and signed by the President in March 2006. This aims to protect consumers taking credit or entering into consumer credit transactions. In addition, The Act makes provision for the control and regulation of all credit transactions, including mortages, credit cards, overdrafts, micro-loans and pawnbroking transactions. The Act also regulates all institutions that provide consumer credit, including banks, furniture companies, clothing and other retailers, micro-lenders and pawnbrokers. Provision is made in the Act for the registration of debt counsellors and debt restructuring for over-indebted consumers.
For more information on debt counsellors The Act also regulates credit bureaux and consumer credit information, providing for free access to this information, kept by credit bureaux, and for a process by which any errors on the credit records can be corrected.
For more information on credit bureaux
Bodies established under The Act:
The National Credit Regulator
A National Credit Regulator (NCR) was established under the Act to carry out education, research, policy development, registration of industry participants, investigate complaints, and ensure enforcement of the Act.
For more information on the NCR
The National Consumer Tribunal
The Tribunal is an independent body provided for under the Act. It is tasked with the hearing of cases arising from non-compliance with the Act as well as issuing of fines for contraventions thereof. Consumers and Credit providers may appeal to the Tribunal against the decisions of the NCR.
For more information on the Tribunal |
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Features
Fix Your Rate
Another innovation from the people who brought you the discount home loan. Fix the rate on up to 100% of your loan for 20 years!
What's it about?
In an era of rising interest rate SA Home Loans have launched an innovative new home loan product - a 20-year fixed rate home loan that cannot go up but can still come down. Here’s your chance to lock in your home loan at our fixed interest rate and not have to worry about an increase in your instalment for as long as you have a bond. If rates move down in the future you don’t lose out because your fixed discount home loan rate will automatically reset down at no cost to you.
Who is it for?
If you wish to switch an existing home loan to the 20-year fixed option – it is quick and cheap to do. Call SA Home Loans and we’ll show you how to re-finance your home loan and also take advantage of the increased value in your property. When you switch you can take out some of this increased value as cash and settle other costly debts or even refurbish your home. Then fix and make sure you never see an instalment increase again. If you’re buying an investment property to rent out – this fixed option is ideal. Your rental income can escalate each year but your monthly instalments are fixed allowing you to repay your bond much faster. The fixed option allows you to budget for your bond instalment without any surprises.
Select a portion of your home loan to fix
You choose the exact mix between the fixed and variable percentages selected to suit your needs. Why would you choose this option? A 50% fix will cost you less than a 100% fix – and while it means your monthly instalments can go up in the future (whereas the 100% fix cannot) it will be gentler than an increase on a fully variable home loan. Ask a SA Home Loans Consultant about the impact on your instalments as your percentage fix changes.
Switch & Save
Don't move house - just move your bond! It's quick, cheap and you can bring down your monthly premiums right away.
Buying a Home
Save money - get the best deal on your mortgage loan. Cut out the middleman and deal with the professionals. Contact us directly to arrange financing when buying your new home.
Refinance
Take out cash on a property currently bond free and re-finance other debts such as credit cards at a much lower interest rate. Or use the cash for home improvements!
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Sanlam Home Loans offers home loans with the following features: - variable interest rate linked to the Sanlam Home Loan rate
- terms up to 20 years
- surplus funds can be paid into the loan and withdrawn when needed
- 50% discount on bond registration cost (excluding postage and petties) in case of switching
- further advances possible.
Whether you already have a mortgage bond registered with another financial institution or whether you need a new home loan, just consider the benefits of a home loan through Sanlam Home Loans: Why can Sanlam offer you a lower interest rate? In South Africa, banks traditionally provide home loans by getting their funds from their own investors and depositors. To service these investors and depositors means banks must have an expensive branch network. They then add 3% to 5% interest on to the cost of these funds to cover overheads and still provide a profit margin for themselves. At Sanlam Home Loans, we are linking individual borrowers directly to the wholesale investors through a process called securitisation. Therefore we don't need an expensive branch network, thus saving borrowers millions.
About Sanlam Home Loans Sanlam aims to be the leader in wealth creation. This vision touches the entire spectrum of our clients; personal finances, and now includes home loans ; because Sanlam knows that a house is the most important financial investment that many people will make in their lifetime. Sanlam Home Loans was created to fulfil this need. We offer home loans at competitive rates through the use of a low-cost operating model, backed by the excellent service that youve come to expect from Sanlam. Sanlam Home Loans (Pty) Ltd, Reg no. 2003/029810/07, is one of Sanlam;s joint venture companies.
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