Rate Cuts and existing loans

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Sarvis
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Rate Cuts and existing loans

Postby Sarvis » Mon Jan 05, 2009 6:11 pm

Ok, so apparently the Fed has cut the interest rate again. This apparently means my savings account rate is getting cut yet again. On the bright side, most of my money is in a stripper's pocket right now... and that at least made _something_ grow. On the down side, my loans aren't automatically lowering the interest rate. Specifically my car loan and my student loans.

Are actual loan rates lower these days? Does it make sense to look into refinancing or something? I consolidated my student loans once already, can I do that again to take advantage of lower rates (assuming there ARE lower rates?)


EDIT: Also can someone explain a 7-day yield to me? My money that isn't losing money in stocks is in a money market account, and has a 7-day yield of .94%. I'm guessing, but does that mean that I'd earn .94% over an entire year, if the money market grows at the same rate as it has the last 7 days?
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Re: Rate Cuts and existing loans

Postby Corth » Mon Jan 05, 2009 7:27 pm

Incredibly, this is NOT a joke.

Redneck Bank

FDIC insured checking account yielding 5.25%, no miminum balance.. and your ATM card says.. Redneck Bank. Too good to be true!

Of course, they can change that rate at will.. its not locked in. If you want to lock in a rate, look for certificates of deposit. Fatwallet.com is a good place to find the highest yielding CD's.

The student loan lending industry is highly regulated. I don't follow it anymore. Back when I did a few years ago, technically you could only consolidate one time.. though there was a loophole which I believe has been closed.

Auto loan.. You can certainly TRY to refinance an auto loan, though I'm not sure you will be able to. From what I hear, the only auto financing readily available at the moment is for new cars. The manufacturers subsidize the financing so they can sell those cars. From what I hear, its very difficult to get financing right now for a used car, and presumably it would be difficult to refinance a car that is not new.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth

Goddamned slippery mage.
Sarvis
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Re: Rate Cuts and existing loans

Postby Sarvis » Mon Jan 05, 2009 7:37 pm

Corth wrote:Incredibly, this is NOT a joke.

Redneck Bank

FDIC insured checking account yielding 5.25%, no miminum balance.. and your ATM card says.. Redneck Bank. Too good to be true!


So... it's a real bank? Those interest rates put HSBC's (and any other bank I've ever seen) to shame...

Of course, they can change that rate at will.. its not locked in. If you want to lock in a rate, look for certificates of deposit. Fatwallet.com is a good place to find the highest yielding CD's.


This is more my "emergency" savings than anything else. I'd probably look at CDs or something after I get that up to where it _should_ be. You know, assuming I start living within my means and all that...


The student loan lending industry is highly regulated. I don't follow it anymore. Back when I did a few years ago, technically you could only consolidate one time.. though there was a loophole which I believe has been closed.

Auto loan.. You can certainly TRY to refinance an auto loan, though I'm not sure you will be able to. From what I hear, the only auto financing readily available at the moment is for new cars. The manufacturers subsidize the financing so they can sell those cars. From what I hear, its very difficult to get financing right now for a used car, and presumably it would be difficult to refinance a car that is not new.


Trouble getting financing for used cars is pretty much why I bought a new one in the first place. Oh well... :(
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Corth
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Re: Rate Cuts and existing loans

Postby Corth » Mon Jan 05, 2009 8:19 pm

Yeah, it actually is a real bank, FDIC insured to boot. I think in order to keep that rate you need to make 10 purchases on your debit card each month. But if thats not a problem, that rate is unbelievable for a checking account. And of course, they could easily revise it tomorrow.. there is no lock on it. Your mileage may vary.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



Goddamned slippery mage.
kiryan
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Re: Rate Cuts and existing loans

Postby kiryan » Mon Jan 05, 2009 10:46 pm

theres a price war going on for deposits because thats what banks need in order to make loans. You can only leverage your assets (deposits being the realest of a bank's balance sheet assets) so far. If you don't have enough assets then you arent "well capitalized". The old school way to increase deposits was to raise interest rates they pay you for putting your money there. It went out of fashion for a while, but its back with a vengance since the crisis as banks struggle to raise enough capital to maintain their "well capitalized" status (to be FDIC insured).

Your rates will only go down if they are variable. The reason why is because variable rates are financed on short term commerical paper. So as the rates on short term loans go up, so does your interest rates and vice versa.

In order to reduce your fixed rate loans, you have to refinance (and pay all sorts of fees usually) and pay a higher rate than the variable rate. Interestingly enough, I got a big surprise when I tried to lock in a variable rate. The rate on my home equity line of credit with WAMU was 2.97% last month. I called to see if I could "lock" it in and max it out, but the wanted to lock it in at 8%. Because the rates have only been going down and predicted to keep going down, they said they haven't adjusted their "lock in rate" in over 6 months. about 2 weeks later, I got a notice that they had cut my LOC by over 50k. so what im saying is I really don't understand it either =). I'm still contemplating whether it makes sense to borrow a lot of money and sit on it in case deflation and credit contraction gets really crazy... then pay it off when inflation goes crazy 3-5 years down the road.
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Re: Rate Cuts and existing loans

Postby Alta » Mon Jan 05, 2009 10:58 pm

kiryan wrote:theres a price war going on for deposits because thats what banks need in order to make loans. You can only leverage your assets (deposits being the realest of a bank's balance sheet assets) so far. If you don't have enough assets then you arent "well capitalized". The old school way to increase deposits was to raise interest rates they pay you for putting your money there. It went out of fashion for a while, but its back with a vengance since the crisis as banks struggle to raise enough capital to maintain their "well capitalized" status (to be FDIC insured).

Your rates will only go down if they are variable. The reason why is because variable rates are financed on short term commerical paper. So as the rates on short term loans go up, so does your interest rates and vice versa.

In order to reduce your fixed rate loans, you have to refinance (and pay all sorts of fees usually) and pay a higher rate than the variable rate. Interestingly enough, I got a big surprise when I tried to lock in a variable rate. The rate on my home equity line of credit with WAMU was 2.97% last month. I called to see if I could "lock" it in and max it out, but the wanted to lock it in at 8%. Because the rates have only been going down and predicted to keep going down, they said they haven't adjusted their "lock in rate" in over 6 months. about 2 weeks later, I got a notice that they had cut my LOC by over 50k. so what im saying is I really don't understand it either =). I'm still contemplating whether it makes sense to borrow a lot of money and sit on it in case deflation and credit contraction gets really crazy... then pay it off when inflation goes crazy 3-5 years down the road.


Dude, we should max out the credit line and put 25K into the Redneck bank. We'd be makin' money the funner way!
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Re: Rate Cuts and existing loans

Postby Corth » Mon Jan 05, 2009 11:19 pm

Hey the spread between your HELOC and RNB is worth almost 50 bucks a month. You can go crazy at Denny's once a month and Redneck Bank will pick up the tab!
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



Goddamned slippery mage.
Vaprak
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Re: Rate Cuts and existing loans

Postby Vaprak » Tue Jan 06, 2009 12:02 am

Corth wrote:The student loan lending industry is highly regulated. I don't follow it anymore. Back when I did a few years ago, technically you could only consolidate one time.. though there was a loophole which I believe has been closed.


Right. The student loan program we were going through to provide the minimal requests for studen loans that we get from our customers went away. It's pretty tough to get a student loan outside of government programs these days I believe.

Auto loan.. You can certainly TRY to refinance an auto loan, though I'm not sure you will be able to. From what I hear, the only auto financing readily available at the moment is for new cars. The manufacturers subsidize the financing so they can sell those cars. From what I hear, its very difficult to get financing right now for a used car, and presumably it would be difficult to refinance a car that is not new.


Depends on where you are. We're still doing used auto loans, but now we get a pretty decent premium on the rate for people with less than perfect credit. We're also doing a lot more new car loans than we used to because the commercial paper and the financing that the manufacturers used to do is dried/drying up. We're also seeing a lot more farm and construction equipment loans. For a small bank that has always been highly capitalized this "financial meltdown" is just fine.

Also our local radio station just did an informal study where they contacted every locally owned business that advertises with them in the area. Not a single business in our area had a bad year. In fact a really bad snow storm a few weeks ago caused more lost sales/business than any financial mess that's going on in the bigger cities across the nation.

Also Sarvis, for your emergency fund while it's nice to get a decent rate of return, don't go putting it into some that's not FDIC insured. Stick with anything that even remotely keeps pace with inflation and keeps your fund liquid.
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Sarvis
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Re: Rate Cuts and existing loans

Postby Sarvis » Tue Jan 06, 2009 12:14 am

Vaprak wrote:Also Sarvis, for your emergency fund while it's nice to get a decent rate of return, don't go putting it into some that's not FDIC insured. Stick with anything that even remotely keeps pace with inflation and keeps your fund liquid.


Yeah, that's the plan. I'm just annoyed because my savings account interest has gone from %5.05 to %2.6 in the last year and a half or so. Redneck bank is sort of looking tempting. Except for the retarded name and concept, at least...
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Re: Rate Cuts and existing loans

Postby Corth » Tue Jan 06, 2009 1:58 am

Vaprak,

Thats the kind of thing I wish I heard more of. If government would just get out of the way and let the market do its job, there are plenty of competently managed financial institutions that are just waiting for the opportunity to steal some market share from the large poorly run ones.

Does your bank keep all its loans on its books or is the debt sold to investors? Have you been able to take advantage of any of the alphabet soup federal reserve programs that are buying debt?
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



Goddamned slippery mage.
Lathander
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Re: Rate Cuts and existing loans

Postby Lathander » Tue Jan 06, 2009 3:32 am

Refi's on mortgages are really getting attractive. I'm in the process of doing a refi to go from 6.25 to 5%. Sweetness!
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Re: Rate Cuts and existing loans

Postby Vaprak » Tue Jan 06, 2009 4:10 am

Corth wrote:Vaprak,

Thats the kind of thing I wish I heard more of. If government would just get out of the way and let the market do its job, there are plenty of competently managed financial institutions that are just waiting for the opportunity to steal some market share from the large poorly run ones.

Does your bank keep all its loans on its books or is the debt sold to investors? Have you been able to take advantage of any of the alphabet soup federal reserve programs that are buying debt?


We try to keep everything on our books that is within our lending limit. So basically some real estate (we do more farm land than home mortgages) we have to either sell portions of the loan off to other banks (participations). We also do some secondary market home mortgages if that's what the customer wants.

We don't really have much bad debt to speak of so no we don't sell any debt off to the Fed. We've been coerced by the FDIC into being a part of a couple programs that we'd rather not be a part of, but it's not really that big of a deal at the end of the day and I guess it's OK for our customers.

There's not really any reason to participate in any of the Fed or Treasury programs unless you really need it (ie either a very large poorly run bank, or a well run mid-size bank that aspires to be a very large poorly run bank). Just think what's going to happen when Congress/Treasury calls in their bets on all those TARP funds, who owns your bank now?
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Lathander
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Re: Rate Cuts and existing loans

Postby Lathander » Tue Jan 06, 2009 4:17 am

Interesting that you mention a poorly run big bank in light of the recent Jamie Dimon, CEO of JP Morgan, interview where he says it is tough just to get your hands around everything going on at a big bank. If a star like him has trouble, those regulators making 50K a year don't have a hope in hell.

Also, I think the government made a decent move with the sell of IndyMac to a group of private investors. That hits on Corth's idea to get these restructured troubled banks to strong hands.
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Re: Rate Cuts and existing loans

Postby Vaprak » Tue Jan 06, 2009 6:07 am

Lathander wrote:Interesting that you mention a poorly run big bank in light of the recent Jamie Dimon, CEO of JP Morgan, interview where he says it is tough just to get your hands around everything going on at a big bank. If a star like him has trouble, those regulators making 50K a year don't have a hope in hell.

Also, I think the government made a decent move with the sell of IndyMac to a group of private investors. That hits on Corth's idea to get these restructured troubled banks to strong hands.


That's exactly the problem, all of those banks that are "too large to fail" are simply too large to manage properly, and thus are more likely to experience faults that would normally lead to failure. If the government would quit taking the damned slingshot away from David for what Goliath did and let the behemoth fall a LONG time ago things would probably end up a lot better. The investment group that bought IndyMac for a song isn't going to be interested in building a long term sustainable business that rewards its customers, employees, and shareholders. They're going to want to turn the ship around, make a quick buck, and sell to the highest bidder...consequences or FDIC insurance fund be damned. A family-run business just isn't going to be inclined to do stupid things like these gigantic corporations.

And no, the examiners making $50k aren't going to be able to wrap these issues up at these large banks. Heck most large banks in the $50b+ asset size have bank examiners dedicated to them full time, because you can't really do a safety and soundness exam on an institution that large in 1-2 weeks like you would at a normal bank. If a team of examiners that are onsite full time couldn't smell this storm brewing what makes anyone think that there's any hope for these giants. Plus most of the examiners these days are young pups still wet behind the ears from college or purgatory or wherever it is they come from. Once all the bad eggs get done failing then those that did the right thing for all these years are left holding the bill.

If someone could figure out a way to insure massive deposits for less than what the FDIC is going to be charging here pretty soon they'd probably make a decent living.
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Re: Rate Cuts and existing loans

Postby kiryan » Tue Jan 06, 2009 6:46 pm

i dont know that i agree... the motivations are different. its easy to get blinded by greed and great performance... company cultures aren't always interested in the answer and rather are looking for the right answer.

regulators are looking at very specific things... so they shouldn't be as easily blinded, but they can get too cozy and too trusting. the biggest problem is and always will be where is the government... is it out in front of the pack or is it 2-5 years behind. With the FDA, you're out in front because drug makers are legally prohibited from selling their drugs until they have approval. With regulators you are behind for a variety of reasons from talent to access to proprietary information. Do you want to stifle innovation and business expansion at the cost of advancement... and profit? I'm starting to lean that way as the bailout cost reaches 8 trillion, but I would've never thought that was the American way.
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Re: Rate Cuts and existing loans

Postby Lathander » Wed Jan 07, 2009 3:46 am

Vaprak, I'll have to disagree with you on the family owned bank stuff. Golden West was family owned until they sold out.

I do agree with you totally on the regulators though. The field people are by and large mid 20's to early thirties. Those with ambition move from the regulator to the private companies in order to help get through the regulations. Those few without ambition who only want a pension sit in a shabby little office in DC and rubber stamp what the field people send in. From talking to folks, most field people who are young basically repeat in their reports what the management tells them. Probably the biggest problem for government is they don't pay enough. At our founding, this was good because it forced people out to go back and make a living. Today, it's bad because it creates an environment where the lowest common denominator hangs around for a pension.
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Re: Rate Cuts and existing loans

Postby Nokie » Thu Jan 15, 2009 3:01 am

I just got a used car loan from my credit union less than a week ago at 4.75% (60-month term). So at least in Atlanta it isn't that hard to get a used car loan.
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Re: Rate Cuts and existing loans

Postby Corth » Thu Jan 15, 2009 3:42 am

I think a lot of the credit unions were not very badly affected by this 'credit crisis'. They never got swept up in the mania. They're a throwback to simpler times when banking was stodgy and conservative.

That being said, I have noticed an overall loosening of credit conditions recently. You can't very well throw around as much money as the FED and Treasury are throwing around without seeing at least SOME improvement. Time will tell whether it was worth it.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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