Affordable Financial Services LTD’ Weekly Finance Review

Bankrate.com reported on March 31 that home equity rates fell slightly from 7% last week to 6.99% this week, based on a survey it conducted with large banks and thrifts. Meanwhile, the typical home equity line of credit (HELOC) averaged 5.57%, a gain of one basis point from the previous week. (One basis point is equivalent to 0.01%.)

The Wall Street Journal reported that the Securities and Exchange Commission is set to issue draft proposals requiring firms that package loans and other assets into securities to hold a portion of the credit risk on their balance sheets. The rules, mandated by the Dodd-Frank Act, will surely affect everything from car loans to mortgages. The law requires issuers of securitized assets to retain 5% of the credit risk on the theory that they will adopt more prudent lending requirements. Banks and financial institutions that meet certain conservative lending standards will be exempted from the risk-retention requirement.

Thursday’s Daily Real Estate News reported that a housing shortage is on the horizon which may propel construction of new homes. According to a survey of 41 U.S. cities by Metrostudy, 78,000 houses are either vacant and for sale or under construction, 25% below the levels of those in 2006. Between the decline in new construction and falling housing prices, demand will increase as a severe housing shortage take place, the survey says. This will mean a demand for more homes to be built.

Reverse Mortgage Daily reported on Thursday that a new industry study aims to change people’s attitudes when it comes to reverse mortgages. A study conducted by Reverse Mortgage USA finds that, through reverse mortgages, Americans could save billions of Medicaid dollars and help reduce the U.S. deficit. The study says that those who use reverse mortgages to pay for long-term care could save the government-funded Medicaid program $5 billion a year. This could be help reduce the budget — now at $1.6 trillion — in which 58% of the budget is slated for Medicaid, Medicare and Social Security. In addition, senior citizens ages 62 and over hold $2 trillion in home equity, which is untapped for long-term care costs; it is exempted for Medicaid eligibility limits and is usually projected against Medicaid estate recovery.

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