The Week In Review (July 23, 2007) : What To Watch For

With more ups-and-downs than an elevator, the mortgage market has not been for the faint of heart since March. 

Last week provided more good news than bad, though, and mortgages rates closed out the week slightly improved overall.

The good news for mortgage markets came in three distinct parts:

1. Federal Reserve Chairman Ben Bernanke did not cite a fear of inflation in his congressional testimony
2. The Cost of Living (as measured by CPI) and the Cost of Doing Business (as measured by PPI) increases in July were squarely within the markets expectations
3. Oil prices remain at high levels putting strain on the American Consumer

The bad news in mortgage markets is that sub-prime loans continue to lose their luster as default rates rise. 

Last week, Bear Stearns acknowledged that sub-prime losses wiped out $1.5 billion of investor capital.

This major loss could scare investors away from buying any mortgage-backed securities in the future and if the demand for MBS is lower, the price of the urderlying bonds will be lower, too. 

Because mortgage rates move in the opposite direction of mortgage bond prices, this would cause mortgage rates to rise.

There are two housing reports this week — Existing Home Sales (Wednesday) and New Homes Sales (Thursday)– but neither figure to move mortgage rates too much; traders have lately turned a blind eye to news from the beaten-up sector.

Expect rates to continue bouncing this week.

(Images courtesy: Wall Street Journal Online)

Getting Married? Honey, We Need To Talk

Managing your credit can be tricky, even when you’re single. Add a new spouse to the mix, and you have to be extra careful to ensure your credit remains in good standing.

Honesty is the best policy

First of all, both you and your spouse should put all your financial records on the table. This includes savings, salaries, investments, real estate, and especially credit. If one of you has a less-than-perfect credit history, it will affect the other as soon as you start applying for credit together and opening joint accounts. In addition, your new joint accounts will appear on both spouses’ credit reports in the future, so be sure to pay careful attention to your bills and pay them on time.

Once you’ve aired your credit laundry, you’ll need to decide whether or not to merge all of your financial accounts. Many couples do this because consolidated accounts often make for easier record keeping. Just remember, both of you are responsible for all debt incurred in any joint credit accounts. So, regardless of who’s incurring the debt, a missed payment or two on a joint account could negatively affect both of your records.

The same is true in community property states, where virtually any debt entered into during marriage is automatically considered joint. Also, if you miss a payment on an individual account, it could impact your ability to open joint accounts in the future, since both credit histories will be considered.

It’s not terms of endearment, but rather terms of your joint accounts

The best way to keep your record clean starts with a solid understanding of the terms of your joint accounts. That means paying close attention to interest rates, credit limits, annual fees, late payment fees and cash advance limits. If you decide to consolidate your accounts, you might want to keep at least one credit account in your own name as a safeguard in the event of an emergency. Not to rain on your nuptial parade, but keeping an individual account can also be a good thing in the event of divorce to reestablish an individual credit history.

When the honeymoon is over

Women who take their husband’s surname after getting married need to notify the Social Security Administration, as well as any current creditors. You do not need to notify the credit agencies of a name change – they will automatically update the name on a credit report when creditors report it.

If you plan to have children, you can best prepare yourself now by building a cash reserve to meet the eventual expenses of having a baby. This will help you avoid overextending your credit to meet expenses such as cribs, strollers, diapers, clothes, playpens and toys. Also, building a savings account is also essential for buying a home and being prepared to face such emergencies as severe illness, disability or job layoff. Finally, planning for your retirement early on in your marriage can help make your golden years more comfortable and less stressful.

The key to a successful credit marriage as a couple is to understand that your individual credit behavior affects both you and your partner. To ensure that you are able to quickly get credit at the best possible terms, be sure you both understand all the implications that accompany a joint account.