Refi Home Mortgage Loans – Different Types Of Mortgage Refinance Loans
With today’s lenders, you have more refinancing options than ever before. So whether you are looking to reduce your rates or lower your monthly payments, you can find financing that is right for you.
Lenders also let you compare loan quotes online without hurting your credit score. So with real numbers, you can determine which is the best lender and loan for you. You take the guesswork out of the refinancing process, knowing how much you can save.
Stability Of A Fixed Rate Mortgage
Refinancing for a fixed rate mortgage can lower your rates and give you peace of mind. By setting your mortgage rate today, you know exactly how much your interest will cost and how long your loan will last.
Fixed rate mortgages also allow you to buy down the rate, saving you thousands if you keep the mortgage for several years. You can also extend the loan period to reduce monthly payment amounts.
Betting On Lower Rates With An Adjustable Rate Mortgage
Refinancing with an adjustable rate mortgage will qualify you for some especially low rates a year or more. With these introductory offers, you can save hundreds a month.
There is the chance that rates will increase, along with your monthly payments. Depending on your caps, you may also see your mortgage lengthen due to high rates. But if you aren’t planning to keep your loan or house for too long, you may find the savings worth the risk.
Cashing Out Your Equity With A Refi
Cashing out part of your equity during a refi saves you money on application fees and higher rates with a separate home equity loan. When you pull out your equity, you can still select fixed or adjustable rates. You also have the options of extending or shortening your loan terms.
Creative Terms For Unique Situations
Interest only loans and similar creative loan terms work for those in unique situations. For instance, if you are planning to move in a year, refinancing with an interest only loan can cut your mortgage payments by hundreds of dollars. And by selling before the loan payments jump, you don’t have to worry about high payments.
Stock Research - Amaranth Hedge Fund Collapse – What Happens When Your Friendly Banker Becomes – Predator
You might be familiar with Amaranth LLC, the giant hedge fund that collapsed last fall, after blowing up $6 billion of investors’ money. It now comes out that the circumstances under which they self-destructed are worth studying.
But first – A METAPHOR
What would happen if you had a pain in your chest, and you had tests taken at your doctor on a Monday who you have known and trusted for 30 years? He tells you that the results will tell you if you are going to live or die, no in between. You now visit the doctor on a Friday to discuss the results. The doctor says to you how would you like to bet on the results.
You offer to bet $1 million that you are going to live. The doctor says, “I will take your bet myself.” Would you still make the bet? The answer is no, of course you wouldn’t because the doctor already knows the result. and you don’t. It’s like betting against the house in Las Vegas when the house already KNOWS how the results will turn out.
This is the same situation in our opinion that Amaranth the hedge fund faced during its trading crisis. Hedge funds have to book their trades through a clearing firm, no different than many major brokerage firms clearing trades for smaller brokerage firms. The smaller firm pays a fee to the bigger firm that clears the trades for them.
In the case of Amaranth the hedge fund, JP Morgan was the clearing broker, known as a Prime Broker. In essence Amaranth made bets on the energy futures markets, and these bets went the wrong way. As a hedge fund, Amaranth uses leverage when it trades against its equity, usually borrowing about 6 to 1, and sometimes as high as 8 to 1. JP Morgan as the clearing broker was the lender of the additional margin.
Now when a trade goes against a hedge fund, the fund may be called upon by the clearing firm to put up more margin, meaning cash, or securities to protect the clearing firm. In this case the problem happened on a Friday. Amaranth wanted to get rid of billions of dollars of toxic bad trades by giving them to Goldman Sachs, who agreed to take them if Amaranth would give Goldman $2 billion in cash along with the trades. Goldman would then assume the risk of what happens to those trades. Amaranth wanted its clearing firm, JP Morgan to give Goldman the $2 billion from its capital account simultaneous with the movement of the trades.
JP Morgan would not release the funds. They barked, stating that they felt they would still be at risk if this were to happen. A clearing firm hates risk, and never wants to take risk. Amaranth very quickly had to operate in the most treacherous waters imaginable. They had to begin talking to outsiders in a desperate attempt to structure a transaction with anyone capable of taking these trades or injecting new additional capital. Remember, this is Wall Street, the sharks were circling.
Anyone who had knowledge of Amaranth’s trades knew immediately how precarious the oil markets that Amaranth was involved in. They also knew how to play the market to its own advantage using Amaranth’s weaknesses. The SHARKS came in and did trades that would work to their advantage. Within a matter of trading hours, this giant hedge fund was losing hundreds of millions of additional dollars. Merrill Lynch decided to take a piece of the funding deal, and this drove Goldman Sachs up a wall. Goldman upped the ante, and decided to charge Amaranth hundreds of millions more to do the deal which would partially save Amaranth.
Now here’s where our story of the doctor with the patients information and the patient’s bet come in handy. JP Morgan as the clearing broker was in a position to know more about the condition of Amaranth’s books, and their trading positions than anyone else in the industry. Since JP Morgan also trades in the same market as Amaranth, the bank knew the market’s condition better than anyone else also.
When the Morgan bank was informed that a deal was imminent between Goldman and Amaranth, the Chairman of Morgan got involved himself and called in his top energy trader over the weekend. Morgan was thinking of making their own deal for Amaranth’s positions, the very positions that they cleared for Amaranth over the preceding months.
The Morgan bank was sitting in the catbird seat. They knew everything; they saw everything, no different than a black jack dealer in Las Vegas being able to tell everyone’s cards. As a person who has been in this field for 30 years, and watched a few firms go down the tubes in a deal like this, I tell you, it doesn’t SMELL RIGHT.
JP Morgan knew that Amaranth couldn’t make a deal with anyone as long as the Morgan bank held the collateral. No deal could be structured if Morgan wouldn’t release at least part of the money in the Amaranth account at Morgan. The Morgan bank was in complete control of Amaranth’s destiny. What would the bank do?
JP Morgan also acts as a giant hedge fund trader for its own account in the energy markets, and in other markets. In a sense it competes against its clients if it chooses to, in these markets. The difference is when you are a major clearing firm as well as trading yourself, which is what Morgan does, you have the advantage. You have an understanding of the market place that nobody else can even dream about having. It is the trader’s ultimate dream. There are times when the clearing firm can dictate the market.
The FINAL DEAL
Discussions ensued through the weekend, into Monday, and Tuesday. Amaranths finally capitulated at 5:30AM on Wednesday morning, and guess who signed the deal. J.P. Morgan in conjunction with the Citadel Investment Group, another hedge fund inked the deal. Amaranth’s $800 million in portfolio losses from the weekend would be eaten by Amaranth themselves. Morgan and Citadel got $1.6 billion in cash to take the trading positions in the portfolio off Amaranth’s books. They got another $300 million to assume options positions, plus a $250 million kicker for commodity investments.
What’s the bottom line here? It just became public information that J.P. Morgan made $725 million for its bottom line on the deal. Congratulations to a nice conservative bank, that always catered to conservatively managing the trust funds of its wealthy clientele. Do you think that GREED had anything to do with the bank’s decision to cut the deal with Amaranth, as opposed to arranging a bailout? Gee, a bank wouldn’t function like that, would it?