April 4, 2017
Payday v. Installment Loans
OppLoans.com quoted me in What’s the Difference Between a Payday Loan and an Installment Loan? It opens,
If you’re looking to borrow, you may already know about payday loans—they’re fast, dangerous, and designed to take advantage of those in need. (Think of them as the jackal of the lending animal kingdom.) Is there a better option? Something just as fast, but… you know, not evil?
You bet there is.
When it comes to lending, consider the personal installment loan the noble lion, king of the lending jungle.
Payday loans are short-term, unsecured loans that target the financially vulnerable—the low income, the elderly, and those without limited financial education. Payday lenders won’t perform a credit check and, depending on the restrictions in your state, they may not even check your income first.
Fast money without a credit check? What could be wrong?
Well, a lot. Payday loans charge unfair fees and massive interest rates, meaning they have extraordinarily high annual percentage rates (APR)—the measurement that allows you to see the full cost of loans.
Certified financial educator Maggie Germano (@MaggieGermano) says, “Payday loans usually turn out very negatively for the borrower. Interest rates and fees are sky-high and many people are unable to pay them back in time. Every time you miss your payment due date, the amount owed increases significantly. This makes it impossible for people living paycheck to paycheck to pay them off. This can destroy a borrower’s credit and wipe out their bank account.”
It may be tempting to try out the fast, risky option with the short payment terms, but don’t forget: it’s a trap.
When it comes to payment terms, installment loans are the exact opposite of payday loans. Instead of having to make a massive payment in a short amount of time, installment loans offer you the chance to make regular, smaller payments over a much longer period of time.
Most installment loans will offer you a MUCH lower APR on your loan than a dangerous payday loan and also—unlike many payday loans—they won’t charge a sneaky prepayment penalty.
What’s a prepayment penalty? Law professor David Reiss (@REFinBlog) sums it up well: “Prepayment penalties come into play if the borrower repays all or part of a loan before the payment schedule that the borrower and lender had agreed upon when the loan was first made. In theory, they compensate the lender for the costs of making the loan in the first place and any decrease in interest payments that the lender would get as a result of early repayment. In practice, prepayment penalties can be a new profit center for lenders if the fees are set higher than the amounts actually lost by prepayment.”
April 4, 2017 | Permalink | No Comments
Tuesday’s Regulatory & Legislative Roundup
- After studying the housing crisis of the early 2000’s, Congress created the Consumer Finance Protection Bureau to protect U.S. citizens from poor and damaging practices of the American financial institutions. In early 2017, the Trump Administration questioned the constitutionality of the bureau and is seeking to shift some of its practices at the very least. As a result, the Democrats of Congress have rallied together to save the federal agency.
- A Michigan pastor is under investigation by the Securities and Exchange Commission (SEC). The federal agency alleges the pastor created a real estate scheme to garner over 6 million dollars fraudulently. The pastor is accused of targeting Michigan’s most exposed citizens such as retirees and laid off auto-workers.
April 4, 2017 | Permalink | No Comments
Monday’s Adjudication Roundup
- The J.A. Green Development Corp. is dissatisfied with the services provided by their previous legal and accounting team. The real estate development company sued both their legal and accounting teams due to alleged misguidance regarding their prior tax practices.
- Trump University real estate seminars have made residents on the east and west coast upset about the content of the seminars. Individuals attending, claim the seminars were fraudulent. As a result, President Trump has reached a 25 million dollar settlement deal which was approved by a California court.
- Attorneys in the Ninth Circuit are begging a federal judge to “overturn the fees and sanctions” against them. The fees and sanctions stem from a failed lawsuit attorneys filed against a resort in which they alleged the owners participated in a “loan-to-own scheme.
April 3, 2017 | Permalink | No Comments
March 31, 2017
Friday’s Government Reports Roundup
- Jordan Rappaport of the Federal Reserve of Kansas City in a paper titled Crowdedness, Centralized Employment, and Multifamily Home Construction, identifies several characteristics that account for a large share of the variation in multifamily construction across metropolitan areas during 2013-15. It was stronger in larger metros, as measured by population, and less crowded ones, as measured by median population density and the increase in density from the 50th percentile to the 95th percentile across tracts.
- Kelly D. Edmiston of the Federal Reserve of Kansas City in a paper titled, Residential Rent Affordability across US Metropolitan Areas examines recent trends in rent affordability for both low and middle income households and across metropolitan areas.
March 31, 2017 | Permalink | No Comments
March 30, 2017
Thursday’s Advocacy & Think Tank Roundup
- Could the post-Great Recession drop in housing demand have been driven in part by an increase in mortgage credit spreads across borrowers? In a new Joint Center working paper that uses proprietary data on the spread of mortgage rates across borrowers with different credit, I find that mortgage demand does react to mortgage interest rates in economically and statistically significant ways.
- The HOME Coalition is organizing a national sign-on letter for state and local organizations, businesses and other stakeholders urging Congress to reject the Trump Administration’s proposal to eliminate the HOME Investment Partnerships (HOME) program and restore its funding to at least $1.2 billion in fiscal year 2018 (FY 18). Please sign onto the letter by the March 31 deadline.
- As part of a series of monthly columns on growth, housing, displacement and the future of neighborhoods in Nashville, The Tennessean looks at efforts to transform Nashville’s public housing complexes into mixed-income rental developments without displacing existing residents. According to this effort, which is already underway, Nashville’s public housing complexes will be redeveloped in phases and existing residents will be allowed to gradually move into their new units, in order to avoid displacement while construction is ongoing. Efforts to redevelop public housing into mixed-income developments will be completed by the end of this year, according to Jim Harbison, executive director of the Metropolitan Development and Housing Agency.
March 30, 2017 | Permalink | No Comments
March 29, 2017
Wednesday’s Academic Roundup
- This paper, titled Economic Policy and Systemic Risk: The Un-Constitutionality of Rent Control/Rent-Stabilization Statutes; Multiple Listing Systems; and the Licensing of ‘Real Estate Websites’, discusses how Multiple Listing Systems (MLS), Real Estate Website Laws (REWL), and Rent-Control and Rent-Stabilization statutes (RC-RS) are un-constitutional and affected the rapid changes in housing prices and housing demand which occurred in the US between 1995 and 2010.
- Bargaining and mortgage financing have been extensively studied in the literature. However, they have only been studied separately. This paper, titled Bargaining, Mortgage Financing and Housing Prices, is the first to embed financing into a bargaining model, and our model yields several new insights.
- The Housing and Mortgage Crisis at the turn of the 21st Century has overwhelmed traditional housing and neighborhood code enforcement policing in many neighborhoods in cities across the nation. This short paper, titled Code Compliance Enforcement in the Mortgage Crisis, suggests what needs to be done to make code enforcement more effective in both preventing and recovering from the damage done in hard hit communities. It lists 10 policies and practices that are being used to good effect.
- National data suggests that notwithstanding its placement in the firmament of modern landlord-tenant law, few tenants actually assert breach of the implied warranty of habitability, whether affirmatively or defensively. Even in housing markets fraught with substandard rental dwellings, the warranty is underutilized. This Article, titled The Implied Warranty of Habitability Lives: Making Real the Promise of Landlord Tenant Reform, endeavors to examine that lapse in the context of nonpayment of rent proceedings initiated by landlords in Essex County, New Jersey.
March 29, 2017 | Permalink | No Comments
