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European Regulator Worries Banks Are Ignoring Borrower Troubles

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The European Central Bank is worried lenders in the eurozone aren’t properly evaluating the impact of the coronavirus pandemic on the financial health of borrowers, a problem that could result in a sudden cascade of defaults.

Andrea Enria,

head of banking supervision at the ECB, said banks are setting aside less money to cover for loan losses than peers in other countries, including the U.S. He added that the provisions are below levels reached during the financial crisis and short of the levels models suggest are required.

“The way in which banks are preparing for asset quality deterioration varies widely and could, in some cases, be insufficient,” Mr. Enria said Thursday.

He expects the impact of renewed lockdowns will be reflected in banks’ fourth-quarter results and through 2021. Several eurozone banks are due to report their annual results next week.

The true health of eurozone borrowers has become harder to track due to the amount of financial support from the ECB and the region’s governments, which includes payment holidays on existing loans. In Italy, for instance, over a quarter of loans to businesses are under payment moratoriums. In Portugal, half of the credit to companies in the hospitality and restaurant sectors are under the program.

State guarantees on loans have also incentivized eurozone banks to continue lending, including to small companies that would likely go bust without that help.

Mr. Enria said that while the support is likely helping banks to keep their loan books healthy, there are signs lenders aren’t properly looking at the personal situation of the borrowers who received support.

“Since March last year we told banks that they should develop additional indicators to try to understand the quality of their customers and to see through the moratoria,” Mr. Enria said. “We are not seeing a lot of that happening,” he said.

The ECB earlier last year said bad loans in the eurozone could soar as high as €1.4 trillion, equivalent to $1.7 trillion, if the economies were to contract more than expected, a scenario the central bank said was severe but plausible. That amount would be more than during the aftermath of the financial crisis more than a decade ago.

The ECB said the probability of that scenario is lower now, but “significant uncertainties remain in the short to medium term.”

Most banks were able to keep their capital levels stable through last year, although nine have taken advantage of looser regulatory requirements and ate into their buffers, the ECB said Thursday without naming the lenders.

The biggest concern for regulators is that low profitability—and a potential flood of losses from bad credit—could quickly deteriorate those capital levels.

Write to Patricia Kowsmann at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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How to get rid of medical debt without damaging your credit

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Medical debt is piling up for Americans – but how do you handle it without ruining your credit? (iStock)

No doubt about it, Americans are drowning in medical debt.

One recent study indicated that 137 million Americans were battling onerous medical debt – and that was just before the coronavirus pandemic rolled into the U.S. Another more recent study from Freedom Debt Relief noted the problem is only growing more severe, as 75% of these individuals say they have accumulated more medical debt since March 2020.

If you have medical debt and want to make sure it’s not hurting your credit, Credible can help. To ensure you’re staying up-to-date with your credit status, enroll in a credit monitoring service. Credible can help you get started.

How to best pay off medical debt

Tackling high medical debt isn’t easy, but it is doable. Financial experts advise that an eye for detail and a disciplined research campaign yields the best result. These strategies may work best.

1. Review EOBs

Some experts estimate that 80% of medical bills contain errors or inflated charges said Sean Fox, president of Freedom Debt Relief in San Mateo, Cal. If you want to deal with medical bills, make sure you’re staying on top of what’s actually in them. “Go back and review the bill in question from your health care insurer, known as an explanation of benefits (EOB),” Fox said. “If you see an issue or have a question, call the provider’s (or insurance company’s) billing department who can solve the problem.”

2. Contact providers 

Be upfront about your situation. “If you’re unable to work and make money to pay your bills (because of your medical state), contact providers’ billing offices and explain,” Fox added. “Ask about any options they can offer to you.”

3. Negotiate payments

Call your providers’ billing offices and ask about payment deferral or other plans. “They may be especially open to working with patients now, during the pandemic,” Fox said. “If you had to visit an out-of-network provider, or if you do not have medical insurance, ask for a cash-payer price. In certain situations, some providers may also charge the discounted Medicare or Medicaid fee.”

4. Get a personal loan

Consider a consolidation loan that covers all your current debt. “The biggest positive impact here is that you end up with just one monthly payment rather than several,” said Matthew Alden, Debt Relief and Bankruptcy Attorney in Cleveland, Oh.

Explore your personal loan options by ​visiting Credible ​to compare rates with multiple lenders – all within minutes.

Improve your credit health

Once you’re on the path to paying off your medical debt, focus on repairing any damage to your credit health.

“One of the best ways to improve your credit score is to simply be consistent over time,” said Daniel Joseph, founder of CoupleWealth.com, a digital platform that helps couples achieve financial stability. “Consistently pay off your balance, avoid making late payments, and ask for credit line increases periodically. Credit scores are heavily influenced by time, so the longer you can consistently have good habits, the better your score will be.”

Multiple factors affect your credit scores, however, and paying your bills and credit accounts on time is typically the most significant factor. An unpaid medical bill can cause serious issues.

Not sure where you fit on the credit score spectrum? Then you should start using a credit monitoring service to track changes to your credit score. Credible can get you set up with a free service today.

“Also, maintain a low credit utilization ratio, which is the amount of debt you have on revolving credit accounts (such as credit cards and lines of credit) compared to your credit limits,” said Laura Adams, the host of the Money Girl podcast. “In general, a utilization ratio of 20 percent or less is best to maintain good credit or improve your scores.

You can also visit Credible.com and use its personal loan calculator to find the best personal loan rates to help pay down medical debt.

Problems tied to medical debt

1. Severe money troubles

According to Michael Broughton, co-founder of Get Perch, a credit building mobile app platform, often people have to go to great financial lengths to dig out of medical debt. “Often this financial hardship has led people to have to tap into their 401(k) accounts, personal savings, or even file for bankruptcy,” Broughton said.

2. Declining credit score issues

If medical debt is not taken care of in a timely fashion, the medical provider or hospital can turn it over to a collection agency who can then report it to the bureaus. “If this happens, the medical debt can negatively impact your credit score,” Broughton added. “However, hospitals or medical providers rarely ever report the debt directly to credit bureaus.”

In the event a medical debt does go to a collection agency, there is some relatively good news

“On the bright side, if it is taken to the collection agency, the three bureaus treat medical debt delinquencies less critically than other debts in that they offer some relief to medical debt holders,” Broughton said. Here’s what they offer:

  • 180-day grace period before showing the debt on your credit report.
  • Removal of the debt from your credit report once it is paid or resolved

Whether you currently have outstanding medical debt or just want to stay on top of your credit, Credible can help. From bad credit to fair credit to excellent credit, to improve your score you first need to know what it is. To see where you fit in, turn to a credit monitoring service. Credible’s partners can help you find your credit score, history, alert you to potential fraud, and more.

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Best Cash-Out Refinance Lenders In 2021

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Tapping into your home’s equity can be a smart move, whether it’s to lower high-interest debt, fund a home renovation, pay for college tuition or make progress toward another financial goal. One way you can accomplish this is through a cash-out refinance, in which you refinance your mortgage for more than what you owe and take the difference out in cash.

Many mortgage lenders offer cash-out refinancing, and Bankrate evaluated several to determine the best ones to consider. Here is our guide to the best cash-out refinance lenders in 2021.

Best cash-out refinance lenders

LoanDepot

LoanDepot has refinanced $179 billion in mortgages since its founding in 2010, with more than 200 branch locations across the U.S. serving borrowers in-person, online and by phone. For borrowers interested in accessing their home’s equity in cash, the lender’s cash-out refinance options include:

  • Conventional and jumbo cash-out refi
  • FHA cash-out refi
  • VA cash-out refi

When working with LoanDepot on a cash-out refinance, you can count on the lender’s “no steering” policy to get the best refinancing option for your needs. In addition, if you come back for a second refinance, you won’t have to pay any lender fees, and the lender will reimburse the appraisal fee as part of its “Lifetime Guarantee.”

Refinancing through LoanDepot can take 45 to 60 days, according to the lender’s website, and in a cash-out refinance, you’ll receive the funds one to three days after closing.

On the downside, LoanDepot doesn’t readily provide cash-out refinance rates through its website, so you’ll need to contact the lender to compare your options. The lender doesn’t offer home equity lines of credit (HELOCs) or home equity loans, either, which could be alternatives to a cash-out refi.

PennyMac

Founded in 2008, PennyMac has a range of loan options for borrowers, including cash-out refinancing for those interested in leveraging their home’s equity. The lender’s cash-out refi products include:

  • Conventional cash-out refi
  • FHA cash-out refi
  • VA cash-out refi

Both the FHA and VA cash-out refinancing options also apply to a non-FHA or non-VA loan if you’re interested in refinancing into an FHA or VA loan, according to the lender’s website.

Among its upsides, PennyMac advertises low cash-out refinance rates, which can make it easy for you to do side-by-side comparisons with other lenders. You can also take advantage of the lender’s refinance calculators and a home value estimator to get a better idea of how much equity you have.

While PennyMac already boasts competitive cash-out refinance rates, its “better rate promise” rewards you with a $250 gift card if you find a better offer from another lender. You’ll also benefit from the lender’s closing guarantee, which rewards you a $500 gift card if the lender causes the closing to be delayed.

PennyMac has no brick-and-mortar locations, however, which can be a disadvantage if you’re looking for an in-person experience.

Better.com

Better.com is touted for its 100-percent online process and speedy service. It has somewhat limited loan options compared to other lenders — no VA or USDA loans, for example — but its cash-out refinancing options include:

  • Conventional cash-out refi
  • FHA cash-out refi

What helps set Better.com apart is the ability to review current cash-out refinance rates on the lender’s website by simply inputting information about your home and your desired cash out. The lender also doesn’t charge lender fees, which can further save you money when you refinance.

Better.com was also named one of Bankrate’s best mortgage lenders overall and best online mortgage lenders in 2021, with fast preapprovals (in as little as three minutes), rate locks (in as little as 30 minutes) and closings sooner than the industry average, according to the lender.

Some drawbacks, however: Better.com isn’t available in every state, so refinancing through this lender might not be an option for some. There are also no branch locations.

Bank of America

If you’re looking for a more traditional lender for your cash-out refinance, consider Bank of America, the second-largest bank in the U.S. with thousands of branches throughout the country. In addition to other types of home loans and refinancing, Bank of America offers borrowers:

  • Conventional cash-out refi
  • FHA cash-out refi
  • VA cash-out refi

The bank was also named one of Bankrate’s best mortgage refinance lenders overall in 2021.

Current Bank of America customers enjoy some perks that others might not have access to. FHA and VA refinancing options are only available to current mortgage customers, for example, and customers enrolled in the bank’s Preferred Rewards could be eligible for an origination fee discount up to $600.

Bank of America’s interest rates are posted on its website for quick comparisons, but the bank doesn’t list lender fees online. Like other lenders, it also has a home value estimator so you can get a sense of what your home might be worth and what your cash-out options are.

New American Funding

New American Funding has proven to be a trusted mortgage lender, with an A+ Better Business Bureau rating and five out of five stars among Bankrate users. The lender’s cash-out refinancing options include:

  • Conventional and jumbo cash-out refi
  • FHA cash-out refi
  • VA cash-out refi

With a cash-out refinance through New American Funding, you can expect to receive your funds within three days of closing. Notably, the lender has flexibilities that some others don’t, making it an attractive option for bad credit borrowers. The lender was also named one of Bankrate’s best mortgage lenders for low credit borrowers in 2021.

New American Funding is available in all states with the exception of Hawaii, and brick-and-mortar branches can be found in many of them.

Fee information isn’t available on the lender’s website, but there are some rate offers advertised to the public. To initiate the cash-out refi process, you can call, request a quote online or apply in person.

Cash-out refinance requirements

To be eligible for a cash-out refi, you typically need to:

  • Have a minimum credit score of 620
  • Have a debt-to-income (DTI) ratio below 50 percent
  • Maintain a minimum 20 percent equity in your home following the cash-out (depending on loan type)

Who is cash-out refinancing for?

A cash-out refinance is best when interest rates are low, and for borrowers who meet the previously mentioned requirements and have specific goals for the funds they’re withdrawing. This includes those seeking to consolidate high-interest debt, complete home renovations or fund a college education.

Cash-out refinance vs. rate-and-term refinance

A cash-out refinance is different from a rate-and-term refinance, in which you lower the rate on your mortgage, change the length of the loan term, or both. A cash-out refi can also lower your rate, but it primarily involves withdrawing a portion of your home’s equity in a lump sum, which adds to the amount of your loan and increases the interest you’ll pay. Those funds can be used for a variety of purposes, such as a major home renovation.

Cash-out refinance vs. HELOC

A cash-out refinance isn’t the only way to tap your home’s equity. You can also pursue a home equity line of credit (HELOC).

With a HELOC, your first mortgage remains intact, but you’ll have access to a revolving source of funds throughout the HELOC draw period, which can be up to 10 years. You are only obligated to pay interest on the funds you withdraw during this period. Once the draw period ends, any balance must be repaid, usually over 15 or 20 years.

The advantages of a HELOC are that you’re only responsible for paying what you use, you can access the funds at any time and you won’t incur interest on untapped funds. However, HELOCs come with variable interest rates, which mean they change, and they could be higher than what you’d get with a cash-out refi.

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Pima Supes address eviction protections

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TUCSON, Ariz. (KGUN) — Economic fallout from COVID has cranked up concerns about evictions as tenants have trouble paying. There are Federal protections to reduce evictions in the pandemic but Pima County Supervisors are concerned about evictions that could bypass those safeguards.

Federal restrictions from the Centers for Disease Control restrict evictions if they could increase health risks in general— or the risk of spreading COVID because someone is put out of a home. Those protections are based on whether someone has trouble paying the rent.

Landlords and their lawyers spoke at this week’s Supervisors meeting. They say compared to keeping a tenant, an eviction is a loss for everyone. They want county rental assistance programs to move much faster to channel Federal grants to help tenants pay rent and help landlords cover their expenses.

Steve Huffman of the Tucson Association of Realtors reminded Supervisors tenants will still have to pay back rent and if they can’t it could hurt them long term.

“Many of them have huge judgments that will be issued against them eventually they will owe back rent for the time that they have not been paying rent, those judgments will create bad credit, and will interfere with future housing opportunities, and also future job opportunities.”

Tenants who create other problems beside non-payment or rent can still be taken to court and evicted.

But Pima Supervisors are concerned about reports of people evicted over questionable claims like a car parked in the wrong space or a toilet clogged too many times.

Chairperson Sharon Bronson says these eviction issues are focused by COVID but call for a broader look at how people become homeless.

“We are addressing basically the pandemic issues right now, but this may be, you know, an opportunity to just began the discussion about the larger discussion about homelessness and addiction down the road.”

Supervisors agreed to ask an existing task force on evictions during COVID to take a fresh look at eviction issues, especially in light of possible policy changes under the Biden Administration.



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