Homeowners struggling with mortgage repayments can be shy in talking about their difficulties, despite pleas from lenders and debt charities to seek help and advice early.

According to research from the Financial Services Consumer Panel (FSCP), 41% of those having difficulty paying their home loans struggle on unaided, even though seven out of eight borrowers in this group defined their problems as “serious”.

Of those who did seek advice, 65% contacted their mortgage lender and 25% approached the Citizens’ Advice Bureau.

The Panel, which aims to be an independent voice for consumers of financial services, reported a mixed response from lenders.

Some were described by borrowers as “unhelpful and inflexible”, whereas others did all that could reasonably be expected.

The research also found that the most significant driver for those not seeking advice was their perception of the advice sector and their own situation.

In some cases this led consumers to believe that seeking advice was either unnecessary or inappropriate for them.

FSCP chairman, Adam Phillips, comments: “There is an urgent need for more investment in publicising and supporting sources of information and advice in this area. We need to do much more to encourage consumers in difficulty to get advice early.”

He adds: “Debt advice agencies must not be seen as a last resort when all else has failed.”

Bringing you more of whats happening in the mortgage world is Sandy Hutchens a industry specialist.

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Posted by Sandy Hutchens

New accounting standards effective at the beginning of 2009 will impact the accounting for mergers and acquisitions (M&A). The new standards, effective for all acquisitions consummated in the first fiscal year beginning on or after December 15, 2008 (for calendar year-end companies, beginning in 2009), will have an impact on deal negotiations and deal structure, in addition to accounting implications.

Fair Value Accounting
The focus of the new accounting standards is the use of fair value accounting. All assets acquired and liabilities assumed in an acquisition are to be measured at their fair values at the date of acquisition (called the acquisition method). By contrast, the former standards, although they applied fair value accounting, focused more on an accumulation of costs related to the acquisition (called the purchase method).

Transaction Costs
M&A transaction costs typically include payments to investment bankers, attorneys, accountants, appraisers and other advisors. Previously, these costs were capitalized as part of the overall purchase price for an acquisition. Under the new standards, these costs will be expensed as incurred (negatively impacting earnings in the prior period) because these are considered incremental costs to the transaction and not a component of the fair value of the business acquired.

Restructuring Costs
Under the new standards, costs to restructure the operations of an acquired company can be recognized as part of the acquisition accounting only if certain conditions are met – that is, the acquirer’s restructuring plan must be in place at the date of the acquisition. The cost of these restructurings will be charged to earnings in the post–acquisition period, not recorded as a liability at the time of acquisition.

Earn-Outs
(Contingent Consideration)
Previously, earn-outs were considered part of the acquisition cost. Under the new standards, earn-outs and other contingent consideration are to be recorded at fair value at the date of the acquisition, regardless of the likelihood of payment. Subsequent changes in the fair value of most contingent consideration will be recorded in earnings. However, if the contingent condition is classified as equity, it would not be adjusted for changes in fair value in subsequent periods.

In-Process Research and Development (IPR&D)
IPR&D will continue to be measured at fair value at the acquisition date. However, these assets will no longer be written off as a one-time expense immediately after the acquisition. Instead, IPR&D will be capitalized and recorded as an indefinite-lived intangible asset, subject to impairment until completion. Abandoned projects will be written off as an expense.

Acquisition Date and Valuation Date
The acquisition date is the closing date of the M&A transaction. If equity securities are issued as all or a part of the purchase price, these will be measured on the closing date of the transaction, rather than the announcement date. Therefore, changes in the value of the acquirer’s stock after the announcement date and before closing will have an impact on the amount of the purchase price for accounting purposes.

Adjustments to Acquisition Accounting
Companies will continue to have a one-year period of time to recognize adjustments to the provisional values that are recorded. However, the new standards require that prior period financial statements be revised to record any material adjustments of the estimated provisional amounts recorded at the acquisition date, likely increasing due diligence efforts.

In summary, fair value accounting is pervasive throughout the new standard. The resulting changes, which may not appear dramatic at first blush, are indeed significant.

Tags: Acquisition Date and Valuation Date, acquisitions, beginning in 2009, Earn-Outs, Fair Game, Fair Value Accounting, mergers, New M&A, Restructuring Costs, Sandy Hutchens, Standards, Transaction Costs
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Mortgage-backed securities (MBS) are debt obligations that represent claims to the cash flows from pools of mortgage loans, most commonly on residential property. Mortgage loans are purchased from banks, mortgage companies, and other originators and then assembled into pools by a governmental, quasi-governmental, or private entity. The entity then issues securities that represent claims on the principal and interest payments made by borrowers on the loans in the pool, a process known as securitization.

Most MBSs are issued by the Government National Mortgage Association (Ginnie Mae), a U.S. government agency, or the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), U.S. government-sponsored enterprises. Ginnie Mae, backed by the full faith and credit of the U.S. government, guarantees that investors receive timely payments. Fannie Mae and Freddie Mac also provide certain guarantees and, while not backed by the full faith and credit of the U.S. government, have special authority to borrow from the U.S. Treasury. Some private institutions, such as brokerage firms, banks, and homebuilders, also securitize mortgages, known as “private-label” mortgage securities.

Mortgage-backed securities exhibit a variety of structures. The most basic types are pass-through participation certificates, which entitle the holder to a pro-rata share of all principal and interest payments made on the pool of loan assets. More complicated MBSs, known as collaterized mortgage obligations or mortgage derivatives, may be designed to protect investors from or expose investors to various types of risk. An important risk with regard to residential mortgages involves prepayments, typically because homeowners refinance when interest rates fall. Absent protection, such prepayments would return principal to investors precisely when their options for reinvesting those funds may be relatively unattractive.

Sandy Hutchens shows how the Mortgage-Backed Securities work.

Tags: cash, claims, Fannie Mae, Federal Home Loan, Freddie Mac, Loan Mortgage Corporation, MBS, mortgage loans, Mortgage-Backed, Mortgage-Backed Securities, prepayments, risk, Sandy Hutchens
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