Mortgage Insurance

Trinity: 'Soundest investment you can make' [The Decatur Daily, Ala.]

2011-12-19T05:18:00.000-08:00

By Ronnie Thomas, The Decatur Daily, Ala.
McClatchy-Tribune Information Services

Dec. 19--Like the Somerville and Priceville areas of Morgan County, Trinity's residential housing market is growing.

Realtor Leighann Turner of RE/MAX believes the reason is that people want to be closer to the industries near Trinity.

She also believes U.S. Department of Agriculture Rural Development Loans have fueled growth in Priceville, Trinity and Somerville.

"Most people didn't know about the program, which has gained in popularity the last couple of years," she said. "They are zero down payment with low private mortgage insurance. Until two months ago, there was no PMI at all. Now it is still much less than any other mortgage."

Turner said area residents have been fortunate compared to surrounding states and larger markets.

"I think it's because of our industries," she said. "Our real estate is still the soundest investment you can make."

Kent Hollingsworth developed Mountain Cove subdivision off Mountain Home Road in Trinity and has 16 of 44 lots left in the subdivision. He said he has finished 17 homes.

Hollingsworth said a lot of Lawrence County residents are moving into Mountain Cove.

Trinity Mayor Vaughn Goodwin is excited about his town's future.

"We think we're going to start seeing more movement in residential building in the spring," he said.

Two other older subdivisions along Mountain Home Road, Blakely Estates and Hidden Creek, offer opportunities for homeowners.

Jason Owens continues to build in Stone Village beside West Morgan Elementary School on Old Alabama 24, and lots are available in Greenway Place at Ghost Hill and South Greenway drives.

In addition to residential building in Trinity, Goodwin has another reason to be positive.

"We just got our first walk-in, sit-down restaurant since Mountain Top Cafe on Old Alabama 24 closed years ago," he said.

Dirt Road BBQ opened last week in a seven-business strip mall on Gordon Terry Parkway.

___

(c)2011 The Decatur Daily (Decatur, Ala.)

Visit The Decatur Daily (Decatur, Ala.) at www.decaturdaily.com

Distributed by MCT Information Services

Wordcount: 324

How To Avoid Mortgage Insurance?

2011-11-29T23:37:00.000-08:00

Avoiding mortgage insurance is not always an easy thing to do, especially if the borrower is financially strapped. However, it can be done. What exactly is mortgage insurance? There is several mortgage-related insurance—mortgage protection insurance and private mortgage insurance (PMIs), to name a few. However, we will only be elaborating on PMIs when we use the term “mortgage insurance.” Mortgage insurance is therefore an insurance coverage that is required on the mortgage of a borrower who is putting less than a 20% down payment toward the purchasing price of a home.

Therefore to avoid paying mortgage insurance, a borrower must put down 20% or more toward the cost of the property. There are lots of other ways to avoid paying mortgage insurance, though. Another way to side step the extra expense is by taking out a second loan, sometimes called a piggyback loan or second mortgage that closes simultaneously with the first mortgage. The second loan can normally be a home equity loan or a home equity line of credit provided by the lender or lending institution.

By paying a little extra each month toward the mortgage payment, one can dramatically reduce the principal of the loan faster, which will facilitate the removal of mortgage insurance if one was used in attaining the mortgage in the first place. When 20% or more of the mortgage has been paid, a borrower with mortgage insurance can contact the lender of the mortgage and request a removal of the mortgage insurance. By law, the lender is required to remove the mortgage insurance when requested by the borrower, providing that 20% or more of the mortgage is paid.

Refinancing a home loan with a lender who does not require mortgage insurance can also help a homeowner do away with or remove mortgage insurance from a mortgage. People with good credit can ask their lenders to exempt them from paying mortgage insurance. Most banks are willing to work out deals with borrowers who have excellent credit because it makes good business sense. People with good credit are less likely to default on loans and are less risky for banks or other creditors. So lenders will be more apt to take a chance on credit worthy people and will be more than willing to wave the mortgage insurance requirement.

To conclude, avoiding mortgage insurance is not the easiest thing to do, especially when there is a limited in available funds. Banks and other lenders usually require borrowers to pay mortgage insurance when the down payment is less than 20% of the purchasing price of the home. However, there are many ways to get around paying mortgage insurance. Paying more than 20% down toward the purchasing price of the home and paying extra on the mortgage each month, so the principal can be paid down quickly are some of the ways people avoid paying mortgage insurance.

Analysts see fragmented mortgage insurance industry

2011-09-12T01:41:00.001-07:00

The struggling private mortgage insurance industry is more fragmented than ever, as companies grapple with elevated levels of underwater mortgages and loan delinquencies, according to one equities research firm.

The Bedford Report released its latest outlook for The PMI Group (PMI: 0.21 0.00%) and MGIC Investment Corp. (MTG: 2.37 0.00%) this week.

The analysts who wrote the report are bullish on MGIC, despite the stock being down about 75% this year. The outlook stems from the company's main operating unit writing more new insurance in August, while the number of bad loans under MGIC's roof fell from July.

The analysts maintain a bearish outlook for The PMI Group, which was pulled under the umbrella of the Arizona Department of Insurance last month and forced to stop writing new business. The company also faces possible delisting from the New York Stock Exchange because its stock price has traded at less than $1 for more than a month.

Analysts last month suggested PMI's struggles could boost the market share of other mortgage insurers in the near-term.

Private mortgage insurers represented by the Mortgage Insurance Companies of America wrote $4.9 billion in new business in July even as some companies struggled with falling stock prices and uncertainty about liquidity levels.

The Bedford Report analysts report the trade group said the private mortgage insurance industry has raised more than $8 billion in new capital since the beginning of the credit crisis a few years ago, "which is a testament of investor confidence in the industry's ongoing role in the marketplace."

Insured at a high price

2011-09-12T01:40:00.000-07:00

The strategy To work out whether I need mortgage insurance on my home loan.

Do I need to do that? Mortgage lenders will typically insist on mortgage insurance if you borrow more than 80 per cent of the value of your home. On the plus side, it means you can get into the market sooner by buying now rather than waiting to save the full 20 per cent deposit. However, this has to be offset against the cost of the insurance, which can run into thousands of dollars. Depending on your lender - and how good a credit risk you are - you might be able to borrow as much as 95 per cent of the property's value with mortgage insurance.

But many borrowers mistakenly think mortgage insurance covers them if they default on their loan. It is designed specifically to protect lenders losing money from defaults; it doesn't cover borrowers.

Advertisement: Story continues below So how does it work? You pay a one-off, upfront premium for the insurance, usually organised by your lender. The cost can often be included in your loan balance, so you pay it off over time. If you default on your loan and the lender doesn't recover the full amount owing when it sells your home, the lender can claim the difference from the insurer. If you want your own insurance, another product is available, known as mortgage-protection insurance, which covers mortgage payments in the event of death, sickness, unemployment or disability. However, you'll need to weigh up the likely benefits against the costs involved.

How much does mortgage insurance cost? It depends on your loan, how much you borrow and your deposit. The chief executive of RateCity, Damian Smith, quotes costs of about $4500 for insuring a $270,000 loan for a $300,000 property. He says the costs increase as you borrow more, with insurance costing about $17,500 for someone buying a $600,000 home with a 10 per cent deposit. Insurance can be more expensive for first-home buyers. GST and state stamp duty might also be payable on the premium.

Ouch! That seems high. Can I take the insurance with me if I switch lenders? Generally not. Smith says mortgage insurance costs are one of the biggest barriers to refinancing a home loan because your insurance policy will be cancelled and you might have to apply for fresh insurance cover with your new lender. If you've built up enough equity in your home before you refinance to get under the 20 per cent limit, you shouldn't need insurance on your new loan. However, if you still need insurance, expect to be charged the full cost by your new lender.

Both Australia's main mortgage insurers, QBE and Genworth, say a partial refund might be available if your loan is terminated in the first year or two. But this will depend on the arrangements made between your lender and the insurer. In some cases, no refund may be allowed in exchange for a lower upfront premium. You should check with your lender about this.

As part of its bank-account switching measures, the government will require lenders to provide borrowers with a fact sheet on mortgage insurance when they take out a home loan from July 1 next year. The fact sheet will set out the costs and benefits of the insurance and allow for a comparison of premiums and rebates. However, the government says it won't force the industry to allow borrowers to transfer their insurance if they refinance because of the complexity involved.

Many home insurance policies do not cover digital downloads

2011-03-09T02:55:00.001-08:00

Music fans could be at risk of losing out financially as the majority of home insurance companies do not cover digital downloads, according to a recent study by Which?

The study by the consumer watchdog found that a third of leading home insurers’ standard policies fail to offer any form of protection, even though over 100m tracks are downloaded by Brits every year. Those that do offer cover generally limit it to around £1,000.

According to Which? only four providers, including HMV Digital, Play.com, 7 Digital and Tesco Entertainment, allow customers to re-download lost music . However others, which includes the popular iTunes, say in their terms and conditions that: "Products may be downloaded only once and cannot be replaced if lost for any reason".

Which? CEO Peter Vicary Smith said: "It's surprising that, at a time when the popularity of digital downloads is soaring, insurers aren't offering music lovers the protection they need. People who buy a lot of digital music should double check their home insurance policy to make sure downloads are covered. If they're not, we'd recommend switching to a provider that has entered the digital age."

How to Get Mortgages For Bad Credit

2011-03-09T02:53:00.000-08:00

For people who want to pay off their debts and increase their credit score, they can always look for mortgages for bad credit. It is a loan which is derived from the home equity accumulated over the years in your home. This kind of loan can be quite beneficial for you since it can lower interest costs and monthly payments. It also consolidates your debts so that you can only pay once a month.

The two most accepted choices for bad credit mortgage loans are cash in mortgage finance and a home equity mortgage. These mortgages count on your equity, which will then be used to manage your debts. When you consolidate your debts, it can be arranged to combine all of your credit card payments, auto loans and other related debts into one easy monthly, lowered interest payment. In due time, you will notice that your credit score is improving.

When you apply for a bad credit mortgage loan, you need to increase your down payment as well as your cash reserves. A lower credit score means more money to pay for down payment. Credit scores below 600 require around 5% down payment. Lenders need to have confidence that you can still pay your loans even if you’re going through a financial situation.

You can always have the option to do your own research on this type of loan.

Mortgage Protection Insurance

2011-03-09T02:52:00.001-08:00

A large amount of UK homeowners never consider mortgage payment protection insurance (MPPI) when taking out their home loan. Although MPPI is not compulsory it should be a priority for anyone with a mortgage.

For people who might have stretched themselves financially with their mortgage it is probably even more important to be covered in the event of unforeseen unemployment. Good policies will cover any bills related to your mortgage - including interest and repayments.

The State benefits for people in this situation are limited and they are means tested, so if you have savings you would be expected to use them first. Payouts can also take around 9 months to be made.

A good MPPI policy will start to pay one month after you are out of work (either through illness or redundancy) and typically last for 12 months. The one-year period is the time expected to be taken by people to find other employment or recover from illness or injury.

Insurance payments should start once you inform your provider that you're out of work and this is verified. Payments are usually made directly to your mortgage lender, although in some cases payments are made to the customer.

Although costs can vary between different providers, it is usually by a small amount. On an average mortgage payment of £650 a month, cover sold by most banks and building societies would cost about £450 a year.

Most people tend to buy MPPI from their mortgage lender at the time of the transaction or through a broker/adviser, but it can be bought as a stand-alone product from any provider. A list of MPPI providers can be obtained from the Association of British Insurer's website.

As with all types of insurance available, remember to shop around and be wary of lenders who insist on selling you their insurance.

Home Equity Conversion Mortgage Saver Offers 0.01% Loan Rates

2011-03-09T02:50:00.000-08:00

In late 2010, the Federal Housing Administration launched a new type of reverse mortgage called a Home Equity Conversion Mortgage Saver, which reduces most of the 2 percent up-front insurance rate that borrowers have to pay from standard federal backed loans.

However HECM Saver – is offered only to homeowners 62 years old and over. The Saver’s up-front premium is only 0.01 percent. This up-front premium difference is huge, particularly as the loan rate increases. The current yearly fees that borrowers have to pay are similar as for an average reverse mortgage of 1.25 percent of the loan’s existing balance. Although Saver borrowers are limited only to borrow 10 to 23 percent less than the average version permits.

A perfect applicant for the HECM Saver is a senior citizen with a permanent income or resources who has long-term needs further than the need for temporary money. “The HECM Saver is ideal for their situation because there are enough proceeds [to do so],” says Beth Paterson of Reverse Mortgages SIDAC, St. Paul, Minn.

“The HECM Saver is a breakthrough product that will enable more seniors to access the advantages reverse mortgages can provide,” says Eric Declercq, national sales lead for reverse mortgages at MetLife Bank, Bloomfield, New Jersey. “It increasingly will become an important financial planning tool for America’s senior population looking to use the equity built up in their homes to finance a comfortable retirement.”

HUD introduces new variation of reverse mortgage

2010-11-04T05:49:00.000-07:00

The U.S. Department of Housing and Urban Development (HUD) has announced a new reverse mortgage alternative aimed at cash-strapped seniors who are looking to reduce the up-front costs of tapping their home equity in exchange for lower loan proceeds.

The move comes on the heels of increases in the cost of mortgage insurance. Mortgage insurance is required on all reverse mortgages so that the lender is protected if the senior outlives the value of the home. It also protects the owner in the event the lender goes out of business.

Both issues come into play in a down real estate market, where many homes are worth less than they were at the time the reverse mortgage was issued.

A reverse mortgage historically has enabled senior homeowners to convert part of the equity in their homes into tax-free funds without having to sell the home, give up title or take on a new monthly mortgage payment. Funds obtained from the reverse mortgage are tax-free.

The new HECM Saver is a variation of the federally insured Home Equity Conversion Mortgage (HECM Standard), which allows owners older than 62 to stay in their homes for as long as they wish. More than 130,000 HECMs were originated last year.

According to Vicky Bott, HUD deputy assistant secretary, implementation of the HECM Saver will reduce the amount of mortgage insurance premium (MIP) required at closing. However, the reduced upfront cost also reduces the maximum amount an owner can take out.

The HECM Saver will have an upfront MIP of .01 percent of the maximum claim amount (the value of the home or $625,500, whichever is less). The HECM Standard upfront MIP remains at 2 percent of the maximum claim amount.

In addition, both products will have an annual MIP of 1.25 percent. This is an increase in the now HECM Standard MIP, which has been .5 percent annually.

The HECM Saver has principal limits between 10 percent and 18 percent less than the HECM Standard principal limits, thus offering consumers the option of lower proceeds in exchange for lower costs. According to HUD, the lesser decrease in principal limits will be for younger borrowers and the larger for older borrowers.

The changes were made because the funds for reverse mortgages have dwindled. The HECM portion of the overall FHA Mortgage Insurance fund pool of funds is down significantly and no private lender has resurfaced. Private reverse mortgage “jumbo” funds have virtually evaporated given the present credit crisis.

According to Peter Bell, president of the National Reverse Mortgage Lenders Association, reverse mortgages are increasingly being used by seniors to pay off defaulted mortgages and avoid foreclosure, thus preserving their ability to remain in their homes.

A reverse mortgage also can be an effective tool to relieve the burden of current loan payments or moving from the home. In many cases, homeowners use reverse mortgages to pay off existing “forward” mortgages, thus eliminating burdensome payments on their current mortgages and freeing up cash for living and health care expenses.

While reverse mortgages have been used primarily as a way to keep seniors in their homes, they have other uses as well. The Housing and Economic Recovery Act of 2008 approved the HECM for purchasing homes as well. The move allows older homeowners to make a large down payment on a new home and then utilize the reverse mortgage as permanent financing.

The same law reduced the maximum loan fee on reverse mortgages to 2 percent on the initial $200,000 of the home’s value and 1 percent on the balance thereafter, with a cap of $6,000. Previously, HECM fees were capped at 2 percent of the home’s value or the county lending limit, whichever was lower. These fees are in addition to the mortgage insurance premium.

If you are a senior in the market for a reverse mortgage, shop around for the best program for you. Some lenders have reduced fees for servicing, origination and title insurance for fixed-rate HECMs. Lump-sum payouts, monthly draws, lines of credit — or combinations of these options — are now part of the reverse mortgage mainstream.

Reverse mortgage with a twist

2010-10-10T02:01:00.002-07:00

The U.S. Department of Housing and Urban Development has announced a new reverse mortgage alternative aimed at cash-strapped seniors who are looking to reduce the up-front costs of tapping their home equity in exchange for lower loan proceeds.

The move comes on the heels of increases in the cost of mortgage insurance. Mortgage insurance is required on all reverse mortgages so that the lender is protected if the senior outlives the value of the home. It also it also protects the owner in the event the lender went out of business.

Both issues come into play in a down real estate market where many home are worth less than they were at the time the reverse mortgage was issued.

A reverse mortgage historically has enabled senior homeowners to convert part of the equity in their homes into tax-free funds without having to sell the home, give up title, or take on a new monthly mortgage payment. Funds obtained from the reverse mortgage are tax-free.

The new HECM Saver is a variation of the federally insured Home Equity Conversion Mortgage (HECM Standard), which allows owners over 62 to stay in their homes for as long as they wish. More than 130,000 HECMs were originated last year.

According to Vicky Bott, HUD deputy assistant secretary, implementation of the HECM Saver will reduce the amount of mortgage insurance premium (MIP) required at closing. However, the reduced up-front cost also reduces the maximum amount an owner can take out.

The HECM Saver will have an up-front MIP of 0.01 percent of the maximum claim amount (the value of the home or $625,500, whichever is less). The HECM Standard up-front MIP remains at 2 percent of the maximum claim amount.

In addition, both products will have an annual MIP of 1.25 percent. This is an increase in the now HECM Standard MIP, which has been 0.5 percent annually.

The HECM Saver has principal limits between 10 to 18 percent less than the HECM Standard principal limits, thus offering consumers the option of lower proceeds in exchange for lower costs. According to HUD, the lesser decrease in principal limits will be for younger borrowers and the larger for older borrowers.

The changes were made because the funds for reverse mortgages have dwindled. The HECM portion of the overall FHA Mortgage Insurance fund pool of funds is down significantly and no private lender has resurfaced. Private reverse mortgage "jumbo" funds have virtually evaporated given the present credit crisis.

According to Peter Bell, president of the National Reverse Mortgage Lenders Association, reverse mortgages are increasingly being used by seniors to pay off defaulted mortgages and avoid foreclosure, thus preserving their ability to remain in their homes.

A reverse mortgage can also be an effective tool to relieve the burden of current loan payments or moving from the home. In many cases, homeowners use reverse mortgages to pay off existing "forward" mortgages, thus eliminating burdensome payments on their current mortgages and freeing up cash for living and health-care expenses.

While reverse mortgages has been used primarily as way to keep seniors in their homes, they have other uses as well. The Housing and Economic Recovery Act of 2008 approved the "HECM for Purchase" program. The move allows older homeowners to make a large downpayment on a new home and then utilize the reverse mortgage as permanent financing.

The same law reduced the maximum loan fee on reverse mortgages to 2 percent on the initial $200,000 of the home's value and 1 percent on the balance thereafter, with a cap of $6,000. Previously, HECM fees were capped at 2 percent of the home's value or the county lending limit, whichever was lower. These fees are in addition to the mortgage insurance premium.

Notable Mortgage Insurance Stocks Movers (ABK, PMI, HIG, AIG)

2010-10-10T02:01:00.001-07:00

Ambac Financial Group, Inc. (NYSE:ABK) surged 15.06% to $0.898 on an unusual volume of 47.67 million shares after the troubled bond insurer reached a deal with bankrupt Lehman Brothers Holdings Inc. regarding claims the two filed against each other. Ambac Financial Group, Inc. (Ambac) is a primarily a holding company. The Company, through its subsidiaries, provides financial guarantees and financial services to clients in both the public and private sectors worldwide.

The PMI Group, Inc. (NYSE:PMI) spurted 4.63% to $4.07 on an unusual volume of 9.39 million shares. The company said that it will host a conference call to review third quarter 2010 financial results on Thursday, October 28, 2010 at 9:00 a.m. PDT (12:00 p.m. EDT). Financial results for the third quarter of 2010 will be released at approximately 3:00 a.m. PDT (6:00 a.m. EDT) on October 28, 2010. Leon Cooperman, whose Omega Advisors Inc. disclosed a stake in mortgage guarantor PMI Group Inc., said the insurer will rebound after posting 12 straight quarterly losses.“We feel they’re a survivor,” Cooperman said in a telephone interview.

Hartford Financial Services (NYSE:HIG) declined 1.26% to $23.44 on a volume of 3.66 million shares. Connecticut State Treasurer Denise L. Nappier announced that, after a competitive bid process, she has selected The Hartford Financial Services Group Inc. to launch and manage CHET Advisor, a new advisor-sold 529 college savings program. TIAA-CREF will continue to manage the Connecticut Higher Education Trust (CHET). The stock has been moving within a range of $18.81-$30.46 over the past 52-weeks.

American International Group, Inc. (NYSE:AIG) climbed 0.12% to $40.79 on a volume of 2.99 million shares. International Lease Finance Corporation (ILFC), a wholly-owned subsidiary of American International Group, Inc. today announced the repayment of a $2 billion bank loan. PricewaterhouseCoopers LLP’s two- year-old, $97.5 million settlement with holders of American International Group Inc. securities is set to go before a federal judge next month.

Mortgages: the facts and the fiction

2010-09-18T01:39:00.000-07:00

Want to buy a home but are confused by mortgages and frightened by financial advisers? Moneymadeclear, the government's independent guide to personal finance, has produced a series of guides and tools for home buyers.

The basics A 30-page guide, Just the facts about mortgages, explains the different types of mortgages and answers common questions. It is available at moneymadeclear.org.uk or by calling 0300 500 5000.

How much you can borrow Guardian Money has an interactive mortgage calculator where you can work out monthly costs. For example, it tells you a £100,000 loan over 25 years at a rate of 4.99% would cost £584.01 a month.

Finding a mortgage Study our best-buy tables or go to moneyfacts.co.uk. If you don't have a large deposit, you won't qualify for the lowest rates. Try the comparison tables at moneymadeclear.org.uk/tables for an unbiased list of providers. If you're not comfortable taking a loan without going into a branch, the best deals on the high street right now tend to be offered by HSBC and Santander.

The other stuff they'll push on you Sales people earn big commission from insurances to cover your loan, such as MPPI, ASU, critical illness and income protection cover. If your job is under threat or your health poor, they will be worth considering. Only buildings insurance is essential. Don't buy it from your lender – try the main comparison sites (moneysupermarket/Confused/gocompare/comparethemarket), and remember to shop around for a new quote every year. Ignore lenders who insist you have to take out their insurance to get a mortgage. You don't.

Solicitors and conveyancing Direct.gov.uk has a guide on the various stages of buying, from making an offer to exchanging contracts. You can use a solicitor, (lawsociety.org.uk), a licensed conveyancer (conveyancer.org.uk), or do it yourself.

After you move in Try the BudgetBrain.com site to work out how much you've got coming in, and your outgoings. There are tips for overspenders.

Staying in control Falling behind with your repayments? Moneymadeclear has a Problems paying your mortgage guide, which explains what you can do, sets out what help is available and answers common questions.

It says: "Speak to your mortgage lender … All mortgage lenders regulated by the Financial Services Authority have to consider your circumstances, and will have procedures for dealing with cases like yours."

Refinancing: Whom Can You Trust?

2010-09-18T01:38:00.000-07:00

With mortgage rates falling to record lows this summer and the housing market showing signs of a pulse, refinancing activity is perking up.

It's too bad that so many people are relying on oversimplified advice and bad numbers to decide when to pull the trigger.

The refinancing equation has never been more complicated. While some borrowers are desperate to reduce their monthly payments, others are looking to build equity. Some are even treating their mortgage as an investment vehicle, sinking excess cash into their homes in order to secure a lower rate and cut future payments.

Yet most personal-finance resources these days don't account for situations like these. Even essential factors like tax rates and inflation expectations are often ignored in favor of simplistic calculations.

Many popular Web resources, in fact, are financed by lenders, mortgage brokers or "lead generators" that connect borrowers with banks. At times, their advice can be downright harmful.

That's because of the risk involved. Refinancing generally costs 3% to as much as 6% of the outstanding principal of the loan, with banks levying fees on everything from application fees and title searches to appraisal costs and legal expenses. (Mortgage "points" can add to the total, though they typically help reduce the interest rate and lower overall costs.)

Fees are often murky, too, making comparison shopping difficult. The best way to compare deals, says Melinda Opperman of Riverside, Calif.-based Springboard Nonprofit Consumer Credit Management Inc., is to consult with a housing-counseling agency approved by the U.S. Department of Housing and Urban Development.

Given such costs, you don't want to refinance often. Yet the advice coming from the mortgage world suggests you should be doing it regularly.

One particularly dubious idea gaining prominence is the "1% rule," which used to be the 2% rule when rates were higher. The gist: Refinance when you can knock a full percentage point off your rate.

Students 'should consider the value of their belongings' when searching for a house insurance quote

2010-09-18T01:37:00.001-07:00

Students searching for a house contents insurance policy to cover them when they are away from their parent's home could do well to evaluate how much their belongings are worth.

This is according to Graeme Trudgill, technical and corporate affairs executive at the British Insurance Brokers' Association (BIBA), who explained that consumers should account for designer clothes, their computer, printer and gadgets like iPads - as when combined their value could be very high.

"People have a lot of stuff and you have got to make sure that you just add it all up. It doesn't take long - you can do a quick check and your insurance broker can help talk you through it to make sure you have covered everything," he continued.

However, students - of which UCAS states there will be 470,789 attending new courses this year - may not have to shell out for their own individual policy, as some providers offer home-from-home deals where parents extend their policy to cover the youngsters' possessions while they study elsewhere.

House insurance reminder for victim of distraction burglary

2010-09-18T01:35:00.000-07:00

The victim of a distraction burglary that took place in Towcester may have been reminded about the importance of an up-to-date house insurance policy.

A woman was approached by a man on September 15th who claimed he needed to check the pipes in her property. While the lady was occupied with the first perpetrator, another entered the house and searched the rooms before leaving empty handed, About My Area reports.

The first male has been described as white, aged between 30 and 35, with a clean-shaven face and slim build.

He is also said to have spoken with a northern accent and was dressed in smart clothes at the time of the incident, which took place between 15:30 BST and 15:50 BST.

A female who carried out a similar offence in Plymouth recently has been found guilty of burglary and attempted burglary, according to the Herald. She entered homes on the pretence of looking for lost ferrets, while her accomplice made off with items of value.

More Borrowers Opt for ‘Cash-In’ Refinancing

2010-08-14T21:05:00.000-07:00

CASH-OUT refinancing, in which borrowers pull out equity from their homes to finance everything from vacations to sports cars, were all the rage during the housing boom.

Now, as the nation continues to endure the slow, painful correction of that boom, another trend may be emerging: cash-in refinancing. In this case, borrowers put extra money into a transaction to obtain cheaper loans and pay down debts.

According to Freddie Mac, the government-sponsored entity that, along with Fannie Mae, helps set lending standards, 22 percent of homeowners who refinanced their mortgages in the second quarter of this year paid additional money at the closing to lower their principal balance. That ties the record for the third-highest “cash-in” refinancing — set in the fourth quarter of 2002 — since Freddie Mac began recording such transactions in 1985. The highest level was in the fourth quarter of 2009, with 36 percent of refinancing homeowners cashing in.

Freddie Mac’s chief economist, Frank Nothaft, linked the change to low interest rates on cash-equivalent investments like certificates of deposit. Consumers are finding that they can save more money on monthly interest payments by paying down their mortgages than by leaving their cash in banks, which are offering meager interest rates.

Indeed, mortgage industry executives said they had heard borrowers express such motives when choosing a cash-in refinancing strategy. But they said borrowers were also looking to qualify for a cheaper loan. Often, the more equity they have in their homes, the easier it is for them to qualify for certain loans and for lower interest rates.

Michael Moskowitz, the chief executive of Equity Now, a lender based in Manhattan, said that over the past year he had seen more borrowers add money to their mortgage refinancings with the aim of lifting equity levels high enough to qualify for a lower monthly payment.

Mortgage group spent $1.09M in 2nd-qtr lobbying

2010-08-14T21:03:00.000-07:00

The Mortgage Insurance Companies of America spent $1.09 million to lobby the federal government on housing and other issues in the second quarter, according to a disclosure report.

That's up from the $670,000 that the trade group spent in the year-ago period, and about even with the $1.06 million it spent in the first quarter of this year.

The Mortgage Insurance Companies of America is the trade association representing the private mortgage insurance industry. Private mortgage insurance protects a lender against losses when a borrower defaults.

During the April-June period, the trade group lobbied the federal government on legislation related to the restructuring of government-sponsored enterprises such as Fannie Mae and Freddie Mac, according to the report filed on July 20.

The group also lobbied on appropriations for housing and insurance issues involving the Department of Transportation and the Department of Housing and Urban Development; mortgage insurance taxes; the Restoring American Financial Stability Act; and, provisions relating to mortgage insurance in the financial regulatory bill signed by President Barack Obama last month.

That bill included new funds to aid homeowners, including $1 billion for a new program being run by HUD to provide homeowners with emergency zero-interest rate loans of up to $50,000 for up to two years.

In the second quarter, the group lobbied the House of Representatives and the U.S. Senate, according to the report filed with the House clerk's office.

How to get a better rate on your mortgage

2010-08-14T20:58:00.000-07:00

Mortgages are often one of the largest expenditures a household has. Such being the case, it makes sense to find ways to get a better rate on mortgage loans. Fortunately, several methods exist to obtain lower rates or at least work toward the goal of lower rates. The following techniques can be used toward obtaining a better rate on a mortgage.

• Mortgage Duration

Switching from a 30 year mortgage loan to a 20 or 15 year mortgage can also get you a better interest rate. This is because the lender will recover its money faster which in effect lowers its lending risk and lowering the rate. If a shorter-term mortgage is affordable, it can lead to a much faster payment of the principal value of the mortgage, and lessen overall loan cost significantly.

• Equity value

Increases in equity value, be they through market appreciation or extra payments into a mortgage can also lower lending risk. By having more value in a home, your chances of getting a better rate on your mortgage increases. This method is more likely to work if mortgage rates are steady or declining, as otherwise, the higher equity value is working against an increasing mortgage rate trend.

• PMI Insurance

Property Mortgage Insurance (PMI) is usually required on loans that have less than 20% of the total loan amount paid off. By surpassing this 20% requirement, PMI can be dropped leading to a lower monthly cost of the mortgage where PMI is included in the interest rate calculation. PMI can be lowered by making extra payments or by adding a down-payment on a refinance.

• Credit rating

A better credit rating usually leads to better interest rates so it follows a higher credit rating can lead to a better rate on a mortgage loan. If your credit rating isn't as high as it could be, it could be higher within a few months if basic, yet important steps are taken to rebuild credit rating.

• Refinance

Even with the same credit rating it may be possible to refinance at a lower rate if aggregate mortgage loan rates have moved down from the rate at which you originally financed your real estate. A refinance that drops Annual Percentage Yield (APY) 1% or more could be enough to cover any extra fees related to the refinance in addition to lowering total interest paid.

To get a better rate on a mortgage loan more than one of the above techniques may be used. This has the affect of compounding the value of the lower interest rate. For example, a home that is refinanced at a rate 1% lower than the original mortgage that is also reduced in duration by 5 years and has a down-payment that puts that principal higher than 20% lowers the interest in three ways. The total decline in interest rate may then, be higher than the original 1% lower refinance rate.

U.S. mortgage rates steady below 5 percent in week

2010-03-20T21:34:00.002-07:00

NEW YORK, March 18 (Reuters) - U.S. fixed mortgage rates held steady under 5 percent over the past week, Freddie Mac (FRE.N) said on Thursday, amid signs that winter storms overcame low borrowing costs to quell housing activity.

The average 30-year mortgage rate was 4.96 percent in the week ended March 18, little changed from 4.95 percent a week earlier and 4.98 percent a year ago, the second-largest U.S. home funding company said.

Lenders charged 0.7 point in fees, on average, the same as the prior week.

To see more rates see TABLE at [ID:nWALIEE640].

Winter storms snuffed out home building in much of the country, dragging construction down 5.9 percent in February, while builder confidence unexpectedly fell in March.

Demand for mortgages also declined in the latest week even though 30-year loan rates held below 5 percent, the Mortgage Bankers Association said on Wednesday. [ID:nNYS007847]

Beyond the weather, many potential home buyers are hesitating with near double-digit unemployment and concerns about job stability at the forefront, economists and housing experts have said.

The housing market is not without some bright spots, as stabilizing or even rising prices are helping current owners slowly rebuild equity in their houses, Frank Nothaft, Freddie Mac chief economist, said in a statement.

"After losing almost $7.9 trillion in home equity since the end of 2006, homeowners regained almost $1.1 trillion over the past three quarters ending in 2009," he said, citing Federal Reserve figures.

The Fed -- the U.S. central bank -- this week restated its pledge to keep benchmark interest rates low for an extended period, part of sweeping efforts to restore health to the battered housing market and the economy, which is recovering from the worst recession in decades.

Mortgage rates are seen trending higher once the Fed ends its more than $1.4 trillion in mortgage-related securities purchases at the end of this month.

In its March housing and economic outlook, Freddie Mac forecast a 30-year mortgage rate rise to 5.6 percent in the fourth quarter. (Editing by Andrea Ricci and James Dalgleish)

New mortgage rules leave homebuyers confused

2010-03-20T21:34:00.001-07:00

Frank and Susan Williams bought a house near Hamilton, Ont., this month, they followed a time-honoured tradition of using leveraged financing.

With mortgage insurance they only had to put down 5% of the $270,000 purchase price. They went with a closed variable rate at 2.25% and amortized the loan over 35 years. The deal was initiated with a mortgage broker, with Bank of Nova Scotia providing the financing.

"It's a three-bedroom bungalow. That was attractive to us. We have a dog and we like to do things in the backyard. We did not have the type of money we thought we'd have to put into a house. We said let's just bite the bullet and get this over with," Ms. Williams says.

And getting it over with was probably a good idea. First, they were in a rent-to-own arrangement and had to exercise their option to buy before August 2010. And second, based on pending federal rules for government-backed insured mortgages that come into effect on April 19, the Williams (not their real name) would probably not have qualified for the variable-rate mortgage. In fact, as recent arrivals from the United States and its housing crisis, their credit history might not have passed any stress test.

"We really came from the United States with nothing. Everything we had disappeared with the housing crisis. In areas that had bad loans all the houses just hit bottom. We were expecting US$250,000 out of our house but we got nothing," Ms. Williams says. They walked away from the whole mess.

But while the Williams might have had good reasons for leveraging to get their dream home -- they are firsttime buyers in Canada -- the new federal rules governing mortgages have been widely misunderstood. In fact, the biggest fear among the young and house-less is fear itself.

"There are a lot of rules that changed. But they weren't communicated very well," says Robert McLister, the editor of Vancouver-based Canadian Mortgage Trends (www.CanadianMortgageTrends.com).

Margo Wynhofen, of Grimsby, Ont.-based Verico One Mortgage Corp. ( www.mymortgageadvisor.ca) and vice-president of the Independent Mortgage Brokers Association of Ontario, says she has had to spend considerable time explaining federal Finance Minister Jim Flaherty's statement of Feb. 16.

"I had a lot of people misunderstand the announcement. So I had a lot of clients call me for clarification. There was an overwhelming sigh of relief," Ms. Wynhofen says.

Under current mortgage-lending rules, buyers with a down payment of less than 20% of the purchase price must purchase mortgage insurance, with the most common source being Canadian Housing and Mortgage Corp. The new rules affect only customers that are required to purchase the insurance.

Under the new rules, all buyers requiring mortgage insurance will have to meet the "ability to pay" for a higher, more expensive five-year fixed-rate mortgage even if they choose a mortgage with a lower interest rate and a shorter term.

"It's not just first-time homebuyers who are affected. It's anyone who wants a variable mortgage rate now who doesn't have one already, they now have to qualify at a higher interest rate. Some of them won't qualify. And that's fine so they'll just take a fixed rate. It's not the end of the world," Ms. Wynhofen says.

Bernice Dunsby, director of home equity financing at the Royal Bank, says the new rules might even help save first-time buyers from themselves.

"We believe the new measures will have a small impact on mortgage growth, if any. First-time buyers should not be any more concerned about these changes. In fact, I believe the changes will actually help first-time homebuyers to ensure that not only can they afford their home today but in the future, especially if interest rates rise," says Ms. Dunsby.

In some cases, the rules might be outdated before they are fully implemented. A growing number of homebuyers are forgoing the conventional mortgage and using alternative financial products. Take the case of London, Ont., accountant and recent homebuyer Phil Parkinson. Three years ago, he bought his first home with a fully secured line of credit offered through Manulife Financial Corp.

The Manulife One product provides up to 80% of the appraised value of your home. It can be used to pay off the balance of your existing mortgage, personal lines of credit and any other outstanding debts you might have.

"These operate on a variable rate. It's just like one big bank account. You can have your money deposited into the account, you can pay your bills. [As you deposit] you can knock your account down and lower your interest calculation. Theoretically, you don't have to pay anything expect the interest," Mr. Parkinson says.

Other highlights of the rules don't directly affect firsttime buyers. For example, the maximum amount Canadians can withdraw in refinancing their mortgages has dropped to 90% from 95% of the value of their homes. rule has created a mini-stampede.

"There is a bit of urgency now to get [a refinancing] done before April 19. People are chronically refinancing. I have clients that refinance every two to three years to take the equity out of their home to pay off credit-card debt. The home has become an ATM machine," Ms. Wynhofen says.

A January 2007 Statistics Canada study of personal debt concluded that "increasing mortgage debt for refinancing purposes or taking out home-equity loans implies that homeowners in both [Canada and the United States] are using their homes as a source of cash to finance their spending rather than as an investment."

And in an effort to contain the risks of real-estate speculation, as of April 19 the minimum down payment for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation rises from 5% to 20%.

As for ex-patriot Americans Frank and Susan Williams, they're pretty relieved about their fresh start with a new house.

"It's very different to get a mortgage here. It's a lot less hassle than in the United States," Ms. Williams says.

And because the Williams are not particularly worried about the new mortgage rules, they are already thinking about their next purchase.

"We might be able to buy a little place that's larger when we can leverage this up a bit -- maybe get something cheaper than this with more room,' Ms. Williams says.

NATIONAL FLOOD INSURANCE PROGRAM

2010-01-29T20:45:00.000-08:00

Flood insurance is available to homeowners, renters, condo owners/renters and commercial owners/renters. The annual premium varies from property to property based on the level of coverage and the location's predetermined flood risk.

Homes and businesses with mortgages from federally regulated or insured lenders in high-risk flood areas are required to purchase flood insurance.

The insurance provides coverage for flood damage to buildings and contents, with maximum limits of $250,000 for buildings and $100,000 for contents. Separate deductibles apply to buildings and contents with different amounts available for policyholders.

This coverage is not provided by a standard homeowner's insurance policy.

Flood insurance coverage is limited in basements, defined as areas where the floor is below the ground level on all sides. Basement damage is limited to portable air conditioners, washer and dryer, furnace, water heater, circuit breakers and freezer.

Information is available from local insurance agents or online at www.floodsmart.gov. A policy may be purchased only from an insurance agent, not online or otherwise, according to the Federal Emergency Management Agency. Rates are set by the federal government and do not vary from company to company. A policy must be purchased for an entire year and is not effective until paid in full.

Flood Area Homes Insurance Rates to Rise

2010-01-29T20:44:00.000-08:00

Now 11-thousand properties in Broome County are in flood hazard areas.

Since FEMA added 65-hundred more properties to their flood maps.

FEMA made up new draft flood maps for the federal, billion-dollar "Map Modernization" program.

They encourage residents to review the latest data.

When the maps become final in 2011, many properties on the maps are required to get flood insurance, and the premiums for those who already have insurance will increase.

Since the old maps are still in effect, if you purchase insurance now, FEMA officials say you can a get substantially reduced rate.

Abbey enhances Additions home insurance range

2010-01-29T20:43:00.000-08:00

Abbey for Intermediaries is alerting mortgage brokers to the fact that they could be losing out on a market potentially worth £30 million in sales commission this year, if they fail to exploit the general insurance market.

The lender suggests intermediaries can supplement their business revenues by cross selling insurance products to homeowners, and by way of encouragement has made some changes to its Additions home insurance range.

Premiums have been reduced by an average 17% by introducing a panel of three insurers to oversee the range: Aviva, Zurich and Groupama.

In addition, from this week, home insurance add-ons are available on Bedroom Plus and New Build policies

According to the bank, only one in five homeowners purchase buildings or contents insurance when they take out a mortgage with an intermediary, leaving 80% of borrowers as potential insurance customers.

Abbey for Intermediaries managing director, Ricky Okey, says: “It is no secret that insurance offers one of the most attractive income sources for intermediaries, and yet there are still so many who overlook it as a revenue stream.”

He adds: “Brokers are missing out if they do not take advantage of the opportunities available to them in this lucrative market.”

AIG Sells Mortgage Insurance Units In Canada And Israel

2010-01-10T03:40:00.002-08:00

A private investor group led by the Ontario Teachers' Pension Plan announced it has acquired the Canadian mortgage insurance business of American International Group (AIG).

AIG United Guaranty Mortgage Insurance Co. Canada is the second largest private mortgage insurer in Canada, and had assets of approximately $263.4 million and total equity of around $122 million at Sept. 30. Ontario Teacher's Pension Plan did not disclose the terms of the transaction.

The announcement follows Harel Insurance Investments & Financial Services (HARL.TV) of Israel's announcement last month that it has agreed to acquire AIG's Israel mortgage insurance business EMI Ltd. for $35.5 million. EMI's net profit for the first three quarters of 2009 was $14.2 million, Harel said.

AIG has been selling off non-core assets in order to repay its government bailout.

An AIG spokeswoman confirmed the sales.

Free job-loss mortgage insurance?

2010-01-10T03:40:00.001-08:00

Job-loss mortgage insurance -- which pays all or part of your mortgage payment if you lose your job -- can bring peace of mind to homeowners and would-be homebuyers alike.

And it's often available at no cost to the homebuyer.

With the unemployment rate hovering around 10 percent -- the highest in more than 25 years -- it's not surprising people are hesitant to buy a home, even in a low-rate, low-priced market. And countless current homeowners no doubt lose sleep worrying how to keep a roof over their heads if they join the ranks of the unemployed.

Once hard to find, job-loss mortgage insurance is now available not only from traditional insurers but from new-home builders, banks and other lenders, real estate agents, realty groups, and state and local housing agencies as well.

"The only reason people may not be buying (homes) now is fear of losing their jobs," says George Akers, executive vice president of First Mortgage Company, whose mortgage customers get the Worry-Free Mortgage Protection program free. In his experience, mortgage protection plans have become increasingly common in the past year or so.

Policies vary
As with any insurance product, policies vary. For example:
The California Association of Realtors', or CARs', Mortgage Protection Program is free for first-time homebuyers, who can get up to $1,500 per month for six months to help make their mortgage payments. The CARs' Housing Affordability Fund has committed $1 million to the program.
Genworth Financial's Job Loss Protection is available at no charge to buyers purchasing Genworth mortgage insurance. It covers PITI (principal, interest, taxes and insurance) for up to a certain amount, also up to six months.
Prudential Georgia Realty's Mortgage Protection Program is funded by the seller at closing for $500. One of many throughout the country affiliated with The Rainy Day Foundation's Homeowner Education and Loan Protection service, the program covers the lesser of the PITI or $1,800 per month, up to a maximum of six payments during the 24-month coverage term.

What Type of Insurance Do I Need When I Buy a Home?

2009-08-20T19:48:00.001-07:00

Question: What type of insurance will I need to purchase once I buy a new home? I am currently renting and have renter’s insurance at a low monthly rate, but was wondering if there is a similar type of insurance for when I own. I also hear that I need mortgage insurance, and am not sure what that means. Thanks for your advice!

Answer: When you purchase a home, you should be aware of several different types of insurance and you may need to purchase each depending on the type of home you buy. They include: 1) Homeowner’s insurance 2) Mortgage insurance and 3) Title insurance.

Since you are currently renting, you’re familiar with renter’s insurance, which covers issues arising from theft, fire, or personal liability within your leased apartment. With your new home, you will purchase a similar policy except it will be called homeowner’s insurance. Typically, homeowner’s insurance is not very expensive, it’s required by your mortgage lender, and it’s well worth the price and peace of mind. Your monthly or yearly premium will cover your home against theft, flood, fire, natural disasters, etc. It will also provide you coverage in case somebody slips and falls on your property and sues you.

Mortgage insurance (often abbreviated as PMI — private mortgage insurance) may be necessary if you are buying a home with less than a 20 percent down payment. Mortgage insurance protects the lender against a default (non-payment) by the borrower (you). Once you’ve paid down the principal on your mortgage or your property has appreciated so that you have 20 percent equity in your home, you will no longer need to maintain the mortgage insurance. Additionally, there are certain ways to avoid having to pay this type of insurance, including taking out more than one mortgage or a home equity loan to cover a portion of the down payment.

The third type of insurance is title insurance. This protects you from claims against the title to your new home from previous owners or third parties claiming to have a right to the property. These issues can arise if your home was previously transferred fraudulently, there were liens that were unpaid, encroachments on the land, etc. Title insurance is a one-time charge (no ongoing premiums) that is paid at settlement. There’s lender’s title insurance (mandatory) and owner’s title insurance (optional).

Reverse mortgages shift gears

2009-08-20T19:44:00.001-07:00

Now, a new program made possible by federal legislation passed last year to address the foreclosure-driven housing crisis is also helping seniors use a reverse mortgage to help buy a home, provided they can come up with a large down payment. Before the Home Equity Conversion for Purchase program rolled out in January, seniors 62 years and older could only use reverse mortgage loans to draw out tax-free payments from the equity held in an existing home while continuing to live in it.

Many lenders are starting to offer these new loans in addition to traditional reverse mortgage products. But as withtraditional reverse mortgages, there are costs involved that can add thousands of dollars to the loan amount, which grows over time and has to be repaid after the last borrower leaves or sells the property or dies and the home is passed on to heirs.

"We had not been able to offer that option to seniors before," said Joseph DeMarkey, regional director for MetLife Bank, which provided the loan for the couple. "It's still the same underlying product that's been around for 21 years. It just allows people to use it for purchase finance as opposed to a refinancing tool."

Program participants are required to make a down payment typically ranging from 30 to 40 percent. The reverse mortgage loan amount is used to pay off the balance of the new home's purchase price. (see breakout for example of how it works).

People who have a traditional reverse mortgage on an existing home cannot refinance it into a reverse mortgage for purchase to buy a new home. Instead, the reverse mortgage on the existing home would have to be paid off before applying for the reverse mortgage for purchase.

The reverse mortgage for purchase program requires that the new home be the primary home, which means living it in for a least six months of the year. The home can be located anywhere in the United States.

"The home you are moving out of is irrelevant in regards to the new one. We are seeing folks who become snowbirds and are going to live in Florida for seven months of the year," said Eric Bachman, founder and chief executive officer of Golden Gateway Financial, an Oakland-based reverse mortgage broker that started offering the new loans earlier this year.

Borrowers never have to make a mortgage payment as long as they live in the primary home. Unlike with traditional reverse mortgages that require seniors to be homeowners, renters are not excluded from the new program. And if you already own a home, there is no requirement to sell it. In fact, you could rent it out, which is what Tubbs and Majid are doing with their Moraga home while waiting for the real estate market to improve before selling it.

Before taking out a reverse mortgage for purchase loan, borrowers are required to receive counseling from a nonprofit agency approved by the Department of Housing and Urban Development.

"It's a new way to use a reverse mortgage. It's catching on pretty fast," said Tricia Smith of San Mateo-based HIP Housing, an HUD-approved loan counseling agency in San Mateo.

While it may be the right move for some people, borrowers need to be aware of closing costs, fees and Federal Housing Administration mortgage insurance premiums that can add thousands of dollars to the cost of the loan, she said. Typically, those extras are financed in the loan amount.

The loan amount available to borrowers is tied to a percentage of the current reverse mortgage $625,500 lending limit or appraised value of the purchased home, whichever is lower. The older the borrower, the higher the percentage. The $625,500 lending limit amount expires at the end of 2009 unless Congress acts to extend it.

The down payment money that borrowers have to come up has to be from savings, retirement income or proceeds from the sale of an existing home. If the existing home is sold to provide the down payment for the new home, there are fewer closing costs involved than if the transactions were done separately.

Once the title on the home changes hands, the loan amount, along with accrued interest, mortgage insurance premiums and other fees, has to be repaid to the lender.

"It's not free money. It's a rising debt loan," said Smith.

That said, the product can be used to help retirees downsize to a smaller home or help renters become homeowners, she said. "They won't have to make a (mortgage) payment for the rest of their life," Smith said.

HOME EQUITY CONVERSION MORTGAGE (HECM) FOR PURCHASE REVERSE MORTGAGE
1. Must be age 62 or older.
2. Property can be a single-family house or condominium and must be the primary home. Investment purchases not allowed.
3. Loan amount is a percentage of the reverse mortgage $625,500 lending limit or appraised value of purchased home, whichever is lower. The older the borrower, the higher the percentage of loan amount.
4. Borrower must have substantial funds available for a down payment either from the sale of an existing home, savings or retirement income at time of closing.
5. No credit or income restrictions.
6. Borrower must participate in a consumer information session given by an approved HUD-approved counselor.

The subprime to prime mortgage handoff

2009-08-20T19:40:00.000-07:00

Data released by the Mortgage Bankers Association confirms the trend that prime borrowers are the ones to worry about.

While the percentage of mortgages entering the foreclosure process in the 2Q held relatively steady at 1.36%, the change in composition is noteworthy.

From the MBA press release:

While the rate of new foreclosures started was essentially unchanged from last quarter’s record high, there was a major drop in foreclosures on subprime ARM loans. The drop, however, was offset by increases in the foreclosure rates on the other types of loans, with prime fixed-rate loans having the biggest increase. As a sign that mortgage performance is once again being driven by unemployment, prime fixed-rate loans now account for one in three foreclosure starts. A year ago they accounted for one in five.

Another interesting bit for taxpayers - there’s been a big jump in FHA foreclosures, currently at 1.15% percent. The FHA is essentially a government mortgage insurance agency so foreclosures. While the FHA brags on its website that it’s self-funded, if the losses become too much, it’s safe to assume in the current environment that the government would extend a helping a hand.

Also, it’s the FHA that essentially took on subprime lending last month when it agreed to give mortgages with negative equity in their homes. In July, it loosened its criteria so homeowners significantly underwater could refinance into an FHA loan. These borrowers can now borrow 125% of their home’s worth, up from 105%.

UPDATE: MBA just got back to me about what’s included in their prime category and it looks like Alt-A loans are mostly categorized as prime by those banks participating in the survey. That could be skewing things since Alt-A loans by definition are less than prime and extremely loose lending standards during the boom have made them look more like subprime loans. For example, borrowers taking out an Alt-A loan could state their income rather than prove it.

Tips on buying a home

2009-08-04T22:46:00.001-07:00

When you hear advertising for REVERSE End Mortgages and the lender says you must buy mortgage insurance to cover your loan if you can’t pay for it. Bull!

1. Before some PMI (private mortgage insurance), the home must go into foreclosure.

2. When getting loans that seem like a terrific deal, ask questions, before it becomes too late.

3. If you try to sell your home and prices are still low and your offer to purchase your home is not what you as a seller wants, ask your lender about a short sale. This means what is due against the loan. Sometimes this is doable and can be worked out and if you were told to buy PMI insurance it’s with the understanding it is a great deal for you––wrong. This is only if you can sell the home.

4. When you go searching for a loan, just remember that if you use a secondary market that is used for a lesser down payment or no down payment, the mortgage on your home is sold after 90 days or whatever pleases your lender. It could sell three to six times more (change lenders). You, the original lender, never know or you could get lucky and not be sold at all. But if it is sold, remember each time your loan changes hands, the previous lender needs to file a release at the recorder’s office in the county your property is located in, so when you choose to sell, it goes smoothly.

There probably isn’t a person who at one point in time in their life that doesn’t want to own a home! But here is some food for thought. Try the lenders in your hometown and make sure you are comfortable with the loan and the terms.

If you choose to go online or go elsewhere, check with someone who has used that lender.

I have used lenders outside of home boundaries and I interrogate them to make sure they are the quality we need to be using.

Ask every question possible when going to purchase a home, when using PMI and make very sure you don’t have to be homeless and sitting along the street or in a tent or your car, when the air has cleared.

Buying a home or an investment property is still the American dream, but make sure it’s your dream and you have good results.

The Meaning of a Buyer’s Market

2009-08-04T22:39:00.000-07:00

In the world of real estate investing, it is very important to pay attention to market conditions for they will dictate whether it is the best time to make a move or wait things out. With all that has been happening in the housing industry and financial sector these days, many experts and analysts are saying that it is indeed a buyer’s paradise.

When you hear the term “buyer’s market”, you can safely assume that buyer’s have the upper hand. In terms of investing in real estate properties including foreclosure homes, it could mean three things: low asking prices, acceptable interest rates and large inventories.

These three factors are very important if you want your foray in the world for real estate investing to be successful. If they are present, you will never go wrong. At present, you will be delighted with the many homes for sale to choose from, the high affordability of these homes and the reasonable interest rates. Keep in mind that having a high credit score.

Of course, having the advantage will mean enjoying certain perks. For example, you can always ask sellers to lower their asking prices during negotiations. If this is not possible, you can look for a seller offering incentives like shouldering closing costs.

Considering that it is a buyer’s market, you should not hesitate to ask for such things especially because of the tough competition among these sellers. And with the foreclosure crisis still rampaging on, most of the lenders/sellers are slashing down asking prices for these foreclosed properties in order to reduce their inventory and control holding costs.

A buyer’s market should be taken advantage of considering that, sooner or later, the market will eventually balance out. In an ideal market, the buyers and sellers are on equal footing and you should definitely not wait for this to happen if you do not want to lose all those advantages.

CORRECT: New Mortgage Insurance Applications Up In June

2009-08-04T22:35:00.000-07:00

DOW JONES NEWSWIRES
New residential mortgage insurance applications rose in June from a month earlier, but the number was the second-smallest in the past seven months, according to a survey of the biggest private mortgage insurers.

Mortgage defaults grew slightly in June from May while cures fell in the same period. Defaults and cures remain elevated from a year earlier, though defaults have fallen from the highs in December and January and cures are lower than in February and March.

Insurers received 56,271 new applications for mortgage insurance in June, up 1.5% from May but 38% below June 2008.

New insurance written grew 11% to $7.65 billion in June from May but fell 44% from a year earlier.

The total amount of mortgage value that is covered by private mortgage insurance was $915.1 billion in June, with insurance typically guaranteeing a portion of that amount. In June, total insurer exposure was $209.6 billion.

Covered mortgages that went into default, or became at least two months overdue, rose 0.5% to 88,362 in June from May and jumped 30% from a year earlier.

Defaulted mortgages that cured, or were brought current after being at least two months overdue, fell 1.3% to 51,908 in June from a month earlier but were 20% more than in June 2008.

Mortgage insurance protects lenders from losses on defaulted mortgages and is typically required on mortgages obtained with less than a 20% down payment.

Mortgage Insurance Losses Narrow to $1.9bn

2009-07-14T23:55:00.000-07:00

Underwriting losses in the mortgage and finance guaranty segment reached $1.9bn for Q109, but compared to the same quarter for 2008, losses might reach a plateau, according to a report from A.M. Best, a global credit rating system.

In Q108, mortgage and financial insurance companies registered $3.3bn in losses, an analyst at A.M. Best said. The losses are decreasing, but their magnitude still impacts the US property and casualty insurance industry’s net income, which plummeted by 87% in Q109 from the same quarter last year to $1.2bn.

“The year over year decline in earnings was primarily due to the severe and prolonged turmoil in the financial markets and the related impact on the industry’s net investment income and realized capital losses,” analysts said in the report.

Mortgage insurance companies protect lenders against loss on defaulted loans. Analysts couldn’t point to a specific cause for the quarterly losses, and a mortgage insurance firm could not comment ahead of Q2 earnings releases.

Mortgage Insurance Stocks Move Lower Amid Economic Concerns

2009-07-10T00:57:00.000-07:00

NEW YORK (Dow Jones)--Mortgage insurance stocks were in the red Monday, weighed down by continued worries about the economy, though the rest of the insurance sector managed to buck the trend as Sandler O'Neill issued a positive second-quarter outlook for property/casualty insurers.

Among the insurance sector's worst performers Monday was mortgage insurer Radian Group Inc. (RDN), which fell 10% recently to $2.49. Fox-Pitt analyst Matthew Howlett noted in an interview, "mortgage insurers are more levered to economic fundamentals" such as jobs and housing. "People are getting more skeptical on housing and the default cycle," Howlett said.

Among other mortgage insurers, PMI Group Inc. (PMI) slid 3.7%, to $1.80, and MGIC Investment Corp. (MTG) dropped 1.7%, to $3.97. Struggling insurance giant American International Group Inc. (AIG), which has mortgage insurance operations, dropped 12%, to $16.03.

Several bond insurers were also down Monday, as Amabac Financial Group Inc. (ABK) fell 3%, to 85 cents, and Assured Guaranty Ltd. (AGO) slumped 2.2%, to $11.79. But MBIA Inc. (MBI) rose 1.8% to $4.03.

Most other insurers were also in the black. The Dow Jones U.S. Insurance Index was recently up 1.2%.

Sandler O'Neill issued a note to clients Monday predicting second-quarter book values for most of the insurers it covers will have had "significantly positive book value growth during the quarter." The firm projected the property/casualty group will show average growth of 9.4%, thanks to equity and bond market increases during the quarter.

The firm also said it expects "a fairly positive" earnings season for the property/casualty insurers. However, the firm noted there is a big unknown for the quarter: how much in favorable reserves will have been released. Noting 2008 and first-quarter 2009 results benefited from favorable reserve releases, the firm said "we believe that these favorable reserve releases can't last forever and expect favorable development to decline significantly over the course of 2009."

As for the mortgage insurers, Motley Fool analyst James Early told Dow Jones Newswires "we still have had a lot of negative housing news and a lot of negative employment news, which can morph into negative housing news. That's a negative from a business perspective; if the money's not coming in the door for those insurers, and they're paying out more, that's not good."

Consumer Protection on Wide Scale

2009-07-01T01:59:00.000-07:00

WASHINGTON -- The Obama administration's proposed consumer-protection agency would have broad oversight for a range of products, beefing up the government's regulation of credit cards, mortgages and gift cards, as well as expanding its authority over financial firms.

Draft legislation unveiled Tuesday by the Treasury Department would for the first time make a single entity, the Consumer Financial Protection Agency, responsible for writing and enforcing rules across a range of financial products used by consumers.

Real Time Economics
What Would Consumer Protection Agency Do? "This agency will have only one mission -- to protect consumers," Treasury Secretary Timothy Geithner said.

Securities products overseen by the Securities and Exchange Commission and most of the insurance industry wouldn't fall under the new agency's oversight, a Treasury official said. But the agency would have subpoena power and would be funded in part by the financial-services industry.

The Treasury and White House plan to work with Democratic leaders in Congress to try to move the legislation quickly.

The measure is expected to draw opposition from the financial-services and business communities, which argue that the new agency would stifle product innovation and prevent firms from offering tailored products to customers.

"Basically, the government is deciding what every bank in every circumstance should offer," said Ed Yingling, president and chief executive of the American Bankers Association.

The proposed new agency is part of the Obama administration's efforts to revamp regulation of the U.S. financial system.

The new agency's reach would allow it to streamline federal mortgage-disclosure rules, and enforce recently enacted credit-card rules, Mr. Barr said. It could also potentially write rules to require banks to get permission from customers before enrolling them in costly overdraft plans.

The Tax Implications of Foreclosures

2009-06-25T08:12:00.000-07:00

Foreclosure Tax Basics
A foreclosure transaction occurs when a mortgage lender repossesses a borrower’s property and then sells it to pay off the debt. In most cases, however, a foreclosure will only happen when the mortgage debt exceeds the property's fair market value, or FMV. In this situation, the federal income tax rules treat the foreclosure as a sale for the FMV amount.

Therefore, a tax gain will result if the property’s FMV exceeds its tax basis. (The tax basis of a principal residence usually equals the original cost of the property, plus the cost of any improvements.) On the other hand, a tax loss will result if the property’s FMV is less than the tax basis.

If a mortgage lender also forgives some or all of the debt against your property in conjunction with or after the foreclosure transaction, you have cancellation of debt (COD) income. That income is taxable unless an exception applies.

Remember: Just because your property is foreclosed doesn’t necessarily mean the lender will forgive any of the unpaid mortgage balance (the so-called deficiency). When there is no forgiveness, there is no COD income. That said, mortgage lenders in these tough economic times sometimes will forgive all or part of the deficiency, so COD income can be fairly common these days.

Don't Forget the Home Sale Gain Exclusion Break
Another thing to consider is whether or not you qualify for the federal home sale gain exclusion break, which allows an unmarried person to exclude (pay no tax on) a gain of up to $250,000 while married joint filers can exclude up to a $500,000 gain. To qualify, you generally must have: (1) owned the home for at least two years during the five-year period ending on the foreclosure date and (2) used the home as your principal residence for at least two years during the five-year period ending on that date.

The Bottom Line
Probably the most important thing to understand about a principal residence foreclosure is that the mortgage lender will not necessarily forgive any of the unpaid balance that remains after the property is sold. However, in the current environment, some forgiveness would not be unusual. Also, keep in mind that you may not know for quite a while after the foreclosure whether anything will be forgiven.

Tax-wise, the most important thing to understand is that a foreclosure can potentially result in a taxable gain, and it might result in some taxable COD income, too.

Fortunately, with a principal residence foreclosure, an otherwise-taxable gain can often be excluded for federal purposes thanks to the home sale gain exclusion break (state income tax results can vary). Also, some or all of the COD income may be tax-free thanks to favorable tax-law exceptions. However when no exception applies, the COD income is fully taxable.

Mortgage approvals rise in May

2009-06-25T08:08:00.000-07:00

The number of mortgages being approved rose by 15.8% year-on-year during May, reaching 31,162 in total, according to new statistics from the British Bankers' Association (BBA).

This figure marks a continuation of a trend seen during the last six months, with the number of house purchase loan approvals, along with their average value, increasing steadily.

However, the BBA indicated that the mortgage market as a whole was still struggling, with net new lending standing at £2.3bn for May, the weakest monthly increase since early 2001.

Net new lending stood at £2.5bn in April.

"Steady monthly increases since last November have seen the number of loans approved for house purchase recover to levels seen in early 2008, although gross and net mortgage lending show a subdued wider mortgage picture," said BBA statistics director, David Dooks.

"However, unlike much of the mortgage market, the high street banks are still seeing lending growth and improved mortgage availability is reflected in higher average loan approval values."

Have Mortgage Delinquencies Hit Rock Bottom?

2009-06-18T01:43:00.001-07:00

It is baffling just how many homeowners are going belly-up in their loans, especially considering that there are copious mechanisms in place to save those who are facing foreclosure or even see themselves nearing the road to foreclosure. The foregoing not withstanding, there is a school of thought that suggest that mortgage delinquencies have not yet hit rock bottom. Economists state that seven out of 100 homeowners are currently delinquent on their mortgage loans.

What makes matters is the number of those who are barely hanging on to their homes and who are being laid off, overtaken by consumer debt, and also fell victim to the lure of easy equity when they could ill afford to take out any money from their homes. Now upside down in their loans, there is no chance of refinancing and rescue is available only by qualifying for one of the government programs. Perhaps it is the notion that homeowners are finally seeking help that makes the Mortgage Banker’s Association comment on a decline in new foreclosure filings.

Unfortunately, investors are not buying the good news, especially since the drop in foreclosures could be the loans currently on hold while awaiting a decision to see if homeowners are eligible to participate in any one of the governmental programs. Thus, there is a good chance that the actual number of halted foreclosures may be unduly watering down the foreclosure rates, seeing that not all halted foreclosures will actually result in saved loans. In these cases, the halted foreclosures may buy some time, but eventually become foreclosures nonetheless.

With the upset in the housing market, the upset in the employment numbers does not bring any good news. As a matter of fact, states that are considered ground zero for the mortgage meltdown – Nevada, Florida, Michigan, and California – also report skyrocketing unemployment as well as projected job losses that are yet to hit the ailing economies of these states. Speculations are rampant that further economic downturns are likely to happen. When this occurs, the next wave of foreclosures is going to continue dragging down the markets locally but also nationally.

As such, it is a safe bet that mortgage delinquencies have not yet hit rock bottom, and may actually still be in the mid stages of their freefalls. This is especially true considering that other forms of mortgages are now beginning to also join the subprime mortgages in their foreclosures. With so many consumers living from paycheck to paycheck, even the loss of only one or two such paychecks can hail fiscal disaster for the consumer, and by extension for the lender who holds the mortgage papers.

Although not saying so loudly, investors are leery to once again jump headfirst into the mortgage market and not even the government incentives are sufficient to have them change their minds. This of course begs the question what it will take to once again make them comfortable to invest in the housing market. Some speculate that only governmental coercion could accomplish this feat, while other hope that a slowdown in foreclosures will be enough for the more daring ones to once again infuse cash into the housing market.

More fixed-rate mortgages go up

2009-06-18T01:41:00.000-07:00

More big lenders have increased the cost of their fixed-rate mortgages for new borrowers.

The Abbey, the UK's second biggest mortgage lender, has put up the cost of its fixed-rate deals by between 0.25% and 0.5%.

Lloyds banking group has also made some of its fixed-rate deals more expensive.

The trend started last week when the Nationwide building society raised the cost of all its fixed-rate home loans by up to 0.86%.

The main factor behind the changes has been the increasing cost of swap rates.

These are the fixed rates at which banks and building societies borrow money from each other, for specified periods of time, to fund these particular mortgage deals.

"Swap rates have increased substantially in May and June and in particular last week," said Nici Audhlam-Gardiner, director of mortgages for the Abbey and the Alliance & Leicester, both run by the Spanish bank Santander.

"Following competitor moves and further swap rate increases, it has become necessary to increase the rates on some of the deals we offer," she added.

Going up

Other lenders which have taken similar steps recently are the Woolwich (part of Barclays), Northern Rock, Cheltenham & Gloucester (part of Lloyds) and the Halifax (also now part of Lloyds).

Fixed-rate deals have become very popular again in the past few months.

During April 69% of all new home loans were at fixed-rates, according to the Council of Mortgage Lenders (CML).

With the Bank of England's Bank rate still at a record low of just 0.5%, the expectation is that the official cost of borrowing can only go up when it is next changed. Some suggest therefore it may now be a good time to fix the cost of a home loan.

"People thinking of taking out a fixed-rate should not delay, but should move as quickly as possible," said Melanie Bien, of mortgage brokers Savills Private Finance.

"I think rates will go higher still."

According to the financial information service Moneyfacts, the average cost of a two-year fixed-rate loan, for someone with a 25% deposit, is currently 4.28%.

For borrowers who can only put down a 10% deposit the average rate is higher at 6.06%.

A Mortgage Modification While Unemployed Is Not Impossible

2009-06-18T01:38:00.000-07:00

Some homeowners think that getting mortgage modification while unemployed is impossible. This couldn’t be further from the case. While it is true that you will have a more difficult time being approved for a mortgage modification while unemployed, many lenders do accept homeowners who currently do not have a job.

Unemployment is no rarity in today’s economic climate, and lenders are coming to cope with that.

Even someone who used to have a very stable position in their company is at risk at layoffs these days. Homeowners from all walks of life with homes that range in value from $60,000 dollars to $700,000 dollars are having problems sending in that monthly check to their mortgage lenders. Families who were having trouble before are facing impending foreclosure while those who were secure are now having trouble making ends meet.

If you are currently unemployed, it’s important to highlight your possible financial possibilities in the near future and how you are planning to handle your mortgage after the modification.

If you receive unemployment checks, your chances are higher to be approved that someone who is not. In some cases you get the same chances as someone with a job, depending on your debt to income ratio. If you bring in enough through unemployment and do not have many expenses, your chances for approval are significantly higher than otherwise.

Your best chance for getting mortgage modification while unemployed is for you to state your case in your hardship letter. The hardship letter tells the lender what is going on with you right now and why you can’t pay your mortgage at the current interest rate. And on top of that, you let the lender know your plans for getting out of your financial troubles and how you’re going to handle the payments once the modification is approved.

Lenders are looking for homeowners who are going to be able to pay the new mortgage rate after loan modification. Even if you’re unemployed, the lender will still consider you if you show that you have a real intent to get back on your feet and work with them.

Some lenders, like Citibank, are even reaching out to homeowners who have lost their jobs and attempting to work with them towards lower interest rates to keep them in their homes. Foreclosure doesn’t help anybody, and lenders know that more than anyone else.

Do you want to know how to get a mortgage modification while unemployed? Show you’re confident you’ll be on your own two feet again and tell your lender that you will do anything to stay in your home. It may just work.

By: Lindsy Emery

Regulator Says Mortgage Aimed at Elderly May Be Risky

2009-06-10T02:19:00.000-07:00

By Margaret Chadbourn

June 8 (Bloomberg) -- Comptroller of the Currency John Dugan said a type of mortgage sold to older homeowners may pose the same risk as subprime loans, and that his agency was slow to act as rising foreclosures led the market to collapse.

“We all could have sounded the alarm earlier about risks that were developing in the subprime mortgage market,” Dugan said at an industry conference in Orlando, Florida, as he raised concerns about so-called reverse mortgages. “It is imperative that our consumer protection standards be robust.”

Congress stepped up efforts to curb predatory lending practices and halt foreclosures after the subprime mortgage market collapse in 2007. Lawmakers passed a $700 billion package that was signed into law in October and sought to shore up the financial system and halt the record pace of foreclosures.

“While reverse mortgages can provide real benefits, they also have some of the same characteristics as the riskiest types of subprime mortgages - and that should set off alarm bells,” Dugan said at the American Bankers Association conference on compliance issues. “Now is the time to get out in front of this issue - before real problems develop.”

A combination of job losses, lower pension benefits and declining values in retirement accounts will increase demand for reverse mortgages as homeowners older than 62 seek to increase their income by using the equity in their homes, he said. The loans are often attractive to lenders because insurance from the Federal Housing Administration limits their losses, he said.

Guidelines

Dugan said OCC will release guidelines on reverse mortgages, which let a homeowner borrow without having to make payments until they die, sell the home or fail to pay taxes. Regulators should establish more rules for borrowers and lenders, including requiring escrows for taxes on reverse mortgages, he said.

Risks that contributed to the collapse of the subprime- mortgage market also are a concern in the sale of reverse mortgages, Dugan said. Complex lending products have the potential to result in “skewed incentives” for servicers that are underwriting reverse mortgages, and the product is “fraught with consumer compliance concerns,” he said.

Dugan, who regulates more than 1,500 banks including units at Citigroup Inc. and Bank of America Corp., said the agency needs to be on “constant alert to emerging risks” and remain vigilant on regulatory compliance. He said lenders contributed to the worsening economy by using loose underwriting standards and failing to adequately protect consumers.

The Department of Housing and Urban Development has estimated borrowers with lines of credit often withdraw at least 60 percent of their funds once the loan is approved, Dugan said. HUD pledged to develop programs that give financial counseling to consumers, including those with reverse loans, he said.

Insurance deals need to cover valuable possessions

2009-06-05T00:09:00.000-07:00

New research shows that two-thirds of respondents have a potentially valuable collection of items but many are unaware of how much it is worth.

Findings from Halifax Home Insurance revealed that 47% said they do not know how much their items could be worth while a further one in 10 have no home contents insurance in place.

Additionally, 38% think their valuables are covered but are not certain about the policy details.

David Rochester, head of underwriting at Halifax Home Insurance, said: "Although in many cases collectables are unique and irreplaceable, most people would at least want to recoup any financial loss in the event of them being stolen or damaged.

"We'd recommend anyone who has a potentially valuable collection to get it valued by an expert every two years and ensure they obtain a dated copy of the valuation certificate."

The survey also showed that 19% of people said they were keeping these collections in the hope that they will increase in value in the future.

Rate standstill prompts advice to fix home loans

2009-06-05T00:05:00.000-07:00

BORROWERS were advised yesterday to lock in to a fixed rate mortgage after comments from the European Central Bank were interpreted as signalling an end to the current cycle of rate cuts.

Economist Austin Hughes of KBC Bank said it was now likely eurozone rates would not go below their current level of 1pc even if the first hike in interest rates seems far away.

Comments from ECB president Jean-Claude Trichet yesterday indicated that central bankers believe the worst is over for Euorpean economies, but that the turnaround would be slow.

Mortgage

Mortgage adviser Karl Deeter of Irish Mortgage Brokers warned that some fixed rate mortgages have already started to rise.

In March, before the ECB dropped its main rate to 1pc, homeowners could get a five-year fixed rate of 3.6pc from AIB, but now that has crept up to 3.69pc.

"Profit margins are moving upwards while the ECB's base rate moved down. Already that means you'll pay just over €20 per month more on a €300,000 mortgage."

Mr Deeter said the danger of a return to inflation was evident. Any rise in inflation would spark the ECB to start pushing up rates.

Commodity prices, such as gold, copper and oil, were all rising. These were all signs that inflation is coming, Mr Deeter said.

Frank Conway of Irish Mortgae Brokers said the cycle of interest rate rises appears to have run its course.

Mr Conway said that with fixed rate so low, the argument for fixing has never been stronger.

"For consumers who have experienced savage wage cuts (in the private sector) as well as increased taxation by way of income and pension levies, fixed-rate mortgages can provide excellent insulation against rising mortgage repayments.

"They also become a great budgeting tool for homeowners who need to manage their day-to-day finances," Mr Conway said.

The Professional Insurance Brokers' Association (PIBA) said consumers should consider fixing, but not at any price.

Its chief executive Diarmuid Kelly said some short-term fixed rates may not be optimal if interest rates rise substantially within the next two years.

"PIBA would caution against such short-term fixed rates, as they may not represent value taking account of likely medium term economic realities.

"The kind of stimulus packages being injected into the US and belatedly European economies are likely to lead to increased inflation to which the natural economic response will be increased interest rates.

"For an extra payment of €96.14 per month on a loan of €190,000 a person can avail of a five-year fixed rate rather than a two-year fixed rate giving them security against upsurging interest rates after this deflationary period," he said.

Months later, flood recovery still ongoing

2009-06-05T00:01:00.000-07:00

TUMWATER, Wash. -- Most of the Tumwater Fish Hatchery is back up and running, but not all.

The Deschutes River backed up so high in January that the water level rose up to 6 feet, filling a huge space near the fish ponds with gravel, sand and other debris.

Crews have been dredging out the buildup, but their work isn't done. Part of the lower fish ladder still needs work.

The gushing waters also wiped out a safety fence where people can stand to get a good look at the falls, and will cost close to $3,000 to replace it.

"These are a bunch of small projects where that we're working," said Willie Nunn of FEMA.

The damages were small by FEMA standards, but large to most counties that don't have tens of thousands of dollars to spare for repairs. Thirty three of the state's 39 counties have ongoing repair projects.

FEMA works closely with the state to make sure each of those projects is getting done since they involve community infrastructure. But they also work closely with homeowners to make sure they're getting the help they need.

"If they feel that something's missing they need to call back, they need to let us know. They need to let the state know. Because if we don't don't know, we can't help," said Nunn.

Now, FEMA and the state are pushing to prevent the damages from recurring in future storms.

"If you've been flooded, you may qualify or be eligible for a mitigation grant that would elevate your home so that we can turn around and prevent the flooding in the future," said Kurt Hardin of the state Department of Emergency Management.

Studies indicate each dollar spent to prevent damage saves taxpayers $4 in repairs.

And residents shouldn't skip flood insurance, even if they don't live in a flood-prone area. Over the course of a 30-year mortgage, a homeowner's risk of flooding is one in four while the risk of fire is just one in ten. And one third of all flood insurance claims are by residents who live in low-risk communities.

"If a water main breaks and they get flooded, they may not be eligible for any assistance except flood insurance," said Hardin.

House prices could be rising by the end of the year, predict experts

2009-05-11T04:11:00.000-07:00

House prices could begin rising again by the end of this year, ending a slump that will have wiped more than ?50,000 off the average property value.

Experts from Lloyds group, which owns 30 per cent of the mortgage market, and the brokers, John Charcol, believe the clouds covering the property market will begin to lift by the autumn.

There is already some evidence of a pick-up in the number of buyers and sales going through estate agents.

Separately, both the Bank of England and Council of Mortgage Lenders (CML) are seeing a rise in the number of mortgage approvals for home purchase.

To date, the levels involved are still well down on a year ago - around 50 per cent - and they have not been enough to halt the fall in house prices.

However, while prices are expected to show further falls over the summer, there are signs they will stabilise and even move upwards by Christmas.

The consensus is that the current bust will see house prices fall by around 25 per cent - more than than ?50,000 - from the peak of the summer of 2007 before any recovery.

According to the Nationwide, the fall has already been 18.4 per cent and it believes there is another 6 per cent to go.

He believes house prices will fall 8 per cent by the autumn, but will then rise by 3 per cent over the final three months of the year.
'Estate agents have been reporting increased interest from both first time buyers and movers since the beginning of the year and some of that interest is now translating into sales.

'The good news on the mortgage front is that over the last few weeks lenders have been increasing the availability of mortgages up to 80 per cent and 85 per cent Loan to Value.

'I expect the market to stabilise by the third quarter of this year and house prices to show a net fall of only 5 per cent in 2009.'

He stressed there would be no return of a boom, saying: 'House prices are unlikely to recover quickly… the prospect of increases in interest rates, plus lenders’ less generous affordability calculations, will inhibit house prices increasing too quickly.'

Fixed Interest Rates a “Mortgage Mistake”

2009-05-11T04:10:00.001-07:00

Mortgage holders that took up banks’ fixed interest rate loan offers are losing thousands of euros annually, reports the regional daily Aamulehti.

The majority of fixed interest rate loans are in the neighbourhood of five percent. People carrying home loans pegged to fixed rates are losing thousands of euros annually in comparison to borrowers with home loans that are anchored to fluctuating reference rates, such as Euribor, according to the Financial Supervisory Authority.

The agency calculated that a four percent five-year fixed rate deal on a 150,000 euro loan will not beat out variable rates until interest rates reach 6.76 percent.

Mortgages linked to the fluctuating European inter-bank lending rate Euribor currently carry interest rates between 1.5 and 1.7 percent.

Between 2006 and 2008 up to a third of home buyers took out fixed rate loans. The popularity of these loans, some 160,000 which have been issued to date, has recently dwindled.

Budget 2009: Building and mortgage lending

2009-04-23T03:08:00.000-07:00

Alistair Darling has said a lack of mortgage credit is holding the housing market back.

The chancellor announced construction firms would get £500 million of extra finance to build new homes, and the armed forces would receive £50 million to make home improvements.

He also said the scheme to guarantee mortgage backed securities would be used to help boost lending, particularly for first-time buyers, and an extra £80 million would be put into the shared equity mortgage scheme.

Peter Rollings managing director of estate agent Marsh & Parsons, said: "The government needs to think long term – sticking plaster over sticking plaster isn’t going to heal a wound that needs stitches.

"Crucially, demand for mortgages is there – it’s full to bursting. The banks just haven’t been able to lend. The government guarantees for new mortgage backed securities should offer lenders new finance to fund new lending to take the cap off pent up demand."

Good news also came for the environment as the chancellor announced £100 million for local authorities to build energy efficient homes.

Mark Blackwell, sales director at property and mortgage outsourcing specialist Xit2, said: "The budget announcement that new mortgage backed securities will be underwritten from today should reopen wholesale funding markets for good quality lending.

"Those at the property market coal face tell us demand to buy property is there – we hope these measures will have a noticeable and quick impact on the volume of lending lenders are capable of."

However, the Federation of Master Builders (FMB), has said the chancellor's announcement has not gone far enough for the beleaguered construction sector. Brian Berry, director of external affairs at the FMB said: "The chancellor had an opportunity today to invest in our housing but instead has offered a lukewarm package of financial measures that will do little to increase the housing supply or to make our homes more energy efficient.

"The amounts on offer of £500 million to support the construction industry and kick start stalled construction projects of new homes, coupled with the £100 million for local authorities to invest in energy efficient improvements are a drop in the ocean."

Retirement Still a Concern, but Everyday Expenses Take Priority

2009-04-22T02:44:00.001-07:00

AXA recently surveyed Americans age 25 and older with annual incomes of $50,000 or higher, and found that the picture looks bleaker than it did for surveys the company conducted in October and April. In the latest survey, 65% of those polled said they were concerned about meeting everyday expenses, including the ability to pay their mortgage, should they lose their job, up from 54% a year ago.

“Our research showed that paying bills was a middle-of-the-pack concern last April,” said Christopher “Kip” Condron, chairman and chief executive officer of AXA Equitable, in a release of the survey results. “The fact that it is now a top priority underscores how the yearlong market volatility has shaken Americans’ sense of security about their immediate financial future, most notably as a result of job instability.”

AXA suggested that this concern about day-to-day expenses might have led consumers to be less focused about retirement savings. Since last year, consumers’ concern about keeping inflation, taxes, and declining markets from eroding retirement savings has dropped three spots on the overall ranking of financial concerns (from second to fifth). Similarly, concern about protection from market conditions fell two notches to the eighth spot.

Although meeting day-to-day financial obligations is clearly more important, the study found that securing guaranteed income for life remains the top priority for 69% of Americans polled. While half of the respondents indicated they have done nothing to change their financial picture, the results show that more have chosen to do something since October (26% compared to 21%).

“The fact that people are still concerned about the health of their retirement during the market volatility we are experiencing makes it clear that they still understand the importance of preparing for their financial future,” said Condron. “What is alarming, however, is that so many are still not taking the steps needed to achieve those goals.”

Men, Women Agree on One Thing: Retirement Will Have to Wait

The study shows that approximately 40% of men and women within 10 years of retiring plan to postpone retirement. Specifically, 39% of women said they will delay retirement by four years to a revised age of 66. Forty percent of their male counterparts will wait an extra three years and now expect to retire at the age of 64. In both cases, current market volatility is the primary reason for the shift in thinking, according to the survey.

In keeping with the generalization that women are often more conservative investors than men, women respondents show more concern about the economy, yet are less likely to make changes in response to their concern. While 75% of women polled said that receiving guaranteed income for life is a priority, only 58% of men agree, according to the results. Similarly, 74% of women said that paying everyday expenses is “very important,” but just 54% of men shared the same sentiment. In response to market conditions, the study shows that men are also more willing than women to make changes:

Almost three in 10 men (28%) expect to invest in a new product, compared to 20% of women.
More than six in 10 men (61%) plan to shift the asset mix of their investments, compared to 51% of women.
Affluent Investors Show More Concern

The latest survey also found that amid current market volatility, behaviors and attitudes not only varied by gender, but by age and affluence. Notable results include:

Approximately seven in 10 of the affluent polled (67%) are concerned about their ability to pay everyday expenses if they were to lose their job, compared to 60% of the non-affluent. (Affluence is defined by AXA as having an annual household incomes of $100,000 or greater.)

Six in 10 affluent are worried that they may not be able to pay their mortgage if they were to lose their job, compared to slightly more than half (54%) of the non-affluent.

More than three in four (76%) of the older affluent (age 45 and up) polled are concerned about securing guaranteed income for life, compared to just 63% of the younger affluent (ages 25 to 45).

Less than half (48%) of the younger affluent polled believe their personal financial situation has declined in the past year, while 66% of the older affluent feel they are worse off today.

The online survey was conducted in February by a third-party research firm among 1,116 randomly chosen U.S. consumers.

What can you get for $2.3 million?

2009-03-30T07:28:00.000-07:00

BY JENNY STALETOVICH
jennystaletovich@bellsouth.net

As long as none of us has any money, why not take a gander at some really beautiful homes that few of us will ever be able to afford? Some ooze style; some come pimped with amenities like full home gyms, commercial-grade refrigerators, soaring fireplaces or guest houses; and some are just cool.

Monthly mortgage payments (not including taxes or insurance) on $2.3 million total $9,878 for a 30-year mortgage at 5 percent interest with 20 percent down. Estimated annual taxes are based on sale prices and include a $50,000 homestead exemption. Broward taxes are calculated using a countywide average millage rate.

Chicago Workplace Spotlight – Seaway Bank & Trust Company

2009-02-21T20:43:00.000-08:00

Seaway Bank & Trust Company
645 E. 87th Street
Chicago, IL 60619
773.487.4800
www.seawaybank.us
President/CEO: Walter Grady

--------------------------------------------------------------------------------

A long-standing fixture in the African-American community, Seaway Bank & Trust Company was created to “counter discriminatory lending practices on Chicago’s South Side”. Founded in 1965 as Seaway National Bank of Chicago, the original founders knocked on doors of neighborhood residents to sell shares in hopes to raise $1 million in capital, which was needed to obtain a Federal charter.

Seaway did exceedingly well in its first year, amassing assets of over $5 million dollars and became nationally recognized as one of the largest Black-owned banks in the U.S. (largest in the Midwest) and one of the few “minority-owned banks with corporate trust services”.

Today, Seaway Bank & Trust Company has seven locations throughout Chicago (and recently including the suburb of Waukegan), with ATMs across the city and in O’Hare and Midway airports. Seaway continues to support local businesses and provide minority entrepreneurs with capital needed to shape a new generation of businesses. They are also known for the Seaway Community Development Corporation (SCDC), which features “the 1% Down Mortgage” – a program that has allowed “qualified buyers the opportunity to purchase homes with a minimal one percent down payment and no private mortgage insurance (PMI)”.

You can learn more information about Seaway National Bank & Trust Company by visiting this link.

Finance blog: Bored with Bankers Boards

2009-02-14T01:18:00.000-08:00

I am too bored with the banks and the Government this week to rant on about them. That is not to say they don't deserve it, and they have continued to be remarkable in their disingenuousness and hypocrisy, but I would rather a few cheerier topics for once, so a few snippets from this weeks work. A far quicker read for you all as well.

More importantly, we have the answer to last weeks question, and something of a record. We have had the most entries ever, and not one of them was correct. Outstanding, and I thank you for your efforts, and the joy of being custodian for another week of some rather dubious pens & pencils.

You were asked who was the young army officer who took out a policy with the ‘Accident Insurance Company' in 1896, then went on to be involved in various military conflicts, usually involving cavalry charges, was taken prisoner of war, escaped, left the army, became a journalist, went to a war zone, was imprisoned, escaped, and then settled down a bit? Had I mentioned he subsequently became a Prime Minister you would have got it I'm sure. The answer is Winston Churchill. This weeks question is below.

Life Assurance
A topic that arose this week. Many have some form of life assurance, and if you have what is known as a term assurance or decreasing term (usually in connection with a repayment mortgage) these insurances do not have any savings element, and are pure insurance. Circumstances and prices change, so it is worth double-checking now and again to see if yours is at the lowest cost. Be aware though, if you have had any health issues since you took out your current policy, a new insurer might not give cover, so normally, if a premium seems cheaper, make the application but hold onto the old policy until you definitely know the new one is sorted. As an example, I did a check for someone this week, and we can replace their current policy costing £48 per month, with one costing £33, a saving of around £180 per annum, or 30%.

Clarity & Comparison
Will the Banks ever be regulated properly? I doubt it, because there is no will to do so, but I am about to start my own mini campaign for the regulation of savings and borrowing products, so that the terms are clear, easy to compare, and accessible. I'm sure this will be unsuccessful as well but fortune apparently does favour somebody or other.

R85
Another topic that arose this week. A little reminder for those on low incomes with savings; retired perhaps. The personal allowances were increased greatly last year, (to make up for Darling Alistair's 10% tax cock-up) so that for somebody who is 65 or more between April 2008 and April 2009, has a tax allowance of £9,030. (Higher if over 75.) This means you can have this much in pension, or savings interest without paying tax. I

f you have any savings accounts, or cheque account that pays interest, you can arrange to receive the interest gross by use of the very simple ‘R85', a form from the revenue you sign and hand to your bank or building society. (Contact me if you want one.) There is also a form to reclaim the tax over paid. It may not add up to much, but every little helps. (Where have I heard that before?)

Your Question
Mandy & The Mervyns are busy next week, cooking up something nice. They have lots and lots of money to print. Yummy. Sorry, I meant to say undertake a rational round of quantitative easing that will not lead to hyperinflation, and a loaf of bread costing £500. No, in fact I meant printing money. This leads us to your question. What is the largest denomination bank note printed by the Bank of England? Answers by e-mail please, and I promise to find something better than the much-maligned pens & pencils as a prize, and I am even prepared to probe the depths of the desk drawer again.

John.

John C. Cartlidge
Independent Financial Planner
Tel: 0151 336 6610
Email

Jobless rate surges in Florida, bay area

2009-01-24T00:21:00.000-08:00

By Jeff Harrington, Times Staff Writer
In Print: Saturday, January 24, 2009

Florida economists are growing accustomed to repeating a phrase no one likes to hear: It's worse than we thought.

As a jarring punctuation mark to a dismal year for job seekers, the state's unemployment rate rocketed from 7.4 percent to 8.1 percent from November to December.

Florida shed a quarter million jobs in 2008, exiting December with 752,000 jobless workers out of a labor force of 9.3-million, according to the Florida Agency for Workforce Innovation.

In the Tampa Bay area, unemployment rose to 8.3 percent, the worst major metro area in the state.

Given the unexpected acceleration in lost jobs, economist Sean Snaith of the University of Central Florida said Friday that the likelihood Florida will reach double-digit unemployment this year "has gone up significantly.'' Indeed, a handful of Florida counties are already there, including Hernando, with an unemployment rate of 10.9 percent.

Historically, unemployment continues rising months after a recession ends. Under one best-case scenario, according to economists, the recession ends in the second half of 2009, and unemployment rises into 2010.

What does that mean for Floridians?

If 2008 was the recession's clarion call, 2009 is shaping up as the year of austerity.

Banks are restricting lending to the most creditworthy consumers, while paring down and eliminating lines of credit for others. To the dismay of the tourism industry, the U.S. Travel Association forecasts fewer people traveling in the country this year, and spending less when they reach their destinations.

Even enthusiasm for the Tampa-bound Super Bowl is tempered, with PriceWaterhouseCoopers projecting visitors will spend $150-million — $30-million less than if the economy was thriving.

The age of austerity also is rewriting the ground rules for small businesses trying to squeeze a buck. Some are slowing down payments to vendors or lobbying heavily for discounts.

Henry Glime, president of Gallo Building Services in Tampa, isn't reluctant to negotiate with materials suppliers and contractors to find a pricing point that makes sense.

"You have to ask until they say, 'No,' '' he said. "If everyone gives a little bit, the whole project works and everybody ends up being successful.''

Contraction is broad

The housing downturn led the way into the recession, but it doesn't appear ready to lead the way out. Housing starts plunged to a record low in 2008, and home prices continue to fall. By far, construction took the toughest punch last year, accounting for 88,200 lost jobs statewide, or 30 percent of the total loss.

Heading into 2009, the contraction is much more spread out; Microsoft and Disney are among corporate icons announcing job cuts this week.

Retailers are particularly vulnerable, as those that endured disappointing holiday sales are still struggling to entice shoppers. Among the latest moves: Saks Inc. laid off 1,100 workers and cut out its 401(k) matching program, while Williams-Sonoma trimmed 18 percent of its work force, slashed inventory and cut back on catalog mailings.

Businesses find themselves in uncharted territory, which only intensifies the frustration and uncertainty.

The last time Florida's unemployment was this high was September 1992, a year after that recession ended. But unlike that recession and the ones in the 1970s and 1980s, this one is exacerbated by a credit freeze that shows no signs of thawing.

"Florida entered the recession a little earlier than the rest of the country, but there is no sign that the downturn will end sooner there,'' said Mark Vitner, senior economist for Wachovia Corp. "Home prices are still declining across much of the state, putting downward pressure on household wealth and making it more difficult for residents to refinance home mortgages and take advantage of falling interest rates.''

Stimulus package

As with any recession, the depth of the angst and the pace of the recovery vary house by house, industry by industry.

A potential $850-billion federal stimulus package could mitigate the pain. So, too, could moves by federal regulators to keep interest rates low, shore up banks and buy toxic mortgage-backed securities. But don't look for any quick-fix panacea or a V-shaped recovery once a turnaround begins.

"We shifted to a full-blown panic in September, and the thing about panics is you don't un-panic,'' said Scott Brown, chief economist with Raymond James Financial in St. Petersburg. "It takes a while to restore confidence.''

Time, in fact, may be the only solution. Enough time for investors to start trusting Wall Street again, for the shell-shocked but still gainfully employed to start eating out and shopping a little more. Time for banks to start taking a modicum of healthy risk.

Snaith, the UCF economist, thinks a stimulus mix of tax relief and government-backed infrastructure projects will at least mark a turning point.

"What it does is start to put a floor underneath this drop into despair we're seeing and give people a sense that there is a bottom, and we will start to climb out of this recession as we have every other recession in the past,'' he said. "It will get worse, but we're not going to see the Great Depression either. Let's get a reality check. Unemployment was 25 percent then, and we're not going to see that.''

New Northern Rock lending policy

2009-01-19T03:57:00.000-08:00

Nationalised lender Northern Rock has been given longer to pay back its £26bn loan as part of government efforts to boost lending and the economy.

The bank had been encouraging customers to re-mortgage with other lenders so it could pay off the loan quickly, but this policy will now be relaxed.

"This means that more mortgage customers will the able to stay with Northern Rock," the bank said.

Northern Rock said "there will be no impact" on its savings customers.
Northern Rock, which was bailed out by the government after a run on the bank in 2007, added that "all government guarantees remain in place".

The bank has been encouraging existing customers to remortgage to other lenders, when their fixed rate product deal ends.

Challenging climate

"We have decided it is not appropriate for Northern Rock to continue to shrink its activities, they have made substantial repayments to the government and is ahead of its repayment schedule," said Chancellor Alistair Darling.

"It is right for them to maintain their lending in the housing market."

He added that the decision was made in the climate when "you're facing the departure of foreign-based banks and some of the smaller building societies are not going into too much lending".

Northern Rock made its announcement on the same day that the government unveiled a second package of measures to support the banking system.

The measures include a scheme to offer banks insurance against them losing more money from their bad debts.

Sale of IndyMac Bank Appears Imminent

2008-12-26T03:30:00.000-08:00

IndyMac Bank, the California mortgage lender seized by U.S. regulators five months ago, will be sold by the Federal Deposit Insurance Corp. before the end of this year, said a person familiar with the matter.

The bank may be sold intact or split among multiple buyers, according to the person, who declined to be named because discussions aren’t public. Bids were due by Dec. 15. FDIC spokesman David Barr said today an announcement about IndyMac will be made by year-end. He declined to comment on a sale.

Regulators seized IndyMac in July after overdue mortgages left the lender short on cash and triggered a run on deposits. The FDIC said at the time it intended to sell the Pasadena-based bank within 90 days, preferably in one piece. Potential bidders may include U.S. Bancorp and PNC Financial Services Group Inc.

IndyMac, which had $32 billion in assets and $18 billion in deposits when it was seized, at the time ranked as the second-largest failure in FDIC history. The bank crumbled under the weight of huge losses on mortgages gone bad.

Habitat International honors Sue Croom

2008-12-20T06:11:00.000-08:00

BY MICHELLE GENZ ASSOCIATE EDITOR

Take it from a woman who’s dealt with more than her share of construction workers: There is one big advantage working on Habitat for Humanity’s job sites. “They don’t whistle,” says Sue Croom. “That’s kind of refreshing.”

But fans of Sue Croom will be standing, cheering and maybe even whistling in January when the 61-year-old Orchid resident, who puts in 20 hours or more each week on construction sites, is honored in Atlanta as 2008 National Volunteer of the Year by Habitat for Humanity International.

Croom, whose association with construction was for many years through a now-ended marriage, is being recognized by the global organization for her own work with Habitat’s Women Build program. Her all-woman work force has built nine homes locally, with more on the drawing boards.

“She represents the true Habitat spirit,” says Carrie Rossman, assistant operations managers in charge of volunteers, who nominated Croom for the award. “Her energy and enthusiasm is almost contagious. She makes volunteers – especially women volunteers – feel really comfortable in stepping up to the plate and saying ‘Yes, I’ll volunteer.’ ”

While Croom was the first nominee from the local Habitat chapter, Rossman says she wasn’t surprised that Croom won — though Croom herself was. “She was shocked. She’s very humble about the work that she does. She should be proud.”

Standing at a job site near Olso Road, what Croom seems most proud of is her ability to gather good intentions around her to turn a vacant lot into somebody’s home. She’s also proud of having found a passion in her life.

“Framing is the thing I love most,” says Croom, who had no hands-on construction experience before she started with Habitat. She also loves roofing, can put up fascia and soffit, and can set windows, and operate a table saw and a circular saw.

While she still gets regular manicures and wears pale peach lipstick on the job, the Harley-riding Croom is entirely comfortable with terms like jacks, cripples and studs – and knows how to wield them in pun-strewn descriptions of the male crews.

“I can never figure out why men come out here and want to be bossy. But we’ve got them pretty well trained,” she says. “We don’t put men with our group unless they are of like mind and like heart. You don’t want to be treated poorly.”

“It used to be you drew the short straw if you had to supervise the Women Build,” she says. “But over the years, we’ve developed into a fairly skilled group of people. The Women Build gives a new person opportunities to come into a group and not feel intimidated by the men. It makes them comfortable about learning new skills.”

--------------------------------------------------------------------------------

Croom credits her community service with Habitat with restoring her sanity. Raised in Sarasota, Croom had married local builder David Croom at 21. Moving to Vero in 1976, she raised two children, and worked in the office of her husband’s construction firm. Thirty-one years later, her husband suddenly left her. He remarried the next year. They have not spoken since, she says.

Devastated, Sue Croom fell into a deep depression. “For five years, I didn’t know whether I was coming or going.”

It was a friendship with a neighbor in Orchid Island that eventually drew her out of her sense of worthlessness. That friend, Jo Tripp, was recently widowed, and had not known Croom’s ex. That gave Croom a sense of making a fresh start, having found a kindred spirit in figuring out how to have fun as a woman alone.

One day, Tripp invited her to the groundbreaking of Grace Pines, Habitat’s community of 26 homes in Gifford. Orchid Island was sponsoring one of the houses about to be built.

Through that first visit, Croom began her association with Habitat. “Through helping others, I finally got out of my box,” she says. “There’s a whole lot worse stuff out there than me and my problems.”

“A verse comes to mind when I think of Sue,” says Cyndy Hazelton, a Women Build crew leader who lost her husband to cancer a year ago. She has known Sue Croom since their children were small, and they both served on the parent association. After a few years without contact, they reconnected by chance at church the morning after Sue’s husband moved out.

“ ‘Man’s heart plans his way, but the Lord directs his step.’ I think that’s exactly what happens in Sue’s life,” Hazelton said. “The opportunities have come her way and she’s participated in them, and that’s how she got where she is today.”

--------------------------------------------------------------------------------

Croom’s first role at Habitat was as a family support partner for a prospective homeowner. Habitat’s homeownership process is rigorous, involving a dozen classes in budgeting, legal matters, and home maintenance. “It’s a huge amount of preparation. These are the working poor. To participate in this program is a lot of extra stress on them.”

Habitat tailors mortgage payments to a family’s income; a typical payment ends up at around $450 a month, which includes property taxes and insurance.

“It’s eye-opening when you look at the amount of money these people make,” Croom says. “It’s nothing, yet they manage to live off of it. It’s humbling to work with these people, after working with a firm that built multi-million dollar homes.”

Once Croom had moved her new homeowner into the Habitat-built home, Croom looked for another way to participate. Habitat had just started work on Grace Grove, another community in Gifford. Croom’s church was involved in what Habitat calls a “Circle of Faith build,” and one cool clear day in May 2004, Croom drove over to see how she could help.

Plenty of workers had already shown up there, so they directed her to another project down the road.

That house needed someone to work on the roof. Croom didn’t hesitate. She clambered up a ladder, where longtime volunteer Dave Dearing was working with a group of girls from the juvenile detention center who were performing community service. The girls were sheathing the roof with plywood.

“I had never hammered a nail in my life,” says Croom. “One of the girls showed me how to angle the nail to catch the truss and go through the plywood.”

The sight of tiny Sue Croom on the roof caught Habitat executive director Andy Bowler’s eye.

“He said, ‘Susan what are you doing up on there?’ I said, ‘Well, I don’t know but I’m having a blast.’ ”

By the end of the work session, she had blisters covering her hands. Exhilarated from the effort, she had forgotten to wear gloves.

Today she knows better: she always wears gloves, and they are pink suede. She bought them for all her crew, as well as pink tool belts: they fully embrace their feminine side. On the open tailgate of a grey pickup truck, there is a welcoming display of goodie baskets filled with hand lotion, peppermints, bottled water, sunscreen, nail files, and this week, a bottle of Tabu cologne.

It also includes toilet paper and seat covers; the Portolet is not the favorite room on the site.

--------------------------------------------------------------------------------

The team is gathered on a chilly Saturday morning – they start at 7:30 am. Sally Slate-Hyatt is on the roof in a brightwhite sweatshirt, with “Las Vegas” written in rhinestones on the back. She is nailing shingles on plywood.

Sue Croom, whose nametag reads “Queen of Women Build,” has vaulted over the side of a dumpster to retrieve pieces of cardboard big enough to wrap around window screens, a trick they developed to keep the screens from getting damaged until the new owners set up housekeeping. Inside the house, concrete floors are swept of debris; exposed block is spray painted with one-word instructions.

It was Andy Bowler who convinced Sue Croom to start a Women Build group; they exist all over the country. In ten years, 1,400 homes have been built by all women crews.

It was not without its challenges. Soon after the rooftop rendezvous with Bowler, Croom started putting together to-do lists and working on publicity to recruit volunteers, looking forward to a January start date for her Women Build group’s first house.

But in August 2004, Croom discovered a tumor in her kidney the size of a tennis ball. Two weeks later, she underwent surgery to have the entire kidney removed. The tumor was benign, and the recovery period was relatively brief, a matter of weeks.

Croom is convinced that the tumor was her body’s reaction to the years of stress due to the divorce. “Habitat saved my life,” she says, by giving her a new focus and an optimistic outlook.

But another calamity was happening at the same time – the double hurricanes that struck Vero Beach in 2004 — and that recovery took much longer.

Croom hesitated, but in the end persevered amidst the chaos. She credits two grant writers at Habitat for showing her the bigger picture: the future. “Carrie Rossman and Kelly Brown became my best friends,” she says. “They opened up doors for me and encouraged me to go on.”

On this chilly Saturday, two women are driving screws into a window frame, inserting a black plastic shim under a twoby- four to block the screw from going too far into the frame. Janet and Kristy Zabrosky are mother and daughter, from Pointe West. They showed up after reading an article on Women Build and thinking it sounded like fun.

They smirk after explaining what they’re doing to a newcomer: it’s their first day. “We had no idea how to do this until about an hour ago.”

Youth is not a requisite to be part of Women Build: Croom has a 76-year-old working on a Fellsmere project. Another woman, Barbara Mandell, is 84; she sorts nails by the paint-bucketful, part of Habitat’s Green team that recycles materials thus saving dump fees and generating revenues.

The Green team was born of a thrifty homemaker’s ‘Ah-Ha!’ moment when Marcia Zimmer of the Moorings, working on a Women Build crew, asked, “Do we recycle these nails?”

--------------------------------------------------------------------------------

One nail will not go into any bucket. Croom, who is deeply religious, believes it was bent into a “J” as a sign from God. Fired from a nail gun, it ricocheted off something on the worksite and up into the eye of a crew supervisor the Tuesday before Thanksgiving. “It was a cold day, and you’re supposed to wear safety glasses, but his were steaming up. So he slid them up on his head.”

That’s when the errant nail struck him. As the eye began to bleed and swell, the Habitat crew surrounded him and prayed, though he himself was not “a believer,” says Croom. He was rushed to the emergency room where he was told he would lose his eye.

“An ambulance took him to Leesburg to a specialist. The doctor took the patch off and said, ‘You’re going to be fine. Your sight’s going to come back.’ We feel that that was a miracle. The fact that they had prayed with him and anointed him brought his sight back.”

One of Croom’s crew put the bent nail into a frame with the inscription: “I was blind and now I see.”

“We waiting for the second part of the miracle,” says Croom, who hopes the incident will make a convert out of the man.

The Habitat crews pray before every workday; when the ribbon is cut on the new house, the group gives a Bible to the new homeowner, along with a hammer with a cross on one side, though the group helps people of all religions, and invites all to participate in its work.

Habitat was founded in 1976 by a millionaire couple, Linda and Millar Fuller, who divested of their fortune to begin a life of what they regarded as Christian service. In 1984, former president Jimmy Carter and his wife Rosalynn joined the effort, greatly increasing public awareness of the organization.

The Carters’ efforts took Habitat international; homes have been built in more than a hundred countries.

Indian River County’s chapter is paired with Romania. In 2006, Sue Croom and Carrie Rossman were part of a team of 10 who traveled abroad and stayed with a local family while building a house in a small village.

“It was June but it was cold, and the host would come into our rooms to build us a fire since there was no heat in the house. It was quite an experience,” says Rossman.

It was on the job site when someone was painting a soffit red that Croom’s passion for Dracula came to the fore. She and Rossman conspired to make the most of a Romanian moment. “We turned the scene into a Dracula impalement.”

Another beloved hard-working and enthusiastic friend, Madeleine Kerns, is now the Saturday crew leader on Women Build. But she is working more and more at the Home Center, helping redesign the aisles for better merchandising, and enjoying the spectacular success of sales there – it is Habitat’s second highest grossing center in the country.

Sue Croom laments that the retail store may eventually steal Kerns from her crew, but some things are beyond her control.

“The word is, Madeleine is growing very attached to the flush toilets there,” says Croom, frowning. “We can’t compete with indoor plumbing.”

Deep recession could force more foreclosures: BoC

2008-12-12T20:28:00.000-08:00

CTV.ca News Staff

If the global recession deepens, a growing number of Canadian households could be driven into foreclosure by crushing consumer and mortgage debt, the Bank of Canada warned Thursday.

A faltering economy - coupled with rigid credit markets and lower incomes - could create a perfect storm that would swamp vulnerable households right across the country, the central bank said.

"With household balance sheets under pressure from weak equity markets, softening house prices, slowing income growth, and record-high debt-to-income ratios, a severe economic downturn could result in a substantial increase in default rates on household debt," writes the bank in its December financial review.

But Tom Velk, an economics expert at McGill University, downplayed the report and said it casts far too much doom and gloom.

"It's too easy to get rolled (in) with the enthusiasm for pessimism," he told CTV Newsnet Thursday. "Less than 1 per cent of Canadians are in real trouble with their mortgages."

Even if the recession deepens, Velk estimated that the number of Canadians who could experience a foreclosure would top out at about three per cent.

In short, Velk said the economy is simply going through a cyclical recession, and that too much worry among the public could makes things worse.

"It's not right, and it's not good and it just gets everybody ... in the mood where they don't want to make sensible investments," he said.

According to Velk, Canadians should think about investing in the stock market now, given the rock-bottom prices.

"The Warren Buffetts of the world are buying now," he said, referring to the investment guru and multi-billionaire.

Patti Croft, an economist with RBC Global Asset Management, said that while Canada likely won't have a rash of home foreclosures like in the U.S., Canadians are currently carrying record-high debt loads.

Croft told CTV Newsnet Thursday that if the recession gets worse, it could get harder to manage that debt.

"There's potentially less assets to service those debts ... and that could cause people to default, or could cause home foreclosures as well," she said.

However, Croft stressed that debt levels in Canada are much lower than those in the U.S. and United Kingdom.

Things will get better: report

The Bank of Canada report suggests the "most likely" outcome is that global financial markets, and Canadian credit conditions, will gradually improve "as the various extraordinary measures aimed at resolving the crisis take hold."

There were few hard-and-fast predictions in the statement about how Canada will be affected and how long it will take for consumer confidence to rebound. But the statement was clear that Canada has been affected by the global slowdown and will continue to feel pressure.

"The Canadian financial system has proved relatively resilient throughout the crisis, owing to lower leverage and more conservative lending practices, but it has not been immune to spillover effects," the statement said.

"In particular, strains in Canadian wholesale funding markets have been significant in recent months, and this has impeded the normal functioning of the financial system."

The report warns it's still possible that the situation here could take a turn for the worse, driven by panic linked to household debt.

"Household indebtedness could act as a channel of contagion spreading losses through the Canadian financial system and causing a further tightening of credit conditions," it said.

"The impact on the balance sheets of financial institutions would, however, be substantially mitigated by mortgage insurance."

--------------------------------------------------------------------------------
Comments are now closed for this story

Future kinda scary in Ontario
So we spend miliions, billions to continuously bail out the auto industry, but hard working Canadians who pay taxes and are starting to feel the pinch could end up lossing their homes putting themselves and their children on the streets is okay?
How about we funnel some of the tax money we pay to helping out normal people. Or if the case of we are all going to be losing our homes threat is there are we going to be building more homeless shelters. I can only hope that the stories I heard from my grandfather about the depression is not history reapeating itself. I don't think raising my kids on the streets is a future I am looking forward to!!!
Guess I should start saving my recyclables for making my makeshift home on younge street!!

Business in Wonderland

2008-12-07T05:32:00.000-08:00

The new, topsy-turvy world of finance has turned the business world upside down – and the old, established rules no longer apply

FOR 37 years Val Padden worked at the brickworks in Accrington, Lancashire. He is proud of the plant’s history — the works has made bricks for 120 years, including the “Nori” high-strength blocks built into the foundations of the Empire State Building and Blackpool Tower. Local legend has it that the Nori brand originated when its intended name – Iron – was painted upside down on the factory chimney.

Last month the credit crunch broke Accrington’s brickmaking tradition. Hanson, the building-materials company that owns the plant, said the housing downturn meant it would be mothballed and 50 staff made redundant.

“Nobody thought it would shut,” said Padden. “We thought there would be some lay-offs and fewer hours, but we didn’t predict it would close down altogether. I still haven’t emptied my locker – it just doesn’t feel real.”

Several other brickworks, including those at Steerforth near Barnsley in Yorkshire and Caernarvon, North Wales, have shut in recent weeks. Just over a year ago such closures would have been unthinkable. The government had set a target of 3m new houses to be built by 2020, and the housing boom was in full swing. Now, due to the banking crisis and recession, housing is in retreat. Last year the UK made 2.4 billion bricks. This year it will be 1.9 billion, the lowest for 60 years.

The wave of brickwork closures is an example of how big business, like Alice when she followed the White Rabbit into Wonderland, finds itself in a topsy-turvy world. Recession has swept down like an avalanche. Its speed and depth, combined with the disruption of banking and other financial markets, has pushed firms and governments into actions that only a few months ago would have been thought impractical, or downright crazy.

Radical measures are now the norm. Take two examples from last week: the Bank of England cut interest rates to 2%, the lowest level since 1951, in a desperate attempt to stimulate the economy. The move made a mockery of the desire to drive out inflation that had obsessed the Bank’s rate-setters only six months ago. And the car-market slump forced Honda to quit Formula One motor racing, ending the Japanese car-maker’s 40-year association with the sport and a competition it recently vowed to spend any amount of money to win.

In some cases, such as the reshaping of the car-manufacturing and financial-services industries, the world is being turned upside down with the help – or at the behest – of governments. In other sectors, including commercial airlines and property, the scramble for survival has made businesses ditch long-held assumptions about their future.

“The unthinkable has become the inevitable,” said Tim Linacre, chief executive of stockbroker Panmure Gordon, which advises mid-sized public companies on their relations with investors. Robert Silver, senior partner at US law firm Boies, Schiller & Flexner and one of America’s top corporate lawyers, said there was no precedent for the shifts now taking place. “I’ve never seen anything like this. Every day is extraordinary,” he said.

The difficulty now is predicting what surreal twist the crisis has in store. Senior executives and City advisers fear the rupture in normal business activities – in particular companies’ refinancing of existing loans – will lead to a “bolt from the blue” – the collapse of a big UK group for no obvious reason.

“There is now a real risk that fundamentally viable and financially sound companies could fail because of a lack of liquidity,” said Peter Marshall, managing director at Houlihan Lokey, an investment bank that specialises in corporate restructuring.

This risk of large corporate defaults is prompting the government and officials to think about even more drastic actions. Gordon Brown and the Bank of England are contemplating whether interest-rate cuts go far enough, or should be augmented with direct economic intervention to reflate the economy.

Lord Mandelson, the business secretary, is drawing up a list of industries threatened by the crisis that could receive direct government support – a return to policies not seen since the 1970s. THE descent into Wonderland began with banks. The collapse in trust and drying-up of credit markets over the past year has threatened the survival of the international banking system. The result has been a spectacular shake-out of the big financial institutions, all done with the connivance of governments.

Five years ago Lloyds TSB was blocked from acquiring Abbey National on competition grounds. A merged Lloyds and Abbey would have had too large a market share, it was decreed.

Yet when Lloyds revealed plans to take over HBOS two months ago, the government had changed its tune. Together the banks will control almost one third of Britain’s mortgage market, but competition concerns were waived in the interests of securing HBOS’s future. On Wall Street, the crisis deepened so swiftly that the institutions seen as saviours had to be bailed out themselves. At the end of September Citigroup was asked to rescue struggling US retail banking giant Wachovia. A rival deal with Wells Fargo was stitched together soon after. Last month Citigroup itself received a $326 billion (£220 billion) government bail-out in a remarkable case of the hunter becoming the hunted.

Lehman Brothers had been thought to be one of those firms that was “too big to fail”.

It was a false assumption. While Washington had been willing to bail out the mortgage agencies Freddie Mac and Fannie Mae, had stood behind the rescue of Bear Stearns and took insurance giant AIG on to its books, Lehman was hung out to dry.

“Until the day they put me in the ground, I will wonder,” Lehman chief executive Dick Fuld told a congressional committee when asked why he thought the authorities had been unwilling to act. “I wake up every single night thinking what could I have done differently?”

Lehman’s collapse has in turn caused an unexpected crisis in the hedge-fund industry. The dozens of hedge funds that dealt with Lehman found their assets and trading books frozen, a gridlock that has still yet to be fully resolved. “The Lehman default has resulted in a state of chaos for fund managers – operationally, legally and from a risk perspective,” said Richard Saunders, chief executive of the Investment Management Association.

In other industries the scramble for survival is running ahead of government intervention. British Airways’ planned merger with Qantas, which stunned the City when it was first leaked, then officially confirmed last week, is a prime example.

Airlines have proved stubbornly resistant to the pan-national mergers that have swept through other global industries. They are largely protected from takeover by the 70-year-old system that governs international aviation and all but forbids foreign ownership and control of national flag carriers.

Reform has been glacial. Europe removed most of the constraints between its member states a decade ago, and last year agreed with America an “open skies” deal which dealt with some of the traffic-right restrictions but none of the ownership curbs.

The BA-Qantas deal could drag protectionist governments kicking and screaming into a liberalised brave new world. The pair plan to sidestep restrictions by creating a dual-listed company, a construct that allows the airlines to merge without losing their individual corporate identities. If a subsequent merger with Iberia and tie-up with American Airlines goes ahead, BA will have driven a coach and horses through what were until now regarded as inviolate rules that prevented such deals.

“This is the kind of transaction that does cause rules to change. It creates a positive need, and commercial imperative, to change rules rather than just a theoretical desire to change them,” Mike Whittaker, head of regulatory affairs at United Airlines, said.

It is the speed of the recession that has bowled over some industries, including Padden’s beloved brickworks. The UK housing market has gone from boom to bust in a little over a year, meaning that demand for bricks, cement blocks and other building materials has evaporated.

In April last year the shares of Taylor Wimpey, the UK’s biggest housing group, stood at 517p, giving it a stock-market value of about £4.5 billion. Last week the shares closed at 9.9p, valuing the group at £104.5m. The shares of its rivals have also taken a pummelling.

The number of new houses built during the next 12 months is forecast to fall as low as between 50,000 and 60,000. The lower number would represent a quarter of the 209,606 homes built last year and a fraction of the 404,356 houses built in 1967 – the peak year for housebuilding. Not since 1920, when only 2 9 , 7 0 0 homes were built, has output been so low.

IT TAKES about nine hours to drive the 520 miles between Dearborn, Michigan, and Washington DC. The road trip offered the bosses of the big three car firms plenty of time to work on their begging strategies.

The decision by the bosses of Chrysler, Ford and GM to drive to Washington this week in lean, green hybrid cars was an act of penance. Not so long ago hybrid was a dirty word in Detroit as the trio concentrated on selling gas-guzzling behemoths. High petrol prices and scared, credit-deprived consumers have brought their industry to the edge of destruction, threatening millions of jobs.

Two weeks previously, the car bosses had been sent packing by politicians after flying down to Washington in private jets. Now they were back, begging for $34 billion.

“We’re here today because we made mistakes,” said GM’s chief, Richard Wagoner.

Few doubt that the collapse of one of the three will have a profound impact on the US economy, but polls last week showed that the US public, as well as politicians, are reluctant to simply hand over more money to the car firms.

So, once unthinkable solutions are now being considered – such as a forced merger of GM with Chrysler. Silver, of Boies, Schiller & Flexner, said the government’s primary concern was to prevent more shocks to the system.

“It’s always a question of what risks do you want to take. Do you want to take a risk that you are going to have too much consolidation? Or do you want to take the risk that you are going to have a business failure that you could have prevented? Given everything that is happening now, and all the fragility, I think governments that would normally go in the first direction will now go in the second.”

FOR corporate Britain, the scrabble for funding will dictate the itinerary on the next stage of its trip through Wonderland. The banking crisis means that some groups will struggle to refinance loans that are falling due, and certainly not at the interest rates they enjoyed when the loans were first taken out.

Bankers say the funding crisis has been exacerbated by the recent collapse in equity markets. Deficits in defined-benefit pension schemes have soared as a result. “If pension trustees then force firms to take aggressive steps to reduce the pension deficit at the same time as the credit crisis, the results could be disastrous,” said Houlihan Lokey’s Marshall.

If loans are unavailable, companies will have to turn to their shareholders for cash injections. Corporate advisers expect a rash of rights issues – where companies give their existing shareholders the option to subscribe for new shares, usually at a substantial discount to the existing price – early next year.

“You could see a number of companies look to launch rights issues rather than get into tricky negotiations with their banks further down the line. The best companies will be looking to do this sooner rather than later to make sure they don’t end up at the back of the queue,” said Panmure Gordon’s Linacre.

Not all rights issues will succeed, however. There has been a polar swing in investor sentiment. Two years ago, when debt was cheap and the bull market was in full swing, no corporate story was too good to be true. Now, no tale of potential disaster, forced merger or corporate collapse is too outlandish to be believed. “[Two years ago] the world was so different as to be almost beyond remembering. It was ruled by greed, optimism and credulity. In short, it was the opposite of the last few weeks . . . [now] no scenario is too negative to be credible, and any scenario incorporating an element of optimism is dismissed as Pollyannaish,” Howard Marks, chairman of American investment firm Oak-tree Capital Management, told his clients in a recent letter.

For those rejected by their shareholders, there is another potential source of funds. Emboldened by government’s willingness to bail out banks, several large industrial groups have made a plea for state subsidy, the most high-profile of which has been Jaguar Land Rover, which is asking for around £1 billion.

Mandelson is now drawing up his list, but this weekend told The Sunday Times that he would take a tough line, with no open cheque book for British business.

For the moment, it’s hard to see an obvious way out of Wonderland.

Cottage offers timeless appeal

2008-12-01T02:55:00.001-08:00

THE Government’s pre budget report has done nothing to provide any help to the housing market, according to local agents.

The new measures, announced on Tuesday by Chancellor, Alistair Darling, covered tax changes — the personal tax allowance increase by ฃ600 announced in May, is to be permanent, with a further increase of ฃ130, a temporary reduction in VAT to 15 per cent, until the end of next year — and other measures, including an increase in child benefit brought forward to January and a ฃ60 payment to pensioners brought forward to January.

Along with the ‘benefits’ go changes to National Insurance contributions — to increase from April 2011 by 0.5 per cent and the restriction of income tax personal allowances for those earning over ฃ100,000 from April 2010, amongst other measures, none of which, says Richard Beville of Beville in Sonning Common, will help the housing market recovery. “The measures announced would not appear to provide any stimulus to the housing market: a revision of the stamp duty thresholds would reduce the cost of moving and help kick start the property market,” he said.

Rob Bruce, research manager for Hamptons International commented: “Hamptons International welcomes the ฃ1.8 billion package of housing measures to be implemented following the Chancellor’s pre-Budget report. However we question whether they will go far enough to reinvigorate consumer confidence during such challenging economic times.

“With repossessions up 41 per cent during the first half of this year when compared to the previous six months, consumers have also found their properties falling in value by 16 per cent during the year which has left them with substantially lower equity and therefore lower spending power.

“The changes in the pre-budget report also do not directly address concerns around the majority of household costs which is likely to put off many shoppers who will stay out of stores in favour of maintaining a roof over their head. Historically high costs of borrowing and the potential for the rate of unemployment to climb clear of three per cent also means that spending — both personal, and for business expansion, will remain capped.

“We look forward to clearer guidance on the ‘detailed scheme’ to improve the supply of mortgages before the Budget next spring. The immediate effect of today’s changes will also do little to ease the burden on mortgage borrowers and will not assuage first-time buyers’ fears that capital values will continue on the recent boom-and-bust rollercoaster.”

COTTAGES are timeless: they speak to us of the past, with their rooms designed for cosy living, simpler needs for furnishings and windows whose size is determined by window taxes or the cost of glass. In the present they represent one of the most popular, sought-after types of property, as they remain family homes, set in idyllic rural and semi rural locations, and provide versatile, character homes for the future.

Woodleys Cottage, in the heart of the village of Brightwell-cum-Sotwell, just three miles from Wallingford, is a pretty home in a quiet lane. The village itself has a local pub, a post office — held in the hall twice weekly — and a thriving village community. Wallingford offers a large Waitrose, a variety of shops and a cinema/theatre. Communications in the area are excellent, with access to the M4 at junction 12, and Didcot main line railway station just four miles away. There are good schools in the area, too, including Moulsford Preparatory, Radley College and The Oratory.

Woodleys Cottage has a thatched roof, which has recently been replaced: the cottage is believed to be the oldest in the village.

On the ground floor, the front door opens directly into the dining room, with a large fireplace to one side, windows to either side and an opening into the sitting room. Two small windows look to the front of the property, and there is an inglenook fireplace to one side. Looking to the rear garden, there are windows, and a single door opens onto the gardens.

A door from the sitting room leads to the kitchen/breakfast room, which has been newly fitted. There is a walk-in larder, with a window looking to the side of the house, and a shower room. Continued on back page

Stairs lead from the sitting room to the first floor; the master bedroom lies to one side, with a large window looking to the side of the house and built in cupboards to the other side. The second bedroom, across the hallway, has windows to two side, and the third bedroom/study/dressing room, which has been fitted with a range of built-in cupboards, is reached through the second bedroom.

The family bathroom has a power shower, wc and wash hand basin, and windows looking to the garden.

Outside, the garden has a circular lawn, edged with well-stocked flower beds. To the front, a cottage garden bounds the property, and, in the rear garden, there is a summer house and patio storage sheds. There is also off street parking.

For more information, call Savills in Henley on (01491) 843001. The guide price for Woodleys is ฃ560,000.

Record year for JN

2008-11-28T05:00:00.000-08:00

Jamaica National Building Society recorded one of its best financial years for period ending March 2008, helped substantially by its cashing in on shares held in Lascelles de Mercado and Company.

Indeed, the group's $3.9 billion gain from the disposal of investments accounted for most of its $4.9 billion profit, which tripled that of the previous year.

But as the mutual declared itself sound to deal with the challenges thrown up by the global financial crisis, its bosses told members last week that it has also begun to fix concerns raised by regulators - including writing off $1.9 billion of debts by subsidiaries.

JN's general manager Earl Jarrett explained that formally, buildings societies are allowed to lend up to 40 per cent of capital to subsidiaries, or twice the level of commercial banks.

JN was close to the formal legal limit, but the regulator, the Bank of Jamaica, during a long-term trend analysis of the building society called for a roll-back of the intra-group exposure.

"What the BOJ has suggested is that we bring that down to 20 per cent," Jarrett told the Financial Gleaner.

Business activity

Jamaica National was now close to that benchmark at "a little over 20 per cent", he said.

At the organisation's annual general meeting last week, Jarrett said that among the other issues regulators had raised in their trend analysis was the sharp rise in the group's overhead costs, a slippage in gross revenues and a loss on the building society's core business activity.

While he did not give specifics, Jarrett said that JN had begun to address the issues by revising its governance structure, including re-establishing a risk-management unit, sharpening its internal auditing efforts and ramping up training on regulatory and compliance issues.

Internal projects

"We are engaged in several internal projects which are aimed at improving our internal processes and to meet external regulatory requirements as well as internal operating structures," he said.

But the demand for some re-engineering notwithstanding, JN broadly, remained a healthy operation, with its book value at the end of review period, jumping 26 per cent, to $17.7 billion.

During the review period, the building society approved 1,767 new loans, valued at $7.7 billion lifting its loan balance by 28 per cent, to $31.3 billion.

Last year's writing of new loanswas 10 per cent below JN's target. While it retained its position as the island's biggest mortgage lender with 45 per cent, the figure represented a slippage from the previous year.

Central bank figures indicate that a year ago, March 2007, the building society had a 47 per cent share of the mortgage loan market.

Net savings income or NSI also fell well below the JN's aggressive target of $15 billion, but the $5.7 billion booked was 71 per cent above the NSI flows at year end March 2007.

The group - whose holdings range across mortgage and real estate, insurance, small business financing, information technology, money transfer/remittances and fund management - reported revenues of $11.5 billion, a 19 per cent improvement on the $9.6 billion, on the previous year.

Loan portfolio

Within the 2007/08 year, the company grew assets by 22 per cent to $90 billion, ramped up its loan portfolio to $31.3 billion from $24.4 billion, and added $10 billion to its now $53 billion savings fund.

JN was successful at ramping up business, not by trying new strategies, but, as Jarrett told the society's annual general meeting on Thursday at JN's corporate offices in Kingston, just by being better at delivering good old-fashioned customer service. "JNBS continues to offer value for membership by providing benefits for members not given by other financial institutions," he said.

The company has a 97 per cent customer satisfaction rating, and was fourth of 12 corporations in customer satisfaction in a poll done in December 2007 by pollster Bill Johnson.

Surplus

JN's pretax earnings grew almost threefold, from $2 billion to $5.4 billion, while net surplus, after a near half a billion of taxes, was $4.9 billion, compared to $1.68 billion made in 2007.

Still, the group's bottom line looked that fat only because of the $3.9 billion gain from the liquidated investment in Lascelles. In 2007, it reported a similar gain from disposal of investments, but only $867 million.

Additionally, the society - which is the main subsidiary within the group representing 90 per cent of the business - had a $1.9 billion bill for restructuring.

The notes to the accounts, however, said briefly that the restructuring costs "relate to advances in subsidiaries written off to meet regulatory requirements."

The only operation within the group known to have ceased operation is JN Real Estate Company Limited.

Merging depositors

JN group also advises it is in the process of merging the depositors in its 100 per cent owned Jamaican subsidiary, First Metropolitan Building Society, into the operations of the society, but says the merger is subject to the approval of the Ministry of Finance.

JN's mid-line income in the period just ended gives a clearer indication of how well the group performed.

At $1.35 billion, operating surplus was up by 34.5 per cent on the $1 billion made a year ago.

The company's report to shareholders comes two months into the turbulence that has rocked Jamaica and the world market, but Jarrett has given his assurance that JN would "continue to offer its members security and stability."

business@gleanerjm.com

US expands record bailout of insurance giant AIG

2008-11-10T18:57:00.000-08:00

WASHINGTON (AFP) — The US government announced Monday an expanded bailout for insurance giant AIG of more than 150 billion dollars, as the Treasury tapped into emergency funds originally set for banks.

The latest bailout plan, the largest in US history, came as AIG burned through billions of dollars of cash and reported a third-quarter loss of 24.47 billion dollars.

The original Federal Reserve rescue of 85 billion dollars in mid-September, at the time the largest in corporate history, was expanded by 37.8 billion dollars just a few weeks later, and involved the government acquisition of a 79.9 percent stake in the troubled insurer.

But AIG, the world's largest insurer before the global credit crisis, has continued to suffer from soured bets on credit default swaps (CDS) and other complex financial instruments amid a financial crisis that accelerated in October.

Under the revised program for AIG announced Monday, the Treasury will replace the entire previous package with a larger, longer-term 152.5 billion dollar program, including a 60 billion dollar five-year loan and 52.5 billion dollars to buy up distressed securities.

The Treasury will tap its Troubled Asset Relief Program (TARP) for 40 billion dollars to buy preferential shares in the company.

"This action was necessary to maintain the stability of our financial system," said Neel Kashkari, the head of the US Treasury's 700 billion dollar rescue operation for the financial industry established in October.

"We recognize that the financial system remains fragile and we continue to stand ready to prevent systemic failures," he said.

The White House emphasized the huge risk of an AIG failure and defended the Treasury's extension of the financial lifeline to the insurer.

Treasury Secretary Henry Paulson and Fed chairman Ben Bernanke "have determined that a failure by the firm would cause damage to our financial system, the US economy and the global economy," White House spokeswoman Dana Perino told reporters.

"Today's announcement is new proof that the TARP will be used more and more to bail out distressed companies -- and not only banks -- instead of its initial goal of buying toxic assets," Marie-Pierre Ripert, analyst at Natixis.

The rescue came as AIG reported its balance sheet deteriorated quickly over the third quarter.

The company said it took 15 billion dollars in provisions, reporting that in addition to losses in its credit default swaps portfolio and securities lending business, its general insurance division was in the red to the tune of 899 million dollars, compared with a profit of 2.51 billion dollars a year ago.

AIG chief executive Edward Liddy defended the expanded aid from Treasury, saying it puts AIG "in a much better position" to address its problems and set it toward recovery.

The extra money gives AIG "more flexibility and more time" to sell assets.

"It is a smart, disciplined process," he said in a conference call with reporters.

"AIG is, in fact, on the road of recovery."

The Treasury rescue, however, suggests that AIG's recovery period could be much longer than anticipated just a few months ago.

In the new program, the previous 85 billion dollar loan is cut to 60 billion, and a lower interest rate is set, but its duration is extended to five years from two.

Another 52.5 billion dollars is provided to purchase distressed assets from the company, including 30 billion for collateralized debt obligations and 22.5 billion for residential mortgage-backed securities.

Thirdly, the government will use 40 billion dollars in TARP funds to buy AIG preferential shares, which will carry a high interest rate of 10 percent.

Defending the deal, Kashkari said the government was setting "stringent" limitations on executive compensation for AIG's senior executives, corporate expenses, and lobbying.

AIG shares were up 8.53 percent at 2.29 dollars in afternoon trading.

The expanded bailout for AIG from a fund originally set aside for banks was likely to raise eyebrows in the US Congress. According to a Treasury official, President-elect Barack Obama, who is already crafting strategies for the economy ahead of his inauguration on January 20, was briefed Sunday on the Treasury's new AIG plan.

The Treasury insisted Monday its exposure to AIG would have a limited lifespan.

"The US government intends to exit its support of AIG over time in a disciplined manner consistent with maximizing the value of its investments and promoting financial stability," it said in a statement.

Washed-away home shows danger of living on edge in OBX

2008-11-01T02:52:00.000-07:00

By Catherine Kozak
The Virginian-Pilot
© November 1, 2008
Jeff Akins and his wife picked up the key to their vacation rental in Rodanthe, looking forward to a glorious week in July relaxing at the beachfront home they had so enjoyed the summer before.

After the long trip from their Highland, N.Y., home, they were the first to arrive at the six-bedroom house they were to share with friends. They parked under the house, the view of the ocean obstructed by slats. But something didn't seem right this time.

"We pulled in and watched the surf explode through the boards," Akins said. "We said 'Wow! There must've been a lot of erosion.' "

That same house, he said, had 50 to 75 feet of beach in front of it the summer before.

When their friends arrived from Raleigh, they were nervous about the safety of the house. Akins, a civil engineer, made a cursory check of the house's structure and didn't see anything awry. He did note that the sand fence that had been back behind the dunes last year was now at the high-tide line.

The next day, with the surf crashing up the beach right under the deck, the four friends lined their beach chairs up on a little hill of sand at the tide line by the house. Then one of them happened to glance over at the piling under the deck and exclaimed, "Oh (expletive)! " Akins recounted.

"Tide was splashing against the post, " he said, "then it slid under the post. We said 'noooooo...' Then we realized that there's three of them hanging in the air."

Akins said they immediately called the rental company, which helped them pack up and move to another house. Before they left, Akins saw one of the pilings swinging in the air like a pendulum.

The 5-year-old house, named Caramore, collapsed into the ocean two weekends ago during a coastal storm.

According to Dare County records, the 3,958-square-foot house was valued at $488,800; the oceanfront parcel is valued at $453,600.

Caramore was demolished by an excavator this week. Contractor Carroll Midgett said there were probably 10 to 12 tractor-trailer loads of rubble to haul away, as well as a dozen small truck loads of other debris.

Owners Daniel and Lindora Sargent, from Whitehouse Station, N.J., can hardly believe that, within 24 hours, Caramore was gone.

"Shock is not the word," Daniel Sargent said in a telephone interview Friday. "We had a tremendous amount of sweat equity in that house. This is a disaster for us."

Nothing, he said, was able to be salvaged from the house.

Sargent, 61, said he had an insurance policy with a face-value of $600,000, and he was told he was insured adequately. But recently he has learned that he has only $250,000 of coverage from his federally subsidized flood insurance policy, and maybe minimal coverage from his private insurance for the contents.

"If you're a mortgage broker or a banker, you'd think they would know," he said. "Why the heck would they give me that mortgage? You ask all the questions, then you hire professionals to answer them."

Sargent, a retired police officer who does construction work part time, said he put a big kitchen upstairs, a small kitchen on the ground floor and did all the tile work. His wife, a teacher, delighted in buying upscale decor for the house. Every fall, they would come and reinforce the sand fence with Christmas trees and push the dune back up.

The property, which rented for $5,495 a week at the height of the season, was booked from April to November.

"It was a tremendous investment," Sargent said. "It paid for itself."

Caramore, Gaelic for "friend," was "a dream" to the couple, who have been regularly visiting the Outer Banks for 30 years, Sargent said.

"When we looked at this piece of property, it was absolutely beautiful," he said. "It was 200 feet from the dune to the water. Anybody would have bought it. It had a very spectacular view, both to the north and south."

Buddy Shelton, the chief building inspector for Dare County, said the Sargents met all the conditions that were required before building their house. When it was built, the house was 70 feet back from the first stable line of vegetation - 10 feet more than required by state Coastal Area Management Act regulation.

Since the deed was platted and recorded before the CAMA regulations were implemented in 1979, the setback requirements were grandfathered. Currently, CAMA rules mandate that oceanfront structures must be set back from the first line of vegetation to a distance equal to 30 times the annual erosion rate, or a minimum of 60 feet.

The annual erosion rate of the beach in front of Caramore is an average of 9.5 feet, said Jim Meads, county flood plain manager. The highest rate of erosion on Hatteras is about one mile north at Mirlo Beach, which has an average 14 feet a year. The lowest is 2 feet a year.

Before building, Meads said, oceanfront property owners are required by CAMA to sign a hazard notice that informs them of the erosion rate, the possible number of feet the shoreline could move in a storm and the predicted number of feet of floodwaters during a major storm.

Meads said Caramore is the first house on Hatteras Island to fall into the ocean since Hurricane Isabel in 2003. But oceanfront houses in Kitty Hawk and South Nags Head, also plagued by severe shoreline erosion during nor'easters and hurricanes, have been damaged or destroyed by the ocean over the years. And in every significant storm, houses must be condemned, usually temporarily, because of damage to steps, decks, roofs, septic systems, power supplies or water systems.

Parcels adjacent to Caramore had washed out, but Meads said even that is not necessarily predictive of future disaster. With the way the shoreline erodes and accretes with the seasons, he said, sometimes a parcel comes and goes.

"It sounds crazy, but down the road, that lot could come back," he said. "It's unlikely, but it has happened."

When people see the photographs of the practically brand-new Caramore collapsed pitifully in the ocean, Sargent said, he knows that "everybody thinks he's an idiot" for building a house there without checking into the risk.

"Well, we did check. We asked people," he said. "Perhaps I wouldn't have built if I knew I couldn't insure the structure for the cost it took to build it.

"We're not bitter with anybody we've dealt with professionally. It's just that we would like other people to be aware that your life savings could be out the window in a blink of an eye."

Catherine Kozak, (252) 441-1711, cate.kozak@pilotonline.com

Troubled home loans didn’t require insurance

2008-10-13T18:05:00.000-07:00

by Jim Landers / McClatchy-Tribune

WASHINGTON — If the problem threatening to take down the economy is bad mortgages, then why isn’t mortgage insurance taking care of it?

In the 1980s and 1990s, most homebuyers could not get a mortgage with a down payment less than 20 percent unless they bought private mortgage insurance, or PMI. This insurance covers the lender in case the borrower can’t pay. It wasn’t cheap (about $150 a month for a $235,000 mortgage). And unlike mortgage interest, you couldn’t deduct it on your federal income taxes.

Between 2000 and 2007, lenders offered homebuyers unable to afford a large down payment several ways to get a house without mortgage insurance.

One of the most common was a “piggyback,” where the borrower took out two mortgages at once. The first mortgage covered 80 percent of the price. The second mortgage, usually with an adjustable rate, covered another 10, 15 or 20 percent of the price. Down payments ranged from 10 percent to nothing.

With house prices rising, it all looked good. Interest paid on both mortgages was tax-deductible. If the second loan was going to set at a high rate, the borrower could refinance with the rising value of the house.

But when the housing bubble popped, so did piggybacks.

“The loans that are in the most trouble are the loans that circumvented mortgage insurance,” said Jeff Lubar, spokesman for the Mortgage Insurance Cos. of America.

Karen Watson, who runs a Dallas mortgage company in Preston Center, said buyers of mortgage securities set the guidelines allowing borrowers to get home loans with no money down and no mortgage insurance. The underwriting and approval process was automated.

Mortgage securities buyers “came in and took on the risk that insurance companies were designed for,” she said.

Mortgage insurers got back in the game after persuading Congress to allow homebuyers to deduct their mortgage insurance payments. That law took effect on Jan. 1, 2007, but expires in 2010.

Watson said she was still offering piggyback mortgages until this spring, when the lenders “changed the guidelines almost ex post facto — 'We’re not offering these as of yesterday.’”

Despite the mayhem this month on Wall Street, she said mortgages are still being sold.

“People are getting used to the new guidelines, which are the old guidelines,” she said. “We’re doing what we used to do.”

Mum with Midas touch for property

2008-09-23T05:32:00.000-07:00

By Lorna Tan

Ms Sharon Lie, 38, likes to be in charge when it comes to managing her own money.

Said the head of compensation and benefits at consumer finance provider GE Money Asia, the retail financial services unit of General Electric (GE): 'I am a firm believer in individuals taking charge of their own finances. As a wife and mother, I feel that women in particular should be able to handle their own finances.'

Her investment approach has evolved with her career and age. She admits that she took on more risks when she was younger, but says she has become more conservative since giving birth to her son, Noah, now 21 months old.

Apart from her forays into stocks and unit trusts, Ms Lie also invests in property. She bought her first flat when she was working in London in 1996; she sold it a year later at a 30 per cent profit. Currently, she has two properties: an apartment in Paris and a semi-detached home on the East Coast.

She spent a total of 10 years in Britain, including three years in London as an articled clerk and solicitor after getting her law degree at what was then the University College of Wales, Aberystwyth. This was followed by a four-year stint in Sydney as a consultant in executive compensation before she returned to Singapore in 2003.

She joined GE Money in 2004.

Ms Lie is married to Frenchman Olivier Maigniez, 37, a global account manager at Cisco Systems. They tied the knot in 2000 in Sydney.

In Singapore, GE Money is known for its James personal and auto loan packages and ezyCash.

Q: What are your money habits?

When I first started work, like most people, I had no spare cash to put in savings.

My then-boyfriend, who is now my husband, and I bought our first home within a year of starting work, and everything in our home - appliances and furniture - was bought with the help of loans. We knew depending on loans would be fine as long as we could afford them and we handled them prudently.

I learnt an important technique called 'pay yourself first'. What this means is you should use your salary to pay for your investments first and your bills after. This sounds risky, but somehow, it helps you to be responsible and manage your finances, and enables you to settle your loans and bills.

Currently, 25 per cent of my pay goes towards servicing my mortgage and 20 per cent towards cash savings and investments. The remainder is for expenses.

I keep very little cash and I usually have eight months' worth of my pay in United States shares.

Q: What financial planning have you done for yourself?

I started a stock portfolio in 2003 when I returned to Singapore. It invested in US stocks, for an average return of 25 per cent a year.

My strategy was to exit when the upside or downside hit 20 per cent. I would monitor about 10 US stocks, and I traded them actively through my Sydney-based broker. However, I have since liquidated the shares, with the exception of one blue-chip technology stock that I'm still holding on to.

It was a lot of work, but I was solely responsible for the profit or loss, which was very satisfying. Now, most of my investments are in unit trusts as I'd rather spend the time with my son. Since he came, I have been more concerned about preserving my wealth and making sure there is money for him.

My risk outlook has changed a lot. I'm glad I took big risks when I was younger - borrowing and taking loans when needed, and accumulating more wealth. Now I'm more conservative.

The average returns of my equity funds are about 7 per cent a year now.

Q: What about insurance planning?

I am not a strong believer in buying insurance for investment purposes. Currently, I have mortgage insurance for my two properties and a whole life policy for my son.

Q: Tell us about your property investments?

Olivier and I believe that if you buy the right property at the right time, it will be an appreciating asset. We also believe in buying rather than renting the place we live in.

Our first property was a two-bedroom, 1,200 sq ft maisonette in the heart of London. We bought it in 1996 and sold it for a 30 per cent gain just over a year later.

After that, we bought a bigger ground-floor apartment with a garden in London, and lived there for two years before selling it at a 10 per cent profit.

In Sydney, I bought and sold two properties. I didn't make any profit out of them, but recouped all renovation and legal costs.

The most significant investment my husband and I share now is a gorgeous 1,100 sq ft apartment in Paris that we bought in 2003. We have never lived in it, and have no idea whether we will or when. But the thought of it makes us smile and keeps us motivated. You need to have a dream. Not all investments have to be sterile.

I think the property has appreciated nicely, but we have not checked and don't plan to as we have no intention of selling it. It is being rented out and the rental yield is about 5.2 per cent.

Q: Moneywise, what were your growing-up years like?

I am very fortunate to have parents who follow very different but extremely useful approaches to money. My dad, a civil engineer, is good at making the big money decisions. My mum, an ex-teacher, is great at managing day-to-day expenses and is the world's greatest bargainer.

Together with my two older siblings, we lived in a landed property in the East Coast. We had everything we wanted, but we also knew what it cost.

My mum used to say every cent counted and, when I was starting out, I rebelled against this, refusing to count my pennies. Now, I know she was right: No matter how much you earn, you need to watch what you spend. I would also say that you need to make whatever you save work for you.

Q: What has been a bad investment?

I lost a couple of thousand investing in an initial public offering. The company closed down after 18 months, so its shares were worth nothing and I lost everything.

The experience taught me not to be impulsive about investments, and I learnt that I have to examine the fundamentals of a business before sinking my money in.

Q: Your best investment to date?

My career has been my best investment. Obviously, if you are successful in your role, there are financial returns.

Working in a great organisation offers indirect financial benefits as well. It exposes you to clever people and their lifestyles. It also helps you gain insight into the workings of the business, and that helps you analyse other businesses and their potential.

In terms of financial investments, I made an excellent choice in 2002 when I invested in a Macquarie infrastructure fund. I invested my bonus and the average return has been about 15 per cent a year.

Q: What's your retirement plan?

My son. Seriously, I hope to have the two homes fully paid up and to have sufficient investments to provide an income stream. The icing on the cake would be to also own a ski chalet in the Italian Alps.

I would like to be able to retire at around 50. By then, I would like to be running my own business - perhaps a bookshop. My financial investments should need nothing more than monitoring at that point.

Q: And your home now is...?

A semi-detached, two-storey, 6,000 sq ft house on the East Coast. It was bought in May last year.

Q: And your car is..?

A bronze Saab.

AIG plummets after credit rating downgrades

2008-09-16T05:35:00.000-07:00

NEW YORK (Reuters) - American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz) shares plummeted in early trading Tuesday after the insurer's credit ratings were cut, jeopardizing efforts to raise cash necessary for its survival.

In pre-market trading, AIG shares were down $1.83, or 38.4 percent, at $2.93. They closed at $22.76 as recently as Sept 8.

Late Monday, Standard & Poor's cut New York-based AIG's long-term credit rating three notches to "A-minus" from "AA-minus," citing "reduced flexibility in meeting additional collateral needs and concerns over increasing residential mortgage-related losses."

Moody's Investors Service on Monday cut AIG's rating two notches to "A2" from "Aa3," while Fitch cut its rating two notches to "A" from "AA-minus." Those agencies' new ratings are the equivalent of one notch higher than S&P's new rating.

The downgrades will make it much more difficult for AIG Chief Executive Robert Willumstad to raise cash. The company suffered $18 billion of losses in the last three quarters tied to guarantees it wrote on mortgage-linked derivatives.

AIG's struggles are mounting a day after Lehman Brothers Holdings Inc (LEH.P: Quote, Profile, Research, Stock Buzz) filed for Chapter 11 bankruptcy protection because of its own losses tied to mortgages and real estate.

JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) and Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) are examining putting together a $70 billion to $75 billion credit facility for AIG, a person familiar with the matter said on Monday.

Those efforts are supported by the U.S. Federal Reserve, which received a request for help from AIG on Sunday.

On Monday, New York Gov. David Paterson said the state would allow some of AIG's regulated insurance units to provide the parent company with $20 billion of liquid investments to address immediate liquidity needs.

(Reporting by Jonathan Stempel; editing by John Wallace)

Canaries' future hangs in balance

2008-09-03T05:25:00.000-07:00

NORWICH City's future was in the balance today as Delia Smith effectively put the club up for sale.

It leaves the club at a pivotal point in its history - aspiring for Premiership status or settling for lower-league mediocrity.

It is understood that Delia and her husband, Michael Wynn Jones, are looking for new investors of all sizes, including outright ownership.

The joint majority shareholders looked set to call time on their 12-year love affair with the Canaries as fellow directors Andrew and Sharon Turner resigned from the board - leaving City with a £1.5m black hole to fill this year.

The Turners, who own financial services business Central Trust, will not be able to immediately recover £2.5m of interest-free loans to the club, which are on long-term repayment schedules.

But they will now not be making good their promise to put in another £1.5m this year.

It leaves City with a worrying cash shortfall, which could lead to a flurry of backroom redundancies and a frantic bid to cut the current £10m wage bill for playing staff.

It also means City boss Glenn Roeder will have less money to play with in the immediate future as he bids to turn a promising squad into one with real hope of a return to the Premiership.

However, in a development that would excite many City fans, the Turners' departure and Delia and Michael's apparent willingness to sell could reopen the door to billionaire businessman Peter Cullum, who two months ago made a failed £20m bid for ownership of the club.

Mr Turner, whose sub-prime mortgage business is valued at £275m, said: “It is true. It happened two weeks ago and it is a sad moment for us, obviously, but we are making no further comment.”

The couple, lifelong fans of the club, got involved when they bought the 5,000 shares of vice-chairman Barry Skipper, who stepped down from the board after 10 years last year.

In a statement, Delia, 67, and Michael, 67 later this month, said: “We would like to place on record our thanks to Andrew and Sharon for their hard work and endeavour since they joined us and their interest-free loans to the club totalling £2.5m.”

City chairman Roger Munby said the board was in “active conversations” with “more than one” potential investor.

But he admitted that club finances were “under active review”, and added: “If staff were to leave at the moment we wouldn't immediately replace them.”

He said: “We've got to recover our ground. This has put us back by £1.5m and it has put us back because we have lost two expert, fresh executive minds.”

Mr Munby said the club had been on track to move from loss-making to profit-making in the near future, and said the absence of the Turners' cash meant the situation was more likely to be “neutral”, which he said was “still no bad thing in football”.

He said: “It's a sad day. Andrew and Sharon have taken their own advice and made their own decision to leave, regrettably. Categorically this does not mean that there is a threat of the club going into administration.

“There are plans in hand. There's belt-tightening but fans can be reassured that the club is not in any embarrassed financial position.”

Two months ago Mr Cullum, ranked the 40th richest person in Britain and executive chairman of insurance giant Towergate, put in an offer of £20m to invest in new players in exchange for ownership of the Canaries.

The lifelong City fan and former Norwich City youth player, 57, was initially snubbed by the board. And when the two sides finally held talks, they quickly broke off with no agreement.

Last night there was no comment from Mr Cullum.

But Mr Munby said a rekindling of the deal was “certainly a possibility”. He said: “We left the last discussions on amicable terms. Peter may class himself as one of the people who may be interested.”

He said he “could not say why” the Turners had walked away.

He said: “They left despite the fact that they are lifelong fans who harboured a lifelong ambition to be involved with the club. I'm sure their reasons must be very pressing. The situation has come up very quickly.”

Mr Munby said the Turners had carried out an audit of the club's finances and left behind a “strong strategy” that the club would be following through.

He said the board members were informed of the Turners' decision to leave via a series of individual telephone calls and the “odd meeting”.

Amid rumours of a boardroom split he said: “There's been no bust-up.”

Downshifting in the workplace: Options for balancing career and homelife

2008-08-27T16:16:00.001-07:00

professionals all over the country are trading in their high-paying, high-stress careers, with their 60-hour weeks and $200 ties, for a more fulfilling life. This trend, known as downshifting, is catching on as overworked professionals look for balance in their lives.

“When you are stuck in the rat race trying to climb the ladder to career success, you often have to put so much of your life on hold,” said Julia Kennedy, assistant vice president of career services for 110 Everest schools located throughout North America. “You may end up sacrificing time with your family, not giving yourself time outdoors or putting your hobbies and passions on pause.”

Downshifting is one way professionals re-establish their priorities, Kennedy said.

“They recognize that perhaps their new careers won’t be as lucrative, but they will be more fulfilling,” she said.

Downshifting is one of many innovations to the traditional work culture that has redefined the workplace in the past few decades, including a rise in part-time, flex-time and work-from-home options.

The phenomenon of downshifting is due in part to generational differences between baby boomers and older generations, Kennedy said. While older generations saw work as something mandatory and not necessarily enjoyable, baby boomers believe they deserve fulfilling lives and careers.

Kennedy said there are many options for employees who want to balance between their careers and personal lives, without necessarily having to give up their jobs. For example, workers can say no to new projects, take on fewer projects or renegotiate work arrangements.

“If you aren’t ready for a complete career change, you still have a number of options,” she said. “For example, bargain for more vacation time instead of that annual raise. Or see if you can work from home or move to part-time work.”

But for some, small changes aren’t enough. There are many wake-up calls that encourage a complete career change. Whether it is the death of a close friend, a divorce or getting that dreaded pink slip because your company is downsizing, many professionals realize that life is too short to stay in a career they hate.

For those who might be considering downshifting, it’s important to consider how a career change could alter your life.

“You have to take your finances into consideration. There is a lot of planning that needs to happen before you make any big changes,” said Dr. Samuel Carrol, business department chairman at Everest University in Orange Park, Fla. “Specifically, you need to be thinking about how to meet costs of your insurance, children’s education and mortgage and retirement savings. That being said, with careful planning, changing careers can be done well and can be incredibly satisfying.”

In addition to financial planning, downshifting may also require going back to school.

“Many downshifters want to open a new business – perhaps a bed and breakfast, or local used-book store or massage therapy business,” Carrol said. “Starting a new business in something you are passionate about is a great way to find a fulfilling career, but at the same time, you want to make sure you have the knowledge you need to be successful. For example, if you want to become a massage therapist or bed-and-breakfast owner, you may need to take massage therapy classes or basic accounting and entrepreneurial courses before making that leap.”

Daniel Keller, a massage therapy instructor at Everest, has noticed an increase in older-age students.

“In our massage therapy program, we find a number of older and career-changing students,” Keller said. “This is something they have always been passionate about, but just didn’t have the time to devote to developing their expertise. … All are looking for a fulfilling career.”

The Madness of Bankers

2008-08-23T04:17:00.000-07:00

Millions of words have been written about the ongoing financial disaster largely caused by the subprime mortgage mess. But the most concise and easiest to understand handbook on the issue is almost certainly Charles R. Morris’ The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash. The book, published in March, spent several weeks on The New York Times best-seller list, and for good reason: The book explains in clear language exactly what happened and why.

Morris, a lawyer and former banker who lives in Manhattan, has written 11 books. His articles have been published in myriad publications, including Atlantic Monthly, The New York Times and BusinessWeek. He exchanged e-mails with Observer contributing writer Robert Bryce in early August.

Texas Observer: You wrote a recent piece for BusinessWeek in which you argue that it is “essential to shrink the hypertrophied financial sector.” Why has the financial sector grown so large over the past few decades?

Charles Morris: Financial rewards on Wall Street have been rising much faster than in the rest of the economy for about 20 years. Commerce Department surveys show that financial sector profits were more than 40 percent of all corporate profits in 2007, far out of proportion to their share of output. Those rewards sucked in the cream of each year’s B-school grads, top mathematicians and physicists, lawyers, etc. Couple that with the anti-regulatory atmosphere of the last couple decades, and we have seen an orgy of truly irresponsible, destructive “innovation”—anything to drive up earnings.

The subprime crisis was purely a Wall Street invention. Subprime lending had always been a tiny sliver of the mortgage market, mostly within the Federal Housing Administration. In 2004 or so, Wall Street realized they needed higher mortgage yields to sell the complicated, mortgage-backed structures that produced their biggest fees. They started acquiring subprime lenders, paying brokers premiums for high-yield mortgages and the like, until by 2006, high-risk mortgages were about a third of all new originations. Nobody seemed to care that most of them could never be repaid; the focus was just on the fees. It’s not much different from what happened with the infamous “investment trusts” that National City and other big banks were flogging in the late 1920s.

TO: Perhaps the most important single deregulatory move of the past few decades was the repeal of the Glass-Steagall Act, a law created in 1933 that kept banks, insurance companies, and brokerage houses from merging with each other. Glass-Steagall was replaced by the Gramm-Leach-Bliley Financial Services Modernization Act (named for the trio of Republicans who sponsored it, Sen. Phil Gramm of Texas, U.S. Rep. Jim Leach of Iowa, and U.S. Rep. Thomas Bliley of Virginia), which was signed into law in 1999. How culpable is Gramm for our current mess?

CM: Gramm-Leach was part of the zeitgeist, and by the time it was passed, the big banks had long since worked around the old rules, so Glass-Steagall had already become virtually a dead letter. Investment banks had been stripping away the bread-and-butter lending businesses of the commercial banks, so Gramm-Leach was partly just an attempt to restore some balance. The root problem wasn’t Gramm-Leach, but the prevailing dogma that self-regulated markets were inherently superior to supervised markets.

TO: Speaking of Glass-Steagall, you wrote in your book that Congress “should seriously consider restoring some version” of it, including the separation of commercial banking and investment banking. Why is this so important?

CM: Over the long term, financial sector profits have been about twice as high as corporate profits as a whole, which flies in the face of economic theory. High peak profits at financial companies make sense because they are so highly leveraged. But that should also expose them to commensurately greater losses, so profits would be about average over the cycle. But we tend to socialize financial sector losses, as we’re doing now, while allowing partners and shareholders to keep their profits from the booms.

I think we need a rigid distinction between regulated and unregulated financial companies. Only the regulated sectors would have access to deposit insurance, the Fed window, etc., while there would be strong legal bars against government support for the unregulated sector. [The “Fed window” refers to lending that the Federal Reserve normally provides to depository commercial banks. The Fed recently opened its “window” to Wall Street investment banks.]

The regulated sectors would have strict leverage rules, and be intentionally a bit boring. Enforcing such distinctions would require very carefully crafted legislation. And I admit it would probably be hard to pass. Everyone deplores “moral hazard,” but bankers make a lot of money when they succumb to it.

TO: In our recent phone conversation, we talked about the role of hedge funds and their use of leverage, which is magnifying the potential damage of the derivatives now being employed. You said, “We can’t control hedge funds. But we can stop regulated banks from lending to hedge funds.” What effect will that prohibition on lending have?

CM: There are many different kinds of hedge funds, of course. But a common strategy is to earn outsized returns by using extremely high leverage; and the leveraged lending, most of the time, comes from banks. If rich people want to invest in high-risk, high-leverage undertakings, that’s their business. But regulated banks with a potential claim on public support shouldn’t be allowed to lend to them, or be allowed to lend only with a very high capital penalty. If a hedge fund, or a highly leveraged investment bank, a Goldman Sachs, say, is at risk of failing, the core banking and payments system won’t be at risk. The corollary of that, of course, is that if a hedge fund or an unregulated investment bank, say, gets into big trouble, they must simply fail, no matter how much damage it causes, which is why the barriers to a bailout would have to be written into law. Markets can’t work if there is a “social safety net” for the biggest players.

TO: It’s obvious from your book that you are no fan of Alan Greenspan and his laissez-faire attitude toward financial markets. How responsible is he for our current situation?

CM: To state it as generously as possible: Greenspan is the classic case of a good man in a job for much too long. Starting with the 1987 market crash, he built his reputation as a financial genius by intervening, often very adroitly, to supply fresh market capital at moments of crisis. He did the same thing after 9/11 and the 2001-2002 recession, but then kept rates much too low for much too long. His anti-regulatory zealotry also blinded him to the obvious asset bubble building up. And that’s not hindsight; there were a lot of warnings, including from other governments.

TO: Given your book’s take on Paul Volcker and how he addressed the problems in the U.S. economy in the 1980s, it appears that you favor higher interest rates as a way to strengthen the dollar and therefore restore credibility to the U.S. financial system. That will almost certainly lower oil prices. It’s also likely to trigger a sharp recession. But you think that a quick (and likely painful) recession is the best cure for our financial ailments. Why?

CM: By my rough count, the federal government has already poured some $2 trillion into propping up the financial sector—that’s including new Fed lending facilities, expanded lending by Freddie and Fannie (much of which goes to buying up mortgages from banks), the spending rebates, the new housing bill, and so on.

Consumers have been spending far more than their incomes, at least since 2004 or so, personal savings rates are near zero, retirements are looming, we have crippling trade deficits and a collapsing dollar, which is a big factor in the oil price rise. And the current federal strategy is just to keep all that going, pouring in borrowed federal money to make up for the fall in consumer borrowing.

It’s the most shortsighted, let’s-get-through-the-next-month strategy possible—not unlike strapped consumers playing credit-card roulette. I fear we’re just making the ultimate reckoning worse and worse, much as Japan did when it covered up its asset bubble through the 1990s.

The recessions that Volcker triggered in 1981 and 1982 were awful, but he managed to wrench the country onto a radically different course. I don’t think there’s any choice. Consumer spending rates are still near an all-time peak relative to income, and overall debt is still rising. We need a radical change of course. Whether McCain or Obama wins the presidency, they should try to get this behind them in their first two years.

TO: I agree that we need better regulation of financial institutions. But it appears that financial chicanery happens on a regular, almost predictable cycle. In the ’80s we had Ivan Boesky and Michael Milken. In the ’90s we had the savings and loan debacle and the Barings Bank meltdown. In the early ’00s, we had Enron and Adelphia. We’ll never be able to stop all the scam artists, but will more regulation reduce the frequency of the disasters?

CM: My hopes are more modest than that. I just want to stop the scams going on now. If Wall Street and its lobbyists have their way, we’ll end up with a total Wall Street bailout, plus some cosmetic regulatory changes ... It’s the same kind of thing that’s proved such a brilliant success at the Department of Homeland Security.

TO: Perhaps your most important recommendation is this: “Force tough leverage constraints on regulated institutions while moving all risky exposures onto the balance sheet.” Enron and other companies were experts at moving their risky assets off the balance sheet. If we are to achieve better regulation of assets and assure that they get properly accounted for on the balance sheet, won’t that require better funding of regulatory agencies like the Securities and Exchange Commission?

CM: There are two ways to defeat regulation: One is to pass toothless laws; the other is to pass tough laws and not finance them. The [Food and Drug Administration] is perhaps the classic case of the second one, even more than the SEC. But, yes, it’s pointless to create regulatory regimes without the tools to do their jobs.

TO: Your book is titled The Trillion Dollar Meltdown. Will the final cost be $1 trillion? Or more?

CM: More. It looks like probably $1.5 to $2 trillion at this point, although there may never be a final accounting.

Car dealer Butch Suntrup adds insurance to his business

2008-08-18T04:00:00.000-07:00

By Christopher Boyce
ST. LOUIS POST-DISPATCH
08/17/2008

Butch Suntrup has been selling cars since 1974, and has been a dealership owner since 1985.

But in April, he expanded his horizons to auto insurance. True, it's not that much of a stretch from his core business. For that reason, he chastised himself a bit when the idea first was pitched to him.

"I hit myself in the head and said, 'This a no-brainer,'" Suntrup said. "I was disappointed I didn't come up with it."

The expansion comes at a time when auto dealers need to create new revenue streams. Many dealerships are facing slumping sales due to the sluggish economy.

Beyond that, vehicle quality is steadily improving, so revenue from vehicle repair is expected to slip in the near future, said Mark Rikess, chief executive of dealership consulting firm The Rikess Group in Burbank, Calif.

For the next three years, "It will be survival of the fittest," Rikess said. "So dealerships, being entrepreneurially driven, will become more creative in finding sources for revenue."

Butch Suntrup and his brother, Craig Suntrup, jointly own three dealerships in south St. Louis County: Suntrup Hyundai, Kia, and Nissan-VW. They also own a mortgage brokerage business.

Butch Suntrup said his decision to begin selling auto insurance was not driven by fear of the slumping industry, but by excitement about the new business.

Chesterfield-based Equity One Franchisers LLC pitched the idea to Suntrup in late 2007. Equity One owns GlobalGreen Insurance Agency, an insurance-agency franchise that sells policies of well-known companies such as Travelers Cos., SafeCo Corp. and MetLife Inc.

It didn't take much to convince Suntrup of the potential value.

"It'll be as big as another auto store," he said of the GlobalGreen insurance franchise. "It'll never compare in revenue, but this will be more profitable because this has so many fewer employees."

His GlobalGreen franchise opened for business in April from an office in Creve Coeur, though Butch Suntrup said eventually it will place agents at his and his brother's dealerships. Dealerships owned by other Suntrup family members aren't involved in this insurance business.

The three Suntrup dealerships are the first area auto dealerships to open a GlobalGreen insurance franchise, but they aren't expected to be the last. Ray Spears, president and chief executive with Equity One, said his company already has sold a franchise to E$ell Express Classics & AutoSales, a dealer in Waterloo, and is working on other deals.

Outside of auto dealers, Equity One has sold eight GlobalGreen franchises.

In the early 1990s, many dealerships began selling their own insurance, according to Rikess. However, dealers ultimately struggled to inspire the kind of confidence consumers desire from their insurance companies.

"With insurance, the question is, 'When I have a problem, are they going to make things easy for me?'" Rikess said. "For most people, dealerships generally don't" make things easy.

Suntrup acknowledged this perception, saying he witnessed many leery customers when his dealership incorporated a mortgage brokerage in 2006.

But while some customers will balk at the idea of buying auto insurance at a dealership, Suntrup thinks more will appreciate the convenience of having all their needs serviced by one business.

"If they feel comfortable enough to spend $25,000 for a car with us, there is some level of trust," Suntrup said.

The dealership also will benefit from selling well-known insurance brands, said Art Spinella, president of consumer research firm CNW Marketing Research Inc. in Bandon, Ore. He said most auto dealers in the early 1990s were selling their own plans.

Still, it can be tough to woo consumers away from their existing insurers. Spinella said many people rarely switch insurers, assuming the discounts they get for renewing a policy earn them the best deal. However, he also noted that dealerships encounter plenty of first-time car buyers who have no established insurer.

Suntrup thinks there will be plenty of opportunities, saying his three dealerships sell about 500 vehicles per month. However, Suntrup said he and most of his employees are learning the insurance business, so he has taken on only about 120 customers thus far.

Still, Suntrup is careful not to spread himself too thin. He hired his daughter, Lindsey Suntrup, to learn — and eventually manage — the insurance business.

Lindsey Suntrup, 25, was never interested in selling cars but said she's excited about learning the insurance business and capitalizing on the complementary family partnership. She hopes the business eventually will grow into selling house, life and business insurance as well.

"I think we're on the cusp of a new era," she said. "So many companies are expanding horizontally instead of vertically to broaden resources for income."

Over 50% of tenants are increasingly concerned about being able to afford their future rent - Axa

2008-08-12T05:00:00.000-07:00

As the housing market focuses on mortgage arrears and repossessions, AXA can reveal that the private rental market could also be heading for a bumpy ride. According to research from the insurer, the number of private renters slipping into arrears because they simply can't afford the rent is rising. In fact, 13% of renters have gone into arrears in the past 12 months, with over half of these (7%) doing so in the past three months alone...

On top of this, over 50% are increasingly concerned about being able to afford their rent going forward.

All of this potentially adds further misery to the mortgage market as buy-to-let owners are left financially strapped through tenants failing to pay the rent.

AXA can also reveal that 95% of those in privately rented accommodation have no kind of income protection to help out if their financial situation was to alter through losing their job. Recent statistics show jobless levels are on the rise and redundancies are increasingly hitting the headlines.

Mike Keating, Managing Director of Personal Lines Intermediary at AXA:

"Our research shows that over a third of people privately renting are doing so because they can't get a mortgage at the moment. On the surface of it, this looks like the rental market should be buoyant. But if you consider that many of those renting may be struggling to make ends meet it's certainly not all good news for buy-to-let owners.

"The cost of living is rising rapidly and average earnings are not keeping pace. And while rental rates appear to have dropped marginally in the last few months it's going to continue to be tough for many tenants."

AXA are advising both landlords and tenants to take the necessary precautions to protect themselves. The company provides a Buy To Let insurance with an option to cover unpaid rent.

Getting a mortgage during the credit crunch

2008-08-10T04:23:00.000-07:00

DITCHING the credit cards, paying your bills on time and shopping around for lenders are among tips from experts on how to secure a home loan.

Amid the credit crunch, mortgages are harder to get than at any time in the past 20 years, experts say.

Faced with a collapse in home lending approvals, would-be borrowers need to get their financial affairs in order before approaching banks, they say.

Despite the plummeting house prices and imminent interest rate cuts, experts predict getting a mortgage will not get easier -- with banks toughening their lending criteria.

Steven Anderson, head of research at ratings agency InfoChoice, said potential borrowers needed to take time and care over their mortgage applications.

"This is the first time in a while that the banks haven't been falling over themselves to lend to you,'' he said.

His view is shared by Phil Naylor, CEO of the Mortgage & Finance Association of Australia.

"I think lenders are getting more stringent,'' he said. "They haven't changed their policies, but they are dotting the Is and crossing the Ts.''

To help would-be borrowers, the major banks and financial experts have listed the most common reasons why people are turned down for mortgages.

The bank doesn't think you can service the debt

Mr Anderson said banks were conservative when it came to estimating how much debt people could service.

"If they won't give you the loan, you should seriously consider a smaller property,'' he said.

One way to look better is to consolidate any debts.

"Get rid of unnecessary debt -- if you've got credit cards and you don't use them, get rid of them,'' Mr Anderson said. "The banks don't look at how much you owe, but at how big the credit limits are.''

Kelvin Lawrence, Westpac's general manager of mortgage portfolios, said banks looked hard at people's savings history.

"Having a history of genuine savings stands a borrower in very good stead with the institutions,'' he said.

He said if a bank was unhappy with an applicant's savings history, they could work with a customer to put a savings plan in place.

Steven Shaw, NAB's general manager of mortgages and consumer insurance, said it was sometimes possible to get around the savings requirements if a family member was prepared to guarantee the loan.

The term of the loan is greater than the time until you retire

According to Mr Anderson, this is the easiest financing problem to get around.

"All they do is change the terms of the mortgage,'' he said.

"So instead of paying the loan off in 25 years they give you a shorter period, so you pay it off quicker.''

You have had debt defaults or a bankruptcy

Mr Anderson said most banks overlooked small defaults on bills.

"If it's only minor it probably won't matter,'' he said.

Mr Lawrence said the number of defaults was also important.

"We look at one versus multiple defaults,'' he said.

"We are looking for a trend.''

Mr Anderson said that in the past there were more lenders prepared to provide low-doc or no-doc loans, but those options had shrunk.

"There are still specialist lenders who will lend to people with bad credit histories, but you will be charged a much higher interest rate,'' he said.

"Really, the only option is to get someone to go guarantor.''

Security is not acceptable

This means the bank does not accept the valuation of the property and refuses to lend the money.

Mr Anderson said while it was possible to get your own valuation and appeal against a rejection, there was little chance of the bank accepting it if the difference was too big.

Mr Naylor said being turned down was not the end of the world.

"The bottom line is if one lender doesn't want to lend to you -- shop around,'' he said.

"That's why mortgage brokers are a good idea -- hopefully they can find a lender that meets your requirements.''

Wall Street ends sharply down

2008-07-29T05:13:00.000-07:00

US stocks tumbled on Monday as worries about the economy and the troubled financial sector overshadowed the announcement of a rescue plan for mortgage giants Fannie Mae and Freddie Mac.

Financial stocks were among the blue chips hit the hardest, with insurance giant AIG down 12%. Shares of Citigroup fell 7.5%, Bank of America sank 5.1%, and Wachovia tumbled 6%. Bond insurer Ambac was the biggest loser for the day, falling 19%.

Merrill Lynch, AIG and Fannie Mae led financial shares to a third straight drop after the IMF warned that worsening credit conditions may prolong the economic slowdown in the US. Verizon slid to an almost two-year low on a bigger-than-estimated decrease in home-phone lines.

Tyson Foods tumbled the most in six weeks after profit sank 92% on higher feed costs.

The S &P 500 Index slumped 23.39 points, or 1.9%, to 1,234.37, its lowest level since reaching an almost three-year low on July 15. The Dow slid 239.61 points, or 2.1%, to 11,131.08. The Nasdaq Composite Index dived 46.31 points, or 2%, to 2,264.22.

Market breadth was very negative. Four stocks fell for each that rose on the New York Stock Exchange.

US indices had finished slightly higher in the previous session on encouraging reports from the housing and manufacturing sectors.

Stocks opened lower as worries about the credit crisis were exacerbated by federal regulators shuttering two more regional banks on Friday. They came off their lows briefly after Treasury Secretary Henry Paulson laid out guidelines for banks seeking to issue covered bonds as a way to finance home mortgages.

Investors will see if the US market can rebound on Tuesday as a key measure of consumer confidence is due to be released shortly after the opening bell. Scores of earnings reports are also due before and after the market.

Government-sponsored mortgage finance giants Fannie Mae and Freddie Mac turned higher after the Senate approved a bill that could establish a rescue plan for the embattled firms. Shares of Fannie and Freddie both soared in morning, but turned sharply down by midday. Fannie fell 10.7% and Freddie sank 6.7%.

Oil prices rose US$1.47 to US$124.73 per barrel as traders weighed slumping demand with renewed concerns about Iran's nuclear capabilities. Nonetheless, crude is still about US$24 below its high of US$147.27 set on July 11.

The average price of gasoline in the US fell 1.2 cents to US$3.958 per gallon.

In currency trading, the US dollar slipped against global currencies. The greenback fell against the euro, even as a measure of German consumer confidence fell to a more-than-five-year low.

COMEX gold for August delivery rose 90 cents to settle at US$927.70 an ounce after fluctuating above and below the break even point for much of the day.

Treasury prices rose, sending the yield on the benchmark 10-year note down to 4.01% from 4.11% late on Friday.

Europe stocks ended lower, as German consumer confidence dropped to a five-year low, Citigroup downgraded the banking sector and Ryanair Holdings warned of the possibility of its first-ever annual loss. The pan-European Dow Jones Stoxx 600 closed 1.1% lower to 278.73.

In Germany, the benchmark DAX 30 fell 1.3% to 6,351.15. The French CAC 40 fell 1.2% to 4,324.45 and the UK's FTSE 100 slipped 0.8% to 5,312.60.

In the emerging markets, the Bovespa in Brazil dropped 0.6% to 56,869 while the IPC index in Mexico was down 1.3% at 26,732. The RTS index in Russia slipped 1.2% to 1928 and the ISE National-30 index in Turkey gained 1.9% to 46,990.

Fame and Fortune: Claire Goose

2008-07-20T06:09:00.000-07:00

Actress Claire Goose will be appearing next month in ITV’s police drama The Bill as the new Sergeant Rachel Weston.

Born in Edinburgh, she grew up in Norfolk before attending the Italia Conti stage school in London at 16. She established herself as nurse Tina Seabrook in the BBC drama Casualty and more recently played a detective, Mel Silver, in Waking the Dead. Goose made her movie debut in 2001 in the horror film Alone.

Goose, 33, is married to the scriptwriter Craig Woodrow, 34. They live in Chiswick, west London.

How much money do you have in your wallet?

I have £8.27. I normally don’t take out more than £40 at cash machines. That will last me the week. I’m a slave to work so I don't get a chance to spend much anyway.

I like to have some change for a coffee — there’s a Starbucks round the corner from where we’re filming. I tend to use my debit card for my daily shopping.

Do you have any credit cards?

I have a Virgin Money Visa but I only really use it when I go abroad to take cash out. I know it’s not the most effective way to do it but I’m normally in such a last-minute rush that I never get round to organising things like foreign cash.

I have to say, though, Craig was brilliant when we went to New Zealand for our honeymoon in January. He shopped around and found Nationwide don’t charge fees for foreign cash withdrawals, so we opened an account and put a great big lump sum into it before we went there.

Are you a saver or a spender?

Probably more of a saver although I love spending money on interior decorations. Having said that, I haven’t spent anything on the house recently. We spent a lot of money when we got married so we’ve decided to slow down for a bit.

Whenever I earn money I never for a second think all of the money’s mine. I tell myself that about half of any money I earn is for the taxman.

How much did you earn last year?

With the acting, repeat fees and voiceovers it’s probably getting into the six-figure mark. For a voiceover you might get anywhere between £150 and £250 an hour. You also get paid every time it’s used. I recently did a radio advert for BHS.

I love voiceover work because it’s very different from acting on screen and there isn’t all that pressure for make-up.

Have you ever been really hard up?

When I first came to London from Norfolk, I was quite hard up. I was 16 at the time and at drama school.

Dad gave me an allowance for my living expenses but I remember when my roommate and I had a fiver between us for the whole weekend. We went to the supermarket and bought a box of cereal, a pint of milk, some toast and some butter and that’s all we ate — we were pretty sick of it by the end.

The day I left college, I told dad that I didn’t want any money from him. I wanted to start for myself. I got a part-time job at the NSPCC children’s charity — I didn’t get a full-time job as I needed to be free for things like auditions.

Do you own a property?

We have a two-bedroom maisonette in Shepherds Bush, west London. I bought that in 2002 for £272,000. I lived there for a number of years but I now rent it out. People say it’s worth about £400,000 but you never know in the current market. The mortgage on it is about £282,000 so we probably have about £100,000 or so in equity. We paid off the mortgage on the flat, but we remortgaged that to put a deposit down on our house in Chiswick in 2004. It’s a three-bedroom Victorian terrace which we bought for £410,000. Other places on our road are probably worth about £525,000 to £550,000.

Further decline in UK mortgage lending

2008-07-18T16:45:00.000-07:00

New figures released today show gross mortgage lending declined to an estimated £23.8 billion in June, down three per cent from May.

The Council of Mortgage Lenders (CML), which compiled the figures, said there had been a 32 per cent fall since June last year.

"Market activity during a traditionally a busy time of year for mortgages has been muted by funding shortages and, more recently, dampened consumer demand," CML director general, Michael Coogan.

"While by historic comparisons we still have had a good level of gross lending, new net lending has been constrained in 2008 and this picture will continue for the rest of this year."

The decline between the first and second quarter was a marginal, at one per cent.

However, the CML would usually expect an increase in spring.

The year-on-year decline has gathered pace in recent months; lending in the first quarter of 2008 was down 11 per cent on 12 months earlier, while the second quarter was down 21 per cent.

"Government efforts to help housing associations purchase new-build properties and borrowers to save for a deposit are welcome, but are likely to have only a marginal impact on the housing market," said Mr Coogan.

This week the government announced a 'rent now, buy later' scheme, with the ambition of getting more first-time buyers onto the housing ladder.

"The recent reduction in short-term fixed-rate mortgage costs is a small bit of welcome news for hard-pressed households facing significant pressures on their finances from the higher cost of food and fuel, in particular," continued Mr Coogan.

"However, borrowers on tight budgets will have to plan ahead to manage higher mortgage payments than they have been used to. Speak to your lender early remains the advice for anyone struggling to pay."

Commenting on the figures Howard Archer, chief economist at analysts Global Insight, said: "There is just no let up on the bad news on the housing market, with the very low level of mortgage activity for house purchases being a consequence of the toxic mix of stretched buyer affordability and very tight lending conditions.

"Elevated affordability pressures on potential house buyers stem from high house prices and modest disposable income growth, while very tight credit conditions have led to markedly fewer and more expensive mortgages being available."

Regulators seize Mortgage lender IndyMac

2008-07-12T01:16:00.000-07:00

(RTTNews) - Pasadena, California-based IndyMac Bancorp Inc. (IMB: News, Chart, Quote ), the holding company for Indymac Bank FSB, was closed by the Office of Thrift Supervision or OTS after the company's failure to raise capital. The regulatory has named Federal Deposit Insurance Corp. or FDIC as the Conservator to the run the bank.

OTS specified that, according to FDIC data, IndyMac is the second largest financial institution to close in US history and the largest OTS-regulated thrift ever to fail. IndyMac, which had total assets of $32.01 billion and total deposits of $19.06 billion as of March 31, 2008, now joins the list of financial institutions of major collapse, including Continental Illinois National Bank and Trust Co., which became insolvent in May 1984, and American Savings & Loan Association in 1998.

IndyMac is specialized in making and selling so-called Alt-A mortgage loans to consumers, who though more credit worthy than subprime borrowers, usually doesn't have complete documentation of income or assets necessary to receive a prime-rate loan.

IndyMac, which was founded as Countrywide Mortgage Investment in 1985, and spun off by Countrywide as an independent company in 1997, came under fire recently when Senator Charles Schumer of New York commented that lax lending standards and deposits purchased from third parties left the bank on the edge of failure.

Making situation worse, issues about taking responsibility of the failure were in a debate. OTS criticized that the immediate cause of the closing of the bank was a deposit run that began and continued after the public release of a June 26 letter by the Senator. OTS noted that, following the release of that letter expressing concerns about the bank's viability, depositors withdrew more than $1.3 billion from their accounts in the following 11 business days. In response, Schumer on Friday said that, "OTS should start doing its job to prevent future IndyMacs "

Commenting on the situation, OTS Director John Reich said, "This institution failed today due to a liquidity crisis. Although this institution was already in distress, I am troubled by any interference in the regulatory process."

Life Insurance 101

2008-07-02T06:08:00.000-07:00

Life Insurance can be confusing, let us help you decipher your way through it. This is the first in a several part series where we will introduce you to a few of the key terms in the Life Insurance world.

First of all, life insurers (also known as carriers) offer more than just traditional life insurance. One of today's hot products is Long Term Care (LTC), we will talk about LTC in another article.

They also offer products like Annuities, Critical Illness and Disability Income insurance. You can purchase these products through agents, which typically sell only the carrier's product they are associated with, brokers which sell products from various carriers and on your own through the Internet.

An introduction to Life Insurance products starts with the two basic categories that life insurance products fall into. These are those with Cash Value and those without Cash Value. An insurance policy with a cash value is a policy that has a value for the insured that they can borrow or withdraw from. Cash value is built up by paying premiums to build up your cash value. Typically, those without cash value are Term Insurance products. Those products with a cash value, typically are investments that last until you die. A Whole life policy and a Universal life policy are examples of policies with a cash value.

In this article, we will concentrate on term life policies. These are the most common types of policies and do not have a cash value. You purchase a term policy for a specific amount of time, usually 10 or 20 years. Since these policies have no cash value, they are generally a very good value. A term policy is the ideal choice for people under 40 years old. For example, a 30 year old with good health can find a policy for less than $300 a YEAR for $500,000 in protection. This should more than cover anyone around that age.

Another form of a term policy is offered to many of to help offset some of our credit risks. For example, have you received an offer that if you pass away, your mortgage will be paid off? This is generally what is known as a decreasing term policy. Mortgage companies market this to their clients that covers the unpaid portion of the debt to them. Before purchasing one of these types of policies (often offered along with car loans, credit cards, etc as well) do your research! You can easily find out how much a policy will cost by clicking one the links on this page.

In later articles we will discuss some of the different kinds of cash value policies.

This article is brought to you by the Wealth Bounce webmaster.

Scott Cote is a software and business professional specializing the operations of life and health insurance companies. You can visit him at his website, www.wealthbounce.com

MICA Reports Continued Problems for U.S. Homeowners

2008-06-30T16:41:00.000-07:00

(CEP News) - Nearly 68,000 American homeowners with mortgage insurance fell more than 60 days behind on their loans in May, outnumbering the 40,687 people who cured their situation in the month, according to a release from the Mortgage Insurance Companies of America (MICA) on Monday.

This is the 26th month in a row that delinquent homeowners have outnumbered cures.

"What we're seeing in the mortgage market is a continuation of the return to realistic and responsible lending standards and privately insured loans are part of that equation," said Suzanne C. Hutchinson, executive vice-president of MICA.

Primary insurance in-force totalled $860.339 billion in May, a 20.8% increase compared to the $712.028 billion reported for the same month a year ago, the report said.

MICA's members reported that 89,365 borrowers used private mortgage insurance (PrivateMI) to buy or refinance a home in May.

By Patrick McGee, pmcgee@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca

Flawed foundations

2008-06-25T02:17:00.001-07:00

'It's the worst suffering, it's financially draining, it's destroyed their relationships, their homes. It's so repugnant to what Australians would expect," says Catherine Cusack, the NSW opposition spokeswoman for fair trading. "How have these people that I deal with had all their suffering ignored for so long?"

Cusack is talking about the nightmarish limbo faced by people who are locked in dispute with their home warranty insurers. Unable to move into their homes, get defects repaired or sell as is and start again, many are tens of thousands of dollars worse off because they tried to make a claim against their home building warranty insurance when something went wrong.

Most consumers think that the mandatory home building warranty scheme in place in NSW and Victoria will cover them for substandard building work. But the reality is very different. And consumers groups are concerned.

"No rational consumer would choose to buy this insurance if it wasn't mandatory," Choice's Gordon Renouf says.

In Victoria and NSW, government regulations compel home owners to buy the privately administered insurance, which is exempt from oversight by the Australian Prudential Regulatory Authority.

Voices condemning the mandatory scheme are getting louder following the collapse earlier this year of Beechwood Homes, NSW's biggest home builder, throwing up new doubts about its worth to consumers.

"It has no value whatsoever, in a nutshell," says Gerard Brody of the Consumer Action Law Centre in Victoria. "You can only make a claim when the builder is dead, disappeared or insolvent. So a consumer basically has to exhaust all their legal avenues before they can claim on the insurance. That's not really insurance."

In all states except Queensland (see box), home warranty insurance is only a "last resort" scheme which does not cover all instances of shoddy work.

It's meant to be a safety net for consumers when a builder dies, disappears or becomes insolvent but the unlucky consumers only discover its limited application when things go wrong.

What many don't know is that consumer protection for renovators and home building has never worked well and has been a running sore for years.

There have been more than 30 government inquiries into the system's flaws. Six years ago there was a national review, led by Professor Percy Allen, which was meant to fix the problems.

Since then it is estimated that about $225 million has been collected by the six private insurers in NSW alone, with only a fraction - about $16 million - paid out in claims.

In the Victorian Parliament last year, an answer to a question on notice said premiums in the state were between $90 million and $120 million a year. Vero, owned by Suncorp Metway, has between 60 and 75 per cent of the home building warranty insurance market.

Now, following the release of a highly critical Productivity Commission report in May, an all-party Senate inquiry is investigating the scheme - again.

At the Sydney hearing on June 13, several people who have fallen into the black hole of protracted disputes around home building warranty insurance gathered to hear the submissions. Irene Onorati, who has dedicated years of her life to lobbying on this issue, spoke first.

"The lives of many honest families have been shattered," she told the committee. "We've had enough, we need a new system." There were murmurs of "hear, hear" from the gallery. Onorati has spoken at many of the previous government inquiries into the area. "I'm getting very angry now," she told the Herald later.

"All these cases were in the NSW parliamentary inquiry in 2006, and tell me, what did that get us?"

Submissions to the Senate inquiry suggested a deliberate policy by the insurers, particularly Vero, of dragging out litigation to minimise payouts and force inadequate settlements on claimants - "litigation for harassment", as Senator Christine Milne summarised it. (Vero has not attended the hearings yet but Vero spokeswoman Sue Repanellis says the insurer has not ruled out appearing at a later date.)

Brody says, "You can't claim the legal costs on the insurance at the end of the day, so most consumers get advice and rationally decide not to proceed and don't claim on insurance and are just left out of pocket."

There are horror stories of those who refused to give up, such as Rob Siebert, who is $70,000 worse off after following all the processes necessary to claim on his insurance after his builder refused to remedy defects in his Lismore home.

"From a consumer perspective, it's hopeless," says a Victorian builder and lobbyist, Phil Dwyer.

"It's crucifying people. It's not only the cost and the legal costs but the frustration and the never-ending litigation. One thing rolls into another and it goes on for years. That's why a lot of this hasn't come to a head, because the consumers are only coming out the other end now as broken people. For God's sake, a $2 item in Coles is afforded better consumer protection than what we've got for people's homes. That's why we're so angry about it."

The scheme is also bad news for small-to-medium builders, says Dwyer, the national president of lobby group the Builders Collective Association.

For years, after a claim nearly ruined his business, he has been lobbying state and federal governments to ditch the mandatory scheme, as the Tasmanian Government did earlier this year.

Builders of residential premises under three storeys must obtain home warranty insurance before they begin a project. For a home costing $230,000, the insurance costs about $3000 for a policy in NSW and slightly less in Victoria, Dwyer says. (Vero claims the average premium is less.) This cost is typically passed on to the consumer.

Based on the average cost of the insurance and the number of building permits issued, Dwyer estimates the insurers are raking in about $358 million a year nationally. In order to get the mandatory insurance, builders must sign a deed of indemnity and often get a bank guarantee as well.

"The builder himself becomes the underwriter of the insurance through the indemnity or bank guarantee," Dwyer says. "We have to undertake to repay to the insurer within 28 days of demand any claim plus all costs to the insurer. It's a bit like having car insurance and having to pay for any accident you have."

From figures provided to the inquiry by the chairman of the Home Building Warranty Scheme Board, it has been calculated that in NSW insurers are paying out a mere 7 per cent of revenue in claims. Vero disputes this. Repanellis says Vero's loss ratio is in line with the accepted premium-to-claim ratio for most consumer protection insurance (about 65 to 80 per cent) but she did not give Money exact figures.

"There's a lot of misinformation out there," she says. "If it was such a profitable business, why were we the only insurer who stayed in the market when HIH collapsed? You'd think all the other insurance companies would drive right in if it was really so profitable."

The present Victorian and NSW schemes came into force after the 2001 collapse of HIH insurance, then the majority provider of home building warranty insurance. When that was followed by the September 11 terrorist attack, the insurance industry contracted and it was harder to obtain insurance.

Under pressure from builders and insurers, in 2002 the Victoria and NSW governments agreed to change the home building warranty legislation to make it

"last resort", shortening the period of cover and limiting maximum payouts.

Then the Federal Government changed the corporations regulations to effectively convert home building warranty insurance from a retail to a wholesale product, stripping out consumer protection requirements and oversight by APRA. That is why the exact figures on premiums taken compared with commissions and payouts made are not publicly available.

"What is of interest in this whole situation is how the regulations came to be put there in the first place," Cusack says. "It's not an oversight; it's a carefully crafted set of words that's devastating in its impact, removing the scheme of any accountability. It removed it from any independent authority looking at consumer complaints. To me that's why it has been allowed to run rampant for so long."

However, the NSW Office of Fair Trading defends the scheme against charges of being "junk insurance".

"It's very valuable insurance," says spokesman Graham Humphreys. "It is a last resort scheme ... If a claim is declined [people] have appeal rights to the tribunal and to courts. So a person does get a chance to have their claim fully assessed. At least there is this form of insurance ... If the builder was to go bankrupt, imagine a situation where there was no insurance. These people would be essentially out of pocket."

Humphreys says that 1250 claims had been settled in NSW as at December 2007 under the scheme but figures about any difference between the payouts and the actual costs incurred in each case were not available.

"We'd like people to make a judgment on the scheme after Beechwood," he says. "We're right in the middle of a process here. If people have criticisms, we'd need to evaluate that at the appropriate time. We'd point to the 1250 cases were the scheme has worked."

Repanellis says: "The problem arises when builders refuse to come back and fix defects, when people are paying the biggest amount of money most of them ever do in their lives. It's the one side of this argument that people seem to forget. "Insurance companies need to be profitable and it's not [as has been suggested] 'obscene' profit. You have to be profitable so you can pay out claims such as Beechwood's collapse. You're looking at millions of dollars here."

Have you had a bad experience with home warranty insurance? Send your stories, with contact details, to newsdesk@smh.com.au

HOW TO PROTECT YOURSELF IF YOU'RE BUILDING OR RENOVATING

For now, people building or renovating their homes in NSW and Victoria are stuck with the mandatory home building warranty scheme. That raises the question of how you can protect yourself when renovating or building.

"Consumers have to wonder whether it's worth building. It's one of the biggest risks for consumers and they can't in essence insure against it, because of the limited application of building warranty insurance," says Gerard Brody from the Consumer Action Law Centre in Melbourne.

Some people mistakenly think they are covered by their general insurance - their home building policy - but these policies specifically exclude building defects.

For instance, NRMA's home building insurance cover excludes inherent defects and structural defects; settling, shrinkage or expansion in buildings, foundations, walls or pavements and faulty design or workmanship.

That means consumers have to be defensive in their thinking and rely only on highly recommended builders.

As a start, they would have to be licensed. Phil Dwyer, builder and national president of the Builders' Collective of Australia, says: "Probably the best thing you can do is find a builder that represents himself, ask the builder for the last three jobs they've done, and get references from owners.

"Check his credentials - not through websites, but through the people he's just worked for. Until such time as we get proper consumer protection, that's the best thing that can be done. It gives you a year's track record for the builder, from people who will know if there will be any issues. And a good builder will be happy to give you his last three jobs."

Real estate consultant and consumer advocate Neil Jenman says progressive payment is key to managing construction work - make sure you hold some money back.

"My wife and I built our house eight years ago. I found that when you pay the tradesmen you wouldn't see them again. So I got them together and said, 'I like spending time with you guys but there's only one way to keep you coming back and that's to not pay you.' So always hold something back, to keep them coming back. Keep control of the purse strings.

"In general, home owners don't understand that you're the boss and the boss calls the shots. When we hire tradesmen or real estate agents we tend to get intimidated. They say, 'It's our policy.'

"Home renovators and home builders themselves should say, 'Let me tell you about our policy; our policy is we don't pay until we're happy the job is done properly. If you don't like it then too bad, go find another job.'

"The way the economy is tightening up, home renovators are in a much better position than they used to be. Home owners don't realise how much power they've got."

Make sure your documentation is as detailed as possible and don't leave anything vague so there is no wriggle room to cut corners or push up costs.

"If you have any trouble later, bring them back to it and say, 'This is what we agreed to'. And always ask, 'Is there anything else I should know?' Later on when they raise something new you can say you asked and they didn't bring it up at the time," Jenman says. KM

QLD LEADS THE WAY

Consumer advocates and builders want a Queensland-style home building insurance scheme to be implemented nationally.

There, the government underwrites home warranty risk and the Building Services Authority regulates it.

The insurance is mandatory and there's a binding, low-cost dispute resolution system where a builder's licence may be at risk if he doesn't rectify defects.

Queensland company Real Property Constructions suffered a Beechwood-style collapse in February this year, leaving 233 uncompleted homes.

Under Queensland's "first resort" scheme, the responsible minister, Rob Schwarten, reported that all complaints received by the authority had been assessed and 70 per cent had been finalised - all within three months.

Ian Jennings, general manager of the authority, says: "You're covered for defects, subsidence and non-completion up to $400,000. It works because of the integrated model. You need dispute resolution, a licensing regime, the ability to get rid of a builder, plus you've got to have the insurance. It all comes as a package."

In the event of a dispute with a builder, the Queensland consumer has a clear, simple set of steps to take to have it remedied.

"For example, the house is finished but the roof is leaking," Jennings says. "They've got to raise it first with the builder." If the builder doesn't fix it, the consumer can lodge a complaint with the authority, which will inspect the site with both the consumer and the builder present and determine whether the work complies with the building code and Australian standards. If not, the builder must fix it and, if he refuses, a formal demerit goes on the public register against his licence. Then the insurance kicks in and the authority supplies a rectifying builder to fix the defects then recover costs from the original builder.

"If a house isn't finished," Jennings says, "and a consumer legally terminates a contract because the builder's not performing, then we apply the insurance contract and finish their home. In NSW and Victoria, they'll only pay 20 per cent of the contract price; we will finish their home and then recover from the builder. The consumers' problem has been fixed."

However, the Housing Industry Association, which represents builders, trade contractors, manufacturers and suppliers but also benefits from commissions as the home warranty insurance broker, dismisses the Queensland approach as expensive and unmanageable.

"Queensland's scheme is more expensive than [that of] any other state," it says in its submission to the inquiry.

Jennings disputes this. "It doesn't cost the government," he says. "We're self-funded. All our current liabilities are funded for the next 61/2 years. Our revenue comes from licence fees and insurance premiums. The regulatory business is funded through licensing income and the insurance business is funded through payment of premiums."

The authority's premiums vary according to contract size. The insurance premium for a $200,000 contract is $1580. KM

THE VICTIMS WHO LOST THOUSANDS

For the past 20 years Irene Onorati has fought for the rights of consumers and the victims of shoddy building and bureaucratic indifference. She's spoken at every hearing into the lack of consumer protection. And she's still fighting.

Onorati's volunteer lobby group, the Building Action Review Group, has helped hundreds of consumers left with nowhere else to turn. Here is a small sample of those let down by the scheme.

Yasmin Fahri is a single mother who contracted a builder for $160,000 worth of renovations on her Sydney home in 2005. The builder was licensed by the NSW Office of Fair Trading. Fahri paid $68,500 for work that was defective, incomplete and could not be certified. The dispute escalated and, after receiving threats from the builder, Fahri took out an Apprehended Personal Violence Order against him. She paid for mandatory home building warranty insurance but never received the certificate from her builder. In any case, it is useless to her as it only applies when the builder dies, disappears or becomes insolvent.

FairTrading has no power to force the builder to rectify defects but disqualified him for one year. Meanwhile, Fahri, who can't afford a lawyer, faces a demolition order from her local council. It has cost her $450,820 - more than three times the original contract - and the dispute continues.

"I compare it to a form of torture," she says. "Your builder can take your life savings and have a holiday in Greece! This should not happen in Australia."

In 1993, Redfern pensioners Prokopios and Kalipso Frantzis signed a contract to extend their home. The first builder abandoned the job and left them without a working toilet or hot water for more than three months. Statutory insurance applied at the time and was quickly invoked. But then successive rectifying builders only made the defects worse. In each case the Frantzis family relied on the Fair Trading assessments and used licensed builders. When defects reappeared after the third builder's work in 2001, the insurer, Royal Sun Alliance (now Vero), denied liability, saying it was Fair Trading's responsibility. The botched jobs have together cost them $226,898.

In 2005, Fair Trading's home building service approved demolition and reconstruction but only to a value of $100,000, when the repairs would cost significantly more. This year, the minister, Linda Burney, offered $167,000 for the cost of demolishing and rebuilding the defective works. It's not enough for the job and the family is still trying to get Fair Trading to fix their house.

Then there's Cabramatta man Minh "Charlie" Tran. More than six years ago, dodgy building work left him with a house beset by structural problems, sinking on one side. He now lives in a caravan on his property, with mortgage repayments of $4200 a month, and faces orders from the Land and Environment Court to repair the building under threat of contempt of court or jail.

In 2006, it would have cost $450,000 to fix. Desperate and out of money to pay his lawyer, Tran went to mediation but refused Vero's offer of $75,000 (Vero spokeswoman Sue Repanellis disputes this amount and says their offer was "far in excess of $75,000").

There was no written agreement. Vero took him to the Supreme Court to try to force him to accept the offer. The case was dismissed. The insurer is appealing.

"I did nothing wrong," Tran says. "I've lost five years of my life and $300,000. And instead of paying me $200,000 [then the full amount under the policy], Vero spent $1 million dollars taking me to court. The only thing I suspect is that, if they pay me, there may be another thousand people behind me."

The NSW opposition spokeswoman for fair trading, Catherine Cusack, says: "The revelation of Mr Tran's case is that the insurers are bullying people to accept inadequate payment and saying, 'If not, we'll take you to court.'

"It's deliberate and predatory. I find it difficult to believe that such a thing can happen but it's real. I've spoken to these people and I've seen their documents. The victims can't reconcile themselves to the injustice of their situation.

"In Australia you'd think there would be consumer protection to curb this behaviour but there is none in relation to home warranty."

Onorati agrees: "They're trying to force people to go into mediation when they have no more money to continue in court. The smallest building repair ends up the biggest nightmare of your life and destroys completely your health and financial livelihood. The whole system needs fixing." KM

Financial risk analysis and the space industry revisited

2008-06-23T05:32:00.000-07:00

by Taylor Dinerman
Monday, June 23, 2008
Last week we looked at the different risks that exist in different parts of the space industry (see “Financial risk analysis for the space industry”, The Space Review, June 16, 2008). Roughly speaking they divide into two groups. One is the conventional space industry, which includes both the military and civil space sectors as well as the conventional commercial space sector. In these sectors risk is well understood and can be managed by conventional means. This is also the sector where risk has been bought down by ample and sustained government investments.

Then there is the NewSpace sector: entrepreneurial and visionary, but full of technological and financial unknowns. This is the area where the greatest potential profits exist and where there are excellent chances for unwary investors to lose their proverbial shirts. However, one must recognize that these dangers have been reduced over the past decade. The NewSpace firms that have survived are agile, thick-skinned beasts who either have very rich patrons or have become exceptionally good at scavenging the landscape for contracts and investors.

NewSpace is the area where the greatest potential profits exist and where there are excellent chances for unwary investors to lose their proverbial shirts.
Companies like SpaceDev, TGV Rockets, and XCOR Aerospace are not going away anytime soon. They have all gotten beyond the “viewgraph engineering” stage and are cutting metal and building products. By itself this may not be enough to secure their future profitability, but it’s a long way from where they were eight or nine years ago. SpaceDev, for example, has latched onto a successful niche making actuators and similar small components at its facility in North Carolina while still working on more ambitious systems in California. The firm may be making a small profit, but it still has a ways to go before it can compete with better-established ventures.

One thing that the NewSpace firms all have in common is that they share big ambitions. They may have different visions of what they want to do, but none of them are thinking small. They all believe that one way or another their ultimate success will transform the way the space industry operates and will open up the solar system for human exploitation. Those who dream big dreams can often be their own worst enemies when it comes to dealing with the day-to-day world of equity and finance. Smart investors do not simply put their money into good ideas, they invest in people. If the CEO and other leaders in a firm appear to have their heads stuck in the clouds, their chances of raising risk capital will remain earthbound.

Investors and business leaders are ready to take risks, but they are not willing to take stupid risks, at least not normally (anyone remember the “New Coke”?) Mitigating risk by spreading it around is a basic principle of money management. Yet as the techniques of risk mitigation become more and more sophisticated, so do the opportunities for systemic failure: we have all seen what happened to the financial engineers who helped create the subprime mortgage disaster. The success of Western capitalism is due in large part to the inventions of the joint stock company and the insurance industry. Entrepreneurs who make it big are ones who know how to use these institutions rather than those who spend time and effort fighting them.

The next phase of the NewSpace industry will logically result in the emergence of one or two major new companies that will take their places amongst the so-called “big boys”. Virgin Galactic and Scaled Composites are part of large conglomerates, and while they may behave like small, independent firms, they have the kind of support needed to carry though with their plans without the need to raise new capital or to win new government contracts. The independent companies are the ones that will either grow or go under. This is where investors will have to take real risks.

However one or more of these firms could make the kind of technological breakthrough that would turn them into a giant of the 21st century. They simply have to come up with the right product at the right time for the right price. This usually requires a divine miracle.

The history of capitalism is full of such miracles, yet as we all know there are far more failures than successes. What is happening is the convergence of various technologies with the demand for low cost access to, and operations in, space. The basic science of rocketry is now better understood than it was fifty or sixty years ago when it was much more of an “art”. The NewSpace firms are free to try and use combinations of new products and ideas to build their products. Some or most are sure to fail, but those who do not may have their hands on a gold mine. For example, a firm that comes up with a genuine new two-stage-to-orbit RLV that can dramatically cut launch costs will instantly change to economics of the commercial launch industry.

Technology may be taking some of the “art” out of rocket science, but it cannot help much with the “art” of risk management in the space industry.
Imagine what would happen if, in say, 2011 or 2012, a NewSpace firm were to put into service a launch vehicle that could put a two-ton payload into geosynchronous orbit for two million dollars. Would this hurt the market for the Ariane 5, the Proton and for Sea Launch? Probably, but only if there were satellites available in that class that could provide services roughly comparable to the heavy ones that are now being designed and built. To truly disrupt the market, the new satellite would have to combine lower manufacturing costs and lower operating costs with the lower launch costs. The launcher would have to be shown to be at least moderately safe and reliable.

Some of these factors could be met by turning an orbital space tourism vehicle into a satellite launcher. If a vehicle designed to safely carry passengers into orbit works as planned, then modifying it to profitably carry satellites is only logical. This may be why the European conglomerate EADS is looking to build its own suborbital space tourism vehicle.

For everyone involved in the space industry their are risks and dangers involved in staying with today’s tried and true expendable rocket technology and even greater ones in investing in the next generation of reusable launchers. The only way to avoid these risks is to get out of the industry altogether.

Technology may be taking some of the “art” out of rocket science, but it cannot help much with the “art” of risk management in the space industry. It takes men and women with years of experience and considerable investing skill to understand this emerging industry. It is evident that investors must place their bets on people, rather than on hardware that may or may not work as well as planned.

Flurry on Smith Hill means the end is near

2008-06-20T01:18:00.000-07:00

By Katherine Gregg, Steve Peoples, Cynthia Needham and EDWARD FITZPATRICK

PROVIDENCE — In their usual chaotic rush to finish after six months at the State House, lawmakers raced through votes yesterday on scores of high-profile bills including a new $6.9-billion state budget now headed to the governor to be signed into law; a bill to “quash-and-destroy” criminal records, no matter how serious the offense, and legislation aimed at easing the brunt of the foreclosure crisis.

Other bills that bubbled to the surface in recent days — such as the proposed $12.6-million sales-tax rebate to the Canadian company talking about building a heavy-equipment auction house in West Greenwich — were still hanging in the balance.

Among the highlights of a session, that included 106 bills in the House alone on what may have been the next to last day of this year’s legislative session:

•The Senate approved, and sent to the governor, a $6.9-billion spending plan that lops hundreds of people from the state’s health-care and welfare rolls, freezes non-school aid at this year’s already-reduced levels, and relies on more than $150 million in iffy — and not yet fully explained — savings in the state employee and Medicaid arenas to help avert a humongous deficit during the budget year that begins in two weeks. The bill cleared the House a night earlier after close to 9 hours of debate, and the Senate on a 36-to-2 vote that belied the depth of some of the objections.

“The choices we had were slim,” said Senate Finance Committee Chairman Stephen D. Alves. “We came to realize that we were not going to tax our way out of this budget problem.”

Despite the lopsided vote, a chorus of senators voiced concern over cuts to early childhood programs, reduced health-care coverage and a perceived lack of oversight in the plan to transform Medicaid programs that serve more than 180,000 Rhode Islanders. “I honestly feel like we’ve kicked some people under the bus,” said Sen. Daniel J. Issa, D-Cumberland.

•A bill to lift a looming July 1 deadline for sprinkler and other fire-code requirements sailed through the House, with Rep. Joseph Trillo, R-Warwick saying that if left untouched, the law would “force the closure of many schools and places of business…because a lot of them have been unable to meet the code requirements at this point.” The bill — now headed to the Senate — does not specify a new deadline, leaving it to the state’s Fire Safety Code Board of Appeal & Review to grant extensions “for good cause.”

•Jerome Williams won Senate confirmation as director of the Department of Administration, the mega-state agency that oversees hiring, purchasing and auditing of government operations, after a year as state transportation director. Noting that “Jerry is no stranger to this building or state government,” Senator Alves, D-West Warwick, said, “Jerry certainly has the qualifications and knowledge to run that department.” Senate Government Oversight Chairman J. Michael Lenihan, D-East Greenwich, called him “a breath of fresh air.”

•Despite objections from the governor, state police and attorney general, a House-passed bill to automatically “quash and destroy,” after five years, the criminal records of people given “deferred” prison sentences was headed for a final vote by the Senate, after clearing a key committee on a 6-to-1 vote last night.

This was the sentence given, for example, to one of the admitted co-conspirators in the Lincoln bribery scandal, the executive secretary for the Barrington police chief who pleaded no contest to embezzling town money and the admitted accomplice to a gunpoint robbery in Waterplace Park who traded testimony for a reduced sentence.

Advocates say clean records are essential to the kinds of jobs that would provide an individual a second chance. For example, current state law bars people with certain felony convictions from obtaining state licenses to work in nursing, social work and auto repair; this would provide a way around that. But opponents question how the state, and other employers, can do required background checks if criminal records are erased.

Current law allows a judge to expunge a single nonviolent offense from the record of a first-time offender five years after the individual has completed a sentence for a misdemeanor, 10 years after completing a sentence for a felony.

This bill is not limited to youthful offenses, first-time offenders or even nonviolent crimes. Cosponsors included Representatives Joseph Almeida, D-Providence, Grace Diaz, D-Providence, Nicholas Mattiello, D-Cranston, and Frank Ferri, D-Warwick.

The criminal-defense lobby also scored another victory, with House passage of a bill to spare those criminals who can’t afford to pay court-ordered fines — as evidenced by their food stamp eligibility, for example — from going to jail.

But some bills got snagged on objections from powerful lobbies, such as the mortgage bankers association, including a bill aimed at making sure the banks that acquire multifamily houses, by foreclosure, pick up the bills for “essential services” such as water for at least 60 days so tenants are not left without.

Advocates for this “Tenant Protection Bill” conveyed a willingness to compromise. But a scheduled vote by the House Judiciary Committee was postponed, with the chairman, Rep. Donald Lally, D-Narragansett, saying he was concerned about “unintended consequences” and the possible problems cited in an e-mail to him from the chairwoman of the Bar Association’s Title Standards and Practices Committee. Among them: the potential difficulty in determining who is a bona fide tenant, and who paid what before the foreclosure.

“The practical effect is to require any foreclosing lender to pay all of the tenant’s ‘essential services’ as soon as the foreclosure takes place,” regardless of how much the tenant may have paid before, the writer, Linda Tessman warned. Lally promised to revisit the bill today.

More successful was the so-called Foreclosed Property Upkeep Act, which would require lenders — and any one else — who acquires a foreclosed property to post a bond equal to 25 percent of the assessed value of the property, subject to forfeit if the property condition slides below minimum housing code standards. The bill’s chances in the Senate are unclear.

The sponsor, Rep. Charlene Lima, D-Cranston, said the bonds would save taxpayers from having to spend “excessive” amounts for police and fire protection and code enforcement. But warning of more unintended consequences, Rep. Nicholas Gorham, R-Coventry, said “banks are going to be reluctant to foreclose if they have to pay for upkeep…Instead of foreclosing, they’ll just let the property rot.”

But some bills had a clear shot of passage, including one giving elderly drivers a break by raising the age threshold from 70 to 75 before they have to start renewing their licenses every two years. One of the two versions of the bill has cleared the General Assembly.

And the bills that sparked the longest debates were not necessarily those that had ever before captured public attention. In the House, for example, lawmakers spent 50 minutes arguing over who should pay for local hydrants –– ultimately deciding to shift the burden from taxpayers to anyone who pays for water, including tax-exempt institutions such as hospitals and colleges.

But it was a national political question of electing presidents by the popular vote that provoked the most vigorous House debate.

After clearing both chambers, the bill would allow Rhode Island to join a compact of states, who pledge their delegates to whoever wins the national popular vote. Legislators argued passionately for more than an hour on whether the change would help make Rhode Island more — or less — relevant on the national political stage. In one of the closest votes of the night, they voted 36 to 34 to approve the change.

Supporters argued that the “one person, one vote” concept creates a more democratic system while getting presidential candidates to pay attention to states such as Rhode Island that fall far beyond the so-called “battleground states” such as Florida and Ohio that are crucial under the electoral college system .

But critics on both sides of the aisle warned that abiding by the national popular vote wouldn’t get rid of the Electoral College; it would simply force Rhode Island to join a compact, which if it swings in favor of a Republican candidate, would force this Democratic state to vote Republican.

“This is absolutely trashing a good system for no good reason at all,” Rep. Robert Jacquard, D-Cranston, said.

While politics weighed heavily on the outcome of many decisions, the Senate in an unusually tight 17-to-15 vote approved a bill to allow the Town of North Providence to take by eminent domain 15 acres currently known as Camp Meehan to keep it out of the hands of a Lincoln developer who is the father of Rep. Peter Petrarca, the vice chairman of the House committee where a matching bill is stalled.

Senate President Joseph Montalbano recused himself from the vote without explaining why.

The last debate to hit the House floor was one of the more intense.

For more than an hour, Republicans lobbied against a plan to build a courthouse in Smithfield several years from now that would cost taxpayers $88 million. The lawyer-dominated legislature, they said, shouldn’t be so quick to commit an astronomical amount of money to the court system in a year that’s been fraught with fiscal cuts.

“How can we burden our state with $88 million of debt when we just came through one of the most difficult budgets?” House Majority Leader Robert Watson said.

But after a prolonged screaming match, Democrats ultimately won out, passing the courthouse bill in a 49-20 vote. Majority Leader Gordon D. Fox said it was critical to offer the citizens of Rhode Island an alternative to the congested Garrahy Judicial Complex in Providence.

“Access to justice is one of the services government must provide its citizens and to do that, infrastructure matters,” Fox said.

Originally planned as a less expensive facility to be located in Lincoln, the proposed courthouse was relocated to Smithfield this spring, with funding pushed off until 2010.

The Senate voted 33 to 0 for a bill that would prevent utility shutoffs in homes with children who are age 2 or younger. “It’s an important bill considering the budget and fuel prices,” said the sponsor, Sen. V. Susan Sosnowski, D-South Kingstown.

On lighter topics, the Senate approved the issuance of WaterFire license plates and a judge emeritus license plate for the recently retired Superior Court Judge VinBudget Briefing

The Rhode Island House and Senate have approved a $6.9-billion budget for the fiscal year that begins July 1. Here are highlights:

TAXES: No increases in income, sales, capital gains or corporate taxes. Tax on medical and dental premiums increases from 1.1 to 1.75 percent

DEFICIT: Closest estimated deficit of $422 million, mostly through spending cuts. Largest include $67 million in Medicaid spending; $90 million in cuts to state work force.

AID TO CITIES AND TOWNS: $12.5 million cut in non-school aid. Slight increase for school aid.

COMMUNITY SERVICE GRANTS: $9 million cut to programs such as Meals on Wheels, the Rhode Island Community Food Bank and the Crossroads homeless shelter.

WELFARE: Cut in maximum stay on welfare from five years to four years; recipients barred from collecting benefits more than two consecutive years of benefits in any five-year period.

MOTOR VEHICLES: $10 increase for motor vehicle violations; proposed $50 fine for driving while talking on handheld cell phone is rejected.

HEALTH CARE: $67 million in Medicaid savings through reducing eligibility to expensive nursing home care, requiring Medicaid recipients to use least expensive health care providers and other measures; cutting about 1,000 adults from state Rite Care health insurance program.

MOVIES: $15-million cap on tax credits for movie productions in Rhode Island.

HEATING: Repeals program to help poor people pay heating bills.

With reports from Associated Press

kgregg@projo.com

AIG loses its head

2008-06-16T06:27:00.000-07:00

WHAT could underline more clearly the pain that the global credit squeeze is inflicting on financial giants? Seven months after Citigroup, America’s largest bank, booted out its chief executive amid mounting mortgage-related losses, the world’s biggest insurance group has followed suit. On Sunday June 15th, after a hastily convened board meeting, American International Group (AIG) said that its beleaguered boss, Martin Sullivan, would step down with immediate effect. His replacement is Bob Willumstad, the company’s chairman and a former high-ranking Citibanker.

Mr Sullivan’s undoing was AIG’s bulging book of credit-default swaps, much of it tied to subprime mortgages, which has been written down by some $20 billion. After posting total losses of some $13 billion over the past two quarters, the company has been forced to join the humiliating rush to raise fresh capital. As with the “monoline” bond insurers, such as MBIA and Ambac, its woes stem from straying from its core business—in AIG’s case, underwriting property, casualty and life policies—into the alphabet soup of structured finance. Writing swaps on collateralised-debt obligations linked to mortgage-backed securities is a long way from pricing the risk of a hurricane or flood ravaging a factory.

Mr Sullivan did himself no favours by mismanaging expectations. He and his team poo-pooed critics, insisting until this year that AIG had oodles of excess capital and that its actual (as opposed to mark-to-market) losses would be modest. The firm has since been forced to admit that its accounting models were too optimistic, after its auditors found “material weaknesses” in them. It continues to argue that much of the damage to its bottom line will be reversed, thanks to the vagaries of fair-value accounting—indeed, it has campaigned to have the rules softened in times of turmoil. But any such write-ups are unlikely before 2009, if they appear at all. The markets are in no mood to give glass-half-full managers the benefit of the doubt.

Mr Sullivan’s fate was probably sealed on June 6th, when AIG admitted that the Securities and Exchange Commission, America’s markets watchdog, and the Justice Department were investigating the way the company valued its credit-default swaps—in an ugly echo of the accounting probes that brought down Mr Sullivan’s predecessor, Hank Greenberg, in 2005.

This appears to have been the last straw for some big shareholders, including Legg Mason, a fund manager, and Eli Broad, a billionaire, who have seen the value of their holdings dive by 41% since the beginning of the year. They called for the board to consider replacing the current management team. Mr Greenberg, who has been at war with AIG since being shown the door, and remains its largest individual shareholder, also threw his weight behind an overhaul. There was even disquiet within the AIG empire. Executives at International Lease Finance Corporation (ILFC), the world's biggest buyer of commercial aircraft and part of AIG since 1990, have been agitating for a spin-off. They worry that AIG's woes will drag down ILFC, whose credit rating was cut along with its parent's following the latest loss.

The defenestration of Mr Sullivan may placate dissident shareholders, but AIG is hardly out of the woods. Quite apart from its unknowable swap losses, the group is increasingly viewed as the Citi of insurance: too large and sprawling to be managed effectively. Mr Willumstad has the advantage of his experience at Citi, where he served as president before losing out to Chuck Prince for the top job. He should be able to outmanoeuvre those calling for a break-up of AIG, which would not be easy given the strong ties between its various businesses. Restoring the robust profits of the Greenberg era is another matter.

Mr Willumstad faces other headwinds. With pricing power dwindling and catastrophe pay-outs set to climb after an unusually calm couple of years, America's property and casualty industry—dominated by AIG and Berkshire Hathaway—is entering another of its periodic downturns. With stockmarkets sputtering, life insurance and annuities could suffer too. And insurers face lower returns on investments in alternative assets, such as hedge funds and private equity. Mr Willumstad pronounced himself honoured to take the reins at such a critical juncture. He must be more than a little apprehensive, too.

Foreclosures heat as market cools

2008-06-09T05:29:00.000-07:00

Lower Mainland foreclosures have doubled in the last two years as affordability has decreased along with the promise of quick profits.

Kap Hiroti, who tracks Lower Mainland foreclosures at ForeclosureList.com, says foreclosures stand at 20 per week, up from 10 per week in 2006.

"For one reason or another, they didn't pay the mortgage, or insurance, or property tax," says Hiroti, who advises real estate owners looking to foreclose or prospective buyers looking to buy a foreclosed property. "Or they get behind in their strata or condo fees, or face a one-time cost such as a roof or a leaky condo, which might set them back 40, 50 or 60 thousand dollars."

The Lower Mainland, largely buoyed by Olympic optimism and a good international reputation, has so far eluded the real-estate meltdown south of the border.

In the U.S., home foreclosures hit a record high in the first quarter. Almost one in 100 homes were pushed into a foreclosure proceeding in the quarter, the Mortgage Bankers Association reports.

And the U.S. mortgage delinquency rate hit a record 6.35 per cent, indicating foreclosures will still climb.

As house prices fall in the U.S., foreclosures often result when people whose mortgage is worth much more than a home's potential selling price simply walk away rather than make payments on a losing proposition.

Even Ed McMahon, Johnny Carson's sidekick on "The Tonight Show" for three decades, may lose his home to foreclosure. McMahon's Mediterranean-style estate on storied Mulholland Drive north of Beverly Hills faces a $643,596 default notice on a $4.8-million mortgage.

Former baseball star Jose Canseco is another of the 650,000 U.S. homeowners in the foreclosure process.

"It's happening to anyone and everyone," Canseco says.

Hiroti believes the Lower Mainland real-estate market has "flatlined," meaning investors who were counting on making a profit no longer see an upside.

As a result, some have chosen to lose their investments through foreclosure rather than hanging on with no sign of a significant upside return.

"They were kind of speculating that the market would go up, but when the market flatlines, some people just choose to get out. Local people are getting priced out of the market."

Helmut Pastrick, chief economist with Credit Union Central of B.C., says many foreclosures result from unexpected turns of events -- a job loss, a divorce -- and are not necessarily driven by traditional investment decisions or market swings: "It could be income, divorce, or a change in the household."

Falling interest rates will help some people who have trouble making payments, he says.

"Since January, mortgage rates have dropped more than one per cent. I think we'll see rates at this level, or even lower, through the end of this year, and they shouldn't increase until at least 2009."

Pastrick says most Canadian lenders have taken a much more cautious approach to lending money. He doesn't expect as many Canadians to be faced with foreclosure as in the U.S., where the twin problems of lax lending standards and falling housing prices have created a crisis.

Check By Phone

2008-06-04T06:45:00.000-07:00

When you have been in business for a while, you know that success isn’t just about winning jobs or selling products. It’s also about getting paid. And the sooner the better.

Check by phone offers credit card convenience for check customers. Check by phone provides you with:

• Immediate payment for goods & services
• Up to 100% larger marker—instantly
• Reduced in-house paperwork
• Increased return on advertising
• Solid customer loyalty

• Lower credit card costs
• Collection of past due accounts over the phone
• Ship products faster—no more COD hassles
• Easy implementation

What is check by phone?

Check by phone is an extension of the pre-authorized payment system used by insurance and mortgage companies since the 1970s.

Your customer authorizes you to debit his/her checking or savings account as a means of payment for your goods or services. Once you have authorization from the customer, you are in control of being paid. Using the banking information provided by your customer, you simply enter the information on an Internet based software program to collect check by phone sales. The check by phone amount moves from your customer’s checking or savings account into your business checking account within 48 hours!

Increase Your Market & Your Profits.

Less than half of the American public owns a credit card—even fewer businesses. And half of those businesses that do can’t use them. You are probably already accepting checks from these customers. Why not take advantage of the convenience and financial benefits of accepting checks over the phone, fax or Internet as they would a credit card.

• Mail order/catalog sales
• Travel agents
• Collection agencies
• Advertising sales
• Parts suppliers
• Network marketing companies
• Utility companies
• Television shopping networks
• Charity fund raisers
• Florists
• Pharmacies
• Internet service providers
• Delivery services

Any business that accepts checks can enjoy the ease and profitability of check by phone services.
How does it work?

Accepting your customer’s check by phone, fax, Internet, or email can be as easy as accepting a credit card. Ask your customer for the bank routing and account numbers which are printed at the bottom of every check. You enter this information using Internet based software to collect your funds within 48 hours. It is as simple as that!

What does check by phone cost?

This depends on the volume of checks to be processed monthly. A very inexpensive amount is typical which will almost always be less than the cost of accepting credit cards.

Now you can offer credit card convenience to checking account customers by allowing them to pay by check right over the phone, and save the hefty percentage you are paying on credit card customers. If you have customers who order over the phone, check by phone can increase your sales potential by 100 million customers in the U.S.

By: C. J. & Tuck Consulting, LLC owns and operates www.cashflownow.org. We specialize in Electronic Payment Processing Services and offer a low cost Check by Phone service as well as many other Electronic Payment Processing services. For more information, contact: Pat A. McDavitt, Author and Sole Manager of C. J. Tuck Consulting, LLC Telephone: 512-837-1358 Fax: 512-837-0345

More Headaches for McCain’s Camp

2008-06-01T06:34:00.000-07:00

For weeks now, John McCain's presidential campaign has faced awkward questions about the outside activities of several top advisers. Add one more name to the list: former Texas senator Phil Gramm, McCain's longtime friend and one of his five campaign co-chairs. (A sixth, former congressman Tom Loeffler, quit recently after NEWSWEEK reported on his lobbying work for Saudi Arabia.) According to McCain spokeswoman Jill Hazelbaker, the co-chair position affords Gramm "broad input into the structure, financing and conduct of the campaign." She added that Gramm, who has a doctorate in economics, is also "a valued voice on economic policy." Gramm is not a paid McCain adviser, but his day job—vice chairman of a U.S. division of Zurich-based financial giant UBS—could pose new tests for a candidate who has promised high ethics standards and ditched advisers who failed to meet them.

UBS has recently written off huge losses in subprime-mortgage-based securities, and last week liberal bloggers noted that Gramm was a registered UBS lobbyist on mortgage-securities issues until at least December 2007.

NEWSWEEK has learned that UBS is also currently the focus of congressional and Justice Department investigations into schemes that allegedly enabled wealthy Americans to evade income taxes by stashing their money in overseas havens, according to several law-enforcement and banking officials in both the United States and Europe, who all asked for anonymity when discussing ongoing investigations. In April, UBS withdrew Gramm's lobbying registration, but one of his former congressional aides, John Savercool, is still registered to lobby legislators for UBS on numerous issues, including a bill cosponsored by Sen. Barack Obama that would crack down on foreign tax havens. "UBS is treating these investigations with the utmost seriousness and has committed substantial resources to cooperate," a UBS spokesman told NEWSWEEK, adding that Gramm was deregistered as a lobbyist because he spends less than 20 percent of his time on such activity. Hazelbaker said the McCain campaign "will not comment on the details … of ongoing investigations and legal charges not yet proved in court."

McCain's campaign is already distancing itself from some of Gramm's other work for UBS: his involvement in attempts to sell financial products known as "death bonds," which BusinessWeek described last summer as one of "the most macabre investment scheme[s] ever devised by Wall Street." Not long after joining UBS, the Houston Chronicle reported, Gramm helped lobby Texas officials, including Gov. Rick Perry, to sign on to a UBS proposal in which revenue would be generated for a state teachers' retirement fund by selling bonds, whose proceeds would in turn be used to buy annuities and life-insurance policies on retired teachers. UBS would advance money to the retirement fund, then repay itself, compensate bondholders and pocket profits when insurance companies paid off on retirees who died. According to a banking-industry source, who asked for anonymity when discussing a sensitive matter, Gramm was involved in efforts to pitch similar UBS products to other financial institutions.

Gramm's office declined NEWSWEEK's request for comment. A source familiar with the bank's current business, who also asked for anonymity, said UBS no longer markets the kind of plan that Gramm was allegedly trying to sell to Texas. Hazelbaker said that McCain, who has been critical of the financial industry's performance in the subprime market, disapproves of death bonds and "supports increased accountability, transparency and capital backing in our financial markets as a solution to these problems." Death bonds, she continued, "move markets away [from]—not toward—these goals."

Will Fannie's help result in fairy tale or nightmare?

2008-05-21T02:49:00.000-07:00

Once upon a time, there lived a King who granted each subject enough money to make his home his castle. Everyone was content. The castles created vast riches throughout the land. Alas, the King had large armies to support, and the royal coffers had run dry. So he levied a tax on each household. And there was much misery throughout the land. The people rose up in protest. The King and his ministers knew not what to do.....

The content you have requested (abstract above) is only available to paid subscribers and registered users. If you do not have a paid subscription and would like to read this article we ask that you register with the Daily Report Online. Registration is free and provides access to selected articles, daily news alerts, and special offers.

Your privacy is important to us. Any information provided will be handled in accordance with our Privacy Policy. Also note that registration signifies that you agree to our Terms and Conditions.

Saving for survival

2008-05-19T05:41:00.000-07:00

As the cost of living stretches household budgets to breaking point and beyond, many people are reassessing their spending habits and lifestyles in order to make ends meet.

'Sides to middle." It's a phrase evoking vivid memories for a generation of New Zealanders – memories of cash-strapped mums running scissors down the middle of worn sheets, flipping the halves and sewing the edges together to eke a fraction more life from the fabric. And when the mattress again began to scratch through the fraying threads, the sheets became curtain lining.

"It wasn't a case of being thrifty. It was just what you did. Things were not available or you couldn't afford them," says 77-year-old Mollie Brown, of Lower Hutt, who grew up during the Depression and struggled as a young mother in postwar shortage years.

When Mrs Brown married in the 1950s, washing machines and fridges were scarce, and credit non- existent. She stretched the [PndStlg]5-a-week housekeeping by growing vegetables at the couple's Waterloo house, planting fruit trees and keeping chooks. She even had a beehive till the neighbours complained.

She remembers cramming the boot of their inherited Austin 10 with five- shilling sacks of coke, a byproduct from Petone Gasworks, to keep the wetback firing hot water. She knitted, "sewed like mad", baked, made jam and bottled preserves, and still does. There's a fresh batch of Weet-Bix slice in the pantry, and jars of marmalade, plum and apricot jam in the garage.

It seems extreme in today's disposable culture. It's hard to imagine young sophisticates even contemplating cutting up old linen, rather than popping into Briscoes for a new set, much less piecing together a patchwork of curtain lining out of old cloth nappies.

But spending attitudes are changing. With petrol prices up more than 30 cents a litre on last year, a basket of basic groceries up 25 per cent and fixed mortgage rates pushing 10 per cent, many are feeling the pinch and looking to their parents and grandparents, as well as new technology, for ways to save money.

Gerald Davidson has put a down- payment on future savings, installing solar water heating in his Petone home as insurance against rising gas prices. It costs him about $140 a month paying off the interest-free loan he took out to put in the $8000 system about two years ago.

In summer it provides enough hot water for the household of four, but in winter the sun disappears behind the hill at about 1pm and the electric backup system kicks in. A government audit (a government scheme covers the interest up to $500) found the system halved Mr Davidson's summer electricity bill.

Renewable energy seems the perfect long-term answer to rising electricity costs, with the feel-good bonus of helping save the planet by reducing carbon emissions. But the best way for the average urban family to save money on energy is to use less, says Energy Efficiency and Conservation Authority (EECA) renewable energy adviser Joseph Mayhew.

He says expensive renewable technologies such as photovoltaic panels (which convert the sun's energy into electricity) and micro wind turbines are only likely to be economic on rural properties without a grid connection. It's cheaper to save by using compact fluorescent light bulbs or insulating.

Solar water heating can be cost effective, especially if it's a household of shower-happy teens. EECA estimates about 35,000 homes now have it, each with an average annual saving of $350 to $450. But at a cost of $4000 to $8000 to install, it's no quick fix.

Fuel is also becoming a budget killer. Land Transport New Zealand (LTNZ) says traffic on its Fuelsaver website has quadrupled since January – 40,000 people a day look for tips. There was also a threefold increase in visits to its Rightcar site, rating car models for fuel efficiency.

Again the best money-saving strategy is simply to use less, LTNZ spokesman Andy Knackstedt says. Many car trips are shorter than two kilometres – easily travelled on foot or by bike. Short trips use more fuel, especially in winter – a cold engine burns 20 per cent more petrol. If you have to drive, car-pool to reduce costs, accelerate smoothly and travel at less than 100kmh to burn less fuel, Mr Knackstedt says.

A survey this week found that one in four Kiwis is preparing to leave the car at home if petrol prices hit $2 a litre. Some are swapping four wheels for two. Cycle Aware Wellington has signed up an extra 200 members this year, bringing its total to 700. Most cite rising petrol prices as their motivation.

James Brown and his partner have resolved never to get a car, having lived in France for a year and been horrified at the way cars dominate cities. They chose their Island Bay house for its proximity to bus, shops and school, and they bus, bike and walk to get around.

Mr Brown cycles the 15 to 20 minutes to work at Te Papa, and his partner bikes or catches a ride to her job as a school teacher. They walk to the supermarket, breaking down the weekly shop into two or three more portable loads.

It can be limiting – the kids, aged eight and 11, enjoy the bus and getting into town is no hassle. But trips to the swimming pool at Kilbirnie, or journeys between suburbs out of the girls' biking range are more convoluted.

The couple has generous neighbours who lend their car when needed, but are dependent on hooking up with other families for outings such as river picnics.

But it is a huge money-saver. Biking to work saves Mr Brown $5.60 a day in bus fares.

Switching to public transport was one measure that enabled Auckland couple Tara and Greg Holland to save more than $1000 in a month by axing non-essential spending.

The couple, who have two young children, have been living off Greg's jeweller's income for four years. They got through Christmas and realised, "Oh, my god – we seriously needed to budget."

Greg, 38, gave up daily takeaway coffee, made sandwiches for lunch and caught the bus. Rather than taking supermarket snacks for a friend's barbecue, Tara, 34, made dips and Greg made bread. The couple bought 2 1/2-year-old Maia a second-hand bed and mattress on Trade Me for about $250, instead of the $450 frame Tara was eyeing, and made about $600 selling the kids' old clothes.

On-selling baby and children's gear is one of the easiest ways to earn cash on Trade Me – that category has some of the highest success rates alongside mobile phones, weight loss products and concert tickets. Last week, the site hosted 230,000 successful auctions, about 60 per cent for second-hand goods.

But the Hollands' biggest saving was on groceries. Tara saved about $100 a week by shopping at Pak 'N Save instead of Foodtown, piling her trolley with house brands and stretching a week's purchases to nine or 10 days.

Though their one-month challenge was extreme and the couple has eased off on savings, the mentality of justifying even small purchases – "that's where the money just leaks out" – has remained and they have increased their mortgage payments.

Mother of two Sophie Gray, who writes the destitute gourmet cookbooks, maintains it's possible to cook healthy, fashionable food cheaply.

"Peasant cultures around the world have been doing it for years." She's worked to a tight budget for nine years, since she and her husband took a big income drop to start a business from home.

At their leanest, the weekly food budget was $50. Ms Gray is often in supermarkets researching prices and has never seen people so angry about the cost of living. "I've heard people ranting to complete strangers in the supermarket dairy aisle."

She advocates eating healthily and in season, shopping smart, and picking a couple of luxury items and spinning them out. Old-fashioned concepts, such as Mrs Brown's capped housekeeping money, make people think about how they spend.

Menu planning – setting a weekly budget, planning meals within that, making a list and sticking to it – is the key to cutting grocery spending, Ms Gray says.

Home baking, cooking from scratch instead of buying pre-prepared sauces, cooking satisfying but cheap ethnic food, slow-cooking cheaper meat cuts and bulking up meat meals with extra vegetables are all good ways to reduce costs. Savings usually come with a cost in time and effort, so it's about deciding how far you want to go.

Supermarkets, while convenient, are often not the cheapest source of fresh produce and meat, Ms Gray says. The Dominion Post found in-season fruit and vegetables were, on average, twice the price at a major supermarket as at the Victoria St Sunday vegetable market. Eggplants, peppers and red onions were almost three times as expensive. The market specimens are less perfect, but taste the same.

Manager of Simple Savings website Jackie Gower also advocates menu planning and spinning out expensive food – replacing cheese sauce with white sauce sprinkled with grated cheese, for instance. But her top tip is to take a long, hard look at spending.

"Middle New Zealand is quick to blame the lack of money on rising food and petrol costs, but people still spend weekends at shopping malls and buy the latest mobile phone. People need to look at how much crap their money is going on."

She's also a fan of growing veges. Always having something on hand, you're less inclined to make an extra trip to the supermarket, which always costs more than expected, she says.

Island Bay greenie Jon Field is proof you can have a productive garden even in Wellington's sometimes inclement weather. He built a vege patch from nothing when he moved in 6 1/2 years ago and now grows everything from parsley and coriander to fruit, root vegetables and berries.

He does it more for quality (spray- free) than thrift but saves about $400 a year. He spends $50 to $100 annually on seeds and seedlings and brings in about a dozen bags of zoo do at $6 each. But it could be done more cheaply if you were prepared to invest more time, he says.

Akatarawa herb farmer Donna Lee also marries economy and environmental awareness, running sustainable living, frugal living, and chemical-free household classes.

And she practises what she preaches, turning the glut from her garden into tomato sauce, tomato chutney and beetroot relish. What she doesn't grow she buys in bulk when it's cheap and cranks up the dehydrator. Apples and kiwifruit become healthy, long-life snacks, onions can be used for soup.

Her chemical-free classes include recipes for alternatives to harsh and expensive cleaning products, including centuries-old concoctions such as vinegar and baking soda. "That can be a huge saving. There's so much you can do. It's a question of wanting to and learning how."

While most Kiwis could undoubtedly save by emulating Mrs Brown's parsimony, it's unlikely to be the answer to all of today's price squeezes. One former sewer has given up making her own clothes, as patterns and material have become too pricey. Wool is also expensive – $11 will buy enough merino for a newborn's cardigan. But that doesn't take account of the investment in time.

Dressmaking tutor Kim O'Neill says for basics it's more economical to buy super-cheap Chinese imports. But it is still possible to make clothes cheaply by buying one pattern and making it up in several different materials.

The Fabric Warehouse in Thorndon has cheap end- of-line designer fabrics from $2 a metre. With a pattern, you can make a simple pencil skirt for $5.

Her classes, run through Wellington High School's community education programme, have a waiting list. Students range from young women making jackets and skirts for work, and mothers making a daughter's ball dress or bridesmaid dresses, to men sewing dresses for their girlfriends.

And there's always clothes swapping. Emma Williams, of Vogeltown, has held clothes-swap parties for years and reckons their spoils constitute up to a fifth of her wardrobe. "It's a great way to get new clothes and save money."

As a sustainability consultant, that also fits with her ethos of recycling. She invites friends for drinks and gets them to bring clothing they're tired of.

The old adage of one man's junk is another's treasure really rings true, Ms Williams says. Even when people think they have nothing worth trading, others will snap up their offerings. It can get a bit heated if there's competition for one piece, or when the person proffering atrocious granny underwear makes a grab for the designer dress. But it's generally all in the spirit of fun.

The do-it-yourself Kiwi tradition also has potential for big savings. Despite falling retail spending, it's business as usual at Wellington home improvement shops, with customers taking up DIY classes and trying their hand at home decorating to cut costs.

Bunnings Warehouse in Newtown has seen an upsurge in sales of hot-water cylinder blankets, Pink Batts and underfloor insulation – a sign of efforts to save on home energy costs.

In the past four months there has been an increase in the number of home owners buying wallpaper, and stores are stocking up on paint as suppliers predict more householders will do their own decorating, says Guthrie Bowron, Thorndon, owner-manager David Archer.

He says that as living costs increase, people tend to cut down on movies and coffee, so have more time. "It is a time when people stop and think, 'We can do this ourselves'."

That's something Mollie Brown's been doing her whole life.

Dramatic increase in UK repossessions

2008-05-09T04:08:00.000-07:00

The number of mortgage possession claims in Britain has soared, the government has revealed.During the first quarter of 2008 some 38,688 claims were issued by UK lenders, the Ministry of Justice said.In comparison some 35,662 mortgage possession claims were issued in the final quarter of 2007 – representing an increase of 8.5 per cent.The Ministry of Justice figures represent the number properties entering the first stage of the repossession procedure – and do not reflect the actual number of homes repossessed. In a number of cases homeowners are able to make arrangements with lenders in order to prevent their home being repossessed. According to the figure 47 per cent of mortgage possession orders were suspended in the first quarter of this year, compared to 46 per cent in the fourth quarter of 2007.However, the data does show clearly the number of households under severe financial pressure.The Council of Mortgage Lenders (CML) offers a further measure, with research showing 27,100 mortgages ended in actual repossession in 2007. This represents 0.23 per cent of the market as a whole – less than half the level experienced during the early 1990s.However, the CML expects the repossession rate to rise to 0.38 per cent this year – with 45,000 properties repossessed. While higher than 2007, this is still very modest relative to the overall size of the UK market of 11.8 million mortgages. The news of an increase follows an announcement on April 22nd from the government that those in financial trouble and facing repossession would receive assistance from the government. Measures are particularly focused on the 1.4 million borrowers coming to the end of a fixed-rate deal during 2008. With mortgage lending criteria tightening dramatically in first quarter of 2008, such borrowers are likely to face an increase in repayment rates. In response the government has announced plans to develop a new debt advice service with the National Housing Advice Service; train specialist staff at Citizen's Advice; and arrange free legal representation for those facing a court appearance. "For the minority of owners who may need support and advice now, we want to ensure it is there for them in the right place and at the right time," said housing minister Caroline Flint in April.

The Housing Crisis is NOT Over

2008-05-07T04:52:00.000-07:00

Yesterday’s Wall Street Journal features an op-ed by Cyril Moulle-Berteaux (“The Housing Crisis is Over”). The piece is a perfect example of what looks good on paper does not necessarily reflect reality.
Since home sales peaked in July 2005, new home sales have declined 63%. The author’s thinking is that since house prices have fallen 10-15% and mortgage rates are down 70 basis points, homes are as affordable now as during the 1990s. His final argument is that despite falling prices and high inventories, home sales will pick up “because they always do.”
Moulle-Berteaux disagrees with analysts who believe house prices must fall at least 30% further to be back in line to their historical inflation-adjusted average. His reasoning is that most buyers take out a mortgage to purchase real estate, and thus are only concerned with “how much of one’s income is required to be able to make the mortgage payments.” On that basis, today’s mortgage rates are a bargain compared to the high interest rates of the past.
There are so many factors the author left out of his analysis. Despite the decline, home prices are still at record levels historically. More importantly, all the costs associated with owning a home have skyrocketed: taxes, insurance, association fees, repair costs, and utilities. The 5.70% 30 year fixed mortgage cited seems like a low rate to purchase a home, but when all the factors are taken into consideration, how many buyers can make a 20% down payment as required under current lending standards? Additionally, lenders are blacklisting condo mortgages; mortgages issued are becoming “covenant heavy” (as opposed to the LBOs “covenant lite”).
The government and the real estate industrial complex do everything possible to encourage people to buy as much house as they can qualify for. As more and more homeowners are waking up to the folly of that notion, the smart buyer realizes that buying a home for the lowest price possible is the most important consideration. Always buy well below what the calculations determine you can “afford”. You never know what market factors will do, or how your circumstances might change. Carrying costs very rarely decline. As far as mortgage rates are concerned, it is better to have higher mortgage rates and lower housing prices than lower mortgage rates and higher housing prices. Besides benefiting the cash buyer, a high rate is a great motivator to pay off the loan, or refinance as rates decline. Just like buying a stock, it’s the price you pay that determines the profit or loss.

Ready . . . Set . . . Refinance!

2008-05-03T04:41:00.000-07:00

Are you itching with refi fever? It's as natural as it is contagious. Home mortgage rates hit a multiyear low back in February. It didn't help the housing market lift itself out of its slump. There are still way too many homes on the market for that to stabilize. However, for those sitting on relatively high home loan rates -- especially those who bit the hook on adjustable rate mortgages, only to find them reset substantially higher -- mortgage refinancing is a reasonable consideration. Before we explore the benefits of refinancing your mortgage rate and whether or not it's right for you, let's get the bad news out of the way first. If you bought your home over the past couple of years, there's a fair chance that your home may be worth less than what you paid for it. That could be a problem. If you owe more on your home than its currently appraised value, you're not going to be able to refinance. In some cases, you may find yourself having to pay payment mortgage insurance -- or PMI -- as a result of having less than 20% based on your home's updated valuation. Yes, even if you had already cleared that hurdle under your original mortgage. As you can see it, things can get tricky. It also doesn't help that lenders are stingier than they used to be. They are still reeling from the subprime meltdown, so you can be sure that they are going to be very particular about who gets to refinance this time around. If you have enough equity in your home, based on today's depressed real estate prices, then we can take the refi exploratory process to the next level.Should you refinance? It's a numbers game, really. You can't just make a decision based on a lower interest rate. Several closing costs and fees are tacked on to the refinancing process. Some mortgage brokers may offer no-cost refinancing--but that only means that the closing costs will be baked into a higher interest rate. Several Web sites like Bankrate and Money.com offer free refi rate calculators online. Punch in the appropriate values like the difference in rates and how long you plan on staying in the home and the software will crunch the numbers for you. If you have enough equity in your home, you can even do what they call a cash-out refinance, taking out slightly more in principle than you had before. Many people use a cash-out to remodel their homes or pay off higher interest credit cards. Be careful with the latter scenario, because the move makes sense on paper but you're turning unsecured credit card debt into one backed by your home.This shouldn't scare you away from refinancing. It definitely makes sense for a lot of homeowners. Just make sure that it's possible and that you know what you're getting yourself into. Go ahead and scratch that refi fever itch. Just don't pick at it until it becomes infected.Rick Munarriz is a personal finance columnist for HispanicBusiness.com. He has written for sites such as The Motley Fool and Citysearch and has appeared on NPR, TechTV, Sirius Satellite Radio, and CNN en Español. He can be reached through http://www.reportedly.com/ where he discusses his latest articles.