Financial Buzz from Geier Financial Group

 It is apparent that many families are looking for ways to relieve the strain on their wallets.  One topic that has caught the interest of many is mortgage modifications and refinances.  In February 2009, a Financial Stability Plan was announced by the Obama Administration as a mechanism to help homeowners afford their monthly payments and avoid foreclosure.  Four primary programs are referenced below:

The Home Affordable Modification Program

This program allows homeowners opportunity to modify mortgages making them affordable.  Eligibility requirements are:

• Must be your primary residence
• First mortgage must be equal to or less than $729,750
• First mortgage must have been originated on or before Jan. 1, 2009
• Monthly mortgage payment must be greater than 31% of your monthly gross (pre-tax) income
• You must have a mortgage payment that is not affordable due to financial hardship that can be documented

The Second Lien Modification Program

This program allows homeowners to lower payments on their second mortgage.  Under this program a servicer (note holder such as Chase or Wells Fargo) may:

• Reduce the interest rate to 1% for second liens paying both principal and interest
• Reduce the interest rate to 2% for interest –only loans
• Extend term of second loan to 40 years
• If principal was deferred on first mortgage, a servicer must defer same amount on second lien.
• If principal was forgiven on first mortgage, a servicer must forgive same amount or more on second lien.

Eligibility requirements for this program are as follows:

• The mortgage loan is secured by a one- to four-unit property, one unit of which is your principal residence.
• The mortgage loan is a first lien mortgage loan originated on or before January 1, 2009.
• Have an unpaid principal balance of the mortgage loan that is equal to or less than $729,750.
• The current unpaid principal balance of the mortgage loan is equal to or less than $729,750.
• The mortgage loan is delinquent, or default is reasonable possibility
• The mortgage loan has not been previously modified under HAMP, and you have not previously received an UP forbearance period.

In order to be eligible, you must also:

• Request that your servicer consider you for UP before three full mortgage payments are due and unpaid.
• Be unemployed when you request consideration for UP, and be able to document that you will receive unemployment benefits in the month of the forbearance period effective date.
• Your servicer may require that you have been on unemployment benefits for up to three months before your forbearance period can begin.

The Home Affordable Refinance Program

This program allows homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac an opportunity to refinance making their monthly payments more affordable.

Eligibility requirements are as follows:

• You are the owner-occupant of a one- to four-unit home.
• The loan on your property is owned or guaranteed by Fannie Mae or Freddie Mac.
• At the time you apply, you are current on your mortgage payments.
• The amount you owe on your first lien mortgage does not exceed 125% of the current market value of your property.
• You have a reasonable ability to pay the new mortgage payments.
• The refinance improves the long term affordability or stability of your loan.
• Note…you are still eligible even if you have a second lien (The lender that has your junior lien mortgage must agree to remain in a junior lien position).

The Home Affordable Foreclosure Alternatives Program

This program allows homeowners who can no longer afford to stay in their home, but want to avoid foreclosure and move to more affordable housing through a short sale or deed-in-lieu of foreclosure.

Eligibility Requirements are as follows and homeowners must be evaluated for HAFA within 30 calendar days:

• You do not qualify for a trial mortgage modification under the Making Home Affordable Program
• You do not successfully complete the trial period for your modification
• You miss at least two consecutive payments during your modification period
• You must request a short sale or deed-in-lieu of foreclosure

Homeowners must be evaluated for HAFA within 30 calendar days of the following:

• The borrower does not qualify for HAMP.
• The borrower does not successfully complete a HAMP Trial Period.
• The borrower is delinquent on a HAMP modification.
• The borrower requests a short sale or Deed-in-Lieu of Foreclosure.

***Information obtained from www.makinghomeaffordable.gov

Please consult your mortgage servicer

Please be advised due to SEC rules/regulations Geier Asset Management, Inc. cannot and will not accept or respond to any reader comments or feedback with respect to any blogs Geier Asset Management, Inc. posts.   You should always consult with your personal financial advisor before making decisions based on blog content. 

“Securities offered through Triad Advisors. Member FINRA/SIPC.” 

The Crux of the Problem

We continue to be threatened by the state of our real estate housing market.  There is a ton of debt floating around that needs to get serviced.  How did this come about?

Sub prime lenders have prospered in prior years by low interest rates and a popular refinancing trend using nontraditional terms, such as interest-only loans, low down payments and more. Regulators expressed concerns as to these practices and as a result we are now faced with stricter lending regulations, which has propagated the credit crunch we are experiencing today.  Borrowers are defaulting on their mortgages and therefore putting a huge strain on the big banks.  By cutting off access to credit for these extra buyers, demand for homes has fallen further, depressing prices and adding fuel to the already blazing economic slow down fire.

Behind the Scenes of the Domino Effect

Most sub prime lenders sell the loans they’ve originated to big banks, which then bundle them up and sell them on again as mortgage-backed securities to hedge funds and other institutional investors. During the several weeks it takes for them to sell these loans, the big banks agree to store them and keep lenders supplied with enough funds to continue making loans without skipping a beat.  As payment for passing the loan onto these big banks, the originators or lenders get cash equal to the value of the asset, minus a fee, which protects them from late payments and delinquencies.  As more sub prime borrowers struggled to meet their monthly mortgage payments, the big banks began asking sub prime lenders for bigger fees, putting the squeeze on the lenders and even forcing some into bankruptcy.

What Next?

The government continues to offer cost free refinancing incentives to get more homeowners locked in at today’s low rates, and special incentive packages to help drive the push to unload the overflowing inventory of houses for sale.  Will this be enough?  Housing inventories rose for the ninth straight month in September of 2010.  This is driven by further weakening sales, lenders unloading foreclosed homes on the market, short sales, and sellers who can no longer put off listing a home, according to an article in The Wall Street Journal providing insights from Leslie Tyler, Ziprealty’s Vice President of Marketing. So for now, the wildfire has yet to be contained.

Please be advised due to SEC rules/regulations Geier Asset Management, Inc. can not and will not accept or respond to any reader comments or feedback with respect to any blogs Geier Asset Management, Inc. posts.   You should always consult with your personal financial advisor before making decisions based on blog content.

“Securities offered through Triad Advisors. Member FINRA/SIPC.”

Besides eating every high calorie food in the house, reading the classifieds every day until “dishwasher” begins to look appealing, and growing a new found respect for those who hold up the grocery line with their 100 freshly clipped coupons… what else do you do?

First and foremost, pull yourself up by your boot straps and understand that chances are your current situation is a result of a severely damaged economy and not something you should feel embarrassed about.  Secondly, do your due diligence and get started with the unemployment insurance claim process.  Here is how you get started:

Note: You must be willing, ready, and able to work, as well as looking for full-time work, and have lost your job through no fault of your own.

Step 1: Go to the following web page and complete the required information, such as social security number, date of birth, list of prior employers, and list of dependents under the age of 16: https://secure-2.dllr.state.md.us/NetClaims/Welcome.aspx

You’ll have to apply at an unemployment office or over the phone if you worked for a company outside of Maryland, were employed by the Federal Government, had more than three different jobs, or filed for unemployment in another state within the past 18 months.

Step 2:  Once you’ve filed your initial claim using their online form, you will need to request payment through the “web cert” system every two weeks in order to receive your bi-monthly payments.  Use the following link:

https://secure-2.dllr.state.md.us/webcert/welcome.aspx

Step 3:  You should receive a pre-paid Visa debit card from the state in the mail within 10 days. Once received, you will need to call the number on the back of the card to activate it.

Step 4:  You will need to enroll in the “Division of Workforce Development Program” within four weeks of the date you filed your initial claim in order to continue receiving unemployment payments.

http://www.dllr.maryland.gov/employment/

Step 5: Ensure your resume is updated and accessible through various outlets such as www.careerbuilder.com, www.craigslist.com, www.monster.com, www.quietagent.com, www.linkedin.com, www.resumedirector.com, www.careerdirectory.com, as well as others.  Be vigilant about checking your e-mail and following-up with potential leads.  You can even create your own web site via www.intuit.com and share your skills and portfolio in a customized and creative way by supplying your link within your actual resume.

Finally, take a deep breath and don’t be afraid to let friends and family help!

Please be advised due to SEC rules/regulations Geier Asset Management, Inc. can not and will not accept or respond to any reader comments or feedback with respect to any blogs Geier Asset Management, Inc. posts.   You should always consult with your personal financial advisor before making decisions based on blog content.

“Securities offered through Triad Advisors. Member FINRA/SIPC.”

Let’s face it, unless you were born into the Rockefeller or Vanderbilt families, or are the lucky recipient of a full ride scholarship, there is a good chance you may be shopping for a student loan.  Going through the college selection and application process is enough to make your head spin, but dealing with loans can add to the stress.  The process of determining how to finance the education doesn’t have to be as stressful as you might think.  There are some general rules and tips that can help alleviate some of the discomfort associated with this process.

The first tip to remember is your total borrowing should NOT exceed what you expect to make your first year out of school.  The first option to consider should be a Federal Stafford Loan. A free application for federal student aid (FAFSA) should be completed and filed, which may qualify a student for grants, work study and additional variations of student aid. Undergraduate students should look at costs with the Federal PLUS loan as well since this loan tends to have better repayment terms and is much less expensive.

Once you’ve selected the loan that is best suited to your needs, make sure you look at interest rates and fees.  Typically 3-4% in fees is about the same as a 1% higher interest rate. Check out Financial Aid’s loan analyzer calculator at http://www.finaid.org/calculators/loandiscountanalyzer.phtml.

Borrowers should prefer loans that are tied to the LIBOR index as opposed to loans that are pegged to the Prime Lending Rate because the spread between the Prime Lending Rate and LIBOR has been increasing over time. Taking a long-term view, loans with interest rates based on LIBOR will be less expensive than a loan based on the Prime Lending Rate.

A great site to use as a resource during this process is http://www.finaid.org/loans/privatestudentloans.phtml.

Happy Loan Hunting!

Please be advised due to SEC rules/regulations Geier Asset Management, Inc. can not and will not accept or respond to any reader comments or feedback with respect to any blogs Geier Asset Management, Inc. posts.   You should always consult with your personal financial advisor before making decisions based on blog content.

“Securities offered through Triad Advisors. Member FINRA/SIPC.”

Saving for college is not easy these days. A pummeled economy, slow down in pay increases, and record unemployment level make saving a foreign concept to many. So how do you push beyond these obstacles to ensure you are building a college education nest egg?

The first thing to remember is that there are no rules as to how much you need to put away each month. You do what you can, and recognize that any attempt at saving for your child’s future, no matter the amount, is admirable. The usual points to ponder with regard to this topic are the method of saving and the vehicles available in which to do so.

If you don’t have a plan established yet, setting up monthly transfers from your checking account into your savings account is a good start. Once you feel you have enough set aside to earmark for college savings, you can start researching different vehicles such as a 529 plan. If you already have a plan in place it is very easy to set up monthly deposits that flow into these plans automatically, or if you feel more comfortable sending a check in every month, that is fine too. The key is setting it up so it is a recurring transaction. Deposits can be as small as $25 per month and can also be deducted right from out of your payroll so it is one less thing for you to have to think about doing.

For those who don’t have any plan established, the obvious question is which savings vehicle is the most appropriate for us. 529’s are extremely popular due to their tax advantages, flexibility, and ability to transfer to multi-generations. Finding the right 529 plan for you requires a little research. One myth is that you must use the 529 plan set forth by the state in which you reside. Anyone can enroll in an out of state 529 plan. However, oftentimes there are tax advantages to using your state’s plan so you should check into this before finalizing any decision. Investment options made available to you through the plan, fees, and historical performance are all factors that should be taken into account when deciding on the right plan. Kiplinger does a great job of pulling together a list of very reputable and top performing plans – http://www.kiplinger.com/tools/best-529-college-savings-plans. No matter what option you choose, knowing you are helping your child be prepared for that next phase in life makes everything worthwhile.

Please be advised due to SEC rules/regulations Geier Asset Management, Inc. can not and will not accept or respond to any reader comments or feedback with respect to any blogs Geier Asset Management, Inc. posts. You should always consult with your personal financial advisor before making decisions based on blog content.

“Securities offered through Triad Advisors. Member FINRA/SIPC.”

No one likes spending large sums of money often required for big ticket purchases (unless of course you have money to burn, which the vast majority don’t). Having some general rules of thumb to rely on can help guide us in the right direction, and save our credit from taking a nose dive.

Vehicle Purchases

• If you must borrow to buy a car, apply the 20/4/10 rule. Make 20% down payment, don’t borrow beyond 4 years, and don’t agree to a monthly payment more than 10% of your monthly income

House Purchases

• Fix the rate of the loan for at least as long as you plan to stay in the home
• If you can’t afford to buy the house using a 30 year fixed rate, then chances are you can’t afford to buy the house
• Don’t rush to pay off the mortgage until you’ve paid off all other debt, and have taken full advantage of your retirement savings options. This is a low rate deductible mortgage so the priority should be taking care of some of your other pressing issues
• When getting a new mortgage, the balance should be less than 2.5 times your family annual income. So if your family makes $120,000 per year, a mortgage of $300,000 or less is considered ideal.

For those times when the dishwasher breaks, the hot water heater goes up, and who know what else, credit cards may come into the picture. Some tips to remember:

Credit Cards

• If you carry a balance, look for the lowest rate available.
• If you don’t carry a balance, get rewards at least equal to 1.5% of what you spend
• Check out www.cardratings.com or www.bankrate.com
• Pay off the maxed out cards first (even before the higher interest rate cards) since maxing out cards hurts credit scores and can trigger penalty rates and fees
• After paying off maxed out cards, then focus on paying off those cards that carry the highest interest rates
• You should run your free credit report once a year (this score affects whether you can get a loan and the interest rate)

Keep in mind these are only general rules of thumb and everyone’s financial situation is unique. Careful analysis built on your specific criterion will achieve optimal results.

Please be advised due to SEC rules/regulations Geier Asset Management, Inc. can not and will not accept or respond to any reader comments or feedback with respect to any blogs Geier Asset Management, Inc. posts. You should always consult with your personal financial advisor before making decisions based on blog content.

“Securities offered through Triad Advisors. Member FINRA/SIPC.”