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Fannie Mae & Freddie Mac: What Will The Feds Do?

Fannie Mae and Freddie Mac, combined, own or back up some $5 trillion dollars of debt. That is about half of ALL the mortgages in the U.S. They have already lost some $11 BILLION since the current mortgage/credit crisis began, so it is easy to see why there is profound concern about their fiscal health–or lack there of.

Concern turned to horror today after the New York Times reported that the U.S. government is thinking about a takeover of the mortgage giants–placing them in a conservatorship.

Should that happen, the shares of both could be worth almost nothing and taxpayers, you and me, would have to pick up the tab, says the Times, for “any losses on mortgages they own or guarantee–which could be staggering…”

This news brought about what the AFP news agency referred to in a headline as a “meltdown” of the share prices of both Fannie and Freddie.

According to Reuters, “Fannie shares closed at $10.25, down some 22 percent but well above the session low of $6.68. Freddie closed at $7.75, down 3 percent, after touching a low of $3.89 earlier in the session.”

And, here is the most amazing part of the story. Freddie and Fannie have lost almost 90 percent of their enture value just since August, says Reuters.

Doubts about bailout

As the day drew to a hectic close, Treasury Secretary Henry Paulson sent out signals that it is not likely there will be any federal bailout–However, Sen. Christopher Dodd of Connecticut, who is chairman of the Senate Banking Committee, said he spoke with both Paulson and Fed Chairman Ben Bernanke and that they are looking at options that would include “opening access to the discount window,” Reuters reports. The discount window allows the Fed to act as an emergency lender for the banking system.

Meantime, both Fannie Mae and Freddie Mac insisted they have enough capital to keep going and Sen. Dodd said both are “fundamentally sound and strong.”

Although both were originally formed by the federal government, they now function as private corporations, though there has always been an assumption that the government would never let either go under for fear of what might happen to the entire financial system in this country and, indeed, around the world.

How they got into trouble
To understand how they got into trouble, you must first understand what it is they do. Both buy up literally hundreds of billions of dollars in mortgages–then repackage them as securities.

In some cases, they hold on to these new securities, but they also sell them to investors.

That is why when the subprime mortgage crisis hit,Fannie and Freddie were hit hard. And, says the New York Times, “analysts expect the companies to announce a new round of write-downs and possibly be forced to raise capital by issuing additional shares.”

Stocks tumble then regain

At first, the fears of a Fannie/Freddie implosion plunged the Dow Jones Industrial Average down more than 200 points…but, by the end of the trading day, it closed down “just” 128.48 points.

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Fannie Mae & Freddie Mac: What Will The Feds Do?

BREAKING: IndyMac Bank is Shut Down and Taken Over by Feds

INDYMAC IS OFFICALLY CLOSED!!!

In the past minutes newswires around the country and world are now reporting that the Federal Government has shut down IndyMac Bank and has handed it to the FDIC (Federal Deposit Insurance Corp.) as conservator.

Couple the shut down with the Fannie Mae/Freddie Mac troubles, and we’re in for some really rocky waters next week. I’m willing to bet a lot of money that the announcement was held back from being made prior to the close of the stock market because of fears of a massive crash. Well . . . I think we’ll be seeing that happen this coming Monday!

Fasten your seat belts, people . . . we’re in for a ROCKY RIDE!

IndyMac Bank’s assets were seized by federal regulators on Friday after the mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures.

The bank is the largest regulated thrift to fail and the second largest financial institution to close in U.S. history, regulators said.

Yahoo Finance

In the biggest bank failure of the housing downturn to date, federal banking regulators today closed IndyMac Bank FSB, naming the Federal Deposit Insurance Corp. as conservator.

The FDIC said it will transfer insured deposits and “substantially all the assets” of IndyMac Bank, to a newly created successor, IndyMac Federal Bank, which will be operated by the FDIC.

Insured depositors and borrowers will automatically become customers of IndyMac Federal, FSB and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks. Depositors of IndyMac Federal Bank FSB will have no access to online and phone banking services this weekend, but will regain access to them on Monday.

Inman News

IndyMac Bancorp Inc. became the second-biggest federally insured financial company to fail today after a run by depositors left the California mortgage lender short on cash.

The Pasadena, California-based bank specialized in so-called Alt-A mortgages, which didn’t require borrowers to provide documentation on their incomes. Its home state has been among the hardest hit by foreclosures.

Bloomberg

What’s next? Anyone?

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BREAKING: IndyMac Bank is Shut Down and Taken Over by Feds

Online Chat Room Helps Save Foreclosure Homeowner

Okay I admit it? I used to be an active ?chatter? in a local chat room on Yahoo. It was a room where many people from the Dallas area met up to?Chat. Many of us had met outside of the cyber room at local restaurants, clubs and the like.

Yahoo had recently shut down a lot of the member created chat rooms in the wake of all the negativity and sponsor lawsuits. Lets face it?The public opinion of chat rooms was not good. I was a virtual unknown person to most chatters because I stayed away from the ?in person? socials but, that all changed one morning. Here is what happened:

A room regular was talking on ?voice? and venting about his house early one morning and I was listening a few steps away making my breakfast. This is what ?Monte? said, ?I got this letter from some attorney who says he is going to sell my house! How does he think he can do that? He doesn?t own MY house so, how can he sell MY house?? My head spun around so fast that I almost gave myself whiplash. I ran to the computer and grabbed the microphone to speak in the room and here is what was said?

Jim: Monte, what is the name of the law firm that sent you that letter?
Monte: Uhmmm, it says ummm.. Barnett, Burke & Associates.
Jim: Would that be BARRETT Burke?
Monte: Yeah, that?s it.
Jim: Monte, email me your number. I need to talk to you NOW.
(That law firm processes nearly 40% of all foreclosures in the state of Texas)

Within a few minutes I was on the phone with him and I told him that I was a local foreclosure expert and taught classes at Foreclosure Listing Service in Addison. I told him I needed to meet with him and his wife right away because, the letter he got was his notice that his house was in foreclosure and he had less than three weeks left before it would go to the auction. He was shocked and claimed he had no idea (I didn?t know how he could be shocked after missing nine payments). Two hours later I was at his house and explained all about the foreclosure process to him and his wife and what options he may have to save his house.

I remember how bad I felt while explaining the situation because his wife just sat there, staring at me with her eyes wide open, not able to say a word. She had no idea the mortgage was past due at all. She had not seen any letters from the lender or taken any call from them. Monte never told her early on and the situation only got worse as the missed payments added up.

After going over all of the possible solutions, I decided that bankruptcy was likely the best option for them and they agreed. I made a call to Hariett Langston, a friend of mine who is a bankruptcy lawyer in Dallas. Monte and his wife were overwhelmed with the situation and asked if I would go with them when they met with the attorney and I told them I would.

We met with Hariett that same week and everything appeared to be set to stop the foreclosure. All Monte needed to do was pay the bankruptcy filing fee.

A week before the foreclosure sale I went to their house and was a bit surprised to learn that he had not paid the filing fee. I asked him when he was going to file and he just shook his head and said he didn?t know. I remember pausing for a few seconds and it dawned on me why he had not filed. I said, ?Monte? You don?t have the money to file, do you?? In a very humble manner, he looked down at the floor and shook his head. ($500 was the amount he needed to get the bankruptcy filed)

As I drove home I thought to myself that it would be simple if I just wrote a check for the $500 but, I thought that he really needed to pay something so important himself. I got an idea about that time and sent an email to one of the chat room regulars who organized the chat room socials. I recall stating in that email that online chat rooms have such a negative public image and went on to tell her about Monte, his situation and I asked her if she could set up a fund raising get together. It would be our way of proving that normal, everyday people go to chat rooms and this was a chance to show at least one chat room could do something good. I told her that he only needed $500 and all it would take is $5 here, $10 there and a $20 from a few? $500 could be raised.

She arranged to have a Dallas chat fundraiser social for that coming Saturday night. I called Monte and told him about the fundraiser. He asked me to not do it (his pride was the obstacle) but, I told him that we were going to do it anyway and it would be nice if he attended. He later told me he was so choked up that he couldn?t say anything but, he did finally say he would attend.

I expected a handful of people to show up for the fundraiser but, I was wrong. Much to my surprise? At least 50 to 60 regulars from that chat room showed up and contributed. At the end of the night, ordinary people from a Yahoo chat room donated more than $700 to help save someone from losing their house.

The next day I gave the proceeds to Monte & his wife and they quickly paid the attorney the fee to file their bankruptcy and their house?No?Their ?home? was saved.

The story got another interesting twist a few days later. I got a call from a reporter who wrote for a well known local media outlet. They had heard about the fundraiser and thought it was a great community effort story that should be told and asked if I wanted them to write about it.

It took only a few seconds for me to process my answer but, I remember thinking that such publicity would be great for business and my classes would see a boost in attendance. Then I thought about the possibility of other homeowners that would read the story and what would my answer be to them if they contacted me and asked me to do a fundraiser for them as well?

I told the reporter that as wild as the story was, I never expected things to unfold as they did. I told them that I had to pass on their offer because, I had done it to help someone and wouldn?t feel right about profiting off of someone else?s stressful and humbling foreclosure experience. They understood and that was the end of it.

I have to admit . . . Of all the positive experiences I have had in real estate, helping Monte might rank as number one. What stands out in my mind was the fact that so many people pitched in to help save a family from losing their home and they did it for someone most had never met or only knew of by screen name?That?s what made it so great.

This happened in 2005 and two days ago I got a phone call from Monte. He just wanted to give me an update and I was happy to hear they still have their home.

During the call I told him about the reporter. He was surprised I hadn?t told him and more surprised that I turned them down. At the end of the call, Monte told me that three years was long enough and he encouraged me to tell the story of how a bunch of chatters from a Yahoo chat room, came together and did something good.

Thanks Monte.

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Online Chat Room Helps Save Foreclosure Homeowner

Are Mortgage Brokers An Endangered Species?

By all accounts it seems the banking lobby will get everything they’ve been ask for from Congress over the past decade and in do so may legislate mortgage brokers out of existence.

A little history lesson is in order to understand all the political and media spin designed to sway their and public opinion away from mortgage brokers the banking industry orchestrated for the last 10 plus years.

During the 70’s and early 80’s, banks dominated originations carving out a whopping 80% of the retail loan applications. Brokers quickly picked up the slack and by the early 90’s the numbers reversed. The market, especially real estate investors, liked the idea of a personal mortgage broker who understood their goals scouring the landscape for the best products and rates.

Banks have never been know for the best customer service or pricing and the public punished them by fleeing to the broker community. During this time brokers enjoyed about 75% of all originations leaving the crumbs for the banks.

They didn’t take that lying down. The quickly got their lobbyists working on legislation that passed in 1999 to poison the market against broker by demanding brokers show their “yield spread premium” income while the banks were allowed to hide their own. The thought was the public upon seeing this often times enormous “profit” that was heretofore hidden would put brokers in a bad light with consumers and they would come running back to the banks.

It didn’t happen.

As it turns out consumer either didn’t know or didn’t care. Some critics ( myself included) would say the brokers decided one “dirty trick” deserved another and devised ways of obfuscating the YSP. After all banks were getting away with setting up an un-level playing field in the first place so they could claim they were just “evening the score”.

Undaunted in their pursuit of the killing off their competition, many believe the banks decided upon a “scorched earth” plan to rid themselves of retail mortgage competition once and for all.

The Plan was one they pulled from the S&L playbook a decade earlier. Give the mortgage brokers just enough rope to hang themselves just like the Savings and Loans did.

Remember the Savings and Loan crisis of the late 80’s?

Banks wanted the S&L’s out of the way back then too. When a few greedy large S&L’s decided they wanted “deregulation” so they could make commercial loans it was the banking lobby who helped them get it.

At the time it seemed like “strange bedfellows”, but it only took a few years to see the banking industry genius behind their “assistance. They knew the S&L’s were unprepared to thwart their own greed and would create a “banking and real estate crash” lawmakers and the public would rightfully lay at their doorstep.

All the banks had to do this time around was find an equally stupid idea, attach a lot of money to it, and let the brokers commit a little “banker-assisted” suicide.

Enter the subprime loan.

Bankers priced them, marketed them, and feed them to a stupid, greedy bunch who cobbled them down with out the knowledge they’d just been had.

It worked.

Lawmakers and the public are clearly laying the current real estate and banking debacle at the doorstep of mortgage brokers. Legislation will pass making mortgage brokers all but extinct.

It worked so well that the banks may have succeeded in taking down not only the brokers but the mechanism that put them in business in the first place…the GSEs…Fannie Mae and Freddie Mac.

On Friday there were cries to bailout the GSEs since they too got caught in the bankers web of greed. The infection of subprime losses it seems put both GSEs on tilt. With them out of the way, the broker have no hope of staging a comeback since it’s Fannie and Freddie’s pathway to the money markets that give brokers something to sell.

The banker planted subprime virus not only killed brokers and the GSEs, but will likely kill the real estate industry and economy for the next few years too.

But when the dust settles a few years from now, every one will go to a bank to get a mortgage because that is all that is left.

Mission Accomplished!

If investors thought getting a loan was hard before, just wait. You ain’t seen nothin’ yet.

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Are Mortgage Brokers An Endangered Species?

FEDS BAIL OUT FANNIE AND FREDDIE; EMERGENCY MEASURES TAKEN

In a clear sign the federal government is far more concerned about the financial health of mortgage finance giants Fannie Mae and Freddie Mac than its public comments indicated as late as Friday, the U.S. government Sunday night announced what some are calling a “massive aid” package to the two shareholder owned and run companies officially cementing a government relationship that till now was only implied but never admitted to.
According to a Reuters dispatch, the plan, which will require swift approval from Congress, is designed to “head off a potential meltdown in financial markets.”

Here’s what the government is offering Fannie and Freddie:

Access to its emergency cash–the so-called discount window
A huge “temporary” increase in the line of credit available
The U.S. Treasury will, for the first time ever, purchase equity in both companies should it be needed
Investigation by the Securities and Exchange Commission to stop the spread of “false information.”

Both Fannie and Freddie are vital to the housing market–they buy mortgages from banks and other lenders and either keep them or repackage them into securities that are sold to investors.

“Welcome to the socialist state”

Strong words from some critics are already greeting the government plan. Josh Rosner, the managing director at Graham Fisher in New York told Reuters, “It’s outrageous. It’s offensive. Welcome to the socialist state. In capitalism, winners are supposed to reap rewards and losers are supposed to take losses for bad risk management. These are private companies.”

But others are deeply concerned that should Fannie and Freddie fail–though they both say they are well capitalized–the shockwaves would cause a financial meltdown world-wide.

The most troubling part of the government plan,perhaps, is the possibility the Treasury might buy equity in Fannie and Freddie. Some critics charge this could end up costing taxpayers enormous sums of money.

It will be interesting to see whether Wall Street gives the plan a thumbs up or thumbs down during Monday’s trading.

Here are 2 more articles worth reading:

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FEDS BAIL OUT FANNIE AND FREDDIE; EMERGENCY MEASURES TAKEN

A Tale of Two Real Estate Gurus

Those who run real estate investment clubs have a big challenge in lining up speakers for each meeting. Clubs do not usually have the kind of budget that would allow them to pay for speakers, therefore they need to do their best to locate those that will speak for free. This invariably results in the talk being given by someone who has a specific agenda or something to sell. This is not necessarily a bad thing, you just need to keep the speakers ultimate motivation in mind when you listen to the spiel.

Some of these speakers are quite good and their knowledge is obvious. On the other hand, some of the speakers leave you scratching your head and wondering if they have ever owned an investment property. Investing veterans have little difficulty in separating the fakes from those who are the real deal. Novice investors may mistakenly assume that if someone is speaking to a group he must know something. Hopefully they will learn before they are burned by one of these phonies.

My primary purpose for attending monthly club meetings is for the networking and resulting connections ( see: Getting the Most From Your Real Estate Club ), however I do enjoy hearing from good presenters. My local real estate club had two very well qualified speakers at a couple of recent meetings. While both were very obviously qualified to speak about real estate investing, their styles and agendas were a world apart.

Guru #1

At our May 2008 club meeting we had a speaker who specialized in foreclosures. Certainly a timely topic and on that I was looking to learn more about. I had seen this speaker once before and knew that he was a good presenter and very knowledgeable. After introducing himself and providing his background, he openly stated his agenda. He was not there to sell books, tapes or home-study courses, in fact he didn’t have any of that. The business model for his company was to purchase bank REO (foreclosures) properties in bulk. He then sold these properties as-is or after light rehab to investors at wholesale prices. To do that he needed two things, properties to buy from banks and investors to sell them to.

What he was pitching was a two day seminar on how to locate, buy and finance the acquisition of these properties. He was charging $1800 for the seminar with the guarantee that he would refund your money after the first day if you didn’t feel it was worth it. He then proceeded to spend the next hour sharing some of his knowledge of the subject. He was truly impressive and it was a great example of what you would get in his workshop. He had over twenty people sign up and most of them were veteran investors who are not easily impressed.

Guru #2

At our most recent club meeting we had another speaker with impressive credentials. He is currently featured on one the house flipping shows and has a real estate company on the east coast. The club heavily promoted the meeting because they do not usually have a name speaker and the resulting attendance was much larger than normal. Many of the regular meeting segments were cut short to allow this speaker to have as much time as possible.

This speaker had an array of tapes and course material displayed, so his agenda was obvious to anyone who was paying attention. He began his talk with his background in real estate and talked about all of the mistakes he made when he began. He kept telling us that he was going to teach us how to do this, that, and the other thing during his talk. I kept waiting for him to actually “teach” something but all he really did was talk about what he was going to tell us.

As the talk progressed it was laced with sales pitches for a computer program, home-study courses and his five-day boot camp. Some of the pitches were very subtle while others were blatant commercials. After 90 minutes he closed with a final pitch for his boot camp. The regular price was $5,000, but is you signed up now it was only $2,497. But wait, there’s more! He would include a $500 credit for your travel expenses and the first few people to sign up would receive the $2,000 computer program for $1!

A handful of people did sign up. From what I saw they were newcomers to the club or novice investors. None of the veterans were impressed enough to part with their cash.

The Bottom Line

Both of the gurus were qualified to speak about real estate. However their value was very different. One was geared to marketing courses and boot camps to novice investors. Those who sign up would most likely gain valuable knowledge, but would it really be worth the price? The second guru was targeting experienced investors with a desire to participate in the foreclosure market. I spoke to several of the attendees who agreed that there was definite value, but it was not for everyone.

If you are ever inclined to sign up for some gurus course, do so with your eyes wide open. Is the course geared to someone with your level of experience? What do you hope to gain from the seminar or boot camp? Will you be able to implement what you learn or are you just falling for a sales pitch from a smooth-talking speaker? Buyer beware.

The great difficulty in education is to get experience out of ideas.
George Santayana

A Tale of Two Real Estate Gurus

Apartment Building Cost Segregation Analysis

Cost Segregation

One of the great advantages of commercial property investing is the tax benefits. The IRS has a program that allows the owners of apartment buildings or any other commercial property to increase the level of accelerated depreciation allowed in a tax year.

The tax savings may go back to property acquired after 1986, and they apply to new or future construction. They also extend to existing buildings under renovation, expansion and leasehold improvements, as well as to property about to be acquired. It can also be used for financial accounting, insurance and property tax purposes. The primary goal of a cost segregation study is to identify all construction-related costs that qualify for accelerated income tax depreciation. Cost segregation is not a tax shelter and it is not tax evasion.

Ask Yourself These Questions To Determine if You and Your Property Qualify:

Do you own a commercial property valued at $500,000 or more?

Do you pay federal income taxes?

Do you operate a corporation or entity that is for-profit?

Are you planning to the hold the property for more than one year?

To Obtain the Benefits of Cost Segregation You Must Get a Study

Your cost segregation study will analyze the taxes and costs incurred to buy, construct or renovate any kind of commercial real estate. You will need to procure the services of an expert or CPA to conduct the study. The CPA will dissect the costs to determine the accelerated income tax schedules. In order to meet the minimum qualifications of a cost segregation study, property owners must be taxpayers or intend to pay taxes. The cost of a study can range between $10,000 and $100.000.00 depending on the size and complexity of the project.

Advantages of Cost Segregation

Considerable return on investments property that do not need to be insured.
Increased tax deductions for depreciation and reduces taxable income.
Opportunity to correct misclassified assets and claim “catch-up” tax deductions.
Ability to achieve faster building and acquisition cost write offs.
Reduction in insurance costs by identifying the components of the property that do not need to be insured.
Determine personal property versus real property for write off versus capitalization prior to construction. This allows you to write off these items opposed to capitalizing the assets. This can provide you with huge tax benefits.
Defers taxes on capital gain amounts until the property is sold.
Reduces real estate property taxes.
Reduces federal income tax and increases depreciation.

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Apartment Building Cost Segregation Analysis

Always Buy Used Books To Save Money

Buy books that are used. Most are in good condition. You’re buying the book for the words so don’t worry that the spine is a little bent or the pages are a bit folded. I just bought a $35 dollar book on Amazon.com for $15 bucks used.

Some people are irked by buying books used. They’re afraid that the previous owner had abused and neglected their book before putting it on the market. Rest assured: They’re nothing wrong with most used books. The previous owner is selling it because they need the money. Or they do what I do and buy books and then not read them.

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Agree On Finances Before You Get Married

The sooner you and your spouse can agree on where the family money goes, the better. The best time to figure out finances is before you’re married when both of your money is separate.

I’m getting married in November. The shared finances discussion has begun. It will continue for the next few months until we’ve covered all of the ground rules. These premarital financial discussions should minimize the fights while we’re married.

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Finance Findings For Tuesday, June 5, 2007

Finance Findings is Binary Dollar’s periodic link dump.

Zecco IS Cheap [Sun’s Financial Diary]

Traditional Jobs For Men And Women And The Gender Divide [Digerati Life]

Practicing Basic Tax Diversification [Tao]

How to Talk Your Way into Debt [Money Smart Life]

Lazyman’s Prosper Update [Lazy Man and Money]

Don?t Be Fooled Into Thinking an Oil Change Every 3,000 Miles Is Necessary [Generation X Finance]

Are Inflated Shipping Charges On eBay Bad? [Mighty Bargain Hunter]

Why You Need a Budget [Free Money Finance]

Are You a 0% Credit Card Daredevil? [Five Cent Nickel]

GEICO Paid Out A Fraudulent Claim [Blueprint]

Send your submissions for Finance Findings to henry@binarydollar.com.

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Use An Age-Based 529 College Plan To Save For College

Fidelity offers Age-Based 529 investments. Just pick a year.

The best time to save for your children’s college tuition is when your child is born. A small investment now will help them cover their college costs in the future. Say you invest $10,000 when they’re born. Assuming a 12% annualized return, it will grow to about $80,000 by the time the kid’s 18 years old and ready for college. $10,000 investment to pay for $80,000 in school costs? Not a bad price to pay for college at all.

Watch out though: You don’t want a bear market to challenge your kid’s future. You’ll want to secure that fund as cash as the child gets older. Use an age-based 529 investment to save for college.

Age-Based 529 Plans automatically adjust from aggressive (mostly stock investments) to conservative (mostly bonds and cash) as the child comes closer to their project college years. All you have to do is pick a projected year and the fund will handle the rest. The downside is that you pay a bit more in management fees since it’s an actively managed funds. The upside is that you get to spend more of your time playing with your kid instead of balancing their investments.

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Finance Findings For Wednesday, June 13, 2007

Finance Findings is Binary Dollar’s periodic link dump.

My Personal Saving and Investing System [Sun’s Financial Diary]

What Have You Got Against Credit Cards? [Tao]

Curb Appeal: One Of My Best Investments Yet Or How I Turned $80 Into $5,000 With Minimal Risk [Digerati Life]

Understanding the Fine Print of a Loan Can Save You Money and Grief [Generation X Finance]

Alternative Income Streams Progress - June 2007 [Lazy Man and Money]

Are Real Estate Agents Worth the Money? [Money Smart Life]

The Best Online Brokers [Free Money Finance]

Eight Things To Consider When Buying Someone Out [Mighty Bargain Hunter]

Four Reasons You Should Get A Payday Loan [Blueprint]

Eco-Friendly Energy Savings [Five Cent Nickel]

Send your submissions for Finance Findings to henry@binarydollar.com.

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Umbrella Insurance? But My Umbrella Isn?t That Expensive.

Umbrella insurance is a type of insurance that provides extra protection beyond your auto and homeowners insurance. Let’s say that a tree on your property falls and completely destroys a neighbor’s house. You get sued and are ordered to pay $500,000 in damages, but your insurance will only cover $300,000. If you don’t have umbrella insurance, you’re going to have to cover that additional $200k out of your own pocket. Unless you like giving away a couple hundred thousand dollars (if you do, give me a call), you’re probably going to wish you had umbrella insurance. For around two or three hundred dollars a year, you can get an umbrella policy that will provide you with up to $1 million of umbrella coverage.

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Finance Findings For Thursday, June 21, 2007

referral

Finance Findings is Binary Dollar’s periodic link dump.

How We?re Rebalancing Our Investment Portfolio: Modifying Our Asset Allocation [Digerati Life]

10 Tips For Dealing With Car Salesmen to Make Sure You Don?t Get Hosed [Generation X Finance]

Inflating Your Ebay Rating [Lazy Man and Money]

Lifestyle Inflation - When Does It Become A Problem? [Tao]

Colleges Sell Alumni Data for Extra Cash [Money Smart Life]

Credit Inquiries: Hard Pull and Soft Pull [Sun’s Financial Diary]

State and Federal Income Tax Arbitrage [Five Cent Nickel]

Free Checking Isn?t Really Free [Blueprint]

The Cost of Being Overweight [Free Money Finance]

A Mortgage Is Still Debt That Needs To Be Reduced [Mighty Bargain Hunter]

Send your submissions for Finance Findings to henry@binarydollar.com.

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Geezeo - Yet Another Social Finance Web 2.0 Site

Geezeo joins the ranks of Mint.com, NetworthIQ.com, and Wesabe.com as a social personal finance site. The USP (unique selling point) of the site is their mobile accessibility.

It works like this:

Henry’s walking down the street. He stops and wonders if he’s got enough for a Big Mac. He sends a text message to the ether and waits. Moments later a text message comes back with all of my account balances that he setup at the website. Welp. Looks like Henry will have to go another day without food.

It’s targeting students or recent graduates for their service but anyone can use it. They target them because they’re more “connected”. It’s also US-only. Sorry Canada. They have compatibility with 6000+ institutions.

Here are a couple of improvements I would make:

Instead of texting the word “geezeo” to get current account balances, make it a common word that I can enter without switching to “abc” mode.
Instead of texting the word “geezeo update” to update my balances, it should already be updated when you retrieve your current account balances (see item 1). Why would anyone want non-updated information? Deprecate this.
Send a pie chart or graph or something via MMS if possible.

There are more things but here’s the one sentence summary: “Geezeo tracks your money automatically and there’s also discussion boards as well.”

Is it useful? Sure. Consistent awareness of your financial situation is very important for building wealth or getting out of debt.

Will I use it? Probably not. Calculating my net worth at the end of the month is good enough for me.

-h

PS - Sorry about the absence. I was doing pull-ups this entire time.

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Finance Findings For Monday, July 16, 2007

Finance Findings is Binary Dollar’s periodic link dump.

Does Achieving Wealth Make You ?Upper Class?? Facts About Class [Digerati Life]

All the Free Shavers [Sun’s Financial Diary]

Car Hunt And Enterprise Rent-A-Headache [Tao]

The 100,000 Wedding Gift? [Lazy Man and Money]

Mutual Fund Distributions Explained [Generation X Finance]

Money Mistakes To Avoid - Misunderstanding Risk [Money Smart Life]

Identity Theft Tips from Frank Abagnale [Blueprint]

Amazon Deal on the New Harry Potter Book [Five Cent Nickel]

Mind Over Money — My House is Worth More if I Think It’s Worth More [Free Money Finance]

IQ and richness [Mighty Bargain Hunter]

2007 State Sales Tax Holidays for Back-to-School Shopping [Raising 4 Boys]

Send your submissions for Finance Findings to henry@binarydollar.com.

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10 Mortgage Lessons From 12 Phone Calls

I made 12 phone calls today. 2.5 hours of talk time. Here’s what I learned:

All mortgage companies cost the same-ish. If their rates were lower, their closing costs were higher. If their rates were higher, the closing costs were lower.
Some mortgage companies sell your loans. 3 of the mortgage companies I called today gave me an unsolicited aside: “We buy loans. We don’t sell them.” Does that mean that you should always go with a direct lender? Nope. It just means that the mortgage company might not be able to view or change things if the mortgage is owned by someone else.
You don’t need to give out all your information (address, social security) to get rates and closing costs. You can get ballpark numbers as long as you provide the purchase price, the down payment amount, and the type of mortgage.
If you call a company and they won’t give you any estimated numbers without giving all your information, hang up. Call again. A different mortgage specialist will be glad to help you without giving all your information.
Closing cost fees are where you can differentiate a mortgage company from another. Ask the mortgage people to break down their closing fees. Fees can include:
- Property appraisal
- Credit report
- Lender’s inpsection
- Mortgage insurance application
- Assumption
- Mortgage broker fee
- Tax related service fee
- Application
- Commitment
- Rate lock
- Processing
- Underwriting
- Wire transfer
- Abstract or title search
- Title examination
- Document preparation
- Notary
- Attorney
- Title insurance
- Recording
- City/county tax stamps
- Transfer tax
- Survey
- Pest inspection
- Condominium application
- Prepaids for interest
- Prepaids for hazard insurance
- Prepaids for property taxes
- Prepaids for mortgage insurance
- Prepaids for flood insurance
The rates and payments assume you have great credit and good stability. They want to quote you the best rate and closing costs possible so they pretty much assume you’re a model citizen.
Lenders don’t like it too much if you’re quitting your job and you don’t have a job secured yet. Hopefully you have a wife or wife-to-be who looks more stable to lenders.
They ask you if the down payment is gift money or if you saved it on your own. No one gave me a clear answer on why they ask that question.
Do your research even if your wife-to-be’s sister’s soon-to-be husband is a mortgage specialist. You never know…
Every mortgage person you talk to will give you a piece of advice. The advice that resurfaces the most is probably important.

Did I apply for a mortgage yet? Nope. This whole day just narrowed down my choice to 2 or 3 mortgage lenders. Time to talk to Miss Soon-To-Be-Wife…

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When To Borrow Money

Only borrow money to buy assets that appreciate. Why? If you only borrow money on items that appreciate, the interest you’ll pay can be off-set by the increased value of the item. Some examples are a house or your education. But when you put your vacation on a credit card and 6 months later you’re still paying it off at a 15% interest rate, you’re going to regret it. Instead, save your money (earn interest instead of paying interest) and when you have enough, then you can spend it.

- Edwin, CashTheChecks.com

48 Laws Of Power #23: Assume Formlessness

By taking a shape, by having a visible plan, you open yourself to attack. Instead of taking a form for your enemy to grasp, keep yourself adaptable and on the move. Accept the fact that nothing is certain and no law is fixed. The best way to protect yourself is to be as fluid and formless as water; never bet on stability or lasting order. Everything changes.

- Edwin, CashTheChecks.com

Stop Wishing, Start Planning

“It takes as much energy to wish as it does to plan.”
- Eleanor Roosevelt

People wish a lot, but do they plan just as much? Set small financial goals, make them attainable and stick to them. Don’t set a goal like “This year I’ll get my act together.” Set a goal such as: “This year, I’m going to put $100 of every paycheck into my savings account.” That is a realistic goal. Setting short-term realistic goals is good because it gives you confidence every time you reach them. That confidence gives you the determination to do it again the next paycheck.

Let’s do some quick math..

$100 every 2 weeks in a month is:$200
$200 a month one in a year is: $2,400
Plus $100 in interest earned: $2,500

This means that if you save up just $100 from every check you can take you and your family on a vacation every single year. The only thing left is the hard part, sticking to your goal.

- Edwin, CashTheChecks.com