How Does a Wall Street Bail-Out Bill Affect Main Street?

Large and small companies across the globe rely on access to

money markets to finance their daily operations, including

inventories, and payrolls. Lenders routinely make loans to these

companies, and to each other, to make it all happen. When lenders

have confidence in these markets, and investors have confidence in

this system, we have a functional marketplace that, for the most

part, is sustained by competition. When confidence in this system is

shattered, however, like it has been recently, credit becomes

expensive and scarce to all parties, and small and large companies

alike can choke to death waiting for the short-term capital it needs

to fund its long-term success. This directly affects you and your

family. It means a slower economy. It means more lay-offs and less

new job creation, which often means lower home values. It also

fuels volatility in the financial markets that, as we've seen, can

wreak havoc on your savings, retirement, and other investment

accounts.

It is estimated that some $70 trillion in total global investment

capital is available, which would be great news if our financial

systems were functioning with confidence – and that's what the

Rescue Bill is basically about. Like it or not, the US Government

has been given unprecedented power to invest $700 billion in our

financial systems in two main ways. First, as much as $250 billion

to purchase stock in US banks, providing the banks with badly

needed money. Second, through the purchase of certain assets to

help stimulate more liquidity in the credit market. Another initiative

will provide government guarantees for the short-term loans banks

make to each other to run their daily operations. More importantly,

these actions are in concert with similar practices by other

governments and central banks.

None of these actions will solve our problems completely or save us

from recession, but here's the good news. It is a positive step in the

direction of stabilizing the markets. The other good news is that

several other measures were tacked on to the bill to help build your

confidence in the markets. Unfortunately, there just isn't enough

space in this short newsletter to cover them all. We will briefly

highlight a couple of them, but our best, most practical financial

advice is to create your own plan for the future with your financial

professionals. Don't make any rash decisions without speaking to

the experts you trust to handle your investments. If you need help

finding a financial professional you can trust, we'll gladly provide a

referral. Just give us a call. We'll review your mortgage and create a

plan that fits your individual financial goals and needs

Changes in FDIC Limits

As part of the Rescue Bill, Congress also increased FDIC deposit

insurance from $100,000 to $250,000 for all of an individual's

accounts at a single institution. For one year, joint accounts,

retirement accounts, and trust accounts are insured separately.

This means a married couple can insure up to $1 million at a single

bank, by making a few simple adjustments. Changes also affect

revocable trusts, allowing the same amount of insurance for

beneficiaries, such as your children. That means, a married couple

with three kids could create enough qualifying individual and joint

accounts to protect up to $1.5 million. It's important to note that the

FDIC has never failed to pay a single dime of insured money when

banks have failed, so you won't have to make a run on the bank or

hide your money in your mattress anymore. Small businesses will

also benefit from new increases, as well as the confidence that

comes with this kind of insurance.

New and Extended Tax Incentives

Within the 451 page Rescue Bill are nearly 100 tax code changes

that directly affect individuals and business owners, including

education deductions, sales tax, energy credits, and even new

disaster aid. Other tax breaks, which were due to expire, were

extended, including property tax deductions, the Mortgage Debt

Forgiveness Act, and the shield for the Alternative Minimum Tax

(AMT). The property tax provision, set to expire in 2008, has been

extended to 2009, and allows up to $500 ($1000 for joint filers) in

deductions in addition to the standard property tax deduction –

even if you don't itemize! The Mortgage Debt Forgiveness Act,

extended to 2012, was designed to protect those who already lost

their homes due to foreclosures from facing an additional tax

penalty for qualifying cancelled or "forgiven" debt of up to $2 million.

And, finally, the Rescue Bill also saves about 23 million Americans

from the dreaded AMT, a kind of extra tax that some people have to

pay on top of their regular income tax created by the Tax Reform

Act of 1969.

These are just a few of the potential tax benefits created or

extended by the Rescue Bill. As always, there are specific

qualifying standards, and so it is essential to speak with a qualified

tax professional about these and other tax benefits that could help

you lower your tax bill and increase your confidence in today's

tumultuous financial markets.

Increased Federal Loan Limits Lower Price Tag on Hundreds of Thousands of Loans

 

One immediate benefit of The Economic Stimulus Act of 2008 is the increase in loan limits for high-cost areas of the country. By raising the Federal Housing Administration's loan limits on what qualifies for lower-cost FHA, Fannie Mae and Freddie Mac loans, the bill could help a quarter of a million families purchase or refinance their homes at a lower cost. Combined with record low interest rates, the change could improve the financial picture for many now facing foreclosure. The options and loan ceilings vary, however, from county to county and only a Certified Mortgage Planner can weigh all the options to determine if a new loan makes sense for an individual homeowner.

 

The increase is only temporary, however, so homeowners looking to shed the premium they pay for subprime or jumbo loans required to live in their state need to act quickly to take advantage of these federally-guaranteed loans.

 

FHA loan limits that will range from $271,050 to $729,750 with the largest loans available in high-cost metropolitan areas such as New York, Los Angeles, San Francisco and Washington, D.C. But even smaller markets could see increased activity in the housing market when the new loans become available. In Eugene and surrounding areas we did not have any increase in the Fannie Mae limit but did have an increase in FHA limits to $343,750.

 

 

 

Money Magazine Endorses Equity Management Principles

The January issue of money magazine had a great article that reinforces what Wealth Equity Planning is all about. The article is about why pre-paying your mortgage is not mathematically supported. It looked at how over the long term investing that cash you would have put into your mortgage is dramatically superior. It also points out that investments are more liquid and can be accessed easily in an emergency making it a much safer strategy as well. It's great to see the mainstream media finally embracing these sound financial principles. To read the whole article, go to www.wealthequityplanning.com/index.php?op=articles .

Bankrate Study Shows Holes in Mortgage Planning

A recent study by Bankrate.com shows that nearly 36% of homeowners don't know what kind of mortgage they have.  Sadly, this doesn't surprise me too much.  Every day we get at least one call to the office from a person who says they thought they had a fixed rate loan but it is now adjusting and payments are going too high. 

The real problem is not just that these people don't know that their mortgage wasn't fixed but that in almost every instance these people really NEEDED a fixed rate loan.  Most of these people are credit challenged and things really haven't changed for them in the last two or three years.  It's sad to think that many people in this situation may now lose their homes because the market has changed the guidelines making these loans available have tightened. 

The moral to this study is if you're not sure what type of loan you have find out ASAP! Feel free to give my office a call and I can review all of your paperwork with you.

Historic Fed Move Cuts Both Ways for Borrowers

Hot on the heels of its surprise inter-session rate cut of 75 basis points last week, the Federal Reserve cut key interest rates again, the fifth straight cut since September 2007. In its statement last week, the Fed said it had decided to cut the federal funds rate "in view of a weakening of the economic outlook and increasing downside risks to growth." In other words, economic data suggests the US is on the brink of recession, and the Fed is acting accordingly.

Who benefits from this cut?
If you have a loan that is directly tied to the Prime Rate, you will see an immediate benefit. Home equity lines of credit (HELOCs) and variable rate charge cards are the types of loans that will have an interest rate reduction on their next statement.

What does this mean for long-term rates?
Long-term mortgage rates, the lowest we've experienced in years, could actually increase after today's cut, based on historical performance and recent trends.

So if you're waiting for long-term rates to fall further, don't count on it. Your best chance to lock in the lowest rates since 2005 is now. Getting your application in process now will allow you to capture a great rate before it's too late.

What REALLY moves mortgage rates?
Fixed-rate mortgage rates aren't directly tied to Fed interest rate moves. Instead, they tend to follow in the direction of other long-term government bond yields, such as the 10-year Treasury, which historically moves in accordance with the economic outlook and in advance of Fed actions. The performance of Mortgage Backed Securities, issued by Fannie Mae and Freddie Mac, is what really determines long-term mortgage rates.

How does the economic stimulus package fit into the picture?
The economic stimulus package from Congress and the White House could be a double-edged sword for borrowers. Combined with recent Fed actions, the package could create inflation and bring about higher long-term interest rates.

On the positive side, conforming loan limits are likely to be raised from the current $417,000 to upwards of $625,000. This means great potential savings for purchase and refinance candidates who live in 20 high-cost areas across the country.

What should you do next?
If you're unsure how the rate-cut or the proposed legislation affects your mortgage, don't worry, you're not alone. There's no one-size-fits-all answer. Give us a call right away. We'll review your mortgage and see what, if anything, can or should be done to make the most of your individual financial goals and needs.

The Mortgage Planning Process

The mortgage planning process is different than the typical "shopping for a mortgage" experience. The typical shopping for a mortgage experience includes: Wasting your valuable time trying to save $25/month by comparing rates, fees and closing costs among different lenders. Wasting your valuable time trying to baby-sit the mortgage company you've reluctantly chosen to work with. Being promised one thing and then getting something different. Being "sold" on one mortgage product over another. The mortgage planning relationship is about you: Receiving valuable financial advice and guidance that can literally save you hundreds of thousands of dollars. Trusting a professional who is committed, qualified and equipped to deliver what they promise. Experiencing a "concierge" level of service when you are in the market to buy a home, refinance your mortgage or make cash flow changes to enhance your lifestyle. Implementing a defined financial plan of action in helping you achieve your life goals and dreams. Maintaining an ongoing high trust relationship with a team of financial advisors who can help you make necessary changes in your debt, cash flow and home equity planning strategies. This is a relationship, not just a transaction. As such, it requires a defined system of accountability in order to work effectively. The Mortgage Planning Process consists of the following five steps: 1. Establish and define the client-planner relationship. Mortgage Planner Should: Ask you for information about your financial situation and your time frame for results and success. Gather all the necessary documents before giving you the advice you need. Clearly explain or document the services they will provide to you. Explain how they will be paid and by whom. Unless you are willing to pay a flat fee for mortgage and real estate equity advice, mortgage planners are typically compensated through a commission structure set up with the lenders they work with.   You Should: Clearly explain how financial decisions are made in your household and include all the key decision makers in consultations with your mortgage planner. Be prepared to share personal and financial information with your mortgage planner in order for them to be able to advise you on how best to achieve your goals. 2. Analyze and evaluate your financial status. The mortgage planner should analyze your information to assess your current situation and determine what you must do to meet your goals. Depending on what services you have asked for, this could include analyzing your credit situation, real estate equity, debt situation and cash flow.

 

3. Develop and present mortgage planning recommendations and/or alternatives. The mortgage planner should offer mortgage planning recommendations that address your goals based on the information you provide. The mortgage planner should go over the recommendations with you to help you understand them so that you can make informed decisions. The mortgage planner should also listen to your concerns and revise the recommendations as appropriate. 4. Implementing the mortgage planning recommendations. You and the planner should agree on how the recommendations will be carried out. The mortgage planner may serve as your "coach," coordinating the whole process with you and other professionals such as CPAs, CFP® professionals, attorneys, Realtors, builders, insurance professionals and other qualified advisors. 5. Monitoring the mortgage planning recommendations through a quarterly or annual mortgage and equity management review. You and the mortgage planner should agree on how you will both monitor your progress toward achieving your goals. During this review, your mortgage planner can adjust their recommendations, if needed, as your life changes. Most often, this process involves periodic assessment of: Your fluctuating cash flow needs. Changing market interest rates and mortgage strategies. Income and career alterations. Family changes including: Children's financial needs. Caring for elderly parents. How your real estate equity and investments are performing from both a cash-flow and "internal rate of return" perspective.

MythUnderstandings”--Think Like a Millionaire

 

Demystifying Real Estate Investing

Overcoming the misconceptions that keep you from investing in real estate

Most people who aren't investing in real estate are being stopped by doubt and fear. They may want to invest in real estate, but each time they consider taking action, they come up with an obstacle or a core belief that keeps them from moving toward their dreams.

According to The Millionaire Real Estate Investor by self-made millionaire and real estate investor Gary Keller, most successful real estate investors have had to overcome certain beliefs that later proved to be unfounded. Some of these beliefs center around the way they view themselves as investors, and the others are focused on beliefs about investing. By addressing these doubts and fears, and recognizing that they're unfounded, you'll eliminate the major barriers to becoming a real estate investor.

• Personal Myth #1: "I don't need to be an investor. My job will take care of my personal wealth." Truth: History indicates that few jobs pay enough to create true financial independence. Financial wealth building depends on another vehicle.
  
• Personal Myth #2: "I don't need or want to be financially wealthy. I'm happy with what I have."
  Truth: Financial wealth offers greater opportunity to care for yourself and others, and that is something most everyone wants and needs.
  
• Personal Myth #3:
  "I can't do it."
  
• Truth: You don't know what you can or cannot do until you actually try.
  
• 
  
• Investing Myth #1: "Investing is complicated."
  
• Truth: Investing is as complicated as you make it.
  
• Investing Myth #2:
  "All the best investments require knowledge most people don't have."
  
• Truth: Your best investments will always be in areas that you can or already do understand.
  
• Investing Myth #3:
  "Investing is risky. I'll lose my money."
  
• Truth: Investing and gambling are not the same thing. Investing, by definition, is not risky.
  
• Investing Myth #4: "Successful investors can time the market."
  
  
• Truth: Timing isn't about being in the right place in the right time. It's about being in the right place all of the time.
  
• Investing Myth #5:
  "All the good investments are taken."
  
• Truth: Plain and simple, every market, in every time, has its share of good investments.
  

 

There's nothing more powerful for keeping you out of action than fear and doubt. By seeking the truth, rather than relying on unfounded beliefs that lead to fear and doubt, you can overcome your greatest obstacle and get closer to achieving your dreams.

If you're interested in investing, but you have doubts about whether or not investing fits in with your current financial program, it's best to consult with a qualified and reputable Mortgage Planner who can assess your financial situation and put you on a plan that targets your goals. As with any financial program, gaining clarity on the facts is always the best place to start.