Archives for 2012

Obama Offers Up New Mortgage Relief And Refinance Plan

President Obama announced this week that he would be seeking passage of a new updated mortgage relief plan aimed at helping underwater homeowners to refinance their properties and take advantage of historically low rates. The bill has an uphill climb, however, as Republican legislators have announced their opposition to the plan as another waste of money, and a drag on business and hiring.

This isn't the first time we've heard of a mortgage relief program to help underwater homeowners as Obama has floated ideas like this in the past. The programs have had decidedly mixed results, however, with the Making Home Affordable home modification program seeing over half of the people enrolled in the program dropping out. Other programs have had mixed results as well in part because of homeowners unable to fulfill obligations and largely in part to banks not participating in the programs or making it extremely difficult.

Obama Mortgage Refinance Plan

So what are the details of this new refinance program? How does it differ from previous programs? From the Washington Times:

Only three months after proposing a mortgage-relief plan, President Obama went back to the drawing board Wednesday with another proposal, paid for by a new tax on big banks, that would allow millions of “underwater” borrowers to refinance home loans.

The president’s latest plan, which he outlined in his State of the Union address last week, would allow underwater homeowners – those who owe more than their homes are worth – to refinance their mortgages into loans backed by the Federal Housing Administration (FHA). Borrowers could not have more than one late payment in the past six months, and banks would be required to reduce mortgage balances for homeowners who owe more than 140 percent of their home’s value.

The administration says about 3.5 million borrowers would likely qualify for the plan. While the effort last year applied to homes financed through mortgage giants Fannie Mae and Freddie Mac, this latest proposal would help borrowers with private-sector bank loans.

So approximately 3.5 million borrowers may qualify for the program – and you don't have to have a loan that is backed by Fannie Mae or Freddie Mac, as with previous mortgage relief programs.

People looking to refinance under this program would have to meet the following criteria:

Be current on their loan payments with no late payments in the last six months – and only one in the past year.
Have a credit score above 580.
Their loan would also have to be within the FHA’s limits of $271,050 to $729,750.
Loan To Value ratio of below 140.

The program would cost between 5 and 10 billion dollars, and Obama proposes to pay for it by levying a tax on large banks. Because of that many banks and mortgage giants have come out against the proposal.

Reactions To The Plan

Reactions to the refinance plan have been mixed. Based on the lackluster response to past programs many folks doubt that this plan would have much effect either.

Others say that it doesn't matter much either way as the plan has too much opposition in the Congress, and isn't likely to pass.

Douglas Holtz-Eakin, president of the American Action Forum, says the plan is more politics than anything.

“The President’s proposal appears to be more politics than policy. As structured, an expansion of FHA subsidies to refinance does not appear likely to pass Congress, so its policy effectiveness is in doubt. Moreover, even if passed, $10 billion or so would have no serious impact on underwater homeowners when the overall negative equity exceeds a half trillion dollars. The White House must know this, leading one inevitably to conclude that this is campaign rhetoric and not real help for real people.”

David Stevens, president and CEO of the Mortgage Bankers Association, says that the program has some appeal to underwater homeowners, but a tough battle to be passed:

“The mass refinance proposal will have appeal to those that are sitting in homes, underwater, and feel like they have been left on the sidelines during this interest rate rally that has brought mortgage rates to near historic lows. I think the refinance announcement’s biggest hurdle is going to come when it faces the reality of needing congressional approval. The funding mechanism, the moral hazard, the re-default risk, and the role of government intervention in housing will likely create divides on both sides of the debate that will make the likelihood of this moving forward an uphill climb.”

Still others say that the program is a positive one that could help jumpstart the housing market.

What are your thoughts on President Obama's new housing plan? Will it be passed, and if so, will it help people as promised?

Would You Use A Local Currency Instead Of A Federal Reserve Note?

By Miranda Marquit 6 Comments

As the economy continues to limp along, and with the recent announcement by the Federal Reserve that low interest rates are likely to continue into 2014, an increasing number of people are skeptical of the currency that we accept as legal tender. Federal Reserve notes are starting to fall out of favor. But what can take their place?

Some investors decide to invest in precious metals as a way to hedge against inflation and the loss of value expected of the U.S. dollar. Others, though, have decided to turn to local currencies in order to transact business.

local currency

Local Currencies

Local currencies have almost always been a part of the economic landscape in the United States. Indeed, even in Colonial times individual colonies, cities and even banks issued their own currency notes. The tradition has continued throughout the years, although the practice hasn't been much in vogue — until recently.

Since the most recent recession, local currencies have been on the rise again. Localities issue notes that can be used at businesses in a specific area, creating an economy that is more insular than that of the wider U.S. And, of course, because the currencies aren't accepted outside the retailers and tradespeople willing to accept the currency, more of the money stays in the local economy. There are even some digital currencies (beyond the money seen in virtual worlds like World of Warcraft and Second Life), used online amongst members who agree to honor the currencies.

Local currencies range from paper notes, to digital currencies, to metal-based. In some cases, states are drafting legislation that opens up the ability to use alternative forms of currency, usually gold and silver coins.

Most local currencies have a set exchange rate so that you can turn in your Federal Reserve notes for a specific value in local currency. You can then use the currency to make purchases, and choose to accept the currency for your own products or services. If you use the local currency, and amass value in the local currency, you will be protected to some degree in the event that the U.S. dollar as we know it now collapses.

Would You Use a Local Currency?

The idea does sound nice: You boost the local economy, and create a situation where a currency has more perceived value. Plus, you keep your options open — just in case the Federal Reserve System falls to pieces sometime soon.

However, there are downsides to a local currency. One of the biggest issues is that any system of exchange relies on the idea that people have faith in it. Even something tangible, like gold, requires that people agree on its “value.” All forms of money and investment are subject, in some degree, to public perception. If the public perception of a local currency falters, then it could become worthless. And, if you have exchanged a large number of your Federal Reserve notes for a local currency that tanks, your losses could be quite large.

What do you think? Would you use a local currency?

Do You Save Your Pocket Change? For One Indiana Man It Adds Up To A New Car Every 10-15 Years.

By Mr. Money 8 Comments

Whenever I take out cash and pay for things at the store inevitably I end up with a pocket full of change at the end of the day. Quite often I'll just spend the change in the vending machine at work, or leave it in my car for times when i need 25 cents here or a nickel there. More often, however, I'll take the change home with me and put it in the change bowl on my dresser, and every few months I'll take it in and have it deposited in my bank account. Usually it adds up to a hundred dollars or more, which goes directly into my savings.

The question, however, is this. What if you were always paying in cash, and every time you got change it went directly into your change jar? How much money would it add up to, and how much could you save in change alone?

save spare change

Saving Spare Change To Buy A New Car

For most of us who don't religiously save our change the coins in our jars adds up to enough to buy a nice dinner or a couple of video games. But for one Indiana man who was a self-proclaimed penny pincher, the coins added up to be enough to buy a new truck!

Paul Brant considers himself a penny pincher, but his savings in quarters and dollar coins really paid off.

Brant, 70, used more than $25,000 in change to help buy a new Dodge Ram half-ton pickup truck Friday — 13 years after buying another truck with spare change.

Brant has been storing his change for years, and estimated he had about $26,000 in coins for Friday's purchase. In 1994, he bought a Dodge pickup and a Dodge Neon using about $36,000 in quarters.“As long as you don't put your hands back in the till, it really adds up,” he said. Brant stored his change in coffee cans, water jugs and piggy banks over the years, and was escorted by sheriff's deputies as he brought the rolled coins to the dealership.

He's not the only person to be doing things like this, there have been others over the years, all over the world. A businessman in China did something similar in 2010 to buy a van.

Mr Zhao, a businessman, dropped bundles of notes, none worth more than one yuan – about $0.15 – at the dealership in Jining, in northern Shandong province.

Extra staff had to be brought in to work shifts to count it all, a clerk at the dealership said. Finding a dealership to accept the notes, many of them stained and torn, was not easy, he said.

“I held onto the money waiting to see if they would accept it so that I could buy the car. The manager of this dealership decided to accept my cash, so that was really helpful to me,” he said.

After hours of counting, the staff at the dealership confirmed he had provided exact change.

What If That Money Had Been Invested Instead?

It's fun to think about how small amounts of change saved up over the years can add up to large totals. It's truly inspirational. But what if the money wasn't just saved in jars, but instead was invested? How much could it have been?

Let's take the first story for example. If you invested $26,000 over 13 years (how long it took him to save it up) with an average rate of return of 8% you would have almost $42,469 after 13 years. That's a difference of $16,469 by investing your money instead of just allowing it to sit in jars! That's enough to buy another nice used car!

Now realize that he has done this twice now, the first time he saved up $36,000. If he saved at the same rate it probably took him around 18 years the first time – so if he had invested that money at 8% returns he would have garnered almost $71,245 instead of $36,000. That's the power of compound interest!

So next time Mr. Brant, I recommend investing your change by depositing it every few months in a nice index fund!

Have you saved your pocket change and used it to buy something? Tell us your story in the comments.

Should You Itemize Your Tax Deductions?

By Miranda Marquit 2 Comments

For years, my husband and I just took the standard tax deduction, and were happy with it. After all, that deduction is fairly hefty. Then, my home business started making money (and our contributions to our church rose correspondingly), and we bought a home.

Now, suddenly, we had a higher amount that we could deduct — and it was more than the standard deduction. We started itemizing our tax deductions.

should you Itemize deductions

Do Your Deductions Amount to More than the Standard Deduction?

It may seem like a pain to add up all of your deductions, but it can pay off in the end. If your itemized deductions add up to more than the standard deduction, your taxable income will be lowered by that much more. Some of deductions that you can itemize to help you reduce your income by a little bit more include:

Uninsured medical and dental expenses: If you paid out of pocket for medical and dental expenses, these can be deducted. Your expenses must exceed 7.5% of your Adjusted Gross Income, though, if you want to deduct them. For some, though, who have high deductibles, and for those who don't have dental insurance and had major work done, this can be a real help in offsetting some of the costs.
Interest and taxes on your home: The mortgage interest that you pay is tax deductible. Additionally, your property taxes are deductible. Unfortunately, as 2011 expires, so, too, does the tax deduction for PMI premiums paid. But, you can still get a fairly hefty deduction for interest and taxes on your home.
Unreimbursed employee business expenses: If you spent a great deal out of pocket on behalf of your employer, for business-related items, and you were not reimbursed, you can receive a tax deduction for that. Make sure that you keep good records of the expenses incurred, including receipts.
Miscellaneous deductions: In some cases, you might have large, unreimbursed expenses that don't readily fall into any category. With proper documentation, you can deduct these as well, but you might want to consult a tax professional before you do.
Uninsured losses due to theft or casualty: If your home was hit by a disaster, or if you have had a theft, you might be able to itemize those deductions. First of all, any theft or casualty tax deduction has to be on expenses that were not covered by your insurance company. If you insurance company paid for repairs, you can't deduct that amount. You can only deduct the amount using a formula provided by the IRS on losses not taken care of by insurance.
Charity donations: Large charity donations to qualified non-profits can be deducted as well. If you make large enough donations, it can overwhelm your standard deduction.

There are other eligible tax deductions as well. You don't need only one of the above to exceed your standard deduction in order to benefit from itemizing. You can add up as many items as necessary to get your total. It's this total that matters when determining whether or not you have more than the standard deduction. And, if it looks like you will have a larger number than the standard, it's a good idea to itemize in order to increase your tax efficiency.

Should You Move For A Better Paying Job?

By Miranda Marquit 7 Comments

Recently, Kiplinger released a list of cities with the best paying job opportunities. It is no surprise there there are a number of people hiring movers and trying to get to these areas.

The site also has an interactive map that shows where the best paying jobs are — and the worst. I'm not surprised that the major cities in my state of residence, Utah, are among the worst paying in the nation. I've seen first hand how much people can expect to make here. Some of the cities with the better paying jobs include Washington, D.C. and Manchester, New Hampshire.

The rankings were based on the number of job openings available that pay more than $50,000 a year. The idea is that you can look at some of those cities with higher paying jobs, and consider whether or not to move to any of them. It doesn't seem like a bad plan, as long as you actually do plan.

move for a better paying job

Do You Have the Skills to Land One of Those High Paying Jobs?

One of the first things you have to do is honestly evaluate yourself and your skills. Are you qualified for a higher paying job? In many cases, higher paying jobs require some sort of certification, or education. If you aren't qualified for the better paying jobs, it might not do you any good to make the move, since you won't be any better off. Before you pick and move cities, check to see what kinds of job openings are available, and make sure that you are qualified to work them.

Have You Considered Cost of Living?

It's great that Washington, D.C. has a relatively high number of $50K+ jobs available. But, stop and think for a minute: How far would $50K go in D.C.? I mean, if you wanted to have a high quality of life. One of the things you need to take into account when figuring out where to live is what things cost. How much is housing? Food? Transportation?

You also need to decide what kind of neighborhood you want to live in. If you want a higher quality of life, you have to pay more for it. Many people can't afford to live the good life on $50K a year in some of the cities that have high paying jobs.

Disposable Income

As you consider the cost of living, contemplate what it would do to your disposable income. After you pay all your obligations, and take care of your needs, what's left over? Sure, you're not going to receive good pay here in Utah. However, $35,000 a year will go further here than $50,000 would go in D.C.

With my current annual income, I live pretty nice here in Utah. I have a home that I can afford — with a mortgage payment that is less than 1/5 my monthly income. Food prices are mostly lower than what I paid when I lived in New York, as are utilities, gas prices and other expenses. If I were to move somewhere else, my money wouldn't go nearly as far, and I wouldn't be able to enjoy a lot of things that I get to do now.

Before you become too excited about the prospect of making more money by moving, consider the factors involved. You might be better off staying where you are and earning a little less.

American Express Bank Personal Savings Review: High Yield Savings Accounts

By Mr. Money 1 Comment

On this site we've reviewed quite a few online banks from Ally to ING Direct to Perkstreet. In general we've talked about how people view their customer service, what kind of rates they have, the histories of the companies and so forth.

One bank that I missed that has apparently had an online bank for quite a while now is also the company that I had one of my very first credit cards through, American Express. I'm not sure how I missed this offering, but it recently came to my attention. They're currently one of the higher (albeit low) rates right now, so I thought I'd do a quick review of American Express Personal Savings.

History Of American Express Bank

American Express has been around for just over 150 years, so they're no Johnny come lately. From Wikipedia:

American Express Company (NYSE: AXP) or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best known for its credit card, charge card, and traveler's cheque businesses. Amex cards account for approximately 24% of the total dollar volume of credit card transactions in the US, the highest of any card issuer.

BusinessWeek and Interbrand ranked American Express as the 22nd most valuable brand in the world, estimating the brand to be worth US$14.97 billion. Fortune listed Amex as one of the top 20 Most Admired Companies in the World.

Amex hasn't always had a savings account and for much of their 150+ years they have had more of a focus on the credit card and charge card markets (can you say “more profitable”?), but only after our recent financial downturn did they speed up customer acquisition for their deposit accounts. Seems like a lot of companies would like to have that consumer cash on hand nowadays.

Amex Savings Are FDIC Insured

American Express is a FDIC insured bank so you don't ever have to worry about losing your money, as long as you don’t have more than $250,000 per depositor. In other words, each spouse would be covered in separate accounts for up to $250,000.

American Express is a widely known and highly stable brand, however, so I don't think you have to worry about them going out of business anytime in the near future. You're good to go.

American Express Savings Account Benefits

An American Express savings account has a lot of features and benefits, similar to a lot of other online banks. Among them:

24/7 Account Access by phone or web.
No fees to open or maintain a High-Yield Savings account.
$1 to open an account.
Set up automatic transfers from a linked checking/savings account.
Rated 5-star Safe & Sound by Bankrate.com
FDIC-insured to $250,000 per depositor

Opening An Account With American Express

American Express has made opening a savings account quick and easy 4 step process, very streamlined and painless.

Gather your information: Bring together your Social Security number, address, email, date of birth and existing bank account information if funding your account electronically.
Submit your application: Choose what type of account you want (Savings/CD) and apply online or by phone anytime at 1-800-446-6307.
Receive confirmation: If your account is approved you'll receive an e-mail confirming that your application is approved. You will also receive a Personal Savings welcome kit in the mail.
Fund your account: Then you just need to fund your account and start earning interest!

There you go. As mentioned you should get an email confirming that your account is approved and that you're ready to go. Look out for that welcome kit in the mail!

Conclusion

American Express is one of the most recognizable brands in the world. Most people know about them because of their credit and charge cards (that's where I first came upon them), but they've also quickly become a good solid option when it comes to online savings accounts.

You're not going to find many banks nowadays with great rates – or anything really above 1% – but with that said American Express savings is currently near the top of the bank rates hill.

Add to that the fact that their FDIC insured, and are rated as a 5 star safe and sound bank by bankrate.com, and I think you've got a solid savings account option that I would recommend checking out. You can sign up for an account or get details through the links below.

Open Your American Express Personal Savings Account

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