Thursday, May 22, 2008
What are Life Settlements?

Life settlements are financial transactions in which a policy owner possessing an unneeded or unwanted life insurance policy sells the policy to a third party for more than the cash value offered by the life insurance company. The purchaser then becomes the new beneficiary of the policy at maturation and is responsible for all subsequent premium payments after the policy acquisition.

Life settlements are typically offered to high net worth policy owners, aged 65 or older, by financial advisors or accountants. The option is perfect for those who are possess duplicate policies or an unneeded policy as it allows them to convert it into much needed cash while avoiding any future premium payment responsibilities. The strategy is especially effective for term life insurance policies that are set to expire anyway – this option may provide you with “free” money.

Do all life insurance policies allow this? Well, a supreme court ruling (Grigsby v. Russell) established a policy owner’s right to transfer an insurance policy. The argument was that since life insurance possessed all the ordinary characteristics of property, it should be considered an asset that a policy owner can transfer without limitation. The process became streamlined in 2001 when the National Association of Insurance Commissioners (NAIC) released the Viatical Settlements Model Act, which defined guidelines for avoiding fraud and ensuring sound business practices.

In general, you should consider life settlements if: Your policy is no longer needed; investment projections have not materialized; premiums are too expensive; medical or longterm care is required; charitable or family giving is desired; employment status changes; bankruptcy; and any other instance where it may be advisable. It is important to consult a financial advisor before making any decisions.

5/22/2008 5:47:53 PM UTC  #    Comments [0]  |  Trackback
 Wednesday, May 21, 2008
Top 5 Reverse Mortgage Questions

Reverse mortgages are becoming increasingly popular in the United States. The U.S. Department of Housing and Urban Development (HUD) created one of the first federally-insured reverse mortgage programs that can help seniors achieve greater financial security. However, those considering reverse mortgages should be careful to make sure they act prudently.

  1. What is a reverse mortgage? A reverse mortgage is a special type of home loan that lets a homeowner convert some or all of the equity in their home into cash. Unlike traditional home equity loans, this money does not need to be repaid until the borrow no longer uses the home as their principal residence. Most often, this occurs when the homeowner passes away.
  2. How do I qualify for a HUD reverse mortgage? The HUD Federal Housing Administration requires that borrowers are 62 years of age or older, own their home outright (or have a low mortgage balance), and must live in the home. Those interested in obtaining a reverse mortgage must also contact a HUD-approved counselor for a brief consultation. Call 1-800-569-4287.
  3. What types of homes are eligible for a reverse mortgage? Single family dwellings and two-to-four unit properties that you own and occupy are automatically eligible for reverse mortgages. Moreover, some townhouses, detached homes, condominium units, and manufactured homes are also eligible.
  4. Can the lender take the home away if the loan is outlived? No, you do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home’s value.
  5. How are payments sent? There are five options for receiving reverse mortgage payments: (1) equal monthly payments, (2) unscheduled payments via a line of credit, and (3) a combination of scheduled monthly payments and a line of credit.

5/21/2008 5:20:11 PM UTC  #    Comments [0]  |  Trackback
 Thursday, May 15, 2008
Getting Started with Home Improvement Loans

Home improvement loans are home loans used to finance improvements on your house or property. These improvements can include repairs, a new bathroom, a new kitchen, any extensions or simply general improvements. Interestingly, these loans were also the original home-equity loans before they grew into a limitless line of credit. The theory is that any improvements made on the house will increase its value and enable you to pay back the loan.

The key questions to ask when evaluating such a loan is:

  1. Are the improvements you plan to make increasing the value of the home to a greater degree than the loan amount?
  2. What will the monthly payments be and are they affordable given the existing mortgage?
  3. What are the tax implications and are there any potential tax deductions available?

It is important to get quotes from contracts before approaching lenders as well since they will require this information. It is also important to estimate the value from these improvements in order to assure the lender that you’ll be able to pay back the loan. The loans themselves come from five main sources:

  1. First Mortgage
  2. Second Mortgage
  3. Refinancing Solutions
  4. Unsecured Loans
  5. Grants

In the end, home improvement loans can be a great way to leverage your house in order to increase value in the same way that a stock investor can borrow money to invest in stocks in order to increase his/her return. This can pay off in the long term as long as your are sure that the value will be realized.

5/15/2008 7:45:11 PM UTC  #    Comments [0]  |  Trackback
 Thursday, May 08, 2008
What's Fueling Higher Food Costs?
High costs at the gas pump may be a pain when you drive, but now it's becoming a burden at the grocery store as well. Few people take the time to consider that the foods they eat are not grown locally; rather, they are flown in from around the world and combined. The costs to transport these food products are rapidly rising due to the increased cost of fuel. This has directly caused higher food costs for consumers as a result.

There is also another way that energy is involved. Government incentives designed to increase the usage of ethanol have led to tons of farmland being converted to meet the demand for corn. This is land that may have been previously used for growing wheat or other edible crops (ethanol corn is not the same as human edible corn). Currently, ethanol crops account for around 7% of the corn crop, but this percentage is only growing.

In the end, it is clear that rising fuel costs have contributed to rising food costs. The cost of transportation for food products have skyrocketed and forced manufacturers to raise their prices. Meanwhile, high oil costs have led to government incentivizations to produce ethanol. This has caused a reduction in the number of farm acres used for human-edible food products. This is all bad news for the consumer pocketbook!

5/8/2008 6:33:43 PM UTC  #    Comments [0]  |  Trackback
Gas Prices Climb to Record Highs
Gas prices climbed 3 cents overnight to hit a new national record of $3.65 per gallon, while oil prices paused for the day on profit-taking by traders. A survey by AAA and the OIl Price Information Service showed that regular gas nationwide rose 2.7 cents to a reocrd $3.645 while deiesel prices matched the record average at $4.251 per gallon.

Gas prices tend to lag oil futures prices, so crude oil's move higher is bad news at the pump. Crude contracts hit a record $124 per barrel yesterday, which means that the average price of gas may soon rise to over $4 per gallon. In fact, if the move continues, few can argue that it will be possible for gas to stay under $4 per gallon.

Things will only get worse with analysts at some investment banks predicting $150 to $200 per barrel oil prices within two years. These forecasts were issued just days after oil hit record highs and are backed up by economic forecasts showing consumption in China and other developing nations on the rise.

Many other analysts insist that trader speculation is the only reason that oil prices so high. In fact, some say that there is little reason for oil to be above $60 per barrel.These are the same analysts that insist that the dollar's decline is the real reason behind the spike in oil and an upcoming rebound could relieve oil prices quickly.

So, how high will gas be over the next few months? That remains to be seen...

5/8/2008 6:15:13 PM UTC  #    Comments [0]  |  Trackback
 Friday, April 25, 2008
Consumer Confidence Hits a New Low
The consumer confidence survey from the University of Michigan found that consumer confidence is now at its lowest level in 26 years. The survey found that high food and fuel prices, combined with shrinking incomes and falling home values have caused many consumers to save their money rather than spend it. The indicator fell to 53.3 in April, which marks a 6.9 point decline from the previous month.

The economic stimulus rebates due to begin arriving in mailboxes next week should help boost spending temporarily, but a continued rise in food and gas prices will continue to cause consumers to spend less money. Moreover, the survey found that only 30% of consumer plan to spend their upcoming tax rebates, while the rest said they would use it to  pay off debt or put it into savings.

The survey also noted that 90% of consumers believed the economy was in a recession and 75% believed the economic problems will persist for another year. Finally, a third of those surveyed said that they were reigning in spending because of uncertainty about unemployment and income.

In the end, this is bad news for the economy that continues to struggle with a variety of problems.

4/25/2008 6:05:33 PM UTC  #    Comments [0]  |  Trackback
 Thursday, April 24, 2008
Bank of America Reforms Lending Standards
Bank of America said that it will begin implementing new lending guidelines following its acquisition of Countrywide Financial. The biggest change will be the fact that the bank will no longer originate subprime mortgages that were the hallmark of the troubled Countrywide. It will also discontinue all nontraditional mortgages where monthly mortgage payments may not cover all interest and will curtail low-documentation loans.

The bank also plans on helping those already affected with such loans. Bank of America said that it would limit prepayment penalties as well as interest-only and hybrid adjustable rate mortgages. It will also provide $35 million in grants and low cost loans to assit loacal and national nonprofits engaged in foreclosure prevention and to purchase vacant single-family homes for neighborhood stabilization. These will be done through the Bank of America Charitable Foundation and Countrywide.

"We think it's important to clearly explain the changes in mortgage lending practices once we operate as a combined company," said Bruce Hammonds, global consumer credit executive at BofA. "We recognize this tightening, by definition, restricts the availability of credit to some borrowers. However, this will help ensure that those who get loans can afford to repay them."

4/24/2008 8:38:42 PM UTC  #    Comments [0]  |  Trackback
Bankruptcy Filings Rise in Wisconsin
Bankruptcy filings in Wisconsin jumped around 30% in the first quarter of the year as higher fuel and good costs continue to pressure consumers. Meanwhile, rising mortgage payments and lower property valuations have taken away much of the cushion that consumers often rely on in tough times. The figures aren't that different from the national average, however, which saw a 27% increase from January through March compared to the same period last year. Court records showed that there were 4,570 bankruptcy petitions in Wisconsin through March.

Many consumers are beginning to feel the heat as a perfect storm of factors combined to cause troubles that are too great to handle. Higher fuel costs were sparked by the lower dollar and supply problems abroad. Meanwhile, higher food costs come amid a world food shortage sparked by the incentives offered for corn being used in ethanol. The corn being used for the gas is being taken away for usage in food, which includes usage in corn and beef products. Meanwhile, continued housing troubles have eliminated the ability to draw on home equity lines of credit and resulted in higher monthly payments.

4/24/2008 8:16:45 PM UTC  #    Comments [0]  |  Trackback
Cash Usage Outpaces Credit Cards

The credit crunch has many consumers prefering cash over credit cards when spending. The trend is most visible in the UK where the British Retail Consortium conducted a recent survey showing that cash is now used for 60% of all purchases in the UK, which is up from 54% last year. And measured by value, cash is used for 34% of retail spending compared to 32% a year ago.

The news comes after many consumers are struggling to pay credit card bills that they racked up during times when home equity loans could be drawn upon to help out. Meanwhile, many credit card companies themselves are being a bit more particular about who they offer credit cards to in the first place.

Credit cards can be a very useful tool that allow consumers to take out a "free" loan for a month as long as they pay the bills back on time. Any failure to do so can result in substantial fees that can quickly turn the free loan into interest rates that most loan sharks would settle for.

Paying in cash also has several other benefits. For one, it helps many people realize just how much they are spending on a daily basis. Paying with a credit card makes is a little too easy to notice just how much money is being spent. Meanwhile, paying with cash also avoids any chance that you'll incur late fees or charges that are associated with credit cards.

4/24/2008 6:44:29 PM UTC  #    Comments [0]  |  Trackback
 Wednesday, April 23, 2008
Beware of Debt Reduction Scams
Fraud among debt relief companies is running rampant these days and it is becoming more important than ever to do your homework before seeking advice. Debt-Set Resolve Credit Counseling is the latest company to be hit with scandal after the Federal Trade Commission alleged that it violated federal law by falsely claiming that it could reduce consumers' credit card interest rates or the amount of their credit card debt.

According to the FTC complaint filed in March 2007, Debt-Set sold debt reduction services through websites, television and radio advertisements with claims such as "Reduce Debt Now" and "Eliminate Harassing Calls". When consumers called the toll-free numbers, they were encouraged to enroll in a debt consolidation program if their unsecured debt was up to a month overdue or a debt settlement program if it was overdue longer.

The FTC alleged that Debt-Set violated the FTC Act by falsely promising to obtain lump-sun settlements, such as "fifty cents on the dollar" or "50 to 60 percent" of consumers' total unsecured debts. The complaint also noted that the company misrepresented that they would not charge consumers any up-front fees before obtaining the promise of debt relief and that participation in the program would stop creditors from calling or suing them.

In the end, debt settlement and similar services can help reduce debts of 40 to 60 percent, but it is only a possibility, not a promise. Consumers that are in trouble should seek out companies that take the time to explain the process and remain upfront about any fees or other charges that come as a result of using such services.

4/23/2008 5:38:21 PM UTC  #    Comments [2]  |  Trackback
 Tuesday, April 08, 2008
Consumer Goods Under More Pressure
Developing countries now produce nearly half of all American imports, and rising inflation is making these products more expensive. The currencies used in many developing Asian countries, like India and Vietnam, are quickly appreciating. Many common imports, like electronics and fabrics, may face price hikes as a result. This may be sooner than later as inflation continues to increase at a rapid rate. Unfortunately, it comes at a time when consumers are already feeling the heat from rising domestic prices.
From the New York Times:
The free ride for American consumers is ending. For two generations, Americans have imported goods produced ever more cheaply from a succession of low-wage countries — first Japan and Korea, then China, and now increasingly places like Vietnam and India. But mounting inflation in the developing world, especially Asia, is threatening that arrangement, and not just in China, where rising energy and labor costs have already made exports to the United States more expensive, but in the lower-cost alternatives to China, too.

4/8/2008 2:52:09 AM UTC  #    Comments [0]  |  Trackback