Archive for May, 2007 Page 2 of 2

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Watch out for investment traps

Posted on May 18, 2007 by Jason

North County Times, May 18th, 2007

By definition, investing is risky business. But the risk level rises
every time someone comes up with a new way to rip off financial
consumers.

The North American Securities Administrators
Association has just released its annual list of the top 10 traps
facing investors. Included are the usual flagrant deals such as prime
bank schemes, which offer super-high yields with little risk. In fact,
they are usually Ponzi schemes that use new investor money to pay
existing investors after scraping off a big chunk into the pockets of
the operators.

Affinity fraud — using religious, ethnic,
cultural and professional connections to run a scam — are always at
the top of the list. Internet fraud and oil and gas schemes have their
usual place on the list.

The
sale of unregistered securities by unlicensed individuals is back
again. When you’ve got a good scam that works, why change? These deals
seem to always involve such things as viatical settlements, pay
telephone investments and ATM leasing programs. Only the scamsters wind
up making any money on these deals.

But, as always, it’s the
things that smack of legitimacy that are perhaps the most evil. These
are the ones that are offered by people you have a tendency to trust.
That makes it all the more painful when they fall apart and you suffer
a financial loss.

Read more of this article.

GINNIE MAE COMMENDS NEW FHA HECM LOAN PERFORMANCE STUDY

Posted on May 16, 2007 by Jason

Ginnie Mae, May 15th, 2007

Today, Ginnie Mae (the Government National Mortgage Association) praised a new
staff study published by the U.S. Department of Housing and Urban Development’s
(HUD) Office of Policy Development and Research (PD&R) that analyzed 16
years of Home Equity Conversion Mortgage (HECM) loan level data.

“This groundbreaking research will enhance the development of a secondary
market for HECMs; it provides keen insights regarding the timing of HECM loan
terminations; and, will greatly assist secondary market participants in
assessing HECM loan performance,” said Robert M. Couch, President of Ginnie Mae.

The HECM is the Federal Housing Administration’s (FHA) reverse mortgage
product. The Home Equity Conversion Mortgage Terminations: Information to
Enhance the Developing Secondary Market study by Edward J. Szymanoski, James C.
Enriquez, and Theresa R. DiVenti, specifically examined the timing of HECM loan
terminations. This is the first study to make information on HECM loan
performance widely available to investors.

“This type of information is vital to the emerging HECM market because it
will help structure securities more effectively and it will help investors to
price the HECM security efficiently-all of which will ultimately benefit senior
home owners seeking to tap into the equity of their home,” explained Couch.

The newly released study comes as Ginnie Mae prepares its first HECM
Mortgage-Backed Security (HMBS) for issuance in 2007. The Ginnie Mae HMBS will
allow approved issuers to securitize and sell FHA-insured reverse mortgages in
the form of a Ginnie Mae security. The Ginnie Mae HMBS will provide the
mortgage-backed securities marketplace with a full faith and credit vehicle for
the securitization of HECMs. The HMBS will increase liquidity by providing
capital market funding sources to primary market HECM lenders, broadening
distribution channels for HECM loans and expanding the investor base for the
HECM product.

Read more of this article.  Learn more about Reverse Mortgages.

Boomers warm to reverse mortgages

Posted on May 11, 2007 by Jason

Investment News, May 11th, 2007

Reverse mortgages, a relatively small part of retirement income now, will gain
popularity as baby boomers age, a Fidelity Investments executive told attendees
at the Investment Company Institute’s meeting today in Washington.”When you
think about the baby boomers burning the candle at both ends, [will they tap]
their home equity to eat out more often? I think [so] absolutely,” said Stephen
Deschenes, an executive vice president at Fidelity Investments Life Insurance
Co., a unit of Boston-based Fidelity.



Following his speech, Mr. Deschenes said that baby boomers would take a
reverse mortgage to maintain their lifestyles that for two reasons.

“One, they’re more aggressive and probably less frugal than the previous
generation,” Mr. Deschenes said.

“And, two, home equity has played a bigger part in their overall financial
life than for their parents, so I think reverse mortgages are definitely going
to be part of the overall solution for more boomers.”

If you go to Florida today, people who have saved well and have
defined-benefit plans aren’t too worried about outliving their money, he said.
But for the next crop of retirees, the story is different.

“The statistics have almost reversed in 30 years,” Mr. Deschenes said.

Read more of this article.  Learn more about Reverse Mortgages.

Collecting Social Security at 62 makes sense

Posted on May 6, 2007 by Jason

Cincinatti Enquirer, May 6th, 2007

Forget all the hullabaloo about baby boomers turning 60. The bigger
issue is what they’re going to do when they turn 62, which starts
happening next January.

That’s the age at which Americans can
begin collecting Social Security retirement benefits, although doing so
then, rather than waiting until they’re 66 (or more for people born
after 1954), means they’ll have to settle for smaller monthly checks
for the rest of their lives.

Figuring out which option is optimal
- taking smaller monthly benefits earlier or larger checks later -
largely depends on three things: your immediate need for cash, how much
you’re going to earn once you reach 62 and how long you’ll live.

Tim Johnson, president and chief executive of Monfort Heights-based
Johnson Investment Counsel Inc., said in most cases signing up for
early benefits is the best way to go unless you’re going to make more
than the exempted earnings limit, which is $12,960 for 2007 and adjusts
annually.

If you need the money to live on and aren’t going to
make more than that, it’s a no-brainer – take the money at age 62,
Johnson said.

On a straight cash basis – without figuring in any
interest or investment gains in the intervening years – it takes until
age 78 before the cumulative benefits reach break even for someone born
between 1943 and 1954. At that point, the total of 16 years of smaller
benefits from age 62 would equal the alternative total of 12 years of
full benefits from age 66. Beyond that point, the cumulative benefits
would be progressively greater for people who wait until age 66.

(For
people born after 1954, full-retirement age is older than 66 and the
early-retirement reduction percentage at age 62 is greater. So the
breakeven point moves a bit further out, but the calculations are much
the same. Detailed full-retirement ages and related benefits reductions
based on year of birth can be found at www.ssa.gov/retirechartred.htm.)

However,
for people who don’t need the money right away and can invest it, or
who can thereby afford to keep other funds in a tax-deferred retirement
account such as an IRA, the case for taking benefits at age 62 is even
stronger, Johnson said.

Read more of this article.

An economic boost from public pensions

Posted on May 5, 2007 by Jason

The Orange County Register, May 5th, 2007

Even though government workers cost the state money when they
retire, the money they spend from their pensions can help pump up their
local economies, according to a new study by California’s two state
public pension funds.

The study, by professors at Cal State
Sacramento, concludes that in 2006, payments to state and local
government retirees added about $10.3 billion to the gross state
product, equivalent to nearly 139,000 jobs.

In Orange County
alone, California Public Employees’ Retirement System and California
State Teachers’ Retirement System pensions boosted the local economy by
an estimated $750 million – nearly 9,990 jobs. The average retiree here
got $2,011 a month.

The pension funds commissioned the
first-of-its kind economic impact study to offset criticism that their
retiree benefits are a drain to taxpayer coffers with little public
benefit.

“We have for many years gotten calls from retirees
asking what the economic impact is of retiree benefits on the
community,” says Patricia Macht, a CalPERS spokeswoman. “This study
shows that payments add to the strength of the economy.”

The
study also calculated the breakdown in annual pension contributions by
source – investment earnings, employee contributions and employer
contributions.

Read more of this article.

Bank of America’s Reverse Mortgage Acquisition Is Well-Timed

Posted on May 3, 2007 by Jason

Banknet 360, May 3rd, 2007

Amid continued upheaval in the housing market, Bank of America Corp.’s foray into reverse mortgage lending is about the safest
bet it can make, economists said.

Last week, the Charlotte, N.C.-based
bank agreed to purchase Reverse Mortgage of America, a division of Seattle Mortgage Co., for an
undisclosed amount. When the deal closes later this quarter, the unit will
function under the masthead of BofA’s home equity group, which has remained a
frontrunner in home equity, with $90 billion in outstanding balances.

The
acquisition will make BofA [ticker: BAC] the third-largest player in reverse
mortgages, trailing Financial Freedom, a subsidiary of Pasadena, Calif.-based Indymac Bancorp Inc. [ticker: NDE], and San Francisco-based Wells Fargo and co. [ticker: WFC].

The move is what Colin McCormick, senior
vice president of BofA’s home equity pricing division, called “perfect timing.”

“We know the customers are there, and we feel like the market has
matured to a good point,” McCormick said.

BofA’s entry also comes at a
time when the precarious housing market is prompting an increasing number of
second-guesses among consumers looking to tap their home equity, said Bernard
Baumohl, managing director of Princeton, N.J.-based advisory firm Economic
Outlook Group.

Read more of this article.   Learn more about Reverse Mortgages.

Think twice before prepaying mortgage

Posted on May 2, 2007 by Jason

New York House, May 2nd, 2007

DEAR BOB: About two years ago, we refinanced our home mortgage and
obtained a 5.25 percent fixed-rate mortgage. We loved the low monthly
payments. Then, about six months ago, my wife inherited enough money to
pay off our mortgage in full, which we did. Next, I received an
excellent buy-out offer from my employer to take early retirement,
which I did. But now my former employer drastically cut my retirement
pension and eliminated health care coverage. As I am only 63 and my
wife is 57, we are not yet eligible for Medicare. I took early Social
Security, but that doesn’t help much. We are rapidly eroding our
savings, which were drawn down when we paid off our mortgage early. We
“maxed out” our home equity credit line and can barely afford the
payments. What can we do? –Richard R.

DEAR RICHARD: Your situation shows why I constantly recommend not
prepaying a mortgage in full unless you have so much money you will
never need to borrow on your home equity. Obviously, that is not your
situation.

Because you have insufficient income to qualify for a new home
mortgage, except perhaps from a “loan-to-own” mortgage shark, your only
viable alternative is a senior citizen reverse mortgage.

However, there is one little problem. Your wife is too young. To
qualify for a reverse mortgage, she would have to quitclaim her half of
the house to you.

Because you are only 63, with a long life expectancy, you won’t
qualify for much monthly lifetime reverse-mortgage income. I wish I
could be more positive, but now you know why I do not recommend
prepaying mortgages unless you have lots of spare cash.

Read more of this article.

Stay afloat financially after 55

Posted on May 1, 2007 by Jason

Worried about mortgage debt and healthcare expenses? Gerri Willis offers some
tips to ease your money pains.

CNN Money, May 1st, 2007

Americans over the age of 55 are filing for bankruptcy at a faster rate than the
larger U.S. population thanks to growing mortgage debt and higher healthcare
costs, according to a new study. Here are some strategies to avoid becoming part
of this scary statistic.

1: Consider reverse mortgages

If you own a home that you’re worried you can no longer afford, you may want
to consider a reverse mortgage. In a “regular” mortgage, you make monthly
payments to the lender.


But in a “reverse” mortgage, you receive money from the lender and generally
don’t have to pay it back for as long as you live in your home. To qualify for
most reverse mortgages, you must be at least 62 and live in your home. The
downside is that it can be expensive.

You have to pay closing costs, which could be thousands of dollars – this
generally comes out of the home’s equity – and you may not be able to pass your
home to any relatives, according to Doug Flynn of Flynn Zito Capital Management.

To figure out how much cash you could get, crunch the numbers at
www.rmaarp.com

Read more of this article

Learn more about Reverse Mortgages.  Learn more about Long Term Care Insurance.  Learn more about Relocation Assistance

Workers Shirking Retirement Savings

Posted on May 1, 2007 by Jason

INC.com, April 30th, 2007

Employees at smaller businesses are less likely than those at larger
corporations to be saving for retirement, according to a new survey by
Transamerica.

Of more than 1,400 full-time workers surveyed nationwide, just 18
percent of employees at small businesses reported saving at least
$100,000 in household retirement accounts, compared to 29 percent of
employees at larger firms.

Fewer small-business employees said they believed their
employer-sponsored plans to be a primary source of income after
retirement, while many were expecting to rely on Social Security.

“Not enough is being done to help small-business employees prepare for
a comfortable and secure retirement,” Catherine Collinson, a
market-trends expert at the Transamerica Center for Retirement Studies,
said in a statement. “Lower savings rates ultimately lead to a reliance
on the future of Social Security, which underscores the need for a
wake-up call among employers and employees alike.”

Read more of this article.

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