California Governor Arnold Schwarzenegger, more or less fondly known as The Governator, signed seven mortgage finance-related bills into state law this past Monday. These laws are designed to cut down on fraudulent mortgage practices.
Senate Bill (SB) 36: regulates the licensing requirements for residential loan originators in compliance with the federal Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act.
SB 237: requires appraisal management companies (AMCs) and appraisers register with the Office of Real Estate Appraisers and subjects appraisers to the provisions of the Real Estate Appraisers’ Licensing and Certification Law.
SB 239: raises the crime of mortgage fraud from a misdemeanor to a felony and makes it easier for prosecutors to obtain fraudulent loan documents to investigate cases.
Assembly Bill (AB) 260: places restrictions on subprime loans and prohibits originators from “steering” borrowers, or encouraging borrowers to buy riskier loan products when they are eligible for affordable products. It also gives state regulatory agencies the authority to suspend or revoke the licenses of real estate lenders and mortgage brokers that violate the state’s lending laws.
AB 329: sets guidelines for reverse mortgages originated for elderly borrowers — those over 65 years old — requiring specific disclosures and offering counseling service referrals. Originators are also prohibited from selling other financial products to a reverse mortgage borrower.
AB 957: gives the buyers of foreclosed property the right to choose local escrow officers to complete transactions. It prohibits the seller of a residential property from requiring the buyer to use an escrow service company or purchase title insurance chosen by the seller.
AB 1160: requires originators to provide borrowers with a mortgage summary document translated in the language the contract was verbally negotiated.
A report released today by the Hispanic Institute think-tank and the Americans for Secure Retirement (ASR) coalition finds that most Hispanic Americans are lacking proper retirement preparation. Because two-thirds of Hispanic Americans are employed in the service-related field, a field that usually does not offer employer-sponsored retirement plans; they are not adequately prepared for retirement. Furthermore, Hispanic Americans appear to have on average insufficient financial literacy and lower levels of personal savings. This lack of financial literacy, as I have alluded to in the post entitled The Retirement Planning Divide, could certainly be based on linguistic barriers, as Spanish does not contain some vocabulary imperative to retirement planning. What is clear from the report is that Hispanic Americans must consider many retirement vehicles to supplement Social Security and make up for the fact that they might not have access to employer plans. A lifetime annuity is such a product that could build retirement savings as well as offer a secure guaranteed income.
Here are some noteworthy findings from the report:
– Only 41 percent of Hispanic workers say they have saved money for retirement.
– Only 25.6 percent of Hispanics are covered by employer-sponsored retirement plans, compared to 42.5 percent of whites and 40 percent of
African-Americans.
– Of the Hispanics receiving Social Security benefits, almost 80 percent rely on these benefits for at least 50 percent of their retirement
earnings.
– Among people 65 and older receiving Social Security, on average Hispanics receive about $2,124 less in earnings than non-Hispanics.
– Between 1979 and 1999, middle-class Hispanics households increased nearly 80 percent. In the same period, the group of Hispanic households earnings between $40,000 to $140,000 grew to include about one-third of the total Hispanic households nationwide.
Peter Graves returns to television, where he gained his initial fame playing Jim Phelps in Mission Impossible, as an AAG spokesperson for reverse mortgages. These commercials, which will begin airing October 12, will highlight the benefits of reverse mortgages for seniors.
With 401k automatic enrollment gaining increased popularity in the past year, it appears not only are more employees increasing their retirement savings but also increasing U.S. savings by as much as $8 billion a year, according to the Retirement Security Project, an advocacy group partnered with Georgetown University and the Brookings Institute. Automatic enrollment allows employers to provide a 401k plan as a default; an employee must “opt out” of a 401k plan if they (foolishly) decide not to take part in it. According to the aforementioned organization, automatic enrollment could boost 401k contribution rates from 75% of eligible employees to as much as 95%. These stats are sure signs that 401k plans are getting spread across the board, but according to the Profit Sharing Council of America’s President David Wray, automatic enrollment “will be standard practice but not universal.” For example, large employers like Starbucks and FedEx have suspended their employee matches, but despite this fact it appears that 99% of employees have kept their 401k plans. To supplement the fact that more employees are signing up for a 401k plan, a recent Watson Wyatt study shows that 82.7% of eligible employees have balances in their 401k plans, up from 81.9% in 2007.
With the 10% reduction in principal limits on a federally insured reverse mortgage scheduled for tomorrow, October 1, it appears that lenders are getting swamped by last minute borrowers who want the most money for their reverse mortgage. The industry is trying its best to fill demand, but despite this fact it’s obvious that many seniors will not be able to meet the deadline. Leave a comment on reversemortgagedaily.com, and someone will contact you to let you know if you still have time.
According to Reversemortgagedaily.com, Genworth Financial Home Equity Association has just announced the debut of a fixed rate reverse mortgage product which will purportedly have a competitive interest rate of 5.625%. This low interest rate provides enhanced security for the reverse mortgage borrower. However, as with all financial products, make sure to weigh the pros and cons, so you can make an informed decision.
On August 27, I made a blog post about a retirement savings and college savings study. The study stated that 1/3 of people are saving for both equally, a third are saving for one over the other, and a third are not saving enough for either, and it provided no detail as to which option was the most prudents. Well, according to a recent ABC news article, saving for retirement should be your first priority. This article states that a 401k trumps a 529 college savings plan anyday, and also shows that people who are saving for their retirement early will be able to either pay for their children’s college down the road or be able to take on a tad of debt themselves.
A recent milestone analysis of three million employees’ 401k plans in 57 top corporations conducted by Hewitt Associates and the non-profit educational foundation Ariel Investments shows that there are significant discrepancies in retirement planning and saving amongst different ethnic groups. The study shows that just 65 percent of Hispanic workers participate in their company’s 401(k), while 66 percent of African-American employees, 76 percent of Asians and 77 percent of whites enroll. Among them, Latinos contribute 6.3 percent of their income, whites 7.9 percent, Asians 9.4 percent and blacks only 6 percent. This study while at its façade displays how different races plan for retirement differently, underlines how there are many ethnic, social, cultural, economic, and linguistic barriers to receiving retirement information, planning, and saving properly for retirement.
Retirement Revolution, a new series that looks at the stories of everyday people who have found ways not only to survive but thrive in this new retirement reality, premieres on PBS tonight. Our advisor Henry “Bud” Hebeler of Ask Bud fame has an interview on how to have a successful retirement in these tough times with such answers to questions like, Should savings patterns change during inflationary times?. Check out a part of his interview here.
