Thursday, March 6

Reviewed- Kiplingers new Car Buyers Guide

Kiplinger just announced its new Car Buyers Guide, so I thought I'd spend a few minutes checking out the site. Here is what I found-

User Friendliness-

On a scale of 1-10, 10 being the most user friendly, I'd rate this site a 10. I was able to quickly and easly find out MPG and invoice information on each vehicle that I researched. Very easy to navigate.

Usefulness of Information-

Excellent information is provided on each model that was researched. From saftey equipment and ratings, to base invoice price, tons of easily accessable information!

Site Design-

Although it is a little busy, it is nicely laid out and easy to navigate. It didn't take me long to adjust to all of the infomation and to find what I was looking for.


Tons of information for the car shopper. From new car invoice pricing to used car information, this site appears to have it all! I especially liked the ability to 'spec out' the car of my choice so that I could (1) see how much money it would be, and (2) see what options were available.

Great content, lots of information for the car shopper. If you're looking for information to arm yourself with before shopping, I'd highly recommend visiting the Kiplinger Car Buyers Guide

Click Here for the Press Release

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Wednesday, March 5

This Remedy is as bad as the problem!

This remedy is about as bad as the problem!
Bernancke suggests banks write off loan principal to save foreclosure

During a speech yesterday at the annual convention of Independent Community Bankers in Orlando, Florida, Chm. Bernancke gave a speech about 'Reducing Preventable Mortgage Foreclosures'. He mentioned that over the past year and a half, delinquency rates on riskier mortgage loans have steadily climbed.

"... weak underwriting might not have produced widespread payment problems had house prices continued to rise at the rapid pace seen earlier in the decade. Rising prices provided leveraged borrowers with significant increases in home equity and, consequently, with greater financial flexibility. Instead, as you know, house prices are now falling in many parts of the country. The resulting decline in equity reduces both the ability and the financial incentive of stressed borrowers to remain in their homes. Indeed, historically, borrowers with little or no equity have been substantially more likely than others to fall behind in their payments. The large number of outstanding mortgages with negative amortization features may exacerbate this problem."

The banker\lenders job is to measure risk, mitigate risk, and recirculate the money. One factor used to mitigate risk is limiting loan to value (LTV). In a real estate market that for years did nothing but climb and climb, it may have become easy for the banker\lender to exercise more flexibility when it came to LTV, assuming that the housing market would not crash.

One of the work out strategies that the Chairman discussed was refinancing the delinquent mortgage. He recognized that in many cases this is not possible. Two major challenges to refinancing are (1) tightening credit standards, and, (2) LTV Limitations.

"In cases where refinancing is not possible, the next-best solution may often be some type of loss-mitigation arrangement between the lender and the distressed borrower. Indeed, the Federal Reserve and other regulators have issued guidance urging lenders and servicers to pursue such arrangements as an alternative to foreclosure when feasible and prudent. For the lender or servicer, working out a loan makes economic sense if the net present value (NPV) of the payments under a loss-mitigation strategy exceeds the NPV of payments that would be received in foreclosure. Loss mitigation is made more attractive by the fact that foreclosure costs are often substantial. Historically, the foreclosure process has usually taken from a few months up to a year and a half, depending on state law and whether the borrower files for bankruptcy. The losses to the lender include the missed mortgage payments during that period, taxes, legal and administrative fees, real estate owned (REO) sales commissions, and maintenance expenses. Additional losses arise from the reduction in value associated with repossessed properties, particularly if they are unoccupied for some period."

Mr. Bernancke further discussed the Hope Now project, where lenders have modified loan terms and reduced interest rates to make payments more affordable. But, he explained, this isn't really happening.

What he suggested as a remedy would further poison our economic recovery. Yes, it would stave off foreclosure, but how will it motivate those who aren't willing to or otherwise cannot make the payments, whether out of poor financial skills or lack of income? Moreover,it would wreak further havoc on Wall Street.

In order to cut losses, Chm. Bernancke suggests that banks write off the amount of the loan that is 'unsecured'; the balance of the loan that exceeds the property value.

If banks were to subscribe to this kind of thinking, how would investors react? How many more billions of dollars in losses would this amount to? How would this pan out?

First, housing values would further deteriorate, credit would become even harder to come by. Credit standards would be even more stringent, and interest rates and fees would skyrocket in an effort to immediately recover these losses.

I understand the 'why' behind Chm. Bernanckes suggestion, but I'm not clear on how it could possibly make a bad situation any better. I see it as another blow to our economy should it ever happen.

Read the transcript of the entire speech here

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Tuesday, March 4

Should you take your $$$ and run?

During recent testimony, Chairman Bernanke predicted that there could be a rise in the failure rate of small banks. This comes because many of these small banks may have invested in areas where prices have fallen dramatically and are suffering losses associated with the subprime mortgage fiasco. What happens to the money that you have on deposit in these banks if they go belly up?

Federal Deposit Insurance Corporation

The FDIC protects your deposits up to certain limits should the bank fail. So, you don't need to rush out and withdraw you money from these small banks. However, you need to make sure that your deposit accounts are appropriately structured and that the bank IS in fact insured.

Not all banks are insured by the FDIC
Look for this logo to be sure that your bank is insured:

Types of deposits that are insured by the FDIC are; checking accounts, savings accounts, trusts, CD's, and, IRA's. Note that the maximum insured balance per account is $100,000 (Federal Law provides up to $250,000 coverage for certain IRA's). So, if you have a savings account with $137,000, only $100,000 of it is insured, the remaining balance is at risk.

How do you protect the entire amount? This from the FDIC Publication Your Insured Deposits "Deposits maintained in different categories of legal ownership at the same bank can be separately insured. Therefore, it is possible to have deposits of more than $100,000 at one insured bank and still be fully insured."

There are eight ownership categories recognized by the FDIC which have certain requirements that will allow you to insure more than $100,000. Click on each for more information.

* Single Accounts
* Certain Retirement Accounts
* Joint Accounts
* Revocable Trust Accounts
* Irrevocable Trust Accounts
* Employee Benefit Plan Accounts
* Corporation/Partnership/Unincorporated Association Accounts
* Government Accounts

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Monday, March 3

Don't make a bad debt collector out of a good one!

Just like good customer service and poor customer service, you have good and bad debt collectors. The good ones will work with you in order to get the debt paid. The bad ones on the other hand, they'll become abusive and break the law in order to get paid.

Speaking as an experienced debt collector (a good one!), nobody likes to be tricked or lied to, especially someone who is looking for ways to help you through a hard time. If you say that you're going to do something, then do it. Or, if something happens that makes it so you can't do what you say you're going to, then let the debt collector know.

"Most people are not aware of their rights.
And unfortunately debt collectors take advantage of that fact,"

Don't tell a lie just to get the debt collector off the phone. The debt isn't going to go away and neither is the debt collector. It is time to come to terms with the debt, own up to it, and deal with it.

What if you're one of the unfortunate ones that get a bad debt collector who is nasty, abusive, and, doesn't care about the Fair Debt Collection Practices Act? First, know your rights! You need to know what the debt collector can and cannot say and do. Knowing your rights is your primary defense against unfair debt collection practices.

This article called "Rogue Debt Collectors--How to Fight Them" by Jen Haley, explains some of your rights and shares some ideas on ways of dealing with the rogue debt collector.

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