Hail To The Banks...

...well not all Banks.

First, I would like to congratulate Citi Bank for turning a profitable first couple months of 2009. Now I hope they will be able to do as the following banks are planning to do, which is to pay back the government and get back to running their bank the way they intended.

The New York Times is reporting that:
"As public outrage swells over the rapidly growing cost of bailing out financial institutions, the Obama administration and lawmakers are attaching more and more strings to rescue funds.

The conditions are necessary to prevent Wall Street executives from paying lavish bonuses and buying corporate jets, some experts say, but others say the conditions go beyond protecting taxpayers and border on social engineering.

Some bankers say the conditions have become so onerous that they want to return the bailout money. The list includes small banks like the TCF Financial Corporation of Wayzata, Minn., and Iberia Bank of Lafayette, La., as well as giants like Goldman Sachs and Wells Fargo.

They say they plan to return the money as quickly as possible or as soon as regulators set up a process to accept the refunds. On Tuesday, Signature Bank of New York announced that because of new executive pay restrictions in the economic stimulus package, it notified the Treasury that it intended to return the $120 million it had received from the government only three months ago."

Another bank mentioned in the article was Johnson Bank of Racine, WI.

I would like to applaud these banks for boldly standing firm in this economic downturn and recognizing the opportunities for them to succeed if they are not restrained by the government.

There is at least one bank on this list that is local to me. I pledge that if that bank gives back all taxpayer money, thus cutting the strings imposed by the government, I will express my vote as a consumer by opening an account. I encourage you to take note of these banks and keep an eye on the news. When you see a bank in your area that has given back taxpayer money to the Treasury, support them with either your voice and/or your dollars.

Matt Kemper
YourCreditCompany.com

Power to the Consumer!

Sorry about the gap between posting all!

Lately I've been thinking about the consumer. There is a lot of commentary about bubbles these days. The Savings and Loan Bubble, The .com Bubble, and most recently the hosing bubble. Wild fluctuations over several years of expanding and contracting economies. My brain has really been working on the relation with these bubbles, and the consumer. Can a balance exist? Certainly balance can be achieved, but who's responsibility is it to create that balance, and to what extent?

There are those out there that will shout very loudly that the business community in general, and Wall Street specifically, caused this deepening recession. Governments are another choice to create balance. Obviously right now our government is throwing everything, including the kitchen sink, at the economy hoping it will improve. However, let me introduce you to a third choice. This group rises above the other two. The other two choices are ultimately dependent upon this group. Look into the glare of your monitor. The group is you.

Can you comprehend the amazing responsibility you have as a consumer? You, as a part of the consumer collective, decide what products reamain in the market. If you don't like a company, certainly you can sell your interest in that company, maybe even get others to sell too! Government might be more tricky, especially here in the United States. You do have voice and a vote, but not on everything. The United States is a "representative democracy". You get a say in who represents you, but after that the best you can do is remind them who and what they represent. Not to worry though, he/she will be back in a couple years asking for your support again, and you will have the responsibility again.

The consumer vote must remain strong. The strength of that vote is threatened by misuse of personal credit. Personal credit has marginalized many consumers, and will continue to as long as consumers use it irresponsibly. Consumers should work toward a minimizing their personal debt and create responsible habits when using personal credit. Personal credit allows a single consumer to become the equivalent of 3/8 of a vote or less, and barring and misrepresentation, the consumer did it to his/her self.

In this difficult economy it is more important than ever that the consumers recognize their role and responsibility. Every dollar that is spent, or invested, or saved is an affirmative vote. Power to the Consumer!

Matt Kemper
www.YourCreditCompany.com

Barrack Obama says "Yes" again. A Quick Fix for a Large Problem.

Our President, Barrack Obama has said “Yes” again. Our Senators have also come aboard to implement this new program. (I will not mention the amount of ear marks that where applied. I cannot imagine a Senator voting on something just to serve their best interest. A whole other Blog in itself.) Now the question is…"Will the banks come aboard?”
The survey that was taken says that only forty percent of the American people believe there should even be a bailout for irresponsible homeowners. Hardship or not! Nevertheless, let us move past that, and get to the point. The President has implemented a plan, a bail out. This is not just to give them a bailout, but it also include incentives for…paying your bills on time. This does not only apply to the consumer paying their bill, but the banking institution that is receiving it. WOW…an incentive to do the responsible thing!
I understand that there are things in life that happen that one has no control over, like loss of a job. The irony here is that this plan will not apply to these individuals. Their payments need to be paid up-to-date. The housing ratio cannot exceed 38% percent of their budget. The goal is to get it to 31%. This can be achieved by, lowering interest rates, extending the term of the loan (Obviously beneficial to the bank. They will make more interest), or giving a principal reduction. To the banks discretion of course. I have not decided if one should be rewarded for doing what they are suppose to. I will get back to you on this. As a parent, I never rewarded my son for doing the responsible thing. He suffered his own consequences when he did not. The obvious answer for all of us.
Back to the guidelines, I am getting there. The loans have to show proof of income i.e. tax returns, form 4506, two most recent pay stubs. If the borrower is self-employed, their income needs to be verified by a third party. (Such as a letter form an attorney or accountant.) It needs to be a primary resident, one to four units. This will not be done for any investment properties. The borrower needs to show an appropriate amount of liquid assets as well. These all seem like logical guidelines. The government has allowed the loans to be underwritten with three different systems. These are electronic. In the guideline, it says that the consumer has to have a certain confidence score. Who knows how that is being affected? Just as I wrote the other day…the FICO scores are adversely being affected by even ones credit card habits. This was no fault of the consumer that these companies implanted different rules themselves, lowering ones limits. Therefore, we will see how this will contribute to a modification or refinance under this program.
Last and certainly not least, the consumer has to show hardship. This seems simple enough. Between the price of groceries and the stock market and the down turn. However, those circumstances will not apply. It needs to be divorce, payment shock of an adjustable rate mortgage, or other types of payments adjusting, such as one’s credit card.
These loans are controlled and serviced by Freddie Mac and Fannie Mae. Government controlled and insured loan services. If they are not Fannie or Freddie loans, these conditions for a modification will not applied. Again, the advantage of a modification is that there are NO closing costs. There will be exceptions for the loan to value. There is a new formula that will be applied and it is not necessary to have 20% equity in order to acquire this transaction. In a refinance, one still will have to have this wiggle room.
One very important fact about this program is that the interest rate will be reduced, but not necessarily for the whole life of the loan. The rate can adjust, and will be reevaluated in a five-year period. I question this? Our new hope will either be re-elected or no longer dealing with this band aid that then has to be torn off , hopefully, in a recovered economy.
http://Yourcreditcompany.com
Renee Fogle

Homeowner Affordability Plan Is Out!

The Obama Administration and U.S. Treasury released more details on the Homeowners Affordability Plan today. The plan is meant to assist responsible homeowners that are in danger of entering foreclosure or going "under water" by lowering their monthly payments.

YourCreditCompany.com is dissecting the plan and will bring you specific details on plan, which goes into effect immediately. You can find the plan here, and read it for yourself to determine if you qualify or how it might affect your business.

We highly reccomend reading the text. Thus far the television coverage has just scratched the surface of what the plan entails. We can tell you that there are requirments that homeowners will have to meet. Homeowners will have to provide some documentation and will have to show hardship. The lender/servicer that carries your mortgage will also have to participate in the program, however if your home is serviced by Fannie Mae, Freddie Mac, or certain banks that took TARP funds will be required to participate in the plan.

Look for more details tomorrow!

Matt Kemper
YourCreditCompany.com
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Credit Card Crunch

This morning on GMA Elisabeth Leamy met a couple who is directly affected by the ripple affect of the changes that the credit card companies are making. http://abcnews.go.com/gma Banks are now lowering consumer’s credit card lines. This in turn is causing credit scores to be lowered.

What does this mean to the average consumer? Their FICO scores are lowering and it is costing the consumer by paying more in interest on all their other loans. This can include car loans, mortgages, and personal loans. These consumers can no longer even consider refinancing, because based on their credit score; they will then receive a higher mortgage rate of interest.

Most of these companies are doing this with a computer-generated piece of software. It can blanket a large part of this market. These cases are not looked at on a case-by-case basis. When the consumer’s credit card limits are cut, it will then increase the ratio (the amount that they have already put on the card). The consumer does have a responsibility. They have signed a contractual agreement when borrowing these funds. Have they read the fine print before that have spent this money? Are people being forced into using these cards as an instant fix in a financial crunch such as loosing their jobs?

Chris Dodd-chairman of the Senate Committee on Banking, Housing, and Urban Affairs has proposed the Credit Card Accountabilty, Responsibilty and Disclosure Act. This is to insure against predatory practices. This Act is to protect the consumer by “bringing an end” to unfair practices and strengthening consumer’s financial security. It is outlined below: Protect consumers from “any time, any reason” interest rate increases and account changes; Prohibit unfair application of card payments; Protect cardholders who pay on time; Limit fees and penalties; Ensure that cardholders are informed of the terms of their account; and Protect young consumers from credit card solicitations.
My question being…when and how and why not now?

Renee Fogle
YourCreditCompany.com