The Financial Impact of Death

I received a call yesterday from a good client of mine who told me his wife passed away this past weekend. While death is difficult to comprehend in any situation, it is particularly so when it happens in a matter of a month. She went from being perfectly healthy to passing away with no explanation 29 days later.

Although the emotions of losing a spouse will continue to build for years to come, he is trying to deal with the financial impact as well which is the last thing any of us would like to think about at a time like this.

However, he has no choice because there was no discussion, preparation, or expectation of this event.

While I am neither a nihilist nor a pessimist, I am a realist. It is vital that we understand our mortality and plan accordingly. There are several steps that you can take to make a devastating event like this just a bit more bearable:

• Have a Will - Have something in writing to spell out where your assets will go upon your death.
• Know Your Accounts - Have a central and secure location where account numbers and passwords are available for all bank and retirement accounts but also for credit cards, mortgage accounts, and any other debts that need to continue to be paid in the face of this extraordinary event. A safety deposit box is a great location.
• Have Life Insurance - Even if the amount is small ($50,000 or so) it will be so helpful for your partner to have some sort of financial relief during this emotional time.

There are very few events as impactful as death but with some preparation the focus can be on emotions versus finances.

All the best,

Matt Hanson

Mortgage and Financial Planner

303.300.8601

Wells Fargo Sues Itself

E.F. Schumacher said in “Small is Beautiful –Economics as if People Mattered” :
"The most striking thing about modern industry is that it requires so much and accomplishes so little. Modern industry seems to be inefficient to a degree that surpasses one's ordinary powers of imagination. Its inefficiency therefore remains unnoticed."

Wells Fargo got $25 billion (that’s Billion, with a B) in bailout money last fall. Besides using the money to buy another bank (Wachovia) it appears that they are spending the remainder on lawyers. I suppose that’s good for the lawyers, but not particularly useful for all of us non-lawyers.

You really need to read the whole story to understand why Wells Fargo would be suing itself. It’s all here in Al Lewis’s column on 7/11/09.

But this rant is not really about Wells Fargo, per se. They are simply a perfect illustration of what doesn’t work about being a big company. My experience, and I bet yours too, is that the bigger the company the poorer the customer service and the more wasteful the practices. "Too big to fail" is too big to exist.

I agree with Al Lewis, as he says in the final line of the column “I hope Wells Fargo loses this case and ends up having to drag itself all the way to the Supreme Court."


Lil Lively - Your Voice in Real Estate
Broker Associate - Your Castle Real Estate
Cell: 303-746-8827
http://www.LilLively.com
Lil@TopProducer.com

GOVERNMENT SUPPORT FOR THE MORTGAGE MARKET

There has been much confusion over what the government has done to help support the housing market and home owners. There are a variety of plans that the government has been implementing, some successful, some not. Below is a list of a few:

• Fannie Mae DU Refi Plus – This program offers higher loan to values and combined loan to values than previously allowed. If you have a second mortgage, this program works well as long as your current second lender will allow the refinance even though the equity that you have in the home is negative.

• Home Loan Modifications – With this program your current lender would change the term of your current loan, often times converting an Adjustable Rate Mortgage to a Fixed Rate Loan or lowering your rate. However, in nearly all of these modifications, you must be late on your mortgage to qualify.

• First Time Homebuyer Tax Credit – This is perhaps the most successful program. The government is giving a true tax credit for up to $8,000 to qualifying buyers and allowing them to amend their 2008 Tax return to receive it shortly after closing. You must own the home for 3 years to not have to pay the money back to the government. You must close by November 30, 2009 to be eligible.

Please do not hesitate to call if you have any questions about the individual programs.

Home Ownership Still Pays

Now is the time to buy. You don’t want to kick yourself a few years from now, saying to yourself “Back in ’09 I could have bought a house in that neighborhood for….” In the long run, home ownership beats renting for increasing your net worth.

The following is a direct reprint of Robert Freedman in June 2009 Realtor Magazine.

Many Americans have taken a hit to their home equity over the past couple of years, and some may wonder if it’s really the smartest financial decision to own a home. Good news—a recent analysis of Federal Reserve data by the NATIONAL ASSOCIATION OF REALTORS® shows the answer is yes.

In comparison with renters, home owners have much greater household wealth, says NAR’s April commentary on the Fed’s Survey of Consumer Finances. Owners’ wealth exceeds that of renters by a factor of 50-to-1: a median of $205,200 versus a median of $4,200. The main wealth difference between the two is home equity, of course. No news there. But even for households who’ve owned their home only since 2003, home equity gains are the rule rather than the exception—and in some cases, equity gains have been significant. Households who bought five years ago in Honolulu, for instance, already average nearly $272,000 in equity. In Northern California (San Francisco and Oakland), the comparable figure is $105,000.

Times are tougher for home owners in a handful of economically struggling markets like Detroit and other parts of the industrial Midwest. Households in these areas who’ve owned their home for five years or less are facing negative equity, although typically not a lot. Hardest hit are households in Detroit who have been owners only since 2003; they’re underwater by a typical $39,000. That’s significant. But in other markets where equity is negative, the numbers tend to be much smaller—$1,000 in Indianapolis, for example.

Yet the doom and gloom ends there. In all 150 markets tracked by NAR, including hard-hit markets, households who’ve owned their home for 10, 15, and 20 years have uniformly enjoyed strong equity gains despite the recent downturn.

The data clearly show that homeownership remains the biggest store of wealth for the typical household, even when markets are buffeted by some admittedly very rocky years.

Lil Lively - Your Voice in Real Estate
Broker Associate - Your Castle Real Estate
Cell: 303-746-8827

Lil@TopProducer.com

Apes, Art and Dogs

I watched Ape Genius on PBS the other night. Fascinating how much like apes we are, or maybe it is vice versa. Much of the data on the program was research I was familiar with, probably from the Discovery Channel, (hooray for intelligent television) but there was one point that struck me newly.

Human children begin at a very early age to point. We use a finger to indicate a direction to another with the expectation that the other will look in that direction. And the expectation is fulfilled. To point is to communicate, clearly, “look at that!”

Apes pay no attention to pointing. You can point till the cows come home and the ape will not look in that direction, unless by accident. They’ll look at your finger, maybe.

I am intrigued with this. I point, you look. But you don’t look at my finger, you look where I am pointing. Isn’t that what art is? I draw on the cave wall, you look, but you don’t see charcoal marks on the wall, you see animals, the hunt.
I get all lofty with this, and then recall that the other animal that looks where I point is a dog. I’m not thinking that dogs are artistic. I’m thinking that the ability to articulate “look at that!” without words was a survival skill that canines and humans naturally selected for; it made hunting in groups effective.

So, there you go, just wanted to point that out.



Lil Lively - Your Voice in Real Estate
Broker Associate - Your Castle Real Estate
Cell: 303-746-8827 Fax:303-265-9318
http://www.LilLively.com
Lil@TopProducer.com
LilLively@Gmail.com

How Mortgage Interest Rates Work

Today I had a client ask me a simple question but one that I surprisingly do not hear very often:

How do mortgage interest rates work?

My answer was not quite as simple but I thought I would share it. Basically, interest rates move based on the perceived threat of inflation. In a sense, they are based on how the country's economy is faring. If the economy is doing well there is a greater risk for inflation which pushes long term interest rates higher. Conversely, if the economy is performing poorly then in general the greater risk is for deflation which causes interest rates to move lower in an effort to stimulate the economy.

Inflation is defined as a rise in the general level of prices of goods and services in an economy over a period of time. The more the cost everything rises, the greater the need for higher interest rates to increase the cost of money.

As I said, the answer is not as simple as the question but I hope it creates a sense of understanding of interest rates.

Matt Hanson
Mortgage Planner
Founder
Thriving Artist Alliance

Warren Tech- Culinary Arts in Lakewood

In May a friend of mine invited me to have lunch with her at Warren Tech. Her son is in the Culinary Arts program and once a month they provide an amazing gourmet lunch, all you can eat, for $13. The food was exquisite, the students proudly served their finest creations. Trout, lamb, buffalo, and then, my favorite, banana cream cake. I thought I had died and gone to heaven !
Check out the program here. http://sc.jeffco.k12.co.us/education/staff/staff.php?sectionid=12999 I did a bit of a tour of the campus and I was blown away! They also offer training in Graphic Design, TV & Video production and much more. Who knew? I’ve lived in Lakewood for 10 years and didn’t have a clue. Perhaps I’ll go there myself and take classes. We should all be pleased and proud that our Jefferson County School tax dollars are being spent on campuses such as these.

Lil Lively
Broker Associate - Your Castle Real Estate
Cell: 303-746-8827 Fax:303-265-9318
http://www.LilLively.com
Lil@TopProducer.com
LilLively@Gmail.com