Kirby on Finance

Faith Groups Fight Banks on Foreclosures

With recent data stating that U.S. foreclosure filings surged 71 percent in the third quarter from a year earlier, to the highest on record, it’s clear that we have yet to hit the bottom of the nation’s housing troubles. With daily headlines letting us know that the government is bailing out another company for billions it’s easy to forget that there are REAL people out there who are, rightly or wrongly, losing their homes.

I was reading an article in Bloomberg and you might be a bit stunned as I was by a quote they included in the article:

“Every time I call them they say they can’t help,” said Flores, 31, a graphic designer and bartender in Contra Costa County, California, where one in every 146 homes is in foreclosure. “They tell you the solution is that they take Visa or MasterCard.”

What a loaded sentence! First off, Flores works two jobs, so I naturally want to root for him to be able to keep his home. But that wasn’t the real grabber in that paragraph - look at what the bank told him when he asked for help - “They tell you the solution is they take Visa or MasterCard.” Really? That’s akin to asking an alcoholic to buy each of you a shot of liquor because you bought him a shot a couple weeks ago.

Don’t flame me for getting upset at a business that is just trying to get an individual to live up to their end of the bargain. I understand the necessity of making money and I understand that from the bank’s perspective, they just want to get paid - how they get paid isn’t their concern. What does bother me is the sheer lack of concern about the greater problem that many of these banks have created.

Naturally, most problems are created through a conspiracy of mistakes and dumb decisions. There’s a good chance Flores purchased a home that he probably couldn’t afford. But, I guarantee you there were a plethora of banks willing to make him a loan that they knew he couldn’t afford to capitalize on his mistake. They did so knowing that they could easily package the loan and sell it off to investors, therefore absolving themselves of the mistake they helped Flores made.

I keep asking myself, why did the banks fail to realize that while they are citizens of their community in addition to being citizens of their corporation? I know they chiefly owe a duty to their shareholders, but what about a sense of decency to their common man? While it’s obvious we can’t expect that from them, thankfully others are willing to help:

Now Flores has a new ally: the Antioch, California-based Contra Costa Interfaith Supporting Community Organization, one of a growing number of religious and community groups pushing lenders to renegotiate troubled loans so owners can stay in their homes.

Still, more homeowners are turning to groups such as the Contra Costa organization for help in the early stages of mortgage problems, before they result in foreclosures. An affiliated group called the PICO National Network, based in Oakland, California, says it is working with hundreds of families in Contra Costa County and plans to help as many as a million homeowners nationwide.

PICO, short for People Improving Their Communities Through Organizing, is kicking off a national tour tonight in Flores’s hometown of Antioch, where 500 clergy and community leaders are due to meet with representatives from Wells Fargo & Co., Bank of America Corp. and the Federal Deposit Insurance Corp.

The group says it will then move to Kansas City and three other cities before traveling to Washington for a meeting with House Financial Services Committee Chairman Barney Frank. Washington Mutual Inc., now part of JPMorgan Chase & Co., and Wachovia Corp. are other lenders the group is trying to sway.

“It’s a local issue in terms of impact on families and communities but this needs a national response,” said Tim Lilienthal, PICO’s communications coordinator. “We need to move from a case-by-case way of doing things to a more systematic approach.”

PICO has 20 local affiliates in California. Other faith- based groups like the Gold Cross of America in Deltona, Florida, are offering assistance to homeowners as they negotiate with mortgage companies.

I’m glad there are organizations like those who are willing to help homeowners but it’s a shame that they’re even necessary.

For more information:

• PCIO National Network
• Gold Cross of America, Inc.

California Faith Groups Fight Banks on Foreclosures [Bloomberg.com]

Tags: charity, faith groups, financial crisis, foreclosures, mortgages

10 Positives About Today’s Economy

I know what you’re thinking - this economy stinks.  While you’re absolutely right, it is certainly good to remember that few things in this world are all good or all bad.  Perhaps this crappy economy follows that maxim as well.  The jolly folks over at Klippinger’s came up with 10 positives of this current economic mess.  Here’s my summary of their list:

1. It’s cheaper to fill up your car.  Remember that it’s not just the U.S. economy that’s struggling, it’s the global economy too.  “The national average for a gallon of gasoline is down to $3.00, from $4.11 in March, and should stay in the $3.00-$3.50 range through next year. Prices for home heating oil and natural gas are also headed lower this winter than last.”
2. Car makers are finally going green.  In the past, the auto industry treated fuel efficient and electric cars as more of a gimmicky concept.  Well, in today’s economy going green means business.  As the average consumer remains conscious of the price at the pump and the cash in their wallet, the auto industry knows that they’ll need to entice you with a car that will save you money at the pump.
3. Cheap Real Estate.  Every time you see a statistic about foreclosure rates being high, remember that it’s a buying opportunity for someone.  I currently do not own a home, but as a potential homeowner this market is getting very appealing. 
4. More cheap money!  While cheap money has been part of the problem in creating this crappy economy, it remains part of the positives that remain if you’re able to properly take advantage of the relatively cheap mortgage loans.
5. Increased FDIC insurance.  Recent legislation increased the limit of FDIC insurance on all of our bank accounts from $100,000 to a pretty snazzy $250,000.  So, if you’re NOT like me and have hundreds of thousands of dollars sitting in your bank account, cheers to you!
6. Cheap stocks.  If you’re able to stomach the volatile market, there are some pretty serious bargains out there.  I’ve been tempted to take advantage of a few stocks that are trading at seemingly rock-bottom prices, but I just can’t help but feel that the risk of the market going lower  has the potential to pull even the bargain stocks down alongside it. 
7. Cheap Tech.  With the slagging economy comes some great deals on items that are normally artificially marked up, like T.V.’s.  I’m not really sure this is the time to drop $1,500 on a new T.V., but if you’re able to you’ll certainly get a nice bang for you buck.
8. Farm exports are up by 40%.  You would think that the sagging economy and the recent hurricanes and tropical storms would pose a double whammy for farming, but that isn’t the case. 
9. Change brings hope.  Whomever is elected on Nov. 4th will offer an opportunity to turn the page on the past 8 years and the struggling economy too.
10. Insane Holiday Bargains.  Stores normally deeply discount products and offer enticing sales to get you into the store to spend the money that you probably don’t already have - this year will be no exception. With less people spending money the don’t have - the stores will up the ante with even deeper discounts to get you in the door.

10 Things That are Going Right [Kipplinger.com]

Tags: auto-industry, bargains, cheap, Economy, exports, FDIC, gas, holiday bargains, insurance, Real Estate, stocks

Are you stupid for paying your mortgage?

There’s a famous line out there: “Nothing is as certain as death and taxes.” I’m not sure who said it, but I’d like to ask their permission to amend the line to read: “Nothing is as certain as death, taxes, and unintended consequences.”

It seems that whenever we attempt to tackle the problems we face, either personally or as a nation, we lack the ability to really look ahead and see the natural progression of the problem, our proposed solution, and the potential collateral damage that may ultimately result from that solution. Perhaps saying we lack the “ability” to do so is a bit cynical - we lack the desire to take the time to understand the issue.

We’ve become such a reactionary society - if something sounds like a good idea at the time, well, lets just do it! You don’t have to look any further than the last eight years for confirmation of this mindset. Sadly, our nation’s solutions to the current financial crisis are no different.

The most recent idea offered is to suspend the foreclosure process and allow homeowners to rework their mortgages so that the debt they owe on the property reflects the current value of the home rather than what they paid for the property. In fact, John McCain supports such an idea:

“I would order the secretary of the Treasury to immediately buy up the bad home-loan mortgages in America and renegotiate at the new value of those homes — at the diminished values of those homes — and let people be able to make those payments and stay in their homes.”

Doesn’t sound too bad, right? Well, struggling homeowners, Peter Schiff has some advice for you:

If you are a mortgage holder who is either struggling with crushing payments, bitter for having overpaid for your home during the bubble, or who has extravagantly refinanced when prices were rising, the government’s landmark $700 billion bailout package has an important message for you: stop making your mortgage payments . . . immediately. Furthermore, if you believe that with some planning and sacrifice you may be able to meet your mortgage obligations, the government’s message is clear: relax, don’t bother.

Schiff sure sounds like he’s being cynical, but trust me he’s not. Think about the mindset that people have which causes them to live over their means and think for a second what the implications of this plan may have to those individuals.

To bolster your bargaining position it will help to be able to claim poverty. As a result, if you have any savings, spend it soon, before they call. Buy a bigger TV, a new wardrobe, or better yet, take a vacation. After the hardship of spending all of your refi cash, you probably deserve it. If you have any guilt just remember, Washington argues that consumer spending is the best way to stimulate the economy. Living beyond your means is a patriotic duty.

I don’t completely agree with Schiff’s viewpoint on McCain’s proposed plan, but I think his viewpoint does offer one truism - “Nothing is as certain as death, taxes, and unintended consequences.”

Tags: financial crisis, mortgages, public policy

McDonald’s coffee a better option than Starbucks?

Sometimes when I need a quick coffee fix on my way to class in the morning, I’ll stop by the McDonalds that’s right by my house. I usually stop there because I know that i’ll be able to get in, get my coffee, and get out. It doesn’t help that it’s fairly cheap! Little did I know, I was saving money and getting better coffee over Starbucks!

McDonald’s introduced a line of premium coffee that earned first place in this month’s Consumer Reports issue for best in coffee. The brand beat out Starbucks, Dunkin’ Donuts and Burger King (BKC, news, msgs) for both taste and value.

Now McDonald’s is branching out into espresso drinks. The fast-food chain, based in Oak Brook, Ill., has begun introducing McCafe concept restaurants in select locations in the United States with comfy couches, cappuccinos and pastries that look more like the neighborhood Starbucks than your typical Mickey D’s.

Brewing up a strong brand of coffee [MSN Money]

Tags: mcdonald's, Saving, starbucks

Identity theft losses fall - does it really matter?

It turns out that losses from identity theft fell from $55.7 billion in 2005, to $49.3 billion in 2006. This is certainly positive news in terms that society was affected less by identity theft, but when you look at the problem as a whole it’s still a staggering effect.

The average identity theft fraud fell 9 percent to $5,720 from $6,278, while the median - where half were larger and half were smaller - held steady at $750.

I guess that’s encouraging, but I find it interesting that the median loss remained the same. Part of the reason asserted for the drop is that Americans have become more vigilant in protecting their identity. I’d really like to know if the actual number of cases of identity theft have dropped, and then if so - what the demographic breakdowns were among Americans.

Identity theft losses fall to $49.3 billion [CNN Money]

Tags: cnn money, fraud, identity theft

Do the Chinese hate Starbucks more than Americans do?

Personally, I love Starbucks but in a fit of frugality I swore it off as a New Year’s resolution. It only takes a few minutes of “latte factor” computation to figure how much money you can save if you go for a home made brew over the Starbucks variety. But beyond that, many American’s can’t stand Starbucks for its Wal-Mart “mom and pop” coffee shop ending nature.
As you may already know, after saturating the American market, Starbucks has set its sights on China as its next opportunity for monster growth. This was to be easily expected, but what wasn’t expected was the large amount of backlash among the Chinese people over Starbuck’s entry into their market.

The current flap began last week, when Rui Chenggang, a well-known anchorman on Chinese state TV, posted an entry on his personal blog calling for Starbucks to be evicted from its corner of the Forbidden City. The coffee shop’s presence “tramples on Chinese culture,” he fulminated, and constitutes “an insult to Chinese civilization.”

Since that post went up, Rui’s site has registered more than half a million hits and collected thousands of messages of support for his position, the TV personality says.

It’ll be interesting to see if this is just a passing fad, or if the Chinese hatred for Starbucks will be a lasting feeling.

Chinese bloggers bash Starbucks [MSN Money]

Tags: chinese civilization, coffee shop, frugality