Your Money Matters More

Mortgage Refinancing - Be Cautious

As mortgages hit new lows, people are left wondering whether they can refinance their homes.  Those who have seen their home values plummet to where the mortgage is 80% to 100% of the home’s value, most likely don’t have enough equity to refinance their home.  Under current government controlled giants Freddie Mac or Fannie Mae, President Obama has announced a $275 billion plan that would allow you to refinance your debt with the help of the government.  Thirty-year fixed rates are averaging just under 5%, with fifteen-year fixed rates down to almost 4.5%.  It’s worth exploring. However ……………

 A few things to remember when refinancing:

 

·        If you have recently refinanced, remember that you can write off any points that you paid at the time you did this.

 

·        You don’t want to pay a lot of points which brings up your average borrowing cost, or refinance too close together.  Nevertheless, you might want to explore this refinancing arrangement.

Transparency Needed - The Real Value of Taxpayer Bail-Out Funds

I listened to an interview the other day with Elizabeth Warren, Chair of the Congressional Oversight Panel (COP)* and a professor at Harvard Law School.  Ms. Warren discussed the value of TARP funds that were given to banks recently.  To date, $254 billion has been spent in the Troubled Asset Relief Program (TARP), and in turn the taxpayers received paper worth a comparable amount, according to former Secretary of the Treasury Henry Paulson.  After the Panel made an inquiry, they received a letter to that effect from Secretary Paulson.  It could have stopped there.  But given the inquisitive nature of academics, they decided to put together a team to do further investigation.

Crunching the Numbers

The Panel learned that at the time of the exchange, the taxpayers were getting about 66 cents on the dollar, translated to the $254 billion, means they had lost about $78 billion at the time of transfer.  Not to mention the fact since that time, the banks have declined in value.  Arguably these transactions have also declined.

At this rate, we are not apt to get back even close to two-thirds of our investment that we started with.  President Obama spoke of transparency and if the complexity of the issue is such that it takes a team of academics to figure out the value of these issues and I, as a financial professional, cannot accurately project the value, then how is the lay person going to do this even with transparency?  

 

Let's Get Down to Basics

We don’t need derivatives, and we need to get back to basics.  What we need is more simplicity and fewer derivatives.  Maybe I just live in the past, but it was a much simpler past. 

Let’s get back to basics.

 

*check out the website for COP:  www.cop.senate.gov