Flood Insurance for Your Home
FEMA has gotten a fair amount of criticism after Katrina and after reading their “Myths-and-Facts” regarding that whole mess, I am still not wholly convinced that FEMA was/is really on the ball as far as disaster relief. Having said that, however, there is a fair amount of other information that they present that might be of use.
If you have been affected by the recent floods in the Midwest and you are insured, file your claim now!! Call toll free: 1-888-379-9531
A common misconception that home owners have is that their home insurance includes flooding. It almost always does not come along with the inherent insurance plan. You need to get it extra and on your own. “But wait,” your saying to yourself, “I don’t need that!” You might need to think again…
According to Floodsmart.gov, 25% of flood insurance claims come from low-to-moderate risk areas. We can assume that the rest come from high risk…durr. Being sure you are covered is important even if you think there is no way you think you could be adversely affected by a flood. If a flood happens, and your not covered…then thats it for you. Its doubtful your bank is going to say “Oh hey, No that’s OK! We’ll figure something out, lets forget about the whole thing!” Not gonna happen. But even if you live in the desert, on top of a mountain…you could still be affected: What about when you go away for the weekend and somehow a pipe bursts and just runs non-stop for 3 days straight? Your going to want to be protected against that.
Assess Your Risks
Everyone lives in a flood zone. Flood zones indicate areas of low, moderate and high risk. In low- and moderate-risk zones flooding can still occur. The risk is reduced but not removed. Find out what your flood risk is.
What Would Flooding Cost Me?
Take a look at this interactive tool to see the real costs of flooding. The dollar amounts are hypothetical, based on varying levels of flood damage to the main floor of a fictional 900 square-foot ranch-style home. Replacement, repair and labor costs will vary by state, home and market timing. Still a useful tool though, those costs add up quick!!
Premium Directory
Your policy’s premium will be based on a number of factors, including your risk level and the amount of coverage you want. Take a look at the “One Step Flood Risk Profile” on the left first, then look at the policies.
Frequently Asked Questions
Check this resource as well if you are at a loss for answers and haven’t gotten to the calling point yet. Let us know if there is anything we can do to help.
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You Deserve a Luxurious Vacation…Let Me Finance It For You
Today, I receive an email from CitiFinancial. This isn’t rare, being they send email to current and past customers at an annoying frequency. As you can tell from the text of the email (pasted below), Citi is offering a loan in order to finance a vacation. We all know financing a vacation is a horrible idea, but what struck me about their offer is how they worded it and how easy the loan is to obtain.
“A personal loan from CitiFinancial will help you pay for your time off without departing from your budget.” First, if you need to finance your vacation, your vacation is not in your budget. A vacation that is on credit is like a car that takes $4/gallon gas to run. In other words, every purchase that is made requires additional money to enjoy. Every cocktail has an additional cost, coming in the form of the APR on your vacation loan. Depending on how long it takes to pay off the loan, the interest on your cocktail could actually acquire interest – talk about a long hangover.
The other troubling part of this email from Citi, is the relative ease of acquiring credit. “Apply now and you could pick up your check at one of nearly 2,100 local neighborhood branches tomorrow!” Or “Less than perfect credit? No problem.” It is no wonder our nation is in the economic shape it is in today. People owe so much to so many different entities, there is not enough money for the basics, like a home mortgage. It is easy to blame the Financial Institutions for pushing bad lending products down our throat, like Citi has done here. It is just as easy to blame the irresponsible consumers for taking on credit they could not afford. More importantly, we need to start shielding ourselves from these tempting ads and start saving again. If you are paying interest and not making it, you will never have money. $
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Financial Cartoons to Share
Gleaned from around the web, feel free to share these…
Enjoy and be sure to share!
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Pay Off Your Mortgage By Age 65
Being a recent first time home-buyer, my final mortgage payment is comical to think about. And this is exactly why many people don’t think about actually paying off their mortgages, ever. The Washington Post recently reported that, “more than 55 percent of boomers who have mortgages do not plan to pay their mortgages off until their 70s, if ever.” I always just assumed that by the time I reached retirement, I would own my place. But this figure really sheds negative light on the idea of upgrading homes.
Its typical now for homeowners to upgrade their homes by taking their earned equity and trading it up for a bigger better place (although the likelihood of this in the near future is not as good.) Arguably, this trend of trading up is a bad idea in more way than one. For example, the seller has to shell out closing costs to buy a new home; pay roughly 5 percent of their previous homes value to a realtor in commissions; furnish a bigger home; insure a bigger home; and likely face higher property taxes.
Trading up, especially at older ages, forces many to pay mortgages well into their retirement years. Is this something we should try to avoid? I think it is. Although you can argue that the tax benefits of owning a home allows you to pay less to the IRS each year, which could ultimately free up some cash for other investments. The reality, in my opinion, is any money freed up is being spent usually everywhere but on investments. Facing a mortgage in retirement is a great way to run out of money later on. Regardless of how the market is, a monthly payment is due. In bad market years, a lot of your retirement income principal is being spent to cover your mortgage, which is only suppose to happen later in retirement.
Overall, I think setting a goal of paying off your mortgage by the age of 65 is more than reasonable. If this means downsizing your living quarters after retirement, I think it may be worth the lifestyle change. The idea of outliving your mortgage scares me and I’m troubled to learn that so many baby-boomers are facing that prospect. $
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Spend $100 on Dockers Apparel and Receive a $75 Gas Card
It’s Father’s Day weekend and I’m sure many of you will be out looking for the perfect gift for the old man. If your greedy and want to get a little something for yourself, then consider this offer from Sears. Good through tomorrow, spend $100 on Dockers apparel and receive a $75 shell gas card. I’m not sure if you have shopped at sears, but $100 in Dockers clothes goes a long ways. Get a few things you need for work and get your dad the same, then reap in the gas savings. After all, you’re going to spend the gas money anyways.
Happy Fathers Day! $
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Make Summer Activities Affordable
This post is the latest in the Summer Savings Series by the Money Life Network. Check out the details for the contest here.
Living frugally definitely has its challenges in the summer. With the nice weather comes expensive outdoor activities like concerts, golfing, and drive in movies (yes, they still exist). You don’t have to stop taking part in these in order to stay within your summer budget, rather with a little planning, you’ll find many, if not all the things you enjoy doing in the summer are affordable. Here are three examples of what I enjoy doing in the summer that seem expensive but can be made affordable:
Golfing
You either hate it or love it and for those that love it actually hate it. Golf is one of those sports that for the time it takes to play, is a great value. However, depending on where you live and your taste for courses, can be extremely expensive. One great way to save on golf is to pick a course you enjoy playing but isn’t outrageous in price and buy a membership at the beginning of the year. If you’re going to play a lot, memberships can save you hundreds of dollars over a summer, and help you feel less guilty for playing all the time as well.
After peak hour golfing is another great way to save. Most courses will offer reduced priced rounds after a certain time. Some courses twilight prices start around 4-6pm. Take advantage of the milder conditions at night and save a few bucks at the same time. Don’t forget to take your own beverages onto the course.
Baseball Games
If you are lucky enough to live close to a city that has a MLB team, baseball is a great way to enjoy the nice summer days while not busting your budget. I know what you are thinking, baseball beers are $8 and tickets are $30. Both are true, but many people ignore the $5-8 seats. These seats can usually be purchased the day of the game and at the box office, which allows you to bypass paying the outrageous Ticketmaster fees. It is also worth checking if your city has one of the affiliated minor league teams. These games are much cheaper to attend and are surprisingly fun.
Fishing
To fish in most states for the entire summer cost around $30 and assuming you already own the fishing gear makes fishing a great summer bargain. Take a cooler with to save on food and drinks and catch your supper – another great reason to fish! $
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Prosper.com Concerns
Prosper.com has some interesting notions to it that make it unique in the borrowing/lending market. If you have some extra money, you can lend it out and make a return (hopefully) or if your credit is bad, you can get a loan for a badly needed loan that you might not get otherwise, due to your credit lacking in…oh, I don’t know, lets say, “solid numbers.”
In light of the fact that this site is predicting its imminent demise (due to factors not yet discussed), we found a Yahoo-er who has some interesting things to say, complete with spelling errors and all. (Read original here.)
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I have been a lender on Prosper.com since March 2007, with about $2,400 invested. Although my projected ROI is currently about 10%, I stopped lending in October for a variety of reasons all linked to Prosper’s management. Basically, the best way to summarize Prosper is that it is a wonderful concept, executed horribly due to the incompetence and arrogance of management.
There are too many serious problems with Prosper to list here, but brief review of www.prospers.org, which is the largest Prosper forums, will provide anyone interested with a long list. Here are a few:
1) The default rate on Prosper is MUCH higher than advertised. Chris Larsen, Prosper’s CEO has been quoted in news articles saying the default rate is 2.7%. While perhaps technically accurate using Prosper’s narrow definition of “default,” this is utter balderdash from any real perspective. Prosper only counts a loan as defaulted when it sells it to a junk debt buyer for pennies on the dollar. However, Prosper currently has such sales only quarterly, so it is not uncommon for there to be many loans that are 5, 6, 7, or more months late. Historically, loans almost never come back from being even 3 months late, so all of these loans are defaults in everything but name. Moreover, Prosper calculates its official default rate as the number of defaults divided by the number of loans, but because many loans are too new to have defaulted even if the borrower never made even the first payment (which happens far more often than you might think), this also tends to understate the default rate. So far as can be seen, the real default rate appears likely to be about 20% (or more).
2) Another problem with Prosper’s handling of defaulted loans, is that the process completely lacks transparency. Prosper flatly refuses to disclose the identity of any of the junk debt buyers that have purchased defaulted Prosper loans, the identity of (or even the number of) any junk debt buyers that have sought or been solicited to participate in the junk debt sales, the process Prosper uses to advertise the junk debt sales to possible buyers, or the method used to calculate the sale prices of the various defaulted loans. Prosper lenders – who, after all, actually OWN the defaulted loans being sold by Prosper for pennies on the dollar – have no idea whether Prosper diligently and/or successfully obtains as high a price as possible for the defaulted loans, or simply sells them off to the first buyer it can find, regardless of price. For that matter, without transparency there is no way to be sure that Prosper doesn’t simply sell the defaulted loans at a favorable price to a company controlled by a Prosper insider. Given Prosper’s many other shortcomings, there is no good reason to believe that Prosper handles the junk debt sales in an appropriate and competent manner. Moreover, there is at least one piece of evidence that it doesn’t. Long before the last junk debt sale, a lender and forum member made a firm offer to purchase a particular loan that was headed to default. He made this offer by sending it certified mail, return receipt requested, to Prosper’s VP of collections and to its General Counsel. Prosper completely ignored this offer for almost two months, and then sent a rejection letter at the same time it sold the loan (along with others) to a junk debt buyer for considerably less than what had been offered to Prosper. This unjustified rejection by Prosper collectively cost the almost three-dozen lenders on that loan $500, which was the difference between the rejected offer and the actual sales price to the junk debt buyer Prosper chose to sell the loan to instead.
3) One of the contributing factors to issue #1, is that Prosper’s collections are anemic. When a loan turns 1 month late it is turned over to Prosper’s collection agency, but historically, only around 15% of loans in collections are brought current. There have been many anecdotal stories by late or defaulted borrowers on Prosper’s old forums that they either were never contacted by the collection agency, or the contact consisted of an email or 2 and maybe a phone call or two. Prosper’s own newly-hired VP of Collections admitted that the call logs from the collection agency showed that they were repeatedly trying to contact borrowers at the same time of day, such as between 3-5 pm, so if the borrower worked during the day, no contact was made.
4) Very little information about the borrowers is verified by Prosper. Prosper selects a subset of fully-funded listings to verify employment and income, but many listings become loans without such verification. Prosper has already had to repurchase about $400,000 of loans under its ID-theft guarantee, meaning that Prosper let many fraudulent loans through its systems. Indeed, there is one case (identified by a diligent forum member) where one person obtained a dozen loans from Prosper under different identities. After the forum member outed this on the old forum, Prosper repurchased the loans and sued the borrower in Los Angeles Superior Court to get its own money back. However, there is substantial doubt among the lending community that Prosper tries very hard to identify ID-theft loans, because when it does, it has to repurchase them from lenders.
5) Although Prosper has funded a number of fraudulent loans, it has also cancelled a number of legitimate loans, apparently through incompetence. One such loan involved the brother of a well-respected Prosper lender and very active forum participant. After claiming that faxed documents were illegible and then that Prosper couldn’t open a .pdf file, it cancelled the fully-funded listing with no opportunity for the borrower to resubmit the documents. There have been many other Keystone Kops situations involving Prosper’s verification.
6) Related to issue #5, Prosper’s customer service is terrible. Often, they let the phone just ring and ring without answering it. When you send an email, the response is often irrelevant boilerplate. Lenders used to provide a lot of Prosper’s customer service for free on their old forums.
7) Prosper’s advertising is highly misleading in many ways, if not downright fraudulent. They overstate interest rates in ads directed to lenders, and understate them in ads directed to borrowers. Prosper was caught once apparently having photoshopped a screen shot of an actual listing in an advertisement about the rate (changing the actual rate to something more beneficial). Also, Prosper has repeatedly sent out mass email ads featuring borrower and lender testimonials that were quickly proven to be false. After the first time, Prosper admitted that it hadn’t verified the facts claimed by the person, and said it would do so in the future. But whoops, they promptly did it again (in a different testimonial) in the next ad.
8 ) Prosper used to have a vibrant community on its official forums, with about 400,000 posts. These forums were an amazing learning experience for lenders, so that new lenders could avoid the mistakes of their predecessors. Prosper banned me from the forums and from lending (although I had already publicly announced that I had stopped lending due to Prosper’s mismanagement) because I sent a bunch of PM’s to new lenders alerting them to the existence of Prosper’s own official forums. Then, the day before Thanksgiving, Prosper deleted its entire forum with no notice, in an effort to hide the truth from new lenders. It then replaced the old forums with a super-moderated version that is completely useless (every post must be approved before being posted, which often takes days even when the moderator lets it through).
9) When another forum member made an archive of the old forums available on www.prosperreport.com, Prosper had its lawyers send a threatening letter seeking to take the domain away on baseless trademark, unfair competition and cybersquatting grounds. Undoubtedly, Prosper figured this person would cave in and take down the site. Instead, he retained a lawyer from Public Citizen, who responded to Prosper’s letter by explaining how Prosper’s claims are entirely without merit. Both letters are posted on the site. Prosper has yet to respond.
(10) Prosper also misappropriated thousands of dollars of lenders’ money by charging its servicing fee on loans that were more than a month late, contrary to Prosper’s own legal agreements. This too was discovered by yet another forum member. Prosper admitted that its action was “in error,” but only recently returned this money to lenders despite having promised to do so months ago.
(11) Another significant issue is whether Prosper will even survive as a company for the three-year term of its loans. As can be seen on www.Lendingstats.com, loan originations have been essentially flat for the last nine months, and Prosper’s CEO has admitted that loan originations need to increase 400%-500% in order for Prosper to turn a profit. Given that, clearly the outlook is troubling. Although the Prosper Lending Agreement specifies that if Prosper goes out of business the loan servicing will be taken over by another servicing company, there is no guarantee that any such company can and will be found, or that the transition will go smoothly, or that the new company won’t require higher fees in order to do the servicing.
(12) Recently, a new potential legal problem has emerged — there is a question as to whether Prosper has been illegally selling lenders unregistered securities. This issue recently caused Lending Club (a newer Prosper competitor) to stop signing up new lenders and to stop selling loans to lenders while it obtains regulatory clearance. This issue has also resulted in Canadian P2P loan operations being shuttered. While Prosper has stated that it believes it is in compliance.
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Lend and borrow at your own risk!
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Top Financial Leader Thinks Second Wave of Foreclosures Coming July 1
“We have a wave of foreclosures coming after July 1, which may make the first wave look small by comparison.” - Sen. Christopher Dodd (D-CT)
Earlier this week, Senator Christopher Dodd (D-CT), Chairman of the Senate Banking, Housing, and Urban Affairs Committee, expressed his less than enthusiastic financial forecast for the coming months during a Securities and Exchange Commission (SEC) confirmation hearing stating, “We have a wave of foreclosures coming after July 1, which may make the first wave look small by comparison.” The first wave, which sent investors swimming, had enormous impacts on not only the housing and mortgage markets, but also student loans, municipal securities markets and beyond. What does a second wave starting July 1 mean for investors and consumers?
You may remember seeing Sen. Dodd in the news this past year as he attempted to oust Sen. Clinton and Obama out of the top spot for the Democratic nominee for President. Although he is not publicly known beyond this role, he is a man of men in the business community. The committee of which he chairs, has jurisdiction over nearly all financial services issues ranging from mortgage reform, financial regulatory restructuring, and nearly all investment matters. Not only does he have jurisdiction, but being the Chairman, any bill he introduces he can immediately markup in his own committee. What does all of this mean? Well, Sen. Dodd has power and the attention of financial leaders around the world. He is in the know and he knows a lot. For the reasons set forth, I believe his forecast for foreclosures after July 1 may be a sad reality.
As everyone knows by now, any bad news is having a negative effect on our economy. With gas prices and commodities up, consumers are strapped for cash and investors have their fingers on the trigger anticipating future losses. A huge wave of foreclosures could mean another buying opportunity for the buy-and-hold investors. It could also mean your home value will plummet yet again, with another house on your block falling prey to an ARM mortgage. The Federal Reserve may be forced to lower interest rates again, although the prospective of this seems slim at the present time. If they do, first time home buyers would be offered a great chance to snag a bargain at a bargain rate. Another wave has the potential to give our economy that final knockout blow that could leave no financial expert claiming we are not in a recession. Whatever the case may be in whatever situation you are in, Sen. Dodd has sounded the warning. I hope he is wrong and I hope we can continue to show signs that the worst of our mortgage mess is behind us, but if he is right, be prepared…$
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The Hardest Day to Save
Its getting close…just a few more days…then - Freedom! You get up, get ready for the day, and at some point cruise on over to the computer and check your bank account. YES! Its there! You just got paid…and now the temptation sets in.
This happens to each and everyone of us and it turns out that the hardest time to save is right after you get paid. This might seem like a no-brainer, but what you might not realize is the behavior that changes after this powerful day: Pay Day. For me, the day of and the day after are the most difficult because in conjunction with regularly scheduled payment, you know how much money you have in your account, or more importantly, how much extra you have in your account.
This is the time where you are bored at work or hanging around the house and you decide to go do a little internet shopping, or make slightly more extravagant plans with your friends to go out, or go to that slightly more expensive restaurant. These are the sorts of temptations that really take the punch out of your savings and then some how, almost magically, in the course of two weeks, you find yourself getting down to the bottom again and your just waiting and waiting for the next pay day. Rinse, and repeat as necessary.
This is natural though. We all feel like this. We do it for different reasons of course but the behavior for the most part is inherent. We might feel like we deserve a reward for doing so well with a payment we made, or want that one thing we have been thinking about off and on, and what better time to get it but right when our wallets and purses are the fattest? Another aspect that drives us to consume needlessly is the fact that sometimes we feel compelled to buy at this time simply out of fear and greed. We fear that by not buying something, we might not feel completely fulfilled, or if that doesn’t do it, then the idea of simple greed persuades us that its ok.
Again, its not the end of the world and this happens to pretty much everyone. How can you control it though? Well we have a few ideas:
Before your pay check hits your account:
- Make a list of your upcoming bills, put it somewhere prominent (think bathroom mirror)
- Add to that list your goal for a savings account. Don’t worry if its not something wild that will become a crazy amount right away, we’re trying to build habits so smart small.
- Make a list of the things you need, not want. This will show you the value in priorities as well as objectify what you really want versus what you really need.
- Keep the date in mind, as much as you can…don’t let the paycheck surprise you. Its not a gift, its what you have earned from working.
When Pay Day happens:
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Feel free to check your account, don’t avoid it. But keep the mind set that you have things to pay for and savings that need attention.
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Once your financial responsibilities are squared away, keep yourself busy but do it frugally. This is an important time to maintain discipline as its the easiest time to get a little more wild with your money than you normally would.
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Hold off on buying extra things as much as you can. Try telling yourself that you will get that one thing next pay period and then by that time you might have realized that you really didn’t need it anyway and you can cross it off your list as an item you don’t really need. That item will always be there. (For me its books. I am a sucker for the discount section at Barnes and Noble and have some sort of uncanny third sense for “deals” at Amazon. $15 book, not bad. $25 to ship it? Yes! Ugh, its embarrassing to write about.)
The next few days:
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So at this point you have shown enormous restraint and have salvaged what could have been hundreds of dollars. But we can’t live like monks, we do have lives after all. Well now that the influx money storm of cash has gone passed, now its a little more appropriate to make a purchasing decision without the glow of a fully engorged, juicy bank account. Just take it easy and remember, this is going to happen again:
in about 2 weeks. $
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Find Out How You Can Win $100!
We have great news! The Money Life Network is running our first ever group writing project. We’re going to all be writing around the general topic of “summer savings”. To make the deal even sweeter, we’re asking you to all join in by commenting, writing your own posts about how you’re saving this summer, and by subscribing to our group feed to find the secret phrase! Those who participate will have a chance at winning a $100 Amazon gift certificate for their trouble. To find out more details about this exciting contest, go to our contest page.
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