Banks score better than consumers on financial 'stress test'

Financial stimulus prayers answered

Banks did better on "stress tests" than consumers and when it comes to home mortgages, more than one in four homeowners said their mortgage terms escaped them, and turned out to be different than they expected -- likely because they didn't read the small print.

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Don't bust banks' chops too much without considering that consumers also could use a little knuckle busting.

Banks, graded by federal monetary agencies apparently did much better on so called financial "stress tests" than consumers who graded themselves on their own financial well being.

And when it comes to home mortgages, more than one in four homeowners said their mortgage terms escaped them, and turned out to be different than they expected -- likely because they didn't read the small print.

While Federal Reserve Chairman Ben S. Bernanke said banks' stress tests results "should provide considerable comfort to investors and the public," a consumer survey found consumers grading themselves C or worse on personal finance knowledge.

Less than half of 1,000 adults surveyed by Harris Interactive this spring said they keep close track of spending, according to survey sponsor, the National Foundation for Credit Counseling (NFCC).

NFCC's benchmark "Consumer Financial Stress Test", was based on its broader "Consumer Financial Literacy Survey".

"Would your finances be viewed as being on solid ground, or would you be told to address some weak areas before receiving the stamp of approval?" asks Gail Cunningham, spokesperson for the NFCC.

"The survey reveals startling deficiencies related to financial stability," she added.

Here are the questions and how consumers answered.

Q: On a scale of A to F, what grade would you give yourself in terms of your knowledge about personal finance?

A: Less than half, 41 percent of U.S. adults, or an estimated 92 million people, gave themselves a grade of C, D or F on their knowledge of personal finance. Tsk. Tsk.

Q: Which best describes how you manage your money?

A: Again, less than half, 42 percent, keep close track of their spending, with 7 percent, or nearly 16 million, admitting they don't have a clue how much they spend on food, housing, and entertainment, and do not monitor their overall spending. Sad.

Q: What best describes your financial situation?

A: More than one in four adults, 26 percent, or more than 58 million adults, admit they don't pay all bills on time; 13 million said they are hounded by collection agencies or are on the brink of filing for bankruptcy, or already are bankrupt.

Q: In which ways did the terms of your mortgage turn out to be different than what you initially expected?

A: Of those surveyed, 42 percent, or more than 94 million people said they have a mortgage. Of those, 28 percent say that the terms of their mortgage somehow turned out to be different, including either the payment amount or terms of the loan, the interest rate or its duration, or they had no knowledge of the required Private Mortgage Insurance.

Q: Do you have any savings excluding retirement?

A: 'No' said one in three adults. Nearly 72 million people have no savings. And for people without savings one in four say if they are faced with an emergency, they would charge that expense to a credit card or take out a loan. More debt. Still no savings.

Q: What percentage of your household income do you save toward retirement?

A: 'Zero' said more than 74 million people, or 33 percent, up from 28 percent in 2008.

Q: Compared to one year ago, how has the current economic climate affected your spending, and if you are spending less now, if your financial situation were to improve, would you be likely to spend more?

A: "Sure," said 45 percent of those now spending less. The survey said 57 percent of those questions are spending less due to the recession.

Q: Have you ordered a copy of your credit report, and do you know your credit score?

A: 'No' said 66 percent of those surveyed, even though credit reports are free from AnnualCreditreport.com (the ONLY federally approved free credit report service). Two in three have not ordered a credit report in the last year, even though you can get three, one from each credit reporting agencies, every year. Also, more than one third of those surveyed don't know their credit score.

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© 2008 DeadlineNews.Com

Need a break from doom and gloom in the housing market? Get off the beaten news track and stop by the DeadlineNews Group's Offbeat News Examiner outlet for a few laughs.

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Dishwashers, microwaves, televisions the new luxury items

New party animal, H1N1 flu

Since when did dishwashers, microwave ovens and televisions become luxuries? Since the Great Recession took away their "standard equipment" status.

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Since when did dishwashers, microwave ovens, televisions become luxuries?

Since the Great Recession took away their "standard equipment" status.

Many items you expect to find in a 21st Century home are more and more often considered wants rather than needs and consumers are doing without them.

Recession-wary consumers say they are so financially strapped they are rationing their intake of consumer goods and services deemed just not necessary during hard times.

Pew Research's Social & Demographic Trends effects-of-the-recession survey of more than 1,000 adults from April 2 to April 8 this year discovered:

• In 2006 36 percent of consumers said they had to have a dishwasher, today only 26 percent say they can't handle dishpan hands.

• In 2006, 68 percent of consumers said a microwave was necessary. Today, only 47 percent say they still need to nuke popcorn.

• Now, only 56 percent say television is necessary, down from 68 percent in 2006. The 56 percent is the smallest share of couch potato-ness in more than 35 years, according to Pew.

• Forced to go green and air dry clothes, only 66 percent of consumers say they need a close dryer, down from 83 percent in 2006.

• Fifty-four percent said they just had to have home air conditioning during the recent survey, compared to 70 percent in 2006.

Not surprising, according to a Harris Poll, more than two in five Americans are concerned that the household's main income earner may be unemployed before the year's out.

In yet another survey, IPSOS found consumers shunning new products, but gobbling up lower priced, store and generic brand items to save a few bucks.

IPSOS said 80 percent of the consumers surveyed were likely to switch to lower-priced brands or brands on sale, while 72 percent said they were stocking the pantry with store or generic brands.

Pew likewise found that because of the recession consumers:

• Bought less expensive or discount store brands (57 percent)
• Reduced or cancelled cable or satellite TV (24 percent)
• Started doing yard work or home repairs they once hired out (20 percent)



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© 2008 DeadlineNews.Com

Need a break from doom and gloom in the housing market? Get off the beaten news track and stop by the DeadlineNews Group's Offbeat News Examiner outlet for a few laughs.

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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Don't 'eat your house' unless it's gingerbread

Holiday News That Really Hits Home: Home improvements, education for the kids and new business financing are relatively better uses of equity and much better gifts than buying under-the-tree presents, holiday parties and unplanned winter wonderland vacations.

See DeadlineNews.Com's "listings."

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime.

Deadline Newsroom - Unless it's gingerbread, don't "eat your house" this holiday shopping season.

Taking bites out of your home equity to pay for presents could lead to financial indigestion.


Home equity is the difference between your mortgage balance and the value of your home, not collateral for frivolous expenditures.

Any loan tied to your home's equity is, by nature, an equity-depleting loan. The best use of equity money, the experts say, is for capital improvements and investments that provide an equal or better return on your money than the cost of the loan.

Home improvements, education for the kids and new business financing are relatively better uses of equity and much better gifts, than buying under-the-tree presents, holiday parties and unplanned winter wonderland vacations.

Debt consolidation and emergency nest eggs can be other wise uses, provided those uses don't become habitual.

Saving for the holidays and the season beyond is always a much better financial approach.

Creating a holiday budget plan with a holiday savings-spending account is crucial, not only for the season of joy, but also throughout the year.


• List your monthly living costs, including essentials like house or rent payments, food, clothing, health care costs, transportation to work and utilities. Tally these necessary living expenditures help estimate how much discretionary spending -- if any -- you actually have.

• Prioritize. Shelter -- rented or owned -- is your primary and foremost cost. If extra debt burdens your ability to pay the rent, your mortgage or other necessities, accept that you can't afford the extra burden.

• If you have the discretionary cash, create a gift list that cuts back on gifts for "social" friends and acquaintances. Give a card or be creative and give home made individualized gifts.

• In the spirit of the holidays make donations to housing operations for the needy in honor of your family or friends instead of individual gifts.

It's the thought that counts. Especially the thought of hanging onto your home.

When it comes to home equity, don't leave your home without it by using your home to foot your gift-giving bills.

Like this story? See: Gifts that really hit home
Home safe home for the holidays
Eat, drink, be wary at holiday house parties

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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No place like home for saving

Home-related expenses account for a large portion of cost-of-living increases. Your home is also chock full of potential savings you can bank on or use to pay down debt.

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime.

Deadline Newsroom - There's no place like home to save on the cost of living.

Home is, after all, also where many cost of living expenses have risen, according to the Center for Housing Policy, the research affiliate of the National Housing Conference (NHC).

While incomes have risen only 30 to 35 percent in the ten years ending in 2006, some home-related costs are up by more than 80 percent, according to the Center's "Stretched Thin: The Impact of Rising Housing Expenses on America's Owners and Renters."

Here's how not to be stretched so thin while preparing yourself for your next home purchase.

• Create or update your household budget and balance it. Account for every penny you earn, every penny you save and every penny you spend to reveal your spending habits. Your spending habits will show you where you can cut back. Get an online assist from Consumer Reports' recommendations: Buxfer.com, Geezeo.com and Yodlee.com.

• Move down. The average monthly mortgage payment rose 46 percent during the ten years ending in 2006. Don't wait to be an empty-nester or to fund your retirement. Cash in on a smaller home now. Factor in selling costs, the potential for a capital gains tax hit and higher property taxes, but with enough long time equity, a smaller home could come mortgage free.

• Sell out, simplify and organize. Sell all that stuff that won't fit into a smaller home. Sell all that stuff you'll never use. An organized home is a time-saving home. A time-saving home is a money-saving home, says the National Association of Professional Organizers.

CraigsList.com and Ebay.com (Ebay trading assistants will do the work for you) are the usual suspects, but you can open your own cool store on Amazon.com and sell newer, less obscure items for much more than you'd get at a garage sale.

Also, give stuff away to charity for a small tax deduction.

• Shop around for homeowners insurance. Insurance premiums rose 83 percent in ten years ending in 2006, but rates still vary. Comparison shop direct among various companies. Use an Independent Insurance Agent to shop around. Comparison shop online with Insure.com, Geico.com, Progressive.com, Esurance.com and others.

Raise deductibles to cut costs more. Save with discounts for home fire safety and security systems, for buying multiple policies (auto, life, health, etc.) from one company, and for avoiding unnecessary claims.

• Appeal your property tax assessment. In most jurisdictions property taxes are assessed based on a home's price. But in areas where home prices have tanked -- especially if you purchased your home in a bidding war, during the peak of the market -- you could get a tax break.

See your assessor or other tax collector for the appeal process for your jurisdiction. Be prepared to prove the value of your home with an appraisal or comparative market analysis of recently sold properties that are as identical as possible to your home.

• Green up. The cost of energy rose 43 percent from 1996 to 2006, and even more since then, according to the Center. Your home abounds with energy saving possibilities. Check with your local utility and state energy agency. The Residential Energy Services Network offers referrals to energy auditors who can help you uncover energy leaks. Also the U.S. Department of Energy's (DOE) "Energy Savings" page offers a host of additional tips.

• Get help. Don't hesitate to reach out for financial help. Always contact creditors at the first sign of trouble. That's when more opportunities for relief are available. You may be eligible for mortgage modification, special refinance loans or other assistance that can reduce your monthly mortgage.

• Don't squander your savings. Bank some of that money you've saved to pad out or start an emergency slush fund. Also used saved money to pay down debt and slay the revolving credit interest rate monster.

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also the Silicon Valley Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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From Lust To Bust

You lusted after housing didn't you? You really didn't need that five-bedroom 3,000-square-foot corner lot, but you just had to have it because your lender threw you all the money you wanted. How's that mortgage interest rate reset doing? Feeling a little squeezed? Lust turned to dust? There's a cure for what ails you.

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime.

Deadline Newsroom - Did you once spend vacation time staring into storefront windows at real estate listings?

Were home-for-sale websites at the top of your Web browser's bookmark list?

Did the names of hosts of house-and-home TV shows become household words in your home?

If you are sheepishly nodding "yes" to those questions, there's a good chance you may have been suffering from something called "house lust," a fetish-like preoccupation with everything real estate.

Now, of course, what you feel is the sting of piercing, withdrawal tension headaches -- a sort of housing hangover.

There is a remedy. It's not Excedrin, but it is a bitter pill to swallow.

The housing boom, now very much a bust, conjured up a level of lust for housing that became as American as apple pie, says Daniel McGinn, a Boston-based national correspondent for Newsweek.

He ought to know. He wrote the book on the subject. "House Lust: America's Obsession With Our Homes" (Random House, $24.95), was a real page turner in its day -- like, earlier this year.

Now, McGinn's book is probably your door stop -- if you haven't burned it. Not that the top selling tome isn't a good book. It is. And it warned you. Which is what earned it your scorn. You now envy those who paid attention as you were busy buying more home than you could afford. For you, the book is a haunting reminder of how manic you became.

McGinn's research indicates it wasn't just Washington D.C.'s slothfulness or Wall Street's greed, but also consumers' lust for housing that turned a booming housing market on its roof. The distinctly American addiction (though foreign investors also drooled) spawned a sort of realty gluttony that caused many buyers to overdose on house.

Easy mortgage money made it affordable for a consumer to carry a monkey on his or her back.

House lust pandemic

McGinn says instead of taking the practical roof-over-your-head approach to housing, too many American consumers become emotional infants about shelter. They schemed over, bellyached about and ogled homes they probably didn't need and often couldn't afford. And they lied. They lied about income, about jobs, about assets, and about their ability to repay.

House lust reached a fever pitch during the boom when supersized trophy homes, second, third and fourth homes, household-disrupting renovations, over bidding, and the fascination with real estate websites and TV programming reached "obscene" levels, says McGinn.

Even those with tenured careers rushed off and join the army of real estate agents.

McGinn, who explores the seven deadly sins of house lust in his book, conducted research during sleepovers in models homes, at real estate investment seminars and by obtaining his real estate license in a single weekend.

Here's what McGinn's research uncovered.

• Bigger was better. McGinn spent time with a couple who traded up in a series of houses that started at 2,000 square feet and ended with a $3 million 9,000 square foot McMansion that includes a men's hangout room and twin dishwashers. The couple complained the backyard was too small. Many such properties are now McEmpty.

• Virgin homes. McGinn uncovered an "ick factor," a cultural penchant for shiny, new things. People preferred an unsullied new home's smell rather than living in someone else's less expensive grit. The penchant helped fuel new home construction, and ultimately, a new sub market of apartment conversions.

• Voyeurism. Americans became both virtual and real life looky-loos who gathered intel on line from a growing number of data-based real estate web sites. They swarmed open house events with no intention of buying.

• Money grubbing. As long ago as 2002, real estate became the "psychological equivalent of gold" rather than just shelter. It was the dot com stock of the New Millennium. Many who'd just fled the dot com disaster sought financial refuge in residential real estate. Then the walls caved in.

Now, the party's over. Interest rates have ratcheted up. Balloon payments have popped. The stock market has collapsed. The feds are bailing out Wall Street. Blood flows down Main Street.

You can't afford lust.

From 1996 to 2006, the average annual household expenditures on housing rose nearly 65 percent. During the same period incomes fell far behind, rising only about 36 percent, according to a grim new report from the Center for Housing Policy, "Stretched Thin: The Impact of Rising Housing Expenses on America's Owners and Renters, 2008."

Chicken Little was right. What goes up often collides with falling sky.

Now, with the prospect of economic recession, the conversation has turned from hand-rubbing chatter to hushed talk peppered with words like "belt tightening," "frugal," "thrifty," and "economical" as former spendthrifts attempt reform.

Living without lust

There's no place like home -- if you still have one -- to change your squandering ways and save a bundle.

Just ask architect Sarah Nettleton and landscape historian Frank Morton.

They also wrote a book, but about the saner approach to shelter.

"The Simple Home: The Luxury of Enough" (Taunton Press/American Institute of Architects, $40) delves into the realm of simplicity with the idea that having "enough" is often much more than we really need.

You know, like lusting.

The key is, when we inspect our lives at home, we can often find areas where the simple life is a better, less expensive life. And boy do we need one of those right about now.

It doesn't matter where we live, what kind of home we have or how much it cost. If we make it simple, the savings will come.

Nettleton explains:

Enough already. A simple home offers the luxury of space in a world of clutter. When you identify your true tastes, throw out notions of what you think you should have, avoid excess clutter to maintain only the essentials, simplicity begins to set in. Sure, you need a place to eat, but does it really have to be a dining room addition?

Flexible use. Rooms can serve multiple purposes and help you get more out of what you already have. A breakfast nook can be a play area until a child ages. A kitchen can double as an art studio. Make a small screen porch more functional by installing a custom-sized table rather than going to the (likely empty) equity till again to enlarge the porch.

Thrift-minded simplicity. Fresh tomatoes from the garden taste better than greenhouse food. They'll also get you outdoors. Make a list of simple pleasures that delight but do not require expenditures for more stuff.

Timelessness. Avoid the attraction to "new" for "new's sake." Select a starting point for the feel of your home, edit your wish list down to one favorite image from a book or magazine. Trust your instincts. Your own style is authentic and timeless.

Sustainability. Gizmos don't create sustainability. You do. Find the balance between what you can afford and what you really need. A comfy window seat tucked into a window nook where you can curl up with a good book, can be as comfortable as a large custom leather sofa in an imposingly large rec room.

Resolve complexity. We all talk about disliking complexity in our lives, but can we walk the talk? Examine aspects of your home that prove troubling. Identify the real value of change. Is bigger really better? That new home's kitchen is darkened by the attached garage. What about a home without an attached garage? Is saving a few steps with the groceries really worth missing the morning sun beaming into your kitchen?

(Disclaimer: I, frankly, have not gotten over house lust. I dream of a newly built, masonry, commercial-style loft, with a California ocean view. An unstable structure built on unstable soil in an unstable seismic region. Pure lust. It would be an engineering marvel. But I have to have it. What's your dream home?)

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the new Deadline Newsroom, DeadlineNews.Com's news back shop. In both cases, it's news that really hits home!

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Back To Basic Home Buying Skills

The fundamentals still apply. It's time to get back to the basics of buying a home and not just because lenders are forcing your hand. It's the financially savvy thing to do.

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime.

Deadline Newsroom - Lenders tightening their purse strings have sent a signal to potential home buyers to do the same.

There's really little choice.

Just as lenders more and more often make certain mortgage applicants are gainfully employed; are sure borrowers can actually afford to pay the mortgage during it's full term; and more carefully document that buyers have the cash to cover additional costs that come with home ownership, potential home buyers need to get their financial house in order.



"If people were really responsible for their own financial behavior that would have taken the power away from people who put them in these (risky) loans," says Shawneequa Badger, a real estate agent with Century 21-Alpha in San Jose, CA.

"The reason for all the creative financing was because people didn't want to do the work. Well, now it's time to do the work or cut your losses," says Badger and other agents who are stepping up to provide an approach to home buying that doesn't require classes in the school of hard knocks.

Their sage advice does, however, involve hard financial work and sacrifices many households have long avoided.

"There's still a market out there for people to keep things moving. Just stop the irrational financial behavior," Badger advises.

As a carrot, keep in mind, the benefits of owning your own home, likely to be your most valuable asset, far outweigh any passing pain you may endure to achieve that goal.

Here's how to prepare for what's become a more difficult home buying ordeal.

• Set A Tight Budget

You need to know all sources of every penny and you need to know where every penny goes. You can't know where you can cut costs until you know in detail what those costs are.

Offering a budget template online (search "budget"), the Better Business Bureau says "A budget will provide you with a roadmap to financial security. If you drive carefully, perform the right repairs and maintenance along the way, and steadily steer toward your long-term goal, you'll wind up where you want to be."

• Save Pinch Pennies Save Some More

Being miserly is a prerequisite to homeownership.

If your budget reveals you are spending money on eating out when you can eat healthier for less at home; if it shows you gulp way too many cups of Joe at the local cafe when you can invest in a commuter mug and brew your own at home; if it shows movie rentals by mail cost less than screening every major motion picture live, you've already found hundreds of dollars to save.

Stop traveling, stop partying and stop unhealthy habits that could leave you too weak to take on that second job. Bulk up your habit of spending only for what you need, not what you want.

If you don't have a savings account worth three to six months of your net income, you are already a financial disaster waiting to happen should there be an emergency.

In addition to money for the down payment, lenders today will expect you to have some cash left over for insurance, taxes, maintenance and other costs that come with homeownership.

Certainly, it could take years to build the kind of down payment pot that will get you the lowest possible rate in an expensive housing market, but think about the time it will take you to recover from a loan you can't afford should that loan lead to foreclosure and a financial meltdown.

You really can't afford not to save. You really can't afford not to find more ways to save.

• Read Your Credit Report

Don't just get it. Read the darn thing.

AnnualCreditReport.com is the only federally-approved Web site you should visit if you want a truly free credit report. Other web sites will give you your report to you for "free" but typically only after you sign up for other cost-based services. You are trying to save money, not come up with more things to buy.

Your credit report is a report card on your credit use, the good, the bad, the ugly and, too often, the incorrect. Which is why you want to see it. If there are errors follow the instructions to correct them.

Also visit MyFico.com to learn how to improve your report and your credit score -- a numerical rendition of your creditworthiness.

• Get Some Direction

Can't figure what you credit report is trying to say? Not sure how to calculate what you'll need to save? Don't know how to set up a budget?

It's okay to ask for help. It's smart to ask for help. You don't know everything about buying a home. If you are a first-timer you likely know very little.

Learn how to find answers. As agent Badger says, knowledge is power.

Whether it's a financial planner, financial counselor, real estate agent, mortgage broker, loan officer, or real estate market nerd, ask family, friends, co-workers and others you trust for references to find those who can help you.

Get help in setting goals, sifting through mortgage programs, understanding the title and escrow process, finding a home and keeping a home -- all well before you are actually in the market for a home.

Again -- well before you actually begin to shop for a home.

Learn about market and economic conditions that could impact your decision. Learn about home prices, mortgage rates, home buying costs and other issues surrounding what's likely to be your most complicated purchase ever.

Attend workshops, seminars and classes.

Browse for housing information from online content providers, including MyMoney.gov, Better Business Bureau (search "Tips for Troubled Homeowners") and Deadline Newsroom's home buyers search results.

Pick up a few books, or save some bucks in the library reading "Buying Your First Home" (Nolo, $24.99), "The National Association of Realtors Guide To Home Buying" (Wiley, $19.95) and "Let's Get Real About Money" (Financial Times, $19.99), among others.

"The best thing is to sit down with a good professional," said Warren Winsness, broker/owner of Winsness Realty in Los Gatos, CA and 2007 president of the Santa Clara County Association of Realtors.

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the new Deadline Newsroom, DeadlineNews.Com's news back shop. In both cases, it's news that really hits home!

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