Historic Fed Move Cuts Both Ways for Borrowers

Hot on the heels of its surprise inter-session rate cut of 75 basis points last week, the Federal Reserve cut key interest rates again, the fifth straight cut since September 2007. In its statement last week, the Fed said it had decided to cut the federal funds rate “in view of a weakening of the economic outlook and increasing downside risks to growth.” In other words, economic data suggests the US is on the brink of recession, and the Fed is acting accordingly.

Who benefits from this cut?
If you have a loan that is directly tied to the Prime Rate, you will see an immediate benefit. Home equity lines of credit (HELOCs) and variable rate charge cards are the types of loans that will have an interest rate reduction on their next statement.

What does this mean for long-term rates?
Long-term mortgage rates, the lowest we’ve experienced in years, could actually increase after today’s cut, based on historical performance and recent trends.

So if you’re waiting for long-term rates to fall further, don’t count on it. Your best chance to lock in the lowest rates since 2005 is now. Getting your application in process now will allow you to capture a great rate before it’s too late.

What REALLY moves mortgage rates?
Fixed-rate mortgage rates aren’t directly tied to Fed interest rate moves. Instead, they tend to follow in the direction of other long-term government bond yields, such as the 10-year Treasury, which historically moves in accordance with the economic outlook and in advance of Fed actions. The performance of Mortgage Backed Securities, issued by Fannie Mae and Freddie Mac, is what really determines long-term mortgage rates.

How does the economic stimulus package fit into the picture?
The economic stimulus package from Congress and the White House could be a double-edged sword for borrowers. Combined with recent Fed actions, the package could create inflation and bring about higher long-term interest rates.

On the positive side, conforming loan limits are likely to be raised from the current $417,000 to upwards of $625,000. This means great potential savings for purchase and refinance candidates who live in 20 high-cost areas across the country.

What should you do next?
If you’re unsure how the rate-cut or the proposed legislation affects your mortgage, don’t worry, you’re not alone. There’s no one-size-fits-all answer. Give us a call right away at 1-888-456-5635. We’ll review your mortgage and see what, if anything, can or should be done to make the most of your individual financial goals and needs.

 Your Friend,

Robert Weinberg

A Taxing Time of Year

It’s that time again…time to start gathering all of that dreaded documentation to send to good old Uncle Sam! Although I do not usually cover tax related issues in my blog, I thought this information would be valuable for my readers, clients, and associates. 

Recent stats say the IRS audited 1 out of every 97 returns last year, so it pays to be careful. And even though this may seem like a very painful process, taking just a few simple steps right now will make your tax filing far easier and more accurate.

Keep it together. Make a quick list of all the documents or statements that were needed to complete your return last year – or call your tax planning professional for a checklist. Use this as a checklist to make sure you have a good start on the documents you may need this year. As you receive tax documents in the mail, grab your checklist, and mark the item as received. Then, keep all of the tax documents together in a large file or envelope marked “2007 TAXES.”

Do the math. According to the IRS, the most common mistake on tax returns is bad math—from transposed numbers to downright incorrect data. And with one form leading to the other, those errors can make a huge impact. So even if you use tax software, you’re not off the hook–since they only add the info YOU put in. Double-check entries carefully.

Every last cent. The IRS receives copies of your Form 1099 earnings each tax season. So, they know how much you make in interest and dividend income, and they will use that info to double-check your filing information. Make sure you collect all your earnings statements and document them on your return.

Sign on the line. It sounds almost silly, but forgetting to sign a return is actually a fairly common oversight. And the IRS won’t process a return that doesn’t have a signature. So, make sure you sign to avoid resubmitting your paperwork and possibly paying late-filing fees.

Remember, there isn’t a lot of room for error when you’re dealing with the IRS. A slight miscalculation could mean the difference between getting a return and writing a check–or worse, paying a penalty. It pays to work with a tax professional. If you need a referral, contact me at 1-888-456-5635, or e-mail rob@yourdebtresource.com  – I’m happy to help!

Fed Cuts Rate by .75%: Largest Cut in 20 years!

In a nearly unprecedented move the Federal Reserve early Tuesday cut the Federal discount rate by .75 of a point, the largest single rate cut in 20 years.

The move did not come at one of the Fed’s regularly scheduled meetings but rather overnight in response to some truly dreadful news from foreign stock exchanges over the last two days. Foreign markets followed Monday’s steep declines by losing as much as nine percent of the value of some Asian exchanges although those in Europe were near positive territory by the close. There was speculation early that overnight numbers indicated the U.S. market might open down as much as 575 points.

At the opening bell the Dow was down by the mid-300s but within minutes had fallen to -450.

What does this all mean for you? Well last time mortgage interest rates where this low was over 10 years ago! So if you currently have adjustable rate mortgage, or a fixed rate above 7%…what are you doing? Call our offices let’s get you into a lower fixed rate, fast!

Now is not the time to sit and wait!

Call us at (888)456-5635

Your Friend,

Robert Weinberg
The Renegade Financial Insider

Putting a Freeze on Identity Theft

In the time it takes to count to ten, five new people will become victims of identity theft. In fact, according to the U.S. Department of Justice Statistics, identity theft is now passing drug trafficking as the number one crime in the nation–with more than 15 million victims every year.
Rather than lay awake at night worrying and wondering if your identity has been stolen, you can actually take a simple step to protect yourself… it’s called a credit freeze (or, sometimes, a security freeze). Essentially, a credit freeze gives you the ability to “freeze” or lock access to your credit file–which helps prevent someone from opening a new account in your name.

Here’s How It Works

When someone tries to open an account in your name, they’ll be stopped in their tracks. That’s because one of the first things a creditor will do before opening the account is pull a credit report.

By having a credit freeze in place, creditors aren’t able to pull your credit report. And, since very few lenders will issue credit without first seeing a credit report, identity thieves can’t open fraudulent accounts using your name. However, when you want to apply for credit, you can temporarily lift the freeze using a PIN… thus, allowing your legitimate application to be processed.

The Flip Side

First, it’s important to remember that a credit freeze only stops someone from opening a fraudulent account. It can’t stop them from using a stolen credit card. So you still need to keep the phone numbers of your credit cards handy, in case your cards are lost or stolen.
In addition, some critics argue that credit freezes have more of a downside than most people realize. That’s because you won’t be able to purchase a car, get a new credit card, or refinance a mortgage at a moment’s notice. Instead, you’ll have to plan ahead by lifting the freeze, which usually takes about three days.

For most major purchases, this won’t be much of an issue–after all, how many of us buy a car or house on a whim? Typically, we make the decision to start looking and, at that point, can easily lift the credit freeze in anticipation of the purchase. However, a credit freeze can be problematic if you’re at a department store and the cashier offers you 10% off your purchases if you open an instant credit card with the store.

Other Options

Opponents of credit freezes also argue that consumers can just as easily fight identity theft with fraud alerts, which require lenders to verify identity before issuing loans or credit. If you have reason to believe you’ve been a victim of identity theft, you can obtain a 90-day fraud alert. And if you provide reliable evidence that you are in fact a victim–using such documents as a police report–you can extend that fraud alert for up to seven years.

The problem is… fraud alerts only come into play AFTER you’ve been victimized. So for many consumers, credit freezes offer more protection and more peace of mind.

Here’s the Shocker… You May Not Have a Choice!

Believe it or not, credit freezes aren’t available in every state. Some states have yet to pass credit freeze laws. Why? Well… it all comes down to a battle between the big business of instant credit and the growing need for more secure personal information.
And, don’t kid yourself, billions of dollars are at stake in this battle! Credit-reporting agencies sell credit reports to lenders, landlords, employers and other businesses. Department stores and retailers generate huge revenues by offering instant store credit cards that boost profits through interest and increased shopping. And, finally, we as consumers have simply grown accustom to receiving on-the-spot credit for our purchases.

To learn more about these issues and to find out if your state allows credit freezes, visit www.ConsumersUnion.org/finance/creditfreezeinfo.htm.

Making Healthy Financial Decisions

While we all hope that we never have to deal with a sudden medical crisis caused by the discovery of a life-threatening or life-altering illness the reality is that at some point, many of us will have to face this situation. As they say, life is a terminal condition. Good health is a gift that is often taken for granted, but when you are healthy is also the very best time to take a few simple steps to insure that you and your family, income and assets would be protected in case the worst would happen.

A stat that “will” surprise you:

Did you know that less than 10% of all adult Americans have a will? Amazing, because it is one of the most important documents you will ever create, especially if you have children. In addition to your will, it is advisable to create Power-of-Attorney’s to allow someone you trust to be able to make financial decisions or pay bills on your behalf if you are not able to do so yourself.

Also consider creating a living will, outlining the types of treatments that you would want or not want to have performed. Typically a living will is accompanied by a health care proxy, which is a Power-of-Attorney specifically for making medical decisions.

Emergency fund:

There are dozens of reasons that it is important to build up a nest egg of cash, but one of the most important is to help protect against the loss of income that can occur during a medical crisis. Rarely considered for couples who both work, but worth mentioning, is that during a medical emergency, not only would the ill individual be out of work, but oftentimes the other would also have lowered income due to spending time and energy with the sick partner.

Throw me a line:

A Home Equity Line of Credit (HELOC) can be another great safety net to consider, as it allows you easy and immediate access to a relatively cheap source of money. It is important to remember that your ability to qualify for a new loan may be diminished if you are critically ill, so obtaining a HELOC when you do not need it is a very good idea. And since HELOC’s are typically inexpensive to set up, and only require payments if there is a balance owed, this makes it an ideal safety net.

“Insure” your safe future:

Life insurance is rarely considered a popular discussion topic, but it is a very important way to protect your family. Dealing with the loss of a loved one is very difficult and there is no easy way to ease the pain. And the financial problems, although secondary, can be very serious. Loss of home, income, and savings can all be avoided with the right life insurance plan.

Other types of insurance to investigate are disability insurance – which can help provide income if you are unable to work because of an injury or illness – and also long-term care, which can help you preserve your assets from being eaten up by caretakers in the future.

If you need help setting up a Home Equity Line or a referral to a great financial planner or insurance agent, please email or give me a call. I’d be happy to help you make the connections needed to ensure your own healthy financial future.

Your Friend,
Robert Weinberg
Office 888.456.5635