February 1, 2012 4:30 am
While managing your credit is a critical task for every consumer and would-be homebuyer today, credit card companies often make that difficult to do. The average credit card agreement is a sea of confusing legalese with essential information, such as costs, features, and terms of the product, virtually impossible to discern.
To combat this issue and prevent consumers from heading into detrimental credit card contracts, the Consumer Financial Protection Bureau (CFPB) has created a prototype credit card agreement that is shorter, written in plain language, and explains key features upfront. This agreement is part of the CFPB’s broader effort to protect consumers, Know Before You Owe.
According to the CFPB, there are an estimated 514 million credit cards in circulation in the United States. Americans used their credit cards to spend an estimated $1.9 trillion in 2010, and credit card debt is estimated at $700 billion dollars. While the Credit CARD Act of 2009 helps protect consumers from unsavory cost practices, two-thirds of cardholders still say they don’t completely understand how their cards work. And, as indicated in a recent CFPB report on credit card complaints received by the Bureau from July 21 to October 21, 2011, difficulty understanding the terms of their cards is a contributing factor in many consumer complaints.
The CFPB’s prototype is based on four key areas of improvement within credit card agreements:
- Length: The industry average for a credit card agreement is currently about 5,000 words; the CFPB’s prototype comes in at a substantially reduced 1,100 words.
- Language: The draft credit card agreement has an easy-to-read layout and is written in plain language. It is organized into three simple sections: costs, changes, and additional information.
- Consumer Appeal: The simplified agreement explains the prices, risks, and features of the credit card upfront, as opposed to burying it in fine print.
- Consistency: The prototype establishes standard definitions for legal terms like “card” and “balance transfer” that are contractually necessary but largely uninformative to consumers. These definitions are based on standard industry usage and practices and will be housed online where consumers can readily access them. For consumers who do not have Internet access, the definitions will be available from their issuer in printed form. According to the CFPB, doing this allows for a plain language document that clearly explains to consumers how the credit card works.
January 31, 2012 4:30 am
American workers spend an alarmingly high amount of their hard earned cash on somewhat average daily expenses, according to a new Workonomix survey by Accounting Principals, a finance and accounting staffing firm. The survey found that 50 percent of the American workforce spends approximately $1,000 a year on coffee, or a weekly coffee habit of more than $20. And the spending doesn't stop there. Two thirds (66 percent) of working Americans buy their lunch instead of packing it, costing them an average of $37 per week – nearly $2,000 a year.
Despite these high costs, the survey suggests workers are unclear about the biggest drain to their wallet. When asked which work expense they most want to be reimbursed for by their employer, 42 percent of employees chose commuting costs and only 11 percent chose lunch expenses. However, the average American's commuting cost is $123 a month or approximately $1,500 a year, which is well below the average annual lunch tab of $2,000.
This is especially true for young American workers. The survey found that younger professionals (ages 18-34) spend almost twice as much on coffee during the week than those ages 45+ ($24.74 vs. $14.15, respectively). They also shell out more for lunch, spending an average of $44.78 per week on lunch compared to their older colleagues who spend $31.80 per week.
However, it seems American workers of all ages are starting to realize the effect this incremental spending has on their personal bottom line. According to Accounting Principals' survey, one-third (35 percent) of employees have made it a financial goal to bring lunch instead of buying it in 2012.
Other survey findings include:
- Better food and coffee in the office might help cut back personal spending. Perhaps because of how much they're spending outside the office, American workers would like companies to invest in better food and drinks in the office. One-quarter (25 percent) of Americans wish their company would invest in better vending machine snacks and 22 percent of American workers would like their company to invest in better coffee in the office.
- Employers should focus on the "simple pleasures" to keep employees happy. Although better food and drinks would be a plus, employees most want to see their companies invest in better office equipment (46 percent) and more comfortable office chairs (32 percent) in 2012.
- Corporate discounts do not factor into employees' purchase decisions. Companies looking to attract new candidates shouldn't focus on corporate discounts as a selling point. The majority (82 percent) of employees say corporate discounts matter little or not at all when buying a new product or service.
January 31, 2012 4:30 am
In 2011, U.S. consumers were much more diligent in paying against their debts, resulting in significant declines in delinquency rates among the majority of tracked lending sectors, according to Equifax's December National Credit Trends Report.
The data also reflects a cumulative decline in total consumer debt, which now stands at $11.1 trillion. This represents a nearly 11 percent decline in debt from its peak of $12.4 trillion in October 2008.
Equifax's national analysis is sourced from data on more than 585 million consumers and 81 million businesses worldwide. Conducted on a monthly basis, the research provides detailed levels of consumer credit information from various vertical markets including, mortgage, automotive, student loans and bank and retail credit cards.
Most tracked lending sectors reported double digit declines in delinquency rates for 2011. Key findings from the report include:
Bank Credit Cards
The greatest improvement year-over-year (versus 2010 levels) was within the bank credit card lending sector, where 60+ days past due delinquencies declined by 29 percent. As delinquency rates continue to improve, bank credit card issuers have loosened lending standards and from January-October 2011, there was a 48 percent increase in new bank credit cards issued to subprime borrowers (those with Equifax credit scores below 660). In October 2011 (headed into the holiday retail season), monthly subprime bank credit card originations were up 22 percent over October 2010 levels.
Sixty-plus days past due rates declined by 19 percent in the auto finance category and in the auto bank category, 60+ days past due rates declined by 23 percent in 2011. Auto loan-amount totals were also on the rise with more than $30 billion in new auto loans originated in October 2011. That total is almost equally split between auto finance ($15.9 billion) and auto bank ($15.7 billion).
2011 first mortgage 30+ days past due rates declined by 13 percent and home equity installment 30+ days past due rates declined by 10 percent. While not quite as large a decline, the home equity revolving 30+ past due category demonstrated improvement as well, with a 7 percent reduction in 2011. While home equity delinquency rates were better for the year, home equity origination rates continue to be down, with declines recorded for both the number of home equity loans originated and average loan amount, extending a 5-year slide.
Retail Credit Card
In the retail credit card category, the (60+ days past due rates were down 15 percent) for 2011 and on the origination side, a 4-year declining trend was reversed as the number of new retail credit cards originated between January-October 2011 (26.8 million cards total) increased by 7 percent.
The exception among 2011 lending sectors was in the area of student loans that are 60+ days past due, which did not decline, but actually increased by 1 percent over 2010 delinquency levels. However, through October 2011, the industry is experiencing 3 consecutive years of increases in the number of student loans originated.
January 31, 2012 4:30 am
According to a recent report in Real Estate Economy Watch, nearly one out of three home sales in December 2011 went to buyers who paid all cash, adding credence to the belief that investors are key to the recovering real estate market.
The report was based on the findings from the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, which surveys approximately 2,500 real estate agents nationwide each month. According to the survey, in December, the overall proportion of cash buyers in the housing market surged to a record 33.2 percent, up from 29.6 percent a year earlier, and 74 percent of investors used all cash to buy homes. Investors accounted for 22.8 percent of home purchases in December 2011, up from 22.2 percent a month earlier.
The combination of all cash and shorter closing timelines convinced many sellers to accept lower bids. The survey found that cash buyers are able to bid significantly lower—and successfully—on many properties because they offer a shorter and more reliable closing timeline. This is particularly true for bids on distressed properties, because mortgage servicers selling foreclosed properties generally prefer transactions that can settle within 30 days.
The total share of distressed properties in the housing market in December, as represented by the HousingPulse Distressed Property Index (DPI), continued at a high level of 47.2 percent, using a three month moving average. This is the 24th month in a row that the DPI has been above 40 percent.
While investor bids may not be the first offers accepted, they often end up winning properties after other homebuyers are eliminated because of mortgage approval or timeline problems.
Source: Real Estate Economy Watch
January 30, 2012 4:30 am
According to the Conference Board Measure of CEO Confidence™, CEO confidence, which had declined in the third quarter, improved in the last quarter of 2011. The Measure now reads 49, up from 42 in the previous quarter (a reading of more than 50 points reflects more positive than negative responses).
Says Lynn Franco, Director of The Conference Board Consumer Research Center: “The bounce back in CEO confidence in the final months of 2011 was due primarily to an improved short-term outlook. Overall, however, CEO confidence remains rather subdued. On the inflation front, CEOs anticipate price increases of about 1.8 percent for 2012, down from last year’s estimate of 3.3 percent.”
CEOs’ assessment of current economic conditions was less pessimistic, with 17 percent saying conditions have improved compared to six months ago, up from just 11 percent last quarter. In assessing their own industries, however, business leaders were more pessimistic. Now, about 16 percent claim conditions have improved, down from 19 percent in the third quarter of 2011.
CEOs’ optimism about the short-term outlook improved from last quarter. Currently, about 32 percent of business leaders anticipate an improvement in economic conditions over the next six months, up from 19 percent in the third quarter. Expectations for their own industries are also more upbeat, with approximately 25 percent expecting conditions to improve in the months ahead, up from 22 percent last quarter.
The Conference Board is a global, independent business membership and research association working in the public interest. For more information, visit www.conference-board.org.
January 30, 2012 4:30 am
For many of us, winter means more time spent inside and less time spent in the great outdoors, which can often lead to a classic case of cabin fever and winter blahs. According to Debra Duneier, author and creator of EchoChi, with a few simple steps, you can transform your home into a place that makes you feel happier and healthier this winter:
- Use color creatively. Add warmth and excitement to your life by accessorizing your home with red, yellow and orange, says Duneier. These colors have a stimulating Chi (energy vibration) and have the energy of summer. This invigorates our environment, making us feel more optimistic and energized.
- Bake something. Turn on the oven to fight off the wintery chill. After all, who doesn’t feel better by the smell of chocolate chip cookies baking? Try a variety of ingredients like vanilla or cinnamon and experiment with baking an old family recipe, advises Duneier. Winter provides the perfect opportunity to slow down and reconnect to your home and family through baking.
- Use fragrance to bring the outdoors in. Scented candles can be especially helpful in the winter when we spend so much time indoors. Home fragrance can reconnect us to the natural world through our sense of smell. The scents of flowers, fresh rain, the forest, or ocean air are all essential to our well-being. Choose candles made of soy or bees wax with 100 percent cotton wick to ensure a toxic-free experience.
January 30, 2012 4:30 am
For many professionals, money worries are not just affecting life at home, but at the office, too, says a new survey from the Society for Human Resource Management (SHRM).
The survey asked HR professionals key questions, including, "In the past 12 months, have employees been more likely to dip into their employer-sponsored retirement savings plans compared with previous years?" More than half—55 percent—of HR professionals agreed while 17 percent strongly agreed. A little less than a quarter, or 24 percent, disagreed, and three percent strongly disagreed.
When asked the impact of employees' personal financial challenges upon work performance, roughly one in five—22 percent—of HR professionals cited a "large impact." Sixty-one percent noted "some impact" while 16 percent responded, "slight impact." Only two percent of HR professionals observed "no impact" upon workers.
A closer look at the impact on work performance shows that:
- 47 percent of HR professionals noticed employees' struggle with their "ability to focus on work."
- 46 percent noticed issues with "overall employee stress."
- 26 percent observed a negative impact on "overall employee productivity."
- 24 percent said money woes are leading to "employee absenteeism and tardiness."
- 20 percent are concerned about "overall employee morale."
- 12 percent noticed a negative impact on "overall employee health."
- 7 percent said "working relationships with other employees" are the least impacted.
Nearly half—49 percent—of HR professionals said employees are stressed by an "overall lack of monetary funds to cover their personal expenses."
Some money woes were more specific like "medical expenses" and "saving for retirement," said 35 percent and 26 percent of HR professionals, respectively.
Twenty-two percent of HR professionals attribute worker money woes to "credit card debt" and the same number also cited "home mortgage payments."
Roughly 12 percent of HR professionals said "education expenses" were causing workers' financial stress that was noticeable in the workplace. Education expenses include the employee's own tuition costs, that for dependent children, or other family members.
More than half, 52 percent, of organizations represented in the survey currently provide financial education to their employees. A closer look shows that 79 percent offer access to an employee assistance program that includes financial counseling and resources. Sixty-eight percent provide financial education specific to employer-provided benefits such as retirement, medical insurance, and flexible spending accounts. Nearly half, or 47 percent, offer financial education limited to retirement-related planning.
Among the 52 percent of organizations that teach employees about financial planning, 39 percent cover budgeting, paying for education, debt reduction, credit card use, homeownership, and taxes.
January 27, 2012 4:30 am
Making the decision to buy a new home is a life-altering event…in a good way. But the process can be daunting. Take the following advice from CNNMoney into consideration before heading out on your home-buying journey.
- Don't buy if you can't stay put. Given today’s challenging marketplace, don’t buy a home unless you can commit to staying there for at least a few years. The days of flipping for profit are long gone and you stand to lose money if you sell too soon after buying.
- Shore up your credit. Securing a mortgage in today’s market requires excellent credit so take the time to clean up your credit report well before you begin looking for a home.
- Be honest about what you can really afford. The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But CNNMoney recommends using one of the many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford.
- If you can't put down the usual 20 percent, you may still qualify for a loan. There are a variety of public and private lenders who, if you qualify, can provide options in terms of interest rates and down payments.
- Schools affect home values. Even if children aren’t a part of your life now or in the near future, look at homes in areas supported by a good school system. Good schools are paramount for many homebuyers and have a direct impact on the value of your home.
- Work with a real estate professional. Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Today’s market requires expert guidance through every stage of the home-buying process.
- Choose carefully between points and rate. When picking a mortgage, you usually have the option of paying additional points - a portion of the interest that you pay at closing - in exchange for a lower interest rate. If you stay in the house for a long time - say three to five years or more - it's usually a better deal to take the points, says CNNMoney. The lower interest rate will save you more in the long run.
- Get pre-approved. This will help you avoid the emotional rollercoaster of falling in love with houses you can’t afford. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history.
- Make an educated bid. Work with your real estate professional to make the right opening bid. Bids should be based on the sales trend of similar homes in the neighborhood, so review with your agent sales of similar homes in the last three months.
- Hire a home inspector. In addition to the appraiser your lender hires, you should also hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road.
January 27, 2012 4:30 am
According to Microsoft Corp.’s recently released data on consumer behaviors online, everything we do, from responding to emails and texts, to clicking "like" and "retweet,” to uploading photos and making purchases online, contributes to our online reputation. According to the tech giant, now is the time to take charge and resolve to actively monitor and safeguard our online reputations.
Microsoft commissioned a survey of 5,000 people that revealed a wide variance of online behaviors and attitudes and explored the resulting impact to people's overall online profiles and reputations. With respondents from the U.S., Canada, Germany, Ireland and Spain, the research shows that although 91 percent of people have done something to manage their overall online profile at some point, a smaller percentage feel in control of their online reputation (67 percent) and fewer than half actively think about the long-term consequences of their online activities (44 percent).
To help people put their best digital foot forward, Microsoft offers the following tips to help cultivate and maintain a positive online reputation:
- Stay vigilant and conduct your own "reputation report" from time to time. Search all variations of your name in popular search engines, and evaluate if the results reflect the reputation you'd like to share with the world, including current or future employers, colleagues, friends and family members. Research found that 37 percent of adults rarely or never do this.
- Consider separating your professional and personal profiles. When you are job hunting, applying to school or looking for new insurance or a loan, remember that your online profile can be a determining factor for hiring managers and application reviewers. Be sure to use different email addresses, screen names, referring blogs and websites for each profile, and avoid cross-referencing personal sites. Fifty-seven percent of adults think about taking steps to keep their work and personal profiles private; however, 17 percent of people have inadvertently shared information online that was intended to remain private. Most commonly shared are details about one's personal life (56 percent) and personal photos (38 percent).
- Adjust your privacy settings. Review and use the privacy settings on the Web browsers, social networking sites, and personal blogs you use. Privacy settings help manage who can see your information, how people can search for you, and who can comment, along with giving you the opportunity to block unwanted access. According to the survey, 49 percent of adults do not use privacy settings on social networking sites.
- Think before you share. Think about what you are posting (particularly personal photos and videos), who you are sharing the information with, and how it will impact your reputation. Talk with friends and family about what you do and do not want shared about you, and ask them to remove anything you don't want disclosed. Fourteen percent of people have been negatively impacted by the online activities of others. Of those, 21 percent believe it led to being fired from a job, 16 percent to being refused health care, 16 percent to being turned down for a job they were applying for, and 15 percent to being turned down for a mortgage.
- Be a good digital citizen. The Web has a long memory. Conduct yourself in a civil manner, showing respect for those with whom you engage.
January 27, 2012 4:30 am
Home appraisers are in the news a lot these days as many housing pundits blame inadequate appraisals for lagging home sales. As a real estate consumer, you can take matters into your own hands by becoming as informed as possible about the appraisal process. The following tips are from the Appraisal Institute and break down the key facts you need to know about appraisals.
- Appraisals directly affect your mortgage. Lenders order appraisals to get a stronger understanding of risk relating to the underlying collateral offered in a mortgage. Lenders want to know how much the property could sell for so that they can make sure the loan has the right collateral to back it.
- Make sure your appraiser is licensed/qualified. Encourage your lender to look for appraisers with the MAI, SRPA or SRA designation and/or those who are members of the Appraisal Institute. Many of today’s financially pinched lenders are utilizing third-party firms to outsource administrative functions, which can result in the hiring of a low-cost appraiser that lacks the proper market knowledge. Make sure your appraiser has field experience in your market. According to the Appraisal Institute, a qualified appraiser knows how to conduct a thorough market analysis and make appropriate adjustments if/when distressed sales are used as comparables.
- Follow your appraiser. While you may have heard that the appraisal needs to happen independently, the truth is that most appraisers welcome your presence and the detailed information you can provide about your home. Ask your lender for permission to do so, and confirm the appointment. This will also give you an opportunity to ensure that an adequate appraisal is performed. Make sure the appraiser spends a reasonable amount of time assessing the home and takes note of the details.
- Get a copy of the appraisal report. According to the Appraisal Institute, federal law requires lenders provide consumers with the appraisal report, regardless of whether credit is granted, denied, or the application is withdrawn. A mortgage appraisal should not be used for any other purpose.
- Know how to review the report. While a professional appraiser is needed to accurately interpret the report, there are some red flags you can keep an eye out for. Common errors in appraisals include: misuse of adjustments to comparables; disregarding special financing and concessions; or miscalculation of gross living area. Ask yourself how your home compares to other properties in your area to help determine if the appraiser’s review is accurate.
- Appeal the appraisal. Most lenders have appraisal appeal procedures, known as “Reconsiderations of Value.” If you are aware of recent, comparable sales information or items that may not have been available or considered by the appraiser, provide those to your lender.
- Ask for a second appraisal. If problems were found with the first appraisal, you can and should obtain a second appraisal. Once again, make sure a qualified appraiser is used the second time around.
- File a complaint. If you have a legitimate beef, file a complaint with the appropriate state appraisal board or professional appraisal organizations. Lenders are required under federal law to report legitimate complaints with appropriate regulatory authorities.