Monday, August 11, 2014

AlexLOGIC WORDS and PHRASES: Forever Debt.

AlexLOGIC WORDS and PHRASES: Forever Debt.: What is Forever Debt? Forever Debt is debt that is downplayed by economists as "serviceable" on a monthly basis. However what economists fail to mention is that serviceable debt needs to be multipled by 2.5 to determine what it would actually take to pay off the debt...(read more at link above).

Thursday, April 17, 2014

The Best Job to have in 2014 and how it is about to destroy millions of homeowners.

Here is a link that lists the best and worst jobs to have in 2014. You don't have to go farther than number one to see who is about to destroy the lives of homeowners who have spent 10, 20, 30, 40, or 50 years attaining home ownership, it's the Actuary.

Click on Image to Enlarge.

An Actuary calculates the mathematical "sweet spot" where financial services can competitively offer their Insurance products and money loan products, while making a profit.

Think of an Actuary as the Guy behind the Curtain in the final scene of the Wizard of Oz, they pull all the knobs and dials that makes things go boom, but they are kept hidden from the masses. It can be said that Actuaries live in their own gold plated glass bubble.

Actuaries help set HELOC guidelines. A HELOC, (Home Equity Line of Credit) is possibly one of the SAFEST investment opportunities a bank can make if they are the first lien holder on a home property being used as collateral for a HELOC.

Here is one explanation of how a first lienholder HELOC would work. A homeowner has a paid off home. It may have taken the homeowner 30 years to pay off that home, they are now advancing in years, probably retired, and their income is most likely dropping. Their home, having taking so long to be paid off, may now be worth anywhere from 2x to 5X the value of the original purchase price (for non homeowners please keep in mind that many times the appreciation in value is significantly balanced out by all the maintenance, upgrades, yearly property taxes and insurance costs homeowners will typically pay over the course of 30 years time). 

The Home Owner is able to draw money out of their paid off home via a HELOC and they can pay back the loaned amount at interest only payments for the first 10 years, this is called the draw period.

After the 10 year draw period, the homeowner now has to pay back interest and principle for the next 15 years on the HELOC, which can cause the monthly payment to suddenly almost triple. 

Example, 40 years ago a homeowner purchased their home for 100,000 dollars and it is now worth 375,000. The home was paid off after 30 years. The homeowner then decided to take out 100,000 dollars worth of home equity via a HELOC over a ten year time frame. Since the 10 year draw period is about end, and the new payment will be almost triple, the homeowner would rather simply use another 100,000 dollars of home equity, aka a RE-HELOC, to pay off the first 100,000 HELOC, in essence getting another 10 years of interest only payments. Maybe the homeowner wants to  do a RE-HELOC for 125,000 (which is also tax deductible) so they can use the extra 25,000 to pay off their high interest rate credit cards or their kid's student's loans.

A RE-HELOC is an extremely safe investment for all concerned if the homeowner is keeping the RE-HELOC versus overall value of the home at reasonable ratios. In our 375,000 home value example, the 125,000 dollars is 33% value of the home, and there is no mortgage. Should the homeowner default during the RE-HELOC 10 year draw, there should be no risk to the bank that they will recoup their investment as the first lien holder.

But here is where it gets icky, the Actuaries who set the income verification and credit ratings requirements may have set the income levels or credit score requirement so high that it prevents the homeowner from RE-HELOCing their own owned home even if they never missed a payment on their first HELOC, and the HELOC to overall value of the home is extremely safe. Suddenly the homeowner has a 100,000 dollar HELOC, a home worth 375,000, but they can't RE-HELOC their FIRST LIEN HELOC even though there is virtually NO RISK to the banks to do so.

The inability to RE-HELOC a HELOC is how the Actuary is about to ruin the lives of millions of homeowners who took HELOC's out 10 years ago. A scenario has been created in which the banks have one of the absolutely safest investment products on the market because it is completely collateralized and in many instances are the bank is the first lienholder, and they are now going to begin denying RE-HELOC's to millions of american homeowners because either their income is too low or their credit score is too low.

Or, the interest rate will be jacked up because the homeowner will be considered a "risk" even though the bank is the first lien holder on a home that has so much more equity remaining in it versus what is being RE-HELOC'd that there is virtually no danger to the bank of losing their financial stake in the home.

One of the dangers of thinking politically is it can lead to believing that evil is being created by either the left or the right, yet there are plenty of examples where it is just math that is being used to cause grief for millions. Actuaries who have set first lien, no risk RE-HELOC guidelines unnecessarily high are causing hardship to millions of american homeowners with impeccable payment histories.

And this brings another disturbing issue to bear, It seems as if the banks and their money suppliers are truly bored with sure thing investments and relatively low interest rates. During the 2000's, wasn't the economy was first over revved, and then crashed, specifically because banks and their investors became "bored" with lower interest rate, extra safe investments and wanted to "hedge" their bets with securitization schemes that actually banked on homeowners failing?



Thursday, February 13, 2014

"Frozenomics" is all cracked up.

The belief that the world's economy must continue to grow all the time is ridiculous. Growth leads to wars to rebuilding to debt to more strain on the planet's resources.

Economists paint the 2013 / 2014 winter storms, aka frozenomics as being bad for the economy because it forces people to hibernate indoors. Could you imagine if Bears ran the planet and worried about frozenomics? Air raid sirens would go off every hour to wake up  hibernating bears, otherwise the economy would sputter! Wouldn't that be just sheer madness, waking bears up with sirens because hibernation was believed to be bad for the economy!

One way to save the planet is to let people sort of "float" along at times. Winter weather, people can't work. Rather than moan and gasp that frozenomics is wreaking havoc with our happiness, can't we all just agree that not all work is essential all the time.

One mayor actually pleaded for people "not to be stupid" and instead to stay home during the terrible winter storms. The reasoning was sound. The more people that went out, the more that got stuck and clogged the roadways, the more city workers would be endangered trying to find and save those who got stuck. Plus, can't clear the roadways of snow if they are littered with stranded cars.

Restaurants are fearful of losing 75% of their revenue during harsh weather. Isn't it sad that just because wealth already exists that the elite wealth owners that run the planet literally force people to work all the time or risk losing their assets, or even their home?

Is this method really necessary? Lets ask a hibernating bear, but lets wait until they wake up.

Sunday, February 2, 2014

Debt Suspension Rights: Government Sequestration of the Elderly a 100% Success. )ver 98% of the Elderly Collecting Social Security won't Qualify for a HELOC no matter how much Equity is in their Home!


The U.S. government has sequestered the home equity wealth of the elderly. The U.S. government has done this by declaring that anybody who makes less than 3,000 dollars a month is not eligible for virtually any type of a loan, even if that person owns a home and has an abundance of equity in the home...(click link above to read more).

Sounds like 99% of the elderly have been shut out of loans no matter how much equity they have in their home, wow.



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