financial

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For many people, a financial advisor is a key ally in helping you reach your financial goals. While most savvy people under 30 should be able to handle their finances on their own, many opt to hire a financial advisor to get access to personalized advice from a financial expert.

If you live in San Francisco and want help from a local financial advisor, you’ve come to the right place. The best financial advisors in San Francisco are standing by to help you create a financial plan, choose the best investment portfolio, and put you on track to reach your most important financial priorities. Keep reading for a list of the best financial advisors in San Francisco.

What’s Ahead:

Overview of the best financial advisors in San Francisco

BOS

  • Contact: 415-781-8535 or [email protected].
  • Services offered: Financial planning, trust & estate planning, wealth management.
  • Assets required: $3 million in investable assets
  • Typical fees: The fee is quoted as an annual percentage fee, and is billed quarterly by taking the value of your assets at the end of each calendar quarter and applying one-fourth of that annual percentage fee.

Bingham Osborn & Scarborough Wealth Management, better known as BOS, is an investment and financial advising company for individuals with at least $3 million in investable assets.

The fee-only firm advises clients with a holistic approach that looks at all aspects of the client’s finances. BOS works to build long-term investment portfolios using a data-driven approach that incorporates taxes and other factors. 

Burgess Financial Planning

  • Contact: 415-525-1041 or [email protected].
  • Services offered: Financial planning and investing advice.
  • Assets required: $3 million in investable assets.
  • Typical fees: $480 fee for an initial planning meeting.

A smaller shop, Burgess Financial Planning is a boutique firm with just one planner. Sean Burgess is a CFP and Registered Investment Advisor. He is a fiduciary (that means he always puts your best interests first) and doesn’t have any minimum required level of assets to get started.

Burgess charges a $480 fee for an initial planning meeting. If you decide to work with Burgess Financial Planning long-term, investment fees are charged based on assets under management. This firm earns an impressive 4.5-star rating with 35 reviews on Yelp.

Citrine Capital

  • Contact: 415-494-8262.
  • Services offered: Wealth management, financial planning, asset protection, risk management.
  • Assets required: None listed.
  • Typical fees: Starting at $7,000 per year.

Founded in 2014, Citrine Capital is a fee-only wealth management firm with a focus on the Bay Area’s high-tech community. Entrepreneurs, business owners, and startup employees will likely feel at home with this firm.

Citrine Capital works to organize client finances in a way that helps them reach financial goals, mitigate taxes, and manage wealth for long-term needs. Fees start at $7,000 per year for clients with a net worth below $1 million.

Financial Connections

  • Contact: 415-924-1091 or [email protected].
  • Services offered: Financial planning, investment management, retirement planning, socially responsible investing.
  • Assets required: None listed.
  • Typical fees: $290.00 per hour for financial planning.

Located across the Golden Gate Bridge in Corte Madera, Financial Connections offers financial management, investment management, and other services to Bay Area clients. The fee-only firm doesn’t take any commissions or compensation from large investment fund providers.

The firm’s team acts as fiduciaries project-based financial planning. For those with long-term and unique needs, you can sign up for a concierge service to plan for specific needs. Its investment management product comes with either customized portfolios or robo advisor-style modeled portfolios.

Hall Capital Partners

  • Contact: 415-288-0544 or [email protected].
  • Services offered: Investment management, risk management.
  • Assets required: $500 million.
  • Typical fees: $300,000 to $400,000 annual minimum fee.

Founded by Kathryn Hall in 1994, Hall Capital Partners is a large financial planning firm with more than $30 billion in client assets under management. It exclusively works with high-net-worth clients, many of whom hold eight-figure and nine-figure portfolios.

If you have that kind of wealth, the $300,000 to $400,000 annual minimum fee isn’t a huge deal. But for most of us peons with merely tens or hundreds of thousands, or even assets in the low millions, Hall Capital Partners probably isn’t going to work for you. If you just made it big time from your company’s IPO, however, it could be worth giving Hall Capital Partners a call.

Morling Financial Advisors

  • Contact: 800-607-5800.
  • Services offered: Financial planning, investment management.
  • Assets required: None listed.
  • Typical fees: Start at $300 per month.

Morling Financial Advisors is an investment manager and financial planner founded in 1999. Suitable to high-tech Silicon Valley, Morling Financial Advisors has its own app for clients to log in and view their account details.

Financial planning services start at $300 per month. Investment management services start at 1% for those with under $1 million in assets and go down to 0.60% for those with $10 million and up.

Paragon Financial Planning

  • Contact: 510-227-5354 or [email protected] or [email protected].
  • Services offered: Financial planning, investment management, retirement planning.
  • Assets required: None listed.
  • Typical fees: Depends on portfolio size.

If you are in Oakland or Alameda, the office of Paragon Financial Planning may be convenient for you. Paragon Financial Planning is a small office led by Samantha N. Dinh, a Certified Financial Planner.

She’s doing something right, as Paragon Financial Planning earns perfect five-star ratings after 34 reviews on Yelp. Dinh offers financial planning, investment management, and insurance services through her company.

Summary of the best financial advisors in San Francisco

Firm Services offered Primary clientele
BOS • Financial planning
• Trust & estate planning
• Wealth management		 High net worth individuals
Burgess Financial Planning • Financial planning
• Investing advice		 Those looking for no minimums and an affordable advisor
Citrine Capital • Wealth management
• Financial planning
• Asset protection
• Risk management.		 High tech professionals, entrepreneurs, business owners
Financial Connections •Financial planning
• Investment management
• Retirement planning
• Socially responsible investing		 Those with unique money needs
Hall Capital Partners • Investment management
• Risk management		 High net worth individuals
Morling Financial Advisors • Financial planning.
• Investment management		 Tech industry workers
Paragon Financial Planning • Financial planning
• Investment management
• Retirement planning		 Those looking for no minimums and an affordable advisor

How I came up with this list

This list of the best financial advisors in San Francisco is based on several sources.

They are fee-only planners

Financial advisors on this list don’t earn from shady commission deals. They are all fee-only planners where you know what you will pay upfront and can rest easy that there are no major financial conflicts of interest.

They are fiduciaries

Fiduciaries are legally required to put your interests first. It’s a good idea to only work with a financial or legal expert who acts in a fiduciary capacity.

They earn good customer reviews

Before adding a financial advisor, I checked out reviews on multiple sites including Google and Yelp, and public lists of awards given to San Francisco financial advisors.

They work with a wide range of clients

Top advisors from this list may be a good fit for people from all financial backgrounds, whether they have $1,000 to invest or $100,000,000. While every financial advisor on this list isn’t the right fit for every reader, there should be an advisor that meets the needs of most people looking to get started with a financial advisor.

Remember that not all people need a financial advisor. Resources like those available here at Money Under 30 could give you all you need to make good financial decisions without the added cost of a finance professional. Ultimately, it’s up to you and your comfort level with your finances to decide if you would benefit from the services of a San Francisco financial advisor.

What questions should you ask a financial advisor?

How can you help me with my finances?

A financial advisor is a licensed financial professional with the expertise to help you manage various parts of your finances. That can include creating a financial plan, managing your investments, or a fully hands-on advising experience where they handle most of your day-to-day finances. Some focus on taxes, some focus on specific types of business owners or employees, some work with anyone.

There are many types of financial advisors. The one thing they all have in common is a business built around helping you manage your money.

Why should I hire you instead of doing it myself?

A financial advisor is best for someone who isn’t confident that they are making the right financial decisions. Most people don’t get much financial education at school, if any. That means unless their parents taught them about money, they could be just making best guesses around major financial decisions like saving for retirement or buying a home.

If you want help creating a financial plan or having your plan double-checked by a professional, a financial advisor could be right for you.

Are you a fiduciary?

A fiduciary is a type of financial advisor that is obligated to put your interests first. That means they are not allowed to put your money into a fund that isn’t aligned with your long-term goals and needs.

Ideally, you should only ever work with a financial professional that acts in a fiduciary capacity.

What services do you offer?

Financial advisors can offer a range of services. Here are some of the most popular services you can find from a financial advisor.

  • Financial planning – Reviewing where your money is today and how it influences your future is important. With financial planning services, advisors help you chart out the right savings and investments to reach your goals.
  • Investments – If you don’t know the difference between a stock, bond, and ETF, this service could be very valuable to you. Some financial advisors help you set up your portfolio to manage yourself. Others will manage it for you long-term.
  • Taxes – Financial advisors may be able to help with tax planning and tax savings strategies. Not all advisors offer tax services, but it’s an extra perk and could allow you to manage all of your money needs in one place.
  • Consulting – As well-versed financial pros, some advisors also offer business consulting services with a focus on financial management.

What are the costs of hiring a financial advisor?

If you are hiring a financial advisor, it’s important to ask them how they get paid. That’s because financial advisors can charge fees in different ways. They could also make money in ways that give them an incentive to suggest investments that are not in your best interest.

Fee-only financial advisors are only paid by client fees. This is the best type of financial advisor to choose. I would argue that it’s the only financial advisor relationship that works toward the client’s best interests.

Fee-only advisors may charge monthly or annual fees, hourly fees, or fees based on the size of your portfolio. Rates and services can vary, so it could make sense to shop around before choosing a financial advisor.

Some financial advisors are paid commissions by insurance companies and investment firms for selling their products. This is a major conflict of interest. Under this scenario, advisors may be paid to funnel your money into mutual funds or other financial products that are not in your best interest. 

Summary

San Francisco and the Bay Area are home to some of the most successful companies in the world. But it’s also one of the most expensive places to live. A financial advisor can help you make the most of your money and keep it working to help you reach your financial goals.

By choosing a fiduciary financial advisor that works as a fee-only advisor, you should be in good hands. This list of the best financial advisors in San Francisco is a great place to get started.

Read more:

Source: moneyunder30.com

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When the subject of Individual Retirement Accounts (IRAs) comes up, the one question that seems to cross everyone’s mind is: Which investment vehicle is better, a Roth IRA or a traditional IRA?

The subtle differences between the two types of IRAs are the source of all the confusion, but the answer depends largely on whether you expect to be in a higher or lower tax bracket when you start to draw funds out in retirement — however, there is actually more to consider than just your tax bracket.

Four Important IRA Features to Consider

For most Get Rich Slowly readers, the four most important considerations are these:

  1. Contribution limits: For Roth IRAs and traditional IRAs, the contribution limits are identical. In 2015, you may contribute a maximum of $5,500 a year to your account. If you are 50 or older, you may contribute an additional $1,000.
  2. Income limits: Both Roth and Traditional IRAs have income limits. (You can get the details on the IRS website: Form 590 for Roth, and Form 590-A for traditional.)
  3. When contributions are taxed: Both types of IRA are tax-advantaged, but in different ways.
    • Traditional IRA — You are usually able to fund a traditional IRA with pre-tax dollars, so you pay taxes when you withdraw the money.
      (If you or your spouse has a retirement plan through an employer, the deductibility of your traditional IRA contributions may be subject to income limits.)
    • Roth IRA — The money you put into a Roth IRA has already been taxed and will grow tax-free; therefore, you are able to withdraw it tax-free.
  1. Annual distributions after age 70 ½: You must take yearly distributions from a traditional IRA (and pay taxes) when you are over 70 ½ years old. There is no such required minimum distribution with a Roth.
Comparing Features: Roth IRA vs. Traditional IRA
  Roth IRA Traditional IRA
2015 Contribution Limit – < 50 $5,500 $5,500
2015 Contribution Limit – > 50 $6,500 $6,500
2015 Income Limits IRS Roth IRA Info IRS Traditional IRA Info
Required Annual Distribution None Required at 70.5
When Contribution Is Taxed Before contribution At withdrawal

How to Choose Between a Roth IRA and a Traditional IRA Account

So if you qualify for both, which one is best? In general, the rule of thumb is:

  • Choose a Roth IRA if you suspect that your retirement tax rate will be equal to (or greater than) your current tax rate.
  • Choose a traditional IRA if you think your tax rate will decrease during retirement.

Of course, nobody knows what their future tax rate will be. As a general guideline, take an honest look at your lifestyle and your dreams for retirement. If you live a frugal lifestyle, your withdrawals from your IRA should be low enough so as not to put you in a high tax bracket. In that case, a traditional IRA might work best for you.

However, if you are starting early and you know you will have a substantial nest egg which you plan to use to travel the world in style, you can expect to be withdrawing a high enough amount to put you in a higher tax bracket then. If that is the case, a Roth IRA might make more sense for you.

Looking at it from the other side, if you are in a high-paying job now, a traditional IRA might be attractive because you save a significant amount of income tax from the deduction you take. If, however, you are in a low tax bracket at the present, a Roth IRA might make more sense, because you won’t get a significant tax saving from your deduction.

Getting More Specific

If you want more explicit information, you should search the web for an IRA retirement calculator. Be aware, though, that your assumptions about the future are just that — assumptions. Nobody knows what tax rates will be like in the future. If you make very little now, you can guess that your tax rate will probably be higher in retirement. If you make a lot, your tax rate could very well be lower. But what about the rest of us?

I asked Dylan Ross of Swan Financial Planning for his advice:

Because many people will have tax deferred savings from other sources anyway, it usually makes sense to go with the Roth when you have the choice.

Most people will not be withdrawing their entire IRA in a single tax year. It’s entirely possible that some years will have higher tax rates than present and some years will be lower. This is why I think it makes sense to try to have tax-free (Roth) and tax-deferred savings, so I can have options in the future. If I want to save some of my tax-free when I’m retired because tax rates are at a low and I suspect will eventually rise, I’ll pull from my traditional IRA. If tax rates are super high, I’ll tap the Roth.

I’m an advocate of diversifying the tax treatment of my retirement savings; but in the end, when you have a choice, putting it all in the Roth is usually the better move.

The Question Remains, and the Answer is Personal

Traditional and Roth IRAs are great tools to help the average American save for retirement. There are several subtle differences between the two accounts that affect everyone whether they are just starting out in their retirement planning career (and it is a career, the only one from which no one can ever be fired or laid off) or they happen to be near (or even in) retirement.

So which is better? It depends. Your circumstances determine which account makes the most sense. If the choice is not clear to you, you should probably consult a qualified professional such as an accountant or a certified financial planner. Most of the time I route people to one of my previous articles if they want to get a better handle on the subject:

If you are more interested in 401(k)s than IRAs, the same train of thought applies. (And because you are dealing with an uncertain future, a train of thought is the closest you can hope to get to a firm scenario.)

Source: getrichslowly.org

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A new housing development built along a canal near the Mokelumne River is viewed on May 22, 2023, near Stockton, California.

George Rose | Getty Images

Lawrence Yun has as big a stake in the Federal Reserve’s moves as any economist: As the chief economist for the National Association of Realtors, his industry is a target of the Federal Reserve’s efforts to tame inflation with higher interest rates.

But the housing’s industry’s bigger problem right now may be the bond market, and specifically, spreads between treasuries and mortgage rates that suggests homebuyers’ economic challenges may not decline even as the Federal Reserve is nearing the end of its interest-rate hikes. There is a historically-wide difference between the 10-year treasury bond, a benchmark for pricing mortgages, and the actual price of an average 30-year loan. Usually around 1.75 percentage points, and as low as 1.3 in 2021, the so-called mortgage spread is hovering at more than 3 percentage points now. And that is propping up mortgage rates, keeping home owners from selling their homes and buying nicer ones, and hurting first-time buyers, Yun said.

“Buyers know 3.5% mortgages aren’t coming back,” Yun said. “So 5.5% would bring out buyers.” 

Why mortgage spreads should move lower

Logically, mortgage spreads should move down sharply from here, thanks to the recent spate of good economic news, and bring relief to home buyers who have seen affordability deteriorate sharply since 2020. 

Traditionally, spreads widen when markets fear a recession. They spiked before the financial crisis of 2008, for example. Collapsing spreads help revive housing activity after a recession arrives, or can prop up the housing market in a crisis, which happened in 2021 as the Covid pandemic threatened an economic crash. But as the Fed began raising interest rates in March 2022, mortgage rates rose even faster than bond yields.

The case for wide spreads this past year was two-fold. Partly, it was rooted in the idea that the 10-year treasury yield would rise as the Fed hiked more. Fear of a 2023 recession also contributed — evidenced by a sharp widening of spreads in March, after Silicon Valley Bank failed.

Now, both cases are evaporating. Last week’s inflation report showed consumer prices rose just less than 3% for the 12 months ending in June, down from more than 9% a year earlier. Low inflation should persist into the fall, because the government’s measure of housing inflation lags private market data that has been moving lower since last summer. The consumer price index is expected to only start to reflect the now year-old dip in rents and home prices in parts of the U.S. by year-end.

At the same time, the Atlanta Federal Reserve Bank’s tracking estimate of second-quarter economic growth now sits at 2.3% belying predictions of an early-2023 recession that were widespread.

The recent inflation news pushed the 10-year treasury lower, touching 3.76% after reaching 4.09% earlier in July. Mortgage rates also dropped, to 6.89% last Friday from a recent peak of 7.22%, according to Mortgage News Daily. But the spread between the two was little changed.

How much the big mortgage spread costs homeowners

If the spread between 10-year bonds and mortgages were to revert to normal, it would make a huge difference in monthly payments for home buyers.

On a $500,000 mortgage, for example, a 7% interest rate spits out a monthly payment of $3,327, plus taxes and insurance. That falls to $2,934 if rates go to 5.8%, which would represent a 2 percentage-point gap between treasuries and mortgage rates, and to $2,777 with mortgages at a spread of 1.5 percentage points — back within the range of the long-term average, 1.75 points. 

The closing of spreads alone would save that borrower $6,600 a year in payments. A $500,000 loan would typically require about $150,000 in pretax annual income.

“People consider changing their cable company for $30 a month,” Yun said. “$600 a month is a big number.”

A narrowing of spreads last fall, which reversed in February and March, helped stabilize a falling real estate market, according to Logan Mohtashami, lead analyst for HousingWire in Irvine, Calif.

But bond market and housing experts are skeptical of whether the spreads will narrow, and mortgage rates fall, as fast as homebuyers might like.

The Fed is widely expected to raise the Fed funds rate at its meeting on July 25-26, with futures prices implying a 96.1% chance of a quarter-point increase, according to the CME Group Fedwatch Tool. That will support Treasury yields, at least in theory.

More than that, the Fed has stopped buying up mortgage securities as the bonds on its balance sheet mature. That depresses the price mortgages can command in secondary markets or from federally-backed loan buyers like Fannie Mae and Freddie Mac, and puts pressure on lenders to demand wider spreads from borrowers, said Rob Haworth, senior investment strategy director at U.S. Bank in Seattle.

Banks may also seek bigger spreads on loans made in the next few months because of the risk the mortgages will be repaid quickly when borrowers refinance next year as rates fall, he added.

“One might attribute it to quantitative tightening,” Haworth said. “The Fed is a seller.”

Indeed, the Fed has signaled that it doesn’t want mortgage rates to fall soon, according to Mohtashami, citing comments made by Minneapolis Federal Reserve Bank president Neel Kashkari who said in February that lower rates and a hotter market would “make our job harder” in controlling inflation.

“I assumed the spreads would stay high until the Fed cried Uncle and started cutting rates,” Mohtashami said. “If the banking crisis hadn’t happened in March, they would be lower.”

But markets have defied the Fed before, as recently as this week, when the 10-year Treasury yield dropped even as traders remain convinced the central bank will hike rates at least once more.

If the drop in inflation is sustained — a big if — and rising consumer confidence pushes any recession further into the future, markets are likely to reset interest rates with or without the central bank.

The Fed will raise rates at least once more, but the second rate increase many investors have expected may be delayed or canceled if inflation stays tame, said Doug Duncan, chief economist at Fannie Mae. That would let last week’s modest dip in mortgage rates continue, even though Fannie doesn’t expect the central bank to cut interest rates until at least early next year, he said.

How banks think about lending rates

Fannie Mae’s forecast calls for rates to be near current levels through 2023. But the Mortgage Bankers Association of America sees the 30-year rate dipping to 5.2 percent next year.

Banks’ reaction to changing spreads may be tricky to predict, Duncan said. On the one hand, banks would have to watch out for more prepayments if interest rates come back down, pressuring them to keep spreads wide, he said. But that might be overwhelmed by an increase in the value of mortgages that banks already own, as loans from the late 2010s and 2020 that pay lower rates regain value they lost as rates rose, he said. In that case, more banks would probably be more willing to let spreads fall, he added.

Mortgage rates could come down quicker than expected if banks respond to rising mortgage-bond values by relaxing spreads, Duncan said. When the Fed tried to talk markets into tightening credit in 2013, mortgage spreads actually became smaller, loosening mortgage credit, Haworth said. 

“Unless rates go back to 3 percent, banks are still going to be better off, even if prepayments pick up,” Duncan said.

Source: cnbc.com

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Angelo Robert Mozilo, the founder of Countrywide Financial, died from natural causes this weekend, his family announced. He was 84 years old. 

Mozilo was a pioneer of the mortgage industry, though a deeply controversial figure. 

“Independent of how people outside of the industry may perceive this man, insiders know what an incredible force he was,” his son Eric Mozilo wrote in a LinkedIn post. “Over his span of 50 years, he dedicated his life to delivering the American dream of homeownership to millions. He absolutely insisted on ensuring that minorities were represented, first and foremost. No company, not even up until today, has even come close to the size and dominance of Countrywide. Most of today’s mortgage industry leadership, whether it be an employee, an executive, or even a business affiliate, have had a connection or roots with Angelo and Countrywide. Lastly, he was the best Dad a son could ever ask for.”

Originally from New York City and the son of a Bronx butcher, the brash and charismatic Mozilo founded Countrywide in 1969 with his former mentor David Loeb after receiving a Bachelor of Science degree from Fordham University. For most of its history, Countrywide was known for originating low-risk loans. Mozilo was president of the Mortgage Bankers Association (MBA) in 1991-1992.

He gained full control of the company in 2000, after Loeb’s retirement, and put it in growth mode, becoming the largest mortgage provider in America by 2004, surpassing Wells Fargo and Washington Mutual. In 2006, Countrywide made roughly $10 billion in new loans each work week. The company said its five-year total return at the end of 2006 was 340%, close to 10 times higher than that of the S&P 500.

Mozilo avoided working with subprime loans until the late 1990s, when after noticing that his firm was losing business to competitors, Countywide embraced the type of subprime mortgage lending that eventually led to the housing crisis in 2008. And they did it at a massive scale.

Though he publicly defended the company’s lending practices and said he was championing minority homeownership, Mozilo knew about the poor underwriting standards, according to documents disclosed during government settlements.

“On Sunday I met a mortgage broker from a town near Troy, Michigan who told me that he does all of his business with Countrywide. First I was pleased with the news until he told me why. He said that the area he serves is severely economically depressed and the only way he can qualify his borrowers is the via the pay option ARM,” he wrote to a colleague at Countrywide in 2005. “I have heard this story many times over from mortgage brokers who utilize the pay option for very marginal borrowers for the sole purpose of creating volumes and commissions. We simply cannot and will not allow our company to be victimized by this pervasive behavior and since we can’t control the behavior of others it is essential that we control our own actions.”

When home prices started to fall in 2006 and investors abandoned the mortgage-backed securities (MBS) market in 2007, Countywide began running out of money. With Countrywide needing short-term funding and investigations into its mortgage lending business already swirling, Mozilo sold his company to Bank of America for $4 billion. The bank would ultimately lose about $50 billion on the investment.  

Mozilo was charged with insider trading and securities fraud by the U.S. Securities and Exchange Commission (SEC) in 2009, tied to stock sales. According to the New York Times, Mozilo sold $406 million since Countrywide was listed on the New York Stock Exchange in 1984, $129 million realized in the 12 months ending August 2007. 

Mozilo settled with the SEC in October 2010 for $67.5 million in fines and accepted a lifetime ban from serving as an officer or director of any public company.  

Mozilo became the “face of the financial crisis,” the New Yorker reported.   

Mozilo and his wife Phyllis were the founders of The Mozilo Family Foundation, providing scholarships for youth. Phyllis died in 2017. In 2019, Mozilo stepped down from the board’s chairmanship and was engaged in consulting initiatives.  

Rob Chrisman first reported the news of his death on Monday.

In 2019, speaking at a hedge fund conference in Las Vegas, Mozilo said he didn’t care that he was still held responsible for the financial crisis.

“A lot of years went by, my wife passed away, I turned 80 years old, and now I don’t care,” Mozilo said, according to a New York Post report. “There’s other things more important in life. Somehow, for some unknown reason, I got blamed for it.”  

Source: housingwire.com

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The continuous development of loss mitigation tools and practices in the mortgage industry will play an essential part in preventing future foreclosures, but additional safety nets — particularly for those mortgage customers who belong to historically disadvantaged populations — will play a critical role in thinning the racial wealth gap. One such tool rests with mortgage reserve accounts (MRAs).

This is according to a report published late last month by the Urban Institute, funded by the Federal Home Loan Bank of San Francisco.

“Borrowers who have more liquid assets to fall back on are better able to sustain homeownership when they face temporary financial setbacks,” the report said. “Helping less affluent borrowers establish mortgage reserve accounts (MRAs) — ‘sidecar’ savings accounts that can be tapped to weather a financial shock — are one promising solution.”

There are a lot of questions that arise from the use of such tools including those surrounding implementation, achieving scale and making mortgage outcomes more equitable, the report says. With MRAs, however, variations on the concept “are under early-stage development by retail mortgage lenders and the secondary market actors Fannie Mae and Freddie Mac,” the report explained.

MRAs account for only one such tool that could impact the foreclosure rate among homeowners of color, as other approaches — including those in the insurance space — could be scaled to meet the needs of potential beneficiaries.

“Whatever the approach, if the foreclosure rate for Black mortgage borrowers decreased to the average foreclosure rate among white mortgage borrowers, an estimated 300,000 more Black homeowners would keep their homes and have the opportunity to build generational wealth,” the report explained. “Additionally, making mortgages less risky for lenders, insurers, and investors, in addition to families, should lead to an expansion of the credit box and allow even more households with modest incomes and resources to access and realize the benefits of homeownership.”

While several new loss mitigation tools have been developed in recent years, particularly in response to the economic shock caused by natural disasters in 2017-18 and the COVID-19 pandemic for many mortgage borrowers, there are “limited solutions that target the triggers of default and help Black homeowners avoid missing their mortgage payments in the first place,” the report said. “Research has shown that having financial reserves can help households avoid default.”

In comparison to other alternatives, MRAs are a viable option for preserving homeownership among vulnerable homeowners due to a unique combination of product features and flexibility, the report explained.

“Mortgage reserves do not necessarily require a subsidy, nor do they increase the costs of homeownership because they can be financed with money that would otherwise go toward the borrower’s down payment,” the report said. “Additionally, mortgage reserves can add substantial flexibility to a borrower’s finances, as the borrower’s residual income can cover a nonmortgage expense at the time it is incurred, while the reserve fund covers the mortgage.”

Source: housingwire.com

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We would like to think of life insurance agents as trusted advisers whose only aim is to get us the right coverage.

But the nature of life insurance -– and the job of life insurance agents -– makes them something close to our natural enemy.

Life Insurance Agent Secrets 

One easy way to prevent being taken advantage of is to find an independent agent. “Independent agents save you time and money,” said Chris Huntley, co-founder of JRCInsuranceGroup.com.

“Rather than completing applications and medical exams with 15 of the best life insurance companies to see which one will approve you at the best rating, make one call to a qualified independent agent, who can place you with the most appropriate carrier based on your unique personal and medical history.”

In a lot of ways, what hurts us as consumers of life insurance actually benefits life insurance agents. Here are nine examples of what I’m talking about in a quick Life Insurance 101 article!

1. Their Income Is 100% Commission

Any time you’re buying from a person compensated 100 percent by commission, your radar needs to be up and in perfect working order. Being on commission doesn’t make a person evil. But it may change his or her perspective, as well as the type and degree of products that you will be introduced to.

If the agent is entirely on commission, he or she will then have a vested personal interest in selling you products that will result in you paying the highest premium possible and hence yielding the highest commission.  It is also why when you fill out the form for an online life insurance quote engine you will frequently get calls from multiple agents within minutes of hitting submit. Each one is trying to reach you first so that they can get the sale.

2. You May Very Well Be Over-Insured

Whenever an agent evaluates how much life insurance you need to have, he will almost inevitably start with numbers that are larger than anything you’d ever imagine that you would need.

For example, it’s not unlikely that the agent will suggest that you need to have life insurance equal to 30 times your annual income. If you are earning $100,000 per year, he may suggest — without flinching — that you will be adequately insured by a $3 million dollar insurance policy.

After all, you will need to provide income for your family for the next 20 years, college educations for your children, the payoff of your mortgage and a comfortable retirement for your spouse.

He knows that it is unlikely that you will take a life insurance policy that large, but it’s an excellent starting point — for him. After all, if he suggests $3 million but walks out of your house with an application for a $1 million policy, he wins. That’s because he knew going in the door that you probably only wanted a policy for a couple hundred thousand dollars.

And you’d probably be right. After all, if you have other investments and your spouse is also well-employed, you will only need a fraction of the life insurance coverage that the agent will suggest.

Most often, life insurance is only needed to settle final arrangements, medical bills, outstanding debts and maybe a few years of living expenses. Providing for your loved ones to live in luxury for the rest of their lives is an expensive you can’t afford, nor need.

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3. Whole Life Isn’t a Good Investment — Or Even Good Insurance

Life insurance agents like to sell whole life insurance as the best of both worlds–- an investment program with life insurance coverage. In truth, it doesn’t do either particularly well. The insurance benefit will be limited because the premiums are high. And since so much of the premium goes to pay for investment fees and the life insurance coverage, there is relatively little left over for investment within the plan.

4. The Cash Value of Whole Life Won’t Benefit You for Years

Life insurance agents like to hawk the virtues of the cash value build-up in a whole life insurance policy. This is another myth. As a rule, it will take at least five years before you will have a cash value that is equivalent to the amount of money you paid in premiums into the policy. And maybe not even then.

5. “Buy Term and Invest the Difference” Really Is a Better Strategy

There is probably no slogan confronted by life insurance agents that is more irritating to them than this one. And that’s because the slogan is true.

Since term insurance is so much less expensive than whole life, you can buy a lot more of it -– in fact a more reasonable amount for your needs. And the investment performance of mutual funds -– particularly index funds –- dramatically outperforms that of any insurance related investment vehicle.

Even if the combination of term life insurance and investment in a mutual fund is no less expensive than a whole life insurance premium, the money you will accumulate in the mutual fund — and the speed at which you will do it — make it a far superior investment to a whole life insurance policy. And you’ll have a whole lot more life insurance coverage along the way.

6. We Don’t Know About the Value of Long-term Care Insurance

From a consumer standpoint, there are two fundamental problems with long-term care insurance coverage:

  • It’s very expensive.
  • It’s not certain that you will ever need it.

Since people are living longer than ever, making a provision for long-term care has become a hot topic. Insurance agents know this, and they’re exploiting the fear.

Emotions aside, most people don’t need long-term care. And even if they do, it’s often for a short period just before death. If there are other assets available, particularly retirement assets or a home with substantial equity, long-term care insurance with my be unnecessary.

And if it isn’t ever needed, you will have spent tens of thousands of dollars over many decades funding an insurance policy that was never necessary. This is an important consideration when there are so many other priorities in your household budget.

Long-term care insurance is relatively new coverage, and it’s not at all certain that it will survive the test of time. Some insurance companies have withdrawn long-term care insurance coverage due to the inability to predict future medical costs or the longevity of their clients.

7. Your Kids Don’t Really Need Life Insurance

Life insurance agents love to sell whole or universal life insurance policies to parents of young children, stressing the advantages of the investment provisions of the policies. Those provisions, they argue, will help parents to provide funds for their children’s college educations. But nowhere is the advice of “by term and invest the difference” more relevant.

You should have only enough insurance coverage on your children to pay for final expenses and uncovered medical costs. In most cases, a $50,000 term life insurance policy will get that job done with money to spare. There is no need to replace lost wages with a ridiculously large policy.

And as we’ve already discussed, insurance related investment vehicles are underperforming investments. You’ll be far better off investing money in a mutual fund for your children.

8. There Is No FDIC Equivalent Back-Stopping Insurance Companies

This is a very relevant question – but seldom asked — since life insurance agents like to position themselves as investment advisers. The investments that they sell are almost always exclusively insurance products. However, there is no equivalent to the Federal Deposit Insurance Corp. that will back up the life insurance company in the event of investment failure.

There are arrangements within each state for companies to collectively backup a failed insurance company, but there is no apparatus in place to deal with a systemic failure such as the financial meltdown that hit the banks and financial companies a few years ago.

While this has obvious implications for the life insurance coverage that you pay for and expect to have, it becomes much more significant when you have a lot of money sitting in insurer-sponsored investments.

More Tips for Dealing With Life Insurance Agents

If you apply for life insurance, keep these four tips in mind from Jeff Root, a life insurance agent and founder of Rootfin.com. And again, they’re not tips your agent will be likely to recommend.

  • If you’re not satisfied, ask for reconsideration. Life insurance underwriters will always offer the best possible rate class as permitted by their underwriting guidelines; however, if you’re not happy with the life insurance company’s offer, your agent can submit a “reconsideration request” and ask the underwriter for a better offer. Most agents don’t even mention this as an alternative because of the extra work involved in drafting a letter convincing the underwriter why they should qualify for a better health classification.
  • Ask for tentative offers. Consumers can get “tentative offers” from life insurance companies before applying for life insurance. Independent life insurance agents send your risk anonymously to various underwriting desks. Underwriters typically reply within 48 hours with a health classification in what we call a “tentative offer”. You can attach this tentative offer to the life insurance application, and the company you apply with must give you this rate unless you withheld any information from them. This is a must for people with health issues applying for life insurance.
  • Shopping won’t necessarily get you a better rate. Going from website to website won’t result in finding better rates. However, each company looks at your health differently. It’s your agent’s job to fit your unique health situation into the underwriting guidelines of each company and then see who provides the best rates.
  • Most applicants won’t get the preferred best rate. Less than 5 percent of people who apply for life insurance can qualify for “preferred best.” Yet it’s the No. 1 health classification quoted on websites.

Source: goodfinancialcents.com

Apache is functioning normally

The so-called TILA RESPA Integrated Disclosure rule, also known as TRID for short, or Know Before You Owe, was expected to go live on August 1st of this year.

But due to an “administrative error” discovered by the Consumer Financial Protection Bureau (CFPB) at seemingly the eleventh hour, the implementation will be delayed two months and instead be rolled out on October 1st.

Those in the industry will probably be relieved, though not without pointing to the double standard the CFPB (the agency behind the new forms) seems to enjoy.  Imagine if lenders complied two months late…

The error would have only delayed the effective date of TRID by two weeks, but the CFPB felt pushing the date back even further would benefit consumers and mortgage providers’ families who are expected to be busy dealing with a new school year in August.

The news came as a bit of a surprise seeing that vendors and mortgage lenders had been pushing for a delay to the new disclosures for months.

It almost appears as if the CFPB finally caved to public pressure, though apparently it’s a real federal law that barred them from moving ahead as originally planned.

What Is TRID?

If you’ve heard the acronym TRID recently, you might be wondering what the heck it is. As mentioned, it stands for TILA RESPA Integrated Disclosure rule.

Further broken down, it amounts to Truth in Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure rule. Quite a mouthful I know.

It essentially consolidates four existing disclosures (Truth in Lending forms, GFE, HUD-1) into two new disclosure forms known as the Loan Estimate and Closing Disclosure.

It’s a big deal because the current disclosures have been in use around for about 40 years.

The Loan Estimate, or LE, which contains details such as loan term and projected payment, must be put in the mail and sent to consumers who apply for mortgages no later than the third business day after receiving their application.

For the record, an application is triggered when the lender receives six key pieces of information, including:

[checklist]

  • Consumer’s name
  • Consumer’s income
  • Consumers SSN (to obtain a credit report)
  • Property address
  • Estimated property value
  • Loan amount

[/checklist]

The Loan Estimate must also be placed in the mail no later than the seventh business day before consummation of the transaction.

And it expires 10 business days after it is provided if the consumer does not indicate that they wish to proceed.

The Closing Disclosure, or CD, which details all closing costs and the total payments and finance charges associated with the mortgage, must be provided to the consumer at least three business days prior to loan consummation.

Consummation generally means when the borrower signs loan documents, though this can vary by state.

And if certain changes occur, such as an interest rate increase (APR rises 1/8 for fixed loans or ¼ for ARMs), a prepayment penalty is added, or the borrower switches loan programs, a new three-day waiting period is triggered.

Why TRID?

This new waiting period kind of echoes the existing right of rescission that is in place for most refinance transactions.

Put simply, it gives would-be home buyers a cooling off period to review their loan costs and details before moving forward and signing. As opposed to signing on the spot and feeling rushed or confused.

Additionally, the LE and CD are of the same cloth so borrowers will have an easier time comparing estimated costs and final costs, instead of getting lost in paperwork that looks completely different.

This should help borrowers better understand what they’re being charged and why, and also reduce the chances of getting ripped off.

However, some industry participants worry this could delay loan closings and possibly result in the need for longer lock periods and/or lock extensions, which could ultimately cost consumers.

But lenders can adjust accordingly in order to keep loan closings expeditious. Hopefully they’ll be forced to become more efficient and provide more accurate estimates upfront.

In any case, lenders now have two more months to figure it all out, and in the meantime borrowers will continue to see the old forms.

Lastly, it should be noted that TRID does not apply to HELOCs, reverse mortgages, or mortgage secured by a mobile home (or those not attached to real property).

Source: thetruthaboutmortgage.com