The foreclosure crisis and current tough economic times this fall make it hard for me to focus on thoughts of gratitude. But that is exactly the reason that I feel now is the time to focus on being thankful. Reviewing the stories behind the borrowers in our Rescue Mortgage Program, I find myself grateful that ShoreBank is able to continue to reach out to people trapped in predatory loans. When ShoreBank provides a homeowner with refinancing into a 30-year fixed-rate loan means children can stay in their house for Thanksgiving; it means parents can sleep better at night, and it means that neighborhoods do not become wastelands of abandoned foreclosed homes. I am so lucky to play a small part in this process, and so thrilled to work with good colleagues that do the tough lending day in and day out.
Beyond feeling thankful for having such wonderful and rewarding work, many other things make me grateful for the life I have. I am so thankful for my family, particularly my zany husband who keeps me laughing even when the economy makes me cry; my children, young adults both spreading their wings and testing themselves in one of the worst job markets in decades; and the wonderful circle of friends that makes my life fun and meaningful. We live in challenging times and the day-to-day crush can make me forget how wonderful it is to be alive. It is the perfect time to pause and remember the intangibles that make life so worth living, and to reconnect and warm myself with the feeling of gratitude. As we close this work week I wish you all a Happy Thanksgiving.
The scale of the foreclosure crisis threatens the dreams of many homeowners in ShoreBank’s communities. In my last blog, I wrote about what makes a mortgage a bad fit for consumers. The reasons vary, but if someone you know has the wrong mortgage for their circumstances, remember that there are solutions. One is a Rescue Loan.
The most important thing to remember if you’re having difficulty making your monthly payments is to take action right away. It’s easier to recover if you haven’t missed more than one or two monthly payments. As the foreclosure process moves along, the size of the delinquent debt owed, and the bank legal costs that customers are usually charged, mount.
Curing a foreclosure is a little like curing cancer — the sooner you catch it, the better your chance of survival. Acting sooner rather than later, keeps more options open for you, minimizes costs and protects your credit. The first step is to contact your lender as soon as you think you cannot make a payment. Look for the lender’s toll free number on your monthly statement. Do not ignore telephone calls or written notices from your lender. Borrowers who try to ignore their financial problems — and their lenders’ phone calls — will likely lose their homes.
ShoreBank’s Rescue Loan Program offers fixed-rate loans to homeowners at risk of losing their homes. Who should consider applying for a Rescue Loan? To be eligible for a ShoreBank Rescue Loan you must:
• Have a subprime mortgage or other adjustable rate mortgage
• Open a ShoreBank auto debit account at the time of application
• Qualify for sustainable mortgage payment
• Be no more than 90 days past due on your mortgage payment
We look at many factors when considering a customer for a mortgage. We consider your income; your monthly mortgage payment as a percentage of your income; your total debt situation; employment history; property appraisal, and of course, your credit history. This is different than your credit score. ShoreBank will work with you if you’ve had credit difficulties. For example, let’s say you had a rough patch, and lost your job and fell behind on your payments. That would lower your score. But as soon as you could, you worked to catch up on your bills. That’s a good thing, but your credit score may still be low, because those missed payments are on your record. We look at the big picture.
Unlike other banks, we don’t sell our loans. Perhaps you’ve had the experience of getting a mortgage from a bank you knew and then after a few payments, an unfamiliar envelope with your mortgage bill arrived in the mail from a bank you never heard of. That’s because the bank you got the mortgage from sold your mortgage. Now you have to deal with a “stranger” who doesn’t know you.
We don’t sell our mortgages at ShoreBank. We stay with you for the life of the loan. That also means we want you to be successful. It’s not as important to the other banks that sell your loans if you take out a bigger loan than you might be able to handle in the future, because they’re going to sell that loan. If you can’t make payments, it will be someone else’s problem.
So we work with our customers to fit our mortgages to their needs. We want that mortgage to be successful for them (and consequently successful for us). That’s why we’re not in the same position as many other banks today. ShoreBank is safe, secure and strong. We’re not going to be bought out or taken over by the government. Your money is safe with us.
To help fund the program, ShoreBank launched a high interest online savings account, www.shorebankdirect.sbk.com. The interest paid on the online account is currently 3.50% *APY.
Call us if you have a mortgage that is wrong for you. We’ll work with you to help put you back in control of your finances.
* Annual Percentage Yield (APY) is accurate as of June 4, 2008. Rates may change at anytime and without notice after the account is opened. Fees could reduce the earnings on the account. A minimum balance of $1.00 is required to open the account and obtain the stated APY.
An energy efficiency financing option receiving a significant amount of attention in policy discussions is “on-bill” financing. On-bill financing involves providing a utility-extending credit for various energy efficiency improvements, and then adding the ensuing loan payments to the beneficiaries’ utility bills. Proponents of the approach point to several benefits. For one, utilities already have elaborate billing systems, so transaction costs are limited – it’s just one more line item on an established customer’s bill. For another, there exists a notion that consumers are leery of having another bill to pay, so households may be more willing to undertake the improvements if the ensuing payments are simply added to an ongoing bill. Finally, there is a sentiment that customers will go out of their way to make payments if they are part of the household’s utility bill since failing to do so could result in “shut-offs” or cessation of utility service.
While I see potential value in the on-bill financing notion, I think we should critically examine the underlying rationale before moving too quickly to implement this concept.
Clearly, there is some validity to the notion that on-bill financing would have low transaction costs – especially for smaller projects, such as those costing less than $5,000. Yet, I am not convinced these costs are less manageable for other types of institutions, such as credit card companies, that routinely extend credit for even lower amounts.
Secondly, I am skeptical that very many efficiency projects have been derailed because of consumers’ concerns about having another bill to pay. With the average household possessing seven different credit cards, and with over-leveraged consumers being one of the key drivers of the current financial meltdown, it seems hard to imagine consumers running from any form of credit.
Most of all, however, I am reluctant to believe utilities will have lower losses than other lending institutions. If foreclosures are at record levels, utility payments must be faltering as well. Certainly, local press reports here in Chicago have indicated that shut-offs have risen dramatically at both the natural gas and electric utilities.
Given that utilities will charge all rate-payers for any losses that ensue, it would seem prudent to carefully analyze the risks and realities of the approach. My concern is that if on-bill financing is not implemented carefully, it could easily become a regressive tax on low income households that act responsibly and manage their financial obligations appropriately.
To ensure households have access to appropriate and responsible financing options for energy efficiency projects, ShoreBank continues to explore ways to use private capital to underwrite these critically important investments.
Green Festival™, a joint project of Global Exchange and Co-Op America, kicks off a three day festival today in San Francisco. ShoreBank will be there, and is very excited to sponsor tonight’s After Green Festival Party at Mars Bar. If you’re in San Francisco, we invite you to join other green leaders at the event to network and discuss how we can encourage environmental sustainability to change the world. But of course, exciting green innovation and dialogue should not be limited to one location. For example, the story of our clients Tim and Charles Heppner reminds us all that you don’t have to be in San Francisco to implement a ‘do-it-yourself’ approach to ‘greening’ the world.
Brothers Tim and Charles Heppner are rebuilding a 100 year-old wood frame single family residence on the South Side of Chicago, and are implementing energy efficiency improvements that will make it the greenest home in the city! Many DIY projects focus on interior finishes or fixtures while missing the energy basics, but here they are addressed head-on. In addition to the usual insulating strategies, triple-glazed windows with deep overhangs will be used for passive solar heating. The home will have no incandescent lights (perhaps a first in modern Chicago renovation). A shallow hydronic earth-loop will preheat or precool air entering the energy recovery ventilator – this simplified take on a ground-source heat pump (minus the heat pump) may also be a first in Chicago. Rough-ins for future solar electric or hot water panels will make it easy for the brothers to add these features over time.
Tim and Charles began work on this project by deconstructing the internal structure of the original house, reclaiming hundreds of linear feet of old growth forest wood framing, hardwood flooring, sub-flooring and joists. They also recycled all the metal, concrete, glass blocks and windows with the assistance of a local scrapper. All their new materials are required to meet at least one of the following criteria: sustainable, durable, recycled/recovered content, produced locally, low or no VOC, formaldehyde free, plantation grown, rapidly renewable, or FSC certified. They intend to utilize the reclaimed materials for framing up window openings, reinstalling hardwood flooring and building custom kitchen cabinets.
The home takes advantage of the ample property surrounding it by including a large rain garden and bioswale in addition to a vegetated garage roof. Crushed limestone will be used in place of concrete for all sidewalks, addressing both stormwater management and urban heat island. A new reflective metal roof will be installed – a rarity in the shingle-loving Midwest.
We are really proud to be a part of Tim and Charles’ project. Watch and listen to their story and let it inspire you to change the world.
Let’s compare two recent stories from the Home Front.
First, here’s a story, courtesy of The Wall Street Journal. In 2006, Nanci Puerto refinanced her house near San Francisco for $637,288. She and her husband “take home a combined $70,000 a year.” According to the Journal, “Each month, she makes the minimum payment on her loan, $2,416. At the same time, she watches the outstanding principal swell since that payment doesn’t fully cover the interest costs. Now she owes IndyMac $707,000 on a house that the county tax assessor says is only worth $410,000.”
The other story is from The New York Times. Todd Lawrence of Norwich Connecticut “has a traditional 30-year mortgage that he has no trouble paying every month.” Home prices in his area have fallen so much that he now owes more on his home than its market value. “’Why am I being punished for having bought a house I could afford?’ he asked. ‘I am beginning to think I would have rocks in my head if I keep paying my mortgage.’”
Now we’ll do a little math. It takes a monthly payment of $3,820 to fully amortize a loan of $637,288 at 6% interest over 30 years. Just the interest, again at 6%, on $637,288, comes to $3,185 month. And, of course, these amounts do not include real estate taxes and homeowners insurance. The fully amortizing payment is equivalent to about 65% of the Puertos’ take home pay, which is about double the rule of thumb that housing costs should be a third of net household income. No responsible lender would have made Ms Puerto a conventional, fully amortizing mortgage for $637,288. Only an irresponsible lender would have made it.
The efforts that the FDIC, which now owns IndyMac, is making to keep Mr and Mrs Puerto in their home are laudable. Restructuring Ms Puerto’s loan does far more than benefit her family. It helps the local community by saving yet another house from foreclosure, and that, in its small way, benefits the whole country. But our little math exercise cuts both ways, and we shouldn’t automatically picture Ms Puerto purely as a victim of IndyMac. She was also a gambler. She bet that the value of her home would keep appreciating. Then she could keep refinancing at “teaser” rates that would keep the payments low indefinitely. She lost.
But Mr Lawrence lost too, and he didn’t even realize he was playing. The nationwide run-up in home values caused by cheap and easy credit has led to a vicious double-digit devaluation in nearly every part of the United States. Mr Lawrence’s problem underlines an even greater danger than that of the Puertos. Ms Puerto wants to pay, but can’t. Mr Lawrence can pay, but is wondering if he should. Creditworthiness is defined not just as the ability to pay, but also the willingness to pay. Sorting out the mortgage mess must be done fairly, but rigorously. Ms Puerto must be helped without making Mr Lawrence feel like a sucker.
Note: Ms Puerto’s story appears on page 1 of the November 1 Journal in “FDIC Plan Tests Limits of Leniency” by Michael M. Phillips and Ruth Simon. Mr Lawrence’s story is in a page 1 Times story on October 31 called “Mortgage Plan May Aid Many and Irk Others” by David Streitfeld.
Yesterday’s presidential election set our country abuzz with unprecedented events. Few places quivered with Election Day excitement like the city of Chicago. ShoreBank’s new Central Loop branch had to close at 3 p.m. on Election Day to comply with the City’s preparation for the Grant Park party. My colleagues and I used that time to vote.
Voting is a critical component of our collective American community. As a result, it did not surprise me to learn that ShoreBank, a community development bank, implemented a voter initiative program to enable and encourage its communities to vote.
From August 6 through October 6, ShoreBank provided voter registration forms in all of its branches for customers and neighborhood residents to register to vote. At least 350 people participated, and it was the fourth year of the program. However, what I love about ShoreBank is that they built a contest around voter registration, asking ShoreBank employees, customers, and neighbors to deposit their voting receipts in a marked bowls at their local ShoreBank branches. ShoreBank then gave a check to the branch with the highest quantity of voting receipts, to be donated to a local nonprofit of the branch manager’s choosing. Why not help to change the world for a nonprofit through the electoral process?
This credit crunch has certainly highlighted the fact that businesses and consumers are not separated into Main Street and Wall Street. Voting integrates all of us, and I am very proud to be part of an organization that both recognizes that fact and empowers it.
Since the last time I blogged, the ongoing turmoil in financial and economic markets has only increased. These conditions can make people uneasy about the safety of their money. Nobody likes to feel that their money is not safe.
Thankfully, the FDIC recently increased the deposit insurance cap from $100,000 to $250,000 until December 31, 2009. This means that FDIC-member institutions—like ShoreBank —can assure customers that their deposits are insured up to $250,000. Thus, the FDIC guarantees those deposits and would refund consumers the insured amount to customers in case of a bank failure. This insurance brings a peace of mind to folks who are concerned about the safety of their money as the unusual economic conditions continue.
In case you’re not familiar, the Federal Deposit Insurance Corporation (the FDIC) in an independent US government entity that ensures that deposits in banks are insured up to a certain amount per depositor.
The ‘per depositor’ notion sometimes makes the matter feel complicated to some people, but it’s actually pretty simple. FDIC insurance is on a per depositor, per ownership type, per bank basis. “Ownership types” can include checking accounts, NOW accounts, money market deposit accounts, savings accounts, certificates of deposits, cashier’s checks, and interest checks. So if you have $250,001 in all of those products, the FDIC will only insure you for $250,000. The safest choice is to only keep the maximum FDIC covered amount per account type.
The below graph can help clarify the ownership types and FDIC coverage one family can enjoy at a single bank:
I know that the credit crunch is a bit scary for the average consumer. That is why ShoreBank is proud to be a member of FDIC and why we feel it is important that you understand how the FDIC protects your deposits at ShoreBank.
The foreclosure crisis and current tough economic times this fall make it hard for me to focus on thoughts of gratitude. But that is exactly the reason that I feel now is the time to focus on being thankful. Reviewing the stories behind the borrowers in our Rescue Mortgage Program, I find myself grateful that ShoreBank is able to continue to reach out to people trapped in predatory loans. When ShoreBank provides a homeowner with refinancing into a 30-year fixed-rate loan means children can stay in their house for Thanksgiving; it means parents can sleep better at night, and it means that neighborhoods do not become wastelands of abandoned foreclosed homes. I am so lucky to play a small part in this process, and so thrilled to work with good colleagues that do the tough lending day in and day out.
Beyond feeling thankful for having such wonderful and rewarding work, many other things make me grateful for the life I have. I am so thankful for my family, particularly my zany husband who keeps me laughing even when the economy makes me cry; my children, young adults both spreading their wings and testing themselves in one of the worst job markets in decades; and the wonderful circle of friends that makes my life fun and meaningful. We live in challenging times and the day-to-day crush can make me forget how wonderful it is to be alive. It is the perfect time to pause and remember the intangibles that make life so worth living, and to reconnect and warm myself with the feeling of gratitude. As we close this work week I wish you all a Happy Thanksgiving.
