Dennis' Mortgage Blog

Question of the week:  Why do I need a Trust?

Answer:  Because people get hit by busses.  When I suggest to a client that they contact an attorney that specializes in Estate Planning and writing Family Trusts the standard response is, “Oh I/we’ve been meaning to do that….” Or, if a new home owner, “I’m single I don’t think I need a trust.”    

Let’s deal with who needs a trust first.  Everyone.  If you own property or have what can be described as significant assets, you need a trust, otherwise when you die (not if) your estate, which is everything you own regardless of value, becomes under the control of the state.  You have a savings account with $3,500 in it and get hit by a bus, can your brother or sister walk into the bank and say, “My brother died can I have his money?”  What happens to your car, can they legally sell it?  Now imagine a house with a $350,000 mortgage that is worth $475,000.  Who has the ability to sell that house? What about the mortgage payments until it is sold?

Many of my clients are single or in a committed or formalized domestic partnership relationship, just as important to have a trust.  What if your partner gets hit by a bus and there is no trust or estate plan?  Looks like his brothers and sisters, or children from a prior relationship, just became your partners in your home.  If not it can cost you plenty of legal fees to keep them off title and any claims to his estate that you share. 

Estate plans do not just deal with property and assets, they also detail who will have guardianship of your children and providing for their future should a bus make them orphans. 

I use the term “hit by a bus” instead of saying “if you die” because very few of us know when, or about when, we will die.  Getting “hit by a bus” is a good metaphor for when you die, because it may be an accident, you may be with others at the time, and you will not know when it will occur.  If you are hit by a bus tomorrow are your assets protected and will pass along to those you would intend them to be passed along to?  What about your children?  What if you spouse or partner get hit by a bus tomorrow, are you protected and able to retain all assets you consider joint? 

Not easy questions for us to think about, and very easy to put off the answers and solutions.  But there are thousands of busses on the road every day and people get hit.  Make sure your loved ones are spared the onerous dealings with the legal system merely to remain in their homes, especially while they are grieving your loss, contact an attorney that specializes in Estate Planning.  Put it on your calendar now to call on Monday.

If you already have a trust and it has not been reviewed in at least five years I suggest you make that appointment as well, laws and assets have probably changed and you want to make sure your trust is protected.

Have a question for me?  Ask me!

Bernanke comments highlight of slow economic week.  Initial unemployment claims were down only slightly to 456,000 and continuing claims were at 4.5 million ex-workers.  Most of the market movements were off comments from Federal Reserve Chairman Ben Bernanke.  In several comments to various groups, including Congress, he commented that the recovery is happening, slowly.  He does see a slow impact of the private sector and until it edges out the public sector in leading the recovery we will be crawling along.  Bernanke lamented the lack of credit being extended to small and medium size businesses.  Recognizing the importance of small business in generating employment, Bernanke indicated that until those businesses can obtain credit to expand inventories and services employment growth will lag and drag on any recovery.

Cash, cash, cash.    It seems that businesses are sitting on tons of cash, according to the Federal Reserve $1.64 Trillion in cash through March 2010, this is up 26% from the 1^st quarter of 2009.  Unwilling to try to endure another credit crunch companies are sitting on stockpiles of cash awaiting what may happen next and calculating how regulatory changes will impact their bottom lines.  Sitting on cash means they are not investing and not hiring with the money—two things that would help the economy.  Some companies are so laden with cash that they are upping their quarterly dividends to share some of it with their stockholders.

Mortgage applications drop.  For the first time in four weeks the Mortgage Bankers Association has announced in their Weekly Applications survey that total mortgage applications dropped a seasonally adjusted 12.2% for the week June 4^th.  Continuing a trend following the expiration of the IRS home buyers tax credit April 30^th applications for purchase transactions dropped for the fifth week in a row.  For the week of Memorial Day 2010 purchase applications were 30% lower than the same week in 2009.  The home buyer tax credit pulled a lot of buyers into the market early and pulled buyers out of the May and now June real estate markets.

What to watch.  Dow.  In general watch the major stock indices.  If you hear that the Dow surged 200 points then you can expect that rates took a jump that day. If you hear that the Dow lost ground and went below 10,000 again expect rates to move a bit lower.  Not huge jumps and dumps, but maybe a quarter or half a point in fee, or if really big moves perhaps an eighth (0.125%) in rate.  Over the week if the Dow is higher so will rates be.  Again this is a sweeping generalization but a pretty good indicator for direction.

Rates for Friday June 11, 2010: Rates gained early in the week a little and then lost all gains on Thursday (when the Dow surged over 200 points).  Look at the FHA rates, wow!

FIXED RATE MORTGAGES AT COST OF 1 POINT*

30 year conventional 4.5%                                FLAT

30 year conforming-jumbo 4.75%                     FLAT

30 year FHA    4.375%                                    FLAT

30 year FHA jumbo 4.75%                              FLAT

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, and period rate is locked. 

Please note that rates quoted are based on average of several lenders for a purchase transaction with 20% down payment and a minimum FICO score of 740; APR is not quoted as it is dependent upon specific loan amounts, lenders and services selected.  Numbers provided are for comparative purposes only.

Last weekend of the school year! A great weekend to buy a house so give me a call.  If you think you can benefit from a refinance, or if you think your neighbor can, or your sister can, or your nephew can, or your boss can, or your…..!

Not only is it a good weekend to buy a house, it is a great weekend to reconnect with old friends, pick up the phone and get together for a few cold beverages and some burgers on the grill!

Have a great week,

Dennis