9 steps to the American Dream

Book Review: 'The Money Class'

By Tara-Nicholle Nelson, Tuesday, March 22, 2011.

Inman News™

Image courtesy of Random House.

Book Review
Title: "The Money Class"
Author: Suze Orman
Publisher: Spiegel & Grau, 2011; 304 pages; $26

"The American Dream is dead." That’s the provocative headline that topped some news stories announcing Suze Orman’s book tour for her latest release, "The Money Class." The headline belied a core message of the book, as reflected in its subtitle: "Learn to Create Your New American Dream."

Read "The Money Class" and you’ll see — Orman’s message is less that the American Dream is dead, but that it’s molting. If it’s dead or dying, it’s doing so in order that a new dream can be born, Orman argues.

Orman sets the book up by quoting stats and trends to make her case that the dream is dead. And that’s not hard to do — rampant unemployment, foreclosure and bankruptcy rates at the end of last year, when the book was written, were all at all-time or lifetime record highs.

The book presents a laundry list of ways in which the American Dream of homeownership, job opportunities and upward financial mobility has turned into an unattainable fantasy, or even a nightmare, for many Americans. Orman then proposes to teach readers nine courses on individual financial subjects, which she says will help them build a more conservative, sustainable and personalized dream for their own lives.

Orman’s been doing the financial guru drill for a long time, now, and her understanding of Americans’ financial pain points — derived, at least in part, from her live Q-and-A call-in show — is clear in the subject matter covered in this book. So is Orman’s trademark financially conservative, point-blank, "what-are-you-thinking?" approach to money matters.

Her facility with simple, memorable, concrete money rules-cum-catchphrases is also apparent throughout the book. Adages like "the pleasure of saving is equal to the pleasure of spending" and "live below your means, but within your needs" irritate some financial sophisticates as oversimplifications that are tailored more for TV sound bite-dom than for depth. But many, everyday people who seek to have a simple, stable financial system will find that Orman’s advice resonates with their frustration and offers some hope for getting back in control of their finances.

Given that few people make dramatic financial change, I suspect that even Orman’s most conservative advice — such as don’t buy a home without 20 percent down, or don’t spend more than 25 percent of your take-home pay on your housing expenses — will rarely be followed to the letter. What’s more likely is that her advice will temper the financial impulsivity and overextending that got so many in trouble in the recent past.

For example, Orman says the most you should accept as a down-payment gift (gift!) is 5 percent of the cost of the home, or a quarter of the minimum total down payment Orman says buyers should put down. While I doubt you’ll see many people refusing down-payment gifts on Orman’s advice, you might see some reconsider how that gift is impacting the financial situation of their relative who’s giving the gift — another Orman recommendation.

"The Money Class" offers Orman’s signature, black-and-white money advice on family, home, career and retirement planning. Retirement planning is covered in segments tailored to those in their 20s and 30s, 40s and 50s, and those actually living in retirement.

Orman oscillates back and forth between sound bites ("if it doesn’t feel right, it isn’t right") to providing fairly detailed advice on each of these topics and a long list of subtopics.

In the section on home, for example, Orman quips, "A home is a savings account, not a hot stock," and also makes very clear mandates for what is smart buying and ownership in her world.

Underwater? Suze says if you can’t afford to pay the mortgage, the responsible thing to do is sell the place and use your savings to pay the difference. Unless you’re 50 percent or more underwater, in which case she says walking away is OK. That seems a little arbitrary to me — I’m not sure how Orman arrives at 50 percent negative equity as the threshold that turns walking away from an irresponsible to an acceptable act.

Orman’s rules and dictates lack some of the aspirational aggressiveness to move on up that some still hold to be part of their own American dreams. I personally know many single women, ethnic minorities, suburbanites and city-dwellers who would never have owned a home if they waited until they had saved up 20 percent, and are much more prosperous for having been able to become homeowners (myself included!).

However, many recession-weary Americans, looking to fatten up their finances for the next economic winter, will find Orman’s advice meets them right where they are.

I was pleasantly surprised to see Orman offer personal finance advice to entrepreneurs, as an increasing number of Americans find themselves being "inspired" by unemployment to take on freelance gigs and otherwise start their own businesses.

Suze Orman often provokes love or intense dislike among those within reach of her voice. If she always gives you hives, don’t read this book — it is Orman giving her signature firm, conservative rules, with few exceptions allowed. But if you are seeking what Orman calls a "long-term rehabilitation plan" for your finances, want some very clear and simple rules by which to live your financial life, and you usually like what Orman has to say, you’ll probably be very pleased with "The Money Class."

Readers should make sure to check in with their own financial advisers for more personalized advice, though, especially in the realm of mortgage, tax and retirement planning.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

       

      

    

    

     

      

      

   

  

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Rapportive is a free browser add-on developed for Firefox, Chrome and Safari that allows you to view your contacts’ social media profiles and activity right inside Gmail. The add-on works with both Gmail and Google Apps. Give it a try! It’s quick and easy to set up and it truly enhances your traditional mail client.

There are a handful of popular social CRM (customer relationship management) tools available that integrate with your mail client.

Last month, RIM (Research in Motion) announced the acquisition of Gist, one of the more widely used applications that enhance email contacts by displaying profiles that includes blogs, social networks and more. The future of Gist and how BlackBerry users will utilize the product remains to be seen.

The well-established Microsoft Outlook add-on Xobni will finally be releasing the tool for Gmail and are now accepting registration for a private beta preview.

However, since making the transition to Google Apps at Residential Properties Ltd, I have been enjoying Rapportive.

What is Rapportive?

Rapportive was launched in January 2010 by three developers: Rahul Vohra, Martin Kleppman and Sam Stokes. The successful venture capital firm Y Combinator, whose portfolio also includes Dropbox, reddit and Posterous, funds the company. Interestingly enough, it is also funded by Paul Buchheit, the creator of Gmail.

Unlike other similar services, Rapportive streamlines your contacts’ social profiles directly in Gmail without having to leave the mail client and access a separate CRM application. Having one less site or service to log into is always refreshing.

After a quick installation of the extension, connecting social networks is super easy, and all of the major networks including Facebook, Twitter and LinkedIn are supported.

After your networks are added, just open an email and your contacts profile is displayed in the side bar with a wealth of information including a profile picture, Twitter user name with recent tweets, the latest Facebook activity and links to other social networks.

I also found the add-on to be an extremely useful discovery tool as well. You can follow a contact on Twitter or send a Facebook request right from the mail client. Editing your own profile can be accomplished right in Gmail as well. Also, one of my favorite features of Rapportive is the ability to assign a “note” to your contact, which is private and can be viewed only by you.

How does Rapportive obtain its data?

Rapportive states on their site that they “combine information from several sources; at the moment, these are Academia.edu, Bitbucket, CrunchBase, Econsultancy, Facebook, Flickr, GitHub, Google Profiles, Gravatar, LinkedIn, Plancast, Posterous, Rapleaf, Stack Overflow, Tungle.me and Twitter, as well as thousands of organisations’ public websites.” You can learn more about this and their privacy policies here.

Raplets

Another feature that differentiates Rapportive from other services is the ability for vendors to build extensions, which are called Raplets. There are few good extensions that can easily be added, including BatchBook, MailChimp and Klout. Raplets can easily be added or removed right from inside Gmail.

Rapportive is a handy little tool that brings social media right to your inbox. The add-on is lightweight and fast loading — I would love to see a mobile app. Those who spend a fair amount of time in Gmail will appreciate having everything integrated in the mail client without having to access a third-party CRM application.

Tom Flanagan is the director of information technology at Residential Properties Ltd. in Providence, R.I. You can contact him at tflanagan@residentialproperties.com or @tflan on Twitter.

    

Cato Institute analyst Mark Calabria in his piece, Housing Market Will Be Fine Without 30-Year Fixed Loans (Investor’s Business Daily, March 17),  argues that the stability provided to households from the 30-year, fixed-rate mortgage comes with a big contingent liability: the bailout of Fannie Mae and Freddie Mac.

As Calabria puts it, although the 30-year fixed-rate mortgage has given borrowers some stability in their monthly mortgage payment, “it has done so by exposing households, as taxpayers, to massive, hard-to-predict contingent liabilities. There’s been no bigger ‘hidden fees’ or ‘payment shock’ in the mortgage market than the cost of the bailout of Fannie Mae and Freddie Mac.”

But surely Calabria knows that it wasn’t the 30-year, fixed-rate mortgage that forced the two secondary mortgage market companies to need a bailout; it was their dabbling in subprime, stated-income, Alt-A, and other exotic loans while they were playing catch-up to Wall Street players in the private-label mortgage securities market. The Obama administration, in its white paper on reforming Fannie and Freddie, makes this clear:

“Fannie Mae and Freddie Mac were largely on the sidelines while private markets generated increasingly risky mortgages. Between 2001 and 2005, private-label securitizations of Alt-A and subprime mortgages grew fivefold, yet Fannie Mae and Freddie Mac continued to primarily guarantee fully documented, high-quality mortgages. But as their combined market share declined—from nearly 70 percent of new originations in 2003 to 40 percent in 2006—Fannie Mae and Freddie Mac pursued riskier business to raise their market share and increase profits. Not only did they expand their guarantees to new and riskier products, but they also increased their holdings of some of these riskier mortgages on their own balance sheets.”

Calabria says that as long as the federal government guarantees the 30-year, fixed rate mortgage, someone will have to pay for that subsidy. But it wasn’t until the two government-sponsored enterprises strayed from their role backing the 30-year, fixed rate mortgage that taxpayers got hit with a bill to pay for the subsidy to those two companies. On that basis, if the concern is over reducing taxpayer exposure to bad loans that cost taxpayers money, then ensuring the government retains a role supporting the 30-year, fixed rate mortgage is arguably what we should be encouraging.

And to be clear: consumers—i.e., taxpayers—have been unambiguous in their preference for long-term, fixed-rate mortgage financing. About 90 percent of those that finance their purchase choose that type of loan.

COLUMBUS (AP) — Anna Lou picks up the phone in a small basement room at Capital Law School’s downtown Columbus campus.

“Hi, is this Lydia?” she asks after introducing herself. “I’m calling about your foreclosure.”

In this beige windowless room, young law students with promising futures encounter a harsh and foreign reality firsthand.

As part of a novel program, they are trying to help homeowners keep their homes.

Capital Law professor Peggy Cordray launched the pro-bono program in the fall after wondering how students could help in the foreclosure crisis.

“I thought the program would be helpful to the students, but also to the homeowners,” she said.

For the 50 participating students, the experience can be eye-opening.

“You read about how everyone is living beyond their means, but that hasn’t been the case with the people I’ve spoken with,” said Thomas Siwo, a 26-year-old student from Xenia who has worked with 15 homeowners. “Many of these people have been in their home 15 or 20 years and are in their 50s or 60s.”

For the 160 homeowners who have gone through the program, the experience can help smooth a rocky road.

“I didn’t realize I needed the things I needed until Capital called me,” said Kenneth Mattox, who is trying to keep from losing the Groveport home he bought in 1992. “It definitely made a difference because if I didn’t have those documents to take with me, they would have thrown my modification out.”

For those, like Cordray, who are interested in helping people stay in their homes, the program provides an opportunity to tackle one of the biggest problems in the foreclosure process: the lack of homeowner participation.

For all the efforts devoted to keeping foreclosed homeowners in place, the track record for most programs is discouraging. One reason, lenders and advocates agree, is that few homeowners pursue a settlement and fewer still see the process through.

Homeowners might think their case is hopeless and ignore the problem until it’s too late, or they simply might be overwhelmed by red tape.

Last year, for example, 9,649 foreclosure cases were filed in Franklin County. Of those, about 1,800 homeowners, less than 20 percent, pursued mediation through the county’s Mediation Foreclosure Project.

About half of those 1,800 actually showed up at mediation. And about half of those who showed up experienced some positive outcome such as a loan modification, said Eileen Pruett, the project’s administrator.

In the hopes of raising those numbers, Pruett worked with Cordray and others to design Capital’s program.

“One of the things we find is homeowners are very intimidated in even coming to court,” Pruett said. “After they file their request for mediation with us, we thought Capital could walk them through what they could expect.”

Capital students are prohibited from dispensing legal advice. Instead, they tell homeowners how to prepare for mediation. Such guidance ranges from the abstract (“Remember, mediation is not a trial”) to the practical (“Park in the Fulton Street garage, on Fulton between Third and High”).

After going through the process on Friday with Siwo, Dennis Borowski said he felt better.

“I found it really helpful,” said Borowski, whose east Columbus home went into foreclosure in December. “This is complex, it’s a challenge. And I’m not a lawyer.”

Cordray is working on packaging the program idea to offer other law schools. But first, she might modify it to include follow-up questions. Now, students speak once with the homeowners and never learn the outcomes of the cases.

As Siwo puts it, “After every call, I wonder what happened with that person.”

But there is at least some evidence that the program is making a difference.

Recently, Mattox received a call from his lender, Fifth Third Bank, saying he qualified for a loan modification that he thinks will allow him to keep his Groveport home.

 

The enormous home on 15th Street in Boulder, Colo., has had a number of residents in the past 14 years, but it might always be known as “the Ramsey house.”

Stuck in the popular mindset from the days when it was marked off in yellow crime-scene tape — made familiar in photos broadcast thousands of times — it’s the place where the body of 6-year-old JonBenet Ramsey was found in December 1996. For years, the crime was the talk of tabloid television reports and speculation. Her murder remains unsolved.

The house is in the news again, this time for the simple fact that it’s for sale, even though it isn’t the first time it has been on the market since the child’s death.

Yet when a Boulder television station learned of the listing in February, the news inspired a reporter to announce that news from a standup shot on its now-familiar front sidewalk.

“I heard from media all over,” said real estate agent Neil Kearney, who is working with the home’s owners. ” ‘Inside Edition’ called and asked if the owners would let them into the house. I told them, ‘You can send your request in writing,’ but they never did.”

more…

Monday, March 21st, 2011, 5:54 pm

A bill introduced to the Nevada State Assembly would give authorities the ability to charge borrowers with a felony for willfully damaging a home during the foreclosure process.

Nevada Assemblyman Peter Goicoechea, a Republican, introduced the proposed legislation Monday, and it was referred to the state judiciary committee.

According to the bill, anyone who occupies a home, including the borrower or even a tenant, can be charged with a felony if they damage the property while in the foreclosure process. Authorities would have to prove the vandal had personal knowledge of the pending foreclosure or any judicial proceeding.

Nevada has held the highest foreclosure rate of any state for more than four years. There, one in every 119 homes received a filing in February, according to RealtyTrac.

Damaged property is a major concern for banks holding these properties, the real estate agents charged with reselling them and neighbors forced to live next to them.

Oana Sterlacci, an REO broker and owner of Sellstate Realty Solutions in Las Vegas, described in a previous interview a city littered with gutted properties. Storage units throughout the city, she said, were filled with stolen appliances.

In June 2010, Fannie Mae said it was sifting through loan data to hold strategic defaulters accountable. It would then charge borrowers with the deficiency of the REO sale, which includes any repairs to damaged homes.

Goicoechea's office did not immediately reply to requests for comment.

Write to Jon Prior.

Follow him on Twitter @JonAPrior.