The Arizona Department of Environmental Quality has made several changes in the management structure at its Air Quality Division.
Ira Domsky was named director of information technology and a science adviser. He had been acting director since January. Domsky has been with the department for 26 years and previously served as deputy director.
Eric Massey, who has been with ADEQ for 11 years as a manager of air quality compliance and permitting, was named director cash advance loan. He had been acting deputy director since January.
Trevor Baggiore will become the division’s new deputy director. He has been with the department for nine years.
fast cash loan is fast becoming a viable financial option for consumers who need a few extra dollars.
Lawmakers ripped into BP chief Tony Hayward on Thursday, accusing him of being ill-prepared for congressional testimony and not cooperating with an investigation into the Gulf of Mexico oil spill.
In Hayward’s first congressional appearance since the April 20 disaster, lawmakers wanted to know if BP had cut corners in an effort to save money in the run up to the explosion.
Questions during the 7-1/2 hour hearing, which included two recesses, focused on the well’s design and the measures taken while BP was attempting to seal it before it exploded.
"Did BP make a fundamental misjudgment" in using one long piece of well casing instead of many shorter pieces, as other oil companies said they would have done, asked Rep. Henry Waxman, D-Calif.
"I wasn’t involved in that decision," replied Hayward, saying that the single piece was better for the well’s long-term stability.
Waxman produced transcripts from BP’s engineers saying that the single casing was "unlikely to be successful." Waxman said BP went ahead with it anyway to save $7 to $10 million.
Hayward said he was "not prepared to draw conclusions about this accident until the investigation is complete."
"This is an investigation," said Waxman. "Are you cooperating with other investigations? Because they’re going to have a hard time reaching a conclusion if you stonewall them, which it appears you are doing today."
Rep. John Dingell, D-Mich., wanted to know how much it would have cost BP to perform additional tests on the cement in the well.
"I cannot say," said Hayward.
Dingell also wanted to know how much it would have cost to circulate a heavier drilling mud through the pipes, which may have prevented the explosion.
"I cannot say," replied Hayward, again.
"We thought we’d have more candid responses to our questions," said Rep. Bart Stupak, D-Mich. " You’re the CEO, you headed exploration, you know what’s going on."
Criticizing Hayward for his lack of answers became a theme of the meeting.
"Clearly Mr. Hayward is not prepared to answer the questions," said Rep. Joe Barton, R-Texas. "Any one of us could do a better job."
Apology flap
Barton may have been trying to deflect criticism after an earlier incident in which he called BP’s agreement to set up a $20 billion fund for spill victims "a shakedown" by the Obama administration, and apologized to BP.
The comment drew immediate criticism, with Rep. Edward Markey saying the fund is "the American government working at its best," and both the White House and Speaker of the House Nancy Pelosi, D-Calif. issuing statements blasting Barton.
There were reports some Republican lawmakers from Gulf states were asking him to resign as ranking member of the committee, and Republican leaders issued a statement saying "Congressman Barton’s statements this morning were wrong."
Barton later retracted his apology to BP and said he was sorry for using the term shakedown.
"BP is responsible for this accident, should be held responsible, and should in every way do everything possible to make good on the consequences," he said. "If anything I’ve said this morning has been misconstrued in an opposite effect, I want to apologize."
Hayward gets emotional
Tensions in the hearing were apparent before Hayward began testifying, when he was was interrupted by a woman shouting unintelligibly, her face and hands painted with oil.
After a brief struggle with police, she was removed from the room and arrested. U.S. Capitol Police say the woman was charged with unlawful conduct.
Hayward began his testimony by waiving his right to legal counsel.
He struck an emotional tone in his prepared remarks, acknowledging the loss of life and apologizing to residents of the Gulf Coast.
"When I learned that 11 men had lost their lives in the explosion and fire on the Deepwater Horizon, I was personally devastated," he said. "I want to offer my sincere condolences to their family and friends."
He went on to talk about the Gulf Coast economy and environment.
"I want to speak directly to the people who live and work in the Gulf region: I know that this incident has profoundly impacted lives and caused turmoil, and I deeply regret that," he said.
Hayward had been criticized previously for a sometimes callous approach to the disaster, especially the comment a few weeks back that he’d "like his life back" and that the "environmental impact of this disaster is likely to have been very, very modest."
In opening statements short on bluster and long on details, lawmakers outlined a series of steps BP took in the lead-up to the explosion that appeared to put cost above safety.
"Why would a team be sent home before performing a test?" on the well, asked Rep. Mike Doyle, D-Pa., referring to one of the decisions in question. "BP had several warnings, but instead of treating the well with caution, it seems BP was only interested was completing the well quickly and cheaply."
The well exploded 59 days ago, killing 11 workers. Millions of gallons of oil are still spewing into the Gulf, resulting in what some are calling the worst environmental disaster in American history.
According to congressional documents and interviews with workers on the rig when it exploded, it appears BP chose faster, cheaper techniques for drilling this well, sometimes against the advice of their sub-contractors.
Hayward said there was "no evidence of reckless behavior," contradicting President Obama, who referred to the company’s "recklessness" during Tuesday night’s address to the nation.
Hayward also said no BP employees have been laid off as a result of the accident, and that he did not believe cost cutting led to the explosion.
"If there’s any evidence that anybody put costs above safety I will take action," he said.
"I can’t believe you said that," retorted Waxman. "Of course there’s evidence."
– CNN staff contributed to this report
General Motors has banned the use of the Chevy name in all of its corporate communications. From now on, the bow-tie brand will go by its proper name, Chevrolet.
It’s OK if you still call your car a Chevy. It’s just that GM won’t.
The problem, said Alan Batey, vice president of sales for Chevrolet in the U.S., is that in today’s Internet-connected world, documents and Web sites created for an American audience can be read by anyone, anywhere. And the use of two different names for one car brand — Chevy and Chevrolet — can cause confusion abroad.
While Chevy is a popular nickname for the brand in the U.S. and Canada, it’s not used in any of the other 130 or so countries where the brand is sold.
"I get calls from international colleagues asking me ‘What is a Chevy," said German-born GM spokesman Klaus-Peter Martin. "It takes quite a long time to explain to them."
Customers in other countries who want to learn more about Chevrolet and come across the name Chevy on a U.S.-based Web site might think it refers to a separate brand, he said.
But Chevrolet isn’t trying to shun its popular nickname, said Batey. GM still loves Chevy.
"[The nickname] says there’s a rapport and a relationship with the brand," said Batey bad credit payday advance. "We love it when people call us Chevy."
The memo that was sent out to GM employees even asked them not to use the Chevy name in conversation, Batey said. However, the ban on speaking the two-syllable word won’t be strictly enforced.
Existing advertising and corporate communications won’t be changed, he added, but the rule will be enforced in any materials produced from here on out.
Founded in 1911 as the Chevrolet Motor Co., Chevrolet was named for founding partner Louis Chevrolet, an early race car driver.
As part of the company’s push for global consistency, Batey added, more products — such as the upcoming Chevrolet Cruze compact car — will be sold globally using the same model name everywhere. Until now, the automaker often sold similar models under different names around the world.
"The brand is going to become an icon around the world," he said.
Since everyone already knows Chevrolet, Batey said, and everyone in the U.S. knows that it’s Chevy, Americans shouldn’t miss anything.
Terremark Worldwide said on Thursday that revenue for the fourth quarter rose 11 percent to $82.5 million, up from $74.2 million in the prior three-month period.
The Miami-based provider of IT infrastructure services (NASDAQ:TMRK) reported revenue for the fiscal year ended March 31 was $292.3 million, a 17 percent increase over the prior fiscal year.
The company reported a net loss of $1.2 million, or 2 cents a share, improved from a loss of $8.3 million or 13 cents a share in the previous quarter, but down from the same time last year when it earned $4.1 million, or 6 cents a share.
Terremark said it added 56 customers in the fourth quarter, bringing its total number to 1,350.
“With another very strong quarter and fiscal year, Terremark continues to produce the positive results that reflect the strong demand among federal and enterprise customers for our suite of industry-leading solutions across our global footprint and our proven ability to successfully execute our strategic plan,” said Manuel D. Medina, Chairman and CEO of Terremark, in a news release. “Our consecutive quarters of record bookings, robust pipeline and strategic expansion create a solid base for fiscal 2011 and a clear path for sustained growth.”
Last week, Terremark said it acquired 27 acres of land adjacent to its Network Access Point (NAP) of the Capital Region for $5 million. The company also recently opened a 72,000-square-foot headquarters building at the NAP of the Capital Region campus.
The company said it expects revenues in the first quarter to range from $77 million to $79 million. For the full fiscal year, the company raised its guidance of revenue to range from $338 million to $343 million.
Shares closed up 32 cents to $7.50 on Thursday. The 52-week high was $8.98 on Jan. 21. The 52-week low was $4.34 on July 10.
Bank of Korea Governor Lee Seong Tae kept interest rates unchanged at his final meeting, leaving it to his successor to address political pressure to stoke economic growth.
Lee held the seven-day repurchase rate at a record-low 2 percent in Seoul today after Finance Minister Yoon Jeung Hyun said this week that now “is not the right time” to boost borrowing costs. The decision was forecast by 13 of 14 economists surveyed by Bloomberg News. One expected a quarter- point increase.
The government pressed Lee, whose term expires March 31, to hold down rates as the economy shows mixed signs: growth slowed in the fourth quarter, unemployment soared in January, exports have risen for four months and manufacturers’ confidence is at a seven-year high. Since January, Governor Lee has had to accept a vice finance minister sitting in on rate meetings.
Lee appears to have decided to “leave it to his successor to deal with the Finance Ministry pressure resisting a rate hike,” said David Cohen, a Singapore-based economist at Action Economics. “The fact that inflation narrowed a little bit in the latest report gave them a good enough reason to hold off for another month.”
Stocks, Currency
The won weakened 0.2 percent to 1,132.80 per dollar at 12:02 p.m. in Seoul, according to data compiled by Bloomberg. The currency earlier rose as much as 0.4 percent to 1,126.23. The benchmark Kospi stock index fell 0.2 percent to 1,659.15 as of 11:57 a.m. in Seoul today.
The Bank of Korea said in a statement it “will maintain the accommodative policy stance for the time being in such a way as to help sustain the trend of recovery in economic activity.”
“The central bank is unlikely to change the benchmark rate in the second quarter as it will be difficult to change the stance of monetary policy as soon as a new governor is appointed and financial-market concerns over the debt in some countries still linger,” said Lim Jiwon, an economist at JPMorgan Chase & Co. in Seoul.
President Lee Myung Bak is considering five candidates to head the Bank of Korea, DongA Ilbo newspaper reported last month, citing unidentified central bank and government officials.
These include Euh Yoon Dae, head of a presidential council set up to promote South Korea internationally; ex-Finance Minister Kang Man Soo; Kim Jong Chang, head of the Financial Supervisory Service; Park Cheul, a former deputy governor of the central bank; and Kim Choong Soo, envoy to the Paris-based Organization for Economic Cooperation and Development, according to the newspaper.
Markets Unconcerned
The failure to announce Governor Lee’s replacement three weeks before his term expires hasn’t spooked the markets instant credit report. The Kospi index has risen 3.8 percent in the past month and the won gained 2.2 percent over the same period.
Finance Minister Yoon told reporters on March 8 that “it is the government’s firm belief that it is not the right time for rate hikes” as business investment is weak and prices are at manageable levels.
Lee Sung Kwon, an economist at Shinhan Investment Corp. in Seoul, said policy makers may have held off on a rate increase as “concerns over tightening measures in China remain.”
China, South Korea’s biggest export market, in February ordered banks to set aside more deposits as reserves for the second time in a month to avert asset bubbles. In the fourth quarter, Chinese gross domestic product increased 10.7 percent from a year earlier, the fastest pace since 2007.
Unemployment Rises
In contrast, South Korea’s economy expanded 0.2 percent in the fourth quarter and unemployment surged to a 10-year high of 4.8 percent in January. President Lee has put unemployment at the top of the political agenda, vowing to cut the average jobless rate to about 3 percent this year.
The government boosted this year’s budget by 3 percent to 292.8 trillion won ($258 billion) and will accelerate distribution of funds as it seeks to maintain the recovery.
The central bank said the slowdown in growth in the fourth quarter was a temporary adjustment. In November, it widened the annual inflation target range to between 2 percent and 4 percent. Consumer prices increased 2.7 percent in February.
Asia’s fourth-largest economy is showing signs of strengthening. Exports climbed 31 percent in February from a year earlier, the fourth monthly increase. Samsung Electronics Co., the world’s second-largest mobile-phone maker, said its handset shipments may expand about a fifth this year, helped by demand for smartphones.
Manufacturers’ confidence for March rose to the highest level since the fourth quarter of 2002, when the Bank of Korea published its confidence survey on a quarterly basis.
The central bank’s failure to raise rates last year confounded analysts, who forecast it to be one of the first in Asia to move after the economy expanded 3.2 percent in the third quarter, the fastest pace in seven years. Since then, Australia, China, India and Vietnam have tightened monetary policy as Asia leads the recovery from the global recession.
The number of Americans filing first-time claims for unemployment insurance fell sharply last week to the lowest level in 17 months, the government said Thursday. Analysts had expected an increase.
There were 432,000 initial jobless claims filed in the week ended Dec. 26, down 22,000 from the previous week’s revised 454,000, the Labor Department said. The figure is the lowest since July 19, 2008, when there were 413,000 claims filed.
A consensus estimate of economists surveyed by Briefing.com expected claims to jump to 460,000.
The 4-week moving average of initial claims totaled 460,250, down 5,500 from the previous week’s revised average of 465,750.
"It’s encouraging to see that we’re continuing to move in the right direction toward 400,000 claims," said Tim Quinlan, economic analyst at Wells Fargo. "We’re certainly off the highs we saw earlier this year.
Jobless claims have been trending downward since the end of March, when they peaked at 674,000, the highest figure since 1982.
Continuing claims: The government said 4,981,000 people filed continuing claims in the week ended Dec. 19, the most recent data available. That’s 57,000 down from the preceding week’s revised 5,038,000 claims.
The 4-week moving average for ongoing claims fell by 122,250 to 5,101,250 from the previous week’s revised 5,223,250.
But the slide may signal that more filers are dropping off those rolls into extended benefits.
Continuing claims reflect people filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks business card design. The figures do not include those who have moved to state or federal extensions, or people whose benefits have expired.
Congress passed legislation last month to extend federally paid benefits up to 99 weeks, depending on the state, but the law only helps those who exhaust their federal unemployment lifelines by the year’s end.
Lawmakers in the House and the Senate recently passed measures to extend the filing deadline through the end of February. The President is expected to sign the legislation soon.
Both chambers initially introduced bills to push the deadline to apply for benefits through 2010 or beyond, but Democratic leaders in the House scaled back the effort in hopes of getting the bill through the Senate more quickly.
State-by-state: Jobless claims in 10 states declined by more than 1,000 for the week ended Dec. 19, the most recent data available. Claims in Tennessee dropped the most, by 2,972.
A total of 12 states said claims increased by more than 1,000. Claims in New York jumped the most by 1,155. A state-supplied comment attributed the increase to layoffs in the construction, service and real estate industries.
Outlook: The employment picture will continue to improve as jobless claims continue to fall, but Quinlan said they will need to drop near 350,000 for positive job growth.
He expects nonfram payrolls to return to positive territory by the second quarter of 2010, and for the unemployment rate to fall by the end of the year.
American International Group Inc Chief Executive Robert Benmosche said on Wednesday he remains “totally committed” to staying at the company, countering an earlier report that he was considering stepping down.
In a letter to employees obtained by Reuters, Benmosche said he and the company’s board are “frustrated” about restrictions on pay and are in discussions with the U.S. government about them.
AIG, which has received up to $180 billion of federal aid, including more than $80 billion in loans, and is now 80 percent-owned by U.S. taxpayers, posted its second straight quarterly profit last week, helped by a recovery in the value of its investments.
Benmosche said compensation restraints present a “barrier that stands in the way of restoring AIG’s value.”
The Wall Street Journal reported that Benmosche was so frustrated that he told the company’s board last week he was considering stepping down payday cash advance loans. The newspaper cited people familiar with the matter.
The giant insurer’s chief executive said in his letter that he is particularly concerned with the pay of the company’s top 100 executives, which are under the purview of Kenneth Feinberg, the U.S. government’s pay czar.
Benmosche told AIG directors that he was “done” but agreed to think it over when they reacted with shock, the people told the paper.
(Reporting by Steve Eder in New York and Ajay Kamalakaran in Bangalore; editing by Valerie Lee, Andre Grenon, Leslie Gevirtz)
Although the recession isn’t officially over yet, there is a growing sense that the economy is now in a recovery. But there is also a growing debate about who deserves the credit.
The question of who should receive praise for helping to get the economy back on track may seem trivial. But knowing what policies worked, and which ones need to stay in place, could keep the recovery from stalling out.
Many in Washington have gone to extraordinary lengths to try and turn around the economy over the past year or so
Last year, Congress signed a blank check to Treasury to cover losses at mortgage finance giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) and created the $700 billion Troubled Asset Relief Program for banks. Earlier this year, lawmakers passed a $787 billion stimulus package.
Meanwhile the Federal Reserve slashed interest rates to nearly 0% and pumped more than $1 trillion into the economy with its bailout of AIG (AIG, Fortune 500), its support for mortgage-backed securities and various lending programs.
Federal Reserve chairman Ben Bernanke said in a speech last month that the Fed and Congress, as well as other governments and central banks around the world, deserve credit for stopping the global economy from falling into a depression.
"Without these speedy and forceful actions, last October’s panic would likely have continued to intensify, more major financial firms would have failed, and the entire global financial system would have been at serious risk," he said.
A number of economists agree that the Fed, Congress and both the Bush and Obama administrations all deserve credit for steps taken to end of the recession.
"The actions of the Fed and Treasury starting last October actually worked, regardless of how unpopular they were," said Bill Hampel, chief economist of the Credit Union National Association. "It was messy. It was dirty. It required a lot of money. But they were successful in preventing the implosion of a lot of institutions."
Of course, it is easy to find fault with any particular program though.
"They tried an awful lot of things, some worked, some didn’t," said Kurt Karl, chief U.S. economist for Swiss Re. "Mistakes were made. It was an ad hoc solution. It would have been surprising if they made no mistakes."
Turnaround or sugar rush?
To be sure, some economists worry that all the efforts taken will lead to greater problems down the road. For example, the Fed may be risking a bout of inflation in the future if the money that has been pumped into the economy isn’t withdrawn at just the right time.
There are also concerns about how the looming deficits from stimulus and other Congressional spending can only be repaid through higher taxes — which will be a drag on the economy in the future.
"The economy needed a jolt and it got a jolt," said David Rosenberg, chief economist and strategist for asset manager Gluskin Sheff. "It gave us a sugar high, but there was no follow through Business Card Holders. So it’s going to come at the expense of future quarters."
But most economists still support the Fed’s actions. The National Association of Business Economists (NABE) released a survey Monday that showed broad agreement about current monetary and fiscal policies.
And even though few economists believe that the stimulus package has been an unmitigated success, there is widespread agreement that government spending is providing a necessary boost to the economy right now.
"I don’t think it’s any accident that the recession ended when the stimulus was providing its greatest impact," said Mark Zandi, chief economist with Moody’s Economy.com.
Too soon to declare a winner
Still, it’s reasonable to wonder if the current signs of recovery have more to do with how economic cycles work. In other words, the markets, and not the government, solved the crisis.
Worries about job losses and tight credit caused consumers to cut back spending, resulting in some pent-up demand. In addition, businesses slashed production, leaving inventories at very low levels.
"Now that everyone has figured out the bottom is not falling out, businesses will have to replenish the inventories," said Karl
As such, many experts think it will be important for the Fed and Congress to not go overboard in its attempts to stimulate the economy. The NABE survey found 76% of economists don’t think another round of stimulus is needed at this point.
"It’s very difficult to appropriately assess the true state of the economy, given how much medication it is on," said Rosenberg.
Others argue that the Congress and the Fed shouldn’t stop trying to jump start the economy. Despite signs of progress, additional help will be required.
"I think the recovery is very fragile and we could lose it," said Zandi. "It’s far from evolving into a self-sustaining economic expansion. Stimulus is temporary. It very likely will need more help from policymakers."
With that in mind, it’s highly unlikely that any elected officials will rush to take credit for a turnaround just yet.
"As long as unemployment is near 10%, and we’re still losing jobs, it doesn’t feel like a recovery to anyone but economists," said Zandi. "They don’t want to hang up a ‘Mission Accomplished’ banner."
Have you recently been laid off? Lost most of your retirement or college savings in the stock market? Dealt with the loss of the family breadwinner with no life insurance? If you’ve been confronted with some challenge during this recession and would like to have an expert review your situation, send an email to realstories@cnnmoney.com and you could be profiled in an upcoming segment on CNN. For the CNNMoney.com Comment Policy, click here.
The popular Cash for Clunkers program gave a strong boost to auto sales in August, resulting in the industry posting its best month this year by far. But sales dropped sharply in the last week of August — after Cash for Clunkers ended.
A preliminary reading from sales tracker Autodata shows that industrywide sales rose 1% compared to a year ago, to 1.2 million vehicles. That’s the first annual sales gain since October 2007, and sales were about 26% above July’s levels.
Ford (F, Fortune 500) reported the best results among the nation’s six largest automakers. Its sales rose 17% compared to August 2008, its biggest jump in sales in four years. Still, Ford sales’ gain was short of the 22% increase forecast by sales tracker Edmunds.com. Ford shares were down more than 4% following the release of the report.
The situation wasn’t as good at the other two major U.S.-based automakers. General Motors posted a 20% drop in sales from a year ago, while Chrysler Group reported a 15% decrease from last August. But the news was not all bad. The declines were not as large as the forecasts from Edmunds.com.
And both GM and Chrysler, which went through bankruptcy reorganizations earlier this summer, reported sales gains from July. GM’s sales were up 30% from a month ago, while Chrysler’s sales climbed 5%.
Looking at the Asian automakers, Toyota Motor (TM), which had more Clunker sales than any other automaker, reported a 6% rise in sales, its first year-over-year gain since April 2008, and its best gain in two years. Honda Motor (HMC) reported a 10% rise in sales, ending a 14-month string of declining U.S. sales.
Among the other Asian automakers, Korean automaker Hyundai, which is now the No. 7 automaker in terms of U.S. sales, posted a 47 spike in sales compared to a year ago. And Kia, the other major Korean automaker Kia posted a 60% jump in sales.
Nissan was the one Asian car company to not post a sales increase — its sales fell 3%.
Better times ahead or just a Clunkers boost?
Ford director of sales analysis George Pipas said in a conference call Tuesday that industrywide sales probably increased by about 400,000 vehicles during the month from the program. Pipas added that a significant percentage of sales would have taken place even without the program.
Still, sharp declines in sales during the last week of August have raised doubts about the outlook for sales for the remainder of the year, said Edmunds.com senior analyst Jessica Caldwell.
Cash for Clunkers left dealers with limited inventory of new vehicles once the program ended and also with fewer buyers interested in buying cars now that they are no longer eligible for $4,500 in rebates.
Caldwell said that the pace of sales went from a seasonally-adjusted annual rate of 15 million vehicles while the program was in effect in August to only about 8 million currently.
"Cash for Clunkers sent the sales rate on a wild roller coaster ride," she said.
But auto executives said that they believe that signs of improvement in the economy should leave the industry in good shape going into this fall, a time when companies will start to roll out new models.
"The Cash for Clunkers program was certainly a success, but our momentum continues to build on the strength of our new cars and crossovers," said GM sales vice president Mark LaNeve in a statement.
Pipas pointed out that sales of smaller cars are now higher than they were when gas hit a record of more than $4 a gallon last year.
Ford said in its release that sales were also lifted by signs of recovery in the U.S. economy overall. Sales of trucks and vans, for example, rose 12%. In a statement, Ford vice president of U.S. sales Ken Czubay said the company was hopeful that "small business owners are seeing signs of recovery and gaining confidence in the outlook for stronger business conditions."
Chrysler said its sales were limited by low inventory of some of its vehicles. It said it essentially sold out of many models by the end of the month. Chrysler has joined Ford and General Motors in announcing additional production of vehicles this fall in order to replenish dealers’ supplies.
GM said Tuesday it now plans to build 655,000 vehicles in the fourth quarter, up 20% from its third quarter production target. GM had previously announced it was adding 60,000 vehicles to its production plans during the rest of the year to restock depleted inventories.
Still, the low inventories mean that some GM dealerships that had originally been set to close in January will now be closing early rather than trying to restock, LaNeve said.
GM announced plans to cut about 1,100 dealerships as part of its bankruptcy reorganization, but many of those dealerships are due to stay in business for another 12 months.
Talkback: Do you think that auto sales will continue to improve or did Cash for Clunkers just provide a short-term boost? Share your comments below.
On the face of it, a reverse mortgage sounds like a no-lose deal for older homeowners. A lender gives you what amounts to a cash advance on your home equity — no minimum income or credit score required. And you don’t have to pay it back until you move or die, when the proceeds from the house sale typically will be used to close out the loan. But in fact, reverse mortgages have some serious drawbacks. Here’s what you need to know.
You may not be able to borrow that much. A provision in the economic stimulus package raised the maximum home value that could be counted for reverse mortgages from $417,000 to $625,500. But you won’t be able to tap your home up to its full price. The formula for determining loan amounts takes into account your age (the older you are, the more you can borrow) and current interest rates, as well as your home’s value. Anything you owe on your home is subtracted from that amount, as are the loan fees you’ll pay. To see how much you might qualify for, use the calculator at revmort.com/nrmla.
Expect to pay some pretty hefty fees. A reverse mortgage is an expensive loan. In addition to regular closing costs, you’ll pay an origination fee of 2% on the first $200,000 of the loan balance and 1% thereafter, plus a mortgage insurance premium of about 2% and a monthly service charge as well. Though recent legislation has capped the origination fees at $6,000, by the time you add all the other fees you’ll have to pay, the total generally reaches $10,000 to $15,000. So a reverse mortgage doesn’t make sense if you expect to move anytime soon, says Dallas financial planner Michael Anderson.
There’s more risk than you think. Reverse mortgages are particularly appealing to retirees looking to supplement dwindling income from a battered investment portfolio — that’s one reason these loans are up nearly 50% over the past two years. The big risk, especially for younger borrowers (you have to be at least 62 to get the loan): You’ll live longer than you anticipate, run out of money, and won’t have any home equity that you can fall back on. Over the past decade the average age of reverse-mortgage borrowers has fallen from 76 to 72. "One of the first questions to ask yourself is whether you can make the money last," says reverse-mortgage counselor Brenda Grauer.
Other options may suit you better. Before you can get a reverse mortgage, you’ll be required to attend a session with a counselor who is not affiliated with a lender. This person is supposed to clearly explain the loan’s terms and its drawbacks. But a recent study by the Government Accountability Office found that counseling sessions often fail to warn seniors of all the risks. So before you or your folks sign up, make sure you’ve looked into all the alternatives, such as cutting expenses, taking out a home-equity line of credit, or downsizing your home. Says Grauer: "It’s best to put off taking this loan for as long as you can, so that when you really need it, the money is there."
Powered by WordPress -- XHTML 1.0