Article Presented by:
Copyright © 2009 Joyce C. Lock
If we believe we are in the last days, we need to quit calling God's messengers 'false prophets' (Je.25:4). Hell, fire, and brimstone preaching is not a prophet's passion, but the result of other's unbelief. Prophets feel whatever God feels and are honor bound to warn unbelieving people they also love.
For fear of an antichrist or Jonestown type experience, leaders hush prophets by whatever means possible; all the while, feeling justified. And, people continue to believe whatever they are told.
"And (they) say, If we had been in the days of our fathers, we would not have been partakers with them in the blood of the prophets." Mt. 23:30
Most prophets dare not come out of the closet. 'If we talk to God, we are spiritual. If God talks to us, we are scitsophrenic.'
While many truly have a heart for God's people, they error in deciding when, who, and how people can serve (becoming Pharaohs, creating spiritual wounds) when all they would need do is to listen for the Spirit and let God sit on their throne. The Spirit cannot lie.
It makes no difference how one is qualified, as faithful is He who calls you, who also will do it. For, it is God who builds HIS church.
Instead, pride is placed upon one's knowledge and abilities; forgetting such will pass away. You might notice who Jesus would become angry with (not the spiritually weak, poor, sick, or lame) but leaders who kept them that way.
God will do whatever it takes to make sure those who are saved will be saved. When I asked how many prophecies have to come to pass, God answered, "As many as it takes."
"For nation shall rise against nation, and kingdom against kingdom: and there shall be famines, and pestilences, and earthquakes, in divers places. All these are the beginning of sorrows. Then shall they deliver you up to be afflicted, and shall kill you: and ye shall be hated of all nations for my name's sake. And then shall many be offended, and shall betray one another, and shall hate one another," Mt. 24:7-10.
While people look to giant earthquakes, they are missing that the very foundation of their families are being shaken; the center of their world. The famine is spiritual, and they are starving for prophets to be allowed to show them the way, Re.22:6.
Prophecies are happening individually, everywhere, while the church sleeps on. We are Jews who worship in Spirit and truth, and adopted Israelites (Ro. 9:4).
With all the religions in the world, it is insulting God to think any have all the answers. There is only one omnipotent, all knowing God. Stop telling God what He believes. Do not believe everything you hear and let us not quench the Spirit before God has had a chance to speak.
If your life is not peace, it would be good to consider what is really going on. God wants His throne back. If you really want to see revival; Let My People Go, so they can serve God.
Perhaps peace begins once we realize we are all in the same boat and God gave us gifts to help each other find our way.
About the Author:
Joyce C. Lock is a published author, poet, columnist, and Senior Writer for the Storytime Tapestry Newsletter. Her latest adventures include her new website Glimpses of God http://iam.homewithGod.com/glimpsesofgod/ unveiling mysteries via scriptural methods of Bible study. Joyce's writings encourage us in our relationship with God and each other. Find fresh new articles, on a variety of topics, at: http://www.thephantomwriters.com/recent/200/index.html
Read more Articles written by Joyce C. Lock.
Friday, May 1, 2009
Saturday, April 25, 2009
Gambling Online - Is Gambling Online Illegal?
Article Presented by:
Copyright © 2009 Skyler Ace
The legality of Gambling Online has always been a debatable topic. It is not an easy question to answer. The reason is because the whole situation of legality depends on where you are when you play. The matter of gambling online has always been a gray area as it is an unconventional phenomenon.
The concept of gambling online started somewhere around the mid 1990s. This was when the online casinos were launched in Antigua for the first time. This introduction was glorious because a large number of people got interested and turned on by the idea of making a lot of money so conveniently and without ever leaving home. People were impressed by the idea of earning money by just spinning some reels or playing a few hands from the convenience of their home.
From the time of its' introduction in the mid 1990s, the concept of gambling online has grown at a fast pace and a lot of online companies have been able to earn lucrative sum due to their listing in public stock trading worldwide. Internationally, it took some time for lawmakers from different nations to realize that a new concept has hit the market and that this would require a new set of regulations. It is surprising but true that certain territories with state-sanctioned gambling were also unaware of something that had so strongly caught the fancy of general public.
When it comes to solving the complicated issue of whether or not gambling on the internet is legal, different nations and lawmakers have different views. Some officials believe that the whole thing is against the law. They think that one cannot wager over the World Wide Web or the telephone. On the other hand, some feel that the illegal part about online gambling is its' operation and that too if it is set up in the United States. This is the reason websites prefer operating from overseas locations such as Australia, Caribbean and Latin America.
There are also people who think that it is not worth debating on the topic as the government has other major issues to act upon.
According to Sue Schneider, publisher of a well known interactive gaming news, there is nothing specifically written or prophesied in the law books about gambling online being illegal. This is the reason most online gambling companies do not shy away from openly advertising on different stations across the radio dial. It is also true that no one will be charged with a crime for betting with any of the services available across the globe.
The business of gambling online is booming. The Land of Antigua is known to possess most online gambling sites. According to estimations, the industry has been declared to hold a worth of $200 million each year. The revenues tend to top $1 billion on an annual basis.
Antigua is certainly a winner but it is also true that about seventy-five governments across the globe license Gambling Online. Currently more than about 1,800 online gambling websites exist.
This leaves lawmakers in the United States with three options namely: regulate, ban or continue to ignore. In case, they choose to regulate, name brand gambling betting interests in Las Vegas will be the first to leap in and obtain legitimacy to online gambling. In case the law opts to ban, the huge gambling online network and people betting would face huge losses. Hence, it is not easy to make out whether online gambling is actually legal or not.
The only thing people across the globe are sure of today is that gambling online is very lucrative. All one requires to do is to sit comfortably at home, spend some time and start making money. There are a lot of people world wide from different walks of life and age groups who have earned great profits through gambling online.
One also requires considering the risk factor of online gambling and its bad affects due to addiction, especially among teenagers.
Addiction to gambling can have adverse health, financial and mental effects on an individual.
It is advised that if you have an addictive personality, you should avoid online gambling altogether, as your future financial stability does require a measure of self-control when facing the urge to gamble on just one more roll of the dice or slot machine.
Simply put, gambling online is not a bad thing, unless you simply find it too hard to walk away when you are losing.
About the Author:
This article was written by gambling pro Skyler Ace. Warning: Do Not Gamble Another Dollar Online Until You Read This. Free Consumer Awareness Guide Reveals The Seven Deadly Mistakes All Gamblers Make: http://www.jobsource20-23.com/casclok.html Also feel free to visit our gambling blog for tons of winning tips: http://onlinegambling23.blogspot.com/
Read more of Skyler Ace's articles.
Copyright © 2009 Skyler Ace
The legality of Gambling Online has always been a debatable topic. It is not an easy question to answer. The reason is because the whole situation of legality depends on where you are when you play. The matter of gambling online has always been a gray area as it is an unconventional phenomenon.
The concept of gambling online started somewhere around the mid 1990s. This was when the online casinos were launched in Antigua for the first time. This introduction was glorious because a large number of people got interested and turned on by the idea of making a lot of money so conveniently and without ever leaving home. People were impressed by the idea of earning money by just spinning some reels or playing a few hands from the convenience of their home.
From the time of its' introduction in the mid 1990s, the concept of gambling online has grown at a fast pace and a lot of online companies have been able to earn lucrative sum due to their listing in public stock trading worldwide. Internationally, it took some time for lawmakers from different nations to realize that a new concept has hit the market and that this would require a new set of regulations. It is surprising but true that certain territories with state-sanctioned gambling were also unaware of something that had so strongly caught the fancy of general public.
When it comes to solving the complicated issue of whether or not gambling on the internet is legal, different nations and lawmakers have different views. Some officials believe that the whole thing is against the law. They think that one cannot wager over the World Wide Web or the telephone. On the other hand, some feel that the illegal part about online gambling is its' operation and that too if it is set up in the United States. This is the reason websites prefer operating from overseas locations such as Australia, Caribbean and Latin America.
There are also people who think that it is not worth debating on the topic as the government has other major issues to act upon.
According to Sue Schneider, publisher of a well known interactive gaming news, there is nothing specifically written or prophesied in the law books about gambling online being illegal. This is the reason most online gambling companies do not shy away from openly advertising on different stations across the radio dial. It is also true that no one will be charged with a crime for betting with any of the services available across the globe.
The business of gambling online is booming. The Land of Antigua is known to possess most online gambling sites. According to estimations, the industry has been declared to hold a worth of $200 million each year. The revenues tend to top $1 billion on an annual basis.
Antigua is certainly a winner but it is also true that about seventy-five governments across the globe license Gambling Online. Currently more than about 1,800 online gambling websites exist.
This leaves lawmakers in the United States with three options namely: regulate, ban or continue to ignore. In case, they choose to regulate, name brand gambling betting interests in Las Vegas will be the first to leap in and obtain legitimacy to online gambling. In case the law opts to ban, the huge gambling online network and people betting would face huge losses. Hence, it is not easy to make out whether online gambling is actually legal or not.
The only thing people across the globe are sure of today is that gambling online is very lucrative. All one requires to do is to sit comfortably at home, spend some time and start making money. There are a lot of people world wide from different walks of life and age groups who have earned great profits through gambling online.
One also requires considering the risk factor of online gambling and its bad affects due to addiction, especially among teenagers.
Addiction to gambling can have adverse health, financial and mental effects on an individual.
It is advised that if you have an addictive personality, you should avoid online gambling altogether, as your future financial stability does require a measure of self-control when facing the urge to gamble on just one more roll of the dice or slot machine.
Simply put, gambling online is not a bad thing, unless you simply find it too hard to walk away when you are losing.
About the Author:
This article was written by gambling pro Skyler Ace. Warning: Do Not Gamble Another Dollar Online Until You Read This. Free Consumer Awareness Guide Reveals The Seven Deadly Mistakes All Gamblers Make: http://www.jobsource20-23.com/casclok.html Also feel free to visit our gambling blog for tons of winning tips: http://onlinegambling23.blogspot.com/
Read more of Skyler Ace's articles.
Thursday, April 9, 2009
Investing in Life's Necessities
Article Presented by:
Copyright © 2009 Mack Courter
With the stock market down 55% or so from its high of October 2007, many investors feel they are between the proverbial rock and a hard place. We've all seen the data that shows that over the long term, stocks outperform every other common asset class, but that knowledge certainly doesn't make the going any easier on a day to day basis. And with the shocking events surrounding the instability and collapse of some of this country's biggest and reputable institutions, the long-term picture gets even hazier.
So what are your options, knowing that you need equities for portfolio growth and inflation protection, but are very uncomfortable with the stock market? Here's an idea I've been sharing with other investors that makes sense to them.
For starters, all successful investors from Warren Buffett to Peter Lynch focus on companies whose products and services stack up nicely from a supply and demand standpoint. On the demand side, investing in areas where demand is stable or increasing would appear to fit these guidelines. An area that I feel meets these criteria is the consumer staples sector. Thankfully, I am not alone in this assessment. Wall Street strategists such as Richard Bernstein are expecting good relative performance from this industry.
Consumer Staples contains such household names like Wal-Mart, Procter and Gamble, Coca Cola, and General Mills. Economists have touted the inelasticity of consumer goods for years, and with good reason. Regardless of how poorly we are doing financially, we still find the money to buy food, beverages, and toiletries.
The County Fair
Every year I go to an old fashioned county fair. This is not just any ordinary fair; it is reputedly the largest tent fair in the nation. Yes, believe it or not, people actually pitch tents or park their RVs and camp out for a whole week. And there is a 40-year waiting list to get a campsite! Thousands come from miles around for the fellowship, competitions, and well, the food. Frankly, many people I talk to come solely for the last reason. There are vendors offering everything from French fries to snow cones.
With the economy in recession, I was very interested to see if this fair would be slower than most. I spent practically the whole weekend at it. There were no signs that attendance was down or that concession stands were less busy than normal. Matter of fact, I had my normal tedious time making my way through the throngs of people to the next concession stand.
Just to make sure I wasn't imagining anything, I spoke with one of my friends who own a stand. He said business was even better than normal. A phone call to the Fair management also confirmed this. Attendance was as good as last year, and the vendors reported an average increase of 10% in sales. And this considering that food at a fair is not exactly cheap. You can get an ice cream cone one block from the fairgrounds for half the price. It did not make a difference.
Some analysts on Wall Street have been concerned about consumer goods companies this year, because they feel that rising commodity costs impact the bottom line. With the price of oil and other commodities well off last summer's highs, this fear seems to have dissipated somewhat. Also, it seems to me that these companies are not exactly taking these increases lying down. They're passing them on to the consumer. I noticed this at the fair. Prices on many of my favorite things were up 5 or even 10%.
I am noticing a different approach at restaurants I routinely visit. Instead of raising prices, many are cutting portion sizes.
How have consumer staples done so far in this downturn? Over the past twelve months, the Dow Jones U.S. Consumer Goods Index is down 35% as of the date of this writing. The S&P 500 Index is off 45%. Over the past three years, this consumer goods index has outpaced the S&P by around 7% annually.
The Historical Perspective
A look further back into history shows consumer staples out performance during bear markets is not unusual. During the 2000-2002 bear market, the cumulative return for the Dow Jones U.S. Consumer Goods Index was -1.56%, according to Morningstar data. As we all know, it could have been worse. The S&P 500 lost over 37% during that time.
According to Russell Napier in his excellent book, Anatomy of the Bear, consumer staples stocks have been strongholds in the three great bear markets since 1929.
He writes that during the 1968-1982 secular bear market, even though the S&P Composite Index increased by 82% cumulatively in nominal terms, it lost value in real terms. The "Consumer Price Index" increased by 174% during the same timeframe. At this time, there were 30 industrial sectors, and the average return for them was 107%. Only 9 of the 30 sectors did better than average. Among them was Food. The best sector at this time was Tobacco, a sub-category of consumer staples. It boasted a cumulative return of 420%.
Table 1:: Key Sector Performance from December 1968-August 1982
Tobacco... 420%
Oil... 185%
S&P Composite... 82%
Source: Russell Napier
Let's look at the mother of all bear markets, the 1929-1932 plunge that ushered in the Great Depression. Again we see that the qualities of Consumer Goods held up-at least on a relative basis. The Dow shed an incredible 89% of its value. Food and tobacco stocks lost a lot of money as well, just not as much. Tobacco stocks again turned out to be the best performer, with a 38% loss. Food dropped 72%. Napier surmises that perhaps this decline occurred because packaged food was not yet mainstream. 85% of bread was still homemade in 1932. Therefore, people were not as dependent on grocery stores as we are today. Granted, losing 72% or even 38% of your money compared to 89% isn't much consolation. But at least this tells us what happened in the acid test for investing.
Table 2:: Key Sector Performance from September 1929-June 1932
Tobacco... -38%
Oil... -74%
Food... -72%
Dow Industrial... -89%
Source: Russell Napier
Three Ways to Invest
Here are three ways venture into the sector without risking your shirt:
Consider buying ETFs, not individual stock. This hopefully minimizes the negative impact of such events like Pepsi's recent fall from favor. Some examples include State Street Global Advisors Consumer Staples SPDR (XLP) or iShares Dow Jones U.S. Consumer Goods (IYK). The former has 41 holdings and sports an expense ratio of 23 basis points. The latter owns 148 stocks and has an expense ratio of 48 basis points.
Consider using Stop Losses. Place a good 'til canceled stop loss order under the ETF or stock. I've placed these at either support levels for the security or at absolute loss levels a client is willing to sustain.
Consider selling covered calls. Selling a covered call on the ETF or stock you own is another way to reduce the risk. The premium gives you an immediate return on your money, and also serves as a buffer if the investment declines. Recently, I've found myself considering at-the-money or in-the-money options since they afford the most downside protection. I would avoid using ETFs that do not have a lot of open interest and volume in options trading.
Although there are never any guarantees when investing in stocks, the consumer staples industry may be a more conservative alternative at a time like this. And using some of the strategies above, you can hopefully lower your risk even more.
Disclosures:
The principal and yield of investment securities will fluctuate with changes in market conditions. The information presented is general in nature and should not be considered legal or tax advice.
The opinions offered are not to be construed as an offer to buy or sell individual securities mentioned herein.
Securities offered through Cadaret, Grant and Co., Inc., member FINRA/SIPC.
About the Author:
Mack Courter is a Certified Financial Planner (tm) who specializes in Retirement Investing in State College, Pennsylvania and works with clients nationwide. If you have any questions about the article, or would like a complimentary copy of his report "7 Critical Mistakes Investors Make," visit his website at http://www.courterfinancial.com or email him at his website.
Copyright © 2009 Mack Courter
With the stock market down 55% or so from its high of October 2007, many investors feel they are between the proverbial rock and a hard place. We've all seen the data that shows that over the long term, stocks outperform every other common asset class, but that knowledge certainly doesn't make the going any easier on a day to day basis. And with the shocking events surrounding the instability and collapse of some of this country's biggest and reputable institutions, the long-term picture gets even hazier.
So what are your options, knowing that you need equities for portfolio growth and inflation protection, but are very uncomfortable with the stock market? Here's an idea I've been sharing with other investors that makes sense to them.
For starters, all successful investors from Warren Buffett to Peter Lynch focus on companies whose products and services stack up nicely from a supply and demand standpoint. On the demand side, investing in areas where demand is stable or increasing would appear to fit these guidelines. An area that I feel meets these criteria is the consumer staples sector. Thankfully, I am not alone in this assessment. Wall Street strategists such as Richard Bernstein are expecting good relative performance from this industry.
Consumer Staples contains such household names like Wal-Mart, Procter and Gamble, Coca Cola, and General Mills. Economists have touted the inelasticity of consumer goods for years, and with good reason. Regardless of how poorly we are doing financially, we still find the money to buy food, beverages, and toiletries.
The County Fair
Every year I go to an old fashioned county fair. This is not just any ordinary fair; it is reputedly the largest tent fair in the nation. Yes, believe it or not, people actually pitch tents or park their RVs and camp out for a whole week. And there is a 40-year waiting list to get a campsite! Thousands come from miles around for the fellowship, competitions, and well, the food. Frankly, many people I talk to come solely for the last reason. There are vendors offering everything from French fries to snow cones.
With the economy in recession, I was very interested to see if this fair would be slower than most. I spent practically the whole weekend at it. There were no signs that attendance was down or that concession stands were less busy than normal. Matter of fact, I had my normal tedious time making my way through the throngs of people to the next concession stand.
Just to make sure I wasn't imagining anything, I spoke with one of my friends who own a stand. He said business was even better than normal. A phone call to the Fair management also confirmed this. Attendance was as good as last year, and the vendors reported an average increase of 10% in sales. And this considering that food at a fair is not exactly cheap. You can get an ice cream cone one block from the fairgrounds for half the price. It did not make a difference.
Some analysts on Wall Street have been concerned about consumer goods companies this year, because they feel that rising commodity costs impact the bottom line. With the price of oil and other commodities well off last summer's highs, this fear seems to have dissipated somewhat. Also, it seems to me that these companies are not exactly taking these increases lying down. They're passing them on to the consumer. I noticed this at the fair. Prices on many of my favorite things were up 5 or even 10%.
I am noticing a different approach at restaurants I routinely visit. Instead of raising prices, many are cutting portion sizes.
How have consumer staples done so far in this downturn? Over the past twelve months, the Dow Jones U.S. Consumer Goods Index is down 35% as of the date of this writing. The S&P 500 Index is off 45%. Over the past three years, this consumer goods index has outpaced the S&P by around 7% annually.
The Historical Perspective
A look further back into history shows consumer staples out performance during bear markets is not unusual. During the 2000-2002 bear market, the cumulative return for the Dow Jones U.S. Consumer Goods Index was -1.56%, according to Morningstar data. As we all know, it could have been worse. The S&P 500 lost over 37% during that time.
According to Russell Napier in his excellent book, Anatomy of the Bear, consumer staples stocks have been strongholds in the three great bear markets since 1929.
He writes that during the 1968-1982 secular bear market, even though the S&P Composite Index increased by 82% cumulatively in nominal terms, it lost value in real terms. The "Consumer Price Index" increased by 174% during the same timeframe. At this time, there were 30 industrial sectors, and the average return for them was 107%. Only 9 of the 30 sectors did better than average. Among them was Food. The best sector at this time was Tobacco, a sub-category of consumer staples. It boasted a cumulative return of 420%.
Table 1:: Key Sector Performance from December 1968-August 1982
Tobacco... 420%
Oil... 185%
S&P Composite... 82%
Source: Russell Napier
Let's look at the mother of all bear markets, the 1929-1932 plunge that ushered in the Great Depression. Again we see that the qualities of Consumer Goods held up-at least on a relative basis. The Dow shed an incredible 89% of its value. Food and tobacco stocks lost a lot of money as well, just not as much. Tobacco stocks again turned out to be the best performer, with a 38% loss. Food dropped 72%. Napier surmises that perhaps this decline occurred because packaged food was not yet mainstream. 85% of bread was still homemade in 1932. Therefore, people were not as dependent on grocery stores as we are today. Granted, losing 72% or even 38% of your money compared to 89% isn't much consolation. But at least this tells us what happened in the acid test for investing.
Table 2:: Key Sector Performance from September 1929-June 1932
Tobacco... -38%
Oil... -74%
Food... -72%
Dow Industrial... -89%
Source: Russell Napier
Three Ways to Invest
Here are three ways venture into the sector without risking your shirt:
Although there are never any guarantees when investing in stocks, the consumer staples industry may be a more conservative alternative at a time like this. And using some of the strategies above, you can hopefully lower your risk even more.
Disclosures:
The principal and yield of investment securities will fluctuate with changes in market conditions. The information presented is general in nature and should not be considered legal or tax advice.
The opinions offered are not to be construed as an offer to buy or sell individual securities mentioned herein.
Securities offered through Cadaret, Grant and Co., Inc., member FINRA/SIPC.
About the Author:
Mack Courter is a Certified Financial Planner (tm) who specializes in Retirement Investing in State College, Pennsylvania and works with clients nationwide. If you have any questions about the article, or would like a complimentary copy of his report "7 Critical Mistakes Investors Make," visit his website at http://www.courterfinancial.com or email him at his website.
Monday, March 30, 2009
Learn From History - The Anatomy Of An Economic Meltdown
Article Presented by:
Copyright © 2009 Arlo Mooney
Over the last couple years, many consumers were burned badly by the state of the economy and the failing of many of the banks people have relied upon for generations.
At the beginning of 2007, the United States had five investment banks, through which a lot of investment transactions occurred. By the end of 2008, there were zero investment banks in the United States. The investment banks that did not fail outright, changed their charters to commercial banks, thereby eliminating all investment banks in the U.S. by the end of 2008.
Where people got hurt the worst in the recent economic meltdown was when banks stopped loaning money to consumers and businesses.
Banker fears turned our economy on its ear, erasing positive growth and replacing it with recession.
Bankers started to question the viability of their competitors and stopped loaning money to their competitors. Suddenly, when major banking institutions were no longer able to get money to loan to their own clients, banks began to turn off the business credit and consumer credit tap.
We knew the gig was up when General Electric could no longer get loans to float their production cycles. We also knew that the situation was getting bad when banks started freezing credit lines to the automakers. And when the State Of California could not get loans to carry the state through the course of a single economic year, we knew it was ready to hit the fan.
Economic Contraction Has Deep Roots
The lack of business credit is not what killed the auto industry. What brought the automakers to their financial knees was the inability of consumers to get auto loans for new vehicles. This started to happen nearly a year before the commercial credit began to dry up.
When consumers could no longer get loans for major purchases, the economy began to contract significantly, as manufacturers could no longer sell products already in inventory.
As major manufacturers begin to fall by the wayside, the ripple effects hurt hundreds of other businesses, employing thousands.
For every automaker that falls, there are companies that produce tires, car seats, carpet, radios, and automotive parts that will also have to lay off people. The automaker is the easiest example to show the ripple effects of a crumbling economy.
When auto sales fall, car dealerships begin to shut their doors. Dealerships provide hundreds of additional jobs in small towns across America, providing employment for sales people, mechanics, supplies and support. Once you get past the jobs supplied directly by the dealerships, then one must realize that local detail shops generally contract most of their work from car dealerships.
If General Motors fails, jobs are not lost only in Detroit, but in Oklahoma City; Lansing, Michigan; Doraville, Georgia; Ontario, Canada; Spring Hill, Tennessee; Moraine, Ohio; Flint, Michigan; Pittsburgh, Pennsylvania; Ypsilanti, Michigan; and Portland, Oregon. (This list is actually derived from a GM plant closing list from 2005.)
In 2008, GM also closed plants in Grand Rapids, Michigan and Janesville, Wisconsin.
As 2009 approached, GM announced further plant closings. When the announcement came in December of 2008, there were 20 more GM plants on the cutting block for temporary shutdown. This round of plant closings will affect plants in the U.S., Canada and Mexico. Specific states affected by these plant closings include plants in Delaware, Maryland and Texas.
Consumer Credit Dried Up One Year Before Commercial Credit Ended
I mostly respect Bill O'Reilly's view on the world, but one day, he went on a rampage about the economic meltdown, stating that he pays attention to things and did not see the economic meltdown coming. He was complaining that no one warned us of this happening.
I wrote to O'Reilly that day, for the first time ever. I told him that if he watched his own news channel - we knew it was coming. If only he had turned on Neil Cavuto once in a while or watched the Saturday morning business block, then he would have seen this mess coming too.
It all started with a real estate bubble that we all knew was there.
When the real estate bubble began to pop in remote areas of the country and banks started to realize that home foreclosures where on the rise, banks reacted by stopping consumer loans for big ticket purchases, such as homes, cars, furniture and electronics.
The economy began to contract, as consumers could no longer drive the economy unimpeded.
It took business a little while to notice the contraction of business. Most assumed the contraction in sales was more related to the price of gasoline, without noticing that the problems ran deeper than that.
Most business managers assumed that once the price of gasoline dropped back to its historical threshold that all would recover. But gasoline prices only masked the real problem - the lack of consumer credit.
The Roots Of The Real Estate Bubble
The roots of the real estate bubble and subsequent implosion began in the 1990's. Interestingly, both G.W. Bush and Bill Clinton opposed the policies that created this mess, but both were either ineffective or unable to change the course of government policy in this matter.
Bush and Clinton seemed to agree that the credit practices of Fannie Mae and Freddie Mac were bound to create problems that could not be overcome easily. In the discussion I was listening to about this issue assumed that both Bush and Clinton were "unable" to fix this problem, although both spoke about it regularly.
I tend to find it hard to believe that any President of the United States is "unable" to do anything... but then again, Bush was "unable" to address the political hot potato of Social Security in his second term.
In the early 1990's, the role of Fannie Mae and Freddie Mac was changed from helping the underprivileged to buy a home, to guaranteeing banks that wrote loans to anyone and everyone who wanted to buy a home.
Fannie Mae and Freddie Mac began buying loans from banks, packaging those loans, and selling them to investors. Ah... you see the connection... you have heard about that stuff on the news... Good.
Since bank interest rates were so low, banks and mortgage brokers soon realized that they could not make their money collecting interest. So, they began the transition to selling loans to consumers based on closing costs. So long as the consumer could meet and pay for the required closing costs, then the bank would be able to write a loan to the consumer.
If that loan to the consumer was for a home, then the bank could sell those loans to Fannie Mae and Freddie Mac, who would then package a group of loans to sell to investors.
Here is where the story goes south.
Since banks were selling loans only for the closing costs and selling the loans to a third-party investor, banks stopped looking at whether an individual could afford the loans being given to the consumer.
You know, if I can only afford $900 per month on my mortgage, what makes anyone believe that I can repay a mortgage worth $1200 per month?
Within the system as it was constructed, the bank could care less if I could afford to pay $1200 per month. They only cared that they could sell me the loan, get their closing costs, and then they would pass the liability of my problem loan to a third-party investor.
Because the bank had no financial interest in my ability to repay the loan, they did not concern themselves with writing loans that could be afforded by consumers.
As a result, banks lined up to write consumer loans that consumers could not afford to repay. (We can also slap the consumer at this point, because the people who took those loans also knew that they could not repay them.)
The Contribution Of The Consumer
Each consumer who took a mortgage they could not hope to repay contributed to our current economic meltdown.
I know that many felt strongly that they could repay the loan or that they could get a salary increase to help ends meet. But when consumers are struggling to get by, it only takes one unexpected car repair or other large expense to bring the house of cards tumbling down. The end of the road could also come as soon as one got sick enough to miss a couple days of work.
The consumer should have known better than to take the loans they were offered. But many people also expected that banks still worked the way they did in the 1970's and 1980's - making sure that consumers could afford a loan, before offering that loan.
Lining Up The Dominoes
Consumers had taken loans that they could barely hope to repay. But when an unexpected expense came up, people began to get behind on their mortgage payments. Eventually, the added pressure of being behind on payments pushed consumers to cut their losses and default their home mortgages.
Of course, this process was accelerated when the real estate bubble burst and homeowners began to realize that they owed $120,000 on a home only worth $100,000!
As consumers began to default on their home mortgages, banks started to tighten up their credit policies on other large consumer loans such as cars, furniture and electronics.
As consumers became unable to get loans for the things they desired to purchase, manufacturers and retailers began to struggle under slowing sales.
Slowing sales further complicated the issue, because banks began to realize that their business clients were having a harder time paying back business loans.
At this point, the banks worried about their business clients, but they did not close all commercial credit just yet.
Like you and I, banks borrow money from each other, in order to enable ensure that bank liquidity is maintained. In the banking industry, the government requires that a bank always has cash-on-hand to match 10% of the total loans it has in the marketplace.
On days like payday, banks will often borrow enough money from another bank to help them cash all of the checks that will be brought to their bank. They borrow that money to be able to meet their cash needs, without tapping into the money in their safe that is required to meet federal lending standards.
Of course, banks will cash a check on Friday and they will have that money back in their own coffers by the following Wednesday, when the employer's bank is able to send the money back to the bank who cashed the check. Within the banking industry, few-day loans and one-week loans between banks are common for this reason.
It did not really hit the fan until banks stopped loaning money to each other. When the investment banks began to fall, other major banks also began to fail. With banks failing everyday, bank managers began to wonder about the banks to whom they loan money.
Fear crept into the bank-to-bank lending cycle, and bank-to-bank credit came crashing to a halt.
This is the point where commercial credit died. It was September of 2008 - only weeks before the Presidential election. John McCain handled himself badly during this time frame, ensuring that he would forever be only a footnote in history. "I am suspending my campaign to focus on this problem," - John McCain, famous last words of the top dunce of 2008.
When banks stopped lending to each other, other banks had to freeze commercial credit lines. When General Electric's top lender was unable to get bank-to-bank loans, it was unable to loan money to GE, regardless of their belief in GE's ability to pay back the loan.
The Fallout Is Wide And Painful
When GE can no longer get loans to finance the manufacturing cycle of their products, then GE is forced to lay off workers.
When the automakers customers cannot get consumer loans and the automakers cannot get loans to keep them afloat during this economic downtown, the automakers are forced to lay off people. Along with the automakers laying off people, part suppliers and dealerships also have to lay off people.
When the State Of California cannot get loans to keep the state operational until tax payments start coming in, Governor Schwarzenegger has to make some hard decisions, stopping certain government services and stopping production of development projects. Of course, Schwarzenegger does not have the political courage to fix the problem, but only to survive the crisis. Either way, money stops flowing in California from government coffers, leading to taxpayers receiving IOU's from the California tax agency and people losing their jobs in state construction projects.
The Downward Spiral
Consumers cannot borrow money to buy consumer goods, which in turn slows sales at major manufacturers and major retailers. Slowed sales leads to more layoffs and fewer jobs. Slowed sales also leads to lower stock prices and fewer stock dividends.
Sometimes the pain felt at the business level leads to business failures, which in turn leads to more lost jobs. Fewer jobs leads to more defaulted loans and home foreclosures.
It is a cycle that is hard to break.
According to a story by the Fox Business Network last week, American consumers have lost $11 trillion dollars in their net worth over the last one year.
Is there a light at the end of the tunnel? Certainly there is, although it is a bit hard to see right now. Every down cycle in an economy ends with an up cycle. It is just that we have yet to discern a bottom in this economic downturn, so it is hard to predict when recovery will come.
I am an optimist by nature. I see good days ahead, although those good days will necessarily be preceded by some pain.
The best advice I can give anyone in this current recession is to only spend within your means, until this economy recovers its vitality. At my house, we are still spending, but we are not doing it with credit. Instead, we are paying cash for what we want and making darn sure not to increase our debt load during this down cycle.
Author's Note: This article was originally published at: http://cash-advance-payday-loans.org/blog/economic-meltdown/2009/03/
About the Author:
Arlo Mooney writes about the economy and credit. The only loans he will consider at this time are short term loans, in the form of payday loans or cash advance loans to bridge a cash shortage until the following payday. You can read more of Arlo's work at: http://cash-advance-payday-loans.org/blog/
Copyright © 2009 Arlo Mooney
Over the last couple years, many consumers were burned badly by the state of the economy and the failing of many of the banks people have relied upon for generations.
At the beginning of 2007, the United States had five investment banks, through which a lot of investment transactions occurred. By the end of 2008, there were zero investment banks in the United States. The investment banks that did not fail outright, changed their charters to commercial banks, thereby eliminating all investment banks in the U.S. by the end of 2008.
Where people got hurt the worst in the recent economic meltdown was when banks stopped loaning money to consumers and businesses.
Banker fears turned our economy on its ear, erasing positive growth and replacing it with recession.
Bankers started to question the viability of their competitors and stopped loaning money to their competitors. Suddenly, when major banking institutions were no longer able to get money to loan to their own clients, banks began to turn off the business credit and consumer credit tap.
We knew the gig was up when General Electric could no longer get loans to float their production cycles. We also knew that the situation was getting bad when banks started freezing credit lines to the automakers. And when the State Of California could not get loans to carry the state through the course of a single economic year, we knew it was ready to hit the fan.
Economic Contraction Has Deep Roots
The lack of business credit is not what killed the auto industry. What brought the automakers to their financial knees was the inability of consumers to get auto loans for new vehicles. This started to happen nearly a year before the commercial credit began to dry up.
When consumers could no longer get loans for major purchases, the economy began to contract significantly, as manufacturers could no longer sell products already in inventory.
As major manufacturers begin to fall by the wayside, the ripple effects hurt hundreds of other businesses, employing thousands.
For every automaker that falls, there are companies that produce tires, car seats, carpet, radios, and automotive parts that will also have to lay off people. The automaker is the easiest example to show the ripple effects of a crumbling economy.
When auto sales fall, car dealerships begin to shut their doors. Dealerships provide hundreds of additional jobs in small towns across America, providing employment for sales people, mechanics, supplies and support. Once you get past the jobs supplied directly by the dealerships, then one must realize that local detail shops generally contract most of their work from car dealerships.
If General Motors fails, jobs are not lost only in Detroit, but in Oklahoma City; Lansing, Michigan; Doraville, Georgia; Ontario, Canada; Spring Hill, Tennessee; Moraine, Ohio; Flint, Michigan; Pittsburgh, Pennsylvania; Ypsilanti, Michigan; and Portland, Oregon. (This list is actually derived from a GM plant closing list from 2005.)
In 2008, GM also closed plants in Grand Rapids, Michigan and Janesville, Wisconsin.
As 2009 approached, GM announced further plant closings. When the announcement came in December of 2008, there were 20 more GM plants on the cutting block for temporary shutdown. This round of plant closings will affect plants in the U.S., Canada and Mexico. Specific states affected by these plant closings include plants in Delaware, Maryland and Texas.
Consumer Credit Dried Up One Year Before Commercial Credit Ended
I mostly respect Bill O'Reilly's view on the world, but one day, he went on a rampage about the economic meltdown, stating that he pays attention to things and did not see the economic meltdown coming. He was complaining that no one warned us of this happening.
I wrote to O'Reilly that day, for the first time ever. I told him that if he watched his own news channel - we knew it was coming. If only he had turned on Neil Cavuto once in a while or watched the Saturday morning business block, then he would have seen this mess coming too.
It all started with a real estate bubble that we all knew was there.
When the real estate bubble began to pop in remote areas of the country and banks started to realize that home foreclosures where on the rise, banks reacted by stopping consumer loans for big ticket purchases, such as homes, cars, furniture and electronics.
The economy began to contract, as consumers could no longer drive the economy unimpeded.
It took business a little while to notice the contraction of business. Most assumed the contraction in sales was more related to the price of gasoline, without noticing that the problems ran deeper than that.
Most business managers assumed that once the price of gasoline dropped back to its historical threshold that all would recover. But gasoline prices only masked the real problem - the lack of consumer credit.
The Roots Of The Real Estate Bubble
The roots of the real estate bubble and subsequent implosion began in the 1990's. Interestingly, both G.W. Bush and Bill Clinton opposed the policies that created this mess, but both were either ineffective or unable to change the course of government policy in this matter.
Bush and Clinton seemed to agree that the credit practices of Fannie Mae and Freddie Mac were bound to create problems that could not be overcome easily. In the discussion I was listening to about this issue assumed that both Bush and Clinton were "unable" to fix this problem, although both spoke about it regularly.
I tend to find it hard to believe that any President of the United States is "unable" to do anything... but then again, Bush was "unable" to address the political hot potato of Social Security in his second term.
In the early 1990's, the role of Fannie Mae and Freddie Mac was changed from helping the underprivileged to buy a home, to guaranteeing banks that wrote loans to anyone and everyone who wanted to buy a home.
Fannie Mae and Freddie Mac began buying loans from banks, packaging those loans, and selling them to investors. Ah... you see the connection... you have heard about that stuff on the news... Good.
Since bank interest rates were so low, banks and mortgage brokers soon realized that they could not make their money collecting interest. So, they began the transition to selling loans to consumers based on closing costs. So long as the consumer could meet and pay for the required closing costs, then the bank would be able to write a loan to the consumer.
If that loan to the consumer was for a home, then the bank could sell those loans to Fannie Mae and Freddie Mac, who would then package a group of loans to sell to investors.
Here is where the story goes south.
Since banks were selling loans only for the closing costs and selling the loans to a third-party investor, banks stopped looking at whether an individual could afford the loans being given to the consumer.
You know, if I can only afford $900 per month on my mortgage, what makes anyone believe that I can repay a mortgage worth $1200 per month?
Within the system as it was constructed, the bank could care less if I could afford to pay $1200 per month. They only cared that they could sell me the loan, get their closing costs, and then they would pass the liability of my problem loan to a third-party investor.
Because the bank had no financial interest in my ability to repay the loan, they did not concern themselves with writing loans that could be afforded by consumers.
As a result, banks lined up to write consumer loans that consumers could not afford to repay. (We can also slap the consumer at this point, because the people who took those loans also knew that they could not repay them.)
The Contribution Of The Consumer
Each consumer who took a mortgage they could not hope to repay contributed to our current economic meltdown.
I know that many felt strongly that they could repay the loan or that they could get a salary increase to help ends meet. But when consumers are struggling to get by, it only takes one unexpected car repair or other large expense to bring the house of cards tumbling down. The end of the road could also come as soon as one got sick enough to miss a couple days of work.
The consumer should have known better than to take the loans they were offered. But many people also expected that banks still worked the way they did in the 1970's and 1980's - making sure that consumers could afford a loan, before offering that loan.
Lining Up The Dominoes
Consumers had taken loans that they could barely hope to repay. But when an unexpected expense came up, people began to get behind on their mortgage payments. Eventually, the added pressure of being behind on payments pushed consumers to cut their losses and default their home mortgages.
Of course, this process was accelerated when the real estate bubble burst and homeowners began to realize that they owed $120,000 on a home only worth $100,000!
As consumers began to default on their home mortgages, banks started to tighten up their credit policies on other large consumer loans such as cars, furniture and electronics.
As consumers became unable to get loans for the things they desired to purchase, manufacturers and retailers began to struggle under slowing sales.
Slowing sales further complicated the issue, because banks began to realize that their business clients were having a harder time paying back business loans.
At this point, the banks worried about their business clients, but they did not close all commercial credit just yet.
Like you and I, banks borrow money from each other, in order to enable ensure that bank liquidity is maintained. In the banking industry, the government requires that a bank always has cash-on-hand to match 10% of the total loans it has in the marketplace.
On days like payday, banks will often borrow enough money from another bank to help them cash all of the checks that will be brought to their bank. They borrow that money to be able to meet their cash needs, without tapping into the money in their safe that is required to meet federal lending standards.
Of course, banks will cash a check on Friday and they will have that money back in their own coffers by the following Wednesday, when the employer's bank is able to send the money back to the bank who cashed the check. Within the banking industry, few-day loans and one-week loans between banks are common for this reason.
It did not really hit the fan until banks stopped loaning money to each other. When the investment banks began to fall, other major banks also began to fail. With banks failing everyday, bank managers began to wonder about the banks to whom they loan money.
Fear crept into the bank-to-bank lending cycle, and bank-to-bank credit came crashing to a halt.
This is the point where commercial credit died. It was September of 2008 - only weeks before the Presidential election. John McCain handled himself badly during this time frame, ensuring that he would forever be only a footnote in history. "I am suspending my campaign to focus on this problem," - John McCain, famous last words of the top dunce of 2008.
When banks stopped lending to each other, other banks had to freeze commercial credit lines. When General Electric's top lender was unable to get bank-to-bank loans, it was unable to loan money to GE, regardless of their belief in GE's ability to pay back the loan.
The Fallout Is Wide And Painful
When GE can no longer get loans to finance the manufacturing cycle of their products, then GE is forced to lay off workers.
When the automakers customers cannot get consumer loans and the automakers cannot get loans to keep them afloat during this economic downtown, the automakers are forced to lay off people. Along with the automakers laying off people, part suppliers and dealerships also have to lay off people.
When the State Of California cannot get loans to keep the state operational until tax payments start coming in, Governor Schwarzenegger has to make some hard decisions, stopping certain government services and stopping production of development projects. Of course, Schwarzenegger does not have the political courage to fix the problem, but only to survive the crisis. Either way, money stops flowing in California from government coffers, leading to taxpayers receiving IOU's from the California tax agency and people losing their jobs in state construction projects.
The Downward Spiral
Consumers cannot borrow money to buy consumer goods, which in turn slows sales at major manufacturers and major retailers. Slowed sales leads to more layoffs and fewer jobs. Slowed sales also leads to lower stock prices and fewer stock dividends.
Sometimes the pain felt at the business level leads to business failures, which in turn leads to more lost jobs. Fewer jobs leads to more defaulted loans and home foreclosures.
It is a cycle that is hard to break.
According to a story by the Fox Business Network last week, American consumers have lost $11 trillion dollars in their net worth over the last one year.
Is there a light at the end of the tunnel? Certainly there is, although it is a bit hard to see right now. Every down cycle in an economy ends with an up cycle. It is just that we have yet to discern a bottom in this economic downturn, so it is hard to predict when recovery will come.
I am an optimist by nature. I see good days ahead, although those good days will necessarily be preceded by some pain.
The best advice I can give anyone in this current recession is to only spend within your means, until this economy recovers its vitality. At my house, we are still spending, but we are not doing it with credit. Instead, we are paying cash for what we want and making darn sure not to increase our debt load during this down cycle.
Author's Note: This article was originally published at: http://cash-advance-payday-loans.org/blog/economic-meltdown/2009/03/
About the Author:
Arlo Mooney writes about the economy and credit. The only loans he will consider at this time are short term loans, in the form of payday loans or cash advance loans to bridge a cash shortage until the following payday. You can read more of Arlo's work at: http://cash-advance-payday-loans.org/blog/
Thursday, March 26, 2009
Obama Leadership: 8 Ways to Lead in the 21st Century
Article Presented by:
Copyright © 2009 Sharif Khan
"I destroy my enemies when I make them my friends." - Abraham Lincoln, 16th President of the United States
The world is looking for a new kind of leader who can bring hope and stability in dark economic times. President Obama could very well be that leader. Only time will tell. What can we learn so far from Obama's style of leadership? Here are some observations to note for leading in the 21st century:
1. Survival of the Fittest
Charles Darwin spoke of survival of the fittest belonging to the species that is not necessarily the strongest, but the most adaptive. Obama was strong, bold and fiercely determined at the very start of his campaign. But what catapulted his success into the stratosphere was how his communications team adapted to the power of the internet to engage voters through various online social media channels such as Facebook, Myspace, YouTube and Twitter, and by developing a powerful web presence that helped raise over half a billion dollars online for his campaign.
2. Foes to Friends
Will Lincoln's "team of rivals" strategy of appointing campaign opponents to his cabinet work for President Obama? That remains to be seen; but Obama has shown so far that he is a charismatic leader who can successfully put differences behind and get opponents onboard his team using charm and intelligence. Although easier said than done, an enemy turned into a true friend can prove to be a loyal ally. On a broader scale, Obama's consensus building approach to international relations by seeking to understand before being understood and welcoming multilateral decision making, could help ease world tensions and maybe even convert certain enemy nations into allies. Naïve yes, impossible no.
3. Lead by Example
On his first day of office, President Obama froze senior White House staff salaries exceeding $100,000 and promised more openness and transparency to "make government more trustworthy in the eyes of the American people." His example sends a clear message to the public that his leadership team is willing to share in the sacrifices necessary to turn the economy around.
4. Bold and Swift Action
Rhetoric has to be backed by action. In his inaugural speech, Obama spoke of 'bold and swift' action. From the decision to close down Guantanamo prison in a year, to vowing to pull out American combat troops from Iraq in sixteen months, not to mention the herculean task of getting Congress to pass an $800 billion-plus stimulus package, Obama has so far delivered on his call for 'bold and swift' action. Leadership is about judgment - the ability to make decisions. Some of the choices may be wrong in retrospect, but leadership, like a river, must keep moving forward.
5. Admit Mistakes
It takes a special person of character to readily admit mistakes. When Tom Daschle pulled out of the nomination process for the post of Health Secretary after controversy over his personal tax records, Obama admitted, "I screwed up." He was sincere, direct, and to the point. True leaders earn respect by honestly admitting their mistakes. False leaders are despised, and their plans eventually undermined, because they hide behind their title or position and blame someone else for their own mistakes.
6. Maintain Poise
Whether in a public debate, press conference, or media interview, Obama has shown his trademark signature of remaining cool, calm, and collected by neither overreacting nor underreacting to curve ball questions and attacks. When all is said and done, the person who can keep cool when others are hot is usually the one to boss the job.
7. Powered by Purpose
One of the reasons why President Obama has such a high approval rating is that people see that he is driven by a genuine sense of moral purpose. While he could have easily pursued a high paying corporate law career, Obama chose civil rights law practice instead and served as a community organizer who took a grassroots approach to improving his community in the South Side of Chicago. He is a caring and compassionate leader who burns for justice. In perhaps the greatest transfer of wealth from the poor to the rich in the history of America, Obama expresses outrage at Wall Street execs who pocketed billions in bonuses from taxpayer bailout money and calls for a 'new era of responsibility'.
8. Hope Rooted in Reality
Abraham Lincoln once said, "You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time." With unprecedented access to information today, it is becoming nearly impossible to fool all the people even some of the time. People want the facts and aren't fooled easily. Leaders who make the mistake of blind optimism or obscuring the facts are in for a rude awakening. Without the facts, without the proper diagnosis, the disease will only get worse and spread.
President Obama understands this phenomenon and is a leader who provides hope rooted in reality. With sobering resolve, Obama is telling his people that they will have to hunker down, roll up their sleeves, and work hard to rebuild the American dream; a dream that may take more than a term to rebuild, but that can become a reality - with the audacity of hope.
About the Author:
Sharif Khan (http://www.herosoul.com; sharif@herosoul.com) is a freelance writer, consultant, speaker, and author of the inspirational leadership book, Psychology of the Hero Soul.
Copyright © 2009 Sharif Khan
"I destroy my enemies when I make them my friends." - Abraham Lincoln, 16th President of the United States
The world is looking for a new kind of leader who can bring hope and stability in dark economic times. President Obama could very well be that leader. Only time will tell. What can we learn so far from Obama's style of leadership? Here are some observations to note for leading in the 21st century:
1. Survival of the Fittest
Charles Darwin spoke of survival of the fittest belonging to the species that is not necessarily the strongest, but the most adaptive. Obama was strong, bold and fiercely determined at the very start of his campaign. But what catapulted his success into the stratosphere was how his communications team adapted to the power of the internet to engage voters through various online social media channels such as Facebook, Myspace, YouTube and Twitter, and by developing a powerful web presence that helped raise over half a billion dollars online for his campaign.
2. Foes to Friends
Will Lincoln's "team of rivals" strategy of appointing campaign opponents to his cabinet work for President Obama? That remains to be seen; but Obama has shown so far that he is a charismatic leader who can successfully put differences behind and get opponents onboard his team using charm and intelligence. Although easier said than done, an enemy turned into a true friend can prove to be a loyal ally. On a broader scale, Obama's consensus building approach to international relations by seeking to understand before being understood and welcoming multilateral decision making, could help ease world tensions and maybe even convert certain enemy nations into allies. Naïve yes, impossible no.
3. Lead by Example
On his first day of office, President Obama froze senior White House staff salaries exceeding $100,000 and promised more openness and transparency to "make government more trustworthy in the eyes of the American people." His example sends a clear message to the public that his leadership team is willing to share in the sacrifices necessary to turn the economy around.
4. Bold and Swift Action
Rhetoric has to be backed by action. In his inaugural speech, Obama spoke of 'bold and swift' action. From the decision to close down Guantanamo prison in a year, to vowing to pull out American combat troops from Iraq in sixteen months, not to mention the herculean task of getting Congress to pass an $800 billion-plus stimulus package, Obama has so far delivered on his call for 'bold and swift' action. Leadership is about judgment - the ability to make decisions. Some of the choices may be wrong in retrospect, but leadership, like a river, must keep moving forward.
5. Admit Mistakes
It takes a special person of character to readily admit mistakes. When Tom Daschle pulled out of the nomination process for the post of Health Secretary after controversy over his personal tax records, Obama admitted, "I screwed up." He was sincere, direct, and to the point. True leaders earn respect by honestly admitting their mistakes. False leaders are despised, and their plans eventually undermined, because they hide behind their title or position and blame someone else for their own mistakes.
6. Maintain Poise
Whether in a public debate, press conference, or media interview, Obama has shown his trademark signature of remaining cool, calm, and collected by neither overreacting nor underreacting to curve ball questions and attacks. When all is said and done, the person who can keep cool when others are hot is usually the one to boss the job.
7. Powered by Purpose
One of the reasons why President Obama has such a high approval rating is that people see that he is driven by a genuine sense of moral purpose. While he could have easily pursued a high paying corporate law career, Obama chose civil rights law practice instead and served as a community organizer who took a grassroots approach to improving his community in the South Side of Chicago. He is a caring and compassionate leader who burns for justice. In perhaps the greatest transfer of wealth from the poor to the rich in the history of America, Obama expresses outrage at Wall Street execs who pocketed billions in bonuses from taxpayer bailout money and calls for a 'new era of responsibility'.
8. Hope Rooted in Reality
Abraham Lincoln once said, "You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time." With unprecedented access to information today, it is becoming nearly impossible to fool all the people even some of the time. People want the facts and aren't fooled easily. Leaders who make the mistake of blind optimism or obscuring the facts are in for a rude awakening. Without the facts, without the proper diagnosis, the disease will only get worse and spread.
President Obama understands this phenomenon and is a leader who provides hope rooted in reality. With sobering resolve, Obama is telling his people that they will have to hunker down, roll up their sleeves, and work hard to rebuild the American dream; a dream that may take more than a term to rebuild, but that can become a reality - with the audacity of hope.
About the Author:
Sharif Khan (http://www.herosoul.com; sharif@herosoul.com) is a freelance writer, consultant, speaker, and author of the inspirational leadership book, Psychology of the Hero Soul.
Friday, February 27, 2009
Federal Jobs Are Plentiful
Article Presented by:
Copyright © 2009 Benji O. Anosike
Think we have a severe economic recession in the United States today, right? Or, at least, that the magnitude of the apparent severe unemployment situation that we have today, is such that you probably can't find any significant job openings existing just about anywhere in America today, and that there simply aren't any employer today who is making any significant hiring of new workers, right?
Well, think again!
Oh, I know. There's this virtual avalanche of grim economic news flooding Americans even by the minute these days out of Washington, telling about growing business and industry shut downs, worker lay offs and rising unemployment. And sure, it's real. But, this is probably the biggest job-related secret in America today, the common, conventional thinking of general joblessness in America today. Actually, the plain FACT is that there are, in fact, plenty of Federal government job hiring going on right now, and plenty of job openings available around the clock right this minute, and you'd just need the "informed tricks" that' are required for it, and you'd be able to properly job search for and dig out those Federal job openings, then properly apply for them and get one of them.
Point is, what we actually have here in the American job market today, is a diminution, or, if you will, a shrinkage in certain types of jobs. But there is no overall shortage of jobs, no complete dry-up of employment or employment opportunities in the totality of the American economy. Particularly, there is our own Federal Government of the United States. It has large job openings right now and continues to hire new workers in large numbers all along even as we speak right now. And, will not only continue to have need for new workers, and to hire sizable numbers of them in the months ahead, but in numbers even higher and larger.
In deed, several studies by respectable labor and manpower economists and experts, including a recent report by experts (http://www.cnbc.com/id/28948055; http://news.aol.com/article/despite-layoffs-federal-work-force-is/324326?cid=9), released in January 2009 by the White House Council of Economic Advisers, have amply projected that a large number of jobs are to be created by the Federal Government in this 2009 year, and beyond. For example, this latest study estimates that, just based on a $600 billion economic stimulus package by the new Obama administration (a higher amount of some $800-900 billion is what is currently being discussed), about 244,000 newly created government jobs at Federal, state and local levels, are to be expected by that measure alone.
In deed, this is actually totally in keeping with the expected Federal government role in times of unusually hard economic times or crises such as we have today. At such times, the Federal Government is expected and anticipated to have an even higher job-creation and worker and labor hiring load than usual, for one fundamental reason, which is simply that such a role is, in fact, the natural, responsible role meant for the Federal government to play. The Federal Government just has to step in, in such a dire national economic time (the kind we seem to have right now), and play the role of a stabilizer." In fact, the notion has become the common thinking among labor management experts and economists today, that in unusually severe economic times such as today when general employment continues to dwindle, and when major American employers (Microsoft corp., Pfizer, Caterpillar, Home Deport, and the Wall Street, to name just a few) are massively laying off workers, it becomes therefore the "natural, built-in" role of the Federal government to step in and try to pick up the employment slack by stepping up worker hiring, not lessening it.
THE CENTRAL QUESTION: Given the FACT, solidly established, that the Federal government has an abundance of job openings available, and is poised for even higher levels of new worker hiring in the near future, if you are a job seeker who is serious about securing a job with the Federal Government, what would you need to do to secure one of these Federal jobs? Essentially, what and what to do, fundamentally lies in the serious job-seeker making certain to have the vital knowledge, information and skill, to be able to properly job search for where the jobs actually are (in terms of the specific agencies of the Federal government having them, as well as their geographic locations across the country), and to uncover them; and having located those jobs, the other critical necessity is that the job-seeker has got to be able to know how exactly to properly apply for them in a way that will meet the special Federal job standards, and thereby result in his or her landing the priced Federal job.
The question, in short, will really boil down to this: which and which ones among the American jobless or those who want jobs, will be equipped enough and informed enough to be able to take proper advantage of these real, existing 'recession proof' Federal job openings, and therefore be able to walk away with those jobs for which they're qualified?
GETTING FEDERAL EMPLOYMENT IN THE MIDST OF SEVERE UNEMPLOYMENT CLIMATE!?
Here, in a nutshell, are some of the major things that my own new publication, published by the Self-Helper Law Press of America, titled The Handbook of Federal Jobs: How to Job Search for, Apply for and Get Federal Job (www.GetFederalJobNow.com), provides you, as it methodologically guides the reader, in a simple, step-by-step outline, through a maze of the entire Federal job hiring process:
information on the present and projected civilian job openings and career opportunities that are continually available in the federal government;
the present as well as the projected future areas of Federal job growth and openings, and where exactly those jobs are or will be in the future (in terms of the particular government agencies that are applicable, as well as the jobs' geographic locations);
how to search for them and to find them, how to understudy precisely the actual core qualifications required for the job, and to "decode" them;
how to properly apply for the jobs using precisely the appropriate Federal-style procedures and standards (including the Federal-style job interviewing, job resume and KSA writing standards), and
how to successfully process your job application, from the very start to the end, in such a way as to win the Federal hiring officer's nod for the job, etc.
IN SUM: "Just arm yourself with a copy of this Handbook," chimed Dan Benjamin, the Sales Manager of the book's publisher, "and you'll see yourself go quickly, from the ranks of the despairing long lasting unemployed, to the ranks of the happy newly Federally employed."
In this ground-breaking Federal job-hunting Handbook, the Publishers of this Handbook have become even more encouraged and more emboldened by one major, new, unique development that was not earlier unanticipated but which busted lately on the American economic scene, to make an even better and more compelling case for why it's now almost like a dire necessity of life for any serious Federal job hunter today to hurry and grab a copy of the book: the new Obama Presidency! The projected infusion of humongous sums into the economy out of the Obama economic stimulus program, some one trillion dollars or so of it, will clearly mean far more big-government programs and initiatives, and, hence, the creation of a lot more new government jobs across the board in the months ahead. And, even more so, still more new Federal government civil service jobs and new federal hires to be had!
Those are the virtually GUARANTEED new Federal job opportunities that are either already here, or are soon to come! Again, which American jobless or job-seekers would have been properly equipped, informed, and adequately prepared, to take proper advantage of these opportunities? That's the central question! Having in hand this prime essential tool you'd need for it (a copy of The FEDERAL JOBS HANDBOOK), according to author Anosike, will assure precisely that you'd be up to that challenge - an the tremendous opportunity to become a prized Federal employee.
About the Author:
Benji O. Anosike, has been characterized by one analyst as "one of the keenest-eyed Federal government employment researchers and experts around." His latest new study just released, is titled THE FEDERAL JOBS HANDBOOK: HOW TO JOB SEARCH FOR, APPLY FOR AND GET FEDERAL JOB. SUBTITLE: "America's Biggest Job Secret: How the Federal Government is Loaded with Jobs, Where they are, and How to Get Them." (http://www.GetFederalJobNow.com). A recognized national expert on self-help law and consumer cost-saving techniques, Dr. Anosike, holds graduate degrees in labor management economics and a Ph.D. in jurisprudence, and is the acclaimed author of some 26 books, guidebooks and manuals, including several best-sellers, on various topics of American consumer interests and savings.
Copyright © 2009 Benji O. Anosike
Think we have a severe economic recession in the United States today, right? Or, at least, that the magnitude of the apparent severe unemployment situation that we have today, is such that you probably can't find any significant job openings existing just about anywhere in America today, and that there simply aren't any employer today who is making any significant hiring of new workers, right?
Well, think again!
Oh, I know. There's this virtual avalanche of grim economic news flooding Americans even by the minute these days out of Washington, telling about growing business and industry shut downs, worker lay offs and rising unemployment. And sure, it's real. But, this is probably the biggest job-related secret in America today, the common, conventional thinking of general joblessness in America today. Actually, the plain FACT is that there are, in fact, plenty of Federal government job hiring going on right now, and plenty of job openings available around the clock right this minute, and you'd just need the "informed tricks" that' are required for it, and you'd be able to properly job search for and dig out those Federal job openings, then properly apply for them and get one of them.
Point is, what we actually have here in the American job market today, is a diminution, or, if you will, a shrinkage in certain types of jobs. But there is no overall shortage of jobs, no complete dry-up of employment or employment opportunities in the totality of the American economy. Particularly, there is our own Federal Government of the United States. It has large job openings right now and continues to hire new workers in large numbers all along even as we speak right now. And, will not only continue to have need for new workers, and to hire sizable numbers of them in the months ahead, but in numbers even higher and larger.
In deed, several studies by respectable labor and manpower economists and experts, including a recent report by experts (http://www.cnbc.com/id/28948055; http://news.aol.com/article/despite-layoffs-federal-work-force-is/324326?cid=9), released in January 2009 by the White House Council of Economic Advisers, have amply projected that a large number of jobs are to be created by the Federal Government in this 2009 year, and beyond. For example, this latest study estimates that, just based on a $600 billion economic stimulus package by the new Obama administration (a higher amount of some $800-900 billion is what is currently being discussed), about 244,000 newly created government jobs at Federal, state and local levels, are to be expected by that measure alone.
In deed, this is actually totally in keeping with the expected Federal government role in times of unusually hard economic times or crises such as we have today. At such times, the Federal Government is expected and anticipated to have an even higher job-creation and worker and labor hiring load than usual, for one fundamental reason, which is simply that such a role is, in fact, the natural, responsible role meant for the Federal government to play. The Federal Government just has to step in, in such a dire national economic time (the kind we seem to have right now), and play the role of a stabilizer." In fact, the notion has become the common thinking among labor management experts and economists today, that in unusually severe economic times such as today when general employment continues to dwindle, and when major American employers (Microsoft corp., Pfizer, Caterpillar, Home Deport, and the Wall Street, to name just a few) are massively laying off workers, it becomes therefore the "natural, built-in" role of the Federal government to step in and try to pick up the employment slack by stepping up worker hiring, not lessening it.
THE CENTRAL QUESTION: Given the FACT, solidly established, that the Federal government has an abundance of job openings available, and is poised for even higher levels of new worker hiring in the near future, if you are a job seeker who is serious about securing a job with the Federal Government, what would you need to do to secure one of these Federal jobs? Essentially, what and what to do, fundamentally lies in the serious job-seeker making certain to have the vital knowledge, information and skill, to be able to properly job search for where the jobs actually are (in terms of the specific agencies of the Federal government having them, as well as their geographic locations across the country), and to uncover them; and having located those jobs, the other critical necessity is that the job-seeker has got to be able to know how exactly to properly apply for them in a way that will meet the special Federal job standards, and thereby result in his or her landing the priced Federal job.
The question, in short, will really boil down to this: which and which ones among the American jobless or those who want jobs, will be equipped enough and informed enough to be able to take proper advantage of these real, existing 'recession proof' Federal job openings, and therefore be able to walk away with those jobs for which they're qualified?
GETTING FEDERAL EMPLOYMENT IN THE MIDST OF SEVERE UNEMPLOYMENT CLIMATE!?
Here, in a nutshell, are some of the major things that my own new publication, published by the Self-Helper Law Press of America, titled The Handbook of Federal Jobs: How to Job Search for, Apply for and Get Federal Job (www.GetFederalJobNow.com), provides you, as it methodologically guides the reader, in a simple, step-by-step outline, through a maze of the entire Federal job hiring process:
IN SUM: "Just arm yourself with a copy of this Handbook," chimed Dan Benjamin, the Sales Manager of the book's publisher, "and you'll see yourself go quickly, from the ranks of the despairing long lasting unemployed, to the ranks of the happy newly Federally employed."
In this ground-breaking Federal job-hunting Handbook, the Publishers of this Handbook have become even more encouraged and more emboldened by one major, new, unique development that was not earlier unanticipated but which busted lately on the American economic scene, to make an even better and more compelling case for why it's now almost like a dire necessity of life for any serious Federal job hunter today to hurry and grab a copy of the book: the new Obama Presidency! The projected infusion of humongous sums into the economy out of the Obama economic stimulus program, some one trillion dollars or so of it, will clearly mean far more big-government programs and initiatives, and, hence, the creation of a lot more new government jobs across the board in the months ahead. And, even more so, still more new Federal government civil service jobs and new federal hires to be had!
Those are the virtually GUARANTEED new Federal job opportunities that are either already here, or are soon to come! Again, which American jobless or job-seekers would have been properly equipped, informed, and adequately prepared, to take proper advantage of these opportunities? That's the central question! Having in hand this prime essential tool you'd need for it (a copy of The FEDERAL JOBS HANDBOOK), according to author Anosike, will assure precisely that you'd be up to that challenge - an the tremendous opportunity to become a prized Federal employee.
About the Author:
Benji O. Anosike, has been characterized by one analyst as "one of the keenest-eyed Federal government employment researchers and experts around." His latest new study just released, is titled THE FEDERAL JOBS HANDBOOK: HOW TO JOB SEARCH FOR, APPLY FOR AND GET FEDERAL JOB. SUBTITLE: "America's Biggest Job Secret: How the Federal Government is Loaded with Jobs, Where they are, and How to Get Them." (http://www.GetFederalJobNow.com). A recognized national expert on self-help law and consumer cost-saving techniques, Dr. Anosike, holds graduate degrees in labor management economics and a Ph.D. in jurisprudence, and is the acclaimed author of some 26 books, guidebooks and manuals, including several best-sellers, on various topics of American consumer interests and savings.
Thursday, February 5, 2009
Understanding The Due On Sale Clause On Your Home Mortgage
Article Presented by:
Copyright © 2009 Cory Shrader
The "Due On Sale Clause" is among the most frequently misunderstood and most-feared legal terms in American contractual law. In this article, we are going to take a look at what it is, what it is not, and how to avoid violating it.
What Is The Due On Sale Clause?
On nearly every home mortgage and loan contract written in the United States, the Due On Sale Clause is one of those fine print inclusions that a lot of home buyers overlook.
In essence, the Due On Sale Clause is a legal term that means that if a mortgage holder transfers interest in a real property to a third-party, then the bank or other lender has the "right" to call the loan "due in full", and if the mortgage holder cannot pay the loan in full at that time, the bank has the right to foreclose on the property.
It must be noted however that many banks and lending institutions do not enforce their rights in association to the Due On Sale Clause. Banks and lending institutions are "not required" to enforce the Due On Sale Clause, but they have the "right" to do so at their discretion.
Understanding The Foreclosure Process
This is an area that most consumers simply do not understand. In fact, just ten years ago, even I believed that if a home were foreclosed, the bank would hold the property until they could sell it at its full retail value.
But the truth is that banks and lending institutions generally do not make money when they foreclose a property. Instead, most banks will lose tens of thousands of dollars if they are forced to foreclose on a property.
Here is the reason why.
When a bank forecloses a property, they cannot afford to have non-performing real estate on their books. Banks and lenders also borrow money and have debts to service. So a piece of real estate on their books that is not generating an income is contrary to the lenders business model.
As a result, when banks foreclose on a property, they need to sell that property quickly. Foreclosed properties are sent to a sheriff's sale, usually within 90 days of the completion of the foreclosure process.
Now, here is where we get into the dollars and cents of why your lender is going to lose tens of thousands of dollars when they are forced to foreclose your property. The average property sold at a sheriff's auction will only generate 20- to 40-cents return against the retail value of the property!
So, if you have a 40% equity stake in your home at the time of foreclosure and your bank will only be able to collect 20% to 40% of the homes' retail value at auction, your bank is still going to lose 20% to 40% of the retail value of the property at auction. If your home is worth $100,000, you will lose your 40% equity in the property or $40,000, and your bank will lose 20% to 40% of the retail value of the property or $20,000 to $40,000 when they sell your home at auction.
When you begin to understand why a bank or lender would not want to foreclose your home, then you begin to understand why a bank or lender may choose not to exercise its rights under the Due On Sale Clause.
The History Of The Due On Sale Clause
The Due On Sale Clause began to work its way into mortgage contracts during the 1970's. Homeowners who took loans in the 1950's and 1960's were getting really low interest rates on home loans. But, during the 1970's, interest rates began to spiral upwards.
Home sellers who were willing to entertain "creative financing alternatives" to sell their homes began to sell their homes to other parties through Contract For Deed arrangements. This enabled buyers to avoid going to the bank to get new loans, which would require a much higher interest rate than the rate the current homeowner was paying on the home.
The math was easy to follow. The existing homeowner was paying 2% to 4% interest on his or her mortgage. Buyers getting new loans would be paying 8% to 16% to buy the same house. Assumable mortgages were a clear winner for homebuyers, due to the higher interest rates on new loans, and they were a clear winner for home sellers who would be able to sell their homes more quickly to motivated buyers.
Banks viewed the Due On Sale Clause as a method to force buyers into a higher interest rate. So banks began to include the Due On Sale Clause on all mortgage contracts.
Early on, a few states sided with buyers who felt that the Due On Sale Clause was tantamount to predatory lending practices. So in the late-1970's and early-1980's, state governments began to outlaw the Due On Sale Clause.
However, the federal government sided with the banking and savings and loan industries and passed a law in 1982, The Garn-St. Germain Depository Institutions Act of 1982, that made the Due On Sale Clause legal in all fifty states - with a few exceptions defined by the legislation: (http://www4.law.cornell.edu/uscode/html/uscode12/usc_sec_12_00001701---j003-.html)
The Garn-St. Germain Depository Institutions Act of 1982 Exceptions
As with any document filled with legalese, the language can be somewhat confusing, leaving room for interpretation in the law. As a result, many real estate investors operate on the fringes of this legislation, doing things that some people consider legal and other people consider illegal.
In the 27 years since this legislation was passed, the federal government has not taken steps to clarify any of the ambiguity in the legislation. As a result, it is entirely possible to find lawyers who argue for each side of the specific interpretation of the legislation.
Although some elements of this legislation remain ambiguous, some elements of the legislation are crystal clear. (As always, you should consult with an attorney before signing any contract.)
One point that is crystal clear is that any loan written on a manufactured home (mobile home) cannot include a Due On Sale Clause. All loans made on a manufactured home may be assumed by a third-party. Vanderbilt Mortgage, one of the largest lenders on manufactured homes, makes the process super easy. They will send you a credit application for your buyer, and if the person passes credit check, that person can take over your home loan immediately under whatever terms you set.
Another exception includes the ability to sign a lease of up to three years, so long as that lease does not include an Option To Buy.
Allowances for an exception to the Due On Sale Clause have been included to reflect the possibilities of the death of a borrower or a couple getting a divorce.
One more important exception to the Due On Sale Clause has to do with Inter Vivos Trusts. Also called a Living Trust, the Inter Vivos Trust is a legal instrument that permits the transfer of the ownership of the property from the individual to a legal trust, managed by a trustee and held by the homeowner as beneficiary. This was important to note, because many real estate investors use this as a tool to protect the interests of the buyer and seller in the real estate transaction.
If you want to know all of the specifics of this legislation, please refer to the Cornell Law URL included above.
The Due On Sale Protects The Lenders' Interests
Although banks and lending institutions have the "right" to enforce the Due On Sale Clause, most lending institutions will not exercise that right.
Some of the ambiguity that accompanies the legislation regarding the Due On Sale Clause is whether a borrower is required to notify his or her lender of a transfer of interest in a property. While it is fraud and a crime to mislead your lender, some argue that if you don't tell your lender, then you will have circumvented the legal ramifications of violating the Due On Sale Clause. After all, if you don't lie to your lender, then you have not committed any fraud.
The people who take this approach also believe that if the lender never figures it out, then nothing is lost if the buyer continues to make all of his or her payments on time every month.
Personally, I prefer that you play straight with your lender. As someone who buys homes that have a mortgage, it is in my best interest also, if the lender is aware of our intent to do a transaction. I would hate to buy your house under contract, pay on that house for one payment or dozens, and then have your lender discover that you did not tell them that I was buying your house. If your lender calls the Due On Sale Clause after I have worked out a purchase deal with you, then that would be a pain in my you-know-what.
Some lenders will not hesitate to call the Due On Sale Clause, although most are happy so long as they continue to receive on-time payments for the life of the loan.
That is why I suggest always to call your lender with a "If I wanted to" scenario. Don't tell your lender "you did it". Tell your lender before you sign the paperwork "you would like to do it".
Test the waters with your lender before you venture into the deal. Chances are that your lender will agree, so long as the buyer knows that if the payments come late, that the bank may exercise its right to Due On Sale.
One More Note
Someone asked what a Demand Clause was and if it is similar to the Due On Sale Clause. It is similar, but very different. The Demand Clause allows the lender to demand full payment at any time for any reason. With the Due On Sale Clause, then full payment can only be required if the interest in the property changes hands.
In Conclusion
Tens of thousands of deals are done every year, where the mortgage holder sets up a Contract For Deed deal with a buyer, and the lending institution permits the transfer to happen unimpeded - even though the lending institution has the right to stop the transaction at any time under the terms of the Due On Sale Clause.
If you want to sell your home during this housing crisis and credit crunch, your first best bet is to call your lender and have a discussion about "If I wanted to sell my house through a Contract For Deed" scenario.
If your lender says that they would call the note, then you know that this option is not for you. However, if they indicate that they would be happy to let you go through with such a deal on certain terms, then you will know that you have another option for getting out of that house that you do not want anymore.
Author's Note: This article originally published here:
http://www.libertyhomesellers.com/blog/2009/02/due-on-sale-clause/
About the Author:
Cory Shrader writes for the Liberty Home Sellers website. Liberty buys and sell homes in Oklahoma and has regular contacts with other real estate investors in many U.S. states, who also offer single-family homes for sale. If you are looking to sell a home, buy a home, or buy handyman specials, please visit our website and fill out the appropriate form on our website: http://www.LibertyHomeSellers.com
Copyright © 2009 Cory Shrader
The "Due On Sale Clause" is among the most frequently misunderstood and most-feared legal terms in American contractual law. In this article, we are going to take a look at what it is, what it is not, and how to avoid violating it.
What Is The Due On Sale Clause?
On nearly every home mortgage and loan contract written in the United States, the Due On Sale Clause is one of those fine print inclusions that a lot of home buyers overlook.
In essence, the Due On Sale Clause is a legal term that means that if a mortgage holder transfers interest in a real property to a third-party, then the bank or other lender has the "right" to call the loan "due in full", and if the mortgage holder cannot pay the loan in full at that time, the bank has the right to foreclose on the property.
It must be noted however that many banks and lending institutions do not enforce their rights in association to the Due On Sale Clause. Banks and lending institutions are "not required" to enforce the Due On Sale Clause, but they have the "right" to do so at their discretion.
Understanding The Foreclosure Process
This is an area that most consumers simply do not understand. In fact, just ten years ago, even I believed that if a home were foreclosed, the bank would hold the property until they could sell it at its full retail value.
But the truth is that banks and lending institutions generally do not make money when they foreclose a property. Instead, most banks will lose tens of thousands of dollars if they are forced to foreclose on a property.
Here is the reason why.
When a bank forecloses a property, they cannot afford to have non-performing real estate on their books. Banks and lenders also borrow money and have debts to service. So a piece of real estate on their books that is not generating an income is contrary to the lenders business model.
As a result, when banks foreclose on a property, they need to sell that property quickly. Foreclosed properties are sent to a sheriff's sale, usually within 90 days of the completion of the foreclosure process.
Now, here is where we get into the dollars and cents of why your lender is going to lose tens of thousands of dollars when they are forced to foreclose your property. The average property sold at a sheriff's auction will only generate 20- to 40-cents return against the retail value of the property!
So, if you have a 40% equity stake in your home at the time of foreclosure and your bank will only be able to collect 20% to 40% of the homes' retail value at auction, your bank is still going to lose 20% to 40% of the retail value of the property at auction. If your home is worth $100,000, you will lose your 40% equity in the property or $40,000, and your bank will lose 20% to 40% of the retail value of the property or $20,000 to $40,000 when they sell your home at auction.
When you begin to understand why a bank or lender would not want to foreclose your home, then you begin to understand why a bank or lender may choose not to exercise its rights under the Due On Sale Clause.
The History Of The Due On Sale Clause
The Due On Sale Clause began to work its way into mortgage contracts during the 1970's. Homeowners who took loans in the 1950's and 1960's were getting really low interest rates on home loans. But, during the 1970's, interest rates began to spiral upwards.
Home sellers who were willing to entertain "creative financing alternatives" to sell their homes began to sell their homes to other parties through Contract For Deed arrangements. This enabled buyers to avoid going to the bank to get new loans, which would require a much higher interest rate than the rate the current homeowner was paying on the home.
The math was easy to follow. The existing homeowner was paying 2% to 4% interest on his or her mortgage. Buyers getting new loans would be paying 8% to 16% to buy the same house. Assumable mortgages were a clear winner for homebuyers, due to the higher interest rates on new loans, and they were a clear winner for home sellers who would be able to sell their homes more quickly to motivated buyers.
Banks viewed the Due On Sale Clause as a method to force buyers into a higher interest rate. So banks began to include the Due On Sale Clause on all mortgage contracts.
Early on, a few states sided with buyers who felt that the Due On Sale Clause was tantamount to predatory lending practices. So in the late-1970's and early-1980's, state governments began to outlaw the Due On Sale Clause.
However, the federal government sided with the banking and savings and loan industries and passed a law in 1982, The Garn-St. Germain Depository Institutions Act of 1982, that made the Due On Sale Clause legal in all fifty states - with a few exceptions defined by the legislation: (http://www4.law.cornell.edu/uscode/html/uscode12/usc_sec_12_00001701---j003-.html)
The Garn-St. Germain Depository Institutions Act of 1982 Exceptions
As with any document filled with legalese, the language can be somewhat confusing, leaving room for interpretation in the law. As a result, many real estate investors operate on the fringes of this legislation, doing things that some people consider legal and other people consider illegal.
In the 27 years since this legislation was passed, the federal government has not taken steps to clarify any of the ambiguity in the legislation. As a result, it is entirely possible to find lawyers who argue for each side of the specific interpretation of the legislation.
Although some elements of this legislation remain ambiguous, some elements of the legislation are crystal clear. (As always, you should consult with an attorney before signing any contract.)
One point that is crystal clear is that any loan written on a manufactured home (mobile home) cannot include a Due On Sale Clause. All loans made on a manufactured home may be assumed by a third-party. Vanderbilt Mortgage, one of the largest lenders on manufactured homes, makes the process super easy. They will send you a credit application for your buyer, and if the person passes credit check, that person can take over your home loan immediately under whatever terms you set.
Another exception includes the ability to sign a lease of up to three years, so long as that lease does not include an Option To Buy.
Allowances for an exception to the Due On Sale Clause have been included to reflect the possibilities of the death of a borrower or a couple getting a divorce.
One more important exception to the Due On Sale Clause has to do with Inter Vivos Trusts. Also called a Living Trust, the Inter Vivos Trust is a legal instrument that permits the transfer of the ownership of the property from the individual to a legal trust, managed by a trustee and held by the homeowner as beneficiary. This was important to note, because many real estate investors use this as a tool to protect the interests of the buyer and seller in the real estate transaction.
If you want to know all of the specifics of this legislation, please refer to the Cornell Law URL included above.
The Due On Sale Protects The Lenders' Interests
Although banks and lending institutions have the "right" to enforce the Due On Sale Clause, most lending institutions will not exercise that right.
Some of the ambiguity that accompanies the legislation regarding the Due On Sale Clause is whether a borrower is required to notify his or her lender of a transfer of interest in a property. While it is fraud and a crime to mislead your lender, some argue that if you don't tell your lender, then you will have circumvented the legal ramifications of violating the Due On Sale Clause. After all, if you don't lie to your lender, then you have not committed any fraud.
The people who take this approach also believe that if the lender never figures it out, then nothing is lost if the buyer continues to make all of his or her payments on time every month.
Personally, I prefer that you play straight with your lender. As someone who buys homes that have a mortgage, it is in my best interest also, if the lender is aware of our intent to do a transaction. I would hate to buy your house under contract, pay on that house for one payment or dozens, and then have your lender discover that you did not tell them that I was buying your house. If your lender calls the Due On Sale Clause after I have worked out a purchase deal with you, then that would be a pain in my you-know-what.
Some lenders will not hesitate to call the Due On Sale Clause, although most are happy so long as they continue to receive on-time payments for the life of the loan.
That is why I suggest always to call your lender with a "If I wanted to" scenario. Don't tell your lender "you did it". Tell your lender before you sign the paperwork "you would like to do it".
Test the waters with your lender before you venture into the deal. Chances are that your lender will agree, so long as the buyer knows that if the payments come late, that the bank may exercise its right to Due On Sale.
One More Note
Someone asked what a Demand Clause was and if it is similar to the Due On Sale Clause. It is similar, but very different. The Demand Clause allows the lender to demand full payment at any time for any reason. With the Due On Sale Clause, then full payment can only be required if the interest in the property changes hands.
In Conclusion
Tens of thousands of deals are done every year, where the mortgage holder sets up a Contract For Deed deal with a buyer, and the lending institution permits the transfer to happen unimpeded - even though the lending institution has the right to stop the transaction at any time under the terms of the Due On Sale Clause.
If you want to sell your home during this housing crisis and credit crunch, your first best bet is to call your lender and have a discussion about "If I wanted to sell my house through a Contract For Deed" scenario.
If your lender says that they would call the note, then you know that this option is not for you. However, if they indicate that they would be happy to let you go through with such a deal on certain terms, then you will know that you have another option for getting out of that house that you do not want anymore.
Author's Note: This article originally published here:
http://www.libertyhomesellers.com/blog/2009/02/due-on-sale-clause/
About the Author:
Cory Shrader writes for the Liberty Home Sellers website. Liberty buys and sell homes in Oklahoma and has regular contacts with other real estate investors in many U.S. states, who also offer single-family homes for sale. If you are looking to sell a home, buy a home, or buy handyman specials, please visit our website and fill out the appropriate form on our website: http://www.LibertyHomeSellers.com
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