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Why is Goldman-Sachs so powerful and (arguably) innovative? Perhaps because even the 375 top partner/employees are constantly under threat of being “de-partnered”

[catagories: Washington Bankrutpcy attorney]

NY Times reporter Susanne Craig offers us a rare glimpse into perhaps America’s most powerful institution, the investment-banking firm of Goldman Sachs. Former U.S. Treasury secretaries Henry M. Paulson, Jr. and Robert E. Rubin both were one-time partners at Goldman-Sachs, as is New Jersey former governor Jon S. Corzine.

Ms. Craig’s Monday, September 13, 2010 article offers interesting reading about the unique structure of America’s most influentially powerful financial firm.

Goldman has approximately 35,000 employees, and 375 of these are "partners". Goldman-Sachs is a publically traded company (e.g. you can buy shares in Goldman-Sachs) and was one of the last large financial firms to "go public".

It is difficult to be named a partner, but an underperforming partner or a partner who is working in an area perhaps no longer as relevant to the future of the firm can be "de-partnered" to make way for fresh partners. Prior to becoming a publically traded company in 1999, once named a partner you were generally a partner for life, even if you grew to become underproductive dead wood for the company. Partners receive special bonusing and compensation in excess of a $200,000 base salary.

"The (partnering/de-partnering) process is at the heart of Goldman’s culture, a way for the firm to reward and retain top tallent. Goldman was one of the last of the big Wall Street partnerships to go public, selling shares in 1999. When it was private the partners were the owners, sharing in the profits, and in some cases having to put in money to shore up losses. To retain that team spirit as a public company, Goldman continued to name partners. In 1999, there were 221 (partners). Yet there are differences from past practices. When Goldmanwas a private partnership, it was rare that a partner would be asked to leave." reports Ms. Craig. "Goldman weeds out partners because it is worried that if the partnership becomes too big, it will lose its cachet and become less of a motivatinal tool for talented up-and-comers people involved in the process say. If too many people stay, it creates a logjam. The average tenure of a partner is about eight years, in part because of natural attrition and retirements. Goldman insiders also note they have what they call an "up-and-out" culture, leading to the active management of the pool. … Goldman typically removes about 30 partners every two years."

IDEAS FOR ACTION: Goldman-Sachs partners get in and stay in (arguably) by being the best at what they do. Even those partners who resign and move on to other firms often find even greater riches and security. I suggest that we can learn something from these elite partners at Goldman-Sachs, and that is to ask ourselves: "What have we done today, this week, this month, this year to make ourselves more ‘in demand’ in the working world?

Have we learned a few words in Spanish , Russian, Ukranian, Vietnamese or Korean to make cross-cultural customers feel more at home? Have we practiced some Yoga to increase our strength/flexibility and concentration? Have we tried to cut down or quite smoking so as to prolong our working life? Have we worked earnestly and cheerily so as to justify the request for a raise/promotion? Have we tried to become more comfortable with a new computer program or learn new features about one we already use? Did we point out a way our company/office can save money and increase productivity?

This type of behavior is perhaps how the elites at Goldman-Sachs seek to prevent becoming "de-partnered". Perhaps there is a lesson for us from the elites. My goal for you is that in any cycle of future layoffs, that you NOT be one of those who receives the layoff notice.

See Ms. Craig’s interesting article at the following link:

http://www.nytimes.com/2010/09/13/business/13partner.html?scp=1&sq=At%20Goldman,%20Partners%20are%20Made,%20and%20Unmade&st=cse

325% more students in “for profit” colleges since 1998 – but many may be disappointed because of accreditation issues and confusion

[catagories: Washington Bankrutpcy attorney]

I have posted earlier on this blog about accreditation confusion, misrepresentation and problems regarding "for profit" colleges receiving accreditation by one of 70 "national" accreditation bodies. However, the better and more respectable schools such as the University of Washington, WSU, Eastern Washington University, Western Washington University, Cental Washington University, Community Colleges and private schools such as Whitworth, Whitman, Gonzaga, Seattle Pacific University, Seattle University and Pacific Lutheran University are accredited by more reputable "regional" accreditation bodies.

The primary benefit of "national" accreditation is that the for-profit schools can then be eligible to receive student loan monies that the students borrow.

Anyone considering enrollment at a "for profit" college/school MUST read the USA Today article written by Mary Beth Marklein, on September 12, 2010. USA Today’s website does not offer this particular article on-line so you will need to go to the library to read it, but it is well worth the trip, I assure you.

Enrollment at "for-profit" colleges is up some 325% between 1998 – 2008, from a mere 552,777 to 1,797,563. Most of these "for profit" schools are heavily dependent upon encouraging their students to sign up for student loans. These student loans (since 1977) have been nearly impossible to get rid of, even in bankruptcy.

Before you sign up for a "for profit" school, you need to become aware and fully informed…you can easily destroy your future. Please do yourself a favor and read the story of single-mother Chelsi Miller, of Utah, who is now $30,000 in debt with what she calls a worthless degree that was not appropriate to advance her career and educational goals.

Ms. Marklein’s article is excellent and will start you well on your journey to understanding the nearly incomprehensible universe of college accreditation. Ms. Marklein will also show you how the "for-profit" schools misrepresent and hoodwink students into believing the for-profit school "national" accreditation is as valid as a more highly regarded "regional" accreditation.

She will also teach you that even a "for-profit" school with some degree of "regional" accreditation is still suspect. Herein lies a trap!…. so please read the other things I have written about Ms. Marklein’s September 29, 2010 article.

IDEAS FOR ACTION: Considering more education? You MUST secure a copy of the Wednesday, September 12, 2010 USA Today paper containing Ms. Mary Beth Marklein’s detailed investigative article before you sign up for any schooling or student loans.

For-profit colleges: WATCH OUT! says Wyoming Senator Michael Enzi, the Federal Government Accountability Office and many former students suing the schools … the article contains information about Kaplan, Everest, Corinthian, U of Phoenix and others

[catagories: Washington Bankrutpcy attorney]

Locally here in Western Washington, BCTI or "Business Consumer Training Institute" was our worst "bad-boy" local for-profit school. The school (now closed) was criticized for signing up underqualified students for classes that they had little hope of completing. The school would then encourage the enrollee to incur thousands of dollars in student loans to pay for the schooling. (Note that the student loans were not dischargeable in bankruptcy) The student would be unable to complete the courses (many courses of which were of dubious benefit and would not transfer to a regular state or private college or university like Tacoma Community College, U of W Tacoma or even University of Puget Sound) but were then forever saddled with piles of student loan debt. BCTI would leave its students worse off than before, or so it was alleged.

Mary Beth Marklein of USA Today reported on September 29, 2010 that "As for-profit colleges rise, students question value". USA Today did not offer a link to this article on its website, so you will need to go to the library to obtain a re-print. However, anyone considering a for-profit school MUST read this article! I insist!

The article leads off with the story of Chelsi Miller, a Utah resident and former student at Everest College.

Ms. Miller achieved an "Associates Degree" from Everest College, incurring $30,000 in student loan debt.

Fortunately, Ms. Miller (a single mother from a farm town) was thereafter admitted to the University of Utah to pursue a pre-med program, but delight turned to horror. She was devastated, shocked and dismayed to learn that she had to start all over again with her courses because the Everest College degree credits was worthless at the University of Utah! The University of Utah would not accept the Everest College credits, and she claims that after spending $30,000 in student loan money at Everest, she was left with an Everest associates degree that did nothing to advance her education and career goals. She relates that Everest (owned by Corinthian Colleges corporation) mislead her into believing her Everest College credits would transfer well to the University of Utah. Ms. Miller is suing, along with others.

Ms. Marklein reports that the for-profit colleges seem to mis-represent the nature of their "accreditation". They are accredited by a seemingly "wishy washy" organization called the Accredition Council for Independent Colleges and Schools. But the University of Utah and other REAL two and four year schools like the University of Washington, Western Washington University and WSU are accredited by much more stringent organizations unrelated to the "wishy washy" for-profit college accreditation entities.

Here is a quote directly from Ms. Marklein’s article and it is very worth reading:

"…Everest College is accredited by the Accrediting Council for Independent Colleges and Schools, one of the more than 70 organizationsrecognized by the Education Department. The problem:The organization is a national body. Historically, for-profit colleges have been accredited mostly by national groups, which traditionallyhave focused on short-termcollege programs in fields such as culinary arts, medical billing or business administration. In contrast, most non-profit, degree-granting public and private institutions are accredited by one of six regional bodies. (To complicate matters more, some professional associations accredit academic programs in fields such as pharmacy or nursing at both regionally and nationally accrdited institutions). ,…. most specialists in higher education agree that regional accreditation, which takes at least two years for a college to earn and must be renewed every 10 years, is considered the most rigorous and most prestigious."

This is tricky: just because a for-profit school DID obtain some measure of regional accreditation does not mean that other schools/universities are required to accept the transfer of credits from the for-profit college, and often the for-profit colleges seem to stretch the truth in promotional materials and presentations. Writes Ms. Marklein, "It’s up to institutions to decide whether to accept or deny transfer credits, but many use accreditation status as a (mere) guideline. The University of Utah, for example, requires students who want to transfer from nationally accredited schools such as Everest College to seek permissionfrom its faculty to get credit for courses already taken at a different institution."

"’Often those courses (from schools like Everest College) are found lacking in some way or another,’ says Suzane Wayment, associate director at the University of Utah. For example, she says, an algebra textbook used by a nationally accredited school may be for an introductory course, while the university (of Utah) requires that students complete a higher-level course." writes Ms. Marklein.

Ms. Marklein recounts the devil-may-care policy of many for profit colleges: "Many Rivera, spokesman for the Apollo Group, which owns the University of Phoenix, says ‘it is the student’s responsibility to confirm whether credits earned at the University of Phoenix will be accepted by another institution.’"

The Federal Government is concerned about Phoenix, Kaplan, Everest and others. The Federal Government Accountability Office suggests that "some nationally accredited colleges may be exploiting confusion about accreditation by omitting or glossing over details. The GAO report, for example, said a representative for the nationally accredited Kaplan College in Florida told an undercover government investigator who was pursuing an associate’s degree in criminal justice that the college was accredited by ‘the top accrediting agency – Harvard, the University of Florida they all use that accrediting agency.’ But that was not true."

Ms. Marklein relates that this past summer "..lawmakers grilled officials of regional and national accreditors during hearings about whether colleges found to engage in questionable practices – such as encouraging students to lie on their financial aid forms or pressuring students to sign legally binding contracts – should be allowed to keep their accreditation." Senator Michael Enzi, R-Wyoming, ranking member of the Senate’s education committee, as an active participant in the hearings.

Ms. Marklein relates the comments of the now devestated Chelsi Miller, the 26 year old single monther in Utah from the small farm town: "’I feel as if I had been sold a college experience from a used-car salesman….I received misleading guidance and answers that led me to sign my life away (with student loans) … I can’t speak to other colleges, but as far as Everest goes, they really have taken advantage of people that canot afford to be taken advantage of.’"

IDEAS FOR ACTION: Considering a return to school? If you hope to transfer credits from a for-profit school to some other school you must go to the school you hope to transfer to and obtain the specific written committment as to which precise "for-profit" school credits will be accorded full faith and credit as substituting for specific classes at your subsequent transferee school. Better yet, just avoid the "for profit" schools and try to get into a regionally accredited school and do all of your education at one school. Finally, my best advice is in this economy, you should do what you can to avoid large student loans at "for profit" schools, because since 1977, it has been exceedingly difficult to discharge student loans in any form of bankrutpcy filing.

Large bank sues to shut-up top notch analyst who correctly reports bank’s problems: BankAtlantic Bankcorp v. Richard X. Bove. Result: Analyst “litle guy” wins against bank, but ultimately “loses” because of punishing legal costs fighting the wealthy

This article turned my stomach.

The highly regarded bank analyst Richard X. Bove created a list of twenty banking related companies with problems. The analyst was ultimately correct the article seems to say; the bank holding company was approaching insolvency if I understand the Martin/Story 9/12/2010 NY Times article. Nevertheless, the bank sued the "little guy" independent bank analyst (who works from home!) and I note gleefully that the bank ultimately had to back off because the "little guy" seems to have been proven correct according to Martin/Story. I glumly note, however, that the "little guy" analyst is the ultimate "loser"; the "little guy" analyst is now sadled by $800,000 in legal defense costs and fees.

This is a chilling account of a seemingly retaliatory crusade of a wealthy bank owner and C.E.O.’s against an honest and straightforward "little guy". The players are "work from home" bank analyst Richard X. Bove and rich-guy big-shot BankAtlantic Bancorp C.E.O. Alan B. Levan. Mr. Levan is a Florida banker.

So much for freedom of speech. BankAtlantic’s C.E.O Alan B. Levan’s actions may be capable of the following interpretation: "You can speak freely and honestly about my company and its mistakes and mis-deeds, but we the wealthy and advantaged will destroy your life for having done so…."

Click on the link to the September 12, 2010 NY Times article authored by Andrew Martin and Lousie Story and grab the watebasket…you may need to vomit before you finish the article…

Note that if this blog post disappears, it may well be because one of Mr. Levan’s attorneys threatens me.

http://query.nytimes.com/gst/fullpage.html?res=9C07E1D81438F931A2575AC0A9669D8B63&scp=4&sq=&st=nyt

Why isn’t the Federal stimulus working? Colmnist analyzes that the 2009/2010 Federal stimulus cash infusion effects are neutralized (and the Federal stimulus is failing) because of budget cuts in state and local government spending; but there is a gl

NY Times columnist Robert H. Frank supports the Obama administrations $50 billion 9/5/2010 proposal for an "Infastructure Renewal Bank" in which local and state governments could borrow money from the Federal government to repair and rebuild roads, sewers and other infastructure.

Mr. Frank reports that the large Federal stimulus spending is being undercut and eroded by cuts in jobs and improvements by cash-strapped cities, towns, counties and states. (Recently, Harrisburg, Pennsylvania, the state capital, announced that it was bust and would need millions from the state coffers just to provide ongoing basic services – see earlier posts in this blog for posts about this event).

Insomuch as the Federal government might spend, the cities, towns, counties and states contract in their spending so that there is essentially little or no net positive extra spending, says Mr. Frank.

Mr. Franks writes: "Europe spends about 5 percent of its annual gross domestic product on infastructure, while China spends about 9 percent, according to (information from the) American Society of Civil Engineers. In the United States, which spends less than 2.5%, chronically deferred maintenance has left the infastructure in dangerously substandard condition. More than 25% of the nation’s bridges, for example, were structurally deficient or obsolete in 2007, according to the Federal Highway Administration. … 4,404 dams were unsafe or deficient in 2008 That was up from 4,095 in 2007 and 3,500 in 2005."

Mr. Frank suggest that we spend the money to build/repair infastructure for the future, and thus stimulate the economy at the same time.

IDEAS FOR ACTION: Find out if your local dam is structually insufficient. If so, then consider moving to a safer location if you are in the path of the potential floodwaters! Second, perhaps seek training and education in the concrete and ironwork industries if you are looking for a career change or boost. Thoughts are cement truck driver, surveyor, concrete cutting, demolition, excavation and general concrete and construction laborer. If you have construction/transportation skills in these areas, do not become discouraged. If you have construction labor experience consider joining a gym to keep yourself in good physical condition; your skills may be in demand once again if the Obama "Infastructure Renewal Bank" becomes a reality and you want to offer the strength and stamina to keep up with the job demands when you are called back to work.

I enclose a link here to Mr. Frank’s 9/12/10 article: http://www.nytimes.com/2010/09/12/business/economy/12view.html?scp=2&sq=&st=nyt

Buying a spanking new home or a recently built used home in a housing development? CAUTION! Beware of developer 99 year “resale fees” hidden in the covenants.

The NY Times reported on September 12, 2010 that "re-sale" fees creeping into the fine print development covenants, as reported by Janet Morrissey. See Business Section 9/12/10, front page NY Times.

A WHAT????

A "re-sale fee" is a 1.0% fee that must be paid to the developer for 99 years at any time the home changes hands after the original sale to homeowner #1. They are terms that are now being quietly and sneakily drafted into the Homeowners’ Association covenants and/or sales contracts all over America.

Ms. Morrissey reports that "A growing number of developers and builders have been quietly slipping "re-sale fee" covenants into sales agreements of newly built homes in some subdivisions. In one case detailed by Ms. Morrissey concerning a family of seven (five children) who purchased in Utah, the "re-sale fee" language was ina aseparate 13-page document – called the declaration of covenants, conditions and restrictions – that wasn’t even included in the closing papers and did not require a signature by the buyers.

Sometimes the "re-sale fee" is labeled in a difficult to understand nomenclature and is then called a "capital recovery fee" or a private transfer fee".

Ms. Morrissey presents the scenario: "Someone selling a home for $500,000, for example, would have to pay the original developer $5,000. If the home sold again two years later for $750,000, the second seller would have to pony up $7,500 to the developer, and so on." Even if a home declines in value, the seller still must pay the 1.0% fee to the original developer, even years and years later.

Ms. Morrissey reports that the Federal Housing Finance Agency (FHA) is considering a proposal to prohibit the transfer fees on all mortgages financed by Fannie Mae, Freddie Mac and the Federal Home Loan Banks. 17 states have already placed limitations or bans on such "re-sale fees". However, even should such practices be eventually curtailed by a rule or law, the rule/law is unlikely to apply retroactively to older "re-sale fee" terms.

As a lawyer, I would comment wrly how ironic it is that it is often so difficult for homeowner #2 or #3 to sue a builder/developer for shoddy construction and defects in the home, yet that same shoddy contractor/developer may be able to reap rewards for 99 years from each and every homeowner that comes to own and sell the shoddily constructed residence.

See link to NY Times article: http://www.nytimes.com/2010/09/12/business/12fees.html?_r=1&scp=1&sq=developers&st=nyt

IDEAS FOR ACTION: Whenever you purchase a home: (1) secure a written acknowledgement and written representations from the selling homeowner that there is no such "re-sale fee" tassociated with the residence or condominium. (2) ensure that you closely review the "exceptions page" of the title insurance policy and all of the homeowners’ association covenants to carefully look for such "re-sale fee" language. or documents. I(3) if you are going to be the 3rd, homeowner, ask the 2nd homeowner (from whom you are purchasing) to produce a copy of the settlement statement from the prior transaction between 1st homeonwer and 2nd homeowner which should disclose any such fee paid to a developer. (4) ensure that you obtain a written representation from the seller that you have been provided with a copy of any and all documents which govern and affect your purchase, use, enjoyment, future/ongoing fees to be paid with respect to the parcel and sale of the parcel.

Landlords: Good times or bad ahead? Housing prices likely to dive, but rents may increase or even rise, if renters can afford to pay.

USA Today reported on September 29, 2010 that home values will continue to take a dive in value well into 2011, because the "home buying season" is ending after a dismal summer.

Most experts predict about 5 million homes will be sold this year in line with 2009 and just above 2008, the worst since 1997. House values nationally stand at 28% below their July 2006 peak. Some markets like Las Vegas are 57% off of peak values.

Seattle home values are down 1.6% in the July 2009 – July 2010 time period. Las Vegas saw a drop of 4.9% in the same period.

Nationally, another 2.2% drop in home prices is expected in the last half of 2010, reports USA Today in a reprinted Associated Press article of September 29, 2010.

Paul DAvidson and Barbara Hansen of USA Today report that more renters struggled to pay the rent in 2010. The share of renters spending 30% or more of their household income on housing costs – the threshold set by the government to determine if housing is unaffordable – rose to 51.5% in 2009 from 50% of renters in 2008.

The number of homeonwers has fallen by 500,000 while the number of renters has increased by 1,000,000, and the percentage of homeowners dipped from 66.6% to 65.9%.

Renters are more likely to be severely burdened. In 2009, 26.4% of renters spent more than one-half of their incomes on housing, up from 25.1% of renters spending more than one-half of their incomes on housing in 2008. Thus 9.5 million households now fall into the "severely burdened" renter catagory, up from 8.8% in 2008.

IDEAS FOR ACTION: (1) If you are a renter, consider a longer term lease such as a two year lease at a lower monthly rental cost, but negotiate for a "buyout term" which allows you to cancel the remainder of the lease after six months by paying a flat "re-let fee" of perhaps $1,000.00 in the event you must leave because of a job change or relocation. This will offer some protection against rent increases caused by more renters entering your local market. (2) If you are a landlord, look carefully at your new prospective tenants’ finances and ensure that the new tenant can afford the rent you are asking. Since there seem to be plenty of renters according to statistics, don’t be in too much of a hurry to rent to the first tenant that comes along. (3) If you are a landlord working with existing tenants, or an existing tenant, consider negotiating for a new lease for an additional lease extension of a year or two which "locks in" the rent, as although there are more tenants who may be willing to pay a higher rent, a financially stable and committed tenant may be a good long term investment for a landlord, and for the tenant insulation from rent increases may be advisable if a new rush of tenants in the form of recently foreclosed homeowners enters the market and drives up rents.

PIMCO Fund financial super-guru William Gross calls for the government to encourage the widespread refinancing of all underwater mortgages – even though his own investments and investors would take a financial hit.

USA Today’s Paul Wiseman and Stephanie Armour reported on September 29, 2010, that William (Bill) Gross, managing director of investment giant PIMCO urged policymakers to "quickly engineer a refinancing opportunity for all mortgages that are current on paymetns" and guaranteed by Fannie Mae or Freddie Mac. Mr. Gross is reported to have analyzed that turning mortgages now at 5%, 6% or 7% into 4% mortgages could pump up to $60 billion into the national economy and lift housing prices by as much as 10%.

Mr. Gross’ idea is remarkable as it is seems odd it is coming from Mr. Gross. If Mr. Gross is anything, he is a "super-guru" of bond, note and mortgage backed securities investing. Mr. Gross’ advice will actually cause Mr. Gross (and those investors he advises) to lose money and value in the short term, and maybe even in the long term.

Morgan Stanley analyst/economist David Greenlaw agreed with super-guru Mr. Gross, calling such a move a "slam dunk stimulus".

Mr. Gross explained his reasoning: "Whether it’s above water or below water, it’s the same house…there would be fewer foreclosures. There would be fewer defaults. There would be fewer empty homes. … You’ll improve the quality of the houses by keeping people in them rather than forcing them to leave."

The mortgage and banking industries are expected to resist Mr. Gross’s advice because many mortgages are packaged into securities and sold to investors and are not hold by the bank/mortgage sales company that originated the mortgage. A massive refinance program pushed by the government is a "non-starter. …. It would involve breaking a contract with the investor who’s holding the existing mortgage." says Mortgage Bankers Association vice president for research and economics Michael Fratantoni.

USA Today reports that the Obama administration has shown little enthusiasm for the widespread solution recommended by Mr. Gross.

Mr. Gross’ proposal is remarkable in that he invests (and advises investors similarly invested) in the bonds and mortgage backed securities that would take a financial hit by such a widespread refinance. Mr. Gross thus seems to believe that even if bond/mortgage investors take a hit in the short run, they will ultimately be better off with a less anemic economy and higher home prices.

The same USA Today article reports that "cash out refinances" are on the decline. Q2 2006 $83.6 billion was pulled out of homes. Q2 2010 a mere $8.3 billion in cash was pulled out of homes in refinances.

See USA Today, Section B, September 29, 2010, Paul Wiseman and Stephanie Armour. (Sorry, USA Today did not offer a link to this article on their website which I was able to locate.)

IDEAS FOR ACTION: Of course resist the idea to use your home as an ATM, even if you have a modest amount of equity. If you are struggling with consumer debt or unpaid taxes, consider consulting with a consumer bankruptcy attorney and learn about Chapter 7 and Chapter 13 before you trot down the "cash out refinance" road. With the HARP refinance program, note that you may be able to refinance your higher interest rate home notwithstanding slightly rocky credit scores and significant unsecured debt. Keep your eyes and ears open for changes and improvements to the HARP Fannie Mae/Freddie Mac refinance programs in case the Obama administration should see fit to partially follow at least some of the advice of Pimco investment giant super-guru William Gross.

Lowest mortgage rates in history fail to help housing market. 11 million houses are worth less than what is owed on them and 15 million are unemployed. HARP refinance program a failure.

USA Today on September 29, 2010 set forth the grim numbers in a report by Paul Wiseman and Stephanie Armour. "Anemic demand continues to hamper real (economic) growth, " says housing analyst Robert Andrews of IBISWorld. "The housing market needs to find its true bottom before things can finally turn around."

Home sales were thought likely to strengthen after a terrible summer. But the housing market was barely registering a pulse even after 30-year, fixed-rate mortgages hit a record low 4.32% earlier in September. This does not bode well for anyone who is hoping that their home equity appreciation may offer a financial rescue.

Nearly one in four homes with mortgages are underwater – more is owed on the houses than they’re worth reports Wiseman and Armour.

They report that the 2009 Obama HARP program (Home Affordable Refinance Program) has not been effective. Under HARP, homeowners can refinance even if their mortgages are 25% higher than the value of their houses. However, two requirements hold back the success of that program. First, their mortgages must be guaranteed by Fannie Mae or Freddie Mac, and the homeowners must be up to date on their monthly payments. Federal Housing Finance Agency director James Lockhart III predicted in 2009 that HARP could help up to 4 to 5 million homeowners lower their monthly house payemnts. The program has not been effective, as only 380,000 ho
homeowners had refinanced through HARP by the end of June 2010. Note: HARP is different from a loan modification under HAMP. The programs are different.

Wiseman and Armour report that Amhearst Securities analyzed several reasons for the failure of HARP, including (1) homeowners with negative equity are struggling to come up with the funds to pay the closing costs of the new mortgage (2) the mortgage industry laid off many people and cut positions and thus cannot cope with the small surge in HARP refinance requests and (3) mortgage servicing companies are reluctant to handle home loans originally underwrittenby lenders that are now out of business.

As reported in USA Today September 29, 2010. (USA Today publishes selected articles online so I apologize that it seems no link was available to the September 29, 2010 Wiseman/Armour article "Mortgage rates fail to motivate".

IDEAS FOR ACTION: Mortgage rates have already popped up since the 4.32% low earlier this month. DO refinance now and specifically insist on the HARP program, but avoid the temptation to pull home equity out to pay credit cards and other bills if you do have any home equity. If your home equity is less than $125,000 you may be able to refinance to a lower mortgage payment and soon thereafter reduce your credit card burden with a Chapter 13 0% interest repayment plan or a Chapter 7 wipe-out of credit card debt. Do not be afraid to ask relatives and friends to help you pay closing costs associated with an HARP refinance. As cynical as it may seem, consult with a bankruptcy attorney about surrendering your "underwater" home and then buying another one in a year or two that is "right priced" to the market so that you are not paying forever on negative equity.

Your employer is likely to increase your share of healthcare premium contribution by 14%, reports the NY Times, thereby taking about $500.00 out of your household budget.

Your household budget will be even more pinched, especially if you have a family. Reed Abelson of the NY Times reported on September 3, 2010 that workers’ share of the cost of a family policy jumped an average of 14 percent, an increase of about $500 per year.

Whereas the actual total cost of a policy has increased only 3.0% over last year, the employers are shifting all of this 4.0% AND MORE over to employees, thus employees losing ground against their employers. Employees are seeing much of what had been the employer’s share being shifted over to the employee, thus accounting for an are seeing an average of 14% in the amount paid out by employees.

Health care costs continue to eat into the living standard of employees. Since 2005 overall wages have increased by only 18%, but workers’ contributions to premiums have jumped by 47%. The 47% rise in workers’ contributions is almost twice as fast as the rise in the policy’s overall cost. E.g. the employer is paying a lower percentage of the overall cost of the policy than is the employee; the employer is thus shifting the cost of the policy to the employee.

Moreover, workers also are facing larger deductibles than ever before.

According to Mr. Abelson’s article, even greater health insurance premium burdens are headed towards employees. Ms. Helen Darling, president of the National Business Group on Health, an organization representing employers that provide healthcare is quoted, "There’s a sense (among employers) that we can’t keep up….we (employers) can’t afford to continue to subsidize what’s happening."

Mr. Abelson reports that, "Faced with a potential increase int he premiums paid that would bring the cost of family coverage to about$1,000 a month, the executives at a trucking business in Salt Lake City chose to switch to a plan that had a $6,000 annual deductible….to reduce their monthly premiums by nearly $200 to $647 a family…the chief financial officer (of the trucking company) acknowledged that people with chronic conditinos or the need for expensive medicines had felt the impact of the change."

A nonprofit insurance research foundation The Kaiser Family Foundation conducted a study which related that now 27% of employees suffer under a health policy with a deductible of $1,000 or more, up from 22% in 2009.

Some states are authorizing "insurance exchanges" which allows small employers to give employees a fixed amount of money to purchase a policy. The Utah legislature has authorized such an exchange which allows an employee to select between 60 different policies to find a policy which best suits the employee’s needs. In this way, the employee can choose a lesser cost policy if there is no need for a "cadillac" policy.

IDEA FOR ACTION: Check with your state Insurance Commissioner’s office to see if an "insurance exchange" program is authorized should you work for a small employer and have modest family healthcare needs. If you have a high family healthcare needs, open a channel of communication with your employer to explain your analysis of the harmful effect of an increasing deductible. You may be able to discuss with your employer some way to avoid a shift of costs to your wallet by perhaps offering to take on some modest additional work duties.