Warren Wealth Article Archive

It finally happens. What does it mean?

Presented by Jacob Warren
Content provided by Peter Montoya, Inc.

June 1, 2009 was a sad day for General Motors: the venerable automaker, now financially vulnerable, filed for Chapter 11 bankruptcy (and was kicked out of the Dow Jones Industrial Average).1,2

This shocked no one, and the stock market didn’t suffer. The Dow gained more than 2% on June 1, pushing past the 8,700 mark.3 But GM’s bankruptcy will have a huge impact on lives and communities in Southeast Michigan and across the nation.

What’s the goal here? The goal is for GM to arrange financing so that it can leave Chapter 11 as a viable, albeit leaner, company. GM is still in business, although it is closing or idling two (eventually, perhaps four) assembly plants, three stamping plants, five powertrain manufacturing plants, and three service and parts warehouses. It is also aiming to cut 21,000 of 54,000 factory positions held by members of the United Auto Workers.1 It plans to reduce its dealerships by 1,100 or more within the next 18 months.4 It is projected that Oakland County, MI alone will lose 6,600 jobs.5

The government-supervised reorganization will leave a new GM with new owners, at least for the time being: under the plan, the U.S. government will hold 60% of GM, the UAW 17.5%, the Canadian government 12% and GM bondholders 10%.1 If GM can’t viably reorganize, a Chapter 7 bankruptcy (liquidation) would be the next option – but GM is likely “too big to fail” in the eyes of the Obama administration.4

What about employees and their pensions? The most depressing aspect of the bankruptcy is the many non-union GM employees who now have no job security. Pay cuts, job cuts, office closings – GM can request permission to do any of this from the presiding bankruptcy judge. (Whether it would make such a request is anyone’s guess.) While GM is supposed to honor new contracts forged with the UAW, it also legally has the option to ask a bankruptcy judge if it can void them and renegotiate terms with the union.4

As for pensions and healthcare benefits, the White House said May 31 that pensions and health care benefits of GM workers would simply transfer to the new GM. While GM could legally request the bankruptcy judge to reduce or terminate pensions and health benefits for non-union workers, no one is saying it will. Terminating pensions would require a trial, and even if the judge ruled in GM’s favor, pension plan participants would still get about one-third of their benefits via arrangement with the Pension Benefit Guaranty Corporation. If GM’s non-union retirees were to lose healthcare benefits, they would be covered by Medicare.4

Could the GM bankruptcy be as quick as Chrysler’s? So everyone hopes. It appears Chrysler might be out of bankruptcy this summer, if Fiat purchases the bulk of its assets as planned. Of course, Chrysler has a buyer. GM is trying to restructure without a buyer – and with a lot of help from Washington and Ottawa. The U.S. government has loaned GM $19.4 billion and could commit up to $30 billion more. The Canadian federal government and the Ontario provincial government are collectively directing $9.5 billion to GM.1

What might the new GM look like? As widely discussed, GM will likely restructure itself around its strongest assets and liquidate or sell the rest. Pontiac is out of the picture, and Saturn may be out of the picture also if GM can’t get a buyer. Saab has a for-sale tag on it. Hummer looks to have a buyer, and most of Opel is supposed to be sold to a Canadian supplier (Magna) and a Russian car maker (GAZ). Any fuel-efficient vehicles aside, GM’s days of dominance appear long gone. In fact, the forecasting firm IHS Global Insight thinks that the new GM will be about a third smaller, and capture only about 15-16% North American market share in the next few years.6

Jacob Warren
Warren Wealth Management
111 West Port Plaza Drive, Ste 300, Saint Louis, MO 63146
(866) 463- 0752 ext. 52337 toll free, (314) 819-0464


Securities and Investment Advisory Services offered through Woodbury Financial Services, Inc., Member FINRA, SIPC, and Registered Investment Advisor. Warren Wealth Management and Woodbury Financial Services, Inc. are unaffiliated entities



These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.


Citations.
1 usatoday.com/money/autos/2009-06-01-gm-bankruptcy_N.htm?loc=interstitialskip [6/1/09]
2 reuters.com/article/domesticNews/idUSTRE55043Y20090601 [6/1/09]
3 smartmoney.com [6/1/09]
4 nytimes.com/2009/06/02/business/02primer.html?ref=business [6/1/09]
5 detnews.com/article/20090601/AUTO01/906010376/1361/Oakland-County-staggered-by-an-estimated-6-600-GM-job-losses [6/1/09]
6 popularmechanics.com/automotive/new_cars/4319666.html [6/1/09]


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You now have more refi options to explore.

presented by «representativename»
content provided by Peter Montoya, Inc.

Are you underwater? Upside down? Those terms mean the same thing: you owe more on your mortgage than your home is worth. If that is your predicament, what are some of your refinancing options?

You could turn to Fannie and Freddie. Fannie Mae and Freddie Mac have revamped their underwriting engines. If your loan is held by Fannie or Freddie (or the Federal Housing Administration), it may be possible to refinance to up to 105% of your home’s value, get a lower interest rate or reduce monthly payments, and move from an ARM to a fixed-rate loan. Owner-occupants of single-family homes, condos, and rental properties of up to four units are all potentially eligible for this.1

Am I eligible for the Fannie or Freddie programs? To find out, go to this web page: makinghomeaffordable.gov/refinance_eligibility.html. To see if your mortgage servicer is participating, visit makinghomeaffordable.gov/contact_servicer.html. (It’s worth remembering that your lender might bring in underwriting "overlays" more rigorous than the Fannie or Freddie guidelines.)

Another possibility: the FHA programs. Maybe FHA Secure and Hope for Homeowners (H4H) can help. FHA Secure lets borrowers with non-FHA home loans to refi current or delinquent mortgages into an FHA mortgage. H4H looks long-range, assisting borrowers to refinance current mortgages into a new 30- or 40-year home loan with more reasonable monthly payments. You don’t have to be behind on your mortgage to get help from these programs. If you are 90 days or more delinquent, the FHA offers a Streamlined Modification Program to help you in that case.2

A deadline looms. The Making Home Affordable program is scheduled to end on June 10, 2010 – but there is the possibility that application deadline could be extended.1

Another option: try to renegotiate on your own. Many homeowners have tried this, and for many, the result has been “no” or an extended run-around between this department and that department of a mortgage lender. Mortgage redos are more commonly arranged via the Fannie, Freddie and FHA programs.3

Mortgage industry pros suggest that if you have to try and do it on your own, you should present your case for renegotiating as politely and professionally as you can, and keep talking to the same human being (the same contact person) consistently and persistently. When you get a Broker's Price Opinion to back up your argument for a refi, get multiple BPOs from brokers not involved in your transaction.

Get as much knowledge as you can. Yes, you could simply suck it up and continue to make the payments, or rent all or part of your home out and become a landlord. Your neighbor might have settled for a short sale or a deed in lieu of foreclosure, or walked away. If you are entertaining any of those options, why not check out the new refinancing possibilities mentioned above? There may be options available to you now that weren’t there several months ago. Talk to a qualified mortgage professional to learn more.

Jacob Warren
Warren Wealth Management
111 West Port Plaza Drive, Ste 300, Saint Louis, MO 63146
(866) 463- 0752 ext. 52337 toll free, (314) 819-0464









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Securities and Investment Advisory Services offered through Woodbury Financial Services, Inc., Member FINRA, SIPC, and Registered Investment Advisor. Warren Wealth Management and Woodbury Financial Services, Inc. are unaffiliated entities


These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.


Citations.
1 bankrate.com/finance/mortgages/do-you-qualify-for-refi-plan-1.aspx [5/7/09]
2 mainstreet.com/article/moneyinvesting/real-estate/dont-walk-away-underwater-mortgage [12/16/08]
3 cbs4denver.com/recession/refinancing.payment.mortgage.2.1015314.html [5/20/09]


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If you can’t live on your own, what are your options?

Presented by Jacob Warren
Content provided by Peter Montoya, Inc

When you need help with daily living, what choices do you have? You have three choices: home sweet home, a retirement community, or a nursing home as your health and preferences permit. While we’re speaking of choices, long term care insurance has proven to be another wise choice for many Americans – and with longevity increasing, it may be prove even more valuable to families in the future.

Assisted living. Some “assisted living communities” are small, some are huge, but regardless of size, they have common characteristics. Assisted living facilities are socially oriented, typically offering rooms or even distinct housing units for rent, with housekeeping and transportation and meals usually provided. They may or may not be licensed care facilities, and most don’t offer anything more than limited medical care onsite.

Residents really enjoy many of these facilities, but there are some caveats. Some elders really like their privacy, and assisted living facilities encourage a great deal of group activity. Also, sometimes these facilities do ask elders to pack up and leave. The classic example is when Alzheimer’s Disease progresses to a point where it motivates violent or socially disruptive behavior. The amount of personal care in one of these facilities may not be as much as desired. To enter one of these communities, you often have to pay about as much as you would for a luxury sedan (or two), and there is often monthly rent besides.

The nursing home. Of course, there are some elders who need frequent access to medical care – perhaps around the clock. This is the advantage of the nursing home. The disadvantages include a distinct lack of privacy, a borderline hospital environment, and of course the potential for mistreatment of the residents. Nursing homes are often perceived as the last residence of many Americans, but the reality is that some people do return home or transfer to an assisted living facility when their conditions improve.

Through a licensed nursing home, an elder can opt for three types of care. Skilled care is any daily treatment program prescribed according to a doctor’s orders and designed to improve a patient’s health; it is administered by a licensed nurse or therapist. Intermediate care is essentially skilled care delivered on a less frequent basis. Custodial care is care that helps people with daily living activities like eating and bathing, though it can also include things like catheter or colostomy draining. Long term care insurance commonly pays for all three types of care.1

Just how expensive is nursing home care now? One national provider of long term care insurance put out a survey in early 2008 and found that the average annual cost of nursing home care nationwide is $76,460.2 It can be notably higher in big cities.

How about staying home? With demographic trends, the average suburban house may soon become a common kind of American retirement home. LTC insurance can pay for forms of skilled and non-skilled care administered in the home, such as rehabilitative care and therapeutic care. The problem is that the typical suburban home may need to be modified to accommodate a wheelchair, or to make bathroom visits easier, or to guard against falls and other mishaps. The typical suburban home is also some distance from a hospital, a mall, and friends, and public transportation in most of America’s suburbs is frustrating and inconvenient for many elders. But just being around family can help to counteract that isolation from community.

While welcoming an elderly parent into a home is a preferred choice for many baby boomers, talking openly about some of the financial and healthcare matters involved can make the lifestyle transition a bit smoother. Sharing a living space after a period of independence may not be easy, and it is wise to talk about who will pay for what, from medical expenses to food and gasoline.

Contact me. Let me know if you would like more information about this or other topics.

Jacob Warren
Warren Wealth Management
111 West Port Plaza Drive, Ste 300, Saint Louis, MO 63146
(866) 463- 0752 ext. 52337 toll free, (314) 819-0464









---------------------------------------------------------------------------------
Securities and Investment Advisory Services offered through Woodbury Financial Services, Inc., Member FINRA, SIPC, and Registered Investment Advisor. Warren Wealth Management and Woodbury Financial Services, Inc. are unaffiliated entities


These are the views of Peter Montoya Inc., not the named Representative or Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.


Citations. 1 lifehappens.org/long-term-care-insurance/what-types-of-care-are-covered
2 californiahealthline.org/articles/2008/4/30/Cost-of-Nursing-Home-Care-Above-National-Average-in-Bay-Area.aspx?topicID=81
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