Tuesday, August 31, 2010

Mullen: National Debt is a Security Threat

By Michael Cheek
August 27, 2010
The national debt is the single biggest threat to national security, according to Adm. Mike Mullen, chairman of the Joint Chiefs of Staff.
Tax payers will be paying around $600 billion in interest on the national debt by 2012, the chairman told students and local leaders in Detroit.
“That’s one year’s worth of defense budget,” he said, adding that the Pentagon needs to cut back on spending.
“We’re going to have to do that if it’s going to survive at all,” Mullen said, “and do it in a way that is predictable.”
He also called on the defense industry to hire veterans and become more robust in the future.
“I need the defense industry, in particular, to be robust,” he said. “My procurement budget is over $100 billion, [and] I need to be able to leverage that as much as possible with those [companies] who reach out [to veterans].”
Mullen highlighted the unity of purpose between the government and industry as well, in working to solve national security issues.
“I have found that universally, [private-sector workers] care every bit as much about our country, are every bit as patriotic and wanting to make a difference … as those who wear the uniform and are in harm’s way,” he said.

National debt soars to highest level since WWII

The following article appeared in the June 30, 2010 issue of USA Today.

The federal debt will represent 62% of the nation's economy by the end of this year, the highest percentage since just after World War II, according to a long-term budget outlook released today by the non-partisan Congressional Budget Office.

Republicans, who have been talking a lot about the debt in recent months, pounced on the report. "The driver of this debt is spending," said New Hampshire Sen. Judd Gregg, the top Republican on the Senate Budget Committee. "Our existing debt will be worsened by the president's new health care entitlement programs...as well as an explosion in existing health care and retirement entitlement spending as the Baby Boomers retire."

At the end of 2008, the debt equaled about 40% of the nation's annual economic output, according to the CBO.

The report comes as the National Commission on Fiscal Responsibility and Reform meets today. The group, created by President Obama, is expected to issue recommendations in December to curb the debt - a point Democrats raised today.

The CBO report "reinforces the importance of the work being done right now by the president's fiscal commisson," said Sen. Kent Conrad, D-N.D., who chairs the Senate Budget Committee. "We simply cannot allow the federal debt to explode as envisioned under CBO's projections. The economic security of the country and the quality of life for our children and grandchildren are at stake."

(Posted by John Fritze)

Is a Mortgage Refinance Right for You?

By Dave Ramsey

There’s a lot of hype about refinancing mortgages. You’ll hear, “Rates have never been lower!” or, “Refinance now to lock in your savings!” There are even special products like “streamlined” refinancing.
Like anything else, you need to determine if a refinance is right for you based on the specifics of your mortgage. Here are some guidelines to get you started:

The Break-Even Analysis

A refinance makes sense when you can lower your interest rate enough to pay for the closing costs before you plan to sell your home.
Here’s a simple example. If you have a $100,000 mortgage and you can lower your interest rate by 1% in a refinance, you’ll save $1,000 a year. If your closing costs are $3,000, it will take three years to break even on your refinance.
In general, a refinance is worth it if you can lower your rate by at least 2%. At that point, you’ll see real savings on your monthly payment.

Points, ARMs and Seconds

When you’re gathering quotes for a refinance, ask for a par quote or zero quote. That means the closing cost estimates will not include points or origination fees. Don’t pay these fees, which are simply pre-paid interest. The savings, if any, don’t justify the up-front expense.
If you have an Adjustable Rate Mortgage (ARM), Dave will almost always recommend you refinance into a fixed-rate mortgage. Even if you have to write a check to pay for the closing costs, it’s worth it to avoid the risk that your payments could go up when the rate adjusts.
A lot of homeowners with second mortgages want to roll it into their first mortgage with a refinance. Not so fast! If the balance on your second mortgage is less than half of your annual income, pay it off in Baby Step 2. If not, go ahead and refinance it with the first mortgage and pay it off in Baby Step 6.

Going from 30 to 15

When you buy a home, if you’re not paying cash, you should get no more than a 15-year mortgage. However, if you already have a 30-year mortgage and a good rate, you don’t have to go to the expense of refinancing just to get the shorter term. Just calculate what your monthly payment would be on a 15-year term and be disciplined about paying that amount.

What to do if you face vehicle repossession

By Andrew Housser

Reposted from mysuncoast.com

Over the past few years, the rate of auto repossessions has increased as the auto loan market has undergone its own subprime lending crisis, similar to the one that crippled the U.S. mortgage industry.

As with mortgages, auto lenders frequently provided large loans to people with lower credit scores. In turn, American consumers, who became accustomed to borrowing rather than saving, purchased as much car as possible for a low monthly payment. That practice meant that loan repayment terms often extended to 60 months and beyond. For example, among borrowers with good credit, 41 percent of auto loans were longer than 60 months in 2007, up from 12 percent in 2002. Among subprime borrowers (people who paid higher interest rates because of poor credit), 67 percent of loans were for more than 60 months in 2007.

Many vehicle loan contracts specify that if a borrower stops paying the loan, the lender can repossess, or take back, the vehicle. Lenders typically repossess cars once owners are behind on payments by about 90 days. After a vehicle is repossessed, the car will be sold at auction, typically within 41 days.

The repossession has serious costs for the vehicle owner:
  • The owner must pay the difference between the amount left on the loan and the profit brought in from the sale, minus costs for cleaning, repossession, transport and the sale. This amount is known as the deficiency. Some owners are stuck paying for years after they lose the vehicle.
  • A repossession severely damages the credit score. One of the largest credit reporting agencies, Experian, reports that an auto repossession will remain on a credit report for seven years from the original delinquency date, or the date you missed your first payment.
  • Even one late auto loan payment can knock a credit score down by as much as 100 points. As a result, buying a replacement vehicle costs more, with a higher interest rate on a vehicle loan.
What to do if you face repossession

1. Cut costs where you can
In many places, a vehicle is essential to take people to work or school. If this is the case for you, take a hard look at your budget to see if you can cut out expenses, which may range from eating out to entertainment to cigarettes, to free up more money to stay current with car payments.

2. Remove personal items from the vehicle
If you are late on payments, do not keep any personal items in the vehicle in case it is repossessed.

3. Know your rights
You can learn about local laws from the office of your state's attorneys general. For example, in every state, you have the right to try to redeem your vehicle, even after it has been repossessed, by paying all late payments and related costs. Service members on active military duty who bought the car before they went on active duty cannot have a vehicle repossessed without a court order.

4. Communicate with the lender
If you are late on a payment, or worried you cannot pay, contact the lender and explain the situation. Get all promises from the lender in writing. At worst, you can voluntarily surrender the vehicle. This "voluntary repossession" still damages credit, but it will save you the repossession costs of about $700.

5. Sell the vehicle
If you owe less than the vehicle is worth, consider selling it to pay off the loan, then purchasing a vehicle that is within your means.

6. Get help
If you need help in managing your other debts (such as credit card debt) to help reduce your overall debt burden -- and possibly help prevent vehicle repossession -- seek out a reputable debt settlement company. An experienced advisor can help you manage your financial problems and make debt repayment affordable.

Having a vehicle repossessed is second only to a mortgage foreclosure in the damage it can do to your credit and your lifestyle. Before you get into financial trouble with a car, try to remedy the situation -- but if you do face repossession, know how to minimize the damage.
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Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC and its wholly owned subsidiary, Freedom Debt Relief, a national consumer debt resolution firm that has served more than 40,000 clients and manages more than $1 billion in consumer debt. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.

What was the National Debt in January 2009?

Courtesy of the U.S. Treasury Department (www.treasurydirect.gov).

The National Debt on January 1, 2009 was:

When President Barack Obama was inaugurated on January 20, 2009, the National Debt was:

In 1959, the interest paid on the National Debt was $7,592,769,000 (The total debt was $290,797,771,717.63 that year)

In Fiscal Year 2009, the interest paid on the National debt was:
$383,071,060,815.42 (greater than the total debt in 1959)

National Debt Clock