Home loan rate hike inevitable

By DANNY YAP

Thursday November 5, 2009

PETALING JAYA: Financial institutions, in particular banks, have in general agreed to raise mortgage lending yields, which will have an impact of increasing their net interest margins (NIMs).

An analyst with OSK Research said banks with strong mortgage lending growth would be the key beneficiaries, while the eventual increase in benchmark interest rates would benefit all banks on a greater scale as loan assets tended to re-price faster than deposits.

He said higher home loan rates were imminent and expected housing loan rates to trend upwards in the not-so-distant future as the banking industry moved towards risk-based pricing in determining more sustainable interest rates for the industry.

The upswing in home loan rates is inevitable as economic conditions improve.

Financial Mistakes That Could Haunt You Forever

by Katie Adams
Tuesday, October 27, 2009

provided by

After the sudden drop in the Dow this time last year, many investors were left to wonder what else could happen to deflate their savings and investment portfolios. We came up with a list of some of the scariest -- and potentially most costly -- financial mistakes you could make. Take steps now to ensure that you don't lose money by making some of these big, bad choices.

Not Rolling Over Your 401(k) Savings

If you leave a job and opt to take the savings you have accumulated through your employer's 401(k) plan, you need to roll it over into a qualified investment vehicle (i.e. a new employer's 401(k) or 403(b) plan, an IRA, etc.) within 60 business days or you'll have to pay at least 20 percent in income tax on the funds as well as an early withdrawal penalty of usually 10 percent. This is one mistake that can quickly eat up a big chunk of your retirement savings.

Living Off Credit

If you can't make your regular monthly payments on your income and are using credit cards to meet your financial obligations, you're mortgaging your future by accumulating high-interest, hard-to-repay credit card debt. A Demos survey entitled "The Plastic Safety Net: The Reality Behind Credit Card Debt in America" found that one of three American households reported using credit cards to cover basic living expenses four out of 12 months on average.

Half of those consumers using credit for living expenses missed or were late with a payment in the previous year; most credit card companies penalize cardholders by hiking the interest rate after just one late payment.

According to the Demos survey, for a household with the average amount of credit card debt ($8,650), an increase from 12 percent to a 25 percent default rate would translate to an additional $1,100 in costs, which then begins to compound and rapidly escalate your total debt.

Not Reading Loan Documents

By signing a loan document, you become legally responsible for repaying the loan according to its terms and conditions. If you don't carefully read and ensure that you understand those conditions, you may wind up agreeing to something that realistically you won't be able to afford to repay. That's exactly what happened for millions of subprime mortgage holders who took on adjustable-rate mortgages which "reset" to much higher interest rates that they could not afford.

According to the Center for Responsible Lending, 61 percent of all the home buyers who obtained these subprime loans in 2006 could have qualified for a "prime" loan with better terms. Those borrowers paid an extra $5,222 during the first four years of their loan for getting a subprime instead of prime loan and they defaulted at a rate three times higher than borrowers who obtained lower-rate, non-subprime loans.

Making the Minimum

According to Experian's 2007 national score index study, one in six families with credit cards pays only the minimum amount due each month. By paying the minimum you're going to pay much more in interest than if you paid only slightly more each month. For example, look at what would happen if you paid only the minimum amount due compared to paying a fixed amount (above the minimum) monthly on a $2,000 balance on a card charging 18.5 percent interest (see box).

Having Inadequate Insurance

While the U.S. Census Bureau currently reports that approximately 47 million Americans are without health insurance, the number of people who are underinsured skyrocketed by 60 percent between 2003 and 2007. In 2007, according to a survey by The Commonwealth Fund, 25 million adults under 65 were underinsured -- meaning that they have coverage but their policies require high out-of-pocket costs (not including their premium cost) relative to their income.

If you don't have adequate savings to cover those high costs, you could quickly become of the 1.5-plus million Americans who file bankruptcy annually. According to an August 2009 American Journal of Medicine article, the number of Americans filing for bankruptcies due to medical bills increased by nearly 50 percent between 2001 and 2007.

Too Many Eggs: One Basket

If Enron taught us anything, it's that you should never have the majority of your retirement plan savings invested in your own company's stock. While most financial advisers recommend having no more than approximately 10 percent of your total retirement investment assets in company stock, according to a 2008 Employee Benefits Research Institute study, 8 percent of employees have more than 80 percent of their 401(k) savings invested in company stock and almost 19 percent of employees age 60+ have more than half their 401(k) assets invested in their company's stock.

Being overly exposed to fluctuations in one company is a risky mistake to make. Just ask those Enron workers -- nearly 58 percent of workers' 401(k) assets were invested in the company's stock when its value plummeted by nearly 99 percent in 2001.

Missing the Date

Paying your bills by just a few days or weeks late makes a big difference. That's because timely bill payment is the No. 1 factor credit bureaus take into consideration when determining your credit score, the tool that lenders use when determining if they will make you a loan or extend credit, how much they'll lend to you and how much money they'll charge (the interest rate and fees) for doing so.

According to the National Foundation for Credit Counseling, 34 million Americans (15 percent of all adults in the U.S.) made a late credit card payment between April 2008-2009 and 18 million cardholders missed a payment entirely.

Using Your Heart, Not Your Head

Sure, your friend's startup sounds like an exciting venture, but if it fails, can you afford to lose the $10,000 you're thinking about investing in it? Or while you'd like to keep your home as part of the divorce agreement because you're emotionally attached to the property, can you really afford the mortgage, insurance, upkeep and taxes on your post-divorce income? Emotions are powerful forces but when left unchecked they can unduly influence you to make decisions that are not in your financial best interest.

Whether it's pulling out of the market because you're panicked about a drop in the Dow (and potentially losing out on long-term gains) or co-signing a loan because you feel badly for a family member who's down on his or her luck (and potentially being stuck with a loan you can't afford to repay if he or she defaults on it), do your financial due diligence and get an expert second opinion before you risk making a choice that's going to cost you in the long run.

The Bottom Line

Keep these warnings in mind when managing your money and you could avoid making costly mistakes. The information is out there, so don't be afraid to ask for advice and do your research before jumping in.

Source: Yahoo! Finance

5 steps to managing your folks' money

Even if you think you're well prepared to take over an aging parent's finances you'd better read this guide.

By Walecia Konrad, Money Magazine contributing writer

May 28, 2008: 4:31 AM EDT

(Money Magazine) -- Ever since Yvette Mesquita took over her father's finances, she's felt as if she's had two jobs.

Two years ago, Bill Mesquita's longtime companion died. Overcome with grief, he wasn't able to keep up with day-to-day tasks like bill paying. Before Yvette and her two sisters realized what was happening, their dad had racked up $30,000 in credit-card debt.

Mesquita, a 43-year-old parks employee in Tolleson, Ariz., lives about 90 minutes from her now 71-year-old father, so the bulk of the financial management fell to her.

She convinced her dad to cut up his credit cards and refinance his mortgage. Then she took over the bills and budgeting so she could make sure that he kept his expenses within the $40,000 or so he earns from Social Security and a pension.

Her quick action helped avert a disaster. But the process hasn't been easy. "The red tape can get overwhelming," she says.

When Mesquita tried to open a joint bank account with her father, for example, she figured the durable power of attorney he'd signed would be sufficient. It wasn't. The bank had its own forms that both she and her dad had to fill out before Mesquita could act on his behalf.

Her dad was able to come into the bank to do the paperwork, but the incident worried Mesquita. "I thought I had everything taken care of," she recalls. "What if my dad had been in the hospital? I'm wondering what else the power of attorney won't work for."

More than 34 million people help care for a parent or elderly friend or relative, according to the AARP Public Policy Institute. Whether it's paying the monthly bills, appealing a denied insurance claim or overseeing an investment portfolio, money management is often the first role adult children take on when they begin assisting an aging parent. Yet few families are adequately prepared.

Without advance planning, just finding files can be a massive undertaking. Often by the time you realize you need to intervene, memory loss or illness are a problem. Your parent may have misplaced statements, forgotten about accounts or, worse, let payments lapse. Even in the best of circumstances, glitches like an insufficient power of attorney are common.

To avoid adding logistical headaches to what's already a fraught transition for both parents and children, every family should follow these five steps long before help is needed.

1. Create a single guide
When you take over another person's finances, you quickly find that you need information and lots of it. That's why everyone, regardless of age or health, should compile a list of financial accounts and documents in case emergency strikes. The list, including account and policy numbers and the location of backup documents, should cover:

• Monthly bills, including phone, gas, electric and credit-card accounts
• Bank accounts and safe-deposit boxes
• Retirement accounts, including Social Security, pensions, IRAs and 401(k)s
• Brokerage and fund accounts
• Insurance policies, including life, health, home, auto, long-term care, Medicare B, Medicare D and Medigap
• Wills and medical directives, including living wills and health-care proxies
• Also be sure to note the names of any bank employees, insurance agents, brokers, investment advisers and attorneys.

If you're working with your parents to draft this list, expect to take some time with this task, especially if your parents are disorganized or uncomfortable with the process. You'll also need to make copies of the supporting paperwork.

For more help, use the extensive checklist published in "The Parent Care Solution" by Dan Taylor, a book that offers plenty of good advice on how to talk to your parents about money.

Once you've assembled this list, keep the paperwork in an accessible place such as a home file cabinet. Avoid a safe-deposit box in your parents' names; even if you have permission to open it, the bank may not let you do so without a parent present.

2. Get the power
The next step is making sure you can get control of your parents' accounts if and when you need to step in. If your parents haven't done so already, they each need to draw up a durable power of attorney, which authorizes someone else to take care of personal and financial affairs. The durable part means that the authorization lasts even after the person signing the document becomes incapacitated.

A power of attorney with the broadest parameters - the authority to handle all financial, real estate and legal matters - is best, advises Liza Weiman Hanks, an estate attorney and author of "The Busy Family's Guide to Estate Planning."

If your parent becomes incapacitated without this document, explains Hanks, you'll have to go to court to be named as legal guardian for your mom or dad (a long, costly and potentially humiliating process).

3. Close the loopholes

As Yvette Mesquita found out the hard way, a durable power of attorney is not one size fits all. Most large financial institutions require their own forms to be filled out and signed by an account holder before they allow anyone else to access the money.

The extra layer is designed to protect your parents from fraud and protect the institution from liability. When you get a durable power of attorney, call each of your financial institutions and ask if the firm requires a supplement.

4. Take special care with health care

If your parents are in good health, you may not realize how important insurance and other medical paperwork is. "This is one of the areas adult children often overlook," says Rosanne Grande, a financial planner with Rogé & Co. in Bohemia, N.Y. and an elder-care expert. "But it's also one of the most problematic areas when things go wrong."

Grande isn't talking just about living wills and health-care proxies, which spell out your final wishes and authorize someone to make treatment decisions on your behalf. While these are vitally important documents - for you and your parents - it's also critical to make sure that you can get information on your parents' medical condition and health insurance coverage.

For that to happen, follow these steps. First, if your parents have private insurance, contact the carrier and ask how to become a patient advocate. This will give you the power to handle claims appeals, lapsed coverage and other glitches. You will also be able to receive bills and pay your parents' premiums.

With most insurers, says Grande, your parents will have to draft a letter of authorization stating they want you to be their patient advocate. In turn, the insurer will usually send a form that both of you will need to fill out.

Second, you need permission to talk to your parents' medical providers. The reason? With Medicare, only the patient has access to insurance information.

To make sure you stay in the loop, have your parents draft a letter of authorization and fill out special forms for each of their doctors. That way, if there is a dispute over a payment or a question over treatment, you can call the provider directly.

5. Go slowly

Once you've built a strong foundation with the right paperwork, it's best to move slowly when it comes to taking over anyone's finances. It's natural for parents to resist, says Virginia Morris, author of "How to Care for Aging Parents." They're proud of their financial accomplishments and enjoy the independence.

You might start by simply helping your parents write checks for their monthly expenses. With a little time, you may convince them to let you set up automatic bill payments so they don't have to worry about due dates.

Ultimately, your parents may decide it's fine for you to receive the bills and take care of paying them directly. Easing the transition gently will build trust and show your parents that you only want to help make life easier, not take away their independence.

"It's a very emotional process," confirms Yvette Mesquita. "Parents take the whole thing very personally, and it's a lot of work for the kids. It takes time."

How to handle the hard questions: 3 fast fixes

Now that Yvette Mesquita and her sisters have their father's finances in order, they need to address an even tougher issue, says planner and elder-care expert Rosanne Grande.

1. Talk about health care.

Even though Dad is doing well, he needs to sign a health-care proxy, which will name someone to make treatment decisions for him, and a living will, outlining his wishes for life-sustaining care. "We've approached Dad several times about this," says Mesquita, "but every time we do, he balks. It's so overwhelming."

2. Bring in help.

Arrange a family meeting, but not at Dad's house, where he's bound to feel defensive. Instead, have an objective outsider - an attorney, a financial planner or an elder-care counselor - lead the meeting. "I've seen older people open up immediately to a professional in ways they never would with their kids," says Grande.

3. Be an example.

One of the best ways to convince a parent to do this paperwork, says Virginia Morris, author of "How to Care for Aging Parents," is to do it for yourself. After all, everyone needs a living will and health proxy. Then tell your parents how it went. "You get the ball rolling in a nonthreatening way," says Morris.

SOCSO - Not the kind of plan you entirely fall back on

Being a pilot is an admiration to many. Along with the ego of flying planes and jets, this is a career that entices if not all but most of us to consider joining because of it's high-flying income. But what use if the kind of money they earn is not put to better use, especially when pilots are diagnosed with a certain illness, and lose his job due to that.

Here is a story about Gurdeep Singh and SOCSO, a government-backed organisation that deducts salaries of working people to contribute into a fund pool to pay for any illnesses/mishaps in case the contributor is affected during the course of duty.

Thursday September 17,2009
Ailing ex-pilot ‘shunned’ by Socso

IPOH: For 17 years, pilot Gurdeep Singh contributed diligently to the Social Security Organisation (Socso).

Now, in his time of need, the 44-year-old former employee of Malaysia Airline claims he has been shunned by Socso.

His predicament started in July 2006 after being diagnosed with vertigo.

“Despite being certified as suffering from the condition, the organisation still refused to pay the benefits entitled to me,” he said yesterday.

Due to his situation, he said MAS terminated his services in 2007.

At a press conference called by Perak Barisan Nasional Public Services and Complaints Centre chairman Datuk Lee Kon Yin here, Gurdeep said he had raised the matter to the organisation’s appeals board.

”My claims were approved by the board chairman and she subsequently ordered the organisation to pay me,” he said.

However, he said no payment from Socso had arrived so far.

Gurdeep, who is now unemployed, said he had made countless trips to the Socso office and seen many people to seek help to solve his problem.

Lee said he would help Gurdeep raise the matter with Human Resources Minister Datuk Dr S. Subramaniam.

By The Star Online - http://thestar.com.my/news/story.asp?file=/2009/9/17/nation/4729665&sec=nation

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Like Gurdeep, I am sure he has some sort of medical plans for himself and it is a choice made by him. To relate with his predicament on SOCSO claims, SOCSO is not a matter of choice but it was made compulsary for anyone who joined the workforce to contribute part of their salary into this fund. It is like an insurance scheme where it pays back to the contributor, if he/she succumb to injuries or diagnosed with illness during the course of his/her employment.

To me, as a backup plan, its better to have a separate critical illness plan. Usually insurance companies do have plans like these and in a nutshell, these plans are there to protect an individual during unforseen circumstances like Gurdeep is in - at least the claims can be reimbursed promptly rather than to be faced with delays and the like.