Archive for the ‘Speakers’ Category

Frank Talk

Financial Literacy at the Library concluded its Speaker series on July 16 with a standing- room only crowd gathered to hear Congressman Barney Frank discuss Financial Reform and the Economy.

Congressman Frank highlighted the consumer protection laws that have been enacted under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act)  such as the creation of the Consumer Financial Protection Bureau (CFPB).

Under the current leadership of  Richard Cordray, the CFPB was established to “ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices.”

As part of Dodd-Frank, the CFPB  oversees mortgage settlement rules and enforces compliance under the Real Estate Settlement Procedures Act (RESPA).   It is now simpler for consumers  to compare mortgage fees and closing costs before committing to a lender and settlement day surprises are far less likely.  It also prohibits institutions from providing a mortgage that the  borrower cannot repay.

Frank offered some history on the causes of the financial crisis.  He cited two primary sources: securitization and information technology.

Securitization refers to the conversion of mortgages into bundled  securities (mortgage-backed securities or MBS) which are then sold on the secondary market.  With securitization, banks no longer keep mortgage loans, but sell them shortly after creation.  Consequently, they become less concerned with the ability of the borrower to repay the loan. Loan quality suffered and the subsequent mass defaults led to a crisis in the financial markets which had been gobbling up the “low risk” mortgage-backed securities.

Reform under the new law requires that the securitizer (packager) retain a portion of the investment risk as an incentive to produce a higher quality MBS.

Information Technology made securitization possible by enabling the expeditious packaging of  thousands of loans to create and market as attractive investments.

For a good summary of the Dodd-Frank act, click here.

To see a video of Congressman Frank’s talk, please visit the Newton Free Library YouTube page or check our catalog for the DVD.

Financial Literacy at the Library is grateful to all those who participated in our monthly Speaker series, as audience members,  staff and consultants.  We would like to express a particular thank you to Roberto Mighty and Michael Yip of Celestial Media whose expert filming of our events extended our ability to provide financial education outside the walls of the Newton Free Library to the virtual world.

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Financial Recovery

Financial Literacy at the Library concluded its presentation of the FDIC Money Smart series on Wednesday June 20.   Julie Soforenko from American Consumer Credit Counseling led a discussion on Financial Recovery after a Setback.

Participants who braved the hot temperatures to learn how to develop and implement a financial recovery plan were rewarded with snacks and sweets courtesy of Whole Foods Market.

Julie introduced us to the 4 basic steps in financial recovery:

  1. Evaluate Your Current Financial Situation
  2. Develop a Financial Recovery Plan
  3. Implement Your Plan
  4. Evaluate and Adjust Your Plan

To evaluate your current situation, keep count of all your incoming and outgoing items.  To achieve an accurate picture, Julie recommends you track your spending for at least one week and include everything, no matter how small.  Morning cups of coffee, donuts and loans to friends add up over the course of a month.

When developing your recovery plan, first prioritize your bills.  Student loans, rent, utilities and food should be paid before credit card debt.

Cut back on expenses where you can: double up on errands, rent a DVD rather than going out to the movies, enjoy pot luck dinners with friends rather than going to a restaurant. Never go food shopping while hungry or without a list. Review your insurance policies and cable/telephone service plans  annually and shop around for better rates.  If you have been on time with your credit card payments, ask the card issuer for a lower rate. Find cheaper substitutes on entertainment, but do not cut out fun things altogether. Recognize the benefit you experience from an expense, then find a less expensive substitute.

Establish SMART Financial Goals (Specific, Measurable, Attainable/Achievable, Realistic, Timely).

To start rebuilding credit, first order a free copy of your credit report at www.annualcreditreport.com. You may request one copy from each of the three credit bureaus (Equifax, TransUnion and Experian) once a year. Mark your calendar to order one every 4 months.  Check the report for errors and if you find one immediately contact the reporting bureau.  Contact the creditor in writing to dispute the item. Errors on a credit report can be removed but accurate negative histories will remain on the report for seven years.  Bankruptcy will remain on the report for 10 years.  For more information on correcting errors in credit reports including a sample dispute form visit the Federal Trade Commission at  ftc.gov.

Consumers may apply for debt settlement (reduction in total amount due) directly with a creditor.  Julie warned against using a debt settlement company as they are often a cover for scams. For bills that are 3 months overdue or more, call the company yourself and speak with the billing department.  If a debt settlement plan  is negotiated, remember that the amount forgiven will be considered income by the IRS and will be subject to income tax.  Further, it will appear on your credit report as a debt not paid.

Your budget should be dynamic and adjust to changes in circumstance such as:

  •   a change in income or expense
  •   after accomplishing a financial goal
  •   when transitioning to a new life stage

Financial Literacy at the Library would like to acknowledge the contribution of Julie Soforenko whose clear voice and thoughtful explanations over the past two years brought the  FDIC Money Smart curriculum to life for our auditorium and online audience.  Thank you, Julie!

Tips on Improving your Credit Score

Want some quick advice on how to keep your credit score in the favorable zone?

Listen to this one minute podcast on Quick Credit Score Fixes from Practical Money Skills.

Suggestions include:

  • Set up automatic payments for recurring bills
  • Don’t close older, unused credit card accounts (15 percent of your score is based on length of credit history)
  • Sign up for text or email alerts for when your bank balance drops too low

For more ideas on improving your credit score and how to recover from a financial setback, come to the Newton Free Library on Wednesday June 20th for our final Money Smart presentation on Financial Recovery.

Refreshments provided by Whole Foods Market will be served!

Be a Smart Investor

Joshua S. Grinspoon,  Attorney, U.S. Securities and Exchange Commission, Boston Regional Office, spoke on Investment Fraud and How to Avoid It at our May 16, 2012 Financial Literacy at the Library event.

Mr. Grinspoon began by introducing a primer on the basic financial instruments:

  • Stocks – owning stock is like having a piece of a company;  you share in the revenue and are eligible to vote on corporate matters.  Generally considered a risky investment because the company could fail to make money or could commit fraudulent acts.  An extreme example is of the 1929 stock market crash.  It took until 1954 for the market to return to its pre-depression value. Risk cannot be completely eliminated but can be minimized by researching the company and diversifying stock ownership among several companies, industries and geographical locations.
  • Bonds – are long-term debt instruments issued by companies (corporate bonds) and governments (municipal bonds) with a fixed interest rate.  They are riskier than people realize.  If the institution goes bankrupt, the bond will not be repaid and both bond income and principal will be lost.  Further, their value is tied to prevailing interest rates.  If rates go up, the value of the bond decreases and will be difficult to sell. If the investor has no plans to sell the bond, then the interest rate volatility is not a great concern.
  • Mutual Funds – are a basket of stocks alone or with bonds, normally diversified both by industry and geographically.  Theoretically, this makes them less risky, but one still needs to be careful.  In some downturns, all asset classes can lose value, as they did in 2007.  Mutual Funds often require fees, perhaps 1% to 1 1/2% per year plus load fees.
  • CDs – are bank deposits.  If invested with an FDIC member institution in amounts lower than the covered maximum (currently $250,000 per depositor, per insured bank, for each account ownership category), they are a low risk investment. Although the principal is insured against loss, the interest rate can be lower than the inflation rate, resulting in a net decrease in economic value.

When employing a Broker who will act as your conduit to the market, be sure to research the Broker’s credentials.

  • Begin by looking them up on the FINRA Broker Check.  You may also want to check their status with the Massachusetts Securities Division  or the Massachusetts Attorney General.
  • Ask about their commission structure.  Is there a financial incentive for recommending a particular investment?
  • Ask for references.
  • Ask if they have frequently switched companies.
  • Be wary of unsolicited offers and attractive glossy mailers.
  • Be wary of “Senior Advisors”

Other important tips:

  • Don’t invest too much in any one stock.
  • Don’t lose sight of your investments – Periodically review your portfolio.
  • Brokers have a responsibility to put you in “suitable” investments

Remember the Basic Rule of Finance: If you don’t understand the investment, avoid it.

Secured Borrowing Basics

Financial Literacy at the Library welcomed back Julie Soforenko, Community Outreach Coordinator, American Consumer Credit Counseling for a presentation on Financing Fundamentals: Car loans, Home loans and Equity Lines of Credit.

Cars and homes represent the most expensive purchases most people make.  It is important that one’s money matters be in tip-top shape before seeking financing for them.

Julie covered the pros and cons of buying vs. leasing cars.  Monthly payments are generally lower on leases than car loans, but insurance payments can be higher.  Leases often come with restrictions on mileage and on the degree of wear and tear that is acceptable. At the end of the lease term, the vehicle must be returned to the dealer unless a separate purchase option is negotiated.

When borrowing to purchase a car, it is wise to ask the financing company how your personal information such as your social security number will be protected.  Make sure you know all associated costs before signing any documents and avoid loans with a balloon payment or prepayment penalty.

When considering whether to purchase versus rent your next home, Julie advised looking at the following factors:

  • Is this a short-term or long term housing need?
  • Are you looking at a home as an investment or inheritance for your children?
  • Are your savings substantial enough to cover a 20% down payment plus closing costs?
  • Is your income enough to cover property maintenance/repairs, taxes, insurance and association fees?

Julie recommended Renter’s Insurance for those renting a home and suggested that favorable rates may be obtained by combining the policy with your car insurance.

In addition to commercial institutions, home loans are available through several government agencies such as the VA, FHA, HARP (refinancing only) USDA and First Time Home Buyers  programs.

When shopping for a mortgage, it is best to complete your research within 30 days.  Multiple inquires on your credit history for this purpose will not affect your credit report if concluded in a short time frame.  If however, several inquiries are spread out over many months, it will have a negative impact on your credit report.  Remember for a free credit report, visit annualcreditreport.com.

First Time Home Buyers should educate themselves by enrolling in a home buying fundamentals class.

Homeowners aged 62 and older experiencing cash flow problems may want to consider a Reverse Mortgage.  Rather than making monthly payments to a financial institution, under reverse mortgages the bank pays you.  Due to its unique terms and risks, it is required that borrowers consult with a HUD Certified Housing Counselor to become eligible. Read more about reverse mortgages here.

Do not miss the final installment of the FDIC Money Smart Series, Financial Recovery: How to recover financially and rebuild your credit after a financial setback, to be presented by Julie Soforenko on Wednesday, June 20.

April is Financial Literacy Month

In recognition of the 12th annual Financial Literacy Month, the Newton Free Library will hold a series of events for adults and children to “educate patrons about finances and help them make better decisions about their money.”

  • Wednesday, April 18, 7:00 p.m. – Financial Literacy at the Library FDIC Money Smart series with Julie Soforenko. The program titled Financing Fundamentals: Car Loans, Home Loans and Equity Lines of Credit will include lease vs. buy options for cars and homes;  fixed, variable, reverse and second mortgages.
  • Monday, April 23, 7:00 pm, Dr. Kate Levinson will speak about her book Emotional Currency: a Woman’s Guide to Building a Healthy Relationship with Money; an insightful and empowering book that relishes a female viewpoint and a healthy, proactive approach to finances with specific steps for changing attitudes that impede financial success.
  • Wednesday, April 25, 4:00 pm. In a program titled Mixing in Math: Pocket Change, children ages 6 and up will explore math concepts through stories and activities with a focus on learning about different types of coins. (Space is limited. Tickets will be available the morning of the program.)

For more information call the Newton Free Library at 617-796-1360.

Rental Housing Basics

Barbara Chandler, Fair Housing Manager, Metropolitan Boston Housing Partnership, was our featured Speaker at the March 21 Financial Literacy at the Library event.

Ms. Chandler introduced us to the basics of rental housing searches including preparation, protections and affordable housing options.

The Preparation Process is the same regardless of the type of housing sought (affordable, market rate, luxury):

  • Know your needs: bedroom count, parking, laundry, proximity to transportation and shopping
  • Know your Credit Score and Credit History by getting your free annual credit report
  • Know what you can afford  – be sure to factor in utilities and transportation costs
  • Have 3 references – preferably past landlords
  • Expect that a CORI criminal background check will be ordered. One may order a copy of their own CORI through the MassLegalHelp website.

Protections available to tenants include:

Landlords may require the following deposits:

  • Security Deposits – can not exceed 1 month’s rent and are required by law to be deposited in a separate account.  Ask for the bank and account number where your deposit is being held.  If your rent increases, the landlord may ask for a similar increase in the security deposit. Upon vacating the unit and following an inspection, the deposit is returned to the tenant.  Repair costs for damages beyond normal wear and tear may be deducted from the amount.
  • First and last month’s rent
  • Key Deposit – must be a reasonable amount

Affordable Housing is available for households with incomes of 80% or less of the area median.  For the City of Newton, 80% of median income for a family of 4 is $65,000.  For all household sizes, see this chart.

Affordable Housing information and listings are available through the following groups:

Remember to read your lease.  You should understand your obligations. Any changes made to the standard lease must be initialed by both the tenant and the landlord to be valid. Fair Housing Rights cannot be negotiated away.