Unraveling Money – My Exploration of Personal Finance and Productivity

June 2, 2009

New York Times article on…my problem!

Filed under: Mortgage — unravelingmoney @ 10:13 pm

Very timely – the New York Times has a great article about homeowners who do not qualify for loan modifications even though the MakingHomeAffordable site states that they should:

For Some Homeowners, Promised Help Proves Elusive

The article profiles a homeowner in Arizona who, according to MakingHomeAffordable, qualifies for a loan modification – however, she has not been offered one by her mortgage bank, Countrywide (they’re still around??). Like me, she went down the checklist – mortgage greater than 33% of income, recent reduction or loss of income, owes more than home worth…but still apparently isn’t getting an offer from her bank.

It’s really frustrating – the only response from the government is that they need to “fine-tune” their reporting with these banks.


June 1, 2009

Digging into Mortgage Deferment with Union Bank

Filed under: Mortgage — unravelingmoney @ 10:33 pm

One of my new rules when dealing with financial issues is to make sure that I have asked all the questions necessary to get the full picture of anything I’m signing up for. I think that in the past I have been somewhat deficient in this area, and it needs to change. So with that in mind, I worked up a comprehensive list of questions for Union Bank regarding the potential deferment of my mortgage for some months.

Here’s the list:

1. Are there any negative repercussions to my FICO score or to the interest rate(s) of my loans at any point in the process?

2. Is there a lump sum payment due at any point after the deferral?

3. What is the maximum deferral period allowed? Any minimum?

4. Will taking part in this program affect my chances of being eligible for a loan modification or refinance later on in the life of the loan?

5. What are my chances of being approved? I haven’t missed any payments on my loan yet, nor do I want to.

6. Are there any other hidden costs or negatives that I’m missing?

With this list in hand, I called up Union Bank again and asked away – to their credit the agent on the phone was very nice although as with everyone in this industry right now – she didn’t have many answers.

The bottom line is this: I have no idea who mortgage deferment would be right for. The kicker for me was that if I was able to get my mortgage payments deferred, it would probably make me ineligible for a future loan modification, but *not* a refinance. Since I’d really just like to get my loan modified, that wouldn’t really make any sense for me.

That all being said, there is currently no loan modification at Union Bank of California, since they did not take TARP funds and are not required to offer the Making Home Affordable program. So I’m essentially going off something that the agent at Union Bank said – they might offer something similar later this summer. We’ll see.

Back to the Mortgage Deferment program – they said that it would not harm my credit/FICO score, and they said that there were no extra or hidden charges or rate increases associated with it. When i pressed the agent to explain to me who exactly would be eligible for this program, she guessed that perhaps someone with temporary high medical bills might be – but they would still have to show ability to pay in the near future.

Summary: Not for me – I’ll hold out for a loan modification or some kind of refinance – which will hopefully be coming sometime soon. It’s just a shame that no one can tell me when.

May 27, 2009

What I learned today: The importance of an emergency fund

Filed under: Keeping Track of Expenses — unravelingmoney @ 10:33 pm

Today I learned a valuable lesson – having a fund for emergencies/unexpected expenses is extremely important.

Long story short, I got a flat tire in a parking garage about 60 miles away from home – in the early evening when hardly anyone was around and tire-repair shops were closing. You might say – change the tire yourself – but of course I was without 1) skills, 2) tools and 3) any idea whatsoever where, if anywhere, my spare tire is in my car. Underneath? No idea. Perhaps this sounds like I need to get some car repair skills, and that may very well be the case – but regardless, I was stuck in a bad situation.

Luckily I had ample friends and family willing to help, just far away. And also luckily, I have free roadside assistance from my car insurance provider, Farmers. After waiting for way too long and barely making it to the tire repair shop in time, I was stuck with a $95 bill for a new tire and service (old tire was completely ripped to shreds).

This time, I had more than enough funds in my checking account to cover this totally unexpected expense. However, I’d like to get more proactive about saving for unexpected expenses. I really like Ramit Sethi’s use of sub-savings accounts for these types of expenses: http://www.iwillteachyoutoberich.com/blog/tip-using-sub-savings-accounts-for-unexpected-expenses/

He suggests saving a certain amount per month specifically earmarked for unexpected costs, and then sweeping the unused amount into general savings at year’s end. I’m not sure about the second part – I would probably always want to keep somewhat of a hedge against these types of situations. Just like the general emergency fund that everyone should save – 3-6 months worth of living expenses – once you have saved this amount, it’s probably good to move on and start investing your funds elsewhere, such as your retirement or paying off debt.

I recently opened and ING savings account to start saving the way I want to save – specifically with sub-savings accounts for different goals. I’ll write a review of the account usability as soon as I’m able to use it for awhile.

In the meantime – thinking about how much I can devote to unexpected expenses!

Modifying, refinancing or deferring mortgages

Filed under: Mortgage — unravelingmoney @ 5:34 am

I don’t have the greatest mortgage. I also don’t have the worst – my main interest rate is 6.375% and it is a 7-year-ARM, which adjusts only once a year after that. The intention, the pipe dream – is to refinance at a still-low-rate once I have paid off my second mortgage of $60,000. Problem is, $60,000 is a lot of money, a lot of money I unsurprisingly don’t have. As far as I know, I’m unable to refinance my home until I have 20% equity in the property. Right now I have 10% or so.

These are all things I wish I had considered more seriously before signing my life away.

It’s not all bad, of course – I make a good living (crossing fingers it stays that way) and I live in a very nice condo in San Francisco that I can basically afford, although I’m not actually gaining a lot of equity at present, and I have to watch my spending very, very carefully.

Strangely enough, my lender, Union Bank of California, did not accept any TARP funds from the Federal government. Because of this, they are not forced to participate in any loan modification programs such as http://makinghomeaffordable.gov/eligibility.html – but they intend to offer a similar program to homeowners in the next few months, according to the “Loss Mitigation Specialist” I spoke to today.

Side-note – interestingly, it turns out that loan modifications are much more beneficial for banks in the long-run over foreclosures. There was a great piece on This American Life recently – http://thisamericanlife.com/Radio_Episode.aspx?sched=1296.

Even though Union Bank isn’t currently doing loan modifications, they do have plans in place to help struggling homeowners. They will defer mortgage payments for a certain number of months, and then tack those mortgage payments on to the end of the life of the loan.

I am intrigued. There must be a catch. No such thing as money for nothing, right?

However, think of the benefits. By deferring my mortgage payments, I could use the money I would normally spend on my mortage to pay down my credit card debt significantly. This would allow me some breathing room to get my finances in order, set up my savings plan and my debt principal repayment plan as well (you can always pre-pay your mortgage principal separately if you like).

So, I am investigating this and asking the following questions of the bank:

1. Are there any negative repercussions to my FICO score or to the interest rate(s) of my loans at any point in the process?
2. Is there a lump sum payment due at any point after the deferral?
3. Are there any other hidden costs or negatives that I’m missing?
4. What is the maximum deferral period allowed? Any minimum?
5. Will taking part in this program affect my chances of being eligible for a loan modification or refinance later on in the life of the loan?
6. What are my chances of being approved? I haven’t missed any payments on my loan yet, nor do I want to.

I will update this blog with the answers once I receive them, more to come.

May 26, 2009

How to keep track of your expenditures: Part 1

Filed under: Keeping Track of Expenses — unravelingmoney @ 6:35 am

There are a few key steps to keeping track of expenditures:

1. Have a daily system for tracking/reporting expenditures – ALL expenditures

2. Have a monthly, bi-weekly or weekly system for entering your expenditures into Excel. Yes, you can use personal finance software as well, but I like the hand-entering system because it forces me to be extra-conscientious of the money I’m spending.

I choose to carry around a small notebook in which I record my expenditures by day – this goes with me everywhere. I’ve gotten really good at remembering what I spend, but I highly recommend entering line-items each evening so that nothing is left out by accident. Dorky? Yes. Effective? Absolutely. It causes me physical pain when I have to record a large purchase in the notebook.

When you make entries, I recommend you indicate the exact amount you spent along with a simple categorization of the expense – in line with your Excel.

For the next post on this subject, I’ll talk about how to enter this data into your monthly spreadsheet.

Yet another personal finance blog?

Filed under: About Me — Tags: — unravelingmoney @ 6:09 am

I’m embarking on a mission.

I have credit card debt and a mortgage that on second thought, wasn’t such a good deal. I am gainfully employed in my chosen profession, but since I work for a startup I’m not earning what I perhaps could elsewhere – but still happy where I am and on a good career trajectory (I believe).

My whole life money has come to me relatively easily. In the same token, I’ve spent unbeliveable amounts of money on things I apparently didn’t need, since I can’t recall what they are at present.

Now I’m committed to stopping the downward spiral. I want to get total control of my finances and work towards building a secure and stable financial future for myself.

A couple of things that I will be doing on this blog:

1. Publishing a monthly breakdown of debt payoff, expenditures and perhaps income. (Note: I have been tracking my expenses now for 5 months so I have a pretty good system down.)

2. Distilling strategies for financial freedom from other personal finance writers, perhaps devising my own.

3. Exploring strategies for personal productivity and other “lifehacking” tips as time allows.

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