Nicole Lahti, Austin Texas Mortgage

During a time when we're all doing our best to meet financial obligations, apparently staying current on your notes isn't enough. Banks have recently begun foreclosing on builders with perfect pay history due to the slowdown in the housing market.

Dave Brown, has been a well-known builder in Tempe, Arizona for 33 years. Brown's home-building company, Brown Family Communities, naturally saw a decrease in their sales in 2008 -- down to fewer than 300 homes, from an average of 85 homes a month in 2005. Despite these troubled times, Brown never missed a payment on his loans. Regardless, JP Morgan Chase suddenly required additional millions of dollars in collateral citing the increased risk associated with Brown's declining revenue. When Brown couldn't come up with the money, Chase foreclosed on five of his developments causing Brown Family Communities to leave behind unfinished projects and shut its doors.

So let me get this straight, Chase was concerned with taking a hit on Brown's developments because of his decrease in revenue. Rather than minimiz its loss by allowing Brown to continue to make timely payments while he finished and sold the homes, Chase decides to take it in the chin now by selling the homes on its own (some unfinished), and without any financial help from Brown. Riiiight.

Now I understand why banks would require stronger or more collateral to offset increased risk; but foreclosing on Brown's communities seems to lack common sense -- in my humble opinion at least.

Sounds like Chase is getting advice on how to handle borrowers from its credit card department.

Companies are struggling to sustain employee morale as our country's recession affects everyone very personally. One of the main threats to employee morale is the financial stress they suffer, much of which is caused by a near 30% decrease in their investments, ever-present layoffs and pay/benefits changes. An October 2008 survey of 248 U.S. based companies by Watson-Wyatt consulting firm, found nearly one quarter of companies plan layoffs, hiring freezes and increases to employee contributions to healthcare premiums within the next 12 months.

This financial stress is frequently brought into the workplace further affecting companies' bottom-line through reduced productivity. So how do companies cost-effectively sustain employee morale during this turbulent economic time?

Many companies are addressing this issue by offering their employees educational opportunities on financial literacy. A November 2008 study conducted by the Society for Human Resource Management (SHRM), found 83% of companies consider offering their employees financial literature/worshops in the workplace.

Advice Wanted

It turns out employees are asking for financial literacy programs as well. The 6th Annual MetLife Study of Employee Benefits Trends conducted at the end of 2007 found that growing financial distress caused 44% of employees to want financial guidance & advice available through their workplace (up from 31% the year prior). Bill Mullaney, president of MetLife Institutional Business stated:

"This increased employee appetite for advice at the workplace is a significant development. It presents a tremendous opportunity for U.S. employers to optimize the real and perceived value of their benefit plans. Having a benefit program that meets the diverse needs of their employees-and communicating more frequently about benefit offerings-can result in improved employee retention, which continues to dominate employers' minds as their top benefits objective."

Companies Win by Offering Financial Education

The 2007 best practices guide, The Principal® 10 Best Companies for Employee Financial Security, indicated companies who offered their employees financial education in the workplace enjoyed a 7.7% voluntary turnover ratio, compared to the national average of 21.6%. Leaders within these companies believe this sort of benefit helps them recruit & retain the best talent, cut training costs, and improve customer service & productivity.

What Makes a Good Financial Literacy Program?

1. Personalization

Financial literacy programs must appeal to different employee segments. Different topics should be offered to appeal from Gen Y'ers to Baby Boomers.

2. Communication

Voluntary benefit programs need to be properly communciated to employees so they take full advantage of the program's benefits. This means voluntary educational workshops, literature or guidance must be frequent and easily accessible.

3. Measurable

The success behind offering financial literacy courses should be measured every 12-24 months to ensure employees and companies are getting the most out of the program. Success can be measured by tracking (1) employee satisfaction with the educational material (2) employee absenteeism (3) employee retention (4) employee productivity, etc.

There are various for-profit and non-profit organizations who offer financial literacy classes. HomeBenefitIQ is an example of such a program available to organizations and companies in the Austin area. HomeBenefitIQ is offered by a group of local professionals who donate their time to the community to help promote education & awareness in the homeownership & personal finance aspect of people's lives. Examples of the many classes available through HomeBenefitIQ are: Becoming Financially Fit, Buying Your First Home, and Estate Planning 101.

White House Asks HR Professionals to Help Promote Financial Literacy

The important role companies play in promoting financial education has been recognized by the White House. Janet Parker was invited by President Bush to represent SHRM and the HR Profession on the President's Advisory Council on Financial Literacy. Parker's appointment to the council's board recognizes the important role HR plays in helping people plan for the financial future (view a video of her remarks).

HUD is delaying implementation of the "required use" provision of the final RESPA rule that was slated to be implemented January 16th. This provision would keep builders from making incentives or discounts available to buyers only upon using the builders' preferred lenders. The delay comes after the National Association of Home Builders (NAHB) filed a preliminary injunction against the rule in late December.

NAHB argues the provision "limits the options available to new-home buyers as they seek out the services necessary at closing." On the contrary, HUD believes this provision makes other lenders available to the buyers, encouraging them to use the lender who offers the most competitive rates & fees. HUD references statements by consumers that point to higher rates and fee charges by builders' affiliated settlement service providers.

Delaying the implementation of the "required use" provision does not mean it will not be implemented, but rather gives HUD time to build its case in support of this provision. The provision is expected to take effect April 16th.

There are valid arguments on either side, but offering large incentives through exclusive lenders can be anti-consumer. Admittedly, I'm biased having lost many clients to builders' lenders due to the large, exclusive discounts they offer; but I've experienced a number of times when a builder's lender offers completely uncompetitive rates & fees, and gets away with it because the buyer gets a large amount of incentives exclusive to using their services.

Do buyers end-up with a net benefit through these affiliated business arrangements despite the higher mortgage costs? Yes, many times they do; but how much more of a benefit would buyers enjoy with a more competitive mortgage AND all the builder incentives?

NAHB CEO, Jerry Howard, stated, "For the first time ever, HUD has disallowed home builders from offering bona fide discounts and packaging of real estate settlement services, which have saved home buyers thousands of dollars over the years in closing costs, title searches, and other fees. This rule is bad for consumers, bad for the housing industry, and bad for the economy." However, nothing in the new provision states builders can not still offer these incentives or suggest a buyer use their preferred lender; they just can not make these incentives contingent upon using this preferred lender.

This new provision will likely disrupt builders' operational efficiency in the short run, but that's the name of the game if you're in the real estate business right now -- adaptability is something we're all dealing with on a daily basis. To argue this provision is anti-consumer because it will increase the settlement costs to the buyer is just not true. Builders make their money selling homes, not building the businesses of their lenders; therefore, they will still offer their large incentives even if not through their preferred lender if it helps them sell a home.

This provision is ultimately in the consumer's favor as they will still enjoy builder incentives, and now can combine them with the most competitive mortgage.

My husband, Stephen, owns an equipment finance company, so needless to say both of us being entrepreneurs in the lending industry has some days felt a little disconcerting lately. However, despite the recent challenges in our businesses, I was encouraged today when reading Gene Marks' article in BusinessWeek on how this downturn is actually GOOD for the entrepreneur.

When big companies like Linens 'N Things and Lehman Brothers are dropping like flies, here are three reasons why the little guy will emerge STRONGER.

1. Survival of the Fittest

Whether you believe in Darwinism or not, you have to agree with the fact that the companies who ride out this downturn are the fittest. Its easy for everyone to do well during a boom, as much of our competitions' inadequacies can easily be hidden. A perfect example in my business is the amount of Loan Officers who entered during the refi boom, and are nowhere to be found now. I also saw a recent article in Agent Genius that 2009 expects a 20% decrease in Realtors -- whoa, that's HUGE!

We remain respectful and empathetic towards our counterparts who are forced to leave our industry because many of them are very good at their job. However, many are not, and their absence means those of us who make it past this downturn will emerge with less competition.

2. Healthy Disbelief in the Establishment

The Realtor or Lender oftentimes wondered if they were in the right line of work when their friend working for the "big company" had a juicy expense account, company car and travel opportunities; but we realize now that all of that can be fluff because it gets paid for somehow, and recently its been with layoffs. Take for example, the automakers flying on their private jets to Washington asking for a bailout -- an excessive expense that landed them ridicule from Congressmen Gary Ackerman and Brad Sherman. Entrepreneurs look at the automakers now and realize the fat cats really aren't any smarter than we are; and thus, we emerge from the downturn more confident in our ability to run a tight, well-oiled ship.

3. Sticking with the Fundamentals

Gone are the days of buying the new desk, sweet fax machine and renting prime office space because its cool, and it provides a good tax write-off. Business owners have a new-found respect for the guy who kept is overhead low and put away some of his revenue for a rainy day. The great thing about being in real estate is its much easier to manage our overhead especially with operations practically all digital. Most of us have home offices -- a trend big companies have started to emulate. This flexibility allows us the ability to offer our clients the low-cost/high-value product or service our competition can not.

So, for all you Realtors, Lenders and small business owners out there still busting it, stay positive during these times. Most importantly, appreciate & capitalize on the the silvering lining available to you during this downturn!

You've probably already heard TARP funds aren't actually buying troubled assets anymore, and if the reason why isn't confusing or irritating enough, we now find out one of the reasons why Wall Street's $700 Billion is not easing lending as originally intenteded.

From July 7th to date, there has been over $5 trillion in credit-rating downgrades in companies' mortgage-related securities, and of special concern is the accelerated rate of downgrades in 2008 ($1.84 trillion in Q4 2008, compared to $183 billion a year earlier). Ok, English please. Companies take a big hit on their income statements as their AAA-rated securities are downgraded. In order to maintain a higher regulatory capital requirement imposed by lower-rated securities, they end-up hoarding capital (i.e., TARP funds) to cushion their portfolio losses.

None of this came as any surprise Meredith Whitney, the Oppenheimer & Co. analyst known for calling many of our economy's recent ails. She predicted securities' downgrades would be unprecidented and result in banks unwilling or unable to lend the capital available to them. What does this mean for the real estate market? Well, according to Whitney, this could continue to drop real estate prices as, depsite capital injections, lending continues to remain tight.

(See video of Whitney speaking about downgrades, real estate prices & consumer credit in Aug. 2008)

So what's in store for 2009? According to Whitney, Wall Street may need more liquidity. Big surprise -- I think a lot of us figured the $700 billion was just the beginning; but what I find especially disheartening is TARP funds are currently stuck supporting previous malinvestments, and not easing lending as originally intended. I guess some would argue supporting these malinvestments keeps home values & our economy from tailspinning even more, making institutions more willing to lend.

Who knows, but if Whitney is correct about 2009, then where is this liquidity supposed to come from since nobody has the cash to pony-up? My guess is the goverment -- eh, hmm, the American taxpayer -- and if I'm an investor in one of these banks again I want a little more assurance that my money is actually used for what I am told. I'm sure private investors would require this -- why should the American taxpayer be treated any differently?