By Chuck Bentley
Millions of young Americans with student loan debt are about to make a deal without a clue as to how much it’s going to cost them down the road.
President Obama’s latest end-run around Congress presumably to bail out those struggling to repay their student loans is a bad plan on many levels. This move is akin to the danger created by the sub-prime mortgage bubble that promised easy payments now with no thought of the cost later.
But you can’t short sell an undervalued education. As the banking industry has struggled to survive the collapse of the housing bubble and the realities of Congressional tinkering with financial and banking regulations, it’s time to read the fine print of the president’s plan before Washington does to student loans what it has done to the housing market.
The so-called student loan bailout would reduce the maximum monthly payment from 15% to 10% of discretionary income —resulting in less than $10 savings per month for the average student loan borrower, according to The Atlantic magazine. President Obama declares this would help them buy homes, launch businesses and start families. One must wonder where in America ten dollars has so much traction.
Graduates with the most student loan debt, those who have attended law, business or medical school, are likely to have incomes that exceed the cutoff—making them ineligible.
The plan would also allow student loan borrowers to consolidate private and federal loans. This is no small change in policy. Approximately $1 trillion in outstanding student loan debt is on the books, a substantial portion of it held by private banks that stand to lose interest payments that are now tallied as assets. This is a one-two punch to both taxpayers and struggling banks.
The change would put the taxpayers at risk should students default on their loans, a risk that a bank accepted. And it would take assets from struggling banks that made loans in good faith to earn the assets. It’s hard to believe that making taxpayers responsible for all bad loans is the best thing the U.S. can do for students, who presumably want to become job holders and taxpayers themselves.
According to Human Events, the president is already scaring the pants off the credit market with occasional mentions of possible mortgage “cramdowns” –fears of a student loan cramdown, that is re-jiggering the balances on $1 trillion in student loans, might well send banks into a panic.
The president says his plan won’t cost taxpayers a dime. So who is paying? A plan that lowers the interest on $1 trillion and reduces loan life by 5 years, as Obama’s plan calls for, will cost someone. Reduced interest will hurt those who save. Lowered profit in lending will restrict available monies. And with the government consolidating the loans, the idea that taxpayers won’t be on the hook for potential loan losses is fantasy.
The loan modification plan ignores the real problem with college funding in America—the completely out-of-control increases in tuition and fees at the nation’s colleges and universities.
How is it that when almost every other sector of the economy is scaling back expenses, costs at public universities are rising 8% a year? Why institutions of higher learning have raised costs at much greater rates than economic growth or personal income levels must be addressed. And as these institutions receive tax dollars, that is a question the government could ask.
Politically well connected universities, with their lobbyists and activist faculty and staff, have survived and thrived in a struggling economy, while students take on more and more debt for the hope of later employment. The ROI – return on investment – that students can expect from such a purchase is dwindling even as the costs are rising.
Even now, the New York Times is reporting that the average student loan debt of graduates rose again in 2010, to a record high of over $25,000, an increase of 5% from the previous year. Yet few are calling for academia to rein in costs.
Only in the rarified world of academia do costs exceed market forces and benefits. This latest bailout would only exacerbate the problem, by monkeying with free market forces and further separating the consumer from the cost of the product.
The president’s plan will increase not just one but two problems: the sub-prime student loan bubble and the college tuition bubble. The real tragedy in the proposal is that the very people it is purported to help, young Americans who are struggling to make student loan payments, will likely end up shelling out far more in higher taxes down the road to pay back the peanuts they are being fed now.
Originally posted 11/4/2011.
A commonly asked question from Christians seeking advice on financial matters is, “How can I find good Christian counsel?”
Perhaps even more fundamental would be the question, “How can I tell when I find good Christian counsel?”
It is very difficult to receive unbiased advice from someone who is trying to sell a particular product. So, an obvious limitation that Christians should easily recognize is whether the people giving them financial advice are actually giving wise advice or just a sales pitch.
A second limitation is to find financial counselors with like minds, attitudes, and principles. Many financial advisors who profess to be Christians live lifestyles that are far from Christ-like.
Likewise there are those who are very good Christians, but they have no knowledge or wisdom concerning the biblical principles of finances.
There are many guidelines in God’s Word for seeking and selecting good godly counsel. So, although seeking counsel is advised, selecting wise counsel is imperative.
Listed below are four basic principles that Christians need to consider in seeking and selecting good, godly financial counsel.
1. Seek and select Christian counsel. Seek and select financial counselors on the basis of a common value system. For Christians, that means to seek counsel from those who acknowledge Jesus Christ as their Savior and Lord. “How blessed is the man who does not walk in the counsel of the wicked, nor stand in the path of sinners, nor sit in the seat of scoffers!” (Psalm 1:1).
This does not imply that non-Christians are incapable of giving good financial advice. However, the standards by which decisions are made must be based on God’s Word and Christ-like character, rather than on the world’s humanistic get-ahead-at-all-costs standards.
2. Seek and select wise counsel. “He who walks with wise men will be wise, but the companion of fools will suffer harm” (Proverbs 13:20). The fact that people are professed Christians does not qualify them to be good financial counselors.
All too often Christians throw wisdom and caution to the wind when it comes to taking advice from professed Christians. Christian counselor and counselee alike must be in regular communication with God and seek His wisdom before any decision is made. So, not only must counselors be knowledgeable in areas of biblical principles of finance but they also must regularly seek God’s wisdom in prayer and in the study of His Word.
3. Seek and select multiple qualified counselors. “Without consultation, plans are frustrated, but with many counselors they succeed” (Proverbs 15:22). No financial counselor can be an expert in all areas of finance.
The areas of taxes, securities, stocks, bonds, and real estate are so complex in today’s society that only with a variety of good financial counselors who are experts in their respective fields can Christians hope to attain a well-rounded perspective of biblical financial principles.
4. Weigh all counsel given. “The naïve believes everything, but the sensible man considers his steps” (Proverbs 14:15). The purpose of counsel is to offer suggestions, alternatives, and options—not to make decisions on behalf of counselees.
Even the best financial counsel in the world lacks an essential element necessary to make sound and wise financial decisions—knowledge of God’s plan for the lives of the counselees. Therefore, there should never be a decision made unless it has been presented to God in prayer first.
The peace of God—or lack of peace—as a result of prayer is an indisputable indicator of God’s preferred directive. In addition, each decision should be tested against God’s Word. If it is not consistent with the purity and the spirit of God’s Word, the decision should be rejected.
Counselors’ motives and actions also should be evaluated. If counselors will deceive others on the counselees’ behalf, they also will most likely eventually deceive the counselees.
Review the five-year track record of any and all people who offer their counsel. Just because they are Christians does not mean that they have been successful in their financial counsel.
The best method for locating good, godly financial counsel is asking other Christians who have been helped. This could be fellow church attendees, pastors, or Christian businesspeople.
Additionally, this type of information could perhaps be found at Christian professional associations, societies, and organizations—both locally and nationally.
Without a doubt, good and godly financial counsel is available for all who seek such counsel. Prayer, wisdom, and caution must be foremost in order to select the most qualified counselors and those whose lives and expertise conform to God’s will for the lives of the counselees.
To find a Christian financial professional in your area, visit KingdomAdvisors.org.
Originally posted 10/26/11.
Matthew 21:12 describes an event when Christ drove the moneychangers out of the Jewish Temple of worship in Jerusalem. What motivated Jesus to do this or to display this more intense side of His personality? Why did He do this when it seemed obvious that the moneychangers and sellers of animals were meeting a need of the people coming into the Temple to worship as part of their religious celebration?
The prevailing religious law gave the Jewish worshipers the right to sell animals designated for sacrifice if they had to travel a long distance to get to Jerusalem; then they could use the money to buy another animal to be sacrificed once they got to the Temple compound in Jerusalem. The moneychangers served this need, and most of the people seemed to be satisfied with the arrangements.
So, why was Jesus so upset if both sides benefited? Because He knew that the motive of the moneychangers was to get rich off of the needs, or presumed needs, of the people. They bought low and sold high with the blessing of the Temple. In our Christian society today, who are the Temple moneychangers and how can they be recognized?
The moneychangers in Jesus’ day most likely did not set out to deceive the people. They probably originally wanted to provide an inexpensive service for the people and at the same time provide funds for the Temple. It was good for all parties involved. Somewhere along the way, however, things seemed to get out of control and the moneychangers began to take more and more profit for the benefit of themselves, at the expense of the people who were obliged to purchase “blessed” sacrifice animals.
Even so, the moneychangers in today’s church world are probably not interested in hurting people; nor do they set out intentionally to deceive. They generally just want to sell a product that will most likely help people and make a profit while doing so. Unfortunately many use the church, the pastor, or the integrity of the church and its members to accomplish those goals by using Christian catch words to get their “foot in the church door” (James 3:16) and appealing to the customary character of Christianity: helping people.
There are a number of marketing tools that seem to be consistent with most present day church moneychangers. Recognizing these marketing tools and responding with caution can save Christians much financial heartache, emotional frustration, and spiritual indignation.
1. High prices. Most products or services sold to Christians and church members by “Christian” organizations are generally more expensive than comparable products and/or services offered by organizations or businesses who don’t use the “Christian” catchword.
2. Helpful. Almost without exception, the primary clincher used by “Christian” catchword marketers is the idea that the product and/or service can be sold to friends and relatives because it is helpful to people. If companies feel that their products can actually help people, they should be willing to forgo any profit and offer the product or service to those “who need help” in the church at cost with no profit margin.
3. Assumed credibility. This is when sales groups assume that the church’s, pastor’s, or church member’s credibility are such that they can influence and persuade others to purchase the product or service.
4. Claim to be ministries. Although any business can be used to minister and can employ Christians, there is a difference between businesses and ministries. Businesses sell a product and/or service in order to make a profit. Ministries serve functions that can’t (legally) or shouldn’t (ethically) be done for profit. If the “ministry” generates the majority of its funds through the sale of products and/or services, it is a business. So, businesses that try to present themselves to churches as ministries should be viewed with caution.
5. Orients its sales pitch to pastors. When the sales group or organization orients its sales pitch to pastors, be cautious. If it’s a product or service for pastors or for the benefit of the local church, pastors should be approached first. However, if it’s a product or service to be sold to the congregation, using the credibility of the pastor to legitimize sales, the approach should be evaluated with caution.
If Christians are to do business with each other, they need to follow two fundamental biblical principles to avoid becoming present day church moneychangers.
1. Don’t develop a sales program exclusively for the church. Obviously this would not include teaching materials, devotionals, or materials specifically created for a Christian market to enhance spiritual growth. Other products—insurance, wills, trusts, stocks and bonds, nutritional supplements, and so on—that can’t be identified as discipleship and/or spiritual nourishment materials should not be marketed exclusively to a church audience.
2. Don’t practice deception. If Christians have products to sell that they honestly believe will benefit other Christians, let it be known. However, don’t promote it as a ministry and don’t make claims that border on truth. Let the people know the name of the company, what the company has to offer, what the product is, and how much it costs. Do not use the local church as a springboard to gain or enhance a profit.
Solomon said, “That which has been done is that which will be done. So there is nothing new under the sun” (Ecclesiastes 1:9). The moneychangers of Jesus’ day were probably not ruthless deceivers whose intent was to hurt the common Jewish worshiper. They just wanted to make a profit. However, they chose to make that profit by attaching themselves to the Temple, thus seeking to legitimatize their merchandising efforts by relying upon the integrity of the Temple and the dictates of the Temple leaders. Jesus did not condone this at that time, and He does not condone it in today’s Christian world.
Originally posted 8/19/2011.
by Austin Pryor for Sound Mind Investing
Having lived through the thrill of victory (the late 1990 bull market) and the agony of defeat (the 2000-2002 bear market), many people today are finding it increasingly difficult to know which is the “right” step to take. They wonder:
* “Is this a good time to buy stocks?”
* “Should I sell some of my employer’s stock in order to diversify?”
* “How much of my retirement plan should I put in stocks versus bonds?”
* “If I sell this losing investment and buy something else, will I be better off?”
Since we cannot know the future with certainty, it’s obvious that no investment portfolio will ever be perfectly positioned to profit from upcoming events. As the future unfolds, it will always be possible to point to ways we could have made more money than we did—and some of them will appear incredibly obvious in retrospect! This means that it’s pointless to think of the “right” investment portfolio simply in terms of maximizing profits. If that is your approach, you will always be frustrated and second-guessing your decisions.
The “right” portfolio is one that realistically faces where you are right now, looks years ahead to where you want to go, and has a very high probability of getting you there on time. Let’s look at some of the characteristics of the “right” steps to take.
The right investing decision is one that is consistent with a specific, biblically sound long-term strategy you’ve adopted. One common trait that I find among many of those I counsel is that their current investment portfolio tends to be a random collection of “good deals” and assorted savings accounts. Each investment appears to have been made on its own merits without much thought of how it fits into the whole.
I find savings accounts (because the bank was offering a “good deal” on money market accounts), company stock (because buying it at a discount is a “good deal”), a savings bond for the kids’ education (because they read an article that said they were a “good deal” for college), a universal life policy (because their insurance agent said it was a “good deal” for someone their age), a real-estate partnership (which their broker said was a “good deal” for people in their tax bracket), and 100 shares of XYZ stock (because their best friend let them in on this really “good deal”).
I want you to become an initiator (one who develops an individual investing strategy tailored to your personal temperament and goals) rather than a responder (one who reacts to sales calls, making decisions on a case-by-case basis). Then you can select the appropriate investments accordingly. The right investment step is the one that you seek out purposefully, knowing where it fits into the overall scheme of things.
The right investing decision is one where you’ve taken plenty of time to pray and to seek trusted, experienced Christian counsel. Because your decisions have long-term implications, you should take all the time you need to become informed. Don’t be in a hurry; there’s no deadline. A good friend once commented to me: “The Christian life isn’t a destination; it’s a way of travel.” Likewise, you’re not under pressure to predict the best possible portfolio for the next six months or make next year’s big killing. Your goal is to settle into a comfortable investing lifestyle that will serve you well for decades.
You need time to pray, ask for the counsel of others, and reflect. You should consider the alternatives, examine your motives, and continue praying until you have peace in the matter. If you’re married, you should pray with your spouse and talk it out until you reach mutual agreement. You’re in this together and, rain or shine, you both must be willing to accept responsibility for the decision. This will add to your steadfastness during the occasional rough sledding along the way.
The right investing decision is one that you understand. This typically involves at least two things.
1. First, it’s relatively simple. It’s not likely that your situation requires exotic or complicated strategies. In fact, the single investment decision of greatest importance is actually pretty easy to understand. It’s deciding what percentage of your investments to put in stocks (where your return is uncertain) as opposed to bonds and other fixed income investments (where your return is relatively certain). This one decision has more influence on your investment results than any other.
2. And second, you’ve educated yourself on the basics. When you’re able to give a simple explanation of your strategy to a friend and answer a few questions, you’ve probably got at least a beginner’s grasp. The right investment step is the one where you understand what you’re doing, why you’re doing it, and how you expect it to improve matters. That’s the least you should expect of yourself before making decisions that can dramatically affect your life and the lives of those you love. Sound Mind Investing’s Fund Upgrading and Just-the-Basics portfolios are good examples of effective, yet easily understood, strategies.
The right investing decision is one that is prudent under the circumstances. Does it pass the “common sense” test? How much of your investing capital can you afford to lose and still have a realistic chance of meeting your financial goals? The investments that offer higher potential returns also carry greater risks of loss. The right portfolio for you is not always the one with the most profit potential.
For example, it’s usually best not to have a majority of your investments in a single asset or security. For that reason, people who have large holdings of stock in the company they work for often sell some of it in order to diversify. If the stock doubles after they sell it, does that mean they did the “wrong” thing? No, they did the right thing. After all, the stock could have fallen dramatically as well as risen (ask the former employees of Enron).
What would a large loss have done to their retirement planning? The right investment step is the one that protects you in the event of life’s occasional worst-case scenarios. Generally, this moves you in the direction of increased diversification.
Many people seem to find investing to be a nerve-racking, if not downright scary, experience. Making investment decisions, and then watching the results unfold, can be stressful. Do you become anxious when circumstances compel you to make important investing decisions? Most of us do to one degree or another. If my mail is any indication, a great degree of financial fretting is common. Three recurring comments lead the list of ways my readers express their concerns.
1. “There’s so much at stake. I’m afraid I’ll make the wrong decision.”
2. “I don’t have much experience. I’m afraid I’ll make the wrong decision.”
3. “My savings aren’t making enough now, but if I make a change I’m afraid I’ll make the wrong decision.”
What is the “wrong” decision, anyway? If you feel a wrong decision is like saying 2+2=5, then you’re off track; such thinking implies investing decisions can be made with mathematical certainty. They can’t. This doesn’t mean the economy and investment markets are completely random, only that you’re dealing with probabilities, not certainties and predictable events. Scientists can predict with great accuracy when the next eclipse of the sun will occur decades into the future, yet they can’t tell you if the sun will be eclipsed by a thunderstorm and ruin next week’s football game.
All of this is actually good news. It means anybody can play. It’s like learning to drive a car. After a couple of lessons, you know enough to travel around town if you follow a few basic safety guidelines. After all, you’re not trying to qualify for the Indy 500. You just want to reach your destination. In the same way, once you understand Sound Mind Investing’s core concepts, you’re fairly well equipped for making whatever decisions you face.
© Sound Mind Investing
Published since 1990, Sound Mind Investing is America’s best-selling financial newsletter written from a biblical perspective.
Originally posted 8/8/2011.
… and a season for every activity under heaven” (Ecclesiastes 3:1).
The seasons of life include economic seasons of plenty and famine, both for nations as well as for us on our individual journeys. Nothing can completely insulate us from the occasional cyclic downturns. Our government can’t. Our financial advisers can’t. And certainly, Sound Mind Investing can’t.
Life is filled with uncertainties. There are always reasons for concern in the economy and markets. But we can manage our financial affairs so that when the unexpected comes along, we can isolate the damage it does. The blueprint for planning in this manner is given to us in the Scripture, and it is incorporated into the strategies taught here at Sound Mind Investing (SMI). Since 1990, we have been teaching the importance of:
* living within one’s means,
* being debt-free,
* having a 3-6 month contingency fund,
* and investing from a personalized strategy of diversification that accurately reflects one’s season of life and risk-taking temperament.
It’s up to each subscriber to accept responsibility for following these principles and adhering to their plan regardless of outside influences. Those who have done so, I would think, are in good shape to deal with the present financial upheaval in which we find ourselves.
In reading some of our blog comments and message board posts, it becomes obvious that some SMI subscribers have an unrealistic view of life on the investing high seas, and expect a smoother sailing experience than we will ever be able to deliver.
We don’t make market predictions, claim omniscience, or promise to shelter Upgraders from all storms. We have said it’s reasonable to expect that our Upgrading strategy, if followed faithfully, will deliver market-beating returns over time. Nothing has happened this year to shake my view of that likelihood, and my own retirement funds are still heavily committed to that strategy.
Fund upgrading recognizes there is “a time to plant and a time to uproot” (Ecclesiastes 3:2b), and provides guidelines for doing that systematically. Our approach to planting and uprooting, and planting some more, has worked well for a long time. However, it does not protect us from having losses along the way. Some funds, unfortunately, don’t do as well as hoped and get uprooted quickly.
The gains, over time, far outweigh the losses. In discussing the risks of owning stocks, we have frequently pointed out that risk decreases as your holding period increases. Consequently, to be reasonably safe, our oft-stated view is that you shouldn’t have money invested in stocks that you can’t leave there for at least five years. In an editorial from a few years ago, I included a table showing that, since WWII, 97% of the time a broadly-diversified portfolio made up 50% of large companies and 50% of small companies was profitable when held for at least five years.
As Mark Hulbert has pointed out, the goal is not only to make money, but to make more money than you would have if you simply invested in ultra-safe 90-day U.S. Treasury bills. Otherwise, why endure the risk, not to mention the emotional roller coaster? His table showed that 26% of the time, stocks didn’t beat T-bills. That’s about one of every four 5-year periods. As he says, “Hardly unusual, in other words.”
So, is it worth the wild ride? For the highly risk-averse investor, perhaps not. But don’t forget the flip side of the data — almost three out of four times, stocks return more than T-bills. In the average 5-year period since WWII, T-bills have returned about 5.0% annually; the stock portfolio described in the editorial returned 13.6%. So, in return for running the 1-in-4 risk that your stocks won’t outperform T-bills (but will, with a 97% probability, still make you some money), you get far greater returns during the other 3-in-4 occurrences.
The question is not will the market be higher in three months, or six, or even 12. The question is will the market be higher five years from now than it is today. I believe it will be. If you tend to agree, there is no cause for alarm at present. If you disagree, you would likely be better served by an investing strategy other than Upgrading.
I’ve taken time to point out these basic principles, which should be quite familiar to long-time readers, to encourage those who just need to be reminded of old truths. I hope you will see the reasonableness (and long-term profit potential) of staying with your plan.
I take comfort from this excerpt from Ron Blue’s 1994 book Storm Shelter, which reminds us that “What has been will be again, what has been done will be done again; there is nothing new under the sun” (Ecclesiastes 1:9). Ron points out that while economic uncertainty is certain, God’s principles are adequate for our protection. They’ve been tested through the centuries and never found wanting.
The picture is as clear in my mind as it was years ago. As I pulled off the interstate en route to my office, I did not see the road markers; instead my eyes swam with the signs of the times. The year was 1982. Interest and inflation rates had soared to all-time highs, investors faced crushing 70 percent tax brackets, and the price of gold leapfrogged daily. Taking stock of the situation, most analysts warned of a devastating financial explosion within the next few years.
As I drove to work that day, the economic consequences seemed both crippling and inevitable. I had just launched our investment and financial counseling firm. How, I wondered, were we supposed to respond to the clients who came to us for advice? Could anyone afford to purchase a home with 15 to 20 percent interest rates? Which kinds of investments and tax plans could stand up to double-digit inflation? And if the predicted monetary collapse did occur, would the resulting political turmoil uproot even the best-laid financial plans?
One of my fears as I navigated the interstate highway that day was that we faced a “worst-ever” economic climate. Yet economic uncertainty — and its accompanying effects on our sense of security and well-being — are nothing new.
Ten years earlier, in 1972, we had been saddled with Watergate and an oil crisis that threatened to throttle the world’s economy. Who can forget the lines at the gas stations or the rationing of fuel oil that winter? Then, too, I remember being hit with wage and price controls for the first time since World War II. And for the first time in my memory, the prime rate hit 10 percent. Economic security seemed an elusive, if not impossible, dream.
Ten years before that, in 1962, the specter of economic and political uncertainty had hovered in every corner of the world. Our amazement at seeing a shoe-pounding Nikita Khrushchev vow to “bury” us turned to horror as the Cuban missile crisis unfolded. At that point a nuclear holocaust seemed at least possible, if not imminent. And Vietnam lay just around the corner . . .
In 1952, in the shadow of the spread of Communism, amid the mud and blood of the Korean War, bomb shelters were among the best-selling items in the United States. In 1942, we faced Pearl Harbor and felt the full force of our entry into World War II. In 1932 we awoke to the nightmare of the Great Depression. And on and on and on. The point is that we will always face uncertainty.
Suddenly, I felt the subconscious click of the proverbial light bulb: The biblical principles of money management I had been teaching and using for years would work under any economic scenario. Armed with these concepts, I knew exactly how to help our clients weather the coming storm, no matter how hard the financial winds blew.
The predicted financial blowout never did occur. Yet as our business grew in the years that followed, we faced a thousand different financial situations that seemed specially tailored to test the worth and endurance of the money-management concepts our firm espoused. But in each and every case the biblical principles held fast, strengthening our clients’ economic positions — and bringing them peace and security in the bargain.
Friends, just as you should not “grieve like the rest of men, who have no hope” (1 Thessalonians 4:13), neither should you be fearful like the rest of men who have no heavenly Father who has promised to “meet all your needs according to his glorious riches in Christ Jesus” (Phil. 4:19). So, keep praying, that the Father “may give you the Spirit of wisdom and revelation, so that you may know Him better” (Ephesians1:17).
Published since 1990, Sound Mind Investing is America’s best-selling financial newsletter written from a biblical perspective.
Consumer debt is at an all-time high. What’s more, record numbers of consumers are filing for bankruptcy. Sometimes when money is borrowed, lenders will require that loans be secured. Subsequently, from time to time even with the best of intentions, the financial responsibility for payment on a secured loan cannot be met on time. When this happens, foreclosure or repossession could become a necessary option in order for lenders to recoup their investment.
This means that if the loan is defaulted or the borrowers stop repaying the loan, according to the Credit (Repossession) Act of 1997, the lender can foreclose on the loan or repossess the property placed as security against the loan and sell the property to recover the debt.
These secured loans include hire purchase deals (the security for the loan is the property that was bought with the loan) or personal loans secured by a possession that is already owned by the borrower.
Foreclosure is one of the most serious credit issues that lenders fear. Creditors treat this worse than tax liens, late child support payments, automobile repossessions, or in some cases, even bankruptcies.
When lenders foreclose, it means that lenders have terminated mortgage contracts (usually real estate mortgages) because borrowers have defaulted on contracted repayments or in some way have breached the mortgage contracts.
This results in property that had been placed as security against loans becoming the possession of the lenders—repossession—allowing the lenders to sell the properties in order to recover the money they originally loaned.
A breach exists when borrowers fail to make repayments of principal and interest when such repayments are due; when mandatory insurance, taxes, or assessments are delinquent; if the balance of a note is due, failure to make the principal payment plus interest by the maturity date; or transferring the property without the lender’s approval.
Because a foreclosure will stay on borrowers’ credit files for a minimum of seven years and perhaps as long as 10 years, if borrowers fall behind on mortgage payments, they should make every effort to sell the house even if it has to be sold at a loss.
If the loan is an FHA-guaranteed mortgage, the borrower can call the local or regional U.S. Department of Housing and Urban Development (HUD) and ask for a list of HUD-approved counseling agencies in the area.
Borrowers should then contact the lender and tell them that they are under the counsel of a HUD-approved counselor. This may avert impending foreclosure proceedings. However, as of April 26, 1996, HUD can no longer provide any direct assistance to homeowners who fall behind on their FHA mortgage payments.
If the loan is a standard Fannie Mae/Freddie Mac loan, lenders must notify borrowers of their intent to foreclose 30 days prior to filing a Notice of Default. FHA-guaranteed and V.A.-insured loans are allowed slightly more time. Within 10 business days after notifying the borrower of its intent, the lender should record the Notice of Default.
Within 10 days after the Notice of Default is recorded, notification must be mailed by certified/registered mail to the borrower or current owner and those who have recorded a request for a copy of the Notice of Default, informing them that the Notice of Default has been recorded.
After the certified/registered letter has been sent, informing the recipients that the Notice of Default has been recorded, there is a mandatory 30 day to three-month waiting period, depending on the regulations of the state and county where the property is located, before the foreclosure trustee can publish a notice of sale of the defaulted property.
After the waiting period has expired, a sale date is set and is advertised (in the state of Georgia the sale date notice must be advertised four times for four consecutive weeks in a local paper—the first ad must run at least 20 days before the scheduled sale date) giving the time, date, and exact location of the foreclosure sale.
Prospective bidders are unable to view the inside of the property unless the property owner consents. Generally the sale of the property will take place four to six weeks after the publication period has ended. In addition, some counties require that a notice of sale be posted on the property and a public place at least 20 days prior to the sale.
If the IRS has recorded a federal tax lien at least 30 days before the scheduled sale, they must be notified at least 25 days before the sale.If the loan is FHA-guaranteed or V.A.-insured, the sale date must be set to allow time enough for them to provide bid instructions.
So, generally from the time the notice of intent is sent by the lender to the owner until the close of the sale, it will take approximately four to five months, during which time the owner usually has the right to satisfy the lender’s requirements (which will most likely also include foreclosure fees and attorney’s fees), thus nullifying mortgage foreclosure and repossession of the property.
However, before borrowers allow secured property to go into foreclosure, they need to exhaust all alternatives. Two such alternatives to which lenders must agree before these options can be pursued are a Pre-Foreclosure Sale or a Deed-in-Lieu of Foreclosure.
This involves the sale of a property in which the lender accepts proceeds that are less than the amount owed on a defaulted mortgage and agrees to issue a satisfaction of mortgage.
This involves the borrower transferring the deed to the property to the lender in lieu of foreclosure. This enables the borrower to avoid adverse consequences associated with foreclosure. The major disadvantage to taking a Deed-in-Lieu of Foreclosure is that any other mortgages, such as home equity loans or second mortgages, will not be satisfied.
Although it certainly is not recommended as a first alternative, another option that will immediately stop foreclosure proceedings is for the borrower, a tenant who has a recorded lease, or the beneficiary of a second mortgage deed of trust to file a petition of bankruptcy.
RepossessionsIf people have borrowed for specific assets and the assets are security for loans, creditors have the right to repossess the assets according to the terms of loan agreements. Repossessions, while severe, are not as detrimental to borrowers’ ability to buy or refinance a home as a foreclosure. However, repossessions will severely damage borrowers who are seeking second mortgages or equity lines of credit. These lenders view repossessions as the equivalent to foreclosures.
With rare exception, agreements that use specific assets as security give creditors the right to repossess, without written notice, if loan payments are delinquent. Most states, however, require a written notice of intent by lenders, stating that they are taking the borrower to court for collection of delinquent payments, and a waiting period of at least 30 days. Although in most states lenders have the right to send a notice of intent to repossess on the second day of delinquency, most lenders will wait for at least 30 days.
If after the waiting period, borrowers have not notified their lenders to make payment arrangements or if they do not appear in court, the judgment award will be automatic and repossession can be immediate without further notification. In order to redeem property after it has been repossessed, the creditor can demand payment in full. If the debtor does not pay, the creditor may choose to sell the property and apply the proceeds against the outstanding debt.
The difference between the loan balance and the sale proceeds is the deficiency, and the creditor has the right to bill the debtor for that amount, plus all costs associated with the repossession and sale, or sue the debtor for the amount.
Although foreclosure and repossession are serious problems, if one of those happens, it does not mean that God has forsaken the borrower. As a result of losing property, borrowers will learn a costly, but valuable, lesson on the dangers of surety.
Although borrowers may be able to find loopholes that legally negate their responsibility of having to pay the difference between the amount of the loan and the price the lender received from the sale of the property, they are morally responsible to pay the difference.
When borrowers enter into contracts, they are bound by their word to fulfill its intent. As Psalm 37:21 says, “The wicked borrows and does not pay back, but the righteous is gracious and gives.”
Therefore, once a foreclosure has been finalized, borrowers need to work out a repayment plan for the difference between the amount of the loan and the price the lender receives from the sale of the property.
Borrowers need to be sure the payment plan will fit into their adjusted budgets.
Originally posted 8/5/2011.
Obviously, there is no such thing as a Christian business. A business is a legal entity, such as a corporation, partnership, or proprietorship and, as such, has no spirit or soul. It may, however, reflect the values of the principal owners or managers. It is the reflection of these values that determines whether a business is labeled Christian or non-Christian.
One of the prime considerations in determining whether a business is being used to serve God is the policies governing the day-to-day actions. If a Christian is truly committed to Jesus Christ and to serving His purposes, the business will be run according to His principles and precepts. There are five basic business functions that comprise the activities of a Christian business.
Evangelism is sharing Christ’s message of salvation with the lost. There is no tool more effective for evangelism than a business dedicated to the Lord. Not only can employees be won by a dedicated owner or manager but, similarly, so can suppliers, creditors, and customers.
Discipleship is training Christians to grow stronger in their faith. In business, this effort should be directed by the owners or managers to employees who are immediately under their authority. Then those employees will be able to disciple others.
“The things which you have heard from me in the presence of many witnesses, these entrust to faithful men, who will be able to teach others also” (2 Timothy 2:2). If your managers are not saved, you simply back up to Function 1.
A business is the best tool ever created for funding God’s work. A properly run business can generate excess capital and still continue its day-to-day operations. There are many creative ways to use these funds.
Obviously, giving to your church and to ministries is good and necessary to do God’s work, but there are many ministries available within the business itself. For instance, several Christian businesses have hired counselors who work with employees who have personal problems.
Many businesses have funds available for needy employees. Others provide audio tape or CD lending libraries and books as internal ministries to employees.
A business must provide for the needs of the employees, creditors, customers, and owners. This is done by paying salaries, paying for supplies and equipment in a timely fashion, and providing a quality product at a fair price.
Any business must be able to make a profit if it is to continue operations. Sometimes Christians seem to believe that God will bless them supernaturally, even if they ignore every pretense of good management. If you believe that, you haven’t studied God’s Word very thoroughly.
God’s Word directs us to think and plan. “The mind of man plans his way, but the Lord directs his steps” (Proverbs 16:9). Many Christians in business claim to operate by faith when, instead, they are being slothful. “The soul of the sluggard craves and gets nothing, but the soul of the diligent is made fat” (Proverbs 13:4). We are to be active.
The purpose of a Christian’s business is to glorify God. The day-to-day functions are the things we do to accomplish that purpose. No single function is more or less important, and each must be done with excellence. When Christians are truly committed to Jesus Christ and to serving God’s purposes, their businesses will be blessed.
Originally posted 6/5/2011.
In 2006, the average cost of a 4-year private college education broke the $30,000 mark. This is the first time the average education costs have reached that point. For the past several years, costs of college education have increased faster than inflation.
If this trend continues, and if parents intend to pay the entire cost for their children to attend a state institution, a family should begin to save as soon as possible.
Almost any family can set aside some amount of money, no matter how small. Whether a prospective student is in preschool or high school, it’s never too early or too late to start saving for college. Setting a savings goal and breaking it down into manageable installments is a good way to get started.
The most economical way to attend college is also one of the most popular: have the children live at home, attend an inexpensive community college one or two years, and work part time to save money until they can transfer to a four-year school.
Many states are now offering dual enrollment courses, as well. This allows high school students to take college classes, funded by the state, and receive college credit. Students can earn up to an associate’s degree while still in high school, at little to no cost to the student.
Although a proven method for funding college education is for the parent to pay half and the child to pay half, there are five other methods for financing college education that are common with American families:
1. Children work and earn as they go. The majority of students who attend college or university work at least part time.
2. Parents and family help. Many parents pass along a portion of their inheritance by helping their children with education expenses.
3. Grants and scholarships. These are funds that do not have to be repaid.
4. GI Bill. The military offers substantial funding for education in exchange for military service.
5. Student loans. These should be the very last resort. Every other avenue of financing should be thoroughly explored before loans are considered.
It’s good for children to work and to help pay for their education. Proverbs 16:26 says, “A worker’s appetite works for him.” If children are helping to earn their way, the education they are seeking often means a great deal more to them.
Working part time is a great way to assist with paying tuition and to have extra spending money. Many offices on a college campus hire students during the school year. In some cases the work requires that the student is awarded Federal Work Study (FWS). FWS is a federal student financial aid program that promotes part-time employment for qualified students.
One of the best places to start searching for a part-time job is at the school’s student employment office. The next place to search would be the classified sections of local and campus newspapers. Finally, asking friends and classmates if they are aware of job openings is often successful.
Grants and scholarships are the best type of college money, because they are usually tax free and do not have to be repaid. Both are offered by colleges, for-profit organizations, nonprofit organizations, private and personal resources, and government agencies. Federal and state grants usually are restricted to students who can prove that they have a great financial need.
Successfully locating, applying for, and receiving a scholarship requires time, energy, persistence, and patience. Beginning a search early will enable a student to learn about a variety of different scholarships well in advance of any application deadlines.
When beginning a scholarship and grant search, the student should begin at the local level. Check with school counselors’ offices, community organizations (Lions Club, Rotary Club, Kiwanis Club), religious organizations, parents’ employers, labor organizations, or civic group organizations (scouting, YMCA). Next, investigate campus-based scholarships and grants before moving on to state and national offerings.
A thorough search of scholarship and grant opportunities includes research at a public or campus library, local and campus bookstores, and free Internet scholarship search sites.
Although fee-based scholarship search organizations should be avoided if at all possible, if all other efforts have been completely unsuccessful, the student might want to investigate one of the fee-based organizations.
A loan should be considered as an absolute last resort only after all other financing possibilities have been exhausted and parents and children agree that a loan is necessary in order for them to attend college. They also should be certain that attending college will maximize their investment in the future and their growth intellectually, personally, and spiritually.
Even at that, they need to (1) borrow only what is absolutely needed for education expenses; (2) borrow for a short period of time; (3) pay back what was borrowed as quickly as possible; and (4) sacrifice as needed to get out of debt.
If it is truly God’s will for children to attend school, He will supply the funds—many times without having to borrow.
The principle of borrowing does not depend on how or where the money is used. If money is borrowed, it must be repaid—usually with interest. Borrowing to attend school is certainly not a sin, but by borrowing, God’s plan for provision can very well be circumvented.
Many Christians have finished school only to find that they are shackled with enormous debt that they incurred while getting their education. Sometimes it takes many years for them to get out of debt before they are able to go where God wants them to go and do what God wants them to do.
If attending a seminary or college is a need in your children’s lives, then God is able to provide the funds needed without having to borrow.“My God will supply all your needs according to His riches in glory in Christ Jesus” (Philippians 4:19).
Originally posted 5/10/2011.
At Sound Mind Investing, we try to be clear about the primary reason we exist: we want to help you have more so you can give more to share the Gospel of Christ with the world.
As you give more generously:
1. You more fully reflect God’s life in you because God is a giver.
2. You make God happy (2 Corinthians 9:7-8).
3. You testify to His sovereignty in your life and ownership of all that is yours to control (2 Corinthians 8:1-5).
4. You reflect where your treasure is (Matthew 6:19-21).
5. You show your complete trust in Him to supply your needs (Philippians 4:17-19).
6. You ensure greater spiritual usefulness (Luke 16:11-12).
7. You reap eternal benefits (1 Timothy 6:18-19).
8. And, most importantly, you bring Him glory (2 Corinthians 9:13).
For these reasons and many more, I want to inspire you to grow in your giving. Our Stewardship & Giving page has dozens of articles written with that goal in mind. At first, they might seem like strange choices for an investing newsletter. Some don’t speak about financial matters at all. But they do something more important. They powerfully remind us of eternal riches and the unshakable truth of Paul’s admonition to “Always give yourselves fully to the work of the Lord, because you know that your labor in the Lord is not in vain” (1 Corinthians 15:58). In many of these stories, we see examples of God’s resolute determination to use our sacrifices for His glory.
That’s what I want! Don’t you? To see God use our lives for His glory? After all, that’s why He made us. As John Piper put it in Desiring God:
God created us “in his image” so that we would image forth his glory in the world. We were made to be prisms refracting the light of God’s glory into all of life. Why God should want to give us a share in shining with his glory is a great mystery. Call it grace or mercy or love—it is an unspeakable wonder. Once we were not. Then we existed for the glory of God! Therefore it is the duty of every person to live for the glory of God. “So, whether you eat or drink or whatever you do, do all for the glory of God” (1 Corinthians 10:31). What does it mean to glorify God? It does not mean to make him more glorious. It means to acknowledge his glory, and to value it above all things, and to make it known. It implies heartfelt gratitude (Psalm 50:23). It also implies trust (Romans 4:20).
Let me encourage you—if your stewardship and your giving isn’t sufficiently pointed in the direction of God’s glory, change directions. Give at a level that truly reflects your gratitude and trust. Many churches and Christian organizations are operating on a diminishing base of support, yet they are faced with ministering to a growing level of needs. As a consequence, fewer are hearing the Gospel of Christ, fewer are being discipled in their faith, and fewer are receiving help with their physical needs. This is so unnecessary. If we who follow Christ would give as we are capable of giving—some just a tithe, others much more of our incomes—there would be a great abundance of funds to do God’s work.
We’re passing through this life for just a short time. The Bible says we’re strangers, aliens on earth, citizens of “a better country—a heavenly one” (Hebrews 11). You and I know that. May our response to that truth be wholehearted as we keep our eyes on the prize:
For now, our life is a journey of high stakes and frequent danger. But we have turned the corner; the long years in exile are winding down and we are approaching home. There is no longer any question as to whether we will make it and if it will be good when we get there. “I am going there to prepare a place for you,” Jesus promised. “And if I go and prepare a place for you, I will come back and take you to be with me” (John 14:2-3). One day soon we will round a bend in the road and our dreams will come true. We really will live happily ever after. The long years in exile will be swept away in the joyful tears of our arrival home… All we long for we shall have; all we long to be, we will be… And then real life begins. (From the chapter “Coming Home” in The Sacred Romance, Drawing Closer to the Heart of God by Brent Curtis and John Eldredge)
Originally posted 5/5/2011.
by Rick Boxx for Integrity Resource Center
If you’ve ever experienced having a baby you may remember the feeling. You and/or your spouse expectantly nurture the baby in the womb for nine months, and then finally the big day arrives. The bundle of joy is born!
Then the next hurdle comes. The room fills with family and friends, anxious to see and hold this precious child. Can you do it? Can you let go of your baby, and trust him or her into the hands of someone else? This is a very difficult time for many new parents, especially with the first child.
I was reminded recently that this is how it often feels for entrepreneurs. On the same day, I had two different business owners say to me, “Let me get this straight; in order for you to help my business, I have to send you sensitive financial data on the business that I started from scratch and nurtured all these years? This is very hard.”
Many times our work and our business can consume us, becoming a mistress of sorts. Turning loose of something precious is a difficult task. But if this is a problem, it is probably healthy to determine why.
1. Control. It’s good to have healthy skepticism about whom you trust with valuable information, but if the reason for the hesitation is due to control issues, then you may need to look closer at your motives.
Psalm 24:1 tells us, “The earth is the Lord’s and everything in it, the world, and all who live in it.” God owns your business and/or your job, not you! He wants to be in charge. The benefit to you is that this will also give you a freeing feeling, because if God’s in charge, ultimately He will be responsible as well for the results.
2. Fear. If you struggle with being controlling or being fearful of letting others into your private world, ask yourself who’s really in charge?
Rick Boxx is the President of Integrity Resource Center (IRC), a nonprofit ministry providing biblically-based resources, training and counsel to business and ministry leaders. You can learn more about IRC by visiting their website.
Originally posted 3/15/2011.
