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Cheat Sheet Q & A mortgage insurance removal:

Bottom Line:  Today’s question come from a listener who heard me address yesterday’s question regarding current mortgage requirements.  His question stemmed from the discussion of mortgage insurance.

The question is, with home prices recovering in our area, how does he know how much his home is worth and how to try to remove mortgage insurance?  It’s a great question.  Let’s first look at what a traditional mortgage company’s guidelines for MIP are:

  • Loans originated with less than 20% down will carry MIP
  • You can automatically ask for a review to have it removed after 5 years
  • If appraised value shows at least 78% equity then it will be removed

But what about not waiting for 5 years?  If home values are rising and you may now have enough equity in my home can I get rid of MIP?  The answer is yes but…

Most mortgage companies will be extremely reluctant to aid in your ridding yourself of MIP in less than five years.  At best you’d have to order an appraisal with an appraiser that the bank recognizes and pay the fee (which will likely be hundreds) and hope it works in your favor and the bank adheres to it.  The best way to rid yourself of MIP in less than five years, if you have adequate equity, is to refi. 

When you refi a new appraisal will be done as part of the process and even if you aren’t saving much in interest rate – the savings on MIP will likely pay for the fees associated with the refi in about a year.  If you do save on rate then its gravy all around.

If you have a question you’d like me to address on-air & online email me:


Why housing is currently more important to the economy than the stock market:

Bottom Line:  In 2000 right before the bursting of the dot com bubble, Alan Greenspan coined the phrase “wealth effect”.  The concept of wealth effect is straight forward.  Even if our day to day income doesn’t change our spending habits do based upon our net worth.  At the time the stock market had been soaring for years and most investors felt wealthier because of the ever increasing investment portfolio and retirement account values.  That led to a great deal of risk taking and free consumer spending.  Then in March of 2000 the air was let out of the tech bubble and the inverse was true as we entered recession. 

The wealth effect is as real today as it ever was and new research shows the best data to date regarding how the wealth effect influences spending habits.  Here were the findings:

 Our current spending habits are affected by our perceived net worth:

  • For every $1 increase in our stock portfolio or retirement accounts we will spend an additional 2 cents (or 2%)
  • For every $1 increase in our property value we’ll spend an additional ten cents (or 10%)

This is interesting…  First – real-estate values now influence our perception of our wealth more than actual savings.  Second – it’s not just by a little bit.  Real-estate values are five times more important to our perception of wealth than stocks.  But is that a good thing?

No.  Why so definitive?  Anything in life is only worth what someone else is willing to pay at that one particular moment in time.  Unless you have a firm offer on a piece of property you’re simply guessing at what it’s worth and most importantly allowing it to impact your day to day spending habits in the process.  If anything the inverse would make more sense.  Stocks are assets that are easily turned into liquid cash.  By simply selling you can lock in the actual value of those investments and thus take the guess work out of how wealthy you actually are. 

In the meantime it’s a decent sign for the economy as housing is in recovery mode and consumer spending drives 70% of economic growth.


A big reason to be more optimistic about the younger generation:

Bottom Line:  There are many reasons to be concerned about the next generation of adults.  I’m not even going to head down the path of addressing any of those today.  Today there is a piece of data out of Gallup that makes me happy and much more optimistic. 

Gallup’s polling of kids in grades 5 through 12 as to what they want to be?  For the first time the most common answer was…  An entrepreneur.  43% of all of those who responded provided that answer. 

The reasons are likely influenced by what they see for those who are a little older.  The top two concerns of those 18-34 are obtaining employment and student loan debt.  Clearly those still in grade school are aware. 

If they could create their own business they wouldn’t have those two concerns.  As a parent you should encourage and educate you’re young business minded child.  It was my father who helped teach me how to invest at 11 that laid the ground work for me to become an entrepreneur six years later. 

I would encourage you to have them work parallel paths.  I ran a small business while I was in radio and still went to college (those were crazy days).  I eventually dropped out of college but not before I knew that I would be successful without the degree.  I think it’s important to ensure as many paths towards success as possible.


Before you head to the airport…:

Bottom Line:  As a result of the storm impacting the northeast there are hundreds of canceled flights today.  That list is sure to grow throughout the day today.  As I type this there are more than a dozens flights cancelled at Palm Beach International.  Be sure to check flight status before heading to the airport.


IRS off to a fast start to head off tax filing ID theft:

Bottom Line:  We’ve discussed the more than 600,000 ID theft victims from last year’s tax filing season.  The IRS has stepped up their game this year to try to cut off would be thieves at the pass.  The IRS only started accepting tax returns on January 30th and already they’ve taken action in more than 700 ID theft situations and have arrested more than 100 individuals.  This will hopefully lead to a more secure tax filing season and perhaps act as a deterrent to others who may consider tax ID theft.


The internet that has nearly killed the USPS might be the only thing that can save it:

Bottom Line:  You’ll recall that along with the announcement that Saturday mail delivery will end by August, the USPS did announce that they will continue to Saturday package delivery.  There are a couple of reasons for this.

  1. Package delivery is the one profitable business line for the USPS
  2. They are laying the ground work for something bigger than just might save the USPS has been building out nationwide distribution centers as they are readying for same day and next day standard delivery in the future.  The USPS has taken notice and is angling to capitalize on this. 

When you analyze the nationwide footprint of the companies that could deliver same and next day delivery, none is more capable than the USPS.  Not even UPS or Fed Ex.  As a result this is the growth plan for the USPS.  Be the delivery company of choice for the evolution of online shipping for Amazon and all of the other e-tailers that will be forced to follow suit.