December 1, 2023

Bucks Blog: Tales of Unexpected Mortgage Costs

Paul Sullivan’s Wealth Matters column this week is about the many ways that buyers can end up paying more than they should on their mortgages. The extra costs are often embedded in the mortgage documents — and sometimes, the mortgage rate itself.

Those most at risk of paying too much, the experts told Paul, are rushing to get the deal done. Sometimes, as was the case of one buyer Paul interviewed, the extra costs become clear so late in the process that it seems like too much trouble to start all over again.

If you have taken out a mortgage recently, tell us your tales. Did it all go smoothly, or did you find out about all kinds of unanticipated costs along the way?

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Room for Debate: What Should the Fed Do Next?

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Bucks Blog: Would You Dare to Ask for a Raise Now?

It’s hard enough to ask your boss for a raise in normal economic times. So would you be putting yourself at risk if you ask now?

That’s the question that this week’s Your Money column tries to answer. Most of the career experts I spoke with said there was no harm in asking, as long as you could present a strong case and had a solid track record at your job. But they also said it was important to think seriously about how to frame your request, and they offered several tips.

Readers, would you ask for a raise right now? In what circumstances? And how would you go about it? Or if you have already asked, let us know about your experience. Please drop your thoughts in the comment section below.

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Bucks Blog: Carl Richards: More Lessons From His Short Sale

Carl Richards

Carl Richards is a certified financial planner in Park City, Utah. His sketches are archived here on the Bucks blog. His new book, “The Behavior Gap,” will be out in January.

One of the most powerful outcomes of writing about your experience is that you learn things you didn’t know before you started.

The process of sharing one of the more intense experiences of my life, the short-sale of my home, was terrifying. In hindsight, I’m glad I did it because of what I learned. Here are a few of those lessons and answers to some of the questions that readers raised:

I told myself stories: As David Brooks recently pointed out, “people are really good at self-deception,” and I’m no exception. Real people are notoriously good at gathering information, data and “facts” to support the conclusion we want to hear. Often we even call that research.

We are even better at ignoring information that we don’t want to hear. Have you ever noticed how you avoid the scale when you’ve been eating garbage and seek it out when you are eating well? I have wondered if I rationalized my behavior, and the answer is, of course I did. I made mistakes and then looked for a way to make sense of them.

Short sales: A short sale is a negotiated settlement between a borrower and a lender. I worked closely with the bank to explain my situation. The bank reviewed it very carefully, and in the end, we worked something out that both parties felt was better than the other available options.

My wife and I found a buyer for the house at a price the bank agreed to accept. It accepted a loss on the risk it took, and we accepted the consequences on our side of the deal. We lost our home and trashed our credit. Both parties agreed to the deal, but neither party escaped without consequence.

Obligation to society: While I don’t have a debt to the bank, I do feel like I have an obligation to society. This is one part of the experience that I still really struggle with. I know that my decisions had an impact on society as a whole. My individual impact was small, but just like everyone tossing a small piece of trash, it adds up. I’m not sure how I will fulfill that obligation, but I’m pretty sure that it’s part of my life’s work.

That obligation is also a large part of why I do what I do for a living. We have to change the way we deal with money if we’re going to avoid repeating the same mistakes over and over. I have recently found myself really interested in learning from others who have both succeeded and failed because it’s incredible what you can learn from people who have already been there. Maybe, just maybe, sharing my story can help someone avoid the same mistakes.

Security versus securities: One of the things in my story that got the strongest response was how I got into the financial world by applying for what I thought was a security job.

I recently had a meeting with a senior executive at a large research company who told me that he remembered applying for a job after college. It was a window sales job. He thought he would be selling Microsoft Windows software. It turns out it was actually the kind of windows you look through.

I guess I should have included the fact that it started as a part-time job when I was still a full-time college student. I also delivered flowers and worked at Subway. But what followed were years of some of the best training in the industry, a degree in finance and one of the more rigorous industry designations there is.

The point I was trying to make was that life is a journey, and most of the time the path we thought we were on will take a twist, often for the better.

Why I told the story: There’s no good way to address the claim that I wrote the story to sell books. It reminded me of the press conference after Lance Armstrong won his first Tour de France. He was asked how he would respond to people who claimed that his chemotherapy was performance enhancing. As I recall, he said something like, “Let them try it!”

There would be far better ways to sell books than to take your family through three years of hell and then, just as things were starting to feel normal, share it with the whole world.

I decided to tell the story after people I knew asked me for over a year to tell it. These were people who genuinely felt that it needed to be told because it might help others make sense of their situation. Based on the overwhelming number of gracious e-mails I’ve received from people sharing their stories, I think telling my own was the right thing to do.

Getting a second opinion: As my friend Tim Maurer, also a financial planner, says, “Personal finance is more personal than it is finance.”

Because it’s so personal, it’s very hard to stay objective. We are just too close to it to think clearly. Doctors routinely avoid operating on or treating family members and really close friends. After all, that emotional connection could very easily cloud their judgment should something go wrong and require a critical decision during a stressful situation.

When you think about what money represents, it’s easy to see that it’s emotionally charged. Money is about more than spreadsheets. It’s about our most cherished dreams and often our greatest fears. With those stakes on the line, why is it so hard for us to recognize that we shouldn’t be “operating” on ourselves?

Unless you wake up in the morning and see Warren Buffett in the mirror, chances are you need help. Finding someone to act as a sounding board, an objective third party, is worth the effort.

Now I realize that as soon as I say that we have another issue – who? The traditional financial services industry has a well-earned reputation of being untrustworthy. It’s still really hard to determine who is a real financial adviser or even what they do that makes them worth the cost.

But it’s crucial to try. We can seek out a trusted friend, parent, C.P.A. or our lawyer. Our family hired a real financial planner and after working with him for just a few months, I’m convinced we would have avoided many of our mistakes had we hired him five years ago. Just having a rule that before making major decisions you will walk some objective third party through your thinking would be a step in the right direction.

Co-pilot: Getting advice is different from abdicating responsibility. In the end, after all the advice in the world, there is only one person that can make the best financial decision for you. It’s you.

I like to think of this objective third party as playing the role of an experienced co-pilot. This person is there to point things out and to make sure you have thought of alternatives, but ultimately the decision and responsibility is yours. So while I take full responsibility for my decisions, it does help to know that my family now has a trusted third party to help us, hopefully, avoid bad decisions in the future.

Moving forward: No matter what we do, the reality is we all make mistakes. When we make these mistakes, it seems like we should face the consequences, glean the lesson and then move on. We all have a choice. We can wallow in self-pity, blame others and complain, or we can move forward. I’m not sure what role talking about it plays in moving on, but I do know that hiding from the past never seems to help.

One of the things I did learn from my experience is that until you walk in someone else’s shoes it’s impossible to understand what they’re going through and the motives for their actions. I have found myself a bit kinder, a little slower to judge and maybe even looking for ways to give others the benefit of the doubt.

I had zero expectations that sharing my story would change anyone’s mind about what I did. I did hope that it would help people struggling under the crushing weight of financial mistakes. I also had a teeny, tiny hope that those people who vehemently disagree with me would maybe see the other side of the story and understand.

Not agree, just understand.

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National Briefing | Southwest: In Texas, First Mexican Truck Enters U.S. Under Nafta

For the first time under the North American Free Trade Agreement, a Mexican tractor-trailer crossed the border into the United States on Friday on its way to the country’s interior. The Nafta trucking program had been stalled for years by American opponents who said it would put highway safety and American jobs at risk. But after the Department of Transportation said that safety concerns had been resolved, a commercial truck hauling a steel drilling structure entered the United States at Laredo on Friday afternoon. Nafta, signed in 1994, had called for Mexican trucks to have unrestricted access to highways in border states by 1995 and full access to all American highways by January 2000. Canadian trucks have no limits on where they can go.

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You’re the Boss Blog: A Small-Business Owner Considers the Risks of Expansion

Thinking Entrepreneur

An owner’s dispatches from the front lines.

I was fascinated by the recent case study in The Times about a Seattle-based retailer that decided to open a location on the other side of the country. The piece hit home with me because we’ve often had similar conversations here.

My home furnishing store, Jayson Home, has gotten a lot of attention for its mix of merchandise and the way it is displayed. While the business was certainly affected by the economy and the housing crisis, its sales have been growing for the last few years. We are about to unleash a new Web site, and we are always getting flattering reviews in home décor magazines and on blogs. It is very tempting to think about opening another location, and we have crunched the numbers. But I have resisted, because I have a very different view and understanding of growth than I used to.

When I started my business, I was determined to grow as fast as I could. And I did. The business doubled for a few years, and then continued to grow at double-digit rates. It was quite exhilarating, and exhausting. The words growing and business are often said together like soup and sandwich. Why would you want one without the other? Whether it is to fulfill a dream, to get wealthy, or to create opportunity for your staff, it seems like the natural and ambitious thing to do. These days, it might even be the patriotic thing to do since a growing business will create much-needed jobs. And it makes sense — until it doesn’t make sense.

It really comes down to priorities. Do you want to take outside capital and the “partners” that come with it? Do you want to take on more risk? More employees? More travel? More stress? More potential aggravation? I’ve learned over the years that growth is a complicated animal. Many entrepreneurs just keep entrepreneuring without considering the consequences. It’s hard to turn it off. I know, I am one of those entrepreneurs. And while I can’t say that I have turned it off, I have turned it down. I think things through now. I have some rules of engagement. Maybe I have actually grown up! Probably not. But I have learned one important lesson of entrepreneurship: Just because you can, doesn’t mean you should. The most important word in business just might be no.

I regularly get calls from real estate agents who think they have the perfect location for another location for my home store. No. I regularly get approached by investment bankers who either say they have a buyer (probably fictional) or that they want to invest in my business. No. I get solicitations to buy other businesses. No. (All right, maybe). It gets back to my rules of engagement. I don’t want to answer to anyone except my customers, my employees and my family. No investors. No landlords. I don’t want to be forced to travel more. And, finally, I have figured out that I need more money less than I need more aggravation, which, happily, is at an all-time low.

I have also figured out that business is not just about growth. For one thing, it is also about making a profit, which many companies seem to forget as they grow themselves out of business. Business is also about understanding the reality that bad things happen: recessions, lawsuits, uncollected receivables, new competitors, and assorted calamities like fire, flood and other biblical afflictions. Choosing to over-expand instead of being prepared for this kind of stuff can put the company in jeopardy. It happens all of the time — especially in an economy like we have now.

Sometimes, slowing down the growth is the safer and more responsible thing to do. But that can be boring — and that can be a problem, not just for me but for some of my staff. Terms like economies of scale and synergy get thrown around like catnip to the entrepreneurial cat: More buying power! No more advertising needed! No additional buyers! All resulting in a larger marginal profit!

But I respond with my own terms: More travel! An expensive new lease! More money to lose if the economy tanks again! And last but not least, the second most important word in business: Why? I need to know why exactly I should take the risk. For the money? Maybe yes, maybe no. It’s important to remember that we just might lose money. For ego? That’s always a bad reason. How many entrepreneurs have become financially successful at the cost of their health, family or sanity?

It comes down to not only figuring out what your priorities are but also to recognizing your limitations. That is a word that an entrepreneur in the chase is loath to accept. But we all have limitations, which does not mean you can’t be wealthy, happy and wise. So will we expand? Will we take on some new challenges? Maybe. Probably. But I won’t even think about it until: I have the money to burn. And I have the right people in place to handle the additional responsibilities.

These days, I look before I leap. It is a new concept for me.

Jay Goltz owns five small businesses in Chicago.

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Reebok to Pay $25 Million in Settlement Over Health Claims

Opinion »

Fixes: Drugs, Risk and Myth

Some claim that an anti-overdose drug is not safe. Others, that drug users’ lives are not worth saving. Both claims are wrong.

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Bucks Blog: Getting Cash in Exchange for a Short Sale

A short sale home in Nevada.BloombergA short-sale home in Nevada.

To avoid further clogging the already sluggish home foreclosure pipeline, some lenders have been offering cash incentives to strapped homeowners at risk of foreclosure to complete short sales and move out of their homes.

Chase, for instance, has been quietly offering as much as $35,000 to homeowners who are “upside down” on their loans — meaning, they owe more than the home is currently worth. In a short sale, the lender allows the sale of the home for less than the loan amount and often relieves the borrower of any further obligation.

The incentives began late last year and are available nationally, a Chase spokesman said. Why would the bank want to pay more money to a homeowner who hasn’t been keeping up with the mortgage payments? It generally wraps up the transaction much more quickly, and leaves the home in better shape for resale. “A short sale generally produces a better and faster result for the homeowner, the investor and the community than a foreclosure,” the Chase spokesman said in an e-mail. Chase has completed more than 140,000 shorts sales since the start of 2009. The program is continuing.

Wells Fargo also offers relocation incentives for short sales as well as “deed in lieu of foreclosure” transactions in some markets with extended foreclosure timelines, like Florida. The payments apply only to first-lien loans that Wells holds for its own portfolio (rather than loans it merely services for others), a spokesman said. The amount varies, based on factors like the loan balance and appraised value of the home, but can be as much as $20,000.

It doesn’t appear likely that the need for short sales will end anytime soon. The outlook for home prices remains glum, with a drop of 2.5 percent expected this year followed by meager growth for several years thereafter, according to a recent report from MacroMarkets LLC.

Incentives offered in California (where there are a lot of loans made by the failed lender Washington Mutual, which was subsumed by Chase) apparently depend on various factors, agents say. Daniel Klein, a real estate broker and entrepreneur, said his firm had one client with a $300,000 loan who received a $20,000 incentive for a short sale, and another client with a $500,000 loan who received $10,000.

The funds can be used by the borrower to cover expenses, like moving costs.

The programs were started after a government program, known as HAFA (for Home Affordable Foreclosure Alternatives), began in early 2010. That program provides up to $3,000 in borrower relocation assistance for short sales. That program is available through the end of next year.

Despite the incentives, Mr. Klein said, some borrowers prefer to take their chances and stay in the home. The lengthy foreclosure process in some areas appears to have made some people complacent about the prospect of eviction.

Have you been offered a cash incentive for a short sale? Did you take it?

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At Apple, Cook Has Tough Act to Follow

These two notions, one indisputably true and the other somewhere between a prediction and a hope, dominated the discussion of Apple the day after Mr. Jobs stepped down as its chief executive, saying he could no longer effectively run it.

Even Silicon Valley, long accustomed to seeing outsize personalities run a company one moment and be gone the next, has never seen a transition quite like this.

Apple tried to stress that it was business as usual. Mr. Cook, the new chief executive, sent a message to employees saying, “Apple is not going to change.”

Not immediately, perhaps. Mr. Cook should have it relatively easy for the next couple of years, most commentators agreed. The company will keep putting out phones, tablets and computers that are faster, thinner and lighter than those that came before. As the former chief operating officer, Mr. Cook has plenty of experience in securing a supply of cutting-edge parts that will make this possible.

But at a certain point, if Apple wants to retain or even extend its $350 billion stock market valuation, the Apple executives must channel Mr. Jobs and think up a new product — like the iPod, iPhone or iPad — that is in a different category altogether. They will have to see the future and make it real.

Silicon Valley is founded on this notion, that kids in a garage can build something that will topple the existing order. Indeed, that is Apple’s own story. But it is much harder to take huge risks when you’re no longer in a garage but running a 50,000-employee company.

Mr. Cook knows this. At Apple, he once said, “we take risks knowing that risk will sometimes result in failure, but without the possibility of failure there is no possibility of success.”

Now he will have the chance — probably many chances — to take those risks. Many who watch Apple closely say they think he is up to the challenge.

“I would lean toward an optimistic view,” said Michael Maccoby, a management consultant and author of the book “The Productive Narcissist: The Promise and Peril of Visionary Leadership.” “Steve Jobs is a hard act to follow but not an impossible one. I see so many positive factors here. Apple has created a platform, a technology, patents, processes. It’s created the Apple stores. It’s created attitudes among customers.”

Still, genius on the Jobs level is not exactly plentiful.

“Steve could build something beautiful and take all of the fright out of it. What the early Macs did was say a computer is just a tool, anyone can use it,” said Jay Elliot, an early Apple executive.

“He’s leaving Apple with a long-term vision that his successors will implement,” said Mr. Elliot, who has written a book on Mr. Jobs’s leadership style. “But in three or five years they’re going to have to find some other visionaries.”

Investors seem not to be looking that far ahead. Apple’s stock, which slid in after-hours trading Wednesday when the news was first released, fell only modestly Thursday even as the overall market stumbled, closing down 0.7 percent, at $373.72. They may be drawing comfort from the fact that Mr. Jobs is still around as chairman. He was on the Apple campus Wednesday for a board meeting, according to a person with knowledge of his whereabouts.

Mr. Cook, with his soft-spoken demeanor, is at an advantage because his personality is the opposite of Mr. Jobs’s, who was mercurial, said Jeffrey Pfeffer, a professor of organizational behavior at Stanford. They would otherwise be compared, and Mr. Cook would inevitably be described as “Steve Light.”

“It’s better to be different than a second-rate version of what the last person was,” Mr. Pfeffer said. He compared the situation to that of Southwest Airlines, whose colorful co-founder, Herbert D. Kelleher, eventually stepped down and was replaced by a more sedate executive, Gary C. Kelly.

Apple, continuing its tradition of being close-mouthed, did not make Mr. Cook, 50, available for an interview. In a commencement address at Auburn University last year, Mr. Cook, who graduated from the school, described his decision to join Apple in 1998 as the most significant of his life and one that allowed him to engage in “truly meaningful work.”

Joining Apple was not obvious at the time, he said, because of its precarious state, which made many people think it was on the road to bankruptcy.

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Oversight Group Did Not Refer Housing Complaints

While the report did not determine whether these and other complaints had merit, it said that the agency’s unresponsiveness to them was problematic.

“Failure to recognize and quickly provide law enforcement authorities with information about allegations of fraud and other potential criminal conduct presents a significant risk for the agency,” the report said.

The inspector general’s report is the third to assess the agency that acts as conservator for Fannie and Freddie, which have cost the taxpayer roughly $154 billion since they nearly collapsed in September 2008.

The assessment covers the agency’s responses to complaints raised by consumers as well as current and former employees of Fannie and Freddie. It covers a period from July 30, 2008, when the finance agency was created, to Oct. 31, 2010, when the inspector general began its operations.

“Millions of Americans have been touched by the housing crisis,” Steve A. Linick, the inspector general, said in a statement. “Increasingly, they have filed complaints about fraud, waste or abuse, including allegations of improper foreclosures and possible criminal activity. Those complaints deserve timely and responsible action by F.H.F.A.”

Meg Burns, senior associate director in the office of Congressional Affairs and Communications, said that the agency had a limited mandate to deal with consumer issues but that it agreed with the recommendations and would follow them.

Mr. Linick and his staff found that during the period covered by the report, the agency assigned only two employees to process consumer complaints about Fannie and Freddie. Responding to the complaints was an additional duty for these employees, who also handled external correspondence for the agency, the report said. Because the agency’s workers did not separate complaints from other correspondence, they could not provide the inspector general with a complete file of complaints; this limited the study’s scope, it said.

Nevertheless, the inspector general examined 585 e-mail complaints provided by the finance agency. Of those, 68 described possible foreclosure abuses and 27 involved suspicions of fraud.

Complaints in these two categories were supposed to be forwarded to the general counsel’s office at the Federal Housing Finance Agency. But, the report said, the two staff members overseeing the complaints “received no specific training regarding how to evaluate complaints or how to identify allegations requiring further action by the agency or referral to law enforcement authorities, such as the Department of Justice or the F.B.I.”

Agency officials had no records showing that any complaints had been submitted to the general counsel’s office, reviewed or acted upon. The general counsel’s office did confirm that it had referred no complaints to law enforcement authorities during the audit period, the report noted.

“It is stunning that the conservator of Fannie Mae and Freddie Mac, which have received $150 billion in a taxpayer-funded bailout, had just two people receiving and processing customer complaints,” Representative Spencer Bachus, the Alabama Republican who is chairman of the House’s financial services committee, said in a statement. “Who knows how many reports of waste, fraud and abuse have gone unheeded and unaddressed?”

The inspector general concluded that the housing finance agency’s failure to address or effectively track complaints “was largely the result of its inability to decide whether to handle consumer complaints, and how to address those complaints it decided to handle. From the onset, F.H.F.A. treated its complaints processing function more as a public or external relations task, as opposed to a core regulatory or conservator function.”

This approach left the agency in the dark about potential trends or risks in Fannie’s and Freddie’s operations, the report added. Being able to spot such risks is especially crucial for a regulator that is as thinly staffed as the agency, the inspector general said. “Such a capacity could have served as an ‘early warning system,’ ” the report noted.

Most of the e-mailed complaints reviewed by the inspector general — 470 — were sent by the finance agency to Fannie and Freddie for disposition, the report said. But the agency conducted no follow-up about whether the companies had responded.

Agency staff members told the inspector general that “they considered complaints to be resolved or disposed of at the time that they were referred” to the companies. As a result, the agency received complete correspondence and documentation in 2 of the 470 complaints referred to Fannie and Freddie, the report said.

The agency should set up policies and procedures, the inspector general said, to ensure timely and accurate responses to complaints and enable it to identify areas of risk. Agency officials should also work closely with the inspector general on accusations of fraud or abuse.

Ms. Burns of the agency’s communications office said that the general counsel’s office would review complaints of fraud to determine if appropriate action had been taken or needed to be taken. Officials at the agency declined to comment further.

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