What now??

[somethingshiny]

For all of us who aren''t as financially savvy as we wish, what happens now??

1) What happens to current car or home loans through Wacovia (for instance)?
2) What happens to our investments, 401K, etc?
3) What happens to those of us who are new home owners?

What do we do now???

 

[asscherisme]

Keep in mind, the below is just based on my watching way too much news on this and reading on it. I have not worked in fiance in years since I've been raising my kids

I would assume that the people who bought out the banks in trouble would now manage your loans and mortgages. So for Wachovia it would be Citi, WAMU it would be chase. I know when I logged onto chase today to look at my account which I've had for years there was a banner that said welcome WAMU customers. I read that many branches will change to the parents name and some will close where there are too many overlap branches. In the short term, your old credit cards, checks etc will work but over time the parent company would reissue those in their accounts. So your mortgage would be paid as normal until they tell you otherwise. If I had a mortgage by one of the companies that were swallowed up by bank of america or citibank I would call the number for my old bank to try and get info. I also read that in the case of Wachovia and WAMU, since they were both FDIC funds are protecting within their insurance limits.

The thing not to do is run the banks and withdraw money. Thats part of what sunk WAMU. Panic and people trying to take their money out caused them to be short on cash and the governement took over because they could not meet their obligations. Or at least thats my non expert opinon. Someone correct me if I'm wrong.

regarding investments, I cringe at how much my retirement dropped today. I heard on CNN that people lost 1,2 TRILLIAN dollars today in the biggest wall street drop in history. I am trying to stay calm reminding myself that since I'm only 39 I have many many years. I'm more worried about my kids college funds. Luckily I have been pretty conservative. I do think its a good lesson to diversity diversity diversity.

If you are a new homeowner, be glad you got in before it got harder to borrow. Keep paying your mortgage on time and keep your good credit. High credit scores will be more important than ever in the new credit world.

It is a weird and scary time right now. Turning on the news you would think the sky is falling. And for many it is financially.

I know for myself, my bling buying days are over for a long long time and I'm hunkering down to preserve my money.

edited to add: regarding investments and 401K, if you have time, now is NOT the time to pull out in panic. to pull money out of the stock market afte huge drops is a bad decision. If anything, leave it where it is and wait it out. Historically, it will bounce back eventually. I do plan on putting more future savings for college funds into even safe stuff, especially since my oldest son only has 6 more years until college. But I'm not pulling out stuff that dropped, I am going to let it ride for now.

 

[somethingshiny]

Thanks, asscherisme!

You''re right, everything I see looks like the sky is falling. I am so overwhelmed I can''t make heads or tails out of it. It sounds (according to your post) that we don''t have much to worry about with our loans because of the parent companies, but are our interest rates going to change? And while I realize that we''re in for a long hard road, I wonder what happens to those of us around 30. We still have years to save for retirement, but do we need new strategies? Do we just keep playing and hope for a better tomorrow?

 

[asscherisme]

Do you have a fixed rate mortgage? If it makes you feel better, my first home the mortgage was sold by the original lender 4 times! We would pay our mortage and then get a notice in the mail that it had been sold and pay it so xyz compay. So I would call the old company to check it was in fact true.

Second home, morgage was never sold.

My current mortgage has not been sold in 3 years.

Someone correct me if I'm wrong, but I beliieve that if you have a fixed rate mortgage, even if the mortgage is sold, the terms can't change if you are paying as agreed. So if its fixed rate you should be safe.

I am not worried about my mortgage. I have a sweet 5.65 fixed rate mortgage that I got in 2005.

The whold retirment thing is very scary. If you play it too safe, there may not be enough for retirment. But I am not a natural risk taker. I have stuck with index funds and mutual funds and stayed away from indvidual stocks. And seeing the news now, THANK GOODNESS for that. I am diversified as well. I also have some in treasury bonds. Not big growth and not a whole lot but safe for the most part. Again, diversity, diversity, diversity.

If you company has a retirment match, take advantage and max it out. I would max out retirment if you can because I don't think social security will be there for us.

When I was happily married, we maxed out my husbands retirment. Now that I'm seperated soon to be divorced, I max out my IRA.

Merril Lynch failing and being bought by bank of america kind of shocked me. Lehman brothers failing, AIG???!!!!! thats just shocking. These are big companies and if you can't trust them then who?

I did recently move some money into a credit union. And I got a credit union credit card as a back up to diversity from the big name/ big back accounts.

At your age, I would still continue to save as much as you can. Retirement and general savings.

I think that credit will continue to tighten up and having savings to fall back on is so important because I think the idea of carrying credit balances and debt is going to be harder to do.

again, disclaimer, my personal opinions only

 

[somethingshiny]

Thanks for the info.

Yes, our rate is fixed, however we haven''t closed on the house yet!! We were able to "lock in" an interest rate of 6.5% when our offer was accepted. Our closing date is Oct 10. I''m beginning to panic about if it''s going to stay or for that matter if something''s going to fall through with the house closing because of this mess. I need to call the lender tomorrow and find out where my ducks lie, but any info now would be helpful.

 

[strmrdr]

Date: 9/29/2008 11:44:35 PM
Author: somethingshiny
Thanks for the info.


Yes, our rate is fixed, however we haven't closed on the house yet!! We were able to 'lock in' an interest rate of 6.5% when our offer was accepted. Our closing date is Oct 10. I'm beginning to panic about if it's going to stay or for that matter if something's going to fall through with the house closing because of this mess. I need to call the lender tomorrow and find out where my ducks lie, but any info now would be helpful.

depends on who the lender was.
It is never really locked in until the money changes hands but hopefully they will honor it.
What you have is a wishywashy promise that they will loan it at that rate but I bet there is a lot of fine print.

edit: that should say... depends on who the lender and underwriter are.

 

[asscherisme]

Oooohhhh, now I understand why you are worried. I have no idea but would think that the closing should go through. But in this envinorment you never know whats going on. I think the best source is your mortgage officer. I would call him/her first thing. Can you imagine the ripples through the already weak econmony and housing market if citi, chase, and boa did not close on pending mortgages?

I would hope/think that if you are in a standard fixed rate, esp if you have good/excellent credit and at least 20% down those are the safe mortgages. I think the no money down/ interest only/ low documentation mortgages are a think of the past.

You have 11 days to get there. Keeping my fingers crossed for you! I''m sure your sellers are worried too.

 

[Dancing Fire]

Date: 9/29/2008 11:39:47 PM
Author: asscherisme
The whold retirment thing is very scary. If you play it too safe, there may not be enough for retirment. But I am not a natural risk taker. I have stuck with index funds and mutual funds and stayed away from indvidual stocks. And seeing the news now, THANK GOODNESS for that. I am diversified as well. I also have some in treasury bonds. Not big growth and not a whole lot but safe for the most part. Again, diversity, diversity, diversity.

i''m thee opposite...i sold all my mutual funds a few yrs ago and buy indvidual stocks. if i''m gonna lose money i''ll do it myself. i don''t need to paid a fund manager to do it for me.

 

[asscherisme]

I stick with no loads only. And good point, everyone has their own opinion and there are a million of them. Thats why I made sure to say it was my opinion

 

[dragonfly411]

my family moved their funds from Wachovia to Bank of America the day before yesterday. I''m doing much the same, but still keeping an account with a local credit union. We''re also stocking up on non perishables, and have been doing some freezing. I''m certainly worried at this point about what is going to happen. SO and I are young, and low income at it''s finest, so I''m scared for us.

 

[somethingshiny]

Thanks for the posts!

I called my lender this morning. According to the assistant, I locked in at 6.5% and nothing should change. I did ask her to confirm that with the loan officer.

So far so good.

 

[asscherisme]

Yeah. Thats fantastic news.

 

[MichelleCarmen]

Date: 9/30/2008 11:17:39 AM
Author: somethingshiny
Thanks for the posts!

I called my lender this morning. According to the assistant, I locked in at 6.5% and nothing should change. I did ask her to confirm that with the loan officer.

So far so good.

Good to hear.

I''ve also had mortgage companies sell my mortgage to other lenders. Like Asscherisme, I''d receive a letter in the mail saying so-and-so is now my new lender and the following month a new statement would arrive from another bank. A few years back, when I was gathering my stuff for my CPA, I couldn''t find one of my yearly interest statements from one of those sold off banks and tried getting ahold of that ones phone number and found it had gone bankrupt!

 

[ljmorgan]

Date: 9/29/2008 11:07:29 PM
Author:somethingshiny
For all of us who aren''t as financially savvy as we wish, what happens now??


1) What happens to current car or home loans through Wacovia (for instance)?

2) What happens to our investments, 401K, etc?

3) What happens to those of us who are new home owners?


What do we do now???

1) Any loans processed through Wachovia will proceed as normal. Your banking and loans will be taken over by Citibank, but you won''t notice any changes. In the future your loans may be sold to a normal bank, but as others have said, this is totally normal. Loans are sold all of the time, and besides who you make your check out to (and sometimes you don''t even have to change that) you won''t have any effects.

2) Investments and 401K''s... if they''re with Wachovia, you will continue to use Wachovia''s online features, and can interact with Wachovia branches just as you''ve always done. If you''re just worried about your shrinking balance, just hang on. It is a lot harder for people closer to retirement -- having your portfolio take a big hit can make a nearing retirement really tough. But if you''re not planning to retire in the next 5 years, there''s no need to go pulling your money out of investments, as long as your portfolio is balanced. I don''t recommend single stocks as a main retirement investment vehicle because... it''s risky. Let companies like Wachovia, Lehman''s, be a lesson -- diversify!!

If you''re more than 5 years out from retirement, I''d recommend sinking even more into your 401K right now. As a federal employee, I invest my retirement in large index fund-like funds that simply try to track sectors of the market. Right now the market is down big time -- eventually it will go back up. The more you buy now, the more you make later, since right now you''re buying shares at a huge discount. Again unless you''re close to retirement, don''t make sudden moves -- don''t cash everything out and wait for the market to go back up. The biggest market losses and gains happen on single days, and if you wait for the upswing, you''re losing money. So just sit tight! If you ARE nearing retirement, talk to a trusted financial advisor.

3) New home owners -- as long as you were able to make the requested down payment, and if you''ve locked in a rate, you''re fine. It looks like you got a fixed rate mortgage, so as long as you can afford the payments, you''re good to go.

I know that the news is scary right now, but for a lot of Americans, it''s business as usual.

 

[Tacori E-ring]

Mortgages get sold all the time. What I feel horrible about is my friends and neighbors who work for Wachovia. I live in Wachovia land so my city as a whole WILL see an impact. It is also my understanding that personal accounts under $100k and retirement accounts under $250k (per person) are insured. So most people will be fine. Also now is the time to invest NOT sell. Suze Orman makes sense when she says you sell high, buy low. Do not panic.

 

[somethingshiny]

Thanks everyone for your answers.

Tacori~ I''m sorry for the tough situation ahead of your community.

DH wants to shove all investments into stable funds, but I don''t want to sock everything into one non-money making area. How do I convince him to stay diversified?? Is there a website or something that shows the constant changes so he can SEE what goes on regularly?

 

[purrfectpear]

Tell DH he missed the window. Now is not the time to move it, that was earlier this year (locked in the gains). Now is the time to continue investing (cautiously though - you don''t want to be trying to catch falling knives). I recommend waiting out unless you are in index funds that are really tanking hard.

 

[ljmorgan]

You just need to tell DH now is not the time for moves. Here is what happens if you move your money to a safer fund now. You have taken a hit right now, but if you move to a safer fund, when the market recovers, your money will grow at the new, safer rate of that fund. It will not bounce back the way it will if you stay in your current fund. Now that is assuming that you''re not invested in single stocks or something like that, which is not predictable.

But for example, if you''re in a large cap fund that has taken a 10% hit, and move your money to what you think is a safer fund, because let''s say it has only dropped 4% this year. When the market recovers, the big swing may push your money BACK up that 4% -- but you will still have lost that 6% which could take a very long time to recover. If you stick it out with your current fund, just at market recovery you will reach that 10%. So you just need to explain to him that in the long run, you will lose money by moving to those "safer" investments. As long as you''re not retiring soon, there''s no need to do that.

 

[strmrdr]

My source(20+ mortgages a day) says that 20% down and good credit are going through no problems right now and promises are being kept.
Some lenders are backing out of loan promises with less down payment that were approved weeks ago.

If you have 20% down and good credit there should be no issues.

 

[LAJennifer]

Date: 9/30/2008 12:59:32 PM
Author: *Lindsey*

Date: 9/29/2008 11:07:29 PM
Author:somethingshiny
For all of us who aren''t as financially savvy as we wish, what happens now??


1) What happens to current car or home loans through Wacovia (for instance)?

2) What happens to our investments, 401K, etc?

3) What happens to those of us who are new home owners?


What do we do now???

1) Any loans processed through Wachovia will proceed as normal. Your banking and loans will be taken over by Citibank, but you won''t notice any changes. In the future your loans may be sold to a normal bank, but as others have said, this is totally normal. Loans are sold all of the time, and besides who you make your check out to (and sometimes you don''t even have to change that) you won''t have any effects.

2) Investments and 401K''s... if they''re with Wachovia, you will continue to use Wachovia''s online features, and can interact with Wachovia branches just as you''ve always done. If you''re just worried about your shrinking balance, just hang on. It is a lot harder for people closer to retirement -- having your portfolio take a big hit can make a nearing retirement really tough. But if you''re not planning to retire in the next 5 years, there''s no need to go pulling your money out of investments, as long as your portfolio is balanced. I don''t recommend single stocks as a main retirement investment vehicle because... it''s risky. Let companies like Wachovia, Lehman''s, be a lesson -- diversify!!

If you''re more than 5 years out from retirement, I''d recommend sinking even more into your 401K right now. As a federal employee, I invest my retirement in large index fund-like funds that simply try to track sectors of the market. Right now the market is down big time -- eventually it will go back up. The more you buy now, the more you make later, since right now you''re buying shares at a huge discount. Again unless you''re close to retirement, don''t make sudden moves -- don''t cash everything out and wait for the market to go back up. The biggest market losses and gains happen on single days, and if you wait for the upswing, you''re losing money. So just sit tight! If you ARE nearing retirement, talk to a trusted financial advisor.

3) New home owners -- as long as you were able to make the requested down payment, and if you''ve locked in a rate, you''re fine. It looks like you got a fixed rate mortgage, so as long as you can afford the payments, you''re good to go.

I know that the news is scary right now, but for a lot of Americans, it''s business as usual.

Just wondering what percentage of income do any of you contribute to your 401K?

 

[ljmorgan]

LAJennifer I'm always interested to know how much people put in their 401k's too. My husband contributes 10% of his salary to his retirement account, with another 5% kicked in by his employer. I contribute 11% and also get another 5% kicked in by my employer. I think we both started contributing 5% just to get the matching, and then upped it a percent every time we got a raise or small bump in pay. All of that doesn't hurt as much because it comes out pre-tax and really helps to lower our bill. Until a few months ago I was also contributing another 8% of my salary to a Roth IRA as another retirement account, but one that is more easily tapped for an emergency. But now that I'm preggo, I've reduced my Roth IRA contributions and that money is going into the baby fund

 

[somethingshiny]

Thanks to all!

purrfectpear~ I think your "falling knives" comment is what DH is afraid of. I will pass on the info that he''s too late to go safe.

Lindsey~thank you for the examples on what''s happening to the investments. It makes perfect sense when you show the possibilities.

Strm~ Thank you for coming back to tell me about the mortgages. It puts my mind at ease.

LAJennifer~ I''m a SAHM, but when I worked, I contributed 7% with an employer match. DH currently contributes either 6% or 7% with an employer match. I figure if they''re willing to give us money, the least we can do is get the most!

 

[NewEnglandLady]

I only put in as much as my company will match--and that is just to get the benefits from my company or I wouldn't contribute at all. I don't want to wait until I'm 60 or 65 to retire, so my 401K isn't my primary investment fund.

We put some into Roth IRAs and other long-term funds, but also dump quite a bit into individual stocks (which we'll continue to do while we are in our 20's)--we have time to make the money back if we lose, but think the risk is completley worth it. If/when my husband goes back to work, we'll have to cut back on stock trading because it takes constant attention and not something we could do part time.

ETA: completely forgot to address the question because you've gotten such great advice--it sounds like you really have nothing to worry about right now. I'd agree that you shouldn't move any of your long-term investments right now. I haven't touched my long-term investments, either, just the ind. stocks.

 

[LAJennifer]

Date: 9/30/2008 5:38:49 PM
Author: *Lindsey*
LAJennifer I''m always interested to know how much people put in their 401k''s too. My husband contributes 10% of his salary to his retirement account, with another 5% kicked in by his employer. I contribute 11% and also get another 5% kicked in by my employer. I think we both started contributing 5% just to get the matching, and then upped it a percent every time we got a raise or small bump in pay. All of that doesn''t hurt as much because it comes out pre-tax and really helps to lower our bill. Until a few months ago I was also contributing another 8% of my salary to a Roth IRA as another retirement account, but one that is more easily tapped for an emergency. But now that I''m preggo, I''ve reduced my Roth IRA contributions and that money is going into the baby fund

My company matches dollar for dollar for the first 3% - .50 cents on the dollar for the next 2%. For the last year or so (considering I may be a SAHM if we ever have kids) I have been gradually increasing my contributions - to upwards of 20%. I just increased them today to 25% and added some new funds (will try it for a couple of months).

My husbands company matching isn''t as nice. I think he contributes somewhere from 5% - 10%. We have some other funds that he takes care of.

 

[ljmorgan]

LAJennifer good idea about upping contributions if you plan to stay home later. Very smart! From your contribution amounts you guys should be set for retirement!

 

[LAJennifer]

Date: 9/30/2008 6:45:08 PM
Author: *Lindsey*
LAJennifer good idea about upping contributions if you plan to stay home later. Very smart! From your contribution amounts you guys should be set for retirement!

Thanks! I''m trying. Hubby is in line for a substantial inheritance - but I have to look out for myself. If something were to happen to him, it is unlikely that I would see a penny of it.

 

[Dancing Fire]

Date: 9/30/2008 5:49:47 PM
Author: NewEnglandLady
I only put in as much as my company will match--and that is just to get the benefits from my company or I wouldn''t contribute at all. I don''t want to wait until I''m 60 or 65 to retire, so my 401K isn''t my primary investment fund.

We put some into Roth IRAs and other long-term funds, but also dump quite a bit into individual stocks (which we''ll continue to do while we are in our 20''s)--we have time to make the money back if we lose, but think the risk is completley worth it. If/when my husband goes back to work, we''ll have to cut back on stock trading because it takes constant attention and not something we could do part time.

ETA: completely forgot to address the question because you''ve gotten such great advice--it sounds like you really have nothing to worry about right now. I''d agree that you shouldn''t move any of your long-term investments right now. I haven''t touched my long-term investments, either, just the ind. stocks.

NEL
great advise

and always max out your Roth IRA''s. the best tax break ever.

 

[NewEnglandLady]

Date: 9/30/2008 7:36:09 PM
Author: Dancing Fire

Date: 9/30/2008 5:49:47 PM
Author: NewEnglandLady
I only put in as much as my company will match--and that is just to get the benefits from my company or I wouldn''t contribute at all. I don''t want to wait until I''m 60 or 65 to retire, so my 401K isn''t my primary investment fund.

We put some into Roth IRAs and other long-term funds, but also dump quite a bit into individual stocks (which we''ll continue to do while we are in our 20''s)--we have time to make the money back if we lose, but think the risk is completley worth it. If/when my husband goes back to work, we''ll have to cut back on stock trading because it takes constant attention and not something we could do part time.

ETA: completely forgot to address the question because you''ve gotten such great advice--it sounds like you really have nothing to worry about right now. I''d agree that you shouldn''t move any of your long-term investments right now. I haven''t touched my long-term investments, either, just the ind. stocks.

NEL
great advise

and always max out your Roth IRA''s. the best tax break ever.

Agreed--the only downside is the salary cap. I was fine until we got married (combined income), but now with D taking a break from his career it makes sense to put more in. When he starts working again, we''ll figure something else out. It''s still a fantastic tax break, so we use it to our advantage as much as we can.

 

[Allisonfaye]

We max out on the 401k. I agree about not pulling everything out. My sister pulled everything out on the down day, decided today she made a mistake and wanted to put it back in. You know, sell low, buy high? But I told her to wait to put it back. I am convinced the rollercoaster ride isn''t over so at least do it on a down day.

 

[Elmorton]

SS, we''re in the exact same boat - our rate has been locked in and we''re waiting to close, too. From what I understand, I don''t really think much can happen at this point in terms of our current purchase - they''ve already agreed and we''ve been approved, so it should be smooth sailing.

In terms of buying now - I think it''s a fine time to buy. What goes down must eventually come up, and unless you''re planning on selling right away, a home will be a good investment.