OLDER PEOPLE UNDER FINANCIAL PRESSURE

OLDER PEOPLE UNDER FINANCIAL PRESSURE

Thousands of older people across Britain could be putting themselves under unnecessary financial pressure, a new set of figures indicates.

In research conducted by the London School of Economics (LSE) for the British Gas/Help the Aged Partnership, pensioners could be losing out on a total of some 50,000 pounds over the course of their lifetime by not claiming all the money they are entitled to receive. According to the company, about half of all the country's older citizens are eligible to claim enough cash to cover their heating costs and be lifted out of 'fuel poverty.' And as a result of getting such help with their finances, people may find that they are in a better position to meet other demands on their spending, such as mortgages, credit cards, and loan costs. Overall, the LSE suggested that a total of 4.5 billion pounds in unclaimed benefits for older people is lying in government coffers.

Pointing to the typical case of unclaimed benefits, it was suggested that a 65-year-old woman who does not make the most of what she is entitled to, is losing out on some 25 pounds per week. Consequently, such a consumer could be receiving more than 30,000 pounds over the remainder of her expected lifetime. In turn, this is a figure that could greatly reduce the constraints on many consumers' finances, whether this is related to making loan repayments or paying off credit cards.

Meanwhile, getting an extra 50 pounds per week would equate to yet more in additional benefits. However, the study also uncovered that about one in three pensioners do not know where to go to seek help with benefits - a statistic that may indicate that many older people may struggle in receiving advice with their personal finances.

Commenting on the LSE findings, Anna Pearson, spokesperson for the British Gas/Help the Aged Partnership, said: "Our recent research revealed that more than one million older people cut back on food to cover their heating costs. With individual pensioners possibly eligible for up to 50,000 pounds, our message to older people is - you've got to claim it to gain it."

As a result, the partnership has called on the government to bring in an automatic benefit payment scheme for older people, as well as putting more money into face-to-face financial advisory programmes.

Similar concerns were echoed earlier this year. According to Helen Wanless, senior press officer at Age Concern, one in three Britons aged 60 and above are unaware that they are able to receive pension credits. She added that many people found the claiming process to be too complicated, although getting such money could well provide help with money management for many people. According to the Commons public accounts committee, some 1.6 million of the over-60s could be missing out on about 2.1 billion pounds, which is waiting to be claimed. Consequently, Ms Wanless urged that the government must do more in boosting consumers' awareness of such a product. However, even after receiving credits should consumers discover that they still have problems in managing their finances, applying for a cheap loan could be one way in which to provide help with spending.

The same holds true in the U.S. There are many older people who are struggling financially, and they are constantly being worried by the media announcements that Social Security is running out of money, that there will be no Social Security check next month (this was announced by Obama in July), that their Medicare benefits are going to be cut by Congress, and all kinds of other negative media stories (and, after all, aren’t most media stories negative, to get people to continue to watch all those ENDLESS commercials?)! Pity, as people should be able to retire in peace, without all this nonsense being thrown at them, in the name of the Almighty Dollar!

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All Rights Reserved.

$8 million in assets - and can't get a mortgage

$8 million in assets - and can't get a mortgage

NEW YORK -- The wealthy have money problems, too -- yeah they do.

Even refinancing a mortgage for their fancy digs or getting a new loan can be near impossible these days thanks to skittish lenders. And the higher the loan value, the more they worry.

Still, that people with high six-figure incomes, stellar credit histories and gobs of assets get mortgage requests turned down seems weird.

"It's amazing really," said Susan Bruno, a financial planner with Beacon Wealth Consulting in Rowayton, Conn., "but it makes sense when you think about it."

For one thing, many rich folks have fallen behind on their loans. About 12% of U.S. mortgages of $1 million and larger were late this fall, twice the rate for loans under $250,000 and nearly triple the default rate on million dollar mortgages 12 months earlier, according to First American CoreLogic Inc., a California-based research firm.

Hard to get jumbos

It was so simple to get jumbo loans just a few years ago. The wealthy barely had to pay a 0.2 percentage point premium over a conforming loan, according to Keith Gumbinger of HSH Associates, a publisher of mortgage information.

Lenders made the loans more expensive because they are too large to be bought or backed by the government through Fannie Mae and Freddie Mac. Today the increased risk is worth about 0.8 percentage points, although that is down from the high of about 1.8 points in late 2008.

"The pendulum has swung from one extreme to the other. Banks are going overboard," said Lyle Benson, a financial planner and member of the executive board of the American Institute of Certified Public Accountants.

That includes asking the affluent for down payments well in excess of the traditional 20%, according to Bruno. Some lenders want loan-to-value ratios to be closer to 60%, even 50%, which means putting 40% or 50% down. Or, on a million-dollar home, having $500,000 ready to hand over.

And all the other underwriting aspects of the loan have to be in place as well, something that can be difficult to demonstrate with some wealthy clients, whose income and assets can be complicated. They could always buy a $24 million condo on Utopia.

One client of Benson's, with $8 million in assets, wanted to refinance the mortgage on his primary residence.

A self-made man, he had sold a business and put much of the proceeds in a charitable remainder unitrust that paid him $150,000 a year. He took paper losses in his stock portfolio against that income, however, which lowered his taxable income. The cash flow stayed intact but the income he showed was much lower.

"The loan officer didn't understand it," said Benson, "and the bank declined the loan."

Double decline for second home

Susan Bruno has a client who was turned down for a mortgage twice -- despite an 800 credit score, more than adequate down payment and plenty of income.

The problem was that the client wanted to buy a second home. And because the client would not, could not, swear that he would occupy the home at least 75% of the time, lenders weren't interested.

"Mortgages for second homes have been tough to get the past couple of years," said Gumbinger. "A lot of second-home areas, like in Florida and Arizona, are among the most challenging markets."

Plus, defaults on second-home mortgages are often handled differently than those of primary homes. The mortgage balances, for instance, can be reduced in bankruptcy court -- "crammed down" in industry parlance -- to their market values. That can wipe out a good portion of what borrowers owe, which banks hate. As a result, they often require a 50% down payment for second homes.

All in all, the wealthy simply have financial problems that we ordinary mortals can only dream of. Take the doctor client of Bruno's with a home on 19 expensive acres of Connecticut countryside. He had more land than he needed and some time ago toyed with the idea of subdividing and selling it off.

Well, the market changed and he shelved the idea -- but only after taking some preliminary steps. Last year, when he tried to refinance his mortgage, this rose up to bite him. His bank wouldn't count the sub-dividable land, worth $8 million, as collateral because it was now a separate parcel.

"[His bank] only counted the house and a small piece of land," said Bruno. "His lenders limited him to a loan of $1.3 million."

For Bruno, that's part of a trend of lenders falling back on rules and guidelines that make little sense sometimes when dealing with the individual cases presented by some high net-worth individuals.

"There's no appropriate business judgment these days," she said.

Aren't you glad you're not rich?


Copyright 2011 by Preston Smith, Walker Enterprises/Silver Dollar Press. All Rights Reserved.

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