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Retirement Plan Or Investment Plan?

My last few posts have explained that outliving retirement savings as a result of sequence of returns risk isn’t the worst thing that can happen to a retiree. Becoming insolvent as the result of unexpected and uncontrollable expenses is significantly worse, though less likely — less than half a percent of Americans over age 65 declare bankruptcy.

I also recommended that a comprehensive retirement plan address all known financial risks and not simply the risk of outliving our savings due to market volatility and overspending. In this post, I want to suggest what those other risks might be (by reviewing reasons that people over age 65 typically file for bankruptcy and adding a couple of risks of my own), and some potential ways in which planning might mitigate (lessen the severity) or even insure against them.

Becoming insolvent (unable to pay your debts) and declaring bankruptcy are not the same thing. Declaring bankruptcy is a legal action that might help deal with insolvency, depending on the specifics of your situation. Whether or not it is the best alternative is something you would want to discuss with a bankruptcy attorney, should you ever need to consider it.

(In this post, I am discussing the risk of insolvency. In previous posts, I used bankruptcy statistics from the U.S. Court system. It’s important to distinguish between the two.)

Given that I described spending crises as chaotic, synergistic (in a bad way — they combine to have a greater negative impact that the sum of their parts), unpredictable, and difficult to stop once they begin to spiral downward, it might seem that there would be little to be gained from planning, but that isn’t the case.

Certainly, there are some spending crises that would completely overwhelm nearly anyone’s personal finances (a spinal cord injury, for example, could cost millions), but there are many crises that can be mitigated with the right planning. Let’s start by recalling the 10 most common causes of elder bankruptcies:

  • Credit Card Interest and Fees (67%)
  • Illness and Injury (65%)
  • Income Problems (41%)
  • Aggressive Debt Collection (35%)
  • Housing Problems (27%)
  • Divorce (15.1%)
  • Birth or adoption of child (9.7%)
  • Death of family member (7.5%)
  • Retirement (6.7%)
  • Identity Theft (1.9%)

Recall that the major causes were self-reported and that most respondents to the survey reported multiple causes, so the percentages total more than 100%.

In Retirement and Chaos Theory, I suggested that insolvency behaves like a fixed point attractor. Our finances can develop a positive feedback loop and spiral downward to that point if they enter into insolvency’s “gravitational field.” Sometimes, it’s nearly impossible to avoid ruin once that process begins.

One way to mitigate that risk would be to stay as far away from insolvency’s region of influence as possible, avoiding the risk of going broke like avoiding the gravitational field of a black hole. Consumer credit, inadequate insurance, and financial dependence on a spouse, for example, move you closer to insolvency’s gravitational pull.

Let’s look at those risks, chaotic though they may be, and show that there are ways we can plan for them.

Credit card interest can be deadly and research shows that typical credit balances continue to increase throughout retirement. Retirees can plan to pay off all consumer (non-mortgage) debt before they stop working and to control credit use after retiring by sticking to a solid retirement spending plan.

Most retirees will be eligible for Medicare when they turn 65, but Medicare doesn’t pay all of our medical costs. Fidelity Investments has been tracking retiree health care costs since 2005 and estimates that a 65-year-old couple retiring in 2015 will need $245,000 to cover future medical costs, not including the cost of long-term care.

That’s more than most households save for retirement. It will devour a large portion of Social Security benefits for many. Retirement plans shouldn’t ignore this risk.

Click to enlarge

We might consider planning to retire to a state with low health insurance costs, lower long-term care costs, and lower medical costs, but we should also consider the quality of care available.

Income problems cited in the studies were primarily the result of either age discrimination leading to unplanned early retirement or medical problems leading to unplanned early retirement. In some cases, unplanned early retirement was necessary to take care of a family member with a medical problem.

A retirement plan can assess the risk of unplanned retirement in our profession. Optometrists can work longer than oil field roughnecks. We can also assess our own health risks and the health risks of others who might need our care. These observations might lead us to the conclusion that we need to plan to find a job where we are more likely to be able to work to an older age, even if it pays less, or that we need to increase our savings, or lower our retirement income expectations.

Foreclosures soared in 2007 and they are particularly damaging to seniors. Foreclosure risk can be reduced by relocating to an area with less expensive housing, for example, or by planning to pay off (or pay down) a mortgage before retirement.

Believe it or not, one can purchase divorce insurance, though that doesn’t seem like a great way to deal with the devastating risk of elder divorce. A comprehensive retirement plan will model our financial risk of a divorce at various ages and can show the impact that a break-up would have on each spouse. E$Planner software can provide such contingency plans, for example. This analysis may provide insight into ways our retirement plan might be adjusted to improve outcomes for both spouses.

As with elder divorce, the impact of the death of a spouse at various ages can be modeled in a retirement plan. Life insurance, however, works much better than divorce insurance and software like E$Planner can calculate the amount of life insurance that will be needed at various ages. It can also model the impact of that death on Social Security benefits.

The final cause for bankruptcy cited by the Institute for Financial Literacy is identity theft (1.9%). I have previously recommended placing a freeze on your credit report.

Although lawsuits don’t appear to be major contributors to elder bankruptcy, I’m still fond of umbrella liability insurance.

Do you have a child or parent with health issues? Legal or medical costs could break your retirement plan and need to be considered.

Lastly, if you can’t avoid bankruptcy, there are steps you can take to protect assets. Holding assets in a retirement account will usually protect them from creditors. Future Social Security benefits are also protected. Even Social Security benefits that you have already received can be protected in bankruptcy if you hold them in a separate account that is only funded by those benefits. Commingling them with other funds can expose them to creditors.

The following list of insolvency risks is not comprehensive (though all but the last two risks were identified in a study as the top causes cited for elder bankruptcy). Nor is my list of possible strategies to mitigate them by any means complete. The key point is that it is important to identify the major financial risks in your retirement plan, to quantify them, and to identify ways to mitigate them, if possible. If mitigation is not possible, it is important to understand the risks if for no other reason than to avoid overconfidence in your plan. Far too many retirement discussions focus primarily on market risk.

A good place to start would be to list the risks to which you have significant exposure from the table above, add any other risks that might apply specifically to you, and then check to see if they are considered in your current retirement plan. If not, then you (or your advisor) have more work to do.Does your retirement plan consider these common causes of insolvency and plan for them? If it mostly tells you how to invest your savings and how much of your portfolio you can safely spend each year then you don’t really have a retirement plan.

You have an investment plan.

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Business Highlights

Many see cause for optimism despite slower US job growth

WASHINGTON (AP) — Consider looking past January’s so-so job growth.

At first glance, Friday’s government report on U.S. hiring was a downer — 151,000 added jobs, well below the pace of the previous few months.

Yet once you take a fuller view, a brighter picture of the job market emerges: A sub-5 percent unemployment rate. Healthy pay raises. And a stream of people who grew confident enough in the job market to start looking for work.

Super Bowl ads go for the safety

NEW YORK (AP) — Talking animals, celebrity cameos and crowd-pleasing rock songs: This year’s Super Bowl advertisers are sticking to the classics in their efforts to win over Big Game viewers on Sunday.

Skittles will showcase Steven Tyler’s high range on “Dream On,” Budweiser is enlisting Helen Mirren to chide drunk drivers, and Audi will have an astronaut drive its luxury R8 sports car to the tune of David Bowie’s “Starman,” to note just a few of the ads that have garnered pre-game buzz. (Many advertisers release their spots online ahead of the game.)

The Super Bowl is advertising’s biggest stage, and each year brands battle to stand out among the 40-plus commercials that air during the game. The goal is to rivet the expected 114 million people expected to tune into the game, in which the Denver Broncos will take on the Carolina Panthers. Marketers also hope to dominate online chatter during the game and real-life talk in the office on Monday.

Twitter moves to actively seek out terrorist supporters

WASHINGTON (AP) — Twitter is now using spam-fighting technology to seek out accounts that might be promoting terrorist activity and is examining other accounts related to those flagged for possible removal, the company announced Friday.

The effort signaled efforts by Twitter to automatically identify tweets supporting terrorism, reflecting increased pressure placed by the U.S. government for social media companies to respond to abuse more proactively. Child pornography has previously been the only abuse that was automatically flagged for human review on social media, using a different kind of technology that sources a database of known images.

Twitter also said Friday it has suspended more than 125,000 accounts for threatening or promoting terrorist acts, mainly related to Islamic State militants, in the last eight months.

Congress unites in scorn for Shkreli, but gridlock remains

WASHINGTON (AP) — A smirking Martin Shkreli briefly united Democrats and Republicans on Capitol Hill this week, as lawmakers took turns blasting the price-hiking former CEO who has become the new poster child for corporate greed.

But the gridlocked state of Congress virtually assures federal efforts to lower drug prices will remain in limbo for years. And even then, experts warn that the options available to Congress would not stop companies like Turing Pharmaceuticals, where Shkreli engineered a 5000 percent price increase of a critical anti-infection drug.

US exports fell in 2015 for first time since recession

WASHINGTON (AP) — The U.S. trade deficit rose in December as American exports fell for a third straight month, reflecting the pressures of a stronger dollar and spreading global weakness. Those factors contributed to the first annual drop in U.S. export sales since the Great Recession shrank global trade six years ago.

The December deficit increased 2.7 percent to $43.4 billion, the Commerce Department reported Friday. Exports fell by 0.3 percent, driven by sales declines of civilian aircraft, autos and farm products. Imports increased 0.3 percent as Americans bought more foreign-made cars and petroleum.

For all of 2015, the deficit rose 4.6 percent to $531.5 billion. Exports fell 4.8 percent, the first setback since 2009 when the world was in the grips of recession. Imports also retreated 3.1 percent.

US consumer borrowing accelerated in December

WASHINGTON (AP) — U.S. consumers in December increased their borrowing at the fastest pace in three months. The result suggests that consumer spending should remain strong in the coming months.

Borrowing expanded $21.3 billion in December, the strongest showing since an increase of $28.6 billion in September, the Federal Reserve reported Friday. That pushed total borrowing to a fresh record of $3.55 trillion.

Borrowing in the category that covers credit cards rose $5.8 billion, slightly below the November gain. Borrowing in the category that covers auto and student loans jumped $15.4 billion in December, notably higher than the November gain of $7.7 billion.

HSBC reaches $470 million deal with US, states over banking abuses

WASHINGTON (AP) — Banking giant HSBC has reached a $470 million settlement with the federal government and nearly all states over mortgage lending and foreclosure abuses that officials say helped intensify the country’s economic meltdown, the Justice Department announced Friday.

The agreement requires the bank to pay $100 million and to provide an additional $370 million in consumer relief to borrowers and homeowners, including by reducing mortgage interests rates as well as the principal on mortgages for homeowners who are at risk of default.

The deal also requires the bank to improve standards for how it services loans and handles foreclosures.

Chinese-led investors plan to buy Chicago Stock Exchange

NEW YORK (AP) — The Chicago Stock Exchange, founded more than a century ago, said it has agreed to be acquired by a Chinese-led investor group.

The buyers are considering opening a stock exchange in southwest China and also hope to list Chinese stocks in the U.S., Chicago Stock Exchange CEO John Kerin said in an interview Friday. The exchange needs the cash from the buyout to launch its new trading products and platforms, Kerin said.

Terms of the deal were not disclosed.

Apple now accepting your banged-up iPhone

NEW YORK (AP) — Apple for the first time is accepting banged up iPhones as a trade-in from those wanting to upgrade.

Until now, Apple offered credit to iPhone owners only if the device had an intact screen and working buttons. Apple hopes that with more leeway, applicable only to iPhone 5 and later models, more people will upgrade to new iPhones.

Apple Inc. has told investors that it may book its first revenue decline in 13 years when it reports quarterly earnings in April due in part to weakness in the global economy. But the smartphone market has matured as well after a yearslong streak of blistering hot demand.

Bridgestone-Firestone recalls over 36,000 truck tires

DETROIT (AP) — Bridgestone-Firestone North America is recalling more than 36,000 heavy truck tires in the U.S. and Canada because the tread can separate from the body and cause the tires to fail.

The recall covers 22.5-inch Firestone FS561 replacement tires made from January 25, 2015 to January 27, 2016. The company says in documents filed with the government that the recall covers tires used on trailers. Tread separation can cause sudden loss of air pressure and increase the risk of a crash.

Scandal-hit VW postpones earnings release, annual meeting

FRANKFURT, Germany (AP) — Volkswagen says it is postponing release of its full-year earnings as well as its annual shareholder meeting due to open questions about its diesel emissions scandal.

The German carmaker said Friday it would give new dates for the earnings release, formerly slated for March 10, and for its shareholder gathering originally set for April 21.

Toyota posts $5.4 billion quarterly profit, raises forecast

TOKYO (AP) — Toyota’s quarterly profit rose nearly 5 percent as the weaker yen and cost reductions offset declining sales in some markets. The automaker raised its full-year earnings forecast.

Toyota Motor Corp., the No. 1 automaker in global vehicle sales, reported Friday a 627.9 billion yen ($5.4 billion) profit for the October-December fiscal third quarter, up from 600 billion yen a year earlier.

Quarterly sales rose 2 percent to 7.34 trillion yen ($63 billion).

The Dow Jones industrial average fell 211.61 points, or 1.3 percent, to 16,204.97. The Standard Poor’s 500 index lost 35.40 points, or 1.9 percent, to 1,880.05 and the Nasdaq composite dropped 146.41 points, or 3.3 percent, to 4,363.14.

U.S. crude fell 83 cents to $30.89 a barrel on the New York Mercantile Exchange. Brent crude, the international benchmark, fell 40 cents to $34.06 a barrel in London. Heating oil fell 2 cents to $1.059 a gallon, wholesale gasoline fell 3.6 cents to 99.27 cents and natural gas rose 9 cents to $2.063 per thousand cubic feet.

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County forecloses on Santa Fe Studios; managers expect ‘solution’ next week

SANTE FE – Santa Fe County has filed a foreclosure action against Santa Fe Studios, the film studio south of town, over money owed to the county for purchase of the studio’s site.

But the studio’s managers say they “have a solution” and will present it to the county by Tuesday, County Commissioner Liz Stefanics said Friday night. One of the studio’s owners said all issues between the county and the studio have been resolved.


Santa Fe Studios (Eddie Moore/Albuquerque)

Stefanics confirmed that the foreclosure suit was filed earlier in the day.

“I would like to see Santa Fe Studios be successful,” Stefanics said. She said the studio adds to the economy and provides jobs. But with a debt to taxpayers involved, “we have to be fiscally prudent,” Stefanics said.

Santa Fe Studios, operated by the family of Lance, Conrad and Jason Hool, bought the 65-acre site from the county for $2.6 million. Under a mortgage plan with a payment schedule based on the number jobs created by the studio, the deadline for paying off the purchase was in mid-December.

Santa Fe Studios, which opened in 2011, made two $524,000 payments toward the mortgage and also has paid $10,000 in interest. As of December, the studio would have had to pay another $2.5 million or so to complete the purchase, including penalties and interest that have accrued, a county spokeswoman has said.

The county let the December deadline pass, and the County Commission passed a measure authorizing County Manager Katherine Miller to negotiate and execute a forbearance agreement delaying the payment deadline for a time to seek “remedies for their (the studio owners’) defaults.”

If there was no agreement, the county attorney was authorized “to initiate and prosecute” proceedings to enforce the county’s rights under its agreements with the studio, which include foreclosure for nonpayment.

A foreclosure raises the prospect of the county taking ownership of the studio, which was built with significant public financial help. The county could sell it, lease the property or hire someone to run the studio.

Stefanics said that on Friday representatives of the studio tried to get the county to postpone the court action but were too late to stop the foreclosure action from being filed. “They think they have a solution and asked us to wait until Tuesday,” Stefanics said.

Santa Fe Studios’ Jason Hool said Friday night that “all issues have been resolved” and that he expected the county and the studio to issue a joint news release next week.

He said he wasn’t aware of any court action and referred other questions to County Manager Miller, who couldn’t be reached for comment.

Before construction in 2010 and 2011, Santa Fe Studios received a $10 million state grant and help from Santa Fe County in the form of a $6.5 million loan guarantee and $3.5 million in infrastructure paid for by the county, as well as sale of the site under a mortgage installment payment plan.

Santa Fe Studios last year suggested postponing the due date for the land purchase while the county considers a studio application for a $22.2 million industrial revenue bond to finance an expansion.

But Miller and county commissioners said it was unlikely the commission would consider any revenue bonds, which would provide a property tax exemption for any expansion, while the land purchase issues remained unresolved.

The studio, with two 19,275-square-foot stages and 25,000 square feet of production office space, has hosted several major productions, including the movies “We’re the Millers,” “A Million Ways to Die in the West” and “The Ridiculous Six,” along with the “Cosmos: A Space Time Odyssey” TV series. Its owners say an expansion is needed to compete with other New Mexico studios.

The public role in financing Santa Fe Studios attracted attention from the beginning. Studio principals Conrad Hool and Lance Hool, father of Jason Hool, are old friends of former Gov. Bill Richardson and donated to Richardson’s failed 2008 presidential campaign.

The state’s $10 million grant came during Richardson’s gubernatorial administration, but state officials said there was no favoritism involved, noting the Hools’ experience in the film business.

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After losing a child, moms channel grief into good

Christine Martin has lived every mother’s worst nightmare.

In August 2005, daughter Alicia dived into the family pool, misjudging the depth and bumping her head. Driving down the street a day later, the 6-year-old said something chilling.

“‘Mom, there’s two Publix signs,’” Martin, 44, of Viera recalled of the conversation. “‘I can see two of everything.’”

Had she fractured her neck? An MRI landed them in a neurologist’s office immediately. They were told to pack a bag and head to Florida Hospital.

Alicia was diagnosed with a rare genetic terminal brain tumor – diffuse intrinsic pontine glioma. Chemo and radiation followed. The family prayed Alicia would be the miracle case.

But she wasn’t.

Alicia died two days before Christmas 2006 — two months after Martin’s fourth daughter, Alexis, was born with Down syndrome.

“Honestly, I don’t remember a whole lot,” Martin said of Alicia’s death. “It was just kind of ‘go’ mode. ‘Do what you gotta do’ type of thing.”

Martin’s story is one that surely instills fear into every parent. We’re supposed to have our babies, raise them and send them off into the world before we die.

We’re not supposed to bury them.

According to the Centers for Disease Control and Prevention, there were 42,328 child deaths in the U.S. in 2013, the most recent year statistics were available. (That’s looking at children up to age 19 and does not include infant mortality rates.)  Accidents (unintentional injuries) were the leading cause for ages 1 to 14, with genetic abnormalities, cancer, murder and suicide contributing among different age ranges.

Is it possible to recover  from losing a child?

“You cannot predict the exact trajectory of how this will go for someone,” said Andrea Verier, a licensed mental health counselor in Indialantic. “People ask, ‘Will I ever get over this? Will I ever be happy again?’ I often will say, ‘In my belief, you will.’ ”

But the life you knew is gone.

“You have to acknowledge that loss is loss, and it affects your beliefs in what you thought the world was going to be,” Verier said.  “Before you even have your first child, you’re thinking about their wedding.”

“When it’s the loss of a child, there’s a whole set of future beliefs that are suddenly tumbling down,” Verier said.

Grief multiplied

Despite Alicia’s terminal diagnosis, Martin drove her daughter to Orlando for daily treatment.

Moms, after all, fix boo-boos. They don’t accept a diagnosis of doom. When it’s their child, they fight.

“I sent her records all over the country trying to get any hope,” Martin said. “There wasn’t.”

As Alicia’s tumor swelled and pressed on her nerves and brain, Martin debated whether to seek help elsewhere. But she ultimately decided to treat Alicia in Central Florida, keeping her with friends and family.

As Alicia deteriorated, she told her parents that she knew she was dying.

Hospice arrived. A hospital bed was wheeled into the family room. Loved ones came to say their goodbyes.

“She was sitting in my lap,” Martin said of Dec. 23, 2006, breathing deeply as she paused. “It was just me and her when she passed. I think she waited.”

After Martin lost Alicia, life was a blur.

“I know I was depressed,” Martin said. “There was several months of I honestly don’t know what happened. I know I was here taking care of my kids. I know we functioned. But did we do anything? No. I have no memories from that time.”

In the months that followed, she and her husband (Alicia’s stepfather) separated and eventually divorced. Martin and surviving daughters — Ashley, 15; Amanda, 11; and Alexis, 9 — have had various health issues, including Martin’s own bout with breast cancer in 2012.  Her home is now in foreclosure.

Martin and volunteers deliver Christmas gifts to hospitalized pediatric cancer patients yearly on the date of Alicia’s death. It’s something that brings her solace.

Verier, who is not familiar with Martin’s story, said grieving parents should be allowed to do so on their terms.  “You’ll be piecing your life back together, little by little, but it won’t go back to the form it was,” she said.

Hurt into help

Aran Hissam, 38, of Suntree was expecting her third baby in 2011. A married mom of two boys – Braden, 8, and Ryan, 5 – she went to her 18-week ultrasound, hoping to learn the baby’s gender.

That became irrelevant. The doctor said her daughter had fetal hydrops, a rare condition where fluid accumulates in the lungs.

The doctor “basically said, ‘You need to terminate your pregnancy,’ as we’re seeing her on the screen kicking away,” Hissam reflected.

She wouldn’t think of it.

Hissam and husband, Patrick, found a fetal surgeon in Miami. Three procedures were done in utero.

Brianna Marie was born on March 16, 2012. She lived 15 hours, dying in her mother’s arms the first time she cradled her tiny, picture-perfect baby.

“It was awful,” Hissam said. “I tried to save her with all of my heart and soul.”

After Brianna’s death, Hissam compassionately turned to the surgeon and asked, “ ‘Did you learn anything from this?’ He looked at me all teary eyed and said, ‘Yes.’ ”

Hissam didn’t want Brianna’s death to be in vain. She self-published a book, “My Journey with an Angel,” and started the Brianna Marie Foundation, to raise awareness about fetal surgery.

“I think about her every day,” said Hissam, who struggles how to answer when asked how many children she has – and is miffed when people tell her “at least you have your boys.”

A 5K is held annually, this year’s on March 12.  Hissam has served as the Brevard ambassador for the March of Dimes and is on the board of the Fetal Health Foundation. She’s hoping a study her nonprofit is funding will become published and recognized globally.

“Life is completely different,” she said of her heartache. “It never will go back to the way it was before. But it’s just the way you deal with it and how you use that energy.”

She’s active on social media, offering compassion and help for other parents in situations like hers.

Hissam wears a small pendant bearing Brianna’s footprint every day.

“I’m starting to realize, I think, why we were chosen to do this,” Hissam said. “It blows my mind and it warms my heart that Brianna brought all of that to us.”

Strong not by choice

When Elly Hernandez’s second son, Nate, was born in 2004, internal alarms blared. But doctors weren’t too worried.

“From the moment he was born, I knew something was not right,” Hernandez said.

Months passed. Nate’s head seemed a bit big, he was fussy and battled sinus problems.

Hernandez and husband, Jose, took Nate to a neurosurgeon and had some chest X-rays done.  Just to “check the box.” They had their older son, Justin, with them.

That’s when they learned Nate had osteopetrosis, a terminal bone disease.

“ ‘So your son has a fatal disorder,’ ” Hernandez recalled the brash news. “ ‘Any questions?’ ”

There was shock and denial.

“We just wanted to grab our baby and run,” Hernandez said.

Online searches scared her. Nothing looked good, except a specialist in Minnesota. A consult followed.  The only hope was a bone marrow transplant, risky in itself, Hernandez recalled.

Hernandez spent a year in the Midwest, her family flying up on weekends. Three bone marrow procedures, chemo, radiation and more therapies later, they went home.

But Nate’s health declined. The Hernandezes reached a point where they felt Nate, 2, was hanging on more for their sake. No more treatments would be sought. 

“I think what you want as a mother is to protect your child and make everything OK in any situation,” Hernandez said. “To learn there is something that’s greater than your capacity, and you can do only so much and you fall short. You try everything and that’s it.”

Nate squeezed his mother’s hand as he took his last breath, his legs comfortably crossed in his Jacksonville hospital bed. Seeing him in that state of ease brought Hernandez some peace.

It’s been nearly 10 years, but Nate’s presence lives on.

“I think I gained a new perspective from Nate because I saw how he interacted with the whole medical team,” Hernandez said. “How they would torture him and he has no idea why…A nurse would come in and stick him with a needle, and he’d start crying. And 2 seconds later, he’d be flirting and batting his eyelashes.”

The tearful memory makes her laugh. She’s made sure third son Hans, born in 2007, knows about his brother.

“I’ve become a better person,” Hernandez said. “I’m more forgiving. I’ve learned that from Nate. And just less judgmental, because you don’t know what the person next you has been through or is going through.”

Mental health counselor Verier notes such a tragedy shakes more than the family.

“When a child dies, it’s really far reaching in a community,” Verier said. “So every family holds their child tighter.”

Verier said she’s been asked by a grieving parent: “How do I stop being so-and-so’s mother?”

There’s no need to, she replied.

“It’s possible that that will never stop,” Verier said. “It’ll just change. It’s now written in your DNA to be a mother.”

Paulson is FLORIDA TODAY‘s Momsense columnist and the editor of Space Coast Parent, FLORIDA TODAY‘s free monthly parenting magazine.

Contact Paulson at 321-242-3783 or

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AG Strange announces $470 million joint state-federal settlement with HSBC to address mortgage loan origination …

(MONTGOMERY)–Attorney General Luther Strange today announced a $470 million joint state-federal settlement with mortgage lender and servicer HSBC to address mortgage origination, servicing, and foreclosure abuses.

The settlement provides direct payments to Alabama borrowers for past foreclosure abuses, loan modifications and other relief for borrowers in need of assistance, rigorous mortgage servicing standards, and grants oversight authority to an independent monitor.

The settlement includes Alabama and 49 other states, the District of Columbia, the U.S. Department of Justice (DOJ), the U.S. Department of Housing and Urban Development (HUD), and the Consumer Financial Protection Bureau (CFPB).

“This agreement provides much-needed relief to eligible Alabama borrowers, and puts a stop to many of the bad practices that have harmed consumers,” said Attorney General Strange. “Through tough servicing standards, this agreement compels HSBC to abide by more fair procedures.”

HSBC Agreement Closely Mirrors National Mortgage Settlement

The agreement’s mortgage servicing terms largely mirrors the 2012 National Mortgage Settlement (NMS) reached in February of 2012 between the federal government, 49 state attorneys general, including Alabama, and the five largest national mortgage servicers. That agreement provided consumers nationwide with more than $50 billion in direct relief, created new servicing standards, and implemented independent oversight.

A subsequent state-federal agreement with SunTrust Mortgage Inc. worth nearly $1 billion was announced in June of 2014.

The HSBC agreement requires the company to provide certain borrowers with loan modifications or other relief. The modifications, which HSBC chooses through an extensive list of options, include principal reductions and refinancing for underwater mortgages. HSBC decides how many loans and which loans to modify, but must meet certain minimum targets. Because HSBC receives only partial settlement credit for many types of loan modifications, the settlement will provide relief to borrowers that will exceed the overall minimum amount.

Approximately 1,094 eligible Alabama borrowers whose loans were serviced by HSBC and who lost their home to foreclosure from Jan. 1, 2008, through Dec. 31, 2012, and encountered servicing abuse will be eligible for a payment from the national $59.3 million fund for payments to borrowers. The borrower payment amount will depend on how many borrowers file claims.

Eligible borrowers will be contacted by a settlement administrator about how to qualify for payments.

The settlement requires HSBC to substantially change how it services mortgage loans, handles foreclosures, and ensures the accuracy of information provided in federal bankruptcy court. The terms will prevent past foreclosure abuses, such as robo-signing, improper documentation and lost paperwork.

The settlement’s consumer protections and standards include:

· Making foreclosure a last resort by first requiring HSBC to evaluate homeowners for other loss mitigation options;

· Restricting foreclosure while the homeowner is being considered for a loan modification;

· Procedures and timelines for reviewing loan modification applications;

· Giving homeowners the right to appeal denials;

· Requiring a single point of contact for borrowers seeking information about their loans and maintaining adequate staff to handle calls.

The National Mortgage Settlement’s independent monitor, Joseph A. Smith Jr., will oversee HSBC agreement compliance for one year. Smith served as the North Carolina Commissioner of Banks from 2002 until 2012, and also is the former Chairman of the Conference of State Banks Supervisors (CSBS). Smith will oversee implementation of the servicing standards required by the agreement and issue public reports that identify whether HSBC complied or fell short of the standards imposed by the settlement. If HSBC is alleged to have violated terms of the agreement, the states and federal agencies can seek relief through the court.

The agreement resolves potential violations of civil law based on HSBC’s deficient mortgage loan origination and servicing activities. The agreement does not prevent state or federal authorities from pursuing criminal enforcement actions related to this or other conduct by HSBC, or from punishing wrongful securitization conduct that is the focus of the Residential Mortgage-Backed Securities Working Group. Additionally, the agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.

The agreement will be filed as a consent judgment in the U.S. District Court for the District of Columbia.

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Stopping Wall Street’s Land Grab in New Jersey


StateOfTheCityCompositeIn New Jersey, the foreclosure crisis is not a distant memory, but an ongoing crisis tearing at the very foundation of our communities. In fact, New Jersey continues to lead the nation in foreclosures, holding the largest inventory of foreclosed properties at 4.4% – with no signs of easing in the foreseeable future.

East Orange and surrounding cities, comprised of hard working middle class families of color, are the hardest hit – not because of inaction, but based on the unfortunate fact that African-American and Latino homeowners were disproportionately targeted for predatory subprime mortgages in the run up to the economic and housing crash more than 8 years ago. In its wake, the federal government bailed out the banks, instead of bailing out homeowners who were duped into these toxic deals. Since that time, federal housing agencies like HUD, Fannie Mae and Freddie Mac, have been selling distressed mortgages in bulk to Wall Street speculators, private equity firms and hedge funds – essentially paving the way for a massive Wall Street land grab and stripping what’s left of our communities’ wealth.

Just in the last five months, more than 10,000 troubled mortgages in the United States were sold at a discount to Wall Street hedge funds and private equity firms. The Blackstone Group, one of the world’s largest private equity firms, is now also the single largest owner of single-family rentals in the country. As a result, working families are being pushed out of their homes and priced out of the rental market.

As elected leaders in East Orange, we have taken progressive action to address the foreclosure crisis and stabilize our neighborhoods. In November 2014, we established a Division of Vacant and Abandoned Properties solely dedicated to identifying, registering and collecting fees and fines from agencies, such as banks and other creditors, who violate our city code. We are taking advantage of every opportunity  –including the enforcement of new state laws – that will help us to revitalize our city, boost property values and restore community pride. We recently broke ground on new affordable town homes with community partner, La Casa de Don Pedro. This project is just the beginning of revitalization efforts in the Greenwood Area of the city, a 20-block area with over 255 homes identified as vacant and abandoned. We are working closely with La Casa, Sierra House, the East Orange Housing Authority and private developers to rebuild this area and provide affordable housing options for our residents. We will also be sponsoring workshops to connect homeowners and lenders to discuss best possible solutions in lieu of foreclosure. At the local level, we are doing what we can, however, aggressive action is needed at the federal level if we are to save our communities and protect our families.

Fortunately, community groups like NJ Communities United, are organizing for this change, and non-profit housing agencies like New Jersey Community Capital, stand ready to purchase these distressed mortgages and provide homeowners with fair mortgage terms. Community Financial Development Institutions, like New Jersey Community Capital, have the resources and expertise to purchase distressed mortgages, provide principal reductions and mortgage modifications for families struggling to save their homes. In cases when it’s not possible to avoid foreclosure, these non-profit housing agencies can use properties to create affordable housing opportunities.

This is why we are joining local elected leaders across the country to demand that Fannie Mae stop selling our communities to the highest bidder. To underscore our demand, the East Orange City Council will consider a resolution, sponsored by First Ward Councilman Chris James, calling on Fannie Mae to consult with East Orange before auctioning off any more homes in our neighborhoods. We are also calling on our colleagues in cities and towns across New Jersey to join this effort.

It is past time that HUD, Fannie Mae and Freddie Mac act as partners with local governments so we can do right by our residents, protect our homeowners and stop Wall Street’s massive land grab in working class communities of color like East Orange.

Lester Taylor is the mayor of East Orange. Chris James is an East Orange Councilman

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‘The Big Short’ evokes bad memories for viewers who lived through Phoenix real estate crash

In the Oscar-nominated movie “The Big Short,” a hedge fund manager knocks on the door of a new Miami house bought with a mortgage that hasn’t been paid in months. The man who answers the door with his toddler son is renting the house and making his payments.

When the man finds out his landlord isn’t paying the mortgage, the man’s fear in losing a home for his family is painful to watch.

It’s 2006. The Florida neighborhood is half built and nearly deserted, very much like new metro Phoenix subdivisions on the fringes during the crash that started the following year.

I teared up watching the man realize his family would probably be homeless soon. So did Arizona housing analyst Mike Orr, who was sitting next to me. The same heart-breaking scenario played out over and over in the Valley back then.

That’s one of the reasons I had been putting off seeing “The Big Short,” a movie about the events that led up the disastrous housing crash.

Metro Phoenix’s housing market is a few years into a solid recovery, but my angst about the moves made on Wall Street that led to the boom and bust here hasn’t gone away.

I still flinch when someone says “subprime loan.”

The movie is all about big investment houses and banks that created those bad loans. They profited grossly from them, got bailed out when the loans failed and then the bankers behind them failed to be jailed.

But I knew I needed to see the movie. So earlier this week, I asked two of Arizona’s top housing analysts — Orr of Arizona State University’s W.P. Carey School and Tom Ruff of The Information Market — to watch it with me. Misery loves company, they say.

We met at a theater in a Tempe shopping center that opened at the end of the boom and struggled to find retailers to keep their doors open during the bust years when lenders foreclosed on 5,000 Valley homeowners a month.

I talked to Ruff often during the boom and bust and relied on his knowledge and data. He detected first the huge increase in housing speculators in early 2005 and called the peak of the boom in mid-2006, months before anyone else.

Orr, who also publishes the Cromford Report, became a valued source two years later after Ruff introduced me to him. In 2009, Orr called the market bottom for Phoenix’s housing debacle. Unfortunately, we had two bottoms — the last one in 2011 — but he called them both.

I went to the movie looking forward to catching up with my viewing companionsbut also thinking of the many, many people I talked to during the crash who desperately tried to keep their homes and jobs and far too often failed.

When “The Big Short” started, the three of us were sitting with our arms crossed and faces hardened, almost as if we were preparing for a fight or some very bad news.

We grimaced at some scenes, nodded at others that brought back bad memories, laughed at the funny lines not related to the crash, and two of us cried.



Brad Pitt, Christian Bale, Ryan Gosling and Steve Carell star in the movie adaption of Michael Lewis’ book ‘The Big Short.’

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Group rallies behind woman who lost home of four decades to foreclosure

A Detroit woman is fighting to win back her home of 40 years.

Wayne County foreclosed on Mary Sanders’ home over about $1,200 in unpaid taxes and fees.

The home was purchased for $2,300 in a tax auction last fall by Chris Meyer, a California-based developer who owns CDM Real Estate, Inc., in Ann Arbor.

Sanders says she was unaware she owed outstanding taxes. Sanders, 80, also qualified for tax exemptions based on her age and income that she says she was not informed about.

“Had they handed her that paperwork, we wouldn’t be here today,” said David Mitchell, an organizer with the Detroit Eviction Defense, a coalition of homeowners, union and community members, and faith-based activists.

The group held a rally today outside of CDM Real Estate to protest the foreclosure and sale of Sanders’ home.

Sanders offered to buy back her home for the price Meyer paid to Wayne County, plus any expenses.

Meyer says last month he gave Sanders three options to stay in the home: renting the property at fair market price, purchasing the home for $15,000 cash, or to make payments on an agreed price.

He says at no time has he tried to evict Sanders, and he thinks the price is “more than fair” given that the house is worth at least $50,000.

“You’ve done nothing to the house, you haven’t done any improvements, so the $2,300 sounds more than fair,” Mitchell said.

“We don’t expect you to take a loss; we want Mary Sanders to own her home,” Day said.

Day says he is willing to put up a fight.

“These colonizers and developers who think they can come into Detroit and throw people like Mary Sanders out of their home, or make a profit on her back, we’ve got to drive them out of Detroit; they’ve got to go back where they came from,” he said.

Tom Ewing, an Ann Arbor real estate broker, says when a bank takes over a house and it sits empty and not maintained, they often lose equity.

“It’s not necessarily a ‘win’ situation for them to foreclose,” he said.

Ewing says it is a smarter choice to allow the resident to stay and make payments until the issue is resolved.

“And that’s something that appeals to their bottom line,” says Ewing.

Day says Sanders has many community members rallying behind her, and they won’t stop fighting until she has her house back.

“They won’t have to take a loss, but if they think they’re going to make some big profit off Mary Sanders, they’ve got another thing coming,” Day said. “It’s not happening.”

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Feds: Woman pretended to be federal housing agent to scam homeowners – Chicago Sun

Cynthia Wallace, 45, has been charged with one count of falsely assuming and pretending to be an officer of the United States, according to the U.S. Attorney’s office.

In Jaunary, she posed as an official of the “Federal Housing Authority and HUD” in phone calls she made to several area homeowners warning them they might lose their homes, a federal criminal complaint alleges. Wallace would tell homeowners the government was planning foreclosure on their homes unless they wired her money.

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Mobile-home industry may get state scrutiny

Washington state officials want to find ways to protect consumers from abusive sales and lending practices in the mobile-home industry.

Their effort was sparked by a recent investigation by The Seattle Times, BuzzFeed News and the Center for Public Integrity that found that the nation’s leading mobile-home company extracts billions from poor customers by deceiving them about loan terms and charging high interest rates.

Some 450,000 people across Washington state live in mobile homes, according to the U.S. Census Bureau.

The Mobile-Home Trap

Billionaire philanthropist Warren Buffett controls a mobile-home empire that promises low-income borrowers affordable houses. But all too often, it traps those owners in high-interest loans and rapidly depreciating homes.



Kirk and Patricia Ackley spent thousands to prepare their land, then were stuck with a higher loan rate than promised. Their home was taken by Berkshire Hathaway-owned Clayton Homes in 2012. (Katie G. Cotterill and Lauren Frohne / The Seattle Times)   MORE

A bill backed by Gov. Jay Inslee and the state Department of Commerce calls for a study of how the industry sells, finances and repossesses the homes. Supporters say state laws that protect conventional homebuyers typically do not safeguard people buying mobile homes.

Commerce director Brian Bonlender said the key difference is that mobile homes are typically financed with personal-property loans.

“The consumer protections around those are much less significant,” Bonlender said in an interview. Unlike mobile-home purchasers, buyers of conventional homes in Washington enjoy extended timelines to resolve financing problems and foreclosure mediation, he said.

Inslee said in a statement he wants to “find ways to stop unfair practices that could leave some Washington homeowners out in the cold.”

Nationwide, nearly 18 million people live in mobile homes.

The Times’ ongoing investigation of the industry, The Mobile-Home Trap, has focused on Clayton Homes, a company owned by Warren Buffett’s Berkshire Hathaway that dominates mobile-home lending, sales and manufacturing. Clayton builds nearly half the new manufactured homes sold in this country every year, sells them through a network of more than 1,600 dealerships, and finances more than a third of all mobile-home loans, more than any other lender by a factor of seven.

When people fall behind on their loans, Clayton repossesses the homes and resells them.

Bonlender said the study could offer the Legislature some potential solutions when lawmakers return for their long legislative session in 2017.

The bill is sponsored by Rep. Cindy Ryu, D-Shoreline.

At the federal level, an industry-backed plan to roll back consumer protections has stalled in recent months. Last April, the U.S. House approved a bill that would raise the interest-rate thresholds at which additional consumer protections would take effect. The bill would overwhelmingly help Clayton Homes.

The proposal was also included in a larger U.S. Senate bill last year that was approved in a committee but did not make it to the Senate floor.

After a story in December about how Clayton systematically targets minority borrowers and charges them higher rates, senior Democratic lawmakers called for a federal investigation of the company.

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