TedCo Software Financial Matters Blog

I wrote last week in “Is Your Bank Safe? Is it Sound?” about BankRate.com’s bank rating service, Safe & Sound®.

Yesterday, Mish Shedlock wrote, “Don’t Count on the “Safe & Sound” Rating of Bankrate.com“, in his blog “Global Economic Trend Analysis” … and he offers a good reason.

On July 25, 2008, First Heritage Bank, N.A., Newport Beach, CA, was closed by the Office of the Comptroller of the Currency OCC and passed into Federal Deposit Insurance Corporation FDIC receivership without advance notice. The bank had a 3 out of 5 star rating from Bankrate’s “Safe & Sound” rating service.

This is enough to make one wonder about the reliability of bank rating services.

In addition to the Bauerfinancial site which I’ve mentioned in previous posts, another firm that analyzes banks, thrifts credit unions is Bankrate.com’s Safe & Sound® rating service.

Bankrate.com’s Safe & Sound® system evaluates financial firms using 22 tests to measure the capital adequacy, asset quality, profitability and liquidity (or CAEL) of each firm. You can check your bank and find out if it is safe at http://www.bankrate.com/brm/safesound/ss_home.asp

Homebuyer complaints about the slow responses of mortgage companies to borrowers’ requests for information about problems with their mortgage loan appear daily in the media. This morning’s New York Times has “The Silence of the Lenders” which offers a suggestion by Mr. Moe Bedard, president of Loan Safe Solutions, which may make your pen mightier than a telephone or email.

Mr. Bedard describes the use of a “qualified written request under Section 6 of Respa”. RESPA is the “Real Estate Settlement Procedures Act”, a Federal law which protects borrowers from unlawful activity by lenders.

The U.S. Department of Housing and Urban Development offer a sample qualified written request letter that shows what information must be included in your qualified written request for information. The sample letter is here:

HUD RESPA Sample Written Complaint to Lender Letter

The benefit for borrowers? Under Section 6 of RESPA lenders and loan services are required to acknowledge your request within 20 business days and must try to resolve the issue within 60 business days.

It’s important to remember that your qualified written request for information must not be included with your payment. It should be sent, instead, to your lender’s customer service address. You should also continue to make your required mortgage and escrow payments.

To learn more about RESPA, visit http://www.hud.gov/offices/hsg/sfh/res/respareg.cfm

I first mentioned BauerFinancial, Inc. in this blog on June 6, 2006 in a post titled, “How Healthy Is Your Bank?”

I’ve learned something today about my local community bank and the credit union I use. Both are in worse condition this year than last. Instead of “Good”, they’re both now classified as “Adequate” by BauerFinancial, Inc., the firm that has analyzed and reported the performance of U.S. banks and credit unions since 1983.

How do I know how my local bank and credit union are now faring in this down economy? I did the same thing you can do. I visited BauerFinancial’s website and read the current analysis of the two firms.

BauerFinancial reports that health of financial firms using a star rating system. The rankings are:

• Superior
• Excellent
• Good
• Adequate
• Problematic
• Troubled

What will I do with this news? I’ll not act on it right now but I’ll have something to talk about when I next visit my bank and credit union. Competition is a good thing. There’s another community bank in town that has 5 stars and ranks “Superior”.

Find out how your bank or credit union is doing:
http://www.bauerfinancial.com/btc_ratings.asp

The Federal Reserve Board has proposed rules to prohibit unfair practices regarding credit cards and overdraft services that would, among other provisions, protect consumers from unexpected increases in the rate charged on pre-existing credit card balances.

Highlights of the Proposed Rules Regarding Credit Cards and Overdraft Services:
http://www.federalreserve.gov/newsevents/press/bcreg/highlightscredit20080502.htm

The press release and request for public comments is here:
http://www.federalreserve.gov/newsevents/press/bcreg/20080502a.htm

Read the public comments of (literally) 1000’s of other citizens (most seem to greatly favor these new consumer-friendly regulations):
http://www.federalreserve.gov/newsevents/press/bcreg/highlightscredit20080502.htm

The rules, proposed for public comment under the Federal Trade Commission Act (FTC Act), also would forbid banks from imposing interest charges using the “two-cycle” billing method, would require that consumers receive a reasonable amount of time to make their credit card payments, and would prohibit the use of payment allocation methods that unfairly maximize interest charges. They also include protections for consumers that use overdraft services offered by their bank.

“The proposed rules are intended to establish a new baseline for fairness in how credit card plans operate,” said Federal Reserve Chairman Ben S. Bernanke. “Consumers relying on credit cards should be better able to predict how their decisions and actions will affect their costs.”

If you’ve ever wanted the chance to speak out against unfair practices by credit card companies and banks, this is your chance. Make your opinion known!

2.5 Gallons per day is the amount of water experts recommend a person have available in an emergency. 1.25 gallons are for drinking and 1.25 gallons are for cooking and hygiene.

For a family of four that adds up to 10 gallons per day. A full week of emergency water is 70 gallons.

Do you know anyone who has an extra 70 gallons of water stored for their family in their home ready for an emergency? I don’t.

Where did I learn about my lack of preparation for a natural disaster? I’ve been reading the Popular Mechanics “Survival Guide”.

It’s good information and includes a lot of things most of us probably don’t consider until it is too late. “7 Steps to Eat, Drink and Be Smart When Worse Comes to Worst”, “5-Minute Shutdown for Your Home,” and “5 Steps to Get Ready for Disaster (Not Stuck in It),” are some of the article titles.

If you want to prepare your home and yourself for unexpected crises, the Popular Mechnics site is a great starting point.

Here’s one to stir you up. Some bankrupt lenders are literally “trashing” the financial documents of borrowers, throwing names, addresses, social security numbers and financial records into dumpsters for any identity thief to find and use.

The consequences for the bankrupt lender? None. How do you prosecute a company that no longer exists? In businesses like these, greed trumps ethics every time.

Read the article: Bankrupt lenders throwing away your privacy

Without prosecution for this behavior, don’t expect fear of legal consequences to stop this type of irresponsible behavior.

Protecting yourself online takes work. One cannot go willy-nilly where one wishes on the Internet … there are bad neighborhoods on the ‘net. Nor can one leave one’s own doors unlocked. Computer security requires constant effort.

Most know to use locked down firewalls and to use encrypted drives with long, random string passwords which are not written on sticky notes and stuck to monitors. The careful computer users make at least two back ups on encrypted devices which are stored off site in vaults.

Now, while paranoia about losing data or losing it to the wrong person may help you be safer than most computer users, you do have to realize that being paranoid (and consequently, safer) doesn’t mean someone’s not out there trying to get you data. There are people who would love to have access to your financial accounts.

You must protect your financial passwords!

One of the best tools for keeping financial passwords safe is Bruce Schneier’s Password Safe.

Learn more about Bruce and information security at http://www.schneier.com. (You’ll be glad you did.) And if you want to secure your financial passwords, try Password Safe. “Password Safe is completely free: no license requirements, shareware fees, or other strings attached.”

The Investment Adviser Public Disclosure website is a service of the US Securities and Exchange Commission which no investor should overlook.

Using the SEC’s Investment Adviser Public Disclosure website you can search for information about investment adviser firms and their key personnel. Investment advisers must file a Form ADV to register with the SEC. This Form ADV provides some fairly detailed information about an investment adviser and its business operations. Form ADVs also contain disclosures about some of the disciplinary events which involve the adviser and key staff.

If you have a relationship with an investment adviser, you’ll want to visit the Investment Adviser Public Disclosure website and check up on the people who manage your money.

"Buy American", I posted yesterday. The news today on MSNBC.com offers another good reason. China has shut down 180 food factories for using industrial chemicals like formaldehyde, industrial wax and illegal dyes in the production of everything from pickles to seafood.