Recovery Surveyed
A survey was recently conducted by a Minneapolis based company regarding financial literacy. Basically the survey was trying to determine what questions people most frequently have for lenders. It seems from the results that what most people have on their minds is the “recovery.”
Lenders were most frequently asked by borrowers how they can raise their credit scores, reduce debt, and build savings. Most people don’t know how credit scores work, nor how to improve them. (Maybe most people never had to think about it.) A fifth of all institutions surveyed said people ask mainly about their savings accounts and how FDIC works. And one in five lenders said borrowers mostly ask about budgeting and debt consolidation.
Lenders frequently felt that the best information they had to offer was regarding IRAs and home equity loans. The company that conducted the survey feels that the results indicate that borrowers are trying to improve their financial footing.
Whether this adds up to the widespread belief in the economic recovery that they’re predicting is questionable. Had this survey been conducted a year ago, would the results have looked very different? Maybe the most frequently asked question to banks a year ago would have been “Are you hiring?” And two years ago: “Are you lending?” And three years ago … and so on. What a survey like this needs to show are trends. Not snapshots of information. It’s extremely tricky to draw conclusions from isolated data. The best way to really see how the national mood has shifted is to compare these results with ones from previous periods.
We’ll just have to convince ourselves for now that recovery should be on everyone’s mind.
It would be a good idea to show trends. It would also be good to know how many people were surveyed and in what part(s) of the country those who were surveyed reside. You may get very different responses from those surveyed depending on what part of the country they’re in.
Kelly H., Virginia
I try and stay away from these so called “Surveys” as they can be manipulated to reflect what the surveyor wants it to. As for the recovery, this is not a good time to be placing ones faith in the results as it is way too early to judge any of the results being seen. Far too often you will see a smooth trend back to recovery when in fact it is only a small fluctuation disguising yet another big swing in the wrong direction. At this time, there is far too many issues unresolved out there to make an honest recovery last. Ask me recovery questions in another 6-9 months.
The only trend I have noted is the onward trend toward more forclosures., with a second phase (beginning 2010) and a tertiary surge in forclosures predicted to begin in 2011 and extend into 2012. I We still have alot of inventory coming into forclosure.
I have noticed a lot more foreclosures. I know it’s hard work and I am still trying to get going. I know it’s the fear factor especially getting lenders and knowing I have the security there that I am going to need. Just bare with me and with your help I can finally do the thing I want most (help people in their time of need.
Recovery? Well I think the results of the survey above at best reveals scarcity. The way it was designed, I think they already knew what answers would be..does the FDIC cover me or not. Although I think it’s more of a lagging indicator. What do I think, well I’m not convinced that we really are on the way to a real recovery quite yet, although it was good news about 6 straight month of increase in manufacturing(a leading indicator). Future inventory levels will reflect more of an accurate picture. With fairly large increases in 90 day deliquencies of Frannie & Freddie loans each roughly 2-2 1/2 times the number (Nov ‘08 to Nov ‘09) and with prime loans defaults accelerating. I think it’s going to take a number of quarters for the dust to settle. Although in my home state of California, Median sales price of homes in Coastal Southern California and the Bay Areas have increased and unemployed is dipping, the Inland Empire and Central Valley are down more than 10%. So real recovery, not at least for another year or two. Don’t even get me started on what’s going to happen with commercial real estate loans in the next number of months.
There are many entities voicing opinions, but keep in mind they are formulated for their self interest. We as responsible members of society must observe the environment within our “Sphere of Influence”. For it is from this perspective we can do the better good.
Ivry
Yes recovery should be on everyone’s mind and those of us involved in real estate have a new mission to help reduce the large inventories of distressed properties. This will further the recovery and help our economy. Let’s get this software ROCKING and move this country forward!
This indicates the problem with the education system especially in this country. When I graduated from high school as an honor student, I had no idea how important a credit score would be. I had really no clue as to entrepreneurship or being a business instead of just working for one. Get good grades, go to college, get a degree… become a good employee. It’s a joke. I’m not surprised people don’t understand. The only time it’s even considered is when they need a loan, and by then it’s usually too late.
Since we don’t know how the survey questions were worded, it is hard to know whether the survey really tells us anything at all. Based on the wording, it sounds like most of the institutions were traditional banks which could also skew results. Also, which employees of the lending institutions were polled?
I would think a better survey would be polling people after they finished visiting a loan officer.
Craig S., California
I’ve always wondered who got surveyed when there is a write up indicating that the reason they took this off the market or they changed the fries. I know I’m not the only one that wonders that same thing, I’ve had long talks about this subject. It may seem like a simple survey but in the long run it changes things and usually in my mind not for the better.
Darryl W. Oregon
I used to work for a survey company back in the late 70’s, just before another recession, when silver shot into the high 20’s. My job as a field representative was to go into peoples homes and even though most of the times the questions were given in such a way as to not influence the outcome, that was not always the case. So I would say that the survey information is as good as the person writing the question and whether or not they influenced the answer by there formatting of the question. One thing I learned from that experience is that surveys in many case aren’t worth the paper they are printed on. IMHO When we come out of this recession the pundits can’t agree on because so many parts of the country have their own particular economic climates, for instances how many places have been affected by the closing of auto plant?
Well, it looks like the only recovery is in the industries who received bailout money. AIG along with the other bailouts are giving huge bonuses to their top executives so I’m sure the ones receiving the bonuses are “recovering” quite nicely.
I believe we are a long way from “recovery”.
When I hear of surveys and there results it is sometimes difficult to interpret where they are coming from… from what perspective? The word ‘recovery’ is something we hear a lot about and there are “some signs” that things are getting better. Unless someone actually researches and follows the financial reports, there is less knowledge of what the ‘true’ picture is… there is still a huge amount of people unemployed therefore a huge amount of potential upcoming foreclosures and not just in the residential market…. there is a mounting commercial foreclosure market as well. So when hearing the word ‘recovery’ it might pertain more to today, but what will tomorrow bring? I think it is more a sense of what people may hear in the media and may be hoping for.
Tim P., North Carolina
You know, I think financial fitness should be taught at high school level. It’s amazinghow many young people have no idea how to even balance a checkbook, much less understan credit ratings, retirement planning, fiduciary instruments, etc. If kids were taught even the fundamentals of personal finance management, it would fare so much better for them in later life.
Very well said. History tends to repeat itself. If you are knowledgeable of the past, you will have much better insight to prepare oneself for success in every aspect of life. The survey questions/answers seem to indicate that we are all stepping up to learn more about financial responsibility now and in the future.
Let’s see if my browser doesn’t crash this time just as I was ending my comments….
There are a lot of good points here. It seems to me that overall most of us haven’t received a quality education in financial literacy…otherwise we all and our country would be in much better shape, I think.
It would be very helpful to see a study on trends over a longer period of time, including those you mentioned above, Cory. It would give us a much closer picture of the truth in regards to the financial climate, and perhaps as someone mentioned above, taking a look at different parts of the country and urban and rural areas to see how the outlook varies or where there are similarities.
Well the trends that I see coming are definitely more foreclosures on the market. A friend of mine spoke with the VP of Bank of America (Mid-Atlantic Region) and noted that they are about to release 43,000 homes that they have been listing as assests ever since the Obama Administration has been put in. They have been asking them to hold on to them until now and they are getting ready to put them back into theh market place so get ready everyone, they are coming. Can you imagine 43,000 homes being released and that is from just one Financial Institutions? I wonder how many the other large Financial Institutions are holding in addition to these 43,000? It should make for some good deals hitting the market soon.
Neal B. , North Carolina
It just goes to show you how uninformed the public is. Imagine asking a LENDER how to raise your credit scores, reduce debt and build your savings. Lenders don’t want you to reduce your debt or build your savings.
I think we need to not read to much into this survey. I would like to see all for questions in the survey and administer the survey in large cities and small towns throughout the US. Recovery? Well maybe somewhere. The second wave (forclosesure, REO) of this market will hit soon.
I think it is a great idea to include trends when conducting surveys of this sort. It would be great to see the dynamics that went into the survey. Who, what, where were surveyed. Unfortunately, surveys sometimes tend to be biased.
It appears so much credence seems to be placed on ’surveys’. The results would be skewed at best, given the many variables involved, i.e., what questions were asked, in what context, the background of the folks asked the questions, etc. Based on what we are seeing in the marketplace, there are many more foreclosures coming.
Linda B., Texas
I think that surveys tend to be one dimensional in regard to covering the majority of lifes real problems. I’m a LO and the people I talk with who have been into a bank and turned down want to know can they refinance at a lower rate. Secondly, is it possible to pull cash out and third, will they be able to get a lower rate. It is hard to believe that the majority of people with the economy the way it is at this moment is not asking these things first. So, much for surveys…. LOL
I think it’s good that people are trying to get educated on financial matters. Myfico.com is a good place to learn about credit and FICO scores. When we have an understanding about how things work, like the FDIC and how our savings is protected, then the fear factor can be diminished. Part of the state of the economy is due to realities such as job loss but other factors include people being cautious about spending due to fear.
While I agree that the surveys need to show trends, I so believe that surveys are wonderful if used and targeted correctly. They give indepth and vital information to the researcher. We cannot focus on the past we must focus on the present and the future to deal with the prolems ar hand. The questions being asked to lenders by current homeowners tells us where our services need to be positioned, to assist that homeowner out of their issues and to even know what the issues are. Credit Scores are a huge part of the problem its the reason why thousands of people cannot get re-financing in place to stop foreclosure!
Lenders are not trained or positioned to assist the homeowner with the credit, deb, or budget issues leaving them helpless when a crisis arrives with no life raft. Education to the homeowner about his options is paramount in fixing the problem.
I honestly find most surveys to be misleading. As someone with a background in psychographic data sampling and extrapolation, a survey can be created and manipulated to show just about anything. Are the questions the same? How large was the sample size? What types of banks used the survey? Which region? What time of day were people asked? What types of branches? What was the average net worth of the person surveyed? Any of these questions and several more could be used to skew or gloss over the results.
All of this is to say that anecdotally, I’m sure everyone is focusing on economic recovery. However, that focus is not a reinforcement of “financial literacy,” nor is it an indicator for improvements in the economy. Economic spending is highly psychological–it has to do with how people THINK and FEEL that they’re doing, and as long as they are worried about losing money, losing their homes, and losing their jobs, economic reality will lag and there will be plenty of opportunities for the well-positioned investor.
The only thing that lenders can and should do is their jobs–loaning out money and collecting interest (particularly to small businesses). Anything else is irrelevant noise that obfuscates the poor job that they’re doing with just that.
However, I will agree with the post above me in that there does need to be a much larger set of financial education options for the average homeowner. Unfortunately, the best time to learn is on the grade, middle, and high school level, and most people make their mistakes long after that.
I agree with Shari among others. Surveys can be helpful but they are easy to manipulate (trying not to be cynical). Education for homeowners is very important and I find that most of my clients have been misinformed and scared by much of the information out there. I specialize in short sales but educate my clients in their options, from loan mods to foreclosure procedures. Fear paralyzes– Education tends to drive out fear.
I think IRAs and home equity are good ways for home owners help themselves in this economy. however the home owner needs to be responsible with the loan. home equity could eventually led to a financial nightmere
Isolated data is very dangerest. It’s like taking things out of context. It is not responsible reporting if the data is tailer to get a perceived result. If we are looking for trends, we need to look at all of the data for a long period of time. We need to be ready to specified a period of time for a given trends.
Many outside, uncontrol factors could influence the data, and they should be noted
The personal IRA is an absolute gold mine if you know the rules. You are allowed to take a withdrawal from the account and invest it in anything you want. Not news, well what about this. All, let me repeat, all profits are tax free.
Do you understand the implications of that. If you withdraw say $1K and invest in Freedom$oft all profits made from that investment are tax free.
Of course you won’t be putting all of the profits back into the account but just think about the snowball effect in earnings the IRA will have with the profits you do deposit.
Your future is set in stone with Freedom$oft anyway, but with an IRA you can put aside a fortune tax free to grow your future.
When you go on that lastextended vacation for the rest of your life. All that money is waiting for you.
In my opinion, concerning home equity loans, the only reason anyone should get one is if they plan on using the money to make more money. One of the contribuing factors to forclosures right now and especially to houses underwater was lots of people taking out additional equity loans on their house because “times were good, lenders were lending, and they just figured it was more free money”!
IRA’s and Home Equity Loan do have their place. If you already have those set up and they can assist the homeowner out of their current situation that can be a saving grace for some. But a lot of people do not have an IRA set up and again CREDIT SCORES even on Home Equity Loans can stop that dead in it’s tracks, you still have to QUALIFY for that money! It’s the qualifying that is stopping a lot of people from their options. I think lenders should have a division that helps educate and assist with peoples credit scores,that should go hand in hand since that is a big part of the qualifying criteria. I think an IRA is a great thing to have, but most middle class american families do not have one, maybe their job does not offer that and they don’t know enough about them to seek one on their own or thei are just not making enough xtra money to support an IRA account to begin with. It is so expensive to breathe these dys for lot of people. Home Equity has also been turned upside down so that may be a bit of a struggle to access at this point in time, hopefully when we get this fixed the market will return and that will again be profitable.
OOOOH Cory, I think you touch a nerve in me with this one.
As for asking a bank lender how to raise credit, reduce debt and build savings, banks will give advice that best serves the bank, ( in the long run they take more of the customers money). Those questions should be directed to a financial councilor.
Here is what I feel about the following:
1) As for budgeting, Thats good, but you have to stick to it.
2) when it comes to debt consolidating, by all means do it, but if your just going to go out and blow all that new found money, why consolidate in the first place.
3) Individual retirement accounts (IRA), great place to put some of that newly found money you have when you consolidated debt.
4) And for the home equity loan, Most of those are interest only payments and last about 10 years, it’s a great loan to get, but the principle should be paid down during the 10 years, when the money is tight in some months just make the interest payment, but don’t make it a habit. After about 5 or 6 years, start looking for a fixed low interest loan and refinance before the 10 years are up.
As you can see, if you use your head and have some discipline, you should be on the prosperous side of life, but if your always saying ” I’m not going to deny myself this or “I want that”, when you don’t really need it but put it on credit any way, you are going to be on the poverty side of life.
As you all know, I tell it like it is, too many people don’t like to hear the truth because they don’t like to be wrong. Well lets all stop the pity party and learn from our mistakes.
Yes, this post may sound crude, but like I always say at the end of my posts, Im not a politician, I don’t have to be politicaly correct.
It seems to me that there are a number of people that are looking to refinance their mortgages and may be having some trouble doing so because of their credit scores. I know there are some credit card companies out there that as soon as you get a little ahead with paying down your credit cards, they lower your limit, which doesn’t help your credit score.
The survey reflexes how many people are think and feeling in these hard times, but years ago most people never thought about there credit score and how to fix it. In a few years it will be back to don’t know don’t care. Everything is on a circler trend and right now it is on the down. Every twenty to thirty years we hit some down turns then the up turn comes up and people forget the past. They say “Let the good times roll” then they pay for it later. If we learn from the past or see the trends coming then we can avoid the down time or make it work for us as the rich do.
surveys have their own inherent biases, so one must always look behind the curtain….who is asking the questions, what are their motives, what are their biases?
even someone who takes a something as innocuous as a photograph has a “vision”..and they show their viewpoint and outlook on the world. information is not objective.
It is a shame we don’t spend quality time in our schools teaching about the necessary daily life skills to function in today’s world. Where to invest our money, dealing with credit issues, qualifying for a home loan, insurance coverages and many other issues are not being taught in our public schools. We are doing the Dave Ramsey series in our church and have made my two teen age kids attend as well so they pick up things I and the public shools often over look.
Most people are hopeful that a recovery will happen but I’m not holding my breath. At a time when we should be downsizing our government those in Washington want to make government larger by raising our taxes. I don’t think its a good idea the focus should be on job creation and lowering foreclosure rates.