NHLA Blog

Legislation was recently introduced that would expand the existing $8,000 First-Time Homebuyer Tax Credit.  See H.R. 2801 highlight below.

Under this proposal all homebuyers would qualify, not just new or first-time homebuyers.  Additionally, it would eliminate the existing income qualifications.

It appears to have bipartisan support, including that of Banking Committee chairman Chris Dodd, D-Conn.

Remember, the existing First-Time Homebuyer Tax Credit is set to expire 12/1/09.

Stay tuned and review the links on our website on this topic.

http://www.nationalhomeloanadvocates.com/UseTaxCreditForDownpayment

http://www.nationalhomeloanadvocates.com/TaxCreditStatePrograms

http://www.ncsha.org/section.cfm/3/34/2920

H.R. 2801 Highlights:

While many fear the imminent inflation risk of the Feds current monetary posture, I do not see inflation or higher rates on the horizon anytime soon.

While earning a degree in Economics, I learned the classic definition of inflation as; "too much money chasing too few goods".  While the Fed is doing everything it can to spur the "too much money" part of the equation, banks and households are absorbing it more than pushing it into the economy... thus we don't have the "chasing too few goods" in the equation yet. 

In other words, the Fed is doing what it can to lead the horse to water, but that is all it can do with it's monetary arsenal.  And, the horse really doesn't want to drink at the moment.

However, it is worth noting that businesses have done a phenomenal job at managing inventories down and it wouldn't take much of an uptick in consumer demand to strain supplies and spur some inflation.

So what has become clear is this two-sided nature of the problem that won't be resolved anytime soon- in our opinion.

Side One:  Banks reduced willingness to lend... both from a need to shore-up balance sheets in the face of credit markets that are still very unhealthy.. as well as, from a risk perspective... lending into the face of a recession with 10% unemployment and declining residential and commercial property values is not an optimal lending environment.

Side Two:  Consumers reduced willingness to borrow... households already saddled with enormous amounts of debt, facing or dealing with unemployment and declining home values... are pulling-in their spending.  Even if consumers wanted to borrow, side one is not very willing to stick their neck out right now.

This dichotomy was evident in the Fed's last survey of bank loan officers.. showing that more banks had tightened their lending standards than had eased them, albeit somewhat more accommodative than the spring survey.  The banks will argue that they are doing what they can, but "side two" is not willing to borrow.

This double whammy against credit growth will likely keep its target interest rate near zero for a long time, and at the same time, not cause inflation anytime soon.  Households are more interested in shedding their debts and banks are only willing to make safe bets when lending money since they are increasingly having to hold on to the loans they make instead of packaging them and selling them as an ABS (Asset Backed Security).  ABS issuance is down 72% below what is was just two years ago.

Something else that is an undertow to growth is the current demographic shift in the U.S., and it is not mentioned too often.  As the Boomer generation is moving into retirement, they will be spending less- just at a time when we could really use some spending.  There is a big population gap between the Boomers and the Millennials (or Gen-Y).  The Millennials really wont hit their stride in spending for another 10-years.  Although, you can see certain stimulus programs aimed directly at pulling this spending forward... ie... tax credits to buy homes for "firstling homebuyers".

This too will pass of course, but I do not see anything changing in the near-term with the U.S. consumer situation... and they make of over two-thirds of GDP.

www.nationalhomeloandvocates.com

U.S news uses their own database of 2,000 towns and cities in the country. Their rankings are based on the best combination of:

• Safe neighborhoods
• Family fun and recreational activities
• School systems

1. Virgina Beach, VA
2. Madison, AL
3. Overland Park, KS
4. San Jose, CA
5. Boston, MA
6. Rochester, MN
7. Cedar Rapids, IA
8. Denver, CO
9. Plano, TX
10. Edison, NJ

Link to the full article and slide show on Yahoo Real Estate:

http://bit.ly/1acWFB

Did you know that college bills for children born in 2005 could exceed $183,365 for a public university or $375,966 for a private institution?¹ With a price tag like this, paying for your child’s education may seem nearly impossible. However, with the right planning, you can potentially achieve success in saving for one of life’s most costly undertakings.

There are many savings plans out there aimed at helping with education expenses including Coverdell education savings accounts, custodial accounts, 529 college savings plans, trusts and personal savings accounts. In the following article, however, we are going to focus on the ins and outs of 529 plans.

A 529 plan is a state-sponsored education savings program and almost every state offers at least one plan. While parents and grandparents are the most frequent contributors to this kind of savings vehicle, you can still contribute to a 529 plan even if you are not related to the beneficiary. Unlike other educational savings plans, 529s have tax and estate planning benefits that may make saving for a child’s education a smart investment strategy for you as well.

Tax Advantages: The earnings in your 529 plan accumulate tax free. That means that when you withdraw assets and use them for qualified expenses at a participating college or university, your earnings are not subject to federal taxes. If you invest in your own state’s plan, you may also enjoy certain state tax benefits. But remember, if you need to withdraw proceeds for non-educational expenses, the IRS will tax your earnings at your ordinary income tax rate plus a 10% IRS penalty.

Estate Planning Advantages: When it comes to your estate plan, the amount of your gift placed in a 529 plan – and any future appreciation – is taken out of your taxable estate. In addition, if you are married, you can invest up to $120,000 per beneficiary in a single year in a 529 plan without incurring the federal gift tax. If you’re single, the limit is $60,000. Keep in mind that this strategy utilizes five years’ worth of your annual gift tax exclusion amount (which is $12,000 per recipient for 2009), so you would not be able to gift to that same beneficiary again for another five years without incurring gift tax consequences. In addition, the funds will take five years to become completely excluded from your taxable estate; each year, an additional $12,000 will be removed. A portion of the gift may be subject to recapture if the donor dies before the 5-year period has passed.

You Maintain Complete Control: Although 529 plan contributions are immediately excluded from your taxable estate (unless you use the five-year accelerated gift option, in which case it will take five years to be fully excluded), you maintain ownership and control of the account. As the account owner, you – not the beneficiary – approve all investments and withdrawals and you also have the freedom to change your beneficiary to a relative of the original beneficiary without penalty. Additionally, you can name a successor owner on the account so that control passes at your death to that successor owner who would then have the same control over the assets that you had.

Getting Started: Many 529 plans require an initial investment of as little as $250. And, after that you can generally make additional contributions of as little as $25 or $50 at a time. Once you begin setting money aside for your child’s education in a 529 plan, you can leave the investment decisions to the experienced professionals that manage the plan in the state that you choose. Depending on the particulars of your plan, the investment options may include individual mutual funds, age-based portfolios with asset allocations that change over time, or set portfolios in which the investments stay the same for the duration of your holdings. Please consider the investment objectives, risk, charges and expenses carefully before investing in a 529 savings plan. The official statement, which contains this and other information, can be obtained by calling your Financial Advisor. Read it carefully before you invest.

While it may seem like quite an undertaking to finance your child’s education, if you begin now when your child is still young, and save on a consistent basis, you will reduce the amount you must pay out-of-pocket and make education costs less of a financial burden in the future.

[1] www.collegeboard.com, March 14, 2006

This article was written by Wells Fargo Advisors and provided to you by Justin Latvenas CRPC®, Financial Advisor in Marlton, NJ at 800-395-8537. For More information please visit the team website at www.harmandharm.wfadv.com

You can also reach Justin at Justin.Latvenas@WellsFargoAdvisors.com

Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE

Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.

We will likely see two bottoms in the housing market on our way to stabilization.

1)  Home Sales

2)  Home Prices

We will see (and are starting to see) stabilization in #1 above, which should lead to stabilization in #2.

Now, there are still some big issues out there that will prevent the market from going gangbusters for some time. The U.S. consumer is de-leveraging, there is a ton of housing inventory we have to go through (including the shadow inventory on banks' balance sheets) and the banking system is still recovering from a near fatal set of conditions. In other words, stabilization at current levels or slightly higher is the most likely course of events.

This is the first month to month increase we've seen in a long time, so its too early to call it a trend. But when that increase is combined with the steady sales pace we've seen along with the bottoming exhibited in the above charts its looking like a bottom might actually be in.

The existing home sales chart has two important areas. The first lasted from roughly October 2007 to October 2008. Notice that during this time sales were relatively steady. Then came the downturn caused by last falls financial crisis when sales dipped. But now we're again seeing signs of stabilization.

New home sales have been dropping for three years. But notice that sales levels have been consistent since the beginning of this year. In addition, sales ticked up 11% last month.

Like new home sales, housing starts experienced a long decline. But, they have been steady since the beginning of the year (albeit at a low level).

Finally, we have the Case Shiller price index:

Prices are still declining year over year. However, notice the rate of year over year decline has turned upward -- meaning the rate of year over year decline slowed last month. And the reason is the month to month prices rose last month:

U.S. home prices rose in May on a month-to-month basis for the first time since July 2006, according to the national Case-Shiller home price index released Tuesday.

On a month-to-month basis, prices in 20 selected cities rose 0.5% in May, with increases in 13 cities, compared with a decline of 0.6% in April.

There was nothing but good news in the Weekly Mortgage Applications Survey this morning. 

Refinance demand climbed 6.9% the week ending 8/14.  The large swings over he last month have caused refinance application volatility, while purchase activity was not deterred.

Mortgage rates vary across the country but the state average is at historically low rates in all 50 states. According to a report from Zillow.com published yesterday, lenders in Washington and California offer the lowest rates with an average of 5.25%, while rates in Illinois are currently the highest at 5.44%.

Historically low rates combined with home prices and affordability are driving the market into the unemployment and other economic headwinds.

For the first time since the recession began at the end of 2007, the quarter-to-quarter growth rate for national mortgage delinquency shows a decrease, according to TransUnion. 

Although mortgage delinquencies continue to go up, the rate of increase has decelerated. This is particularly noteworthy, in that delinquency statistics are generally lagging indicators of the economic environment.

TransUnion.com says that the proportion of homeowners who are 60 or more days late paying their home loan rose during the second quarter to reach 5.81 percent. In the first quarter, 5.22 percent of borrowers were late.

This is the 10th quarter in a row that delinquency rates have increased, and the new figure is an all-time high, the report states.

Highlights:

• Home prices fell for the 10th consecutive quarter.
• Rate of decline has flattened.
• Home prices are down 12.1% year-over-year.
• In 39 of it's 161 markets, home prices increased.
• 29% of home sales were are prices less than owner paid.
• 22% of sales were on foreclosures.
• 23% of homeowners owe more than the value of the home.

The Seattle-based real estate services company provides on-line information on home values in a number of markets based on a metric using information on recent sales and data on local assessments to compute “Zestimates” which are used by consumers to judge the value of their homes and those of their neighbors.  

Based on its huge data base the company also provides a quarterly Home Value Index which its press release compares to the Case-Shiller and Federal Home Finance Agency reports.

The second quarter 2009 report was released last week.  It reported that, while home prices have continued to fall for the 10th quarter in a row, the rate of decline has flattened significantly.

U.S. home values were down 12.1 percent year-over year to an index average of $186,500.  This is a smaller year-over-year change than the 12.4 percent decline reported for Quarter 1 and much of those losses occurred early in the quarter.  Prices fell less than 1 percent from May to June.
Total home sales were down 23.7 percent in June compared to June, 2008 but sales were actually 3.8 percent higher in June than in the previous month.

The Zillow data covers 161 metropolitan statistical areas.  In 39 of these markets home sales year-over year increased and in 142 markets the rate of declining sales has been lower than the previous reporting period for at least three consecutive quarters.  Of the 39 markets marking increases, some such as Miami-Fort Lauderdale, Los Angeles, and Phoenix were among those hardest hit when the market crashed.

There was not, however, good news everywhere.

Zillow reported that 22 percent of all sales in June were of properties that had been foreclosed by a lender and 29.2 percent of homes sold that month brought in less than their owners had paid for them.   Even homeowners who are staying put are still being hit hard; Zillow reported that 23 percent of all owners of single family homes owe more on their mortgages than their homes are worth.

One of Zillow’s more interesting findings was the amount of pent-up inventory that may be waiting in the wings.  29 percent of the homeowners who responded to the Homeowner Confidence Survey portion of its report indicated that they would be somewhat likely to put their homes on the market if they saw signs of improvement.

As foreclosures continue to rise, they are predominantly taking place in 3 states.  In fact, the total of these 3 states accounts for more foreclosures than all other 47 states combined.

Where are they?

CA    Accounts for 30% of all foreclosures

FL     Accounts for 16% of all foreclosures

AZ    Accounts for 5% of all foreclosures

It should be noted that NV actually leads the country in foreclosures per household.

We post a blog article similar to this each month as a reminder that foreclosures (and housing markets in general) are a very local dynamic.  In fact, you would find pockets of strength in the states mentioned above.

Statistics from RealtyTrac.com

Every homeowner needs to carry homeowners insurance. After all, your home not only provides a roof over your head, in most cases it’s the largest asset on your personal balance sheet. Come what may — whether it’s a tornado, fire, theft or other catastrophe — homeowners insurance offers peace of mind and the confidence in knowing that you are covered.

Generally, homeowners insurance is optional only if you own your home outright. If you have a federally-backed or insured mortgage, your lender will require you to maintain a minimum amount of replacement insurance to protect their investment in the event your home is damaged or destroyed. But even if your mortgage is paid and you own your home, it’s important to keep your homeowners insurance just in case something happens. Without a policy in place or a sufficient level of coverage, you might not be able to repair or rebuild your home, or replace property if something unpleasant does transpire.

So, what is covered by homeowners insurance? A basic homeowners policy covers damage that occurs as a result of a host of “named perils” spelled out by your insurer, which may include wind, hail, fire, theft and other events. Losses of personal property or possessions are also included under homeowners insurance. Typically, a standard policy pays replacement value of structures on your property, such as your home and garage, and provides an additional 75 percent of your home’s appraised value to account for loss of personal property. However, your policy may contain limitations on the replacement value of items that fall under the following categories:

• Jewelry and furs
• Silverware and goldware
• Business property
• Home computers
• Firearms

If you own personal property in excess of 75 percent of the value of your home, or in excess of standard limits in any of the above categories, you should consider purchasing a rider or endorsement to guarantee comprehensive coverage. The trick is to find the right balance so you are not under- or over-insured.

Ask yourself the following questions when purchasing homeowners insurance:

• Does your policy readjust the replacement value of your home annually to reflect changes in value due to inflation or other factors?
• Do you need a separate policy because your property is in an area predisposed to a special hazard such as flooding or earthquake?
• Does your policy include liability coverage for accidental injuries that might occur on your property?
• Do you need a rider or endorsement for valuable items for which replacement costs would not be covered under a standard policy?
• Do you own a special breed of animal that might require a special rider to ensure liability coverage for attacks on your property?

Keep in mind that not every natural disaster is covered by homeowners insurance. Flood and earthquake losses are not covered by homeowners insurance and require separate policies. Go to FloodSmart.gov to assess the risk of flooding where you live and determine if you should purchase flood insurance. The National Flood Insurance Program was created by Congress to help homeowners insure their properties against conditions that could result in flooding and water damage. To qualify for this insurance rider, you must live in an area that has agreed to meet certain standards for reducing the risk of flooding. If you live in California, you can assume you need some form of earthquake coverage. Learn more about earthquake insurance from the California Earthquake Authority at earthquakeauthority.com.

To find a reputable insurance company, check with independent rating services such as A.M. Best Company and Standard & Poor’s. Friends and family are often a valuable resource for insurance company recommendations, especially if they have had experience filing claims. Laws regarding homeowners insurance vary by state, so be sure to consult with a knowledgeable agent who can help you review your insurance needs and state requirements.

Making sure you have adequate homeowners coverage is just one step in protecting your financial future. Enlist the help of a financial advisor to review your insurance policies and other emergency contingency plans.

Jim Larkin, CFP^®, CRPC^®

Financial Advisor

CERTIFIED FINANCIAL PLANNER™ practitioner

Ameriprise Financial Services, Inc.

1308 Village Creek Drive | Suite 2000 | Plano, TX 75093

Bus: 469.865.1050 | Fax: 469.865.1010

E-mail: James.k.larkin@ampf.com

Website: www.ameripriseadvisors.com/james.k.larkin

###

This column is for informational purposes only. The information may not be suitable for every situation and should not be relied on without the advice of your tax, legal and/or financial advisors. Neither Ameriprise Financial nor its financial advisors provide tax or legal advice. Consult with qualified tax and legal advisors about your tax and legal situation. This column was prepared by Ameriprise Financial.

Financial planning services and investments offered through Ameriprise Financial Services, Inc., Member FINRA & SIPC.

©2009 Ameriprise Financial, Inc. All rights reserved.

File # 87699 8/09

This communication is published in the United States for residents of Texas, Louisiana, Arizona, Colorado, Florida only; and this advisor is licensed only in the states of Texas, Louisiana, Arizona, Colorado, Florida.

At least one thing in the mortgage market is back to normal.. it is no longer cheaper to get a fixed rate mortgage than an ARM.  This trend started to emerge again late spring. 

As an example, the difference between a 30-year fixed and a 5-year ARM is 1.2% (on a national average).  That difference 90-days ago was close to .8%.  Average national rates as of 8/6/09:

5/1 ARM             4.23%                  

15-Year Fixed      4.55%  

30-year Fixed      5.31%

That being said, borrower's should be very clear on their goals.. ie how long do you plan on staying in a home?  Do you anticipate any changes or transfers in your job?

With rates at all-time lows, it is easy to make the case that a borrower should still take a 15 or 30-year fixed mortgage to mitigate the risk of higher rates in the future. 

If a consumer was sure to be in a home for only 2-3 years, a 5/1 ARM may be the right choice to optimize mortgage financing.

We still suggest to most that current mortgage rates are so low that a fixed rate makes more sense, given the fact that most experts expect the amount of current government stimulus will eventually work into the economy as inflation.. which leads to higher rates.

But, normalization in the spread between ARMs and fixed rate mortgages is yet another sign that credit markets are restoring to healthy conditions.

In a recent potentially precedent-setting decision, New York Supreme Court Justice, Joseph Maltese, denied a bank’s motion to foreclose on a sub-prime mortgage due to several predatory lending violations.

In the LaSalle Bank N.A. v. Shearon Case (No.100255/2007, 2008 WL 268449), the lender LaSalle Bank, moved for summary judgment in its foreclosure action against David and Karen Shearon. Not only did Justice Maltese dismiss the foreclosure action by the lender, but also granted the homeowners summary judgment on their counter claim that the lender violated New York predatory lending law.

The Judge ordered a hearing to assess damages against the bank. The borrower may be entitled to receive damages including all of the interest paid, the closing costs charged for the loan and a refund of any amounts paid. Because the bank engaged in predatory lending practices, the mortgage and loan may be voided, thus stripping the lender of any right to collect, receive or retain any principal or interest. This also gives the borrower the ability to recover any payments made under the agreement.

Borrower Claimed Predatory Violations

David Shearon alleged that the original lender had engaged in six predatory lending practices through the loan closing process on his Staten Island home.

1. Excessive financing was approved (106% of the purchase price) to allow closing costs to be financed.

2. Inadequate due diligence regarding Shearon’s ability to repay the loan.

3. The lender intentionally placed Shearon in a sub-prime loan to the benefit of the lender with excessively high interest rates.

4. Failure to provide federally mandated disclosures.

5. Forgeries of numerous loan-related documents.

6. The lender repeatedly employed coercive tactics 

Court Acknowledged Predatory Violations

The New York Supreme Court found that the bank had committed at least three predatory lending violations of the New York Banking Law.

1. Points and fees financed on the Shearon loan equalled nearly 5.4% of the total loan. The court held that the original lender, by financing fees and points in excess of the 3% allowed had violated the statute.

2. The court found that the original lender did not even attempt to demonstrate that they had performed their due diligence in determining the borrower’s ability to repay the loan. Not providing this due diligence is a violation of New York banking law governing high cost loans.

3. The court held that the original lender also failed to comply with the so-called "Counseling Statue" of the banking law by not providing a "Consumer Caution and Home Ownership Counseling Notice" with a list of credit counselors.

Details of the Purchase

In January 2006, Karen and David Shearon bought their first home in Staten Island New York for $335,000. The sales contract however, listed a purchase price of $355,100.00, which included a $20,100 "seller’s concession" used to pay closing costs associated with obtaining the loan. The sale was ultimately financed with two loans. One loan for $284,000 with a fixed-to-adjustable rate feature, and a second for $71,000 at a fixed rate in excess of 10%. Total points and fees financed on the loan were approximately 5.4% of the total amount borrowed.

Although the Shearon’s combined annual income was only $30,000, their mortgage broker assured them that they would qualify for traditional loan products with fixed interest rates and that he was "shopping around for the best rates." Despite their strong credit scores, and the assurances of their broker, the Shearon’s were given a high-cost loan typically assigned to sub-prime borrowers.

The borrower’s attorney said his clients tried to back out of the loan prior to closing but were told they’d lose their $5,000 deposit and could be sued if they didn’t go through with the agreement. They had also already given up their apartment lease. "I feel that I was bullied into accepting the way it was," said David Shearon. They ended up closing the loan with WMC Corporation.

Less than two years after closing their loan, when the Shearon’s failed to make their monthly mortgage payments, LaSalle Bank as loan trustee and successor to the original lender began foreclosure action. In defense of the foreclosure action, Shearon argued that he was the victim of predatory lending practices..

Why This Decision is Important

This court case has been followed closely and will have a significant impact on the future of predatory lending for a number of important reasons.

Establishes a Defense for Borrowers Undergoing Foreclosure

This is the first time in New York that a judge has invoked those predatory lending violations against a lender, and it could signal a shifting tide in how foreclosures are handled. James Tierney director of the National Attorneys General program at Columbia Law School said, "Trial judges across the country are beginning to question banks seeking to foreclose on homeowners in similar situations."

This decision will encourage other borrowers and their counsel to wave the red predatory lending flag in response to foreclosure proceedings. One copycat suit, Alliance vs. Dobkin (No. 10625/2006, 2008 WL 1758864), has already received national attention and although this case was unsuccessful because the judge ruled that predatory lending practices were not employed, you can be sure that many more will follow. Expect for many undergoing foreclosure to use this same tactic.

The Warning Message Has Been Sent

Although damages have not yet been assessed, many are shocked by the extent of the damages that may be awarded to the borrower. Damages may include returning all mortgage payments and expenses to the borrower, awarding attorney’s fees and voiding the bank’s mortgage and loans. The scope of the possible relief in this decision makes it very clear that judges are taking predatory lending very seriously.

Margaret Becker, director of the Homeowner Defense Project at Staten Island Legal Services said, "It is very encouraging that judges are clearly taking the issue of predatory lending in the subprime market seriously and are willing to enforce laws to protect people from these kinds of pernicious practices."

Expanded Scope for Lender Liability

The court’s decision emphasizes the fact that loan originators as well as the subsequent purchasers of a loan have liability for predatory lending practices. This is particularly important when one considers how often sub-prime loans are packaged, sold and resold. By the time foreclosure proceedings occur, the original offending lender may be far removed.

It is notable that LaSalle Bank, was not involved in the original mortgage transaction with the Shearon’s. Despite this fact, LaSalle Bank is still being held responsible for the predatory lending violations and ultimately will be "left holding the bag."

Noah L. Pusey of Cilmi & Associates in Mahhattan who represented David and Kathy Shearon said, "LaSalle Bank certainly aren’t the primary bad guys, but clearly it would have been better for them if they had looked into certain protocol adopted by other banks."

Avoid Costly Predatory Violations

In the midst of the ever-increasing cries of predatory lending, this case highlights again the importance of avoiding violations. Lenders in the subprime mortgage market, or lenders who acquire these loans must understand how devastating non-compliance can be.

DocuTech offers high cost loan and predatory lending tools to protect lenders from the risks associated with predatory lending violations. Contact a client support representative today to learn more about protecting your company from this liability. 800.497.3584 www.docutechcorp.com

Consumers should contact Caroline Narttey with a non-profit Homeowners Assistance Company if you have questions at (714)-208-9454 or email her at Sankofa21997@aol.com

While the housing starts report a few weeks ago reported that housing starts surged month-over-month, these numbers are seasonally adjusted and can fluctuate wildly. 

To keep housing starts in perspective it is best to view this data on a rolling 12-month basis.  We are watching for this data to start to flatten or even run flat year-over-year, before we call a housing market bottom.  With still have more than 1 million homes in excess supply and almost 10 months of overall home supply, it will still take sometime of very low new construction to absorb the current and new supply of homes.

As you can see below, on a rolling 12-month basis, housing starts have not bottomed yet.

Most housing experts are now forecasting a housing market bottom in 2010, followed by a slight/moderate recovery in 2011.  See the chart below.  Even into 2013 we will still likely be building less than 1,000,000 homes per year.  This would still be lower than 49 of the last 50 years- with only 2008 being lower.

If you’re like most people, you think estate planning is only for the wealthy. The truth is that everyone — regardless of how much money they have — needs an estate plan. Here are a few frequently asked questions about estate planning, along with the answers that may help you better understand this subject:

What is an estate plan?

An estate plan is a program for the management and distribution of your assets upon your death, as well as instructions for handling your affairs should you become unable to do so while you are still alive. Your estate plan should include a will and/or a revocable living trust as well as updated beneficiary designations for your 401(k), Individual Retirement Account, savings bonds and life insurance policies. Both a durable power of attorney and a health care power of attorney should also be created. Your Financial Advisor can help you work out the details of your plan and can also help keep it up-to-date.

Why do you need an estate plan?

An estate plan can not only reduce the taxes your heirs must pay on assets they receive from your estate, but can also ensure that your accumulated wealth will go to the individuals that you intend to receive it. In addition, an estate plan can avoid probate proceedings, an often long and expensive process that can open your financial matters to the public.

What is the difference between a will and a revocable living trust?

Basically, a will is a legal document that directs how your assets will be distributed among family members, charities or others upon your death. It is important to update a will periodically to reflect any material or personal changes in your life.

A revocable living trust (RLT) is an entity, like a corporation, that holds and owns your assets, while you are alive and continues to hold your assets after your death. Like a will, the RLT directs how your assets will be distributed at your death, but because ownership does not change at your death, it can do so without the expense, delay or publicity of probate court. A revocable living trust gives a trustee the right to make decisions for you if you become incapacitated while a will has no effect until your death.

What is a durable power of attorney?

Whether you create a simple will or a revocable living trust, it is important to have a durable power of attorney. A durable power of attorney is a document that designates a person who can sign on your behalf and handle your financial matters in the event of your incapacity. A durable power of attorney becomes void at death.

Having a basic estate plan can help ease stresses on your family, especially during a difficult time. Your Financial Advisor, with the help of your tax and legal advisors, can help you take necessary steps today to ensure that your wishes are carried out and that you and your loved ones have the peace of mind you would want them to have.

This article was written by Wells Fargo Advisors and provided to you by Justin Latvenas CRPC®, Financial Advisor in Marlton, NJ at 800-395-8537. For More information please visit the team website at www.harmandharm.wfadv.com

You can also reach Justin at Justin.Latvenas@WellsFargoAdvisors.com

* Wells Fargo Advisors / Wells Fargo Advisors Financial Network is not a legal or tax advisor.

Trust services are offered through Wachovia Bank, National Association, a national banking association (chartered by the Office of the Comptroller of the Currency) and a wholly owned subsidiary of Wells Fargo & Company.

Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE

Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.