What consumers can expect in 2013

I don’t have a crystal ball, but I am in contact with a lot of experts in consumer protection, marketing and fraud prevention. Based on information provided by these trusted sources, here are some predictions about what you can expect in 2013.

Anticipated price hikes
The U.S. Department of Agriculture predicts grocery bills will rise 3 to 4 percent in 2013. Higher feed costs will continue to push up prices for animal-based products, especially dairy. In its Food Price Outlook Report, USDA noted that inflation should be “above the historical average” for cereals and bakery products.

Banks will keep looking for ways to raise revenue without inciting customer backlash. This could mean higher overdraft fees and charges for using an out-of-network ATM. It could also mean higher minimum balances to avoid a monthly service charge.

 “We’ll continue to see banks emphasize customer relationships, rewarding those customers that have more accounts, bigger balances, or other products and services by waiving checking account fees,” said Greg McBride, senior financial analyst at Bankrate.com.

Good news for home buyers and home builders: Bankrate expects mortgage rates to remain low.

“The Fed is aggressively buying bonds with the goal of keeping mortgage rates low,” McBride explained. “Because of this, the average 30-year fixed mortgage rate should stay below 4 percent for much of the year – even if the economy continues to improve.”

The editors at dealnews.com predict a number of things will be more expensive in 2013. These include: smartphones and some other electronics, cars and many luxury goods.

Dealnews also expects higher shipping costs. It predicts a jump of 4.5 to 4.9 percent from both UPS and FedEx. This could seriously hurt small businesses and people who sell things on the Internet. It might also affect which orders qualify for “free shipping” at some online stores.

And here’s a surprising one: Dealnews says copper prices could rise. That would have a ripple effect, because copper is used in all sorts of consumer products: wire, pots and residential water pipes. It’s also needed for industrial equipment that brews beer, distills liquor and makes candy.

On the bright side: Gasoline prices should continue their slow decline, barring unforeseen circumstances. The U.S. Energy Information Administration expects retail prices for regular-grade gasoline to average $3.43 a gallon in 2013. That would be down from this year’s average of $3.63.

More consumer-friendly regulations
The Consumer Financial Protection Bureau (CFPB) went after unfair practices in the financial marketplace with gusto in 2012. That is sure to continue in the New Year.

My best guess is that we’ll see new regulations proposed for payday loans, prepaid cards and credit reporting agencies. The CFPB is already investigating complaints about errors in credit reports and the difficulty or sometimes inability to have them corrected.

As of Jan. 2, the agency will regulate the country’s large debt collectors, an industry that has been widely criticized for harassment, deception and other illegal tactics to get people to pay – whether they owe the debt or not, in some cases.

“Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly,” CFPB director Richard Cordray said in a statement.

I wouldn’t be surprised to see some civil penalties levied and new rules proposed to prevent abusive collection tactics.

New and changing digital threats
Cybercriminals are sure to step-up their game again in 2013. In a new report, Sophos (the giant digital security company), predicts businesses will be hit with more malware attacks that give the intruders “long-term, high impact access” to those companies.

Digital extortion should increase with more ransomware malware attacks.  (See ConsumerMan: Latest ‘ransomware’ attacks are scarily sophisticated.) This new generation of malicious software can encrypt the data on your hard drive and hold it for ransom. It’s often exceptionally hard or impossible to reverse the damage. This makes it critical to back-up your data on a daily basis.

Mobile devices, with GPS location, social media apps and new technology (such as near field communication) will give cybercriminals new opportunities to compromise your security and privacy.

“This trend is identifiable not just for mobile devices, but computing in general,” the Sophos report warns. “In the coming year, watch for new examples of attacks built on these technologies.”

Men, millennials in the grocery store
Men have become more comfortable in the kitchen and more active in planning meals and food shopping. A survey by Cone Communications found that more dads than moms (52 percent compared to 46 percent) plan meals for the week ahead.

Industry analyst Phil Lempert, who runs the website SupermarketGuru, predicts grocery stores will focus more on the male shopper this year and in the future.

“Some supermarkets are experimenting with ‘man aisles’ – locations in the store that feature male-oriented foods and other products to make shopping and impulse buying more targeted,” he said.

Lempert also expects supermarkets and food companies to go after the millennial shoppers (those born between 1982 and 2001) who want flavorful and ethnically diverse food that is also affordable. By 2020, millennials will represent about 20 percent of the population and compared to the general population, they’re expected to have twice the buying power for food they eat at home.

“Millennials are deal seekers,” Lempert pointed out. “They are much more focused on finding the lowest price over brand loyalty.”

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website.

Make this mistake and you'll lose thousands when refinancing your mortgage

By Bob SullivanI had just borrowed about a quarter-million dollars and my question was simple: "How do I pay you back?"

The woman on the other end of the phone, however, couldn't tell me. Ten days had passed since I signed the papers to refinance my home and, with the holidays approaching, I was worried my first payment would be late. She tried to soothe me with perhaps the most misunderstood phrase of the refinancing process: "Don't worry. You get to skip a payment."


Follow @RedTapeChron Had I listened to her, it would have cost me thousands of dollars. And if you are one of the millions of homeowners who will refinance in 2013, it could cost you, too. 

If your new year’s resolution is to save money or get control of the family budget, refinancing remains a really good option. But the idea that “skipping” the first payment can be pain free, financially speaking, is a myth, repeated over and over by loan officers like mine. Sometimes they are lying, sometimes they are misinformed and sometimes they are just trying to get an annoying borrower like me off the phone. But with rare exception, they are giving bad advice.  (News flash: Whenever a bank seems to be doing you a favor, it probably has a hand in your wallet.)

Advertise | AdChoices Real estate transactions are already confusing enough. There are questions surrounding when you make your last payment on the old loan, when you make your first payment on the new loan, how many extra days of interest you pay toward both your old and your new loan, and when you are paying for both loans. We'll get to those tricky issues in a moment, but the priciest mistake you might make in a refinance is also the simplest one to correct. 

You've heard this before, but this time, it's probably true: mortgage interest rates are at historic lows, and there may never be a better time to refinance.  It's hard to imagine rates going any lower than the 3 percent range they are at now, but it's easy to imagine that, at the first signs of a real economic recovery or real inflation, they will climb sharply during 2013.  The low interest rates that the Federal Reserve has imposed to boost the economy have been punishing for many, notably savers, who can barely earn 1 percent interest on their bank accounts and certificates of deposit. The one perk for consumers from the Fed’s interest rate policy is the ability to get cheap home and auto loans. If you haven't refinanced your mortgage in the past 24 months or so, you are missing out.

Fortunately, many American homeowners have gotten the message. According to the Mortgage Bankers Association, mortgage holders engaged in $1.3 trillion worth of refinancing in 2012. In fact, more than four out of five new mortgages in 2012 were refinanced loans, not home purchases.

I wish there were a way to know how many of those borrowers chose to skip that first payment.

'Can I get that in writing?' 'No'
My loan officer was lazy, I believe, and -- knowing that my loan had closed and all the commissions were guaranteed -- just wanted me off the phone as soon as possible. My call was unusual.  I am always overly cautious when I set up any kind of new loan payment, as the chances for error are great: a wrong loan number on a check, a bad address, etc. So I always make the first payment early to make sure nothing goes wrong.  That good habit proved profitable this time.

When I signed my loan papers, there were no payment instructions in my closing documents (not terribly unusual). My loan officer said I would receive payment coupons later.  But when 10 days passed, and I heard nothing, I called. She sent me to the bank's customer service line, where I was informed that there was no record of my loan. (Did that mean I didn’t have to pay it back? Sadly, No.) Customer service transferred me back to my loan officer. She assured me that their computers would catch up to my urge to pay the loan, and I’d get payment information soon. Incredulous that they seemed not to want my money, I persisted. She tapped a few keys on her keyboard, made me wait a minute, then told me that my loan had funded on Dec. 5, so I didn't have to make a payment until Feb. 1.

"But my documents say repayment begins Jan. 1," I said. "So you're saying there will be no late fees if I don't pay Jan. 1?"

"Yes," she said.

"Can I get that in writing.?”

"No. I can't do that."

At that point, I did what any mature consumer would do: I laughed. And then I muttered something about the 100 pieces of paper they just made me sign, with innocuous documents putting the finest point on everything you can imagine, like the form I initialed in multiple places agreeing that, yes, I am known by Bob, Robert, Bobby, Robby and various other nicknames. Yet I couldn’t get the bank to put something in writing saying when I should make my loan payment?

Advertise | AdChoices My loan officer didn't laugh, but eventually she put me on the phone with a supervisor who sounded very grave. She'd done additional research, she said, and found out that the reason customer service couldn't find my loan was because it had already been sold to another bank. We called that bank together and found out my loan actually funded on Nov. 30, so my first payment was indeed due on Jan. 1. And I would have been liable for about an $80 late fee if I had listened to my loan officer. The manager profusely apologized.

Steep penalty anyway
But I'm not writing to warn you about late fees. There's a much bigger culprit here you have to worry about.  Had I followed my loan officer's advice and skipped a payment, even if the bank waived the late fee (which the manager said was likely), I would have paid a steep penalty anyway.  You've probably guessed the punch line: there's no such thing as skipping a payment. In reality, homeowners are borrowing that money and extending the loan term for an extra month.  The payment will be tacked onto the end of the loan, with interest.  How much? If it's a conventional loan, that’s 30 years’ worth of interest.  Effectively, you are borrowing one month's payment for 30 years. Ouch!

"Skipping is a misnomer. A better description would be ‘deferring with additional interest added,'" said Jack Guttentag, a professor emeritus at the University of Pennsylvania who also runs a consumer education website called MortgageProfessor.com. 

Just how much extra interest can skipping that first payment cost you? There are too many variables to create a decent rule of thumb. But here's an illustration from Guttentag's site with deliberately round numbers. Skip the first payment of $500 on a $100,000 loan at 6 percent, and you will pay an additional $2,993 in interest during the 30 years.

Forget the $75 late fee. That's real money. As Guttentag puts it, "a payment that is miniscule to one is a fortune to another."

Some loan officers say they only won't offer the "skip-a-payment" option unless the refinance closes toward the end of the month, when the homeowner might have trouble coming up with the extra cash for closing costs and a fresh mortgage payment close together.  Others say they offer it all the time.

To be clear: Most borrowers don’t actually complete their 30-year loans before moving or refinancing, so few would end up paying that high a penalty. Also, it's important to note that my bank didn't even hold the loan, so they weren't profiting from the “skip-a-payment” advice.  I believe this is usually a lazy mistake, not a greedy one. Still, the basic truth holds.  Don't be tempted to skip a payment when you refinance unless you really, really need the cash for some unusual expense (Christmas credit card bills are probably not the best reason.)

Skipped payments are not to be confused with other loan closing related interest payments, including:

*Your last payment on the old loan. You can't skip that, either. If your loan closes near the end of the month, you should still make the scheduled payment to your old bank. Why?  Interest is actually paid in arrears, meaning you pay at the end of the month the cost of borrowing the money for that month.  It's confusing, because mortgage payments are really two payments at once -- last month's interest and next month's principal.  To keep it simple, if your loan closes on the Nov. 30, you will be paying November's interest with your Dec. 1 payment, along with December’s principal. You won't need to make the December principal payment if you refinance on Nov. 30, but most folks pay far more in interest than principal because they are early in their loan's term, so the overpayment won't be large. Just pay it to avoid late fees, and enjoy any refund that comes your way. 

Advertise | AdChoices *Pre-paid interest. When your loan closes in the middle of the month, your new bank will make you pay up-front (as opposed to in arrears) daily interest for the remaining days of the month. If you close on the 20th, you'll pay 10 more days of interest payments.  That's OK, it means you won't owe the money on the back end of the loan.

*Money for nothing: The three-day (or more) overlap. There's an odd quirk in most refinancing deals in which there are several days when the homeowner will be paying interest on the same loan to both banks. In most states, consumers have a three-day "right of rescission" after signing their refinancing papers, meaning they can cancel the new loan if they get buyer's remorse.  Such regret laws are very consumer-friendly and are necessary because of nefarious loan officers who tricked consumers into bad deals in the past. But, in this case, the consumer-friendly law is also costly, as it means both banks have liability for the loan during that rescission period, and are both entitled to collect interest.  Note: The regret period is usually three business days, so if your closing stretches over a weekend, the double-interest period can be even more costly.

It's important to keep all these quirky, refinance-related interest payments straight when talking to your loan officer, so you'll know what to do when he or she suggests you can skip a payment. None of this should scare you away from refinancing, which is really the only way you can make the recession work for you.

But remember, you are refinancing to save money, and you probably shopped around trying to save $50 here or $100 there on closing costs; don't lose thousands of dollars because of one false move after closing.

http://redtape.nbcnews.com/_news/2013/01/01/16239394-make-this-mistake-and-youll-lose-thousands-when-refinancing-your-mortgage?lite

Will Rich People Desert the U.S. If Their Taxes Are Raised?

By BRUCE BARTLETT | New York Times – 1 hour 25 minutes ago

Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of "The Benefit and the Burden: Tax Reform - Why We Need It and What It Will Take."

On April 30, the Treasury Department announced that 461 Americans had renounced their citizenship in the first quarter of 2012. A 1996 law requires that every person doing so be named, with their names published in the Federal Register. The idea is to shame those who may be renouncing their citizenship solely to escape taxation.

The extreme step of renouncing one's citizenship is necessary to escape taxation by the United States, because the United States, alone among the major nations of the world, taxes its citizens wherever on earth they live.

Other countries tax only those who live and work within their borders; if their citizens live and work in another country, they are liable only for taxes incurred in that country.

Americans living abroad, however, must not only pay taxes in the country in which they are living, but United States taxes as well, although there is an exemption of $93,000 that is adjusted for inflation annually. The only legal way for American citizens to avoid American taxes is to renounce their citizenship and live their lives permanently in another country.

In recent years, the number of Americans renouncing their citizenship has increased. According to the international tax lawyer, Andrew Mitchel, the number of Americans renouncing their citizenship rose to 1,781 in 2011 from 231 in 2008.

This led William McGurn of The Wall Street Journal to warn that the tax code is turning American citizens living abroad into "economic lepers." The sharply rising numbers of Americans renouncing their citizenship "are canaries in the coal mine," he wrote.

The economist Dan Mitchell of the libertarian Cato Institute was more explicit in a 2010 column in Forbes, "Rich Americans Voting With Their Feet to Escape Obama Tax Oppression."

According to Andrew Mitchel's research, the sharp rise in Americans renouncing their citizenship since 2008 is less pronounced than it appears if one looks at the full range of data available since 1997, when it first was collected. As one can see in the chart, the highest number of Americans renouncing their citizenship came in 1997.

Mr. Mitchel hypothesizes that the reversion of Hong Kong to Chinese control may have forced many residents of that former colony with dual citizenship to renounce their American citizenship, because China does not recognize dual citizenship.

It is undoubtedly the case that the vast bulk of those renouncing American citizenship do so for reasons unrelated to taxation. Americans who marry foreign nationals, for example, often adopt the citizenship of their spouse's nation. Also, many of those on the Treasury list are not actually American citizens, but foreigners who had permanent residence status in the United States. Those born with dual citizenship sometimes prefer to have only one to simplify their lives.

However, reports by Bloomberg News and the Zurich newspaper Tages-Anzeiger suggest that increased scrutiny by the Internal Revenue Service of Americans living in Switzerland, where a number of banks are suspected of aiding tax evasion, may have led some American expatriates living in that country to renounce their citizenship.

The mobility of individuals with a large net worth - who generally have no difficulty finding a nation to welcome them and their capital - has unquestionably increased in the last several years, especially within the European Union, where barriers against the movement of people have fallen sharply. This has reduced the ability of all governments everywhere from engaging in soak-the-rich policies.

As I noted in a recent post, Britain recently reduced its top income tax rate in part because of a belief that it would reduce the number of Britons living abroad. And the victory of the Socialist François Hollande in France's presidential election on Sunday, on a platform of raising the top tax rate to 75 percent, may lead to some relocation from there, according to an article in The Financial Times.

However, while there is no doubt that some people do migrate solely because of taxes, the number is small even when it doesn't involve a loss of citizenship.

Source

Bank of America Starts Mortgage Reduction Effort

By NATASHA SINGER | New York Times – 7 hours ago

RELATED QUOTES Symbol Price Change BAC 7.715 -0.24

Bank of America has started sending letters to thousands of homeowners in the United States, offering to forgive a portion of the principal balance on their mortgages by an average of $150,000 each.

The reduction for qualifying homeowners could amount to monthly savings of up to 35 percent on mortgage payments, Bank of America said in a news release on Monday evening.

The principal reduction offers from Bank of America Home Loans are the result of a $25 billion settlement agreement earlier this year with 49 state attorneys general as well as federal authorities who had been investigating allegations of abuses over the handling of foreclosures.

“To the extent principal reduction and other modification tools help us turn mortgages headed for possible foreclosure into long-term performing loans, it will be positive for homeowners, mortgage investors and communities,” Ron Sturzenegger, a legacy asset servicing executive, said in the statement.

The bank said it planned to contact more than 200,000 homeowners who could be candidates for the offers, sending letters to a majority of them by the third quarter of this year.

To be eligible for the principal reductions, however, homeowners will have to meet certain criteria, including: having a loan owned or serviced by Bank of America; owing more on the mortgage than their property is worth; and being at least 60 days behind on payments as of the end of January.

In the statement, the bank said it had started making such offers in March to a narrower group of homeowners — those who were already in the process of seeking mortgage modification. The bank estimated that the earlier wave of trial reduction offers to about 5,000 people could amount to more than $700 million in forgiven principal. But homeowners have to make at least three timely payments for the reductions to become permanent.

THANKS LEE

http://finance.yahoo.com/news/bank-america-starts-mortgage-reduction-100202589.html