When I saw this title in The Wall Street Journal article on January 7th, I got excited. It is about time for regulators to release their grip on lenders. But my joy was premature. The actual story was about a meeting in Basel, Switzerland. There, global banking regulators succumbed to the banks’ pressure and eased the “liquidity coverage ratio”. In other words, banks can keep less money in reserves since they need as much capital as possible to make risky investments to generate hefty profits.
After the global financial meltdown was caused by the reckless activities of banks and large financial institutions, the pendulum has swung in the other direction. It seems that the concern about the banks’ lack of capital liquidity became an international issue. After reading the article, I thought that this ruling had very little to do with you and me, but then I changed my mind.
As I mentioned before, I am in the middle of writing the sequel to“The Mortgage Game”. The title of my new book is going to be“Mortgage Solutions for Smart People: 5 Simple Ways to Get Your Loan Approved”. In my book, I write about the ways to increase the probability of getting a mortgage by improving each of the 5 C’s. One of the “C’s” is Capital.
While researching for materials, I came across a good book–“The Smartest Way ™ to Save: Why You Can’t Hang on to Money and What to Do About It.” by Samuel K. Freshman and Heidi E. Clingen. While reading the book, I realized that the Banks’ lack of capital liquidity has a great deal to do with all of us. It is a reminder that for many borrowers the lack of liquidity or “Capital” has caused a lot of problems while attempting to get a loan approved.
The only difference is that there is only one regulator for each of us and this person is looking at you in the mirror. In my new book, I will give specific solutions for each of the “C’s”.
In our consumer society, where government keeps interest rates artificially low, to enable homeowners to refinance and to spend more, it is difficult to save and build the liquidity necessary to survive the challenges of home ownership.
In his book, Mr. Freshman points out, “It is not your income that makes you rich–it’s your savings habits.” The book has many ideas and suggestions on how to save and manage money. One of the suggestions in the book is to hire a coach or have an accountability partner to help to develop “savings habits”. While I will strongly recommend buying the book to all my clients, if you think you need a coach, Kathryn Amenta, I wrote about before, can be the right person. She may be reached at 415.333.6972, email, or website.
We celebrated my 66th birthday in Los Angeles with both of our daughters last weekend. Our eldest daughter, Alona, flew in from Paris. As always, I combined business with pleasure. It was a fun weekend meeting friends and clients.
One of my new clients–a well-known doctor–had a setback in his life. He is trying to refinance his jumbo mortgage and the main obstacle–if you can guess it–is personal cash liquidity. He told me about his friend–a famous actor who lost his house in a foreclosure for the same reason.
Unfortunately, this person is not alone. In my view, every foreclosure can be avoided if borrowers just had money for a rainy day. You know what to do, “Just do it”.
P.P.S
In the photo poll last week, the winner was Image #2.
This week I continue our photo game with a small quiz.
a) Carpathian mountains
b) Near Los Angeles
c) Patagonia in Argentina
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