Strong Market And The Risk Reduction Model

The current strong market is serving investors well if they made no changes in their portfolios.  Those five portfolios where I am using the ITA Risk Reduction model will suffer as a result of the robust domestic and recovery of international market.  Nobody claimed the ITARR model works all the time.  It is designed to prevent major losses during bear markets and that is not what is occurring right now.  In fact, this is a positive market, particularly for the summer.  The old adage that the stock market is an "economy seer" six months in advance of the event, bodes well for a pickup this fall or early winter.  Or this could be a fake rally to sucker cash holding investors back into the market.  The best we can do is try to stay or the right side of the market the majority of the time.

To check the technical indicators, use these two URL links and then run through all the tickers held in your portfolio.  The first link is to check the current price of the investment and compare it with the 195-Day Exponential Moving Average.

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Curie Portfolio Spreadsheet Link

Notice to Platinum readers:  Here is the link to the Curie Portfolio, just updated.

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Schrodinger Portfolio Review: 3 July 2012

Passive is the key word when it comes to managing the Schrodinger Portfolio.  No transactions occurred over the last several months except to add dividends to the cash account.  All asset classes are in balance as shown in the following Dashboard worksheet.  We use sixteen asset classes in this portfolio as I have never added international bonds to the mix.

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Compliance Review on the Mortgage Industry

Compliance Review on the Mortgage Industry


Compliance is becoming a big issue in the mortgage loan business. In April, the Consumer Financial Protection Bureau (CFPB) revealed that some
new rules to regulate practices involved in mortgage servicing are currently under deliberation. In announcing the new proposals, the CFPB stated that the intention of the considered rules is to tackle accountability and transparency, the two fundamental problems with servicing. Many borrowers in recent years have reported that lenders did not provide them with the needed information that could have helped them avoid foreclosures. Others had difficulty getting servicers to answer their questions, which caused further troubles for them. The aim of the proposed rules is to decrease or quickly fix servicer mistakes and make certain that homeowners who are struggling receive the information that can help them find options to needless foreclosures.

The proposed rules involve creating understandable monthly statements for mortgages, warning borrowers in advance when lenders intend to adjust interest rates and allowing borrowers to avoid expensive forced place insurance. Other stipulations include requiring servicers to make reasonable efforts to communicate with borrowers who may be facing foreclosures and offer them continuous, direct contact with teams whose purposes are to prevent foreclosures.

The announcement from the CFPB was not surprising to most residential mortgage brokers and mortgage loan originators. For the most part, experts in the mortgage loans industry believe that the bureau’s objectives are good. Equator LLC Chief Operating Officer John Vella said that new rules were unavoidable after 2006. Because of the current scrutiny of the mortgage servicing business, standardized, comprehensive rules were expected. On the other hand, he believes that hostile or uncooperative borrowers created some of the problems themselves. Contrary to popular belief, foreclosures are not profitable for investors and servicers.

Community Lending Associates President Thomas J. Pinkowish said some of the rules are important because neglectful servicing has hurt consumers. Nevertheless, the issues are complex. The most valuable CFPB rules are the ones that concentrate on circumstances where servicer neglect made borrowers’ delinquency problems worse and created more difficulties and fees for them. In spite of those situations, servicers prefer not to have delinquent loans or foreclosures.

Trott & Trott Managing Partner and Executive Vice President Marcy Ford stated that the new rules are not a bad idea, and they could benefit consumers as well as help restore their faith in servicers of mortgages as a group. She believes that many servicers have already begun implementing the changes in anticipation of the regulations.

Law Professor and Real Estate Attorney Adam Leitman Baily said that the rules would have been good a few years ago because banks were making more mortgage loans than they could manage then. However, most of the issues in the proposals are no longer problems. Monthly statements are now accurate and understandable, and he does not believe that banks take advantage of borrowers.

Morehouse College Department of Economics Chairman Dr. Gregory Price stated that although the new rules may decrease abuses, they will add to the servicing costs.

The Compliance Group President and CEO Annamaria Allen expects that loans will be less affordable because borrowers will eventually be required to pay higher fees for them. Added disclosure requirements will boost compliance costs and may prevent some people from obtaining loans. Investors, servicers and lenders already prefer to avoid loans with high risks.

A growing number of companies are joining the cause and offering professional mortgage compliance services to help mortgage brokers and mortgage originators with their compliance needs. Those businesses see the regulations as a good way to protect borrowers from unnecessary foreclosures as well an opportunity for their companies to provide a needed service for the mortgage loan industry.