Transamerica is considered to be one of the world’s leading insurance and financial services companies. The firm offers insurance and investments to more than 19 million customers worldwide.
As Transamerica’s slogan suggests, the company – and its customers – are “Tomorrow Makers.” This is because the company strives to make its customers’ tomorrows everything that they plan for.
Who is Transamerica?
Table of Contents
Transamerica is a financial services company that provides insurance, investment, and retirement products and services.
It was founded in 1904 and is headquartered in Baltimore, Maryland. Transamerica is a subsidiary of Aegon, a multinational life insurance, pensions, and asset management company based in The Hague, Netherlands.
The History of Transamerica
The company has been in the business of providing insurance and financial advice for more than 100 years and it began its operation in 1904 when Amadeo Giannini started the Bank of Italy in a converted saloon in San Francisco, California.
He strived to make financial services available to everyone of all financial classes, not just the wealthy. His business really ramped up following the 1906 San Francisco earthquake when he was able to provide loans to residents for rebuilding their properties.
Several years later, in 1928, the company merged with Bank of America, and two years after that, it acquired Occidental Life Insurance via Transamerica Corporation. In 1956, the banking and life insurance companies were separated, with the insurance component maintaining the Transamerica name. Today, customers of Transamerica have access to a wide variety of insurance and financial products and services.
The firm is licensed to provide insurance in all U.S. states, and the District of Columbia, and it has approximately $223 billion of premiums in force. Transamerica has a roughly $29.5 billion in assets under management.
Products Offered By Transamerica
Transamerica offers a variety of products to both consumers and businesses.
On the insurance side, the company provides numerous options, including the following types of coverage:
Term Life
Term life insurance offers pure death benefit protection for a specific period of time.
This is typically 10 years, 15 years, 20 years, or 30 years. Should the insured pass away during the time that a term life policy is in force, the named beneficiary will receive the stated amount of death benefit.
Because term policies do not offer any type of cash value or savings component, the premiums for this type of coverage are typically more affordable than other, “permanent,” forms of coverage.
For example, you can get a $1 million term policy for less than 20% of a permanent policy with the same face value. Term life is sometimes referred to as “temporary” life insurance coverage as it is often used for covering temporary needs such as the balance of a mortgage.
Whole Life
Whole life insurance offers death benefit protection as well as cash value build up.
The funds that are inside of the cash value grow on a tax-deferred basis, meaning that no tax is due until the time of withdrawal. The cash grows at a guaranteed rate over time.
Whole life is considered permanent coverage because as long as the premium is paid, coverage remains in force – oftentimes for the “whole” of a person’s life.
Universal Life
Universal offers a death benefit protection as well as a cash value build up. However, it provides more flexibility than whole life in that the policyholder can choose to pay higher or lower premium amounts as their financial needs change over time.
The policy value may simply increase or decrease accordingly. Like with whole policies, the cash value is allowed to grow on a tax-deferred basis.
Variable Universal Life
Variable life, provides death benefit protection and cash value.
With variable universal life, however, the cash value’s return is based on underlying investments in market-related “subaccounts.” These can allow the funds in the account to grow a great deal – provided that the market moves upward. These accounts can also be riskier in a downward moving market.
Accidental Death
This can help to ensure that their loved ones will be taken care of should the unthinkable occur. (It is important to note that this benefit will not typically pay out in the event of death that is caused by sickness or other natural causes).
Final Expense
Final expense coverage focuses on paying for a person’s funeral and related expenses.
Today, the cost of a funeral – including the burial plot, headstone, and other related expenses – can exceed $10,000. Unfortunately, many families are not able to pay these costs immediately upon the death of a loved one.
Having final expense insurance allows for a way to do that – eliminating stress on loved ones, in an already stressful and emotional time.
Key Man Life
What is key man life insurance you ask?
Key person insurance is a form of business insurance that people can overlook, but one that can make all the difference in keeping a business or firm successful in the face of losing an owner, or important team member.
In addition to life insurance, Transamerica also offers a number of other financial products, including long-term care insurance, annuities, and retirement/investment savings options for those who are planning for retirement, as well as those who are already there.
Financial Strength Ratings of Transamerica
Transamerica has been given very good ratings by the insurer rating agencies.
These ratings include the following:
A.M. Best
Moody’s Investor Services
Fitch
Standard & Poor’s
A+
A1
AA-
AA-
Is Transamerica a Legit Company?
Yes, Transamerica is a legitimate company. It is a subsidiary of Aegon, a multinational life insurance, pensions, and asset management company. Aegon is rated highly by financial rating agencies such as Standard & Poor’s, Moody’s, and Fitch Ratings.
Transamerica has been providing insurance, investment, and retirement products and services since 1904 and is regulated by state and federal government agencies.
Biggest Risks Choosing Transamerica for a Life Insurance Policy?
Choosing a life insurance policy, including one from Transamerica, comes with certain risks. Some of the biggest risks to consider include policy lapse, which occurs when you fail to pay the premium on time and could result in losing coverage.
Another risk is market risk, which refers to the performance of any investments within the policy, such as a cash value component, that can be subject to market fluctuations and result in losses.
Misrepresentation is another risk to consider, as providing incorrect information on your life insurance application could result in your policy being denied or not paying out as expected in the event of a claim.
Lastly, it’s important to make sure the life insurance policy you choose is appropriate for your needs and financial situation, as Transamerica offers a range of policies.
Advantages and Considerations
When seeking life insurance, it is important that the insurer is able to offer choice and flexibility – especially such that it meets with your specific needs. Many have the misconception that they cannot find a policy for them because of their lifestyle choices, such as one looking for life insurance for a smoker, there are options out there for you and I can help with finding the best for your needs.
Transamerica provides an extremely flexible and diverse product line up, including:
Term
Whole
Universal
Variable
Final Expense
Accidental Death
This, coupled with the company’s excellent customer support team can make for a nice mix – especially for customers who may need assistance in figuring out the details in terms of how much to purchase and what type of coverage may be best for their specific needs.
In addition, Transamerica’s policies also come with a nice assortment of riders – which can make their plans even more customizable. For example, the firm offers an estate protection rider that can help in protecting loved ones from estate tax obligations that may arise from the payment of the policy’s own death benefit.
The company’s website provides additional information on both policies and policy riders so that interested potential applicants can obtain more information on how these may work in their specific scenario.
Yet, even with all of the good, there are some considerations that should be taken into account when searching for coverage – especially when doing so through just one single insurer. This is especially the case if you have certain health issues, such as searching for best life insurance rates for smokers and/or you possess other factors that may deem you as being a higher risk applicant. This may lead you to need to look into a company that offers no medical exam life insurance policies.
In these cases – or in any case – it is always good to do some comparison shopping. Otherwise, you are essentially “locked in” to whatever price the insurer presents you with. This can be somewhat similar to only going to one car dealer or one computer dealer when shopping for these items, and never even checking prices elsewhere before moving forward with your ultimate purchase. With this in mind, regardless of how good the product, it always makes good sense to shop around first.
How and Where to Get the Best Life Insurance Coverage for Your Needs
When you’re in the process of searching for the best life insurance coverage – regardless of your current health condition or status – it is important that you compare the type of policies that are available to you, as well as the premium cost from different carriers.
This is because there could be a significant variation between one insurer and another – even for the very same type and amount of coverage.
Transamerica is a financial services company that provides insurance, investment, and retirement products and services. It has a long history, having been established in 1904, and is a subsidiary of Aegon, a multinational life insurance, pensions, and asset management company.
One of the strengths of Transamerica is its broad range of products and services, which includes life insurance, annuities, mutual funds, and retirement plans. This allows customers to choose from a variety of options to meet their financial goals and needs. The company has a strong online presence, offering convenient access to account information and resources, as well as easy policy management and premium payment options.
Cost and Fees
Customer Service
User Experience
Overall
3.8
Pros
Wide range of life insurance products: Transamerica offers a variety of life insurance products, including term life, whole life, and universal life insurance, which allows customers to choose the policy that best suits their financial goals and needs.
Strong financial stability: Transamerica is a subsidiary of Aegon, a multinational life insurance, pensions, and asset management company, which has a strong financial position as indicated by its highly rated financial standing from credit rating agencies.
Convenient online services: Transamerica provides a convenient online platform for policy management, which includes access to account information, policy details, and premium payment options.
Professional support: Transamerica has a team of trained professionals who can help you understand the policy options and select the one that best suits your needs.
Cons
Potential policy lapse risk: If you fail to pay the premium on time, your life insurance policy may lapse, which can result in the loss of coverage and any accumulated cash value.
Market risk: Depending on the type of policy, there may be investment components within the policy that are subject to market risk, meaning that the policy’s value can decrease in value.
Complexity: Some of Transamerica’s life insurance products, such as universal life, can be complex and may require a higher level of understanding and management to ensure that you are making the most of your coverage.
Premium costs: The premium costs of Transamerica’s life insurance policies may be higher compared to other insurance companies, and it’s important to consider your budget when choosing a policy.
For many people, a financial advisor is a key ally in helping you reach your financial goals. While most savvy people under 30 should be able to handle their finances on their own, many opt to hire a financial advisor to get access to personalized advice from a financial expert.
If you live in San Francisco and want help from a local financial advisor, you’ve come to the right place. The best financial advisors in San Francisco are standing by to help you create a financial plan, choose the best investment portfolio, and put you on track to reach your most important financial priorities. Keep reading for a list of the best financial advisors in San Francisco.
What’s Ahead:
Overview of the best financial advisors in San Francisco
Typical fees: The fee is quoted as an annual percentage fee, and is billed quarterly by taking the value of your assets at the end of each calendar quarter and applying one-fourth of that annual percentage fee.
Bingham Osborn & Scarborough Wealth Management, better known as BOS, is an investment and financial advising company for individuals with at least $3 million in investable assets.
The fee-only firm advises clients with a holistic approach that looks at all aspects of the client’s finances. BOS works to build long-term investment portfolios using a data-driven approach that incorporates taxes and other factors.
Burgess Financial Planning
Contact: 415-525-1041 or [email protected].
Services offered: Financial planning and investing advice.
Assets required: $3 million in investable assets.
Typical fees: $480 fee for an initial planning meeting.
A smaller shop, Burgess Financial Planning is a boutique firm with just one planner. Sean Burgess is a CFP and Registered Investment Advisor. He is a fiduciary (that means he always puts your best interests first) and doesn’t have any minimum required level of assets to get started.
Burgess charges a $480 fee for an initial planning meeting. If you decide to work with Burgess Financial Planning long-term, investment fees are charged based on assets under management. This firm earns an impressive 4.5-star rating with 35 reviews on Yelp.
Founded in 2014, Citrine Capital is a fee-only wealth management firm with a focus on the Bay Area’s high-tech community. Entrepreneurs, business owners, and startup employees will likely feel at home with this firm.
Citrine Capital works to organize client finances in a way that helps them reach financial goals, mitigate taxes, and manage wealth for long-term needs. Fees start at $7,000 per year for clients with a net worth below $1 million.
Typical fees: $290.00 per hour for financial planning.
Located across the Golden Gate Bridge in Corte Madera, Financial Connections offers financial management, investment management, and other services to Bay Area clients. The fee-only firm doesn’t take any commissions or compensation from large investment fund providers.
The firm’s team acts as fiduciaries project-based financial planning. For those with long-term and unique needs, you can sign up for a concierge service to plan for specific needs. Its investment management product comes with either customized portfolios or robo advisor-style modeled portfolios.
Typical fees: $300,000 to $400,000 annual minimum fee.
Founded by Kathryn Hall in 1994, Hall Capital Partners is a large financial planning firm with more than $30 billion in client assets under management. It exclusively works with high-net-worth clients, many of whom hold eight-figure and nine-figure portfolios.
If you have that kind of wealth, the $300,000 to $400,000 annual minimum fee isn’t a huge deal. But for most of us peons with merely tens or hundreds of thousands, or even assets in the low millions, Hall Capital Partners probably isn’t going to work for you. If you just made it big time from your company’s IPO, however, it could be worth giving Hall Capital Partners a call.
Morling Financial Advisors is an investment manager and financial planner founded in 1999. Suitable to high-tech Silicon Valley, Morling Financial Advisors has its own app for clients to log in and view their account details.
Financial planning services start at $300 per month. Investment management services start at 1% for those with under $1 million in assets and go down to 0.60% for those with $10 million and up.
Paragon Financial Planning
Contact: 510-227-5354 or [email protected] or [email protected].
If you are in Oakland or Alameda, the office of Paragon Financial Planning may be convenient for you. Paragon Financial Planning is a small office led by Samantha N. Dinh, a Certified Financial Planner.
She’s doing something right, as Paragon Financial Planning earns perfect five-star ratings after 34 reviews on Yelp. Dinh offers financial planning, investment management, and insurance services through her company.
Summary of the best financial advisors in San Francisco
Those looking for no minimums and an affordable advisor
How I came up with this list
This list of the best financial advisors in San Francisco is based on several sources.
They are fee-only planners
Financial advisors on this list don’t earn from shady commission deals. They are all fee-only planners where you know what you will pay upfront and can rest easy that there are no major financial conflicts of interest.
They are fiduciaries
Fiduciaries are legally required to put your interests first. It’s a good idea to only work with a financial or legal expert who acts in a fiduciary capacity.
They earn good customer reviews
Before adding a financial advisor, I checked out reviews on multiple sites including Google and Yelp, and public lists of awards given to San Francisco financial advisors.
They work with a wide range of clients
Top advisors from this list may be a good fit for people from all financial backgrounds, whether they have $1,000 to invest or $100,000,000. While every financial advisor on this list isn’t the right fit for every reader, there should be an advisor that meets the needs of most people looking to get started with a financial advisor.
Remember that not all people need a financial advisor. Resources like those available here at Money Under 30 could give you all you need to make good financial decisions without the added cost of a finance professional. Ultimately, it’s up to you and your comfort level with your finances to decide if you would benefit from the services of a San Francisco financial advisor.
What questions should you ask a financial advisor?
How can you help me with my finances?
A financial advisor is a licensed financial professional with the expertise to help you manage various parts of your finances. That can include creating a financial plan, managing your investments, or a fully hands-on advising experience where they handle most of your day-to-day finances. Some focus on taxes, some focus on specific types of business owners or employees, some work with anyone.
There are many types of financial advisors. The one thing they all have in common is a business built around helping you manage your money.
Why should I hire you instead of doing it myself?
A financial advisor is best for someone who isn’t confident that they are making the right financial decisions. Most people don’t get much financial education at school, if any. That means unless their parents taught them about money, they could be just making best guesses around major financial decisions like saving for retirement or buying a home.
If you want help creating a financial plan or having your plan double-checked by a professional, a financial advisor could be right for you.
Are you a fiduciary?
A fiduciary is a type of financial advisor that is obligated to put your interests first. That means they are not allowed to put your money into a fund that isn’t aligned with your long-term goals and needs.
Ideally, you should only ever work with a financial professional that acts in a fiduciary capacity.
What services do you offer?
Financial advisors can offer a range of services. Here are some of the most popular services you can find from a financial advisor.
Financial planning – Reviewing where your money is today and how it influences your future is important. With financial planning services, advisors help you chart out the right savings and investments to reach your goals.
Investments –If you don’t know the difference between a stock, bond, and ETF, this service could be very valuable to you. Some financial advisors help you set up your portfolio to manage yourself. Others will manage it for you long-term.
Taxes – Financial advisors may be able to help with tax planning and tax savings strategies. Not all advisors offer tax services, but it’s an extra perk and could allow you to manage all of your money needs in one place.
Consulting –As well-versed financial pros, some advisors also offer business consulting services with a focus on financial management.
What are the costs of hiring a financial advisor?
If you are hiring a financial advisor, it’s important to ask them how they get paid. That’s because financial advisors can charge fees in different ways. They could also make money in ways that give them an incentive to suggest investments that are not in your best interest.
Fee-only financial advisors are only paid by client fees. This is the best type of financial advisor to choose. I would argue that it’s the only financial advisor relationship that works toward the client’s best interests.
Fee-only advisors may charge monthly or annual fees, hourly fees, or fees based on the size of your portfolio. Rates and services can vary, so it could make sense to shop around before choosing a financial advisor.
Some financial advisors are paid commissions by insurance companies and investment firms for selling their products. This is a major conflict of interest. Under this scenario, advisors may be paid to funnel your money into mutual funds or other financial products that are not in your best interest.
Summary
San Francisco and the Bay Area are home to some of the most successful companies in the world. But it’s also one of the most expensive places to live. A financial advisor can help you make the most of your money and keep it working to help you reach your financial goals.
By choosing a fiduciary financial advisor that works as a fee-only advisor, you should be in good hands. This list of the best financial advisors in San Francisco is a great place to get started.
Prudential Financial, Inc, or Pru, has been in the financial services and insurance business for almost 140 years. The company has been helping both individual and business clients to both grow and protect their wealth throughout that time. Pru is considered to be one of the largest financial services institutions in the world, with operations in the U.S., as well as in Europe, Asia, and Latin America.
The company has for many years had one of the most recognized brand symbols across the globe, as “The Rock” – its icon of strength, stability, expertise, and innovation – is known by both investors and non-investors worldwide, as is the company’s long-running corporate slogan, “Get a piece of the rock.”
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The Company and Its History
Prudential was founded in 1875 in Newark, New Jersey, by insurance agent John Fairfield Dryden. The company began in a basement office as “The Prudential Friendly Society.” The goal of Dryden was to make insurance coverage available to the working-class people, and it sold primarily industrial insurance – a type of coverage that provides burial and funeral coverage for low-income families. At that time, some of the policy premiums were as low as three cents per week.
Within just a few years, The Prudential Friendly Society expanded into Philadelphia and New York City, and its assets had reached $1 million. By 1885, the company had even sold its one-millionth policy. That year, the company’s name was also officially changed to The Prudential Insurance Company of America. It also adopted The Rock of Gibraltar as its company symbol.
Today, Prudential serves customers in 41 countries and territories, and it has roughly 47,000 employees around the world. The company holds approximately $1.176 trillion in assets under management.
Products Offered By Prudential
Prudential offers a variety of insurance and annuity products to both consumers and the business market. For consumers, the following insurance products can be found:
Term Life Insurance – Term policies provide “temporary” protection for a set period of time, such as for 10 years, 15 years, 20 years, or 30 years. This type of coverage can be quite affordable – especially if the applicant is young and in good health at the time that he or she is applying for coverage. If you are not in the best health and you feel a policy for life insurance with no exam is the best way to go for you, we can help find the best carrier for your needs. This is because term life provides only pure death benefit protection, without any type of cash value or investment build-up. Term life can be a good choice for those who are seeking to pay off the balance of a mortgage or other temporary needs, as well as for those who are looking for a large amount of death benefit protection but who do not have a large premium budget.
Universal Life Insurance – Universal coverage provides both death benefit protection, as well as a cash value component. The cash value is allowed to grow on a tax-deferred basis, meaning that no tax is due on the gain of the cash value until the time it is withdrawn. This means that the cash can essentially grow and compound exponentially over time. Universal life insurance offers policyholders a great deal of flexibility in that they can choose – within certain parameters – when they make their premium payment, as well as how much of that payment is allocated to the death benefit and how much of it is allocated to the cash value component.
Variable Universal Life Insurance – Similar to regular universal life, variable universal policies provide a death benefit and a cash value component, along with tax-deferred growth. However, the cash value component is tied to underlying market performance. This provides the policyholder with the ability to grow their cash even more – provided that the market performs favorably. Conversely, these policies can also be riskier if the market has poor performance.
In addition to life insurance, Prudential provides fixed and variable annuities. These products can help those who are either already retired, or those who are approaching retirement, to meet various goals. For example, those who are saving for retirement can participate in tax-deferred savings. Those who are seeking income can choose from a variety of different income options – including a lifetime option where they may receive income for the remainder of their life, regardless of how long that may be.
Prudential also offers additional types of insurance coverage products such as auto, home, RV, watercraft, and personal liability insurance, as well as retirement planning products and investment services to its customers in order to help them meet both their short- and long-term financial needs and goals.
Additional services that are offered by the company include the firm’s “Special Needs Solutions,” which address the unique concerns of parents who have children with special needs, as these families may require specialized life insurance and financial planning advice.
Financial Strength Ratings
Prudential holds strong ratings from the ratings agencies. These include the following:
A.M. Best
Standard & Poor’s
Moody’s Investor Services
Fitch Ratings
A+
AA-
A1
A+
Advantages and Drawbacks
While Prudential is a strong contender in the insurance and financial services industry, the company has both advantages and drawbacks. With that in mind, it is important to consider all of these prior to moving forward with the purchase of a policy with the company in order to ensure that the policy that you choose meets all of your particular coverage needs and goals.
On the plus side, Prudential provides a nice selection of term and universal life insurance products. These particular plans all have strong features – and because they are backed by Prudential, policyholders can be assured that they have coverage that is backed by an extremely strong life insurer.
In addition to providing very good policy rates to those who are in good health, Prudential may also offer favorable rates to those who are tobacco chewers, as well as to those who are cigar users.
In addition to the product positives, Prudential also has high rankings for its customer service. Representatives can be reached in several ways, including via phone or through live website chat. Reps can also be reached through Twitter, Facebook, and Google+. This makes it extremely easy for policyholders who need answers to their questions, or even for those who are researching whether or not to purchase new or additional coverage. Additional information can be found on Prudential’s customer service FAQ page on the company’s main website.
Unfortunately, even with all of the good, there are a few drawbacks to Prudential. First, those who are seeking whole life coverage are out of luck, as the company does not offer this type of policy. So, while universal life policies provide individuals with flexibility, not offering whole life to those seeking guarantees leaves out a potentially huge area of the marketplace.
In addition, those who may have adverse health conditions could have a difficult time finding coverage directly from Prudential’s online quote page. Therefore, in these instances, it is likely best to work with an agency or company that specializes more in higher-risk cases and who can provide more of a comparison shopping experience.
Annuities Offered by Prudential
Another product that is offered by Prudential is its retirement investments. One way that they do that is through annuities. Annuities are contracts that you hold with an insurance company (in this case, Prudential), and it’s a safe way to invest your money. Annuities are one of the most popular investments for people as they start planning for their retirement. The money is invested in a professionally managed portfolio, where it grows money tax-deferred. Once you retire, you can start receiving a paycheck to fund your retirement dreams.
If you’re going to purchase an annuity from Prudential, then you’ll be buying a variable annuity. Unlike a fixed annuity, the variable annuity could fluctuate depending on the investments inside of the annuity.
When you want to access your money, there are some restrictions on getting your hands on your investment money. If you want to start making withdrawals before you are 59 and ½, then you’re going to be subject to an additional 10% federal income penalty on top of the income taxes that you’ll already be paying.
How and Where to Buy the Best Life Insurance Coverage
To get the very best life insurance for your specific needs and goals – regardless of your particular health condition at the time of application – it is always a good idea to first make comparisons.
Just like the purchase of any other key product or service, you will want to make sure that you are obtaining the very best deal possible. This is a product that you are purchasing to protect the people who are most important in your life. With that in mind, you should expect it to be the very best – and that it be there for the long haul.
If you are ready to begin making life insurance policy and premium quote comparisons, my preferred partner is here to help. They work with many of the best life insurance companies in the industry today – and can help to provide you with all of the information that you need. They are also available to answer any of the additional questions or concerns that you may have.
When you’re ready to begin the process of locating the life insurance policy and premium that is best for you and those you love, use the form on the side of this page to run your own quotes and work with our preferred life insurance partner.
I understand that purchasing any type of insurance, such as life or health insurance, is a big decision, and we want to ensure that you have all of the information that you need before moving forward. So, feel free to contact us now – we are here to help.
Between 65 percent and 75 percent of modified mortgages may re-default after 12 months, according to a new report from Fitch Ratings.
The credit ratings agency noted that though loan servicers are ramping up loan workouts, they’re fighting off the effects of the recession, including rising unemployment, shrinking disposable income, and possibly “deceptive practices” by borrowers themselves.
Loan modifications are on the rise, with seven percent of all residential mortgage-backed securities and 18 percent of subprime loans modified through the end of last month, but concerns remain whether they’ll do any good.
“Loan modifications hold clear value for many homeowners provided the modified payments are sustainable, but more often than not reducing the home payments to an affordable level may not be enough to rescue borrowers who are overextended on other credit and expenses,” said Managing Director Diane Pendley, in a release.
“With continued home value declines in many markets, there is growing evidence that some homeowners are voluntarily walking away from their homes even if they can financially afford to stay.”
Pendley added that capable borrowers are positioning themselves to receive relief via loan modifications, but many may choose to cut their losses regardless if they’re too far underwater on the mortgage.
Back in mid-February, Fitch said borrowers who received large balance reductions (20 percent or more) experienced higher 60 day+ re-default rates than borrowers whose monthly mortgage payments were reduced by 20 percent or more.
At the time, they called on servicers to use a combination of payment reduction and principal forbearance or forgiveness to create more sustainable loan mods going forward.
We won’t know for several months if that’s actually happening; in the meantime, expect ugly numbers to fester.
Collateralized debt obligations are complex financial products that bundle multiple bonds and loans into single securities.
These packaged securities are then sold in the market, typically to institutional investors. CDOs became more widely known to the general public due to their role in the 2008-2009 financial crisis.
Individual investors cannot easily buy CDOs. However, the 2008 financial crisis and subsequent recession revealed the interconnected nature of markets, as well as how losses on Wall Street can have ripple effects on the broader economy.
Therefore, it can be important for everyday individuals to grasp the role that complex financial instruments like collateralized debt obligations have in markets.
How Do CDOs Work?
“Collateral” in finance is a term that refers to the security that lenders may require in return for lending money. In collateralized debt obligations, the collateral are the payments from the underlying loans, bonds, and other types of debt.
CDOs are considered derivatives since their prices are derived from the performance of the underlying bonds and loans. The institutional investors who tend to hold CDOs may collect the repayments from the original borrowers in the securities.
The returns of CDOs depend on the performance of the underlying debt. CDOs are popular because they allow lenders, usually banks, to turn a relatively illiquid security — like a bond or loan — into a more liquid asset.
Tranches in CDOs
CDOs are typically sliced into so-called tranches that hold varying degrees of risk and then these slices are sold to investors.
The most senior tranche is the highest rated by credit rating firms like S&P and Moody’s. The highest credit rating possible is AAA. Holders of the most senior or highest-rated tranche generally receive the lowest yield but are the last group to absorb losses in cases of default.
The most junior tranche in CDOs is sometimes unrated. Investors of this layer earn the highest yields but are the first to absorb credit losses. The middle tranche is usually rated between BB to AA.
Recommended: How Do Derivatives Work?
What Are Synthetic CDOs?
Regular, plain-vanilla CDOs invest in bonds, mortgages, and loans. In contrast, synthetic collateralized debt obligations invest in derivatives.
So instead of bundling corporate bonds or home mortgages, synthetic CDOs bundle derivatives like credit default swaps, options contracts, or other types of contracts. Keep in mind, these derivatives are themselves tied to another asset, such as loans or bonds.
Investors of regular CDOs get returns from the payments made on corporate debt or mortgage loans. Holders of synthetic CDOs get returns from the premiums associated with the derivatives.
CDOs vs CLOs
Collateralized loan obligations are a subset of CDOs. Instead of bundling up an array of different types of debt, CLOs more specifically gather together debt from hundreds of different companies, often this debt is considered below investment grade.
CLOs are considered by some market observers to be safer than CDOs, but both are risky debt products. CLOs do however tend to be more diversified across firms and sectors, while CDOs run the risk of being concentrated in a single debt type, such as mortgage loans during the 2008 financial crisis.
According to S&P, no U.S. AAA-rated CLO has ever defaulted. Also, CDOs can have a higher percentage of lower-rated debt. According to the ratings firm Moody’s, CDOs are allowed to hold up to 17.5% of their portfolio in Caa-rated assets and below (e.g. very high credit risk). That compares to the 7.5% in CLOs.
Collateralized Debt Obligations and the 2008-09 Housing Crisis
CDOs of mortgage-backed securities became notorious during the subprime housing crisis of 2008 and 2009. A selloff in the CDO market was said to amplify broader economic weakness in the economy.
Banks had been weakening lending standards when it came to home mortgages, allowing individuals to buy home that may have been too expensive for them.
Meanwhile, Wall Street banks were packaging home loans — some risky and subprime — into CDOs in the years leading up to the financial crisis. Ratings firms labeled these mortgage-backed CDOs as safe, on the premise that homeowners were a group of creditors less likely to default.
A mortgage-backed CDO holds many individual mortgage bonds. The mortgage bonds, in turn, packaged thousands of individual mortgages. These mortgage CDOs were considered to be of limited risk because of how they were diversified across many mortgage bonds.
But homeowners started to become unable to make their monthly payments, and defaults and foreclosures started piling up, leading to a domino effect of losses spread across the financial system.
Recommended: What Is Active Investing?
CDO Comeback
Around 2020, CDOs had a resurgence, with primarily corporate loans rather than home loans being packaged into securities.
A world of ultralow yields in the bond market pushed investors to seek higher-yielding markets. The average yield stands at just 2%, while trillions of dollars in debt trades at negative rates. In contrast, CDOs can yield up to 10%.
This time around hedge funds and private-equity firms, rather than banks, became the big players in the CDO market. Hedge funds are the new buyers–accounting for 70% of volume in the market. Banks were responsible for 10% of volumes in 2019, compared with 50% in the past.
The Takeaway
Collateralized debt obligations or CDOs are financial structures that bundle together different types of debt and sell shares of these bundled securities to investors.
The return investors might see from these debt-based, derivative securities depends on the ongoing payments from the debt holders. CDOs are typically purchased by institutional investors, not retail investors, but it can be useful to know about this market sector.
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This is a guest post from John Forman from The Essentials of Trading. Forman is the author of a book by the same name. He has been a trader of the stock and other markets for over 20 years, and is a professional stock market analyst for Thomson Reuters.
The wealth building potential of the stock market is enormous. I think we all realize that. The long-running debate, though, is whether one is better off investing in individual stocks (or funds that do just that), or whether it’s best to just put your money in an index fund. Most funds fail to beat the market, so it would seem index funds are the better choice.
While it is certainly true that index investing has some advantages, and some mutual funds do perform better than the indices, no index or fund will ever offer the upside potential of investing in individual stocks. It’s a matter of math.
Indices and funds include many stocks which move in all different directions. One of those stocks could double in price for the year, but because most others in the collection will do much less well, the index’s or fund’s performance will be much lower than that one stock’s gain. An investor who held that stock by itself, though, would have done quite well.
Of course you need to be able to find the stocks that will beat the indices and funds.
How Do I Find Good Stocks? The requirements for success in the stock market are much like the requirements for success in any other undertaking. Proper preparation is one of them — potentially the biggest — and a major part of preparation is having a firm objective in mind. As an investor, that normally means either seeking capital appreciation or pursuing income, or some combination. For the purposes of the discussion here, I will focus on the capital appreciation.
Another part of the equation is timeframe. I’m not talking about how long you have to retirement. There’s plenty of literature in financial planning circles about how you should structure your investments from that perspective. What I’m referring to here is how long you will expect to hold any given stock position in your portfolio.
Are you a patient long-term buy-and-hold investor who will have no problem sitting through the inevitable ups and downs of the market? Or are you someone who wants more action, doesn’t have the patience to hold stocks for years at a time, and/or cannot stomach the idea that at points your positions could go well against you for long periods of time?
You may not always be one or the other. It is, however, important to know which mode you are in when you are looking to pick good stocks. A lot of stock market players get themselves in trouble because they go into a position thinking they are one type of player only to change their minds once prices start moving.
Fundamental Analysis If you are in the first category, then your focus in trying to find good investment stocks is to look at the big picture. You are Warren Buffett. You look at the company and its management team. You look at its business and, in many cases, the broader economy. What you are trying to identify is a company which will steadily increase in value over time.
How do you do that? By thinking about what it takes for a company to grow and profit in a sustained fashion.
What do companies like that have? They have strong management teams who know what they are doing, who have a long term view and who aren’t worried about the quarter-to-quarter results or stock price fluctuations. They are in growing business sectors (or niches) where the competition isn’t so intense that no one can really make any money.
This sort of approach to looking at companies is generally referred to as fundamental analysis. Fundamentals are the underlying elements that determine the long-term growth and profitability of a company.
The idea is that you are giving your money to some really capable people and having them put it to good use in their business. Then you let them do their thing in the way they best see fit. So long as they continue to do good things and keep the business on track for positive growth in value, you stay invested. Maybe somewhere down the line you will cash out your investment. Maybe you’ll leave it to your kids or donate it to charity. Whatever the case may be, you would expect the value of your stake in the company to have grown nicely in value by that time.
Security Analysis by Benjamin Graham and David L. Dodd is the classic text for stock market fundamental analysis. You can also find a brief overview at StockCharts.com.
Technical Analysis Now, if you are in the second category where you’re not just going to buy a stock and lock it away, you need to think more specifically about your holding period. By this I don’t mean to imply that you will hold a stock for an exact period of time and that’s it. I just mean you should have an idea of how long you would expect to be in the position. That could still be years, or it could be months or weeks.
The advantage of the long-term investor is that they need not worry about the fluctuations in the price of the stock. They are investing on the basis of the long-term growth of the company with the assumption that the stock price will generally follow along at about the same pace.
Less long-term players (often referred to as traders) have to be cognizant of the intermediate and shorter-term price action. Generally speaking, the shorter your expected holding time horizon, the more you will have to focus on the price action. This is because the fundamentals mentioned above are usually slow moving elements which play out over the longer timeframes. They don’t change quickly, so they can’t really influence short-term price movements much.
What I mean by that is stock prices can move in the short-term on a great many factors. It could be news, economic data, changes in interest rates, the general market environment, and lots of other things. Just because a company is making money hand over fist doesn’t mean the stock price will be rising. If the company continues to do that, the stock will probably move higher eventually, but in the meantime other factors could cause it to go sideways or to even fall. This is something that baffles a lot of new investors.
Focusing mostly on price moves you into the realm of technical analysis. This approach seeks to identify patterns of price movement in the market for the purposes of determining likely future direction. This is also referred to as market timing, which basically means seeking to define good points at which to buy and sell. A lot of stock investors use fundamental analysis to find good companies, then use technical analysis to try to pick the best time to buy the stock.
Technical Analysis of the Financial Markets is widely considered the ultimate source on the subject. StockCharts.com offers an introduction to technical analysis.
Value Investing To this point you’ll notice that I haven’t used the term value investing yet. Many people would refer to Warren Buffett as a value investor, and as such would put value investing in the long-term investing category.
Value investing need not be a “buy it and bury it” type of approach, however. In fact, I’d guess that most people consider it the process of identifying stocks trading out of line with the value of the company in question. They use any number of metrics to determine what a company’s stock should be worth. If the stock isn’t close to that value, they will either buy it or sell it in expectation that it will eventually get back in line. In most cases, once that happens, the stock position will be exited.
This probably all sounds very familiar. You’ve no doubt heard of Wall Street analysts putting out price targets and ratings and such. They generally use fundamental analysis to come up with what they think is the value of the company right now (adjusting it for new information, of course). Then they look at current price to see how it matches up with what their valuation calculations tell them.
If you’d like to learn more about value investing, consider Benjamin Graham’s classic, The Intelligent Investor. The Motley Fool has an interview with Bruce Greenwald about the three steps of value investing.
It Takes Work Regardless which type of stock market player you are, there are no approaches which don’t require effort on your part to pick the good stocks. Even if you have someone giving you recommendations, you should still be doing your own due diligence to see if they really fit in with what you are trying to do in the market.
Also keep in mind that no matter what timeframe investing/trading you do, you should always take the longer-term view. It’s extremely unlikely that any one stock position is going to make you rich in a short period of time. If you try to score it big on any one trade you’re probably going to end up losing a lot of money. Wealth accumulation in the markets is best sought by steady growth, putting the power of compounding to work in your favor.
If you haven’t heard of PNC Mortgage before, you probably will in the near future.
They’re a rapidly growing depository bank and mortgage lender with 2,600 branches across 19 states nationwide.
PNC is also one of the top 10 largest banks in the United States based on total assets. However, most of their retail operations tend to be in the Midwest and Northeast regions of the country.
But you can still apply for a home loan with the company from just about anywhere in the United States because they let you apply online, by phone, or in person at a branch.
Let’s learn more about PNC to see if they should be included in your home loan search.
Who Is PNC Bank?
A depository bank and mortgage lender with roots in Pittsburgh
The name is based on two former predecessors (Pittsburgh National Corporation and Provident National Corporation)
They acquired National City Mortgage during the housing crisis in 2008 to become a major mortgage player
A top-25 mortgage lender nationally that funded about $36 billion in home loans during 2021
The history of PNC Bank can be traced all the way back to the mid-1800s, though it’s unclear when they first began offering mortgages on residential properties.
But one thing is certain – they’ve been around a while and look to be growing larger as time goes on, especially in the home lending space.
One major catalyst in their growth story had to do with their timely acquisition of National City Mortgage, which was a major home loan lender until the housing crisis hit in the early 2000s.
PNC Mortgage basically reinvented itself with the merger thanks to National City’s large mortgage presence. They were a top-10 mortgage lender up until the crisis.
However, PNC has yet to crack the top-10 lender list themselves, though it’s probably a matter of time if they continue on the same course.
What Does PNC Mortgage Offer?
They offer both fixed and adjustable-rate loan options
Conforming and jumbo loans
FHA loans and VA loans
And home equity loans and lines of credit
PNC Mortgage offers a variety of home loan programs, including typical fixed-rate options like the popular 30-year fixed and 15-year fixed.
Additionally, you can get your hands on three different types of ARMs, including a 5/1 ARM, 7/1 ARM, and a 10/1 ARM.
If you happen to live in a more expensive region of the country, or have plans to buy a mega-mansion, know that they accept jumbo loan amounts up to $5 million. This should satisfy most borrowers out there.
Conventional loan options aside, they offer government home loans as well, including FHA loans and VA loans.
Both government loan options come in 30-year fixed and 5/1 ARM varieties.
PNC also offers three different types of home equity options, including a HELOC, a home equity loan, and a so-called “Home Equity Rapid Refinance.”
All three include a 0.25% interest rate discount when you set up and maintain automatic monthly payments via a linked PNC checking account.
The Home Equity Rapid Refinance is referred to as a “lower cost solution than a traditional fixed rate mortgage,” though they also say you can enjoy fixed payments for up to 30 years.
It’s somewhat unclear what it actually is, though it sounds kind of like a cash out refinance with limited closing costs. One twist is it seems to be a home equity loan that is in the first position (not subordinate), an important detail if you were to get foreclosed upon.
Anyway, a home appraisal fee isn’t required in many cases, and they allow LTVs as high as 84.9% with no private mortgage insurance. It sounds like a weird take on a home equity loan.
PNC Mortgage Rates Seem Competitive
PNC Mortgage openly advertises its mortgage rates
Which not all home loan lenders tend to do
They appear to be quite competitive relative to other lenders
But note that they often assume a 70-80% LTV ratio among other things
Speaking of interest rates, let’s talk about the rates at PNC Mortgage. First off, kudos to them for advertising their mortgage rates. Not all mortgage companies do.
My first impression – they’re quite competitive, but as always, we have to consider the assumptions they make. And they make some pretty big ones.
For conforming loan amounts, they assume you’re putting down 20% of the home purchase price, or that you have 20% equity in your home. Plenty of homeowners put down less when buying and/or have less equity.
They also expect you to have excellent credit, defined as a 740-credit score, and presume the property is a one-unit single-family home.
When it comes to jumbo loans, they make the same assumptions but base pricing on a 30% down payment, or 70% LTV.
While this isn’t uncommon (most lenders do this), you do have to pay attention to the assumptions to ensure you aren’t disappointed when you receive your actual rate quote.
Also take note of the lock period, which might be 30 or 60 days. If you accept a lower lock period you might be able to obtain an even lower mortgage rate.
PNC Mortgage Reviews
If their mortgage rates and closing costs are competitive by all means consider them
They also recently launched a digital home loan process powered by Blend
And they offer a free biweekly payment service and relationship discounts
But their reviews are a bit mixed so be sure to do your research
It’s hard to get super excited about going to a big, old bank to get a home loan.
But PNC Mortgage recently launched a revamped digital mortgage process backed by fintech company Blend in September 2022.
They also offer relationship discounts on their mortgage rates and home equity offerings, along with a free biweekly mortgage payment service.
However, they’re a little late to the party seeing that other major players, such as Rocket Mortgage from Quicken, and the digital offerings provided by the likes of Bank of America and Chase, have been around for years.
Maybe PNC can offer lower mortgage rates than the competition, which is certainly enough to choose them over another lender, but there doesn’t seem to be much else to talk about here.
They have their “Home Insight Planner,” which features some mortgage calculators and lets you generate home affordability scenarios, but it seems a bit clunky and not all that revolutionary.
They do service a lot of mortgages, so it’s possible you might actually be making your mortgage payments out to PNC if you get your home loan with them. This can be a plus if you’re sick of your mortgage loan being sold and transferred over and over.
But until PNC Mortgage does more to separate themselves from the crowd, they likely won’t attract many clients outside their existing customer base, especially as more disruptors emerge to shake up the scene.
Lastly, while they do have an ‘A+’ rating from the Better Business Bureau (BBB), many of their reviews are pretty low.
For example, they’ve got a 1.12/5 rating on the BBB website from reviews, a 1.3/5 on Trustpilot, and a 3.7/5 on WalletHub.
The one bright spot is Zillow, where they enjoy a 4.95/5, with most reviews likely more aligned with their home loan business than overall banking services.
If that’s the case, PNC could be a good choice among other mortgage companies out there.
PNC Mortgage Pros and Cons
The Good Stuff
Offer a digital mortgage process powered by Blend
Can apply for a home loan online, in-person, or by phone
Openly advertise their mortgage rates online
Relationship discounts for existing customers
Lots of loan programs to choose from including jumbos and home equity loans/lines
Licensed to do business nationwide
They service their own loans
A+ BBB rating
The Maybe Not
As a big bank they might be overly bureaucratic/slow
Lincoln Financial Group is a large insurance and financial corporation. It is a Fortune 500 company that provides a very diverse array of financial services and solutions to its business and consumer clients. The company has in excess of 9,000 employees and it is headquartered in Philadelphia, PA.
The name Lincoln Financial Group is actually the marketing name for Lincoln National Corporation, as well as its affiliates. The company’s shares actively trade on the New York Stock Exchange under the symbol LNC.
History
Lincoln Financial was founded back in 1905 – and it has thrived and grown throughout the past century. Today, the company holds very strong positions in the financial services industry, being #232 on the 2014 Fortune 500 list in terms of company revenue, and #26 in terms of assets. Lincoln is also listed as #218 on the Barron’s 500 2014 list for the most growth in revenue, as well as for the most cash returns.
As of the third quarter 2014, Lincoln Financial reported to have $215 billion in assets under management, with total adjusted statutory capital of roughly $8.3 billion. This places the company in a solid fourth place for all life and health insurance companies by revenue. However, Lincoln is ranked #1 for both total life insurance sales, as well as for variable universal life sales, according to LIMRA’s YTD rankings as of June 30, 2014.
Products Offered By Lincoln Financial
Lincoln Financial Group offers a wide variety of financial and insurance products for both businesses and consumers. These include life insurance, annuities, long-term care solutions, employee benefits, workplace retirement plans, group insurance, and executive benefit plans.
On the individual life insurance side, Lincoln provides the following options:
Term Life – Term life is typically purchased to provide “temporary” coverage. This type of policy can be obtained for one year, five years, ten years, or longer. It is considered to be the most economical form of coverage. This is because term life provides only death benefit protection, with no cash value build up or investment component. Lincoln Financial offers three different level term options to choose from.
Universal Life – Universal life insurance provides insureds with the benefits of traditional coverage. This means that they have death benefit protection, along with cash value. This cash grows on a tax deferred basis, meaning that there are no taxes due on the growth until the time of withdrawal. With universal life, policy holders have the opportunity to grow cash over time at a set rate, yet the flexibility to set the amount and the timing of their premium. Policy holders can also set the amount of their death benefit – within certain guidelines – when the policy is in force. Lincoln has several different Universal Life products to choose from, including the Lincoln LifeGuarantee UL, the Lincoln LifeCurrent, and the Lincoln LifeReserve.
Index Universal Life Insurance – Similar to regular universal life, index universal life also allows funds to grow tax deferred. However, growth is tracked by the performance of an underlying index such as the S&P 500 or the Dow Jones Industrial Average (DJIA). Lincoln offer several index universal plans, including the Lincoln Treasury Indexed UL, the Lincoln LifeReserve Indexed UL Accumulator, the Lincoln LifeReserve UL Protector, and the Lincoln WealthPreserve Survivorship Indexed UL.
Variable Universal Life Insurance – Variable universal life insurance offers flexible death benefit coverage, along with growth potential in the cash value component of the policy. The potential to grow the cash over time is based upon market performance of an underlying portfolio of “subaccounts.” The funds, however, are not invested directly in the market. It is important to note, however, that while variable life can offer the opportunity to grow funds due to market performance, the potential for poor market performance can also make this type of policy more risky. Lincoln Financial offers several options for variable universal life insurance. For single life plans, it offers the Lincoln AssetEdge VUL, the Lincoln AssetEdge Exec VUL, and the Lincoln VUL ONE. There is also a Survivorship Life option. These plans include the Lincoln PreservationEdge SVUL and the Lincoln SVULONE.
Lincoln Financial also provides a life insurance option as an alternative funding mechanism for long-term care expenses. This can allow an individual or a couple to forgo the expense of having to purchase a stand-alone long-term care insurance policy and instead just use the funds that are inside of a universal plan. This can essentially provide the policy holder (or policy holders) with the benefits of universal life and long-term care insurance combined.
It also helps to eliminate the worry of “not using” long-term care insurance policy benefits that are paid for over many years, but never utilized. Instead, this option provides coverage for long-term care expenses if the person needs it – but if they don’t, it offers either a death benefit or a return of their initial premium if they don’t.
Company Ratings
Lincoln Financial is a solid performer in terms of financial strength – and it has the ratings to show it. The company has received very strong marks from the ratings agencies:
The Lincoln National Life Insurance Company
Lincoln Life & Annuity Company of New York
A.M. Best
A+ (2nd highest of 16)
A+ (2nd highest of 16)
Standard & Poor’s
AA- (4th highest of 22)
AA- (4th highest of 22)
Moody’s Investor Services
A1 (5th highest of 21)
A1 (5th highest of 21)
Fitch Ratings
A+ (5th highest of 19)
A+ (5th highest of 19)
Advantages and Concerns
There are a number of advantages to going with Lincoln Financial as your company of choice. First, this financial services giant offers a nice variety of both term and universal policies, along with a very wide selection of optional policy riders to choose from. So, even though the company does not provide a whole life insurance option, there are a lot of other choices that can meet most other needs.
Lincoln also offers other popular policy features such as a no-exam term conversion (for those who qualify), as well as a level premium guarantee on its term life insurance plans, and access to the cash value on its universal life policies. It does not, however, offer a dividend option with paid-up additions.
The company is also very solid in terms of its financial backing and strength. Across the board, the financial rating agencies have provided Lincoln with strong marks. That, coupled with the company’s century old history, should give policy holders confidence that Lincoln will likely be there when they need them.
Unfortunately, no matter how nice the variety is in a company’s product selection is, it is always a wise plan to get more than just one policy quote before making your final purchase choice. Just like choosing a car or a computer, you wouldn’t just look at one and agree to the sticker price without first doing some comparison shopping.
When searching for life insurance, it is likely that the proceeds will be used for paying off large debt, replacing income, or some other important purpose in which survivors will rely. With that in mind, you will want to ensure that the amount of proceeds is correct, the premium is within budget, and the company is secure. To help protect your family further, looking into Burial Insurance is also a good choice.
Finding the Life Insurance Coverage That Meets Your Needs
If you are ready to begin searching for the right policy for your specific needs, we can help. We can assist you in several different ways. First, we can help you in determining the right type of coverage. In other words, is term, whole life, or universal life the proper coverage type for you? Next, we will also walk you through determining the proper amount of coverage for your needs.
Coming up with the right dollar figure can be daunting at times – especially if projecting out into the future. My preferred provider can help you in coming up with the coverage that can help get your loved ones through the tough times. Get started with your own set of quotes by filling out the form on the side of this page.
They will also help you in reviewing the many different life insurers in the market place in order to find the one that is best for you. Root Financial works with the best life insurance carriers in the industry today, and can get you all of the important information that you need in order to make the right decision. Complete a major part of your personal finance plan today by getting quotes and coverage. We also have great tips for other insurance covers out there too, check out our post on the Best Auto Insurance Companies!
And who could blame them…what with their entire financial system in complete disarray.
The Greek situation is a mess, as you’ve probably heard. The government has fallen behind on its payments to creditors and citizens have made a run on the banks.
There’s apparently no money left to lend (probably no new mortgages) and maybe very little to withdraw.
In fact, the government limited cash withdrawals at ATM machines to 60 Euros per day for Greek residents.
Tourists aren’t limited, but with lines around the block and tapped out cash machines, they’re effectively in the same boat. Can’t wait to visit soon!
Greeks aren’t allowed to transfer money to foreign accounts either, and there are widespread reports of credit and debit transactions being declined.
A Greek once told me (true story) that they didn’t realize you actually had to pay credit cards back, which might explain why they’re in their current dire situation.
In a word, it’s a mess and it doesn’t appear to be getting any better unless a deal is made. Given all the chaos, you might be wondering how Greek homeowners are handling the turmoil.
Greek Mortgage Defaults Rising
As you might expect, more and more Greek homeowners are falling into arrears.
Kind of makes sense right? If your country isn’t even making timely payments, why should you?
Per a new report from Fitch Ratings, 17.3% of Greek mortgages were at least one month behind as of May.
That number is up from 16.9% in February and around 16% in January. And it’s expected to get worse.
Fitch painted a bleak picture, stating that, “a deteriorating economy and almost total absence of bank credit may have combined with retail borrowers withholding loan repayments during the extended period of uncertainty.”
Additionally, the agency noted that some mortgagors “may already be strategically entering early-stage arrears.” In other words, strategic default, similar to what took place here in the U.S. when borrowers fell deeply underwater on their mortgages.
Apparently they’re choosing to make payments on other types of debt because they don’t believe the banks will come after them for their homes.
Heck, the banks may not be around in another year, just like the many U.S. financial institutions that got swallowed up during our housing crisis.
Fitch believes the number of late mortgages will rise and that the possibility of negotiating a third bailout program for Greece will be “challenging.”
It’s unclear what would happen to these borrower’s mortgages if Greece were to exit the European Union and return to the drachma, their original currency before the Euro.
Or what would happen if the banks holding the mortgages fail. But there’s clearly no urgency to keep making payments while uncertainty looms.
Greek Crisis Lowering Mortgage Rates in the USA
The good news, for us at least, is that the Greek crisis has pushed mortgage rates lower. Not significantly lower, but back below 2015 highs.
As I always say, bad economic news generally leads to lower interest rates. And that seems to have been the case this week as the Greek crisis continues to be front-page news.
Unfortunately, it also sent the stock market crashing, so the savings might be awash for some.
And the relief might be short-lived if there’s a strong jobs report released tomorrow (early due to the July 4th holiday).
Still, a mortgage rate an eight or a quarter of a percent lower will be welcome news to those looking to buy or do a rate and term refinance.
Open a BMO Harris Premier™ Account online and get a $500 cash bonus when you have a total of at least $7,500 in qualifying direct deposits within the first 90 days of account opening. Expires 9/15. Conditions Apply.
The rise of online and mobile banking means that the lines between checking and savings accounts are blurrier than ever. Some digital financial platforms don’t even require you to open them separately anymore.
That’s the case for SoFi Checking & Savings, which is essentially a checking and savings account in one convenient package. If you’re not satisfied with your current checking and savings accounts, or you lack one or the other entirely, SoFi Checking & Savings is definitely worth a closer look.
What Is SoFi Checking & Savings?
SoFi Checking & Savings is a digital deposit account with separate subaccounts for checking and savings balances. Both subaccounts earn interest: the checking side at 0.50% APY and the savings side at 4.40% APY.
SoFi Checking & Savings has no monthly maintenance fee or minimum balance requirements. Some debit card purchases earn cash back, though its rewards program isn’t as reliable as the best cash-back credit cards. Other notable features include an account opening bonus opportunity, early direct deposit with a qualifying payer, federal deposit insurance above the standard limit, and free coverage for smaller overdrafts.
What Sets SoFi Checking & Savings Apart?
SoFi Checking & Savings stands out from similar online deposit accounts in several ways:
Pays interest on all balances. SoFi Checking & Savings earns interest on all balances. On the checking side, the current interest rate is 0.50% APY. On the savings side, it’s 4.40% APY. That’s well above the national savings account average.
Potential for excellent cash-back returns. You can earn up to 15% cash back on eligible debit card purchases with SoFi Checking & Savings.
No-fee overdraft protection on smaller overdrafts. You pay no overdraft fees on overdrafts up to $50 as long as you have a qualifying direct deposit set up. This is a relief if you’re known to occasionally overdraw your bank account.
Deposit insurance well above the standard federal limit. This account comes with up to $2 million in federal deposit insurance, several times the standard limit of $250,000. This is excellent news for users with sizable cash cushions.
Key Features of SoFi Checking & Savings
SoFi Checking & Savings has a generous account opening bonus, a two-tiered yield on balances, a debit card cash-back program, and some other notable features.
Account Opening Bonus
If you open your first SoFi Checking & Savings account by December 31, 2023, you could qualify for an account opening bonus worth $250.
To earn the bonus, do the following:
Set up direct deposit with a qualifying payer
Receive cumulative direct deposits totaling $1,000 to $4,999 during the 25-day qualifying period to earn a $100 bonus
Receive cumulative direct deposits totaling $5,000 or more during the 25-day qualifying period to earn a $250 bonus
Account Fees & Minimums
There is no monthly maintenance fee on this account. There’s also no minimum opening deposit or ongoing balance requirement.
Account Yield
Balances held in the savings portion of this account yield 0.50% APY. Balances in the checking portion yield 4.40% APY. There’s no minimum balance to earn interest in either case.
Cash-Back Rewards
Eligible debit card purchases earn up to 15% cash back. SoFi Checking & Savings ties cash-back rewards to specific retailers rather than spending categories, so not all purchases earn rewards.
ATM Access
You can withdraw cash without incurring any fees at more than 55,000 ATMs in the Allpoint network. Out-of-network ATM withdrawals may incur third-party charges that SoFi can’t control.
Overdraft Protection
Overdrafts under $50 qualify for free overdraft protection as long as you have a qualifying direct deposit set up for your account. Larger overdrafts may incur fees or may be declined altogether at SoFi’s discretion.
Early Direct Deposit
If your employer or benefits payer qualifies, you can get your direct deposit up to two business days early (for example, Wednesday instead of the usual Friday payday).
Mobile Features
SoFi Checking & Savings is a mobile-first online bank account with excellent ratings (4.8 stars) from more than 250,000 verified iPhone users. The app itself is comprehensive and can handle basically any demands you place on the standard desktop interface, including remote check deposit, digital bill payments, peer-to-peer payments, and external funds transfers.
Deposit Insurance
This account comes with up to $2 million in deposit insurance. You’re not guaranteed to get the maximum coverage amount, and the exact amount depends on SoFi’s arrangements with its partner banks. But it’s reasonable to expect a coverage amount significantly higher than the standard FDIC limit of $250,000.
Pros & Cons
SoFi Checking & Savings has a lot to recommend it, and a few downsides too.
No monthly maintenance fee or minimum balances
Excellent savings yield
Deposit insurance well above the standard limit
Cash back on eligible purchases
Many purchases don’t earn rewards
Not a full-service bank
Limited overdraft protection
Pros
SoFi Checking & Savings is extremely low-cost and offers excellent returns on your balances. It has some potentially valuable benefits too.
No monthly maintenance fee. This account has no monthly maintenance fee. It costs nothing to keep open, no matter how much you use it or what your account balance is.
No minimums. There’s no minimum balance to open or maintain this account, so it’s useful as a secondary account without much of a balance.
High yield on savings balances. This account yields 4.40% APY on the savings side, on par with the best high-yield savings accounts on the market.
Up to $2 million in deposit insurance. SoFi Checking & Savings offers up to $2 million in federal deposit insurance, far in excess of the standard coverage limit. If you’re fortunate enough to have hundreds of thousands of dollars in the bank, this is a notable benefit.
Potential for excellent cash-back rewards. You can earn up to 15% cash back on eligible debit card purchases, though most earn much less. Still, it’s nice to get back some of what you spend.
Above-average account opening bonus opportunity. SoFi Checking & Savings delivers up to $250 as a bonus when you open your account by December 31, 2023 and receive qualifying direct deposits within the first 25 days.
Cons
SoFi Checking & Savings lacks some important features found elsewhere in the online banking space and is somewhat isolated within the larger SoFi ecosystem.
No overdraft protection over $50. With SoFi Checking & Savings, you’re on the hook for overdrafts above $50. SoFi reserves the right to decline these transactions altogether. By contrast, many banks offer overdraft protection for overdrafts in any amount.
No higher-yielding accounts at SoFi. SoFi offers lots of other financial products, including a slew of consumer loans, but it’s not a full-service bank. If you’re looking for a one-stop shop to open a CD or money market account with even higher yields, keep looking.
Many purchases don’t earn rewards. SoFi Checking & Savings’ cash-back program rewards purchases with some retailers but excludes many others. It’s less reliable than traditional cash-back programs, which reward most or all purchases.
How SoFi Checking & Savings Stacks Up
SoFi Checking & Savings is a convenient money management package that blends the best features of online checking and savings accounts. It’s unusual — but not unique. Before opening an account, see how it compares to a similar package: the Aspiration Spend & Save account.
SoFi Checking & Savings
Aspiration Spend & Save
Maintenance Fee
$0
$0 to $7.99 per month
Minimum to Open
$0
$10
Minimum Ongoing
$0
$10
Maximum Yield
4.40% APY
3.00% APY with Aspiration Plus
Qualifying Activities
Yes
Yes
Maximum Balance to Earn
Unlimited
Yes, $10,000
Spending Rewards
Up to 4.40% APY
Up to 10% cash back
SoFi Checking & Savings is superior to Aspiration Spend & Save in most respects, from the maintenance fee (none) to the minimum balance requirements (also none) to the maximum balance to earn interest (unlimited). The biggest selling point of Aspiration is that it’s intentionally sustainable — your deposits and purchases never fund fossil fuel investments and may contribute to carbon-reduction initiatives like reforestation.
Final Word
It’s difficult to find much wrong with SoFi Checking & Savings. It’s true that the rewards program has some important limitations and the overdraft protection plan isn’t as generous as some competitors, but for most people, these are drawbacks and not deal-breakers.
That said, if you’re in the market for a full-service bank that can handle all your financial needs, SoFi probably isn’t it. Fortunately, there are plenty of online banks that do fit the bill.
SoFi members with direct deposit can earn up to 4.40% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum direct deposit amount required to qualify for the 4.40% APY for savings. Members without direct deposit will earn up to 1.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Interest rates are variable and subject to change at any time. These rates are current as of 7/11/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
The Verdict
Our rating
SoFi Checking & Savings
SoFi Checking & Savings is a two-in-one deposit account for people who enjoy earning interest and hate paying fees. With a well-above-average yield, a generous account opening bonus, and cash back on eligible purchases, it’s a very rewarding product indeed. But it’s not a full-service bank, so don’t expect it to handle all your financial needs.
Editorial Note:
The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author’s alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
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Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he’s not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.