•  Citigroup gets a $20 billion injection from the Treasury to use as it pleases.  Perhaps more importantly, it also gets $306 billion guarantee of its assets by the "U. S. Government".  This is an "asset pool consisting of loans and securities backed by residential real estate and commercial real estate, and their associated hedges, as agreed, and other such assets as the U.S. Government (USG) has agreed to guarantee."

•  This guarantee is in the form of an insurance policy such as there is a $29 billion deductible to Citigroup.  Any losses above that are shared 90% by the USG and 10% institution (presumably Citigroup).

•  Any loss above the deductible is shared such that the "second loss" is capped at $5 billion to the US Treasury and a "third loss" is capped at $10 billion to the FDIC.  Any losses beyond that will be born by the private company known as the Federal Reserve.

•  The privately owned Federal Reserve will lend a stock owning member from its "remaining pool of assets with a non-recourse loan, ... at a floating rate of OIS plus 300bp.  Interest payments are with recourse to the institution."  Of course, we the taxpayers, guarantee that loan.

•  Caution: Treasury reps are speaking at a conference in international financial institutions.

•  Third quarter mortgage originations hit an 8 year low (2000).

•  Regional Banks are reported to be the most susceptible to a slide in the commercial real estate values and market.

Should I pay off my mortgage?

We are asked quite often whether it is wise for a borrower to pay off their mortgage early.  It may be a choice of adding as little as $10 to each payment or as much as taking some portion of their savings and snuffing out the debt.

The answer is that “it depends”.

There is no reason in the world to add additional principal prepayment to any regular monthly check or consider emptying your savings if you have anywhere near the average family’s credit card debt of $8,000.  The interest on that credit card debt is not tax deductible unless it was used for business.  And in most cases, the interest rate is higher on non-secured credit such as this.  If you were to make any additional payments beyond the minimum required then you would have to allocate it to reducing the credit card debt first.  Do this before making any additional principal reductions to your mortgage beyond the minimum due.

Rule 1.  Pay off higher interest rate debt first.

Secondly, unless you have your retirement paid for you must begin planning and saving for it.  And there is no better way than with a tax deferred Individual Retirement Account (IRA) or a tax deferred plan offered by your employer such as the 401(k).  That employer plan is especially important if they match any of your contributions.  That is free money and you must take advantage of it.  Most financial planners suggest maxing out the allowable contributions to each of the different plans before prepaying your mortgage debt.

Rule 2.  Make max contributions to retirement plans before prepaying mortgage debt.

Finally, as Uncle Sam is subsidizing your mortgage debt with tax benefits for the interest and real estate taxes paid there may be no need to be in a hurry.  If there are alternative uses for your funds such as education or investment in a business with the potential for a return that may be a better use.  As mentioned above, you certainly want to pay off non tax deductible debt prior to a mortgage.

Rule 3.  Pay off non tax deductible debt prior to making a prepayment on any mortgage.*

Whatever you do, remember to be judicious.  Prepaying a fixed rate mortgage will not cause the minimum payment to drop as it would with an interest only loan.  And once you use your cash to prepay your mortgage, it is tied up as equity and perhaps difficult to access for any particular future need.  Of course, all these rules can be thrown out if the borrower is just plain uncomfortable with the debt and wants to eliminate it.  There is no reason to lose sleep over a mortgage.

•  "Twas the night after the election and all through the country, not a pollster was calling, not an ad was to be heard."   What sweet relief!

•  48% of Nevada homes have negative equity according to First American CoreLogic.

•  There are settlements reported to be coming soon in several mortgage and securities fraud probes initiated in 2007.

•  Not only are the feds now trying to bail out the U.S. economy, they’re also lending $120 billion to a group of foreign countries in order to help them swap their currencies for US dollars.   At least, that’s what it says in the media... the actual transaction is a mystery to us.

•  The White House is reviewing several foreclosure prevention programs but is not ready to endorse a new loan modification program the Treasury and the FDIC are working on.

•  Hearings have been scheduled for November 12 and 18 on the implementation of the $700 billion Troubled Asset Relief Program (TARP) and other crisis response programs.

•  FHA reverses long-standing policy and wants to help borrowers who have filed for bankruptcy stay in their homes.

•  Realtors want Fannie Mae, Freddie Mac and FHA to abandon their condo rule regarding investors.

•  The financing arm of General Motors wants to become a bank.   GMAC is in talks with regulators to become a bank holding company (BHC).  It has also qualified for participation in the Federal Reserve's Commercial paper funding facility.  The lure of our tax dollars and the opportunity to grab them is overwhelming.

•  Data show senior citizen borrowers are finding themselves particularly hard hit by recent market woes, according to one Internet-based reverse mortgage provider.

•  Please exercise your constitutional right and privilege to VOTE for the candidates of your choice.