Chase and Other Big Banks Fraudulently Devalue Homes

While the banks are reaping billions of dollars in taxpayer funded relief, not only do they continue to make credit tight and foreclose on mortgage holders, but they have now begun to unilaterally adjust home values on mortgage holders who didn't over extend themselves during the housing boom. The audacity of banks, with Chase Bank being one of the largest banks perpetrating this fraud, is just unforgivable. In essence, they are marking to market the property values of homeowners who are not delinquent, not in danger of foreclosure and good paying customers. Furthermore, the values they are assigning to properties are no more based on reality than the values of the toxic assets they hold on their books.

I happen to be one of the people who didn't overreach during the housing boom, didn't use all of the credit line Chase Bank provided and paid my bills every month on time. Still, Chase decided to arbitrarily lower the value of my home on their website to $200,000, a value 40% lower than its assessed value and thereby wiping out, on paper only, most of the equity in my home. They did this even though I have no intention of selling my home and never asked for an increase in my home equity line of credit. I am sure they did this because the line has an adjustable rate of interest which currently is 2.49%. Obviously, they don't like the fact that I am getting a bit of a break on my interest payments at this time. The kicker is that their website specifically states that the values listed for homes are NOT APPRAISALS and "The tool on this page is provided by a third-party site. Please note that the third party's privacy policy and security practices may differ from Chase's standards. Chase assumes no responsibility for nor does it control, endorse or guarantee any aspect of your use of this tool." Yet, they have used this very tool to value my home.

I checked other sites, including Zillow and found the value of my property to range from a low of $279,000 to a high of 375,000. Even on the Chase site, my neighbors property was listed $61,000 higher than my property. While my neighbor has a very nice property and he was very recently approved for a refinancing which exceeds the value Chase assigned to his home, my house is bigger, has more bedrooms, more bathrooms and other features my neighbor doesn't have. My property was also freshly painted this spring and is in excellent condition. The whole point is that Chase arbitrarily deflated the value of MY PROPERTY to force me to beg them for a fixed rate loan.

When I called their customer service line, they were rude and disrespectful. After my third call, I was given the phone number of the corporate office where supposedly I would be able to talk to someone who actually was involved in the decision making process. As you can imagine, I got to talk to a very nice secretary who told me everyone was busy, but someone would return my call. Of course, nobody returned my call.

So now I have a question for you, Jamie Dimon. Is this the way you build customer loyalty? Is this how you envision using taxpayer dollars, MY DOLLARS, to help homeowners. You can rest assured I have already contacted my lawyer and have begun the appraisal process on my property, because you have hurt me financially, degraded the value of other properties in my neighborhood and fraudulently blocked my line of credit, which is the least of my concerns and the only thing you have the legal authority to do.

So fellow taxpayers, is there anyone else who has had a similar experience. Anyone else who thought they were doing the right thing by paying your bills on time, only to get SCREWED by your multinational, too big to fail bank? Please feel free to comment on this rant and perhaps we can join together to sue this and other culprits who have destroyed the value of our investment portfolios, while paying fat bonuses to the very fools who caused this credit crisis.

John H. Kaighn

Jersey Benefits Advisors

The Kaighn Report

Jersey Benefits Advisors Newsletter Fall 2008

DOWN BUT NOT OUT! THE FINANCIAL CAPITAL OF THE WORLD HAS BEEN HUMBLED, BUT NOT DESTROYED!

Market Watch

I ended my summer newsletter with the following assessment of where our economy was heading. It was written before talk of the Emergency Economic Stabilization Act of 2008, which became law on October 3, 2008. “With all of the stresses on the US economy, confirmation of a recession could become a reality either in the second half of this year, or early in 2009. The healing process necessary to recover from the mortgage fiasco and oil shock is underway.”

There is no doubt that anger, frustration and fear are feelings that are being experienced by many of us as we’ve witnessed the deflation of the housing bubble and the subsequent credit crisis which culminated in the emergency relief plan mentioned above. It is important to understand that many economists think this period will be labeled a recession, when the dust has settled and the National Bureau of Economic Research (NBER) assesses the situation, some time in the future. Meanwhile, we are faced with the here and now and surviving this period, while planning for the recovery.

It is important to understand how we got here in order to avoid the same mistakes in the future. The initial media reaction was to blame Wall Street for this fiasco, but as events play out, it is being understood the blame can be equally placed on the shoulders of government, as well as many of the citizens of this fair land who used the equity in their homes as a bank, and stretched for outsized gains on their investments.

At the heart of the matter sit the two Government Sponsored Enterprises (GSE's) Fannie Mae and Freddie Mac. By being a GSE these companies were treated like they had the full faith and backing of the Federal Government, even though they didn't. A little history helps to understand the dilemma.

Fannie Mae was created by the government during the Great Depression to buy mortgages, which they guaranteed with the full backing of the government. In 1968, President Johnson structured Fannie Mae as a government sponsored enterprise, without the guarantee. In the 1970's, Freddie Mac was created and the two quasi public entities began buying mortgages and packaging them into securities, which were purchased by banks, investors, governments and others around the world, because of the “implicit guarantee” that if anything went wrong, the US government would back the securities. Fannie and Freddie were also encouraged by the government to increase lending for subprime mortgages in order to advance the government’s agenda for “affordable housing”.

As we all know by now, the two GSE's did fail, and while the reasons are varied, the implicit guarantee is now an explicit guarantee. Furthermore, the actions of Fannie Mae and Freddie Mac made housing more expensive, not more affordable!

The ensuing credit crunch has had a chilling effect on the stock market, which has not been very pretty this year. At the end of the third quarter, the DJIA was 10,850.7, the S&P 500 clocked in at 1,164.74 and the NASDAQ finished at 2,082.3. All of the indices are in bear market territory and down significantly for the year.

There will be some false starts and possibly some more gut-wrenching ups and downs, especially as the election bears down on us. Fortunately, all bear markets end, just as their counterparts do. Usually, when you least expect it!

Economic Outlook

Regardless of your feelings about the government rescue plan and where the fault lies, the reality of the situation is that the government has chosen to clean up a mess it helped create. The implications for the broader economy remain to be seen, but one thing is for sure, the road to recovery will be bumpy and prolonged. While it is generally believed the current crisis is not over, general consensus is that it is beyond halftime, to use a football metaphor, and possibly in the fourth quarter. I doubt very much the recovery will be instantaneous, even with the recent government actions. Look for a period of extreme volatility as we decide on a new President.

When the news is all bad, and the media paints a dire picture of the future, it is difficult to take the steps which could help you to benefit from the current financial landscape. Those of you who are investing in retirement plans or other investment accounts on a monthly basis, are picking up shares at a discount. While your account value may be down, once the market begins to rebound, the value of your account will increase rapidly, reflecting the increased number of shares you own. If you are not regularly contributing and have some available cash, the next several months should be a good time to add to your account, but I would caution against making a large investment at once.

To help you conquer investing phobia, consider this study by Psychologist Paul Slovic of the University of Oregon. In 2001 he had investors estimate the performance of their portfolio over the next 12 months and the decade to come. Only 6.7% of investors expected a zero or negative return in 2001 and only 1.3% thought they’d have no gains over the next 10 years. He asked investors the same question on September 29, 2008 and 36% of investors saw no profits for the current year and 5% predicted their portfolios would go nowhere for the full decade. Obviously, investors view of the next decade is being shaped by events of the last few days. Looking backward at where the market has been is a surefire way to ensure you will miss opportunities going forward. According to Jason Zweig, author of the Intelligent Investor column in the Wall Street Journal, “You need only two things in order to have an edge in today’s market: cash and courage”.

While the current economic situation seems challenging, the actions by the Federal Reserve and governments around the world will prevent the doomsday scenario of global depression. History will be the judge as to the severity of today’s difficulties, but lessons learned during the Great Depression indicate no government action can be catastrophic. I’ve opted to suspend consolidated statements until the year’s end, so call me to discuss quarterly statement concerns.

Protecting Your Assets In a Down Market

For those of you invested in the Transamerica and MetLife Annuities, I want to remind you about the Guaranteed Minimum Income Benefit on your account which protects the assets so your account will continue to grow in a down market. Look for the line item GMIB, Income for Life or Managed Annuity Program to ascertain this value. While the market value reflects the turmoil in the stock market, the beauty of these products is their insured value during times of market upheaval. These products help to protect your assets and are an especially good investment for retirement assets. While nobody likes to see losses in value, it is reassuring to know these products have protection against downside risk and that insurance companies must have adequate capital in reserve.

Investment Advisory Services offered through:
Jersey Benefits Advisors
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Jersey Benefits Advisors

Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
1150 S. Olive St. Suite T-25
Los Angeles, CA 90015
800-245-8250
Member FINRA & SIPC

Third Party Administration and Insurance Services offered through:
Jersey Benefits Group, Inc
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Jersey Benefits Group, Inc.

John H. Kaighn

Jersey Benefits Advisors

The Kaighn Report