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Things You Do That Could Cost You Money When Buying A Home

Peter Anderson — Wed, 23 Jun 2010 12:32:36 +0000

The last few years have been tough ones for the real estate market, and especially for the banks who have watched as thousands of their home loans have gone into default, and homes into foreclosure. Because the lending market has become so tough, lending guidelines have already started changing, making it tougher for some people to obtain home loans.

Today I thought I would take a look at some of the things that are changing, along with some things you should avoid doing when you’re trying to get a loan.

Credit Reports Are Being Pulled Before Closing

One thing that has changed in recent months is that Fannie Mae has put out a program called the Loan Quality Initiative. It was started with the goal of minimizing the number of bad loans that come through their doors. Fannie Mae wants banks to take more ownership for the loans that they give, and is then giving them the responsibility if things go bad. From themortgagereports.com

The Loan Quality Initiative is Fannie Mae’s response to the foreclosure surge since 2007. The program shifts the onus of mortgage guideline compliance away from the the government-backed group and to the individual banks responsible for making loans…

For the most part, mortgage applicants won’t be bothered with the changes. It’s just extra work for the bank. Things like Social Security Number validation checks and borrower occupancy standards.

There is, however, one major consumer hurdle.

The hurdle that many borrowers will face is the last minute credit check. In the past, when applying for the loan you would have your credit checked at the beginning of the process, and if you were approved – and the loan was underwritten, you could almost be sure that your loan would be funded. Now with the new initiative, after the loan has been underwritten and approved there will now be a last minute credit check before closing to make sure your credit situation hasn’t changed.

If your credit situation has changed and especially if it has worsened, it could mean that your loan won’t be funded, or that you may have to go through the underwriting process again. When you go through underwriting again you may end up with a worse rate, or worse, you could lose your loan approval!

Things Not To Do Before Your Home Loan Is Funded

In order to ensure that you don’t lose your rate, or lose the funding on your home loan altogether, here are some things that you should avoid doing when you’re trying to buy a home – right up until the loan has been funded and you’ve closed on the home.

Don’t open new credit cards or lines of credit: When the amount of debt you take on, or available credit goes up, that will be a negative to lenders. Stay away from these things until you’re actually moved into your new house – after the loan has been funded.
Don’t make any new charges on your existing credit: If you already have existing credit cards or lines of credit, don’t make any new charges, especially larger ones, on the card. Your debt to income ratio will be determined, and the more debt you have, the worse off you are.
Don’t finance any large purchases: Put any plans to finance a new car, ATV or other large ticket item until after you buy the home. Even leasing a car should be put on hold. Again, your debt to income ratio will be looked at.
Don’t try to hide things from your lender: If you try to hide things from your lender it can end up causing you to lose your loan. Don’t try to hide things like large deposits to your accounts (be ready to explain where the money came from), child support payments or alimony. They will end up finding these things out anyway, so no reason not to mention it and jeapordize your loan.
Keep your credit score high: Do everything you can to make sure your credit score stays as high as possible. Pay your bills, and don’t let things go into collections!

The point I’m trying to get across here is that when you’re trying to get a home loan, you need to make sure that your credit situation stays strong, all the way through the process until the loan is actually funded.

In the past people may have been able to get away with financing a car after getting your loan approved (many people buy new cars when moving!), but nowadays things have changed. It’s better to hold off on any new purchases, new credit cards, or anything else that could affect your credit – until things are signed sealed and delivered.

Do you have any other things that people should avoid doing when buying a home (that could cost them money)? Have you run into this situation where you thought your loan was approved and funded, only to have the deal change right before closing because of a change in your credit score? Do you think these changes are a bellweather of a return towards more responsible lending? Tell us your thoughts in the comments.

Details on how to install hardwood flooring

This article was written by Peter Anderson. Peter Anderson is a Christian, husband to his beautiful wife Maria, and father to his baby boy, Carter. He loves reading and writing about personal finance, and also loves a brisk game of tennis every now and again. You can find out more about him on the about page or check out his design site at http://www.logosforwebsites.com. You can also follow him on Twitter at @moneymatters.

The Bush Tax Cuts Are Expiring. Will The 2011 Tax Hikes Bring On A Double Dip Recession?

Peter Anderson — Thu, 17 Jun 2010 15:01:55 +0000

At the end of the 2010 there will be a tax increase for all taxpayers, if something isn’t done. Back in 2001 the Bush administration helped to get an across the board tax cut passed that effectively lowered the marginal tax rates for all people paying taxes. (If you didn’t pay taxes, it doesn’t matter too much does it?). Now those cuts are expiring and on January 1st, 2011 the new marginal tax rates will go into effect unless extended by legislation.

Thankfully for many of us the Obama administration has decided that they will push to renew the tax cuts for all taxpayers making less than $250,000 a year.

Obama wants tax breaks proposed by President George W. Bush to expire this year. His budget would eliminate tax breaks on those making more than $250,000 a year, a move almost certain to be opposed by Republicans and perhaps some Democrats as the economy crawls out of the recession.

“We extend middle-class tax cuts in this budget,” Obama said Monday at the White House, but “we will not continue costly tax cuts for oil companies, investment fund managers, and those making over $250,000 a year.”

So only those taxpayers making more than $250,000 a year (joint) will see an actual increase in their tax rates. The rest of this (hopefully) will see an extension of the Bush tax cut.

For more of a look of what your tax rate would be if the cuts were to expire, check out this article: Tax Rates If Bush Tax Cut Expires

Will Tax Hikes On Higher Income Taxpayers Bring On A Double Dip Recession?

There is no consensus as to what effect tax increases will have on the economy, but there are some pretty strong opinions on both sides. Democrats are saying the tax increases are needed to help close the deficit and Republicans counter by saying that tax increases would cripple our economy in this tough environment. I suspect the truth lies somewhere in between.

Today I read an editorial by prominent economist Arthur Laffer where he argues a tax increase for higher income individuals could have a crippling effect on our economy, and could bring on a double dip recession.

On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply. President George W. Bush’s tax cuts expire on that date, meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero. Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts.

Tax rates have been and will be raised on income earned from off-shore investments. Payroll taxes are already scheduled to rise in 2013 and the Alternative Minimum Tax (AMT) will be digging deeper and deeper into middle-income taxpayers. And there’s always the celebrated tax increase on Cadillac health care plans. State and local tax rates are also going up in 2011 as they did in 2010. Tax rate increases next year are everywhere.

Now, if people know tax rates will be higher next year than they are this year, what will those people do this year? They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be.

Also, the prospect of rising prices, higher interest rates and more regulations next year will further entice demand and supply to be shifted from 2011 into 2010. In my view, this shift of income and demand is a major reason that the economy in 2010 has appeared as strong as it has. When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe “double dip” recession.

Joel Slemrod, a professor of economics at the University of Michigan argues that increases on the wealthy are painful but necessary:

Obama’s approach of raising taxes only on the wealthy is probably the safest bet. While acknowledging that the economy will remain shaky next year, Slemrod said “not raising any taxes in the face of this fiscal imbalance also has economic effects.’’

“We start to play out a scenario where interest rates go up,’’ Slemrod said. “So it’s not as if increasing taxes has certain adverse impacts, but not raising taxes do not.’’

One thing that most agree on is that the coming year has some shaky prospects regardless of the tax cuts are extended or not. The economy has taken a pretty severe blow these past 2-3 years, and who knows what effect tax increases or the lack thereof will have.

What do you think? Will a tax increase on higher earners have a negative effect on the economy? Are tax increases necessary – or an extremely bad idea? Tell us your thoughts in the comments!

Obama Administration Urges Congress To Pass Another $200 Billion Stimulus Package

Peter Anderson — Fri, 28 May 2010 11:56:39 +0000

As the effects of the $787 billion stimulus package of last year begin to wear off, the Obama administration is now looking at the option of passing yet another “limited” stimulus package to help dig the economy “out of a deep valley”. Without it they fear that the slow gains our economy has made this year could be lost. The Financial Times explains:

The Obama administration made a strong plea to Congress on Monday to grit its teeth and pass a new set of spending measures – dubbed the “second stimulus” by some economists – in order to help dig the economy “out of a deep valley”.

The call for action, which was made by Lawrence Summers, Barack Obama’s senior economic adviser, who urged Congress to pass up to $200bn in spending measures, came at the same time as Mr Obama asked Capitol Hill to grant him powers to cut “unnecessary spending”.

The combined announcements were made amid rising concern that centrist Democrats, or those representing marginal districts, might vote against the spending measures, which include more loans for small businesses, an extension of unemployment insurance and aid to states to prevent hundreds of thousands more teachers from being laid off.

On the heels of a $787 billion stimulus package, $200 billion doesn’t sound nearly as large, but the fact is – it is money that we don’t currently have. A lot of people aren’t quite as sure another stimulus package is a good idea, they say it’s throwing good money after bad.

The M3 figures – which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance – began shrinking last summer. The pace has since quickened….

It’s frightening,” said Professor Tim Congdon from International Monetary Research. “The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly,” he said.

The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015.

So there is quite a bit of debate as to whether the first stimulus actually did very much, and now we’ve got quite a bit of debate as to whether there should be another one.

What do you think? Should there be another stimulus? Will another $200 billion in unemployment extensions, small business loans and aid to states make a difference? Should we stop the spending now in light of ballooning deficits? Tell us your thoughts in the comments.

The New $100 Bill Design Adds New Security Features

Peter Anderson — Fri, 23 Apr 2010 12:00:09 +0000

It was announced this past week that the Department of the Treasury will be issuing a new redesigned $100 note on February 10, 2011. It has been overhauled and has been updated to include a ton of new features to help thwart counterfeiters. Over a decade of research and development went into its new security features.

New Security Features Of The New $100 Bill

3-D Security Ribbon: There is a blue ribbon woven into the bill itself (not on top of the paper) that when you tilt the bill will show italics “100″s written vertically.
wiInkwell with Liberty Bell: There’s now an orange inkwell near Franklin’s left shoulder. When you tilt the bill, you will see the Liberty Bell superimposed on that inkwell.
Portrait Watermark: On the far right side of the bill there is a portrait of Franklin done as a watermark. This feature can also be found on other newly redesigned bills.
Color shifting 100: The orange 100 in the lower right will shift colors as you move the bill.
Large Gold 100 on the Back: Just like on the redesigned $5 bill, there is now a large gold 100 on the back of the new $100 bill. This change is made to help those who are visually impaired.
Microprinting: “The United States of America” is printed in tiny letters on Franklin’s collar, “USA 100″ is around the blank space of the watermark, “One Hundred USA” along the golden quill, and finally 100s on the borders of the bill.

Want a more interactive look at the new $100 bill? Check out The Bureau of Engraving and Printing’s interactive tools here.

Here’s a quick video look at the new bill.

Personally I kind of like the newer more colorful design of the bills they’ve been coming out with lately. Reminds me a bit of all the colorful Euro bills we saw when we were in Europe in 2008.

So what do you think of the newly redesigned $100? Love it or hate it? Tell us your thoughts in the comments!

Democrats Hope To Pass A Second U.S. Stimulus Bill By Early 2010

Peter Anderson — Thu, 03 Dec 2009 20:40:49 +0000

Fresh off of a $787 billion stimulus package passed in February of 2009, congressional Democrats are now beginning to talk about passing a second, more modest stimulus package sometime within the next few months – aimed at easing the unemployment crisis. From Reuters:

Congressional Democrats’ push for another U.S. stimulus package got a boost on Tuesday from an analysis that found their earlier effort had blunted the impact of the worst economic downturn in 80 years.

As Democrats weighed measures to bring down the nation’s double-digit unemployment rate before the November 2010 congressional elections, they touted a nonpartisan report that showed the $787 billion stimulus package passed in February had kept between 600,000 and 1.6 million people off the unemployment rolls.

That effort, panned as a boondoggle by Republicans, also boosted the nation’s GDP between 1.2 percent and 3.2 percent, the Congressional Budget Office found.

Democrats hope to pass a more modest effort in the next two months, targeted at bringing down the unemployment rate.

That rate, currently at 10.2 percent, could have been above 11 percent had Congress not passed the first stimulus package, House Majority Leader Steny Hoyer said.

“Is it where we want to be? It is not, but it is certainly a very, very definite, positive impact on the economy,” Hoyer told reporters. “The actions we have taken have worked.”

Elements of the next package are still up in the air

There is still a lot of debate about whether the first stimulus did what it aimed to do, or whether it just added to our national debt. In any event, the Democrats are satisfied that it did what it set out to do, and they plan to pass another one to help ease the high national unemployment.

What Will Be Included In The Second Stimulus?

So what are some of the things that are going to be included in the new stimulus bill? No bill has been finalized yet, and the proposals seem to vary quite a bit, but here are a few of the provisions that have been proposed.

New spending on highways, rail, water and sewer systems, and other infrastructure
Increased lending for small business, using funds left over from the $700 billion Troubled Assets Relief Program
Money to help struggling state governments avoid laying off police, schoolteachers and other public employees
Money to local governments for job creation programs like park cleanups and refurbishing public buildings
Further extending unemployment benefits and health-insurance subsidies for the jobless
A tax credit for businesses that hire new employees
Extending a package of soon-to-expire business tax breaks, such as a credit for research and development.
Unspecified measures to help domestic manufacturing
Upgrading buildings for greater energy efficiency

So it doesn’t look like there are a lot of stimulus measures being discussed that would give individual tax breaks, stimulus checks or other benefits for individual taxpayers. Most of the measures seem aimed at creating jobs, or saving existing jobs.

How Will They Pay For Another Stimulus?

One concern I have with any of these proposals for stimulus spending is – how are we going to pay for it? More taxes? Yes, probably.

The package could also include a tax on financial transactions to help cover the cost, but several Democratic senators said it would have to be written in a way to avoid driving financial activity offshore.

“I don’t want to impose a tax that clearly is going to make American companies less competitive, (but) it’s on the table,” said Democratic Senator Max Baucus, chairman of the tax-writing Senate Finance Committee.

Lawmakers are considering other ways to pay for the measure without threatening the shaky economic recovery. Highway construction, for example, could start quickly but be paid for through measures that would take effect in several years when the economy is healthier, said Democratic Rep. Betty Sutton, co-chair of a House task force set up to consider proposals.

Is it just me, or do they really not know how they’re going to pay for these measures – except through imposing a new tax on businesses – that will in the end cause more jobs to be lost? It really seems like their attempts to solve the problem are creating new problems in the process.

What do you think about these proposed stimulus measures? Do you think they should pass, or would you rather see them not taken up? Will they improve the unemployment situation or will they just add to the ballooning deficit? Let us know your thoughts in the comments!

Cash For Appliances Government Stimulus Rebate Program Will Give Money For Old Refrigerators, Washers And More

Peter Anderson — Wed, 23 Sep 2009 13:42:02 +0000

The past couple of months we’ve talked quite a bit about the Cash For Clunkers program, how it worked, and who could expect to receive a voucher towards the purchase of a new car. People were split down the middle as to whether the voucher program was even a good idea, with some saying it was just another example of wasteful government spending – while others said it was a great way to stimulate spending and boost our economy.

We may now have another cash for clunkers type program to debate. Earlier this year as a part of the American Recovery and Reinvestment Act a new program was announced that would allow people to receive rebates that would be good towards the purchase of a new ENERGY STAR® rated appliance to replace their less efficient models.

U.S. Department of Energy Secretary Steven Chu today announced the availability of nearly $300 million in funding from the American Recovery and Reinvestment Act for state-run rebate programs for consumer purchases of new ENERGY STAR® qualified home appliances. The new program underscores the Obama Administration’s commitment to make American homes more energy efficient, while helping to support the nation’s economic recovery.

“Appliances consume a huge amount of our electricity, so there’s enormous potential to both save energy and save families money every month,” said Secretary Chu. “These rebates will help families make the transition to more efficient appliances, making purchases that will directly stimulate the economy and create jobs.”

The new funding will be awarded to states and territories, through their energy offices, using a formula set forth in the Energy Policy Act of 2005. Each state or territory is required to submit a plan that specifies which ENERGY STAR® appliance categories will be included in their rebate program, the rebate level for each product type, how the rebates will be processed, and their plan for recycling old appliances. States and territories must first file an initial application expressing their intent to participate by August 15, 2009, followed by a full application by October 15, 2009. Approximately 10-25 percent of each award will be spent on administrative costs.

The goals of the program were to spur economic growth, create jobs, save energy and reduce greenhouse gas emissions. How successful it will be in those goals is anyone’s guess.

Depending on which state you’re in, there is a different amount of money available to use towards rebates, so it is probably best to move on it as fast as you can once the program starts. To find out how much money your state has to use towards appliance rebates, check this document.

How Do I Take Part In The Cash For Appliances Program?

The program will start some time late fall 2009, and program details will vary state by state. The states will have the ability to say which appliances are eligible, along with how much of a rebate consumers would get. The energy department has set a deadline of October 15th for states to file formal applications for the program. Details should become clearer for your state at that time.

Although the details will vary state to state, basically the program will authorize rebates to consumers of $50-$200 for purchases of more efficient household appliances. Unlike with the Cash For Clunkers program, people who take part in the program won’t have to trade in their old appliances. (thank goodness for that!) It is also expected that the rebates will be stackable along with other rebates currently available. So if your municipal district offers a $100 rebate towards a refrigerator, you would get that in addition to the federal rebate.

The Energy Dept. expects the bulk of the $300 million to be awarded by the end of November.

What Appliances Are Eligible For The Rebate?

To qualify for the rebate the new appliance must be ENERGY STAR® rated. Qualified appliance categories eligible for rebates may include (depending upon your state):

central air conditioners
heat pumps (air source and geothermal)
boilers
furnaces (oil and gas)
room air conditioners
clothes washers
dishwashers
freezers
refrigerators
water heaters

Want to save even more? Use these coupons to save!

Let The Marketing Push For “Cash For Refrigerators” Begin!

Major appliance manufacturers have been feeling the pinch the past couple of years, with sales dropping and plants being shut down.

The leading appliance makers have felt the pinch. Whirlpool of Benton Harbor, Mich., which controls about 40% of the U.S. market, has seen its sales drop 20% through the first two quarters of this year. North American shipments for its Stockholm-based rival Electrolux, meanwhile, have dropped for a dozen consecutive quarters. Both companies have laid off hundreds of workers, and General Electric (GE) mulled shutting down an entire refrigerator plant earlier this year until deciding to keep it open with a reduced workforce.

Once the program begins I’m sure we can expect to see a huge marketing push, just as we saw with the Cash For Clunkers program. Anything the appliance manufacturers can do to help spur sales will be helpful for them. On the other hand, many are doubtful that the program will have much effect because the value proposition in receiving a smaller rebate for an appliance as opposed to a $4500 voucher for an old car just isn’t as motivational. Many people will probably be able to get by with their old appliance for a while longer. The manufacturers are hoping that’s not the case.

What do you think about the Cash For Appliances rebate program? Does it make you more likely to buy a new fridge, dishwasher or water heater? Tell us what you think in the comments!

Cash For Clunkers Program Is Dead Again. Gas Guzzler Trade-In Program Ends Monday.

Peter Anderson — Fri, 21 Aug 2009 13:50:10 +0000

We’ve been talking a lot recently about the Cash For Clunkers program, and how the program has been successful by some standards, and troubled in other ways. The program ran out of money one week after it launched, and was only re-launched after congress passed another 2 billion dollars for the program.

Now the program is beginning to run out of money again. The Obama administration has announced that the Cash For Clunkers program will end on Monday:

The popular Cash for Clunkers program will end on Monday at 8 p.m. Eastern time, the Obama Administration said Thursday.

As of Thursday, the Administration said the Clunkers program, officially the Car Allowance Rebate System, had recorded more than 457,000 dealer transactions worth $1.9 billion in rebates.

“Applications for rebates will not be accepted after 8 p.m. EDT Monday and dealers should not make further sales without receiving all the necessary paperwork from their customers,” the Administration said in a statement.

The Administration expressed confidence that money would be available to pay all eligible rebates. A total of $3 billion has been allocated to the program.

The Department of Transportation “has been very focused on making conservative assumptions about this program, and it’s precisely why they’ve announced the winddown at this moment,” a senior Administration official said.

The Administration has countered recent complaints of payment delays by saying that many of the applications to the program from dealers have been incomplete and needed additional review or had to be sent back.

Want to take advantage of the program before it runs out? Don’t forget to read our posts detailing the program, and get to your participating dealer before 8pm eastern on Monday!

Also, if you’re signing a deal this weekend, be careful of what you’re signing as some dealers are adding clauses to the contract stipulating that you will have to pay them back for your clunker rebate if the voucher is denied by the government.

Dealers Opting Out Of Cash For Clunkers

In the last week or so a large number of dealers have been opting out of the Clunkers program as they have been having major problems even getting paid for the Clunker deals that they have signed and sent to the government for approval. In a cash important business like the car business, this could be a huge problem for a lot of dealers.

Some dealers.. already have stopped participating in the $3 billion Cash for Clunkers program. On Wednesday, Transportation Secretary Ray LaHood sought to assure dealers that they will be reimbursed for money they have essentially fronted to customers buying cars.

“They’re going to get their money,” he said.

The Greater New York Automobile Dealers Association, which represents dealerships in the New York metro area, said Wednesday that about half of its 425 members had left the program because they could not afford to offer more rebates. They also are worried about getting repaid.

In the Kansas City area, program delays prompted Randy Reed’s Buick-Pontiac-GMC and Nissan dealerships to stop participating in Cash for Clunkers on Monday. Including a dealership in St. Joseph, Reed said his stores had not been reimbursed yet for about 40 deals.

“It seems like a program the government has mismanaged from the start,” he said. “Our number one goal is not do anything to put ourselves at risk with our customers. None of us can afford the kind of losses we’re looking at if we continue participating and don’t get reimbursed.”

I for one am not sad to see the Cash For Clunkers program go. The program, while popular (anytime you “give something away” it’s probably going to be popular), has been beset with problems. The aim of trying to have a positive environmental impact is dubious at best with even environmental groups saying they aren’t impressed. The economic impact isn’t really agreed on either with some experts like Alan Greenspan saying that he didn’t think that the program stimulated the economy. Add to that the fact that the program has probably moved many people into a worse debt situation than they were in previously, and I am actually happy that the program is over!

What do you think? Are you going to be taking advantage of the program in it’s last weekend? Are you glad to see the program go? Do you think all of these dealers with pending deals will get paid, or will the government stiff them? Let us know what you think in the comments!

Cash For Clunkers Gets A $2 Billion Cash Infusion And Rises From The Dead.. For Now

Peter Anderson — Fri, 07 Aug 2009 15:37:06 +0000

More Cash – For Cash For Clunkers

It was only a week ago that we were talking about how the Cash For Clunkers program had only been active for a week, and it was already running out of money. $1 billion dollars had been assigned to the program and after demand for the vouchers was much larger than anticipated, the program had to suspended. The government didn’t want people trying to get a voucher that was no longer available.

Now, a week after the program was suspended, Congress has decided, that the program was such a rousing success, that they should give it another $2 billion dollars. Last night they approved an extension of the program:

The U.S. Senate approved and sent to the White House on Thursday a $2 billion extension of the “cash for clunkers” autos sales incentive program.

The measure, approved by 60 to 37, extends the successful program that has raised sales of the U.S. auto industry. President Barack Obama was expected to sign it quickly.

The initial $1 billion of funding approved in June for “clunker” business has generated more than $920 million in rebates and more than 220,000 in auto sales.

Supported by the incentive program, U.S. auto sales overall were down about 12 percent in July from a year earlier, but it was their best performance this year.

A poll was done last week asking a sampling of Americans if they thought the program should get more money. 54% of the respondents said that it shouldn’t. Despite a majority of people being against the added expenditure, the program will now be continued.

The swift “success” of the program was stunning to a lot of people, and to some degree the government wasn’t ready for the deluge of voucher submissions that happened in the first week.

The administration, stunned by the swift success of the initiative and stung by a series of administrative glitches in trying to process rebates, had warned that the “clunker” measure would be suspended if more money was not approved by week’s end.

The House of Representatives passed the $2 billion extension on July 31. The Senate took a week to affirm that action.

Some senators did introduce amendments to the bill in order to try and kill the measure, but those were soundly defeated – and the program was approved for more money. So if you had planned on trading in your clunker, you may still have time – but act quick! Who knows when it will run out this time. For more details about the program, who is eligible, and what you need to do, check out these articles on our site:

Not Everyone Is Happy With The Program

Some critics argue that while the program was successful in handing out vouchers to thousands of car buyers, that the program isn’t truly as much of a boon to our economy and the environment as is being suggested.

Groups that aren’t as happy with the program as car dealers? Mechanics, scrap yard operators and automotive aftermarket parts dealers.

Who doesn’t like the government’s “cash for clunkers” program? Your mechanic, for one.

Owners of automotive repair shops say the program to help invigorate sales of new cars is succeeding at their expense.

Bill Wiygul, whose family owns four repair shops in Virginia, said he has already had five or six customers decide against repairs. A man who sits on the board of Mr. Wiygul’s bank traded in his car rather than repair it. “He’d been a customer at our Reston store since it opened,” Mr. Wiygul said….

How do we get on the special interests, special treatment bandwagon? How much is it going to cost me and to whom shall I send the check?” he said. “Who picks the winners in this game ’cause obviously the game is fixed.”

So the government is subsidizing one industry (in which it now holds a large stake) at the expense of other small business people like mechanics and repair shops.

The automotive aftermarket, a $250 billion industry that employs about 4.6 million people, could be among the biggest losers in the clunkers program, said Kathleen Schmatz, head of the Automotive Aftermarket Industry Association: “It’s everybody from the Fortune 500 parts manufacturer all the way through the supply chain to the independent repair shop.”

The group that lobbies for independent mechanics in Washington agreed.

“This package will hurt mechanical repairs without question. You are taking older vehicles that are still fine to use and removing them,” said Robert Redding Jr., the Automotive Service Association’s Washington representative. “If you’re taking hundreds of thousands of vehicles that you normally service off the road with no consideration, it hurts people.”

Has The Program Helped The Environment Or Stimulated The Economy?

Even if you dismiss those who have been hurt as having sour grapes, you still need to consider whether the program will actually succeed in it’s aims of helping the environment and stimulating the economy. So, first, did it help the environment?

Cash for clunkers could have the same effect on global warming pollution as shutting down the entire country — every automobile, every factory, every power plant — for an hour per year. That could rise to three hours if the program is extended by Congress and remains as popular as it is now.

Climate experts aren’t impressed.

Compared to overall carbon dioxide emissions in the United States, the pollution savings from cash for clunkers do not noticeably move the fuel gauge. Environmental experts say the program — conceived primarily to stimulate the economy and jump-start the auto industry — is not an effective way to attack climate change.

So it sounds like the program will have a negligible effect on the environment – especially when you take into account the scrapping of all the working cars that could have otherwise been kept running for years to come. How about stimulating the economy? Alan Greenspan says that while he supports the program, he doesn’t think that it helped to stimulate the economy.

The former head of the Federal Reserve gave a thumbs-up to the cash for clunkers program but said Sunday it is popular only because the economy was on its way back up and not because it was stimulative.

Alan Greenspan said that the program has worked to get people to buy cars and move stock, but he wouldn’t necessarily recommend it as an economic fix.

“It’s an interesting issue. I mean, I have qualms about the concept, but there is no doubt that that very extraordinary response is a very important indicator that the state of confidence in the economy is beginning to pick up. If we had been — the clunker program had been put in place six months ago, it would have probably been a dud,” Greenspan said on ABC’s “This Week.”

So the program has been successful in Greenspan’s eyes, but only because the economy was already starting on it’s way to a slow recovery.

Still, the administration and many in congress are hailing the program as a marvelous success, and say that it is one of the main reasons for a rebound that is beginning to happen in our economy.

What do you think about the program? Has it been successful in it’s aims, and was it a good idea? Or do you side with the critics of the program and think that the program is just another government money drain? (can you tell which side I come down on?) Let us know your thoughts in the comments.

Cash For Clunkers Program Suspended After Only A Few Days. Here Is Why

Peter Anderson — Fri, 31 Jul 2009 10:30:10 +0000

The Cash For Clunkers program has only been active since last Friday, but word is now leaking out that the CARS program will be halted at midnight on Thursday July 30th, less than a week after it launched. The problem? There are fears that the program may have already run out of money. The program was to run until November 1st, or until the funds were depleted. It appears the funds have been depleted! From Fox News:

The government plans to suspend its popular “cash for clunkers” program amid concerns it could quickly use up the $1 billion in rebates for new car purchases, congressional officials said Thursday.

The Transportation Department called lawmakers’ offices to alert them to the decision to suspend the program at midnight Thursday. The program offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle.

The congressional officials spoke on condition of anonymity because they were not authorized to speak publicly. Rae Tyson, a spokesman for the National Highway Traffic Safety Administration, which administers the program, declined comment.

So it seems that the program has been either been much more successful than anticipated, or the government bureaucracy is just too slow to keep up with all of the deals that dealers are sending their way.

Congress last month approved the Car Allowance Rebate System program, known as CARS, to boost auto sales and remove some inefficient cars and trucks from the roads. The program kicked off last Friday and was heavily publicized by car companies and auto dealers.

Through late Wednesday, 22,782 vehicles had been purchased through the program and nearly $96 million had been spent. But dealers raised concerns about large backlogs in the processing of the deals in the government system, prompting the suspension.

A survey of 2,000 dealers by the National Automobile Dealers Association found about 25,000 deals had not yet approved by NHTSA, or nearly 13 trades per store. It raised concerns that with about 23,000 dealers taking part in the program, auto dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.

“There’s a significant backlog of ‘cash for clunkers’ deals that make us question how much funding is still available in the program,” said Bailey Wood, a spokesman for the dealers association.

So now that the Cash For Clunkers program is suspended, a lot of people who thought they had time to do a deal may not be able to cash in. The question now is, will congress allocate more money for the program so that more people can take part? Was it successful enough, and did it have the effect that they were hoping?

Even before the suspension, some in Congress were seeking more money for the auto sales stimulus. Rep. Candice Miller, R-Mich., wrote in a letter to House leaders on Wednesday requesting additional funding for the program.

“This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn,” Miller said Thursday. “The federal government must come up with more money, immediately, to keep this program going.”

Brendan Daly, a spokesman for House Speaker Nancy Pelosi, D-Calif., said they would work with “the congressional sponsors and the administration to quickly review the results of the initiative.”

General Motors Co. spokesman Greg Martin said Thursday the automaker hopes “there’s a will and way to keep the CARS program going a little bit longer.”

Friday morning there is already talk of Congress passing a 2 billion dollar extension to the cash strapped program, and the White House is saying the program will be available at least through the weekend. Read details of that here.

Now that the program may be extended – the question remains. Should it be? There are already reports of dealers having huge problems getting CARS deals approved, some even being rejected for silly reasons – when the clunker cars have already been destroyed. That means many dealers will be losing money on those rejected deals because they can’t sell the destroyed cars. Add to that the fact that the program is a bureaucratic nightmare – with the government not approving deals in a timely fashion, the government website constantly going down – and the dealers are now extremely worried about cash flow problems. All of that means you have the making of a huge fiasco.

What do you think? Will the government pass legislation assigning more money to this program? Will they find that the program has had the stimulating effect that they were hoping? Is this program just another way for government to waste our money, and will it end up being more trouble than it was worth? Tell us what you think in the comments!

Congressional Budget Office Says 2009 Stimulus Package Could Be Harmful To Economy

Peter Anderson — Fri, 06 Feb 2009 18:19:16 +0000

photo credit: kevindooley

The Congressional Budget Office released a statemen t this week stating that they believed the current versions of the 2009 stimulus package would actually be harmful to our nation’s economy in the long run.

President Obama’s economic recovery package will actually hurt the economy more in the long run than if he were to do nothing, the nonpartisan Congressional Budget Office said Wednesday.

CBO, the official scorekeepers for legislation, said the House and Senate bills will help in the short term but result in so much government debt that within a few years they would crowd out private investment, actually leading to a lower Gross Domestic Product over the next 10 years than if the government had done nothing.

CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net. [The House bill] would have similar long-run effects, CBO said in a letter to Sen. Judd Gregg, New Hampshire Republican, who was tapped by Mr. Obama on Tuesday to be Commerce Secretary.

The article goes on to talk about how most Republicans and some democrats are balking at the total cost of the bill, which seems to be getting out of hand:

The House last week passed a bill totaling about $820 billion while the Senate is working on a proposal reaching about $900 billion in spending increases and tax cuts.

But Republicans and some moderate Democrats have balked at the size of the bill and at some of the spending items included in it, arguing they won’t produce immediate jobs, which is the stated goal of the bill.

This stimulus package is starting to get out of control, and if it won’t even achieve its stated goal of producing jobs and getting the economy going. So what’s the point? The CBO is saying that it will do more harm than good, so why are we even considering this?

Time to scrap the bill, and start over. Let’s get a much smaller, targeted bill with concrete job creation, tax incentives for businesses to create jobs, tax breaks for taxpayers, and other things to help boost our economy. Let’s not subsidize failed business models and companies that didn’t live within their corporate budgets. Let’s also not turn this into a spend fest for every congressional pet project known to man (which is what it is turning into now).

What are your thoughts on the stimulus package. Will it pass, and will it end up harming our economy, or helping?

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