NEW YORK (CNNMoney.com) -- With the big year-end shopping holidays fast approaching, the credit market freeze couldn't come at a worse time for consumers, retailers and the broader economy.
Despite Congressional approval Friday of a $700 billion bailout for financial institutions, industry watchers say it doesn't guarantee that nervous lenders will unstick credit restrictions and get money flowing again to cash-strapped consumers - or that budget-conscious Americans will want to splurge any extra money at the mall.
"There's definite nervousness in the [retailing] industry," said Marshal Cohen, chief retail analyst with NPD Group.
"We've not even made it to Halloween and retailers are already talking about Christmas discounts," Cohen said.
Christmas is obviously a big deal to retailers, given that year-end holiday-related purchases typically account for half or more of merchants' annual sales and profits.
Just this week, Wal-Mart (WMT, Fortune 500), the world's largest retailer, announced it was chopping prices on popular toys and would launch its Christmas merchandise over the next 10 days.
Another toy seller, KB Toys, said Wednesday that it cut prices on more than 200 toys to $10 or less in order to "allow consumers to stretch their dollar in these challenging economic times."
Not to be left behind, some drugstore chains also debuted Christmas paraphernalia in stores this month.
But will these extra early incentives be enough to save what many industry watchers are expecting to be a dismal holiday sales season?
Cohen doesn't think so. He expects November-December sales to actually decline between 1 to 2 percent. The National Retail Federation forecasts a meager 2.1% gain for the two-month period.
"In 10 years of covering the retailing industry, I've never forecasted a decline," he said.
No desire + No credit = Throwaway year
"This already has become a throwaway sales year," Cohen said, adding that the credit market squeeze will only worsen the situation for retailers in the weeks ahead.
As much as 87% of consumers use some form of credit for their Christmas shopping, according to Britt Beemer, a retail analyst and chairman of America's Research Group.
So as the troubled banking industry tightens lending standards and shrinks credit limits, these measures will likely inhibit consumers' ability - and desire - to splurge on any kind of discretionary spending. Citing these concerns, Beemer thinks Christmas sales could fall as much as 4%.
Any slowdown in consumer spending immediately rings alarm bells for the broader economy, since it accounts for two-thirds of the nation's economic growth.
Access to credit is equally important for retailers, especially in the fourth quarter.
"Retailers rely on a line of credit to ramp up their holiday inventory, hire seasonal staff and pay for holiday advertising," said Catherine Fox-Simpson, a partner with consulting firm BDO Seidman.
According to the firm's recent survey of chief financial officers at 100 retailers, half said they have experienced a tightening of credit by their lenders.
"The trickle-down effect of this is that many retailers will have less holiday inventory, hire fewer additional labor and they are also making the decision to cut back on extended store hours," she said.
Beemer spotted other problems as well. Many retailers, especially during the holiday shopping season, offer credit promotions such as 0% financing for 12 months on high-end electronics, furniture and jewelry to draw customers into their stores.
"I expect these types of promotions will go away this year," Beemer said.
"Every retailer is in survival mode for the holiday [season]. If you are in the apparel or home business, it will be a very, very tough season," said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting and investment banking firm. He expects a 2% drop in November-December sales.
Instead of getting annoyed by seeing Christmas merchandise in October, one analyst suggested that shoppers grab whatever they can, when they can.
"Certainly in key categories like toys and electronics, the popular items will be in short supply," said Stevan Buxbaum, executive vice president of consulting firm Buxbaum Group. "Better get what you can early on."
Friday, October 3, 2008
Tuesday, September 30, 2008
The Credit Crunch
While Congress bickers over how to fix the financial meltdown, there's a decent chance you haven't even felt it. Why, you may be asking yourself, does everyone think there's such a big a problem when you're still being offered credit cards in the mail and zero-percent financing at the car dealership? Maybe you used to bank with Washington Mutual or Wachovia and overnight you've become a Chase or Citi customer, but if your money's still there, why does the rest matter?
The tumult at the top of financial markets has not filtered down evenly, but that doesn't mean it's not seeping. There are cracks on Main Street, but whether or not you see them largely depends on where you stand. Just ask anyone who wants to buy a house with a subprime mortgage — they're not all evil, but these days they are exceedingly rare — or with a jumbo loan, which now carries an average rate 1.2 percentage points above a regular mortgage. (In normal times, the spread is closer to a quarter of a percentage point.) "Some people are saying, 'Credit crunch, what credit crunch?' and others are ready to cry uncle," says Greg McBride, senior financial analyst at Bankrate.com. "It shows it really matters where you fall on the risk spectrum."
Now about those credit card offers. You may not feel it, but there are fewer of them going out — 1.1 million during the second quarter, down 17% from the same time last year, according to the Synovate, a research firm that tracks direct mail. Who's being ignored? Well, subprime borrowers (no surprise there), but also anyone who doesn't make a lot of money: 52% of households with annual income under $50,000 received at least one offer in the second quarter, compared with 66% of such households during the same period last year.
Already got all the credit cards you need? You're still not immune from higher delinquency fees or lower limits. American Express typically cuts the credit limit on about 4% of its members in any given year. That figure now stands closer to 10%, as the card company takes a hard look at customers' credit profiles — including data on who lives in the areas with the most house-price deterioration.
For car loans, the division between those who feel the crunch and those who don't often comes down to credit score. The average 60-month new car loan is priced at 7.10%, not much different than in the spring, according to HSH Associates, Financial Publishers — and the average rate on a 60-month used car loan, 7.54%, has actually been drifting downward. (Those zero-percent financing deals still exist, too, from struggling car companies desperate to move inventory.) The difference is, you're probably not going to get that rate (or any at all) unless your FICO score is north of 700, whereas six months or a year ago, a score as low as 620 would have gotten you behind the wheel. "Some of this just represents moving back to standards that were in place five or six years ago," says Paul Taylor, chief economist at the National Automobile Dealers Association. "But if you're a customer, not getting credit you could've gotten a year before looks like a credit crunch to you."
The situation in student loans doesn't break down quite as neatly. Since the summer of 2007, 137 lenders have stopped funding federal loans, and 33 have suspended private programs, according to Mark Kantrowitz, publisher of FinAid.org and other financial aid web sites. Part of that had to do with a cut in federal subsidies, but part was directly related to the credit crunch — issuers that pulled out tended to be those that packaged and resold loans, a market that has evaporated.
Students at community and technical colleges, especially institutions that are for-profit, are having the toughest time of it. The reason: those students are more likely to use private loans (where credit standards have tightened), and lenders under profit pressure are less willing to write loans for shorter, one- and two-year programs — especially at schools with historically high default rates.
Federal loans aren't completely unaffected. While Stafford loans, which are made directly to students and don't take into account credit history, were up in the second quarter compared to a year ago, loans made to parents through the Parent PLUS program have plummeted — down 29% in dollar volume year-over-year, according to Department of Education data analyzed by Kantorwitz.
The mood at banks more generally is cautious. The most recent Federal Reserve survey of loan officers showed a plurality of banks tightening credit standards across the board. Add in anecdotal evidence — like Bank of America declining to increase lending to McDonald's franchisees even though the two companies have a long-standing partnership — and things do seem to be cascading down to Main Street, or whatever road is home to your local fast food joint. In August, 67% of small-business owners said they'd been affected by the credit crunch, compared with 55% in February, according to surveys by the National Small Business Association.
It's not hard to find anecdotes of business booming at credit unions and community banks, which rely on deposits rather than financing in the capital markets. But even there's nuance even there. The amount you can expect from a top-yielding certificate of deposit has fallen from about 5.5% to 4.25% over the past year, according to Bankrate.com. On the surface that seems to indicate banks aren't that worried — if they really needed cash, wouldn't they up their rates to attract more money? Well, over the same period of time, the federal funds rate has been cut from 5.25% to 2% — a much wider margin. "Banks are hungry for deposits, and that's why yields haven't fallen all that much," says Bankrate's McBride. And CD yields are now on the rise.
Does that mean you're feeling the credit crunch? Maybe not. But it might be an indication that the cracks on Main Street are spreading.
By Barbara Kiviat
The tumult at the top of financial markets has not filtered down evenly, but that doesn't mean it's not seeping. There are cracks on Main Street, but whether or not you see them largely depends on where you stand. Just ask anyone who wants to buy a house with a subprime mortgage — they're not all evil, but these days they are exceedingly rare — or with a jumbo loan, which now carries an average rate 1.2 percentage points above a regular mortgage. (In normal times, the spread is closer to a quarter of a percentage point.) "Some people are saying, 'Credit crunch, what credit crunch?' and others are ready to cry uncle," says Greg McBride, senior financial analyst at Bankrate.com. "It shows it really matters where you fall on the risk spectrum."
Now about those credit card offers. You may not feel it, but there are fewer of them going out — 1.1 million during the second quarter, down 17% from the same time last year, according to the Synovate, a research firm that tracks direct mail. Who's being ignored? Well, subprime borrowers (no surprise there), but also anyone who doesn't make a lot of money: 52% of households with annual income under $50,000 received at least one offer in the second quarter, compared with 66% of such households during the same period last year.
Already got all the credit cards you need? You're still not immune from higher delinquency fees or lower limits. American Express typically cuts the credit limit on about 4% of its members in any given year. That figure now stands closer to 10%, as the card company takes a hard look at customers' credit profiles — including data on who lives in the areas with the most house-price deterioration.
For car loans, the division between those who feel the crunch and those who don't often comes down to credit score. The average 60-month new car loan is priced at 7.10%, not much different than in the spring, according to HSH Associates, Financial Publishers — and the average rate on a 60-month used car loan, 7.54%, has actually been drifting downward. (Those zero-percent financing deals still exist, too, from struggling car companies desperate to move inventory.) The difference is, you're probably not going to get that rate (or any at all) unless your FICO score is north of 700, whereas six months or a year ago, a score as low as 620 would have gotten you behind the wheel. "Some of this just represents moving back to standards that were in place five or six years ago," says Paul Taylor, chief economist at the National Automobile Dealers Association. "But if you're a customer, not getting credit you could've gotten a year before looks like a credit crunch to you."
The situation in student loans doesn't break down quite as neatly. Since the summer of 2007, 137 lenders have stopped funding federal loans, and 33 have suspended private programs, according to Mark Kantrowitz, publisher of FinAid.org and other financial aid web sites. Part of that had to do with a cut in federal subsidies, but part was directly related to the credit crunch — issuers that pulled out tended to be those that packaged and resold loans, a market that has evaporated.
Students at community and technical colleges, especially institutions that are for-profit, are having the toughest time of it. The reason: those students are more likely to use private loans (where credit standards have tightened), and lenders under profit pressure are less willing to write loans for shorter, one- and two-year programs — especially at schools with historically high default rates.
Federal loans aren't completely unaffected. While Stafford loans, which are made directly to students and don't take into account credit history, were up in the second quarter compared to a year ago, loans made to parents through the Parent PLUS program have plummeted — down 29% in dollar volume year-over-year, according to Department of Education data analyzed by Kantorwitz.
The mood at banks more generally is cautious. The most recent Federal Reserve survey of loan officers showed a plurality of banks tightening credit standards across the board. Add in anecdotal evidence — like Bank of America declining to increase lending to McDonald's franchisees even though the two companies have a long-standing partnership — and things do seem to be cascading down to Main Street, or whatever road is home to your local fast food joint. In August, 67% of small-business owners said they'd been affected by the credit crunch, compared with 55% in February, according to surveys by the National Small Business Association.
It's not hard to find anecdotes of business booming at credit unions and community banks, which rely on deposits rather than financing in the capital markets. But even there's nuance even there. The amount you can expect from a top-yielding certificate of deposit has fallen from about 5.5% to 4.25% over the past year, according to Bankrate.com. On the surface that seems to indicate banks aren't that worried — if they really needed cash, wouldn't they up their rates to attract more money? Well, over the same period of time, the federal funds rate has been cut from 5.25% to 2% — a much wider margin. "Banks are hungry for deposits, and that's why yields haven't fallen all that much," says Bankrate's McBride. And CD yields are now on the rise.
Does that mean you're feeling the credit crunch? Maybe not. But it might be an indication that the cracks on Main Street are spreading.
By Barbara Kiviat
America Can't go Cold Turkey
(CNN) -- My family doesn't use credit much. We pay off our charge cards every month. We drive used cars. We paid off our house mortgage early and have not refinanced. We carefully live well within our means. In fact, until very recently, my "apartment" in Washington has been my office.I'm pretty well-known as a cheapskate.
So when I said recently that I would be willing to give up my seat in Congress in order to pass the financial rescue package, it turned some heads.
It's because I understand what's at stake and because I hope to be a part of reforming our financial system so that we don't have these problems again.
I have spent my career as a business, finance and bankruptcy law professor and lawyer. I have helped individuals and institutions get out of financial trouble. More important, I have studied ways to make sure they don't get into trouble in the first place -- and drag all of us down with them.
Some politicians -- and a few economists -- would say that America is drunk on credit and just needs to go cold turkey. But it's more accurate to say we're addicted to credit. Too much credit. Good credit, bad credit, anything that lets us live the high life. We have mistaken growth in the value of financial paper for real economic growth.
Getting clean will not be so easy. When credit is quickly withdrawn, everyone in the business of lending panics. Credit becomes scarce and is not available at a reasonable interest rate. Institutions that need to use credit daily start to fall like dominoes. The financial fallout -- bank failures, risking a stock market crash, worthless retirement and pension funds -- could kill us. We need to reduce our dependence on credit gradually but steadily and with no excuses.
Deep down, we all know that a financial rescue is necessary. I voted for the plan that was defeated today because, to paraphrase Rep. Spencer Bachus, I'm unwilling to play Russian roulette with the financial lives of my children and grandchildren. Although the bill was imperfect and wildly unpopular, I believed that those of us in Congress needed to suck it up, vote for it and let the chips fall where they may.
But the plan has failed. I hope the economists who have warned of an imminent collapse are wrong. To paraphrase Franklin Roosevelt, what we have to fear is fear itself. If people can take a deep breath and avoid an immediate panic, it is my hope that we can improve this plan and still act in time to save our financial future.
My own strong preference is that it focus less on acquiring mortgage-backed securities and be more of a tightly focused effort to minimize foreclosures and home vacancies that drive down property values for all of us. For these non-prime mortgage notes, I would give bankruptcy courts the power to modify mortgage payments to make them more realistic. I would limit the pay of not only top Wall Street executives but the traders who made millions by making this problem worse.
I hope we can get a plan that includes at least some of those elements. But most important, we need a bill that can attract enough support to pass.
Then the hard work begins, and that is the work I want to be a part of in the months ahead: Making sure this doesn't happen again. That's why you run for office, or at least why I did. If I have not, in fact, given up my seat because of my vote, I'll be back to work on that myself.
U.S. Rep. Jim Marshall, a Democrat serving his third term in Congress, represents Georgia's 8th Congressional District. He serves on the House Armed Services and Agriculture Committees.
So when I said recently that I would be willing to give up my seat in Congress in order to pass the financial rescue package, it turned some heads.
It's because I understand what's at stake and because I hope to be a part of reforming our financial system so that we don't have these problems again.
I have spent my career as a business, finance and bankruptcy law professor and lawyer. I have helped individuals and institutions get out of financial trouble. More important, I have studied ways to make sure they don't get into trouble in the first place -- and drag all of us down with them.
Some politicians -- and a few economists -- would say that America is drunk on credit and just needs to go cold turkey. But it's more accurate to say we're addicted to credit. Too much credit. Good credit, bad credit, anything that lets us live the high life. We have mistaken growth in the value of financial paper for real economic growth.
Getting clean will not be so easy. When credit is quickly withdrawn, everyone in the business of lending panics. Credit becomes scarce and is not available at a reasonable interest rate. Institutions that need to use credit daily start to fall like dominoes. The financial fallout -- bank failures, risking a stock market crash, worthless retirement and pension funds -- could kill us. We need to reduce our dependence on credit gradually but steadily and with no excuses.
Deep down, we all know that a financial rescue is necessary. I voted for the plan that was defeated today because, to paraphrase Rep. Spencer Bachus, I'm unwilling to play Russian roulette with the financial lives of my children and grandchildren. Although the bill was imperfect and wildly unpopular, I believed that those of us in Congress needed to suck it up, vote for it and let the chips fall where they may.
But the plan has failed. I hope the economists who have warned of an imminent collapse are wrong. To paraphrase Franklin Roosevelt, what we have to fear is fear itself. If people can take a deep breath and avoid an immediate panic, it is my hope that we can improve this plan and still act in time to save our financial future.
My own strong preference is that it focus less on acquiring mortgage-backed securities and be more of a tightly focused effort to minimize foreclosures and home vacancies that drive down property values for all of us. For these non-prime mortgage notes, I would give bankruptcy courts the power to modify mortgage payments to make them more realistic. I would limit the pay of not only top Wall Street executives but the traders who made millions by making this problem worse.
I hope we can get a plan that includes at least some of those elements. But most important, we need a bill that can attract enough support to pass.
Then the hard work begins, and that is the work I want to be a part of in the months ahead: Making sure this doesn't happen again. That's why you run for office, or at least why I did. If I have not, in fact, given up my seat because of my vote, I'll be back to work on that myself.
U.S. Rep. Jim Marshall, a Democrat serving his third term in Congress, represents Georgia's 8th Congressional District. He serves on the House Armed Services and Agriculture Committees.
Let Risk-Taking Financial Institutions Fail
Let Risk-Taking Financial Institutions Fail
By Ari J. Officer and Lawrence H. Officer Monday, Sep. 29, 2008
The Administration and Congress have felt compelled to do something about the "financial meltdown," so an inefficient and inequitable "bailout plan" has been rushed through the legislature despite harsh criticism from the right and left. That's unfortunate. Both presidential candidates were stalling by qualifying the plan. Whichever candidate had had the courage to reject outright this proposal would have had the better claim to be President.
Do not be fooled. The $700 billion (ultimately $1 trillion or more) bailout is not predominantly for mortgages and homeowners. Instead, the bailout is for mortgage-backed securities. In fact, some versions of these instruments are imaginary derivatives. These claims overlap on the same types of mortgages. Many financial institutions wrote claims over the same mortgages, and these are the majority of claims that have "gone bad."
At this point, such claims have no bearing on the mortgage or housing crisis; they have bearing only on the holders of these securities themselves. These are ridiculously risky claims with little value for society. It is as if many financial institutions sold "earthquake insurance" on the same house: when the quake hits, all these claims become close to worthless — but the claims are simply bets disconnected from reality.
Follow the money. Average Joes and Janes are not the holders of the other side of complicated, over-the-counter derivatives contracts. Rather, hedge funds are the main holders. The bailout will involve a transfer of wealth — from the American people to financial institutions engaging in reckless speculation — that will be the greatest in history.
Rescuing financial institutions is not the best solution. Yes, banks are needed to provide capital to businesses. But it is not necessary to spend $1 trillion to maintain liquidity. If the government is to intervene, it should pick and choose which claims to purchase; claims that are directly tied to mortgages would be a good start.
Let financial institutions fail, merge or be bought out. The faltering institutions will see their shares devalued and will be likely to be taken over by stronger institutions — as has already started happening. This consolidation of the financial sector is both efficient and inevitable; government action can only delay the adjustment.
The government should not intervene. It should leave overleveraged financial institutions to default on their derivatives obligations and, if necessary, file for bankruptcy. Much of the crisis has arisen from miscalculating the risks involved in a large book of positions in these derivatives. It is only logical that these institutions pay for their poor management.
Rather than bailing out Wall Street, we propose that the government should buy up the actual mortgages in question and do nothing else. The government should not touch any derivatives; that is, claims that do not directly tie into the actual mortgages. If money becomes too tight, then the Fed can certainly increase its loans to financial institutions.
Let the poorly managed, overly risk-taking financial institutions fail! Always remember that Wall Street and the real economy are not the same thing.
— Ari J. Officer has completed his master of science degree in financial mathematics at Stanford University. Lawrence H. Officer is a professor of economics at the University of Illinois at Chicago.
By Ari J. Officer and Lawrence H. Officer Monday, Sep. 29, 2008
The Administration and Congress have felt compelled to do something about the "financial meltdown," so an inefficient and inequitable "bailout plan" has been rushed through the legislature despite harsh criticism from the right and left. That's unfortunate. Both presidential candidates were stalling by qualifying the plan. Whichever candidate had had the courage to reject outright this proposal would have had the better claim to be President.
Do not be fooled. The $700 billion (ultimately $1 trillion or more) bailout is not predominantly for mortgages and homeowners. Instead, the bailout is for mortgage-backed securities. In fact, some versions of these instruments are imaginary derivatives. These claims overlap on the same types of mortgages. Many financial institutions wrote claims over the same mortgages, and these are the majority of claims that have "gone bad."
At this point, such claims have no bearing on the mortgage or housing crisis; they have bearing only on the holders of these securities themselves. These are ridiculously risky claims with little value for society. It is as if many financial institutions sold "earthquake insurance" on the same house: when the quake hits, all these claims become close to worthless — but the claims are simply bets disconnected from reality.
Follow the money. Average Joes and Janes are not the holders of the other side of complicated, over-the-counter derivatives contracts. Rather, hedge funds are the main holders. The bailout will involve a transfer of wealth — from the American people to financial institutions engaging in reckless speculation — that will be the greatest in history.
Rescuing financial institutions is not the best solution. Yes, banks are needed to provide capital to businesses. But it is not necessary to spend $1 trillion to maintain liquidity. If the government is to intervene, it should pick and choose which claims to purchase; claims that are directly tied to mortgages would be a good start.
Let financial institutions fail, merge or be bought out. The faltering institutions will see their shares devalued and will be likely to be taken over by stronger institutions — as has already started happening. This consolidation of the financial sector is both efficient and inevitable; government action can only delay the adjustment.
The government should not intervene. It should leave overleveraged financial institutions to default on their derivatives obligations and, if necessary, file for bankruptcy. Much of the crisis has arisen from miscalculating the risks involved in a large book of positions in these derivatives. It is only logical that these institutions pay for their poor management.
Rather than bailing out Wall Street, we propose that the government should buy up the actual mortgages in question and do nothing else. The government should not touch any derivatives; that is, claims that do not directly tie into the actual mortgages. If money becomes too tight, then the Fed can certainly increase its loans to financial institutions.
Let the poorly managed, overly risk-taking financial institutions fail! Always remember that Wall Street and the real economy are not the same thing.
— Ari J. Officer has completed his master of science degree in financial mathematics at Stanford University. Lawrence H. Officer is a professor of economics at the University of Illinois at Chicago.
Friday, September 26, 2008
Home Loans Harder to get
NEW YORK (CNNMoney.com) -- Wall Street's meltdown has put the squeeze on all sorts of lending, and home loans are no exception. Now, even some very well-qualified home buyers are getting turned down for mortgages.
"A lot of good, well-qualified people are being turned away for no good reason," said Mark Savitt, president of the National Association of Mortgage Brokers and a mortgage broker in West Virginia. "The wheels are coming to a grinding halt."
Sometimes the rejections seem completely inexplicable. Long Island, N.Y.-based mortgage broker Bob Moulton had one client with substantial income and assets who planned to put down $1.2 million on a house selling for $2.2 million. For this borrower, a mortgage should have been a snap. But it wasn't.
The hitch: The buyer was a few days late with a single mortgage payment last year when he was away on vacation. That lowered his credit score to 679, which is the reason the lender cited when it denied his loan.
"Just a little ding on his credit report, one late payment a year-and-a-half ago," said Moulton. "Everything else was fine."
Higher rates
Another example comes from Savitt. One of his clients was buying a home for $205,000, putting down 20%. The buyer had an excellent credit score in the mid-700s, and the house was appraised at a little higher than the sale price.
The problem here: The borrower's debt to income ratio would be at about 45 - slightly higher than what most banks like to see, but by no means excessive. And his other risk factors were great.
"The bank turned it down over excessive debt ratio," said Savitt. "That's crazy."
And higher interest rates are making it even harder for borrowers to get a loan. The 30-year fixed rate has shot up in the wake of the financial crisis - to 6.09%, compared with 5.78% last week - making monthly mortgage payments higher as well. That's raising the debt to income ratio for most borrowers, which means more will have their loan applications rejected.
"
It used to be that if most of a borrower's qualifications were quite strong - income, assets, credit score and the value of the home itself - lenders would use their judgment to make exceptions if one factor was a bit weak.
A lender might accept a less than stellar credit score, for example, if the borrower was making a big down payment, or forgive a modest income if the borrower's bank account was fat enough.
Not any more, says Alan Rosenbaum, president of New York City mortgage broker GuardHill Finance.
"There are no exceptions today," said Rosenbaum. "If an application does not meet each of the guidelines - and those guidelines themselves have gotten more strict - it's denied."
That means many more people simply no longer qualify for a mortgage.
A numbers game
"I get as many phone calls as I got two years ago," said broker George Hanzimanolis, of Bankers First Mortgage in Pennsylvania, "but I bet you 40% of the people calling in, we can't do anything for, versus 5% a year ago."
And Hanzimanolis say it's gotten worse in the last few weeks. One recent client who had excellent assets and income wanted to refinance his first and second mortgages. The house was valued at $1.6 million, and he was looking for a $1.2 million loan. That's an excellent loan-to-value ratio of 75%; the banks like it to be no more than 80%.
But these days many lenders are anticipating that home prices will continue to fall, so they're automatically discounting every home's appraised value by 10%.
That dropped the value of the borrower's home to $1.44 million, which put him over the 80% loan-to-value ratio. So the loan was turned down.
Things like that make brokering mortgage loans today a struggle, according to Moulton.
"Nothing is making sense. Everything is torture right now," he said. "We're getting things done but it takes enormous effort. You think a deal is vanilla and it turns out to be rocky road."
By Les Christie, CNNMoney.com staff writer
"A lot of good, well-qualified people are being turned away for no good reason," said Mark Savitt, president of the National Association of Mortgage Brokers and a mortgage broker in West Virginia. "The wheels are coming to a grinding halt."
Sometimes the rejections seem completely inexplicable. Long Island, N.Y.-based mortgage broker Bob Moulton had one client with substantial income and assets who planned to put down $1.2 million on a house selling for $2.2 million. For this borrower, a mortgage should have been a snap. But it wasn't.
The hitch: The buyer was a few days late with a single mortgage payment last year when he was away on vacation. That lowered his credit score to 679, which is the reason the lender cited when it denied his loan.
"Just a little ding on his credit report, one late payment a year-and-a-half ago," said Moulton. "Everything else was fine."
Higher rates
Another example comes from Savitt. One of his clients was buying a home for $205,000, putting down 20%. The buyer had an excellent credit score in the mid-700s, and the house was appraised at a little higher than the sale price.
The problem here: The borrower's debt to income ratio would be at about 45 - slightly higher than what most banks like to see, but by no means excessive. And his other risk factors were great.
"The bank turned it down over excessive debt ratio," said Savitt. "That's crazy."
And higher interest rates are making it even harder for borrowers to get a loan. The 30-year fixed rate has shot up in the wake of the financial crisis - to 6.09%, compared with 5.78% last week - making monthly mortgage payments higher as well. That's raising the debt to income ratio for most borrowers, which means more will have their loan applications rejected.
"
It used to be that if most of a borrower's qualifications were quite strong - income, assets, credit score and the value of the home itself - lenders would use their judgment to make exceptions if one factor was a bit weak.
A lender might accept a less than stellar credit score, for example, if the borrower was making a big down payment, or forgive a modest income if the borrower's bank account was fat enough.
Not any more, says Alan Rosenbaum, president of New York City mortgage broker GuardHill Finance.
"There are no exceptions today," said Rosenbaum. "If an application does not meet each of the guidelines - and those guidelines themselves have gotten more strict - it's denied."
That means many more people simply no longer qualify for a mortgage.
A numbers game
"I get as many phone calls as I got two years ago," said broker George Hanzimanolis, of Bankers First Mortgage in Pennsylvania, "but I bet you 40% of the people calling in, we can't do anything for, versus 5% a year ago."
And Hanzimanolis say it's gotten worse in the last few weeks. One recent client who had excellent assets and income wanted to refinance his first and second mortgages. The house was valued at $1.6 million, and he was looking for a $1.2 million loan. That's an excellent loan-to-value ratio of 75%; the banks like it to be no more than 80%.
But these days many lenders are anticipating that home prices will continue to fall, so they're automatically discounting every home's appraised value by 10%.
That dropped the value of the borrower's home to $1.44 million, which put him over the 80% loan-to-value ratio. So the loan was turned down.
Things like that make brokering mortgage loans today a struggle, according to Moulton.
"Nothing is making sense. Everything is torture right now," he said. "We're getting things done but it takes enormous effort. You think a deal is vanilla and it turns out to be rocky road."
By Les Christie, CNNMoney.com staff writer
Largest Ever Bank Failure
NEW YORK - As the debate over a $700 billion bank bailout rages on in Washington, one of the nation's largest banks — Washington Mutual Inc. — has collapsed under the weight of its enormous bad bets on the mortgage market.
The Federal Deposit Insurance Corp. seized WaMu on Thursday, and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion.
Seattle-based WaMu, which was founded in 1889, is the largest bank to fail by far in the country's history. Its $307 billion in assets eclipse the $40 billion of Continental Illinois National Bank, which failed in 1984, and the $32 billion of IndyMac, which the government seized in July.
One positive is that the sale of WaMu's assets to JPMorgan Chase prevents the thrift's collapse from depleting the FDIC's insurance fund. But that detail is likely to give only marginal solace to Americans facing tighter lending and watching their stock portfolios plunge in the wake of the nation's most momentous financial crisis since the Great Depression.
Because of WaMu's souring mortgages and other risky debt, JPMorgan plans to write down WaMu's loan portfolio by about $31 billion — a figure that could change if the government goes through with its bailout plan and JPMorgan decides to take advantage of it.
"We're in favor of what the government is doing, but we're not relying on what the government is doing. We would've done it anyway," JPMorgan's Chief Executive Jamie Dimon said in a conference call Thursday night, referring to the acquisition. Dimon said he does not know if JPMorgan will take advantage of the bailout.
WaMu is JPMorgan Chase's second acquisition this year of a major financial institution hobbled by losing bets on mortgages. In March, JPMorgan bought the investment bank Bear Stearns Cos. for about $1.4 billion, plus another $900 million in stock ahead of the deal to secure it.
JPMorgan Chase is now the second-largest bank in the United States after Bank of America Corp., which recently bought Merrill Lynch in a flurry of events that included Lehman Brothers Holdings Inc. going bankrupt and American International Group Inc., the world's largest insurer, getting taken over by the government.
JPMorgan also said Thursday it plans to sell $8 billion in common stock to raise capital.
The downfall of WaMu has been widely anticipated for some time because of the company's heavy mortgage-related losses. As investors grew nervous about the bank's health, its stock price plummeted 95 percent from a 52-week high of $36.47 to its close of $1.69 Thursday. On Wednesday, it suffered a ratings downgrade by Standard & Poor's that put it in danger of collapse.
WaMu "was under severe liquidity pressure," FDIC Chairman Sheila Bair told reporters in a conference call.
"For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," Bair said in a statement. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."
Besides JPMorgan Chase, Wells Fargo & Co., Citigroup Inc., HSBC, Spain's Banco Santander and Toronto-Dominion Bank of Canada were also reportedly possible suitors. WaMu was believed to be talking to private equity firms as well.
The seizure by the government means shareholders' equity in WaMu was wiped out. The deal leaves private equity investors including the firm TPG Capital, which gave WaMu a cash infusion totaling $7 billion this spring, on the sidelines empty handed.
WaMu ran into trouble after it got caught up in the once-booming subprime mortgage business. Troubles then spread to other parts of WaMu's home loan portfolio, namely its "option" adjustable-rate mortgage loans. Option ARM loans offer very low introductory payments and let borrowers defer some interest payments until later years. The bank stopped originating those loans in June.
Problems in WaMu's home loan business began to surface in 2006, when the bank reported that the division lost $48 million, compared with net income of about $1 billion in 2005.
At the start of 2007, following the release of the company's annual financial report, then-CEO Kerry Killinger said the bank had prepared for a slowdown in its housing business by sharply reducing its subprime mortgage lending and servicing of loans. Alan H. Fishman, the former president and chief operating officer of Sovereign Bank and president and CEO of Independence Community Bank, replaced Killinger earlier this month.
As more borrowers became delinquent on their mortgages, WaMu worked to help troubled customers refinance their loans as a way to avoid default and foreclosure, committing $2 billion to the effort last April. But that proved to be too little, too late.
At the same time, fears of growing credit problems kept investors from purchasing debt backed by those loans, drying up a source of cash flow for banks that made subprime loans.
In December, WaMu said it would shutter its subprime lending business and reduce expenses with layoffs and a dividend cut.
The bank in July reported a $3 billion second-quarter loss — the biggest in its history — as it boosted its reserves to more than $8 billion to cover losses on bad loans. Over the last three quarters, it added $10.9 billion to its loan-loss provisions.
JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of WaMu's banks, or any assets or liabilities of the holding company, Washington Mutual Inc. JPMorgan also said it will not take on the lawsuits facing the holding company.
JPMorgan Chase said the acquisition will give it 5,400 branches in 23 states, and that it plans to close less than 10 percent of the two companies' branches.
The WaMu acquisition would add 50 cents per share to JPMorgan's earnings in 2009, the bank said, adding that it expects to have pretax merger costs of approximately $1.5 billion while achieving pretax savings of approximately $1.5 billion by 2010.
"This is a definite win for JPMorgan," said Sebastian Hindman, an analyst at SNL Financial, who said JPMorgan should be able to shoulder the $31 billion writedown to WaMu's portfolio.
By MADLEN READ, AP Business Writer
The Federal Deposit Insurance Corp. seized WaMu on Thursday, and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion.
Seattle-based WaMu, which was founded in 1889, is the largest bank to fail by far in the country's history. Its $307 billion in assets eclipse the $40 billion of Continental Illinois National Bank, which failed in 1984, and the $32 billion of IndyMac, which the government seized in July.
One positive is that the sale of WaMu's assets to JPMorgan Chase prevents the thrift's collapse from depleting the FDIC's insurance fund. But that detail is likely to give only marginal solace to Americans facing tighter lending and watching their stock portfolios plunge in the wake of the nation's most momentous financial crisis since the Great Depression.
Because of WaMu's souring mortgages and other risky debt, JPMorgan plans to write down WaMu's loan portfolio by about $31 billion — a figure that could change if the government goes through with its bailout plan and JPMorgan decides to take advantage of it.
"We're in favor of what the government is doing, but we're not relying on what the government is doing. We would've done it anyway," JPMorgan's Chief Executive Jamie Dimon said in a conference call Thursday night, referring to the acquisition. Dimon said he does not know if JPMorgan will take advantage of the bailout.
WaMu is JPMorgan Chase's second acquisition this year of a major financial institution hobbled by losing bets on mortgages. In March, JPMorgan bought the investment bank Bear Stearns Cos. for about $1.4 billion, plus another $900 million in stock ahead of the deal to secure it.
JPMorgan Chase is now the second-largest bank in the United States after Bank of America Corp., which recently bought Merrill Lynch in a flurry of events that included Lehman Brothers Holdings Inc. going bankrupt and American International Group Inc., the world's largest insurer, getting taken over by the government.
JPMorgan also said Thursday it plans to sell $8 billion in common stock to raise capital.
The downfall of WaMu has been widely anticipated for some time because of the company's heavy mortgage-related losses. As investors grew nervous about the bank's health, its stock price plummeted 95 percent from a 52-week high of $36.47 to its close of $1.69 Thursday. On Wednesday, it suffered a ratings downgrade by Standard & Poor's that put it in danger of collapse.
WaMu "was under severe liquidity pressure," FDIC Chairman Sheila Bair told reporters in a conference call.
"For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," Bair said in a statement. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."
Besides JPMorgan Chase, Wells Fargo & Co., Citigroup Inc., HSBC, Spain's Banco Santander and Toronto-Dominion Bank of Canada were also reportedly possible suitors. WaMu was believed to be talking to private equity firms as well.
The seizure by the government means shareholders' equity in WaMu was wiped out. The deal leaves private equity investors including the firm TPG Capital, which gave WaMu a cash infusion totaling $7 billion this spring, on the sidelines empty handed.
WaMu ran into trouble after it got caught up in the once-booming subprime mortgage business. Troubles then spread to other parts of WaMu's home loan portfolio, namely its "option" adjustable-rate mortgage loans. Option ARM loans offer very low introductory payments and let borrowers defer some interest payments until later years. The bank stopped originating those loans in June.
Problems in WaMu's home loan business began to surface in 2006, when the bank reported that the division lost $48 million, compared with net income of about $1 billion in 2005.
At the start of 2007, following the release of the company's annual financial report, then-CEO Kerry Killinger said the bank had prepared for a slowdown in its housing business by sharply reducing its subprime mortgage lending and servicing of loans. Alan H. Fishman, the former president and chief operating officer of Sovereign Bank and president and CEO of Independence Community Bank, replaced Killinger earlier this month.
As more borrowers became delinquent on their mortgages, WaMu worked to help troubled customers refinance their loans as a way to avoid default and foreclosure, committing $2 billion to the effort last April. But that proved to be too little, too late.
At the same time, fears of growing credit problems kept investors from purchasing debt backed by those loans, drying up a source of cash flow for banks that made subprime loans.
In December, WaMu said it would shutter its subprime lending business and reduce expenses with layoffs and a dividend cut.
The bank in July reported a $3 billion second-quarter loss — the biggest in its history — as it boosted its reserves to more than $8 billion to cover losses on bad loans. Over the last three quarters, it added $10.9 billion to its loan-loss provisions.
JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of WaMu's banks, or any assets or liabilities of the holding company, Washington Mutual Inc. JPMorgan also said it will not take on the lawsuits facing the holding company.
JPMorgan Chase said the acquisition will give it 5,400 branches in 23 states, and that it plans to close less than 10 percent of the two companies' branches.
The WaMu acquisition would add 50 cents per share to JPMorgan's earnings in 2009, the bank said, adding that it expects to have pretax merger costs of approximately $1.5 billion while achieving pretax savings of approximately $1.5 billion by 2010.
"This is a definite win for JPMorgan," said Sebastian Hindman, an analyst at SNL Financial, who said JPMorgan should be able to shoulder the $31 billion writedown to WaMu's portfolio.
By MADLEN READ, AP Business Writer
Wednesday, September 24, 2008
7 Steps to Happily Ever After
The 7 Steps to Happily Ever After
What makes love last a lifetime? Affection? Yep. Respect? Sure. But a great marriage is not just about what you have. It's about what you do to make a relationship stronger, safer, more caring and committed. Here's how to make your "forever" fantastic. Marriage is a home, a refuge against the outside storms. And like any house, it requires a strong, lasting foundation. To build one, every couple needs to take certain steps — seven, to be precise — that turn the two of you into not just you and me but we. You may not move through all the steps in order, and you may circle back to complete certain steps again (and again and again). But if you make it through them all, you'll be well on your way toward creating a marriage that will be your shelter as long as you both shall live.
Step 1: Find a shared dream for your life together. It's easy to get caught up in the small stuff of married life: What's for dinner tonight? Whose turn is it to clean the litter box? Did you pay the electric bill? But the best partners never lose sight of the fact that they're working together to achieve the same big dreams. "Successful couples quickly develop a mindfulness of 'us,' of being coupled," says REDBOOK Love Network expert Jane Greer, Ph.D., a marriage and family therapist in New York City. "They have a shared vision, saying things like, 'We want to plan to buy a house, we want to take a vacation to such-and-such a place, we like to do X, we think we want to start a family at Y time.'" This kind of dream-sharing starts early. "Couples love to tell the story of how they met," points out Julie Holland, M.D., a psychiatrist in private practice in New York City and a clinical assistant professor of psychiatry at the New York University School of Medicine. "It's like telling a fairy tale. But happy couples will go on creating folklore and history, with the meet-cute forming the bedrock of the narrative." As you write and rewrite your love story ("our hardest challenge was X, our dream for retirement is Y"), you continually remind yourselves and each other that you're a team with shared values and goals. And P.S.: When you share a dream, you're a heck of a lot more likely to make that dream come true.
Step 2: Ignite (and reignite) a sexual connection. In any good relationship, sex is way more than just a physical act. It's crucial for the health of your emotional connection, too: It's something only the two of you share; it makes you both feel warm and loved; it draws you back together when you're drifting apart. And did I mention that it's a whole lot of fun? Striking up those sparks when you first meet is easy. Nurturing a strong, steady flame? That's the hard part. When you've got a mortgage, a potbelly, and a decade or two of togetherness under your belts, it can be hard to muster up the fire you felt when you first got together. That's when it's even more important to protect your sex life and make it a priority. "You have to keep working to create allure and seduction for each other or your sex life will become lackluster," Greer points out. "Who wants the same turkey sandwich over and over? You want it on whole wheat! On toast! As turkey salad! On a roll!" (And now I will imagine my husband covered with Russian dressing. Thanks, Dr. Greer.) As the years go by, you'll keep revisiting and realigning and reimagining the passion you have for each other. And if you keep at it, you'll have a sex life that transcends your marriage's lack of newness, the stresses of family and work, the physical changes that come with aging. Now that's something worth holding on to.
Step 3: Choose each other as your first family. For years, you were primarily a member of one family: the one in which you grew up. Then you got married, and suddenly you became the foundation of a new family, one in which husband and wife are the A-team. It can be tough to shift your identity like this, but it's also an important part of building your self-image as a duo (and maybe, eventually, as three or four or...). For me, making this transition meant stopping the incessant bitching to my mom when I was mad at my husband — my behavior was disloyal, and I had to learn to talk to Jonathan, not about him. My friend Lynn tells the story of her mother's reaction to a trip to the Middle East she and her then-boyfriend (now husband) had planned. Her mother hit the roof, calling incessantly to urge Lynn not to go. Eventually, Lynn's boyfriend got on the phone with Mom and explained why they were excited to share this experience. "It was clear then that we were the team," Lynn says now. "Not teaming up against my mother, but teaming up together to deal with her issues." Whatever your challenges — an overprotective mom? an overly critical father-in-law? — you have to outline together the boundaries between you and all of the families connected to you. Not only will you feel stronger as a united front but when you stick to your shared rules, all that family baggage will weigh on you a lot less.
Step 4: Learn how to fight right. I'm embarrassed to think of how I coped with conflict early in my relationship with Jonathan. I stormed out — a lot. I once threw an apple at his head. Hard. (Don't worry, I missed — on purpose.) I had a terrible habit of threatening divorce at the slightest provocation. But eventually I figured that this was pretty moronic. I didn't want out, and I knew that pelting someone with fruit was not a long-term marital strategy. "Fighting is the big problem every couple has to deal with," says Daniel B. Wile, Ph.D., a psychologist and couples therapist in Oakland, CA, and author of After the Fight. That's because fights will always come up, so every couple needs to learn how to fight without tearing each other apart. Fighting right doesn't just mean not throwing produce; it means staying focused on the issue at hand and respecting each other's perspective. Couples that fight right also find ways to defuse the tension, says Wile — often with humor. "Whenever one of us wants the other to listen up, we mime hitting the TV remote, a thumb pressing down on an invisible mute button," says Nancy, 52, an event producer in San Francisco. "It cracks us up, in part because it must look insane to others." Even if you fight a lot, when you can find a way to turn fights toward the positive — with a smile, a quick apology, an expression of appreciation for the other person — the storm blows away fast, and that's what matters.
Step 5: Find a balance between time for two and time for you.Jonathan and I both work at home. This frequently leads to murderous impulses. Though I'm typing away in the bedroom and he's talking to his consulting clients in our small home office, most days it really feels like too much intimacy for me. But that's my bias. When it comes to togetherness, every couple has its own unique sweet spot. "There are couples that are never apart and there are couples that see each other only on weekends," Greer says. With the right balance, neither partner feels slighted or smothered. You have enough non-shared experiences to fire you up and help you maintain a sense of yourself outside the relationship — not to mention give you something to talk about at the dinner table. But you also have enough time together to feel your connection as a strong tie rather than as a loose thread.Your togetherness needs will also change over time, so you'll have to shift your balance accordingly. "My husband and I spend a lot of time together, but it's almost all family time," says Katie, 40, a mom of two in San Leandro, CA. "We realized a few months ago that we hadn't had a conversation that didn't involve the kids or our to-do lists in ages, so we committed to a weekly date. We were so happy just to go to the movies and hold hands, something we hadn't done in ages. It felt like we were dating again!"
Step 6: Build a best friendship.Think about the things that make your closest friendships irreplaceable: the trust that comes with true intimacy, the willingness to be vulnerable, the confidence that the friendship can withstand some conflict. Don't those sound like good things to have in your marriage, too? "Happy couples are each other's haven," says Holland. "They can count on the other person to listen and try to meet their needs." Greer adds, "When you're true friends, you acknowledge and respect what the other person is; you don't try to control or change them. This creates a sense of safety and security when you're together — you know you're valued for who you are and you see the value in your partner." Then there's the way, when you've been with someone a while, that you become almost a mind reader. You have a shared history and inside jokes. Your guy knows what you'll find funny, you forward him links to articles you know he'll enjoy, and best of all, you two can make eye contact at a given moment and say volumes without opening your mouths. And is there anything more pleasurable than sharing the newspaper with someone? Sitting in companionable silence, absorbed in your respective reading, sipping coffee, occasionally reading something out loud, but mostly just lazing happily together, communing without needing to speak? Ahh....
Step 7: Face down a major challenge together.You're sailing along through life, and suddenly you hit a huge bump. A serious illness. Unemployment. The loss of a home. A death in the family. How do you cope? The truth is, you never know how strong your relationship is until it's tested. All too often, the stress of a crisis can pull a couple apart. But the good news is, when you do make it through in one piece, you might just find yourselves tighter than ever. "What didn't happen to us?" says Daryl, 28, a preschool teacher in Harrisburg, PA. "My husband lost his job and took a minimum-wage job he was way overqualified for just to make ends meet. He was offered a better job in a mountain town outside San Diego, so we moved. Then during the California wildfires several years ago, our house burned down and we lost everything. We were living in a one-room converted garage with no running water and a newborn. But we found that this chaos somehow brought us even closer together. We took turns losing it. We really kept each other sane." Hey, marriage is no roll in the hay. It's tough, real work. But the reward, the edifice you build together that will shelter you through years of tough times, is more than worth the effort. The small, friendly cottage you build — decorated with your shared history and stories, filled with color and laughter — will be the warmest and safest retreat you can imagine.
by Redbook
What makes love last a lifetime? Affection? Yep. Respect? Sure. But a great marriage is not just about what you have. It's about what you do to make a relationship stronger, safer, more caring and committed. Here's how to make your "forever" fantastic. Marriage is a home, a refuge against the outside storms. And like any house, it requires a strong, lasting foundation. To build one, every couple needs to take certain steps — seven, to be precise — that turn the two of you into not just you and me but we. You may not move through all the steps in order, and you may circle back to complete certain steps again (and again and again). But if you make it through them all, you'll be well on your way toward creating a marriage that will be your shelter as long as you both shall live.
Step 1: Find a shared dream for your life together. It's easy to get caught up in the small stuff of married life: What's for dinner tonight? Whose turn is it to clean the litter box? Did you pay the electric bill? But the best partners never lose sight of the fact that they're working together to achieve the same big dreams. "Successful couples quickly develop a mindfulness of 'us,' of being coupled," says REDBOOK Love Network expert Jane Greer, Ph.D., a marriage and family therapist in New York City. "They have a shared vision, saying things like, 'We want to plan to buy a house, we want to take a vacation to such-and-such a place, we like to do X, we think we want to start a family at Y time.'" This kind of dream-sharing starts early. "Couples love to tell the story of how they met," points out Julie Holland, M.D., a psychiatrist in private practice in New York City and a clinical assistant professor of psychiatry at the New York University School of Medicine. "It's like telling a fairy tale. But happy couples will go on creating folklore and history, with the meet-cute forming the bedrock of the narrative." As you write and rewrite your love story ("our hardest challenge was X, our dream for retirement is Y"), you continually remind yourselves and each other that you're a team with shared values and goals. And P.S.: When you share a dream, you're a heck of a lot more likely to make that dream come true.
Step 2: Ignite (and reignite) a sexual connection. In any good relationship, sex is way more than just a physical act. It's crucial for the health of your emotional connection, too: It's something only the two of you share; it makes you both feel warm and loved; it draws you back together when you're drifting apart. And did I mention that it's a whole lot of fun? Striking up those sparks when you first meet is easy. Nurturing a strong, steady flame? That's the hard part. When you've got a mortgage, a potbelly, and a decade or two of togetherness under your belts, it can be hard to muster up the fire you felt when you first got together. That's when it's even more important to protect your sex life and make it a priority. "You have to keep working to create allure and seduction for each other or your sex life will become lackluster," Greer points out. "Who wants the same turkey sandwich over and over? You want it on whole wheat! On toast! As turkey salad! On a roll!" (And now I will imagine my husband covered with Russian dressing. Thanks, Dr. Greer.) As the years go by, you'll keep revisiting and realigning and reimagining the passion you have for each other. And if you keep at it, you'll have a sex life that transcends your marriage's lack of newness, the stresses of family and work, the physical changes that come with aging. Now that's something worth holding on to.
Step 3: Choose each other as your first family. For years, you were primarily a member of one family: the one in which you grew up. Then you got married, and suddenly you became the foundation of a new family, one in which husband and wife are the A-team. It can be tough to shift your identity like this, but it's also an important part of building your self-image as a duo (and maybe, eventually, as three or four or...). For me, making this transition meant stopping the incessant bitching to my mom when I was mad at my husband — my behavior was disloyal, and I had to learn to talk to Jonathan, not about him. My friend Lynn tells the story of her mother's reaction to a trip to the Middle East she and her then-boyfriend (now husband) had planned. Her mother hit the roof, calling incessantly to urge Lynn not to go. Eventually, Lynn's boyfriend got on the phone with Mom and explained why they were excited to share this experience. "It was clear then that we were the team," Lynn says now. "Not teaming up against my mother, but teaming up together to deal with her issues." Whatever your challenges — an overprotective mom? an overly critical father-in-law? — you have to outline together the boundaries between you and all of the families connected to you. Not only will you feel stronger as a united front but when you stick to your shared rules, all that family baggage will weigh on you a lot less.
Step 4: Learn how to fight right. I'm embarrassed to think of how I coped with conflict early in my relationship with Jonathan. I stormed out — a lot. I once threw an apple at his head. Hard. (Don't worry, I missed — on purpose.) I had a terrible habit of threatening divorce at the slightest provocation. But eventually I figured that this was pretty moronic. I didn't want out, and I knew that pelting someone with fruit was not a long-term marital strategy. "Fighting is the big problem every couple has to deal with," says Daniel B. Wile, Ph.D., a psychologist and couples therapist in Oakland, CA, and author of After the Fight. That's because fights will always come up, so every couple needs to learn how to fight without tearing each other apart. Fighting right doesn't just mean not throwing produce; it means staying focused on the issue at hand and respecting each other's perspective. Couples that fight right also find ways to defuse the tension, says Wile — often with humor. "Whenever one of us wants the other to listen up, we mime hitting the TV remote, a thumb pressing down on an invisible mute button," says Nancy, 52, an event producer in San Francisco. "It cracks us up, in part because it must look insane to others." Even if you fight a lot, when you can find a way to turn fights toward the positive — with a smile, a quick apology, an expression of appreciation for the other person — the storm blows away fast, and that's what matters.
Step 5: Find a balance between time for two and time for you.Jonathan and I both work at home. This frequently leads to murderous impulses. Though I'm typing away in the bedroom and he's talking to his consulting clients in our small home office, most days it really feels like too much intimacy for me. But that's my bias. When it comes to togetherness, every couple has its own unique sweet spot. "There are couples that are never apart and there are couples that see each other only on weekends," Greer says. With the right balance, neither partner feels slighted or smothered. You have enough non-shared experiences to fire you up and help you maintain a sense of yourself outside the relationship — not to mention give you something to talk about at the dinner table. But you also have enough time together to feel your connection as a strong tie rather than as a loose thread.Your togetherness needs will also change over time, so you'll have to shift your balance accordingly. "My husband and I spend a lot of time together, but it's almost all family time," says Katie, 40, a mom of two in San Leandro, CA. "We realized a few months ago that we hadn't had a conversation that didn't involve the kids or our to-do lists in ages, so we committed to a weekly date. We were so happy just to go to the movies and hold hands, something we hadn't done in ages. It felt like we were dating again!"
Step 6: Build a best friendship.Think about the things that make your closest friendships irreplaceable: the trust that comes with true intimacy, the willingness to be vulnerable, the confidence that the friendship can withstand some conflict. Don't those sound like good things to have in your marriage, too? "Happy couples are each other's haven," says Holland. "They can count on the other person to listen and try to meet their needs." Greer adds, "When you're true friends, you acknowledge and respect what the other person is; you don't try to control or change them. This creates a sense of safety and security when you're together — you know you're valued for who you are and you see the value in your partner." Then there's the way, when you've been with someone a while, that you become almost a mind reader. You have a shared history and inside jokes. Your guy knows what you'll find funny, you forward him links to articles you know he'll enjoy, and best of all, you two can make eye contact at a given moment and say volumes without opening your mouths. And is there anything more pleasurable than sharing the newspaper with someone? Sitting in companionable silence, absorbed in your respective reading, sipping coffee, occasionally reading something out loud, but mostly just lazing happily together, communing without needing to speak? Ahh....
Step 7: Face down a major challenge together.You're sailing along through life, and suddenly you hit a huge bump. A serious illness. Unemployment. The loss of a home. A death in the family. How do you cope? The truth is, you never know how strong your relationship is until it's tested. All too often, the stress of a crisis can pull a couple apart. But the good news is, when you do make it through in one piece, you might just find yourselves tighter than ever. "What didn't happen to us?" says Daryl, 28, a preschool teacher in Harrisburg, PA. "My husband lost his job and took a minimum-wage job he was way overqualified for just to make ends meet. He was offered a better job in a mountain town outside San Diego, so we moved. Then during the California wildfires several years ago, our house burned down and we lost everything. We were living in a one-room converted garage with no running water and a newborn. But we found that this chaos somehow brought us even closer together. We took turns losing it. We really kept each other sane." Hey, marriage is no roll in the hay. It's tough, real work. But the reward, the edifice you build together that will shelter you through years of tough times, is more than worth the effort. The small, friendly cottage you build — decorated with your shared history and stories, filled with color and laughter — will be the warmest and safest retreat you can imagine.
by Redbook
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