Where should homeowners turn if they desperately need to refinance their mortgages? What should nervous workers do about their 401(k) investments? Can a parent’s debt be inherited? TODAY financial editor Jean Chatzky, CNBC's Carmen Wong Ulrich and “Start Late, Finish Rich” author David Bach field questions and offer timely advice on these matters.
Q: I am trying to take advantage of the affordable home refinance that is in effect. Unfortunately, I have been calling and calling my mortgage company for two months, but they will not return my calls. I have also written to Freddie Mac about six weeks ago, but have not heard back from them. I am wondering where homeowners in my situation turn. What resources are there to help us when our mortgage company will not? My husband and I have excellent credit, but do not have the 20 percent equity for a conventional refinance due to the decrease in home value. PLEASE help us. — Laura, Manchester, Md.
Jean Chatzky: It sounds like you have a good chance of being eligible for a refinance under the Making Home Affordable plan. The rules for eligibility state that you must be the owner of a one- to four-unit home, your mortgage must be owned or securitized by Fannie Mae or Freddie Mac, you must be current on your mortgage — in other words, you haven't been more than 30 days late in the last 12 months — and the amount you owe is less than 105 percent of the current market value of your home.
You’re not alone in this struggle to get an answer from your lender — a lot of people are having trouble. The mortgage companies, quite honestly, are understaffed because they weren’t prepared to deal with this. I would continue to try to contact both your mortgage lender and Freddie Mac, but I’d also put in a call to HOPE NOW, an organization that will pair you up with a HUD-certified housing counselor in your area. He or she will hold your hand and help you talk to your lender about your options. HOPE NOW can be reached at 888-995-HOPE or through this Web link. You can also find a HUD-certified counselor on HUD.gov. Both options are completely free to you. When you have HUD-certified counselor advocating on your behalf, it helps speed the process because they know how to navigate the system.
Q: Last year, my company changed its 401(k) plan and is using a new administrator. This change occurred a few months before the decline in the stock market. I am contributing 7 percent of my income to our current 401(k) plan, but still have a substantial amount in my company’s previous plan. I can roll over the money to my new plan. The older plan has dropped significantly in value since last year. I still have more than 25 years before I even consider retiring. My question is this: Should I leave my money in the older plan and wait for it to recoup its value, or do I roll the funds over to my new 401(k) plan? — Tim, Denver
Jean Chatzky: This is an unusual situation, but it typically happens when companies merge or a company decides to terminate one type of plan and start a new type of plan. In most cases, you can choose between rolling your old account over into your new 401(k) and rolling it over into an IRA. You want to compare investment options and costs in both, but in general, you’ll find that you have more options and more control over your money in an IRA.
As far as waiting for it to recoup its value goes — this is a question of your investments, not the type of account you have. You should go back and make sure your investments are diversified and appropriate, and if they are, your account value should bounce back over time whether it’s in the old 401(k), the new 401(k) or an IRA, so you can go ahead and roll the money over at any time.
Q: My father passed away a month ago and my question is for my mother, who wants to know if she is responsible for her husband’s credit card debt? He was the only authorized user on the card and all their assets are in a living trust. He had four credit cards. Each had various amounts. The highest was $20,000. Total debt is around $40,000. — Brenda, San Antonio, Texas
Carmen Wong Ulrich: First of all, I’m so sorry for your family’s loss. My family went through this personally when our mother died and left a chunk of debt we didn’t know she had. Here’s how it works for your mother: As long as she didn’t co-sign any debt or wasn’t an authorized or joint user, she should not be personally responsible. The norm is, just because you’re married doesn’t mean you marry debt — you need to be a joint owner or co-signer and in some states an authorized user.
However — and it’s a big however, unfortunately — the debt will have to be paid out of your father’s estate, which they may have held jointly. Note that you also live in a community property state (there are nine states with these laws, including California, Louisiana, Nevada, Washington and Texas), and that can change things for your mother. In community property states all assets acquired during the marriage are considered jointly owned, and in some states — not all — that can mean debts too. Make sure you or your mother talks to an estate lawyer and that she gathers as much paperwork and information on the debts as she can to aid the process. Best of luck.