On money

Personal Finance editor HELEN HUNTLEY E-mail: Click here Archive

By HELEN HUNTLEY

© St. Petersburg Times,
published September 2, 2001

Co-signers should look to loan agreement for answers Q. We co-signed on a $300,000 loan to help our son and his wife buy a house. They are now separated and she is living in the house without him. Payments are being made, but what happens to us if they stop? Will we be notified in time to prevent foreclosure? If we make the payments, do we obtain ownership of the property? Can we obtain ownership through foreclosure?

A. What does the loan agreement say? That's the first place to look for answers to your questions. If the agreement does not have the answers, call the lender and ask directly.

A co-signer is obligated to make payments if the primary borrower does not. Your credit rating is at risk along with your son's and daughter-in-law's. Generally, a co-signer is expected to know if payments are being made, with or without notification from the lender. But most lenders prefer to avoid foreclosures, so yours may be interested in cooperating with you.

Talk with your son now about being released from this obligation if the marriage ends. Your interests should be considered in their property settlement discussions. Most likely the house will have to be sold. If they couldn't jointly qualify for a mortgage without your help, chances are neither one of them alone will be able to afford to keep the house.

Q. A year ago, I placed some of my investments in the hands of a broker after having done my own investing quite successfully. I now have a very good reason to regret this switch. What must I do to again handle my own affairs, removing the brokerage? I wish to receive my dividend and interest checks directly and do my own research. I am involved with stocks, mutual funds, corporate bonds and CDs.

A. Consolidating your investments at a brokerage firm was a smart idea, but apparently handing over control to a broker was not. You don't say what the problem has been, but it sounds as if the broker is not following your instructions or is making unauthorized trades in your account. If so, you need to put a stop to it at once. Send a letter to the broker and the branch manager outlining what has happened and demanding reversal of any unauthorized transactions.

Then, get a new broker or a new brokerage firm. Keep in mind that it is possible to control your investments without doing everything yourself. Many investors rely on brokers for research and advice, then make their own decisions. If you want to try that, ask people you know who work with brokers whether they recommend theirs. Then interview a few of the most promising about their approaches to investing.

If you want to go it alone, your best bet is to open an account with a discount brokerage firm and fill out that firm's transfer of assets form. You could have all your investments individually reissued in your name, but I do not recommend it. It's a lot more convenient to keep your assets together in a brokerage account so long as you are dealing with a trustworthy broker.

Q. Would the T. Rowe Price High Yield Fund be considered junk bonds?

A. All funds with "high yield" as part of the name invest a substantial portion of their assets in junk bonds. These are bonds that have not been rated by a bond-rating agency or that are rated below investment grade. If you want to invest in them, a fund is the way to go. Putting a small portion of your assets in a junk bond fund involves far less risk than buying individual junk bonds.

Q. How do I handle savings bonds that I inherited? My name is not on the bonds.

A. If someone else's name is on the bonds as a co-owner or beneficiary, that person would be considered the rightful owner. If the person who died was the sole owner and left the bonds to you by will, they should have gone through probate and been reissued in your name. If the estate was settled without court involvement and you are entitled to the bonds, you can submit a request for payment to the Bureau of the Public Debt. To get a form, call (304) 480-6112. Possession of a bond does not make you the owner.

Online money map

Have you ever wondered how the Consumer Price Index is calculated? This Bureau of Labor Statistics site (www.bls.gov/cpihome.htm) is the place to find out. You also can check historical data.

- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

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