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Top 10 Market and Economic Variables to Watch…and 3 to Ignore – Part III

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Here are the last four of our Top 10 list. Look back on part 1 and part 2 if you missed them! But check back in a couple weeks for the three things we think you should ignore!

4. Government Spending

Government spending is approximately 18 percent of the Gross Domestic Product (GDP) formula. Remember the potential fiscal cliff that was scheduled to become effective on December 31, 2012? If that combination of expiring tax cuts and across-the-board government spending cuts had been executed, the economy would have been pushed into a recession.  Sequestration, a result of the fiscal cliff, only lasted a year. In January 2014, a new $1.1 trillion budget was signed and sequestration essentially evaporated.

Federal spending is on the rebound and state and local governments are, on a relative basis, in better financial shape than we have seen in many years.  Governments are now spending money and we anticipate that they will make a positive contribution to GDP growth.

3. Housing Momentum

Housing is an important variable in the economy because housing starts mean more jobs. For every housing start, we estimate that there are three direct jobs created (carpenters, roofers, etc.) and another three indirect jobs (carpet manufactures, appliance manufacturing, etc.). We think homebuilder surveys tend to lead to housing permits and starts. Right now, homebuilder surveys are robust and support our forecast of 1 million new home starts in 2014.

Rising mortgage rates and home prices, along with weaker household formation growth, may slow housing activity, but it will not turn negative.

2. Confidence

Consumers and business owners gain confidence in the economy as uncertainty wanes. An increase in confidence is an encouraging signal that consumption and economic activity will be on the rise. The University of Michigan Survey of Consumer Confidence and the National Federation of Independent Businesses Small Business Optimism Index measure the consumer and business owner’s confidence levels. Both indices trended lower long before the Great Recession and the equity market peak in October of 2007. In addition, the indices turned to a positive trend early in 2009, long before the market bottom and the end of the recession.

Confidence data is at a five-year high due to the rising stock market, a strong labor market and all-time high household net worth. With consumers feeling good, we anticipate that consumption will continue.

1. Consumption

Consumption drives GDP and consumption is 68 percent of the GDP formula. If consumption growth is robust and increasing, we think GDP will follow that path.

Personal consumption expenditures have been disappointingly flat. Although spending has increased, it’s nowhere near the level required to advance economic growth to more than 3 percent. Advance retail sales also show positive growth, but only supporting mediocre GDP growth.

 

Of all the noise out there, these are the top 10 market and economic variables to watch closely. But what isn’t often discussed are the three that should be ignored. We’ll bring you those soon!

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When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

DISCLOSURE AND IMPORTANT CONSIDERATIONS:

UMB Private Wealth Management is a division within UMB Bank, n.a. that manages active portfolios for employee benefit plans, endowments and foundations, fiduciary accounts and individuals.  UMB Financial Services Inc * is a wholly owned subsidiary of UMB Bank, n.a. UMB Bank, n.a., is an affiliate within the UMB Financial Corporation. Banking and trust services offered through UMB Private Wealth Management, a division within UMB Bank, n.a.

This report is provided for informational purposes only and contains no investment advice or recommendations to buy or sell any specific securities. Statements in this report are based on the opinions of UMB Private Wealth Management and the information available at the time this report was published.

All opinions represent our judgments as of the date of this report and are subject to change at any time without notice. You should not use this report as a substitute for your own judgment, and you should consult professional advisors before making any tax, legal, financial planning or investment decisions. This report contains no investment recommendations and you should not interpret the statements in this report as investment, tax, legal, or financial planning advice. UMB Private Wealth Management obtained information used in this report from third-party sources it believes to be reliable, but this information is not necessarily comprehensive and UMB Private Wealth Management does not guarantee that it is accurate.

All investments involve risk, including the possible loss of principal. This information is not intended to be a forecast of future events and this is no guarantee of any future results. Neither UMB Private Wealth Management nor its affiliates, directors, officers, employees or agents accepts any liability for any loss or damage arising out of your use of all or any part of this report.

“UMB” – Reg. U.S. Pat. & Tm. Off. Copyright © 2012. UMB Financial Corporation. All Rights Reserved.

*Securities offered through UMB Financial Services, Inc. member FINRA, SIPC, or the Investment Banking Division of UMB Bank, n.a.

Insurance products offered through UMB Insurance, Inc. You may not have an account with all of these entities. Contact your UMB representative if you have any questions.

Securities and Insurance products are:

NOT FDIC INSURED * NO BANK GUARANTEE * NOT A DEPOSIT * NOT INSURED BY ANY GOVERNMENT AGENCY * MAY LOSE VALUE


K.C. Mathews joined UMB in 2002. As executive vice president and chief investment officer, Mr. Mathews is responsible for the development, execution and oversight of UMB’s investment strategy. He is chairman of the Trust Investment, Asset Allocation and Trust Policy Committees. Mr. Mathews has more than 20 years of diverse experience in the investment industry. Prior to joining UMB, he served as vice president and manager of the portfolio management group at Bank of Oklahoma for nine years. Mr. Mathews earned a bachelor’s degree from the University of Minnesota and a master’s degree in business administration from the University of Notre Dame. Mr. Mathews attended the ABA National Trust School at Northwestern University and is a Chartered Financial Analyst and member of the CFA Institute. He is past president of the Kansas City CFA Society and a past president of the Oklahoma Society of Financial Analysts.



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Top 10 Market and Economic Variables to Watch…and 3 to Ignore – Part II

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A couple weeks ago we told you the first of 10 variables to look for in the economy – Earnings Momentum and High Yield Spread. Here are the next four variables.

8. The Bond Market

The bond market, specifically, the 10-year Treasury note, may offer clues on the direction of the economy. Since the U.S. bond market is the largest and most liquid market in the world, the 10-year Treasury has often been used as a “fear” trade. When global uncertainty looms, investors seek a safe harbor against uncertainty and move into the U.S. bond market. As prices increase and yields move lower, this move has been an indicator that economic growth is in question.

The most recent trading range of the 10-year Treasury note has been between 2.4 and 3.0 percent, suggesting we will see moderate economic growth for the remainder of the year. Due to improving economic activity, a stable employment horizon and a hint of inflation, we think the 10-year Treasury will close the year around 3 percent.

7. Help Wanted Signs

Inflation can come in many forms, such as commodity inflation, wage inflation, and so on. The Federal Reserve (Fed) focuses on an inflation index called the “core personal consumption expenditures”(PCE), which excludes food and energy. Historically, food and energy inflation have been very volatile, and therefore are excluded in this index. We think wage inflation is the sustainable inflation. U.S. average hourly earnings have grown less than 2.5 percent each year for the last five years.  However, as the labor market tightens, we would expect some wage inflation. Job openings peaked in 2007 prior to the Great Recession.

Since 2009 job openings have been on the rise.  As the labor market gets tighter, we think it will lead to a continued increase in core inflation.

6. Commercial and Industrial (C&I) Lending Standards

Banks and credit are the lifeblood of the economy. When credit is readily available, business owners are more willing to expand their business and hire workers. Lending standards lead payroll growth by approximately nine months. In the middle of the recessions in 2001 and 2008, lending standards improved, and it was a clear signal that job growth was right around the corner.

The Fed’s Senior Loan Officer Surveys measure the tightening or loosening of loan standards, and there has been a dramatic improvement since 2010. C&I loan growth is up over 10 percent so far this year and we have seen an average of 215,000 jobs created each month in 2014, substantially better than last year.

5. The Slope of the Yield Curve

The shape of the yield curve (the difference between short and long rates) gives insight to economic growth. A very steep yield curve would indicate strong economic growth prospects, and an inverted yield curve (short rates higher than long rates) has an impressive track record of predicting an oncoming recession. The yield curve inverted a year prior to the recessions in 1980, 1981, 1991, 2001 and 2008. In fact, in the past half century, the yield curve has inverted prior to each recession.

Even though we saw the economy contract in the first quarter of 2014, we are confident that this is an anomaly since the yield curve is so steeply sloped.

Later this month, we’ll bring you the rest of the Top 10 variables to watch.

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When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

DISCLOSURE AND IMPORTANT CONSIDERATIONS:

UMB Private Wealth Management is a division within UMB Bank, n.a. that manages active portfolios for employee benefit plans, endowments and foundations, fiduciary accounts and individuals.  UMB Financial Services Inc * is a wholly owned subsidiary of UMB Bank, n.a. UMB Bank, n.a., is an affiliate within the UMB Financial Corporation. Banking and trust services offered through UMB Private Wealth Management, a division within UMB Bank, n.a.

This report is provided for informational purposes only and contains no investment advice or recommendations to buy or sell any specific securities. Statements in this report are based on the opinions of UMB Private Wealth Management and the information available at the time this report was published.

All opinions represent our judgments as of the date of this report and are subject to change at any time without notice. You should not use this report as a substitute for your own judgment, and you should consult professional advisors before making any tax, legal, financial planning or investment decisions. This report contains no investment recommendations and you should not interpret the statements in this report as investment, tax, legal, or financial planning advice. UMB Private Wealth Management obtained information used in this report from third-party sources it believes to be reliable, but this information is not necessarily comprehensive and UMB Private Wealth Management does not guarantee that it is accurate.

All investments involve risk, including the possible loss of principal. This information is not intended to be a forecast of future events and this is no guarantee of any future results. Neither UMB Private Wealth Management nor its affiliates, directors, officers, employees or agents accepts any liability for any loss or damage arising out of your use of all or any part of this report.

“UMB” – Reg. U.S. Pat. & Tm. Off. Copyright © 2012. UMB Financial Corporation. All Rights Reserved.

*Securities offered through UMB Financial Services, Inc. member FINRA, SIPC, or the Investment Banking Division of UMB Bank, n.a.

Insurance products offered through UMB Insurance, Inc. You may not have an account with all of these entities. Contact your UMB representative if you have any questions.

Securities and Insurance products are:

NOT FDIC INSURED * NO BANK GUARANTEE * NOT A DEPOSIT * NOT INSURED BY ANY GOVERNMENT AGENCY * MAY LOSE VALUE


K.C. Mathews joined UMB in 2002. As executive vice president and chief investment officer, Mr. Mathews is responsible for the development, execution and oversight of UMB’s investment strategy. He is chairman of the Trust Investment, Asset Allocation and Trust Policy Committees. Mr. Mathews has more than 20 years of diverse experience in the investment industry. Prior to joining UMB, he served as vice president and manager of the portfolio management group at Bank of Oklahoma for nine years. Mr. Mathews earned a bachelor’s degree from the University of Minnesota and a master’s degree in business administration from the University of Notre Dame. Mr. Mathews attended the ABA National Trust School at Northwestern University and is a Chartered Financial Analyst and member of the CFA Institute. He is past president of the Kansas City CFA Society and a past president of the Oklahoma Society of Financial Analysts.



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Top 10 Market and Economic Variables to Watch…and 3 to Ignore – Part I

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At its core, investment management involves researching thousands of variables and data points. Careful analysis is required of all of these variables and data points to create a “mosaic of information” in order to draw a conclusion on market and economic directions. With the 24/7 news cycle, investors have more data, surveys and reports in front of them than ever before.

In the spirit of a classic David Letterman Top Ten, we’ve put together our own list, but with a twist at the end. KC visited The Street and The Hays Advantage on Bloomberg Radio to share his insights.

Watch…

ListenKC Mathews on the Hays Advantage

Below are the first two market and economic variables to watch in order to make sound decisions. In the next parts of this series, we’ll bring you more variables and three that perhaps, should be ignored. Let us worry about the rest of the noise.

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10. Earnings Momentum

We are fundamental investors and believe that the primary driver of equity prices is earnings. Regardless of short-term noise that may move markets, sooner or later earnings and earnings momentum will determine market direction.

There is a 77 percent positive correlation between earnings and equity prices. Occasionally you will see equity prices deviate from earnings growth due to various reasons. Since 1955, however, earnings have grown 6.5 percent annually, and the S&P 500 has increased about the same, growing 7 percent on average. In 2014, earnings were up 5 percent and valuations increased by 25 percent, resulting in the S&P 500 posting a 32 percent return.

We expect earnings growth to be in the 4 to 6 percent range this year and continue to expect positive returns in equities. We would not be surprised, though, if we experience a meaningful correction to get earnings and market performance back in line.


9. High Yield Spreads

High yield spreads will usually precede or confirm a material correction in the equity market.  We define a material correction as a decrease of 10 percent or more and haven’t seen this type of a correction since June 2012. Market corrections are a normal and healthy part of a secular bull market. As the domestic equity markets continue to increase, the probability of a meaningful correction also increases. Historically, changes in high yield spreads have either signaled or confirmed a correction in the equity market. For example, in early 1998, high yield spreads widened 65 basis points suggesting an oncoming correction. As expected, a 15 percent mid-year correction followed.  Again, spreads widened by 90 basis points in the summer of 2007, right before the peak of the S&P 500.

In the past two years we have seen smaller corrections ranging from 4 to 7 percent with virtually no widening of high yield spreads. This tells us the meaningful correction has not yet occurred, nor is a correction on the near-term horizon.

Remember to check back for the rest of the variables to watch (and ignore) next month!

 

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

DISCLOSURE AND IMPORTANT CONSIDERATIONS:

UMB Private Wealth Management is a division within UMB Bank, n.a. that manages active portfolios for employee benefit plans, endowments and foundations, fiduciary accounts and individuals.  UMB Financial Services Inc * is a wholly owned subsidiary of UMB Bank, n.a. UMB Bank, n.a., is an affiliate within the UMB Financial Corporation. Banking and trust services offered through UMB Private Wealth Management, a division within UMB Bank, n.a.

This report is provided for informational purposes only and contains no investment advice or recommendations to buy or sell any specific securities. Statements in this report are based on the opinions of UMB Private Wealth Management and the information available at the time this report was published.

All opinions represent our judgments as of the date of this report and are subject to change at any time without notice. You should not use this report as a substitute for your own judgment, and you should consult professional advisors before making any tax, legal, financial planning or investment decisions. This report contains no investment recommendations and you should not interpret the statements in this report as investment, tax, legal, or financial planning advice. UMB Private Wealth Management obtained information used in this report from third-party sources it believes to be reliable, but this information is not necessarily comprehensive and UMB Private Wealth Management does not guarantee that it is accurate.

All investments involve risk, including the possible loss of principal. This information is not intended to be a forecast of future events and this is no guarantee of any future results. Neither UMB Private Wealth Management nor its affiliates, directors, officers, employees or agents accepts any liability for any loss or damage arising out of your use of all or any part of this report.

“UMB” – Reg. U.S. Pat. & Tm. Off. Copyright © 2012. UMB Financial Corporation. All Rights Reserved.

*Securities offered through UMB Financial Services, Inc. member FINRA, SIPC, or the Investment Banking Division of UMB Bank, n.a.

Insurance products offered through UMB Insurance, Inc. You may not have an account with all of these entities. Contact your UMB representative if you have any questions.

Securities and Insurance products are:

NOT FDIC INSURED * NO BANK GUARANTEE * NOT A DEPOSIT * NOT INSURED BY ANY GOVERNMENT AGENCY * MAY LOSE VALUE


K.C. Mathews joined UMB in 2002. As executive vice president and chief investment officer, Mr. Mathews is responsible for the development, execution and oversight of UMB’s investment strategy. He is chairman of the Trust Investment, Asset Allocation and Trust Policy Committees. Mr. Mathews has more than 20 years of diverse experience in the investment industry. Prior to joining UMB, he served as vice president and manager of the portfolio management group at Bank of Oklahoma for nine years. Mr. Mathews earned a bachelor’s degree from the University of Minnesota and a master’s degree in business administration from the University of Notre Dame. Mr. Mathews attended the ABA National Trust School at Northwestern University and is a Chartered Financial Analyst and member of the CFA Institute. He is past president of the Kansas City CFA Society and a past president of the Oklahoma Society of Financial Analysts.



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Industry Insights: Manufacturing…3 ways to become more efficient

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For manufacturers, finding more ways to increase cost-savings continues to be a top priority. Looking at the rise in lean standards shows this trend. And while many are making great strides in maximizing their physical operations, administrative areas should be considered as well. Specifically, consider these time and money savers in your company’s financial processes:

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1) Plan for large investments – Evaluate and properly plan for equipment guidance line needs. As technology continues to evolve, many manufacturers are purchasing more equipment to support their operations. As businesses expand their work, make repairs or replace units, they may find themselves making multiple purchases throughout the year. Rather than go through the process of taking out a separate loan for each investment, manufacturers should map out their anticipated needs for the year and take out a line that will cover all potential investments. Not only will this save time, but it also provides flexibility for manufacturers to buy new or used equipment and to proactively plan for capital expenditures they may want to make during the year.

2) Streamline purchasing processesPurchasing cards are another item to consider from a processing standpoint. Not only does the right program provide valuable rewards, but it also cuts down on check writing, and provides increased flexibility in cash flow. Additionally, it creates a more streamlined tracking system for accounting departments. By allowing job numbers to be attached to specific expenses, companies can easily allocate costs to the appropriate projects, which results in more effective planning and budgeting.

3) Use payment technology – Remote deposit is a great service to incorporate into business operations as well. For manufacturers that have not yet made the jump, this is an easy, and extremely valuable, component to incorporate into the payments process. In addition to being very easy to use, it provides a safe and secure way to process incoming funds and also saves valuable time by eliminating the need for deposit trips to the bank.

As the saying goes, time is money, so implementing ways to become more efficient is a great way to positively affect the bottom line.

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Mr. Nohavec is a SVP/Business Development Officer for UMB Bank Colorado. He is responsible for Colorado. He joined UMB in 2005 and has 20 years of experience in the financial services industry.



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Do you need a wealth advisor?

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Do you need a wealth advisor (also known as financial planner)? You might think that only the very wealthy need this type of expert advice. If you’re interested in investing, whether it’s for retirement, education or to leave a legacy, it is recommended that you work with a financial planning professional.

Whether it’s your first time talking to a financial planning professional or your 10th, you want to ensure your advisor is taking the time to ask the sometimes difficult questions to plan the best future for you.

Basic financial planning questions

Most customers focus on questions like:

  • Will I have enough to retire?
  • Will my children’s education be taken care of?
  • What if I get sick?

These are important topics to cover, but an in-depth financial/estate planning will include more than these basic questions.

Do I need a trust?

One question you should ask is, “Do I need a trust?” A trust is a legal agreement that allows you to transfer assets to a trustee. A trust can be used for various reasons including to:

  • manage assets
  • protect assets
  • facilitate charitable gifts
  • transfer of monetary assets or property

If the answer is yes, your advisor should assist you with making sure your assets are titled appropriately, or given the correct ownership recognition. You wouldn’t want to spend several thousand dollars for an attorney to prepare a trust document, only to find out that the assets aren’t titled appropriately. If so, the trust doesn’t get funded and your estate plan isn’t carried out to your intentions.

What about insurance?

Your advisor should also discuss the topic of insurance with you. Customers and advisors sometimes avoid this question, as it can be an uncomfortable conversation. Most insurance is used in the case of a disaster, accident, illness or death, and these are not pleasant subjects to discuss. You want an advisor who will understand the sensitivities of these topics, but will not avoid the subject. Insurance is an important part of a financial plan and it can be helpful to your family’s future.

Building relationships

You should look for an advisor who will build a relationship with you. If they work to create more than a business partnership, it’s likely there will be more open dialogue between you both. Advisors who are thorough in their work and ask the hard questions will be able to build a solid financial/estate plan for you, your family and their future generations.

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When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

Bank deposit products provided by UMB Bank n.a., Member FDIC. Equal Housing Lender EqualHousingLender


UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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2nd step to buying a home—choosing the right loan for you

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So you’re ready to buy a home, and have finished the first step of pre-approval. Did you know that nearly half* of home purchases are from your fellow first-timers? It can be a daunting process, so we’re continuing the step-by-step approach to help you navigate this important financial decision.

There are many home loan choices. Finding the right lender will be the key to obtaining the information you need to make the right decision. The pre-approval process should have uncovered many of the factors that determine which loan will work best for you and let you know what interest rate you might be paying. Remember, to get a good interest rate, you’ll need as high a credit score and down payment as possible. The right lender will be able to guide you and explain the differences in each of the loans you qualify for.

Here is a general discussion of some of the mortgage loans available, to help prep you for your first meeting with a potential lender. The main differences are the size of the down payment and whether the interest rates can change.

Types of mortgage loans:

Conventional vs.Non-Conventional– One of the first decisions you will discuss with your lender is whether you want a conventional or non-conventional loan, which often depends on the size of your down payment.

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Conventional – A conventional loan typically requires a minimum down payment of 5 percent.  If you put down 5 to 19 percent, private mortgage insurance (PMI) may be required. This insurance protects the lender if you do not repay your mortgage.  Typically, you’ll have to pay this insurance until 78-80 percent of your mortgage is left, and then you may be able to remove PMIfrom your payments.  To avoid that extra insurance from the beginning, you’ll typically have to put down 20 percent or more.

Most first-time buyers choose homes with a median value of $147,000*, but in case you’re wondering, the conventional loan limit in most areas is $417,000. These loans can be fixed or adjustable (more on that in a minute). Conventional loans also allow you to have the seller pay up to 3 percent of your home’s closing costs and prepaid taxes and insurance.

FHA (non-conventional) – FHA loans typically require lower down payments than conventional mortgages, but there are also drawbacks to them. For example, FHA loans require mortgage insurance up front and it is usually more than private mortgage insurance with a conventional loan. Here’s how this type of loan works: The Federal Housing Authority does not actually lend the money but insures 100 percent of what the lender funds. FHA loans tend to be the most flexible in their credit guidelines. They usually allow for lower credit scores, higher debt-to-income ratios and as little as 3.5 percent as a down payment. These loans allow for up to 6 percent seller-paid closing costs and prepaid taxes and insurance.

Veterans Affairs (VA) – The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). The VA loan does not require a down payment and does not require monthly private mortgage insurance.

United States Department of Agriculture (USDA) – This loan is intended to help people purchase homes in rural areas. The property must be located within the USDA Rural Development Home Loan footprint. USDA loans offer 100 percent financing to qualified buyers and allow for all closing costs to be either paid for by the seller or financed into the loan.

Fixed vs. Adjustable Rate Mortgages – After choosing a conventional vs. non-conventional loan, it’s time for another decision: do you want a fixed or adjustable rate?

Fixed-Rate Mortgages – Fixed-rate loans are just that, loans that have interest rates that are locked-in for the term of the loan. This means that your rate will not change during the entire time that you have the loan. Keep in mind that even with a fixed interest rate your payment could vary based on changes in taxes or insurance. The repayment of the loan is also spread out, or amortized, over that same fixed period. You can choose from 10-, 15-, 20-, 25- and 30-year fixed rates. Generally, the shorter the term of the loan, the lower the rate, but also the higher the payment. For example, a 15-year loan will usually have a better interest rate than a 30-year loan, but you’ll have to pay more per month in order to get the mortgage paid off sooner. Therefore, choosing the fixed-rate period will be a large part of determining the amount of your monthly payment.

Adjustable Rate MortgagesThese loans typically allow you to have lower payments at the very beginning, but take on higher risk than fixed-rate loans. There is usually an initial time period (1 to 10 years) where the interest rate is fixed. However, the rate can change after the initial fixed period causing the monthly payment to go up. Be sure to talk to your lender about what type of loan is best for your situation. If any of these factors apply to you, your lender can explain in more detail how an adjustable rate mortgage would work for you. However, an adjustable rate may be a good option if:

  • you plan to sell in a few years,
  • you will pay off the loan early, within the next few years, or
  • interest rates are high right now and are anticipated to decrease in the coming years. (not the case today)

To avoid feeling overwhelmed, remember, your lender is there to walk you through everything. Instead, focus on what your needs are. Then, you can outline with your lender what you’re looking for so he or she can provide your best options.

Arrive at your first lender meeting with answers to the following questions:

  • How much will you have for a down payment?
  • What are your preferred neighborhoods?
  • Do you want to get your loan paid off as soon as possible even if it means higher payments, or do you need lower payments with more time to pay it off?

Choosing the right lender is just one part of your home-buying team. Adding an experienced realtor will save you time and money and will be discussed in step three of buying a home.

*statistic source: NAHB.org

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


Jackie Ahumada is a mortgage loan officer with UMB Bank. She has more than 10 years experience in the mortgage industry and more than 18 years in management of customer service delivery and operations.



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UMB: Inspiration – Agriculture

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UMB prides itself on being a financial institution with a heartbeat. We are passionate about what we do and want to share what inspires us with our readers.

Bill Watson, president of UMB Agribusiness, kicks off the UMB: Inspiration series as he shares why he loves agriculture. Take a minute to listen to what inspires him.

“I like agriculture because of the people, because they’re solid. They’re honest. I like agriculture because it’s beautiful. I get to drive across this country and see fields of cotton, wheat, corn and soybeans growing. It makes my heart good.”

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Mr. Watson serves as president of the UMB Agribusiness Division. He joined UMB in August of 2005 and has also served as the president of the UMB Kansas region. Watson is a graduate of Wabash College in Crawfordsville, Indiana with a major in Psychology. He has also attended The Colorado School of Banking, The National Commercial Lending School (where he has also been an instructor), and the Stonier Graduate School of Banking.



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1st step to buying a home: pre-approval

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Imagine walking in to your new house. You moved in a few weeks ago, you’ve unpacked most of your things, and it’s starting to feel like home. But then you wake up from this fantasy and realize you don’t know how to make this dream become a reality. We’re here to help.

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The process of purchasing your first home should be exciting and rewarding knowing you are taking control of your finances by investing into your own home. We want to give you a head start with understanding the process.

First things first. You’ll need to shop for a lender. Start with your own bank (a source you trust and believe in) and shop with other lenders as well. You’ll want to compare rates, cost associated with the loan and feel comfortable with the lender’s service levels before you apply.  A good lender will work closely with your specific situation. They will explain the loan and buying process and answer all your questions as a first-time home buyer.

The mortgage loan process has changed drastically over the years, so be prepared that the lender will want at least 30 days to get your loan approved and closed. Processing times will vary based on how complex your personal history is to document and verify. We suggest getting a pre-approval letter from your lender before shopping for your new home.

Why do you need a pre-approval letter?

  • A pre-approval letter will give your real estate agent a price range to know what homes to include in your search. It outlines the loan amount and terms you are approved for.
  • Pre-approval gives you a negotiating advantage. A seller might be more inclined to accept your offer if you have a pre-approval letter, even if you make an offer that’s lower than a buyer without a pre-approval. Sellers want the assurance of knowing their buyer can get financing since they are also planning on a home move.
  • A pre-approval letter is a stronger option than a pre-qualification letter because the approval is based on verified credit, income and asset data that an underwriter has reviewed and approved. The pre-qualification is based only on the data provided on the loan application that has not been verified or reviewed by an underwriter.

In order to expedite your loan process, here is a list of the documentation to bring to your lender when you have your first meeting for a loan application:

  • Last two years of W-2’s and tax returns with all schedules – This allows the lender to evaluate any other income or loss for qualifying purposes. All self-employed borrowers will need to provide a two year history of tax returns to determine income for qualifying purpose.
  • Most recent paystubs to cover 30 consecutive days – The lender will review and calculate income for wage earners.
  • Most recent asset statements to cover 30 days – This statement, also known as your bank statement, will need to show you have sufficient funds in your account to close on the loan. Any large deposits will need to be documented as to where the funds came from to meet loan requirements.
  • Additional information may apply based on the type of loan you are applying for – another important reason to select a lender who will walk you through the process and give you clear explanations.

The home-buying process can be long and complicated. Preparation involved in getting a pre-approval letter is fairly simple and it helps both you and the seller in the long-run.

Stay tuned for part two of this series: The second step to buying a home—choosing the right loan for you.

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Jackie Ahumada is a mortgage loan officer with UMB Bank. She has more than 10 years experience in the mortgage industry and more than 18 years in management of customer service delivery and operations.



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From 19 to Retirement…a look at a life-long UMB career

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A letter from Rosie, reflecting on her time at UMB:

Rosie

It’s hard to imagine how much has happened during the last 45 years of my time at UMB. I started at the age of 19, on July 17, 1968.

We now have UMB Bank branches in eight states; 112 branches total. I’ve worked for City National Bank, United Missouri Bank, United Missouri Bancshares Inc., UMB Financial Corporation, and UMB Bank, n.a—all the same organization, but with name changes over the years. With each name change, UMB has had six different logos, my favorite being the Indian Scout. What an accomplishment for me to be able to work for such a stable company.

With my first job, we didn’t have computers—a fact that is difficult for my two grown children to comprehend. I started in the Stock Transfer Department working on a posting machine. We actually had to type certificates for the new stockholders on manual typewriters! (After a few years we graduated to electric typewriters.) It’s hard to believe where we came from looking at us now, with all the modern technology UMB Bank has today.

While working at UMB Bank, I was able to meet each of the Kempers who were president or CEO. The first was Mr. R. Crosby Kemper, Sr. who officially retired shortly after I was employed by the bank. Then I met Mr. R. Crosby Kemper, Jr., Sandy Kemper, R. Crosby Kemper III and Mariner Kemper. I would encounter them on the elevators, and each one was so friendly. They thanked me for being part of the UMB family. I especially remember Mr. Kemper, Jr. buying his breakfast in the cafeteria and going to each of the tables to say good morning to everyone. I remember the famous Kemper smiles. They all seemed to have that same smile that reached out to everyone they saw or met.

Rosie and Mariner1

Mr. R. Crosby, Jr. was a big fan of the University of Missouri Tigers. I remember the day I went to the 928 Grand tellers and saw a huge, beautiful tiger in the lobby. Yes, a real tiger. Sometimes I wonder if I really saw that tiger or if it was just a dream, but some of my fellow co-workers also remember the “Tiger in the Lobby” day.

Umbert_Czar the Tiger_1973

In my time here, I witnessed the construction of the 1010 Grand UMB building in 1986 and the Technology and Operations Center in 1999. I saw old buildings being demolished, the resulting big hole in the ground, and then the new completed bank buildings that take up one square block. I loved being there for that history and now getting to tell my grandchildren about it.  Sometimes it pays to be old. You see so many things happen during your life.

As my 45 years are coming to a close, I look back upon a career that has really flown by. There have been ups and downs just like in life, and you become one big family.

I realize that soon I will not be seeing and greeting my work family. Over the years I have made a lot of friends, some gone, some still here and I get a little emotional because I will be leaving part of my family behind.

Once I retire, I will be volunteering for my church and Alexandra’s House, which provides perinatal hospice support, watching my grandchildren while they are out of school and trying to keep busy.

I am saying goodbye now and leaving you with these paraphrased words: “Live. Laugh a lot. It’s good for the soul. And last of all, love your job, because one day you too will be walking down the hallways for the last time.”

With fondest memories,
Rosie Corral

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Prior to her retirement, Ms. Corral was an operations associate for UMB. She worked in the settlement department, receiving and settling buys from brokers. She joined UMB in 1968 and has 45 years of experience in the financial services industry. As of April 30, she retired after a long career at UMB.



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More than an annual report—and a look at what’s ahead

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CEO Mariner Kemper shares thoughts from the 2013 Annual Report and some of the challenges facing UMB in 2014.

UMB is not your typical financial organization. We are unique. With our business model, we’re more than just a bank—we’re a financial services company that owns a good-sized regional bank, an institutional asset management company, a fund services business, and a payments solutions business. That diversification, with nearly 60 percent of revenue coming from non-bank services, is key to UMB’s success. This did not come about by accident—it’s a core strategy backed by years of investment and organic growth.

There are a lot of organizations that would love to be where we are. Many banks in our size category are trying to figure out how we’ve done it—they would like to emulate it. What they will figure out is that you can’t create this overnight. Replicating UMB’s business model is not easy. It took this company 100 years to be excellent at it.

Quality has always been our focus. To find out more about our focus on quality, take a look at our 2013 Annual Report.

Challenges for 2014

1)      Economic cyclesAs much as we all desire calm waters, the norm has always been to experience economic cycles. When will the economy take a turn again? No one knows, but history teaches us that these factors do move up and down—so we can be confident that change is in our collective future.

When the economy was at the top, people were saying “It’s different this time.” When things were getting overheated, you’d constantly hear “But, it’s different this time.” It’s never different.

  • The good news: UMB has proven over the last century that we can thrive in all economic conditions. We have a solid balance sheet and take pride in our extraordinary credit quality and are well positioned to benefit when interest rates begin to move up.
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2)      Bank regulation – The philosophy of expanding regulatory intervention is affecting all areas of our economy—primarily financial services. In the last four years, we have increased our own audit and compliance departments by 62 percent (and rising). Instead of helping, we believe that piling on more regulation passes on the higher costs of doing business to the consumer. To see the failure, you do not have to look further than Washington’s posturing about “too big to fail” banks. Far from solving that big-bank problem, since 2008, we have seen less than a dozen of the largest banks grow to control fully two-thirds of total U.S. banking assets.

  • The good news: Regardless of government regulations, we remind our people to stay prudent and trust the practices we have had in place for more than 100 years. We’re not followers.

The Next 100

Last year, we looked back on the 100-year history of UMB. We’ve found that although many things have changed, our founding principals have remained the same. This has allowed us to weather the storms and provide solid long-term returns to our investors. The below statistics clearly show how UMB compares to the industry.

UMBFvsIndustry

As we head into our next 100 years, our foundation remains the same as we strive to do what’s right, not what’s popular at the moment.

We hope you’ll join us on this journey of continuing our quality story.


Mariner is the chairman and chief executive officer of UMB Financial Corporation and UMB Bank, n.a. He joined UMB in 1997. Mr. Kemper is active in both civic and philanthropic endeavors. One of the causes he is most passionate about is the arts. He currently serves as a trustee and executive committee member for the Denver Art Museum and is a past board member for The Arts Council of Metropolitan Kansas City.



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