Sears “skimps on stores”

A day after my rant about my bad Sears experience, the company announced more losses and another quarter of declining revenue (read “Sears stumbles again” for more). The Wall Street Journal ran an article, “Sears suffers as it skimps on stores,” pointing out that the company spends a fraction of the amount other retailers devote to annual maintenance–about $1.90 per square foot, one analyst said, compared to the $6 to $8 per square foot retailers traditionally spend. Macy’s plans to spend almost as much remodeling a single store (its flagship Herald Square location) than Sears spent on all of its 3,100 stores last year, the Journal reported.

Former Sears Canada Chief Executive Mark Cohen, now a professor at Columbia University, told the Journal bluntly: “There is no viable retail strategy here. In retailing, when your stores get dark, dirty and grim, you are past the point of no return.”

Another analyst told the Journal, “With these ‘dead man walking’ stores, the objective of the parent company is not to maximize [store] productivity but milk it for what little it has left before it can sell the property.”

The article didn’t include information on Sears’ customer service or online operations, but it’s not too much of a stretch to suppose that a company that lets its brick-and-mortar locations fall apart is also skimping in other areas.

I don’t include this just to keep bashing Sears. But if you’ve had positive experiences with them in the past, be warned that Sears may no longer be the store you remember.

What’s wrong with Sears?

The investor buzz on Sears is that it has more of a future as a real estate business, leasing its store space to others, than as a retailer. My recent experience supports the idea that the company isn’t much interested in selling stuff to consumers.

The day before our new washer and dryer were to arrive, I still hadn’t received an email from Sears confirming the delivery. Online, my order was still listed with the word “processing.”

Huh. So I called the customer service line to ask what was going on. After a loooong wait on hold, a rep said he would investigate. There was a second looooong wait on hold. He came back to say the order had been cancelled.

Say what? Why?

He said he would investigate, and then we were disconnected.

I called back, endured another long wait, only to have another phone rep tell me the same thing. She didn’t disconnect me, but she also couldn’t answer why my order had been cancelled or why I wasn’t notified.

So I sent an email to customer service, and eventually got this back:

While our inventory is updated periodically, it is not in a real-time inventory environment. As our website serves customers throughout the entire country, it is typical that several customers will have the same item in their cart. Inventory is again verified after the order is submitted. It can happen that more orders are submitted than we can complete.

Again, no guidance about which item was out of stock (was it the washer? The dryer? The hose? The plug?) or why I wasn’t notified prior to my calls that my order had been cancelled.

The email did encourage me to “please place a new order for the same [sic] after some time or order a similar item at Sears.com.”

Oh, yeah, sure. I’m a lab rat that can be conditioned by intermittent reinforcement. I’ll keep placing my order and hope that sooner or later I get what I paid for…or “a similar item.”

Ordering from Sears.com was a pain to begin with. For one thing, the site automatically includes Sears’ wildly overpriced extended warranty, which equals about a third of the cost of the appliance. After you opt out of that, you have to enter delivery information separately for each appliance—because so many people have their dryers delivered to a different place than their washers, I guess. Sears also wants you to pay extra if you want a four-hour delivery window instead of an all-day wait.

I was trying to be loyal to the Kenmore brand, because the washer and dryer we’re replacing performed well for 13 years. So much for that. Lowes had a nice set for a better price, fortunately, and its free delivery came with a two-hour window.

My new washer and dryer are working great—so this story has a happy ending. I wonder if the same will be true for Sears.

Chase is about to ignore your privacy settings

David Lazarus of the Los Angeles Times reports that Chase bank is contacting customers who already opted out of receiving marketing material–to let them know they’re about to receive more marketing material.

In his column “Banks keep pulling from bag of tricks,” Lazarus writes that the letters being sent to the opted-out customers say that the bank wants “to be sure that you know about available offers and that you have the opportunity to consider them.”

It’s thus giving customers until Dec. 15 to once again register their privacy preferences. “If you do not respond,” the letter says, “you may begin to receive offers in the mail about these products and services.”

Like a kid who keeps pestering his parents with the same question until he gets the answer he wants, Chase is essentially forcing customers to repeat the opt-out process under the guise of “updating our customers’ preferences.”

Banks fought hard against the law that limits their ability to market to you, and to sell your information to third parties. They succeeded to the point where you have to opt out of their marketing efforts, rather than the more consumer-friendly “opt in” approach where they’d have to get your permission.

But now it looks like Chase wants to be able to ignore what you’ve told them by requiring you to opt out twice. A Chase spokesman said it’s because the bank has a bunch of new, shiny products and services they don’t want you to miss. To which Lazarus responds:

Sure. Because you just know that people who’d take the time to opt out once from receiving unwanted marketing pitches might suddenly have a change of heart and realize how empty their lives have become without a steady stream of solicitations for various financial services.

If you get one of these letters, be sure to respond–and maybe send a copy of it to your elected representatives, along with a letter expressing your opinion of Chase ignoring your wishes.

New government refi program may actually help homeowners–finally

Struggling, underwater homeowners finally have a ray of hope.

Changes to the vastly-underused Home Affordable Refinance Program (HARP) could actually help as many as 1.6 million homeowners refinance into a more affordable mortgage. It won’t matter how far underwater you are: as long as you’re employed and current on your mortgage, you can qualify for a refinance. (Current means no late payments in the prior six months, and no more than one late in the past 12 months.) Most importantly, you’re not stuck trying to deal with your current lender. You can shop around.

So many government proposals to help homeowners have fallen so far short that it’s tempting to be cynical about yet another announcement of change. But look under the hood of these changes, and you’ll see that federal regulators are abolishing or at least reducing many of the obstacles that kept a lot of people from taking advantage of some of the lowest interest rates in generations. Estimates of how many homeowners could be helped have ranged from 800,000 to 1.6 million.

Granted, this kind of help should have come a long time ago, but it didn’t. Here’s what you need to know now:

Fannie and Freddie loans only. The HARP program covers only loans for primary residences sold to Fannie Mae and Freddie Mac, the taxpayer-owned mortgage investors that currently buy 90% of mortgages. The new, easier refinancing applies only to loans turned over to the agencies before June 2009. To find out if either agency owns your mortgage, check here at Fannie Mae and here at Freddie Mac. When radio host Bob McCormick and I were answering questions about the program this morning on KFWB, we heard from some investors who were hoping for help with rental properties, but that’s not who the HARP program was meant to serve. FHA, VA and USDA loans are not covered; neither are jumbo loans or “portfolio” loans–those kept by the lender, rather than sold to Fannie or Freddie. You’re also not eligible if you already refinanced under HARP.

LTV limit goes away. Under the current program, you can’t qualify for a refinance is you owe more than 125% of the value of your home (your “loan to value” or LTV), and many of the lenders who bothered wouldn’t make loans if you were over 105%. The new version eliminates the limit, although you still have to have less than 20% equity (if your loan is less than 80% of your home value, you won’t qualify for refinancing under this program).

The refi process is streamlined. Typically, requirements for appraisals and extensive underwriting will disappear. That’s because banks are going to be shielded from “buy back” risk from Fannie and Freddie. The threat that they might have to take the loans back has made lenders extra-careful about the loans they make–which means many loans aren’t being made at all. You’ll need to provide proof of employment or another regular source of income, but you won’t need to pay for an appraisal upfront or submit reams of documentation.

Mortgage insurers are on board. Another obstacle to refinancing is private mortgage insurers that have refused to transfer coverage. These insurers have promised to make transfers much easier under the new HARP rules.

Second mortgage lenders are on board. If you have a home equity loan or line of credit, you’ve typically needed to get that lender’s permission to refinance, a process known as re-subordination. Recalcitrant or overloaded second mortgage lenders have prevented plenty of refinancings in the past, but federal officials say the largest lenders have now agreed to automatically re-subordinate second mortgages under HARP.

Risk fees can be waived. Fannie and Freddie have agreed to waive the fees they were charging for riskier borrowers if those borrowers opted for a shorter-term mortgage than the one they currently have. Refinancing into a 15-year mortgage, then, from your current 30-year loan could save you some dough. If you’ve missed previous refinance opportunities because you were under water and you’re several years into your loan, you may find that your new payment isn’t significantly higher than your old one.

Final details of the changes are scheduled to be submitted to lenders by Nov. 15. If you think you may qualify, line up a chat with a HUD-approved housing counselor (find one here) and get ready to take advantage of a government program that could actually help you stay in your home.

5 silver linings of low interest rates

Today’s low interest rates are making life pretty miserable for retired folks on fixed incomes who are trying to live off their savings.

For those who don’t need to tap their savings yet, however, ultra-low interest rates have some hidden advantages. For example:

You can pay your bills early. I used to hoard the money I needed to pay big annual or semi-annual bills, such as property taxes and life insurance. I’d send in the payments at the last possible moment to squeeze as much interest from our savings as possible. Now, I don’t bother. As soon as I get the bills, I set up the electronic payments and hit the send button. Life’s a lot simpler this way.

You save time. Back when the average savings account paid less than 1%, while online banks paid 5% or more, it was worth doing a little research to find a great rate and to move your money around once in awhile. Now that the gap has narrowed so dramatically—the best online accounts pay about 1%, while the average savings account rate is around .25%–it’s hardly worth the bother unless you’ve got a substantial cash stash.

It’s easier to avoid fees. If you have some cash savings, you can avoid a lot of the silly fees your bank wants to levy—without having to worry about the opportunity cost of keeping your money in a non- or low-interest-paying account. If you have to park $2,500 in your accounts to avoid fees, it’s likely smart to do so, since you’d earn only about $2 a month on the money in a higher-rate online bank account. If you’re required to keep a five-figure balance to avoid fees, though, it may be worth finding a new bank.

There’s no reason to take a chance with money markets. If you still have cash in a money market mutual fund, check the rate you’re getting. It’s probably less than a quarter of a percentage point, and may be as little as a tenth of a point. Remember that money market funds aren’t FDIC insured, so you do have a risk of losing principal, however small. Here’s one of the rare instances where you get a better deal with a safer product—you’ll get a higher yield investing in CDs or an online bank.
It’s clearer that there are no truly “safe” investments. Back when rates were higher, it was tempting to just park money in higher-yield bank accounts rather than risk it in the stock market. The problem with that approach is that your money had no chance of beating inflation over time—your purchasing power was being eroded by inflation and taxes. Today, it’s pretty obvious that you aren’t going to beat or even keep up with inflation if you put all your money in “safe” investments. You need to take at least some risk to get the long-term growth you’ll need to beat rising costs.