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‘This isn’t what we were promised’: Amid GM closures, Trump’s economic policies are coming home to roost




At one time, Donald Trump’s words sounded reassuring to Tommy Wolikow. Now more than a year later, they just torment him.

“Don’t move, don’t sell your house,” the U.S. president urged a cheering crowd in Youngstown, Ohio, in July 2017, promising to resurrect the region’s dwindling manufacturing jobs. “They’re all coming back.”

Wolikow, a 36-year-old father of three, was standing there listening, hopeful. The former General Motors quality control worker at the GM Lordstown Complex had been laid off months earlier, and bought a two-storey home for $110,000 US with his wife, Rochelle, located just three kilometres from the factory.​ He was hoping to soon return to work.

Wolikow voted for Trump in 2016, inspired by his pledge to reinvigorate the manufacturing economy. He was a believer. So when Trump encouraged supporters not to sell their homes, to trust his economic stewardship, Wolikow accepted it.

But as 14,000 layoffs were announced by GM on Monday, it became clear that Trump has not lived up to being the manufacturing messiah he claimed to be.

Among other factors, many economists are faulting his trade policy and confirming their doubts that a tax-reform package benefiting corporations would save factory workers.

After nine years at GM, Trump’s inauguration day, Jan. 20, 2017, turned out to be Wolikow’s last day on the job. Once a diehard Trump supporter, Wolikow’s faith has waned. Over the last two years, he has seen only job losses in Ohio — including both his and Rochelle’s, who was a GM employee on the door line at the Lordstown plant.

“The information we got is devastating,” he said about the new layoffs and GM’s plan to idle five factories in Ohio, Michigan, Maryland and Oshawa, Ont.

Tommy Wolikow is shown with his wife, Rochelle, and their daughters Ali, 6, and Natalie, 11. Wolikow and his wife were both laid off last year by GM. Rochelle has found work as a waitress, while Wolikow is still seeking work. He says the couple has maxed out their credit cards. (Tommy Wolikow )

The couple worry about the value of their home diminishing. “How are you going to sell a house in the area when nobody wants to live there anymore?” Rochelle said.

Economists like Steve Bell predicted this outcome. 

Consumer preferences are changing. Only 30 per cent of American automobiles sold today are cars, like the Chevrolet Cruze compact, manufactured in Lordstown. Trucks and SUVs make up the remaining 70 per cent.

Yet Trump’s vow in Ohio last year seemed to disregard that fact, as well as the shift toward autonomous and electric cars, in favour of crowd-pleasing pledges to build new plants and reverse manufacturing job losses.

“The moment that was said, it was literally an impossibility,” said Bell, a former senior director of economic policy at the Washington-based Bipartisan Policy Center who now does consulting work. “It’s like saying we’re going to make coal have a huge comeback. We’re not.”

The Wolikows bought this house in Youngstown, Ohio, shortly before they were laid off. Tommy Wolikow attended the local rally last July when Trump told his supporters not to sell their homes, promising to revive the manufacturing economy in Ohio. (Tommy Wolikow)

Trump’s apparent lack of understanding for global supply chains and his insistence of imposing 25 per cent tariffs on imported aluminum and steel likely exacerbated GM’s challenges, he said. Hiking the price of those metals simply passes the costs onto consumers, hurting the automaker’s bottom line.

And it’s not just people wanting to buy cars who would be adversely impacted, said former U.S. trade representative Carla Anderson Hill.

“If you put a 25 per cent tax on steel, aluminum, washing machines and a tax on solar panels, you’re going to price out a number of people who would otherwise want those products.”

Take, for example, the Missouri-based Mid Continent Nail Corp., the largest nail manufacturer in the U.S. It’s now clinging to life, unable to price its steel competitively.

While Trump sold the metal tariffs as necessary for saving the U.S. steel industry, it has been a net negative for job creation, Hills noted. The Trade Partnership, a Washington-based economics research firm, found that there would be 16 jobs lost for every one job created by the Trump-imposed tariffs.

Wolikow, second from left, has been attending Trump rallies with a coalition called Good Jobs Nation, which has worked to bring attention to the struggles of workers in the U.S. manufacturing sector. (Tommy Wolikow)

North America’s auto and motor vehicle supply chain was once the most competitive in the world, Hills said. Now she believes the Trump economy is experiencing the unpleasant human cost of some of his economic policies.

“Tariffs,” she said, “are just not an effective mechanism to improve the trade relationship.”

To win re-election in 2020, Trump will likely have to once again take the manufacturing states of Wisconsin, Ohio, Pennsylvania and Michigan. Tariffs could become a sore point.

GM had already seen it coming. The company warned back in the summer that the tariffs could lead to “a smaller GM,” including job cuts in the U.S. and abroad. The company also said Trump’s tariffs have already cost it $1 billion US, prompting Democratic congressman Tim Ryan to accuse Trump of being “asleep at the wheel” and demanding he keep his vow to revive Ohio’s manufacturing sector.

“This isn’t what we were promised,” said Albert Sumell, an economics professor at Ohio’s Youngstown State University.

“I would say that when Trump was campaigning, he was the emperor that wears no clothes, making promises that any objective analysis would prove false — to the extent that most of the jobs that were lost were not lost due to China, they were lost due to automation.”

Americans are also witnessing how slashing the corporate tax rate may have pleased shareholders, but failed to fulfil its premise of incentivizing companies to reinvest in workers and spur manufacturing growth.

That hasn’t been borne out in reality — despite GM posting a $2.5 billion third-quarter profit at the end of last month.

“Look at it from a business perspective,” Sumell said. “All of a sudden, you have millions of more dollars than you expected to have. There’s no rule that you have to use those dollars to invest in new plants and new jobs.”

A survey of 42 economists last year found every expert, except for one, doubted the tax bill would help the economy result in substantially higher GDP. All those surveyed agreed it would increase the debt.

Dwayne Killingbeck bolts parts to a Camaro on the assembly line at the GM plant in Oshawa, Ont. The facility is one of five the automaker says it will soon mothball. (Norm Betts/Bloomberg)

Michael Graetz, a former U.S. Treasury official and tax law expert, agrees the tariffs should blare a “caution sign about trade wars.” But he isn’t so quick to criticize the president’s tax-reform policies, believing it’s still too early to tell whether the lower tax rate will ultimately produce more jobs in the U.S. — even though he says “there’s no question” most of the savings have gone into stock buybacks.

Much as it might be convenient to blame the president, Charlie Chesbrough, a senior economist with Cox Automotive, said the biggest driver was shifting consumer tastes.

“I don’t think we can hang this one around the president’s neck,” he said.

The cuts on Monday could be GM trying to play catchup to Fiat Chrysler, which announced in the summer it would cease making cars in the U.S. to focus entirely on pickups and SUVs. Ford made a similar announcement.

After he was laid off, Wolikow went back to school to earn his diesel technician’s degree. He’s still looking for work. Rochelle is scraping by as a waitress at Cracker Barrel, earning $4.15 an hour, plus tips.  

In the meantime, he’s waiting for the president to respond to a letter from his United Auto Workers president — a letter he hand-delivered to Trump’s 2020 campaign chief operating officer at a recent rally, pleading for help for autoworkers.

“I’m still holding on hope Trump is going to do something,” he said. “But how do you support someone when you know they’re not supporting you?”


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Real Estate

5 ways to reduce your mortgage amortization




Since the pandemic hit, a lot of Canadians have been affected financially and if you’re on a mortgage, reducing your amortization period can be of great help.

A mortgage amortization period is the amount of time it would take a homeowner to completely pay off their mortgage. The amortization is typically an estimate based on what the interest rate for your current term is. Calculating your amortization is done easily using a loan amortization calculator which shows you the different payment schedules within your amortization period.

 In Canada, if you made a down payment that is less than the recommended 20 per cent of the total cost of your home, then the longest amortization period you’re allowed to have is 25 years. The mortgage amortization period not only affects the length of time it would take to completely repay the loan, but also the amount of interest paid over the lifecycle of the mortgage.

Typically, longer amortization periods involve making smaller monthly payments and having a much higher total interest cost over the duration of the mortgage. While on the other hand, shorter amortization periods entails making larger monthly payments and having lower total interest costs.

It’s the dream of every homeowner to become mortgage-free. A general rule of thumb would be to try and keep your monthly mortgage costs as low as possible—preferably below 30 per cent of your monthly income. Over time, you may become more financially stable by either getting a tax return, a bonus or an additional source of income and want to channel that towards your principal.

There are several ways to keep your monthly mortgage payments low and reduce your amortization. Here are a few ways to achieve that goal:

1. Make a larger down payment

Once you’ve decided to buy a home, always consider putting asides some significant amount of money that would act as a down payment to reduce your monthly mortgage. While the recommended amount to put aside as a down payment is 20 per cent,  if you aren’t in a hurry to purchase the property or are more financial buoyant, you can even pay more.

Essentially, the larger your down payment, the lower your mortgage would be as it means you’re borrowing less money from your lender. However, if you pay at least 20 per cent upfront, there would be no need for you to cover the additional cost of private mortgage insurance which would save you some money.

2. Make bi-weekly payments

Most homeowners make monthly payments which amount to 12 payments every year. But if your bank or lender offers the option of accelerated bi-weekly payment, you will be making an equivalent of one more payment annually. Doing this will further reduce your amortization period by allowing you to pay off your mortgage much faster.

3. Have a fixed renewal payment

It is normal for lenders to offer discounts on interest rate during your amortization period. However, as you continuously renew your mortgage at a lower rate, always keep a fixed repayment sum.

Rather than just making lower payments, you can keep your payments static, since the more money applied to your principal, the faster you can clear your mortgage.

4. Increase your payment amount

Many mortgages give homeowners the option to increase their payment amount at least once a year. Now, this is very ideal for those who have the financial capacity to do so because the extra money would be added to your principal.

Irrespective of how small the increase might be, in the long run, it would make a huge difference. For example, if your monthly mortgage payment is about $2,752 per month. It would be in your best interest to round it up to $2,800 every month. That way, you are much closer to reducing your mortgage amortization period.

5. Leverage on prepayment privileges

The ability for homeowners to make any form of prepayment solely depends on what mortgage features are provided by their lender.

With an open mortgage, you can easily make additional payments at any given time. However, if you have a closed mortgage—which makes up the larger percentage of existing mortgages—you will need to check if you have the option of prepayments which would allow you to make extra lump sum payments.

Additionally, there may also be the option to make extra lump sum payments at the end of your existing mortgage term before its time for renewal.

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Real Estate

Mortgage insurance vs. life insurance: What you need to know




Your home is likely the biggest asset you’ll ever own. So how can you protect it in case something were to happen to you? To start, homeowners have a few options to choose from. You can either:

  • ensure you have mortgage protection with a life insurance policy from an insurance company or
  • get mortgage insurance from a bank or mortgage lender.

Mortgage insurance vs. life insurance: How do they each work?  

The first thing to know is that life insurance can be a great way to make sure you and your family have mortgage protection.

The money from a life insurance policy usually goes right into the hands of your beneficiaries – not the bank or mortgage lender. Your beneficiaries are whoever you choose to receive the benefit or money from your policy after you die.

Life insurance policies, like term life insurance, come with a death benefit. A death benefit is the amount of money given to your beneficiaries after you die. The exact amount they’ll receive depends on the policy you buy.

With term life insurance, you’re covered for a set period, such as 10, 15, 20 or 30 years. The premium – that’s the monthly or annual fee you pay for insurance – is usually low for the first term.

If you die while you’re coved by your life insurance policy, your beneficiaries will receive a tax-free death benefit. They can then use this money to help pay off the mortgage or for any other reason. So not only is your mortgage protected, but your family will also have funds to cover other expenses that they relied on you to pay.

Mortgage insurance works by paying off the outstanding principal balance of your mortgage, up to a certain amount, if you die.

With mortgage insurance, the money goes directly to the bank or lender to pay off the mortgage – and that’s it. There’s no extra money to cover other expenses, and you don’t get to leave any cash behind to your beneficiaries.

What’s the difference between mortgage insurance and life insurance?

The main difference is that mortgage insurance covers only your outstanding mortgage balance. And, that money goes directly to the bank or mortgage lender, not your beneficiary. This means that there’s no cash, payout or benefit given to your beneficiary. 

With life insurance, however, you get mortgage protection and more. Here’s how it works: every life insurance policy provides a tax-free amount of money (the death benefit) to the beneficiary. The payment can cover more than just the mortgage. The beneficiary may then use the money for any purpose. For example, apart from paying off the mortgage, they can also use the funds from the death benefit to cover:

  • any of your remaining debts,
  • the cost of child care,
  • funeral costs,
  • the cost of child care, and
  • any other living expenses. 

But before you decide between life insurance and mortgage insurance, here are some other important differences to keep in mind:

Who gets the money?

With life insurance, the money goes to whomever you name as your beneficiary.

With mortgage insurance, the money goes entirely to the bank.

Can you move your policy?

With life insurance, your policy stays with you even if you transfer your mortgage to another company. There’s no need to re-apply or prove your health is good enough to be insured.

With mortgage insurance, however, your policy doesn’t automatically move with you if you change mortgage providers. If you move your mortgage to another bank, you’ll have to prove that your health is still good.

Which offers more flexibility, life insurance or mortgage insurance?

With life insurance, your beneficiaries have the flexibility to cover the mortgage balance and more after you die. As the policy owner, you can choose how much insurance coverage you want and how long you need it. And, the coverage doesn’t decline unless you want it to.

With mortgage insurance through a bank, you don’t have the flexibility to change your coverage. In this case, you’re only protecting the outstanding balance on your mortgage.

Do you need a medical exam to qualify? 

With a term life insurance policy from Sun Life, you may have to answer some medical questions or take a medical exam before you’re approved for coverage. Once you’re approved, Sun Life won’t ask for any additional medical information later on.

With mortgage insurance, a bank or mortgage lender may ask some medical questions when you apply. However, if you make a claim after you’re approved, your bank may ask for additional medical information.* At that point, they may discover some conditions that disqualify you from receiving payment on a claim.

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Real Estate

5 common mistakes Canadians make with their mortgages




This article was created by MoneyWise. Postmedia and MoneyWise may earn an affiliate commission through links on this page.

Since COVID-19 dragged interest rates to historic lows last year, Canadians have been diving into the real estate market with unprecedented verve.

During a time of extraordinary financial disruption, more than 551,000 properties sold last year — a new annual record, according to the Canadian Real Estate Association. Those sales provided a desperately needed dose of oxygen for the country’s gasping economy.

Given the slew of new mortgages taken out in 2020, there were bound to be slip-ups. So, MoneyWise asked four of the country’s sharpest mortgage minds to share what they feel are the mistakes Canadians most frequently make when securing a home loan.

Mistake 1: Not having your documents ready

One of your mortgage broker’s primary functions is to provide lenders with paperwork confirming your income, assets, source of down payment and overall reliability as a borrower. Without complete and accurate documentation, no reputable lender will be able to process your loan.

But “borrowers often don’t have these documents on hand,” says John Vo of Spicer Vo Mortgages in Halifax, Nova Scotia. “And even when they do provide these documents, they may not be the correct documentation required.”

Some of the most frequent mistakes Vo sees when borrowers send in their paperwork include:

  • Not including a name or other relevant details on key pieces of information.
  • Providing old bank or pay statements instead of those dated within the last 30 days.
  • Sending only a partial document package. If a lender asks for six pages to support your loan, don’t send two. If you’re asked for four months’ worth of bank statements, don’t provide only one.
  • Thinking low-quality or blurry files sent by email or text will be good enough. Lenders need to be able to read what you send them.

If you send your broker an incomplete documents package, the result is inevitable: Your mortgage application will be delayed as long as it takes for you to find the required materials, and your house shopping could be sidetracked for months.

Mistake 2: Blinded by the rate

Ask any mortgage broker and they’ll tell you that the question they’re asked most frequently is: “What’s your lowest rate?”

The interest rate you’ll pay on your mortgage is a massive consideration, so comparing the rates lenders are offering is a good habit once you’ve slipped on your house-hunter hat.

Rates have been on the rise lately given government actions to stimulate the Canadian economy. You may want to lock a low rate now, so you can hold onto it for up to 120 days.

But Chris Kolinski, broker at Saskatoon, Saskatchewan-based iSask Mortgages, says too many borrowers get obsessed with finding the lowest rate and ignore the other aspects of a mortgage that can greatly impact its overall cost.

“I always ask my clients ‘Do you want to get the best rate, or do you want to save the most money?’ because those two things are not always synonymous,” Kolinski says. “That opens a conversation about needs and wants.”

Many of the rock-bottom interest rates on offer from Canadian lenders can be hard to qualify for, come with limited features, or cost borrowers “a ton” of money if they break their terms, Kolinski points out.

Mistake 3: Not reading the fine print

Dalia Barsoum of Streetwise Mortgages in Woodbridge, Ontario, shares a universal message: “Read the fine print. Understand what you’re signing up for.”

Most borrowers don’t expect they’ll ever break their mortgages, but data collected by TD Bank shows that 7 in 10 homeowners move on from their properties earlier than they expect.

It’s critical to understand your loan’s prepayment privileges and the rules around an early departure. “If you exit the mortgage, how much are you going to pay? It’s really, really important,” Barsoum says.

She has seen too borrowers come to her hoping to refinance a mortgage they received from a private or specialty lender, only to find that what they were attempting was impossible.

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