Recent news headlines foretell about the looming predicaments and dilemmas facing Social Security. Although most would agree that current recipients are in no imminent danger of losing their benefits, or having their benefits reduced, what remains in the horizon is the future of this social welfare program, which has financially aided Americans for over 75 years. Pressing questions need to be answered. Is Social Security misunderstood, bordering abused? Will the privatization of accounts save Social Security?
A Historical Backdrop
The Stock Market crash in 1929 and the Great Depression that followed led to a virtual standstill of the US economy. This left an overwhelming number of workers unemployed and unable to find work. The Social Security Act, signed into law by President Franklin Roosevelt in 1935, formed a federal program for unemployment insurance, old-age pensions, aid to dependent children as well as offered federal grants to states for workers’ insurance plans and medical care. Disability insurance was added to the Social Security program in 1954, and Medicare was added in 1965.
A Pay-as-you-go System
The present program is a pay-as-you-go system in which the taxes paid by current workers are immediately sent to current retirees as benefit checks. Surplus money is put into a trust fund for use when taxes don’t cover benefits. That means the system can only function when the benefits paid to retirees are equal to or less than the Social Security taxes paid by workers.
Social Security’s future financial troubles will arise due to fact that more and more Americans are living longer, and American families are choosing to have fewer children.
This suggests the retiree portion of the U.S. population is increasing and the worker portion is decreasing. This is the real quandary facing Social Security at the moment.
Social Security is a pay-as-you-go program, and by law, no one has “earned" Social Security benefits or the benefits “owed" to them. In 1960 the U.S. Supreme Court ruled that the federal government is not obligated to pay Social Security benefits to anyone and the government is entitled to cut benefits at any time.
Privatization of Accounts
This is what makes the privatization of accounts attention-grabbing. Private accounts would give the workforce and not the federal government, partial control over the money they pay into Social Security. The hard truth is that Social Security benefits will have to be cut, taxes raised and the retirement age increased regardless of whether a private account scheme is put in place or not. However, the accounts do mean workers would know that some of their money will be there for them in the future and workers’ ability to earn investment income on the accounts will make the impending benefit cuts and tax increases a little easier to deal with.
American Retirement System
Finally, the Federal government needs to look at fixing the entire American retirement system. Many pension plans get swallowed up in corporate takeovers, lost in corporate bankruptcies, or fall victim to poor management in union or company accounts. There needs to be better governmental and private regulation of these accounts, so the money is available to the pensioners when they reach retirement age.
The problems with Social Security are only part of the problem facing retirees in America’s future.
Qualifications For Social Security
In the wake of increasing foreclosures that have sprung up in virtually every state over the past year and a half since the housing boom became a correction, government and mortgage industry officials are taking steps to curb the future rise of foreclosures, which not only negatively impact the mortgage and housing industries, but the overall United States economy as well.
The main step that is being taken to prevent foreclosures is stricter underwriting guidelines. Many mortgage origination companies have been scrutinized for allowing people to borrow nontraditional mortgages that do not typically qualify.
A step towards ensuring tighter underwriting guidelines is to eliminate mortgage borrowing to people without Social Security numbers even if they have an ITIN.
The article, ?Legislation Seeks to Ban Mortgages for Home Buyers Without Social Security Numbers,? written February 26, 2007 by Kenneth R. Harney and posted in realty Times explains how a new proposal will eliminate ITINs as a proper method of mortgage identification despite their strong record of quality borrowers.
?The IRS provides ITINs to immigrant workers who are earning income, want to pay federal taxes, but do not yet have a Social Security card. Growing numbers of banks and mortgage companies are using ITINs as part of their programs to assist ?emerging market? borrowers who have solid and stable incomes, but non-traditional credit and documentation.?
According to MGIC Investment Corp., ITIN-based mortgages are currently issued in 40 states, primarily by smaller banks and lenders. Although on first glance, borrowing a mortgage without a Social Security number and only with an ITIN issued from a small bank may look risky, its results should not be discarded.
?Geoffrey F. Cooper, director of emerging markets for MGIC, says home buyers using ITIN-based mortgages perform exceptionally well ? ?like A-credit borrowers? -- in part because MGIC's underwriting standards are strict. Borrowers must present documentation of two years of income tax filings, two years of stable employment and residence, and other evidence that they are good credit risks.?
But it appears that none of this will matter if a new bill produced by Rep. John T. Doolittle (R-Calif.) that would ban ITINs as an acceptable form of identification for mortgage lending is approved.
?According to Doolittle, undocumented immigrants often are here illegally, and the ?government should not be in the business of creating incentives to encourage illegal behavior. Nor should companies be permitted to reward those individuals in clear violation of our laws.??
But at the same time, most ITINs are good mortgage borrowers and do not default and end in foreclosure nearly as often as other mortgage borrowers with Social Security numbers. ITIN mortgage borrowers have supported local housing markets over the past several years and Doolittle's proposed bill, which is receiving support, could affect the slumping housing market to continue its negative outlook.
?Tim Sandos, president and CEO of the National Association of Hispanic Real Estate Professionals, called Doolittle's plan ?the equivalent of trying to drive a tack with a sledge hammer.? Most of the 7 to 8 million potential home purchasers affected by the bill, said Sandos, are immigrants in some phase of the U.S. citizenship process.?
ITINs had been used on mortgage applications so immigrants could purchase homes faster but it may be an obsolete option by year's end.
Both Raven Kae Yonzon & Groshan Fabiola are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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