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Saturday, February 13th, 2010

Protecting Your Best Financial Interests

Part of becoming truly financially responsible and independent involves accepting responsibility for your financial situation. Not only do you have the power to improve your finances, you’re the only person who can (and will) consistently watch out for your rights as a consumer.

This point was driven home once again in this post from CreditBloggers.com, in which the author examines one aspect of banking that people probably don’t realize can cost them serious money.

Understanding Overages

Here's a look at how you could end up losing a couple thousand dollars in a few minutes (without even realizing it):

  • You go into your bank to apply for a mortgage loan. A loan officer presents some numbers to you and offers you a loan, which comes with an interest rate that is determined largely by your credit score.
  • If you’re lucky, you were offered the lowest interest rate that your credit status qualified you for.
  • If you’re unlucky (as many thousands of Americans are), you were offered an interest rate with an "overage"—an interest rate slightly higher than the best rate your credit score allowed.

Why would lenders even offer such loans? Because it can be profitable for them:

  • A higher interest rate equals a more profitable loan (because you, the borrower, pay more in interest).
  • A more profitable loan is more attractive to investors (because they can collect more money on it).
  • The bank gets a higher price for the loan, some of which goes to the loan officer as a reward.

According to the post, issuing loans with overages is fairly common, even at some large, well-established banks, which is why you must act as your own advocate when investigating significant purchases.

Protecting Yourself and Your Money

If you aren’t already monitoring your credit report, consider doing so. At the web site annualcreditreport.com, you can view a free copy of your credit report from each of the Big Three reporting bureaus once per year.

And, if you’re getting ready to apply for a mortgage, you may want to pay to view your actual credit score (visit MyFico.com). To determine what mortgage rate you’re likely to get, do some online research or speak with a financial guru you know before hitting the banks.

Additional Resources

Choosing the Mortgage that’s Right for You (PDF)

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Posted in Financial Literacy | No Comments »

Friday, November 13th, 2009

October Foreclosures Dip from September, Soar from ‘08

RealtyTrac, a company that follows foreclosure data for the United States, released October numbers on Thursday. It seems foreclosure rates have decreased slightly since last month, but are still significantly higher than they were a year ago.

Foreclosure by the Numbers

Here’s a look at the statistical breakdown of recent foreclosure activity in the country.

  • 332,292 property filings in October: This number includes three specific types of action: notices of bank repossession, auction and borrower default. That means one in every 385 American households is in some phase of the foreclosure process.
  • Percentage changed: The numbers translate to a three percent drop from September of this year, but a 19 percent increase from October of 2008, suggesting that the moderate improvement is only relative.
  • Estimate for the year: Based on information gathered thus far, RealtyTrac is reportedly predicting as many as 3.4 million foreclosures this year, a 48 percent jump from 2008’s total of 2.3 million.

These numbers may seem astoundingly high, and they are – remember that this recession started in the real estate industry, and continues to plague homeowners.

So why are foreclosures still inching up even when the economy is showing signs of recovery? Most likely, sources suggest, the unemployment rate is to blame. Even though consumer spending may be on the rise, millions of Americans are still without jobs – and without serious hope of getting jobs in the near future, which means missed house payments.

Foreclosure Prevention or Just Delays?

The Obama administration has taken some action to try to ease the pain in the housing market. The Home Affordable Mortgage Program, an initiative designed to encourage lenders to offer mortgage loan modifications with cash incentives, apparently helped as many as 20 percent of eligible borrowers last month, up from 16 percent in September.

But those numbers still represent far less than the majority of struggling homeowners – and some other laws may be offering less help than they seem to be.

Nevada, for example, allegedly has a law in place that mandates foreclosure mediation for at-risk borrowers. And, while sources indicate that the state saw a drop in foreclosures this month, it could very well see a jump later on, if and when mediations have been completed and proven unsuccessful.

Additional Resources

Home Affordable Modification Guidelines

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Posted in Mortgage Foreclosure | 5 Comments »

Monday, June 22nd, 2009

Your Second Mortgage Debt Could Potentially be Dismissed by Filing Bankruptcy

What type of debt you have can make a big difference in how bankruptcy can affect your debt.

Generally speaking, unsecured debt is more likely to be dismissed - that is, retired completely - than secured debt.

And, your debt is usually either secured or unsecured, one or the other. So stuff like credit card debt and payday loans are considered unsecured, because ther'es no property attached to them.

Car notes and mortgages are secured debt, because they are connected to a property.

However, as columnist and attorney Ronald H. Surabian points out in the Burlington Union, second mortgages are a different story. After attending a recent workshop he wrote:

The thing that I found interesting about the Chapter 13 bankruptcy proceedings is that second mortgages, home equity loans and the like can be wiped out if these second mortgages are considered unsecured.

And this is something that we even overlook here. We often speak of how filing bankruptcy may help your credit card debt or mortgage, but we don't often discuss second mortgages.

Perhaps we should be because millions of homeowners have a second mortgage - often taken out to fund home repairs or improvements - and are now struggling to make that extra monthly payment.

So, is your second mortgage unsecured and, therefore, potentially able to be dismissed by filing bankruptcy? Surabian provides a clear example:

Assume the fair market value of your home is $370,000 and you have a first mortgage of $376,000 and a 2nd mortgage of $95,000. The second mortgage will be treated as unsecured and will be treated in the same way as credit cards. It will either be wiped out or paid off for pennies on the dollar.

There you have it. If you're facing foreclosure because of a second mortgage and other debts, then bankruptcy may be able to save your home.

To see if your second mortgage is considered unsecured, speak with a local attorney about filing bankruptcy.

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Posted in Mortgage Foreclosure | No Comments »

Thursday, March 13th, 2008

Where’s Your Foreclosed Mortgage Going Now?

The Federal Reserve has offered banks another $200 billion in U.S. currency in exchange for debt that includes mortgage securities, and includes subprime mortgage loans that they hold.

Essentially, experts explain, the Fed is using the available funds to encourage confidence in these securities among investors.

But should investors be buying bad debt, not to mention the Federal Reserve throwing $200 billion in U.S. funds at these nearly worthless mortgages?

Beat the Press has another great evaluation of this latest move:

So how does this story play out? Well, insofar as the Fed is successful, the counterfeit currency retains its value for a while longer. This allows Citigroup, Merrill Lynch, Bears Stearns and the rest of the big boys more time to dump their counterfeit currency on suckers who haven’t figured out how the game is played.

Not exactly a ringing endorsement.

Read the article for a good evaluation of why bailing out the banks doesn't help anyone—it just slows down an inevitable slide by ignoring the "$8 trillion housing bubble," as Baker puts it.

Need your own bailout? Learn about filing bankruptcy.

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Posted in Mortgage Foreclosure | No Comments »

Friday, August 31st, 2007

President To Offer Proposals for Subprime Mortgage Crisis

As recently as a week ago, George W. Bush was touting the "liquidity" of the economy in the face of the ongoing subprime mortgage crisis in the United States.  He suggested that all indicators point to the market correction being a "soft landing."

Today, Bush will make formal statements outlining a plan for relief on homeowners.  Administration officials revealed that the steps Bush will propose include mandating that the Federal Housing Administration allow an additional 80,000 homeowners with less-than-perfect housing records to sign up for its mortgage insurance program.  However, more steps will be introduced in his remarks.

In expectation of the proposals, the stock market opened strong this morning, with Asian markets going strong and the Yen lowering, and European stocks also rising.

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Posted in Mortgage Foreclosure | 1 Comment »

Wednesday, March 7th, 2007

National Urban League President Unveils Plan to Increase Home Ownership

National Urban League President Marc Morial tied homeownership to personal wealth, greater economic empowerment, and closing the gap between blacks and whites in the United States when he described six major policy recommendations designed to minimize obstacles standing in the way of many Americans owning their own homes.

The obstacles the National Urban League Homebuyer's Bill of Rights seeks to overcome are:

  • Lack of net savings for downpayments and closing costs
  • Lack of information on how to shop for homes and apply for loans
  • Lack of quality affordable units in livable locations; and
  • Lack of consumer protection

In recognition of skyrocketing mortgage foreclosure rates across the country, particularly in economically depressed areas where homebuyers are more likely to have been saddled with unfavorable non-traditional mortgage terms, Morial said, "It is not enough to put more Americans into their own homes if we fail to arm them with the tools needed to sustain homeownership."

The National Urban League Homebuyer's Bill of Rights makes six policy recommendations designed to overcome these obstacles:

  1. The Right to Save for Homeownership Tax-Free
  2. The Right to High-Quality Homeownership Education
  3. The Right to Turth and Transparency in Credit Reporting
  4. The Right to Production of Affordable Housing for Working Families
  5. The Right to be Free from Predatory Lending; and
  6. The Right to Aggressive Enforcement of Fair Housing Laws

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Posted in Bankruptcy and the Economy, Mortgage Foreclosure | No Comments »

Tuesday, February 20th, 2007

Skewed “News” Reports Designed to Scare Consumers Away from Bankruptcy…But Why?

A news release popped up in my email this morning headlined "Bankruptcy Won't Stop Foreclosure for Troubled Borrowers".   As an attorney who does a lot of research and writing about bankruptcy law, that came as quite a surprise to me.  After all, I knew that Chapter 13 bankruptcy could provide the relief a homeowner needed to catch up past-due payments over time while making current payments.  I also knew that Chapter 7 bankruptcy, while it didn't provide a long-term solution to foreclosure, would in most cases automatically stay foreclosure proceedings temporarily, allowing the homeowner much-needed breathing room in which to assess his options.

So what might that headline mean?  Apparently, this:  "...filing for bankruptcy will not permanently stop a lender from foreclosing on a home if the borrower stops making payments."

In other words, you can't file for bankruptcy, discharge your mortgage debt, and keep your house.  I suspect that's not a big surprise to anyone, and the fact that you don't get a free house in bankruptcy is quite a bit different from the assertion that "bankruptcy won't stop foreclosure".

So why do we so often see these misleading "news" items, spreading the idea that bankruptcy isn't a viable solution for most debtors, furthering the myth that bankruptcy will "ruin your credit for ten years"?

In the case of this particular news release, it's not hard to guess at the answer.  The only person quoted in the release, and the contact for further information about the release, is Patrick McGilvray of The Home Buying Center, LLC.  A quick glance at  The Home Buying Center's website reveals images strikingly similar to those corrugated plastic signs you see in depressed neighborhoods offering to pay cash for your home fast.  The message in this release seems to be, "Bankruptcy won't save your home, so instead you should avoid foreclosure by quickly selling it to us."

In other news items, the connection may be more subtle.  The banking and consumer credit industry has a powerful lobby and a massive public relations machine at their disposal.  And bankruptcy isn't the right answer for everyone, nor something that should be entered into without research, professional advice, and an understanding of the options.

But when direct misinformation like, "bankruptcy won't stop foreclosure" and "you won't be able to get credit for ten years after you file bankruptcy" is part of the "news", question the credibility of the source and seek out the unbiased facts.

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Posted in Bankruptcy News and Events, Mortgage Foreclosure, Setting the Record Straight about Bankruptcy | No Comments »

Friday, February 9th, 2007

Senate Committee Hears Testimony on Predatory Mortgage Lending Issues

On February 7, the U.S. Senate Committee on Banking, Housing, and Urban Affairs heard testimony from a variety of consumer advocates and mortgage industry spokespeople on the problems of predatory mortgage lending practices and their role in the mounting mortgage foreclosure claims across the country.  Although mortgage industry professionals suggested that the climbing foreclosure rate is the result of numerous possible and probably combined factors, the foreclosure rate for ARMs and other non-traditional subprime mortgages is substantially higher than that affecting traditional mortgages.

In addition, the Center for Responsible Lending recently conducted a study indicating that minority applicants are disproportionately steered toward high-cost subprime loans, even when their credit scores would have allowed them to qualify for more favorable loans or rates.

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Posted in Bankruptcy and the Economy, Mortgage Foreclosure | No Comments »