Archive for April, 2008

Although the efforts of the federal government to extend relief to lenders and homeowners was more than welcome, the actual results have so far only added to about a half million homeowners in the US being able to rework their loan terms and retain their homes in the first quarter of 2008. Over all the housing relief act has not kept up with the rate of foreclosures across the country.

Over 200,000 homes have already been lost to foreclosures in the first three months of this year. Some of the most affected areas are the states of Nevada, California and Arizona, where real estate prices sky rocketed during the real estate boom that started approximately in late 2000 lasting through 2005 and finally stabilizing in 2006 before beginning a solid decline. During this time investors quickly snatched single family homes and condos in these areas hoping to turn a profit when reselling the homes.

Many industry experts consider the current foreclosure situation an ongoing problem that will not see the bottom of its free fall for some time yet. Loan modifications and homeowner assistance are not benefiting all who could use the help. The State Foreclosure Prevention Working Group (SFPWG) reported their estimations to be that for every 10 homeowners who apply for loan modifications, only 3 are able to get somewhere with their lenders. Also the number of troubled borrowers is increasing each month, more defaults are occurring and neither lenders nor the federal government’s efforts to afford help has been keeping up with the rising numbers of defaults.

Along with the rising numbers of defaults and foreclosures is the number of vacant homes for sale across the country, which is at a record high compared to last year. The housing boom which lasted approximately five years, fueled the rate of new home construction across the west, particularly California. Because this was an unnatural rate of growth, and over valuing of real property, it was only a matter of time before a correction occurred.

Not only are these rescue efforts slow and limited, but the latest activity from Washington where Democrats had proposed a housing package has been met with strong opposition from the Bush administration. The package would provide $15 Billion dollars to buy and rehabilitate properties across the country. The White House opposes the package saying that it is excessive risk of tax payer money.

Also a second bill was approved by the Senate earlier this month that addresses a suite of benefits. Tax breaks would be provided for home builders and other businesses, a $7,000 tax credit for anyone who buys a foreclosed property, a program to counsel borrowers would take $150 million and local government would get $4 Billion to buy abandoned and foreclosed properties.

Because there are so many propositions and plans from many source, the housing relief act has not taken shape well enough and has moved very slowly in the direction it needed to when it was first conceived. It isn’t yet clear what the final action will be and what if any relief will being flowing down to home owners who need help. Also amendments to bankruptcy laws are in the works and we should be hearing news about those before the end of this year. So far it’s been rumored that the changes do not benefit the filers, but the creditors.

For more information on finding ways to modify your existing loan and other default and foreclosure options, review the post about free foreclosure help, in which I talk about a site that was launched not long ago with the only aim being to help homeowners in trouble.

Back in 2002 when I bought my condo, there were no obvious signs to me that what was going on in the mortgage market were the beginning stages of the current subprime crisis. I knew I was making the right decision to buy a place while I could still afford one and I saw how property values jumped significantly in the next two years. However, all along I had this feeling that this rapid growth of the market could not be normal and that it could not possibly benefit everyone. I also figured that at some point I would have to sell my condo and I would most likely want to sell it at fair market and maybe just a tad more.

Would someone really be willing to pay me double the price of what I paid for it a couple years ago? This really puzzled me, and even though I thought it would be great to make that much money, I couldn’t help to feel a little concerned for whoever ended up buying my condo. Would they finance with sub-prime or conventional loans? How will they manage such a large monthly payment? Will they continue to enjoy the market growth like I did?

It can’t grow forever, what goes up must in deed come down, and that’s what we’re witnessing here. It’s a nose dive of a decline for the housing market and it really is difficult to watch. The same thing goes for the stock market, there’s usually a period of aggressive growth that must eventually fix itself. I trade very moderately in the stock market so I keep up with it, but it’s definitely not a huge worry for me.

Though the housing market, which everyone is part of in one way or another, is now suffering from a subprime mortgage crisis, which in turn has an impact on the overall economic growth. As more mortgages default, there’s less confidence in buying homes, and we’re ending up with a surplus of homes across the country, causing a very dramatic decline in new home construction and prices of homes. All of this builds the downward pressure that weighs on the overall growth.

Interest rates on a number of subprime and ARM loans are due to go up through 2008. However, to the benefit of home owners who may be finding themselves on the brink of bankruptcy, the US treasury, backed by US legislators, is enabling the deferment of interest adjustments in order to begin working towards stimulating the economy and re-establishing confidence in consumers and financial markets.

To begin a resolution to the subprime crisis, one of the measures that can be taken in the future through legislation is to limit the numbers of different financial products that revolve around these types of loans and to force revisiting the metrics to qualify consumers for these types of loans. Salaries will need to keep up with inflation and unemployment needs to stay low. Finally, the housing market’s steady decline needs to be interrupted as soon as possible, but this won’t be possible without more aggressive efforts from the US treasury and the government.

Meanwhile, if you’re finding yourself in the same situation that millions of homeowners are in right now, where you’re not making your mortgage payment and considering bankruptcy. You need to know that there maybe alternatives available to you, banks and mortgage lenders are starting to resort to offering their customers loan modifications and or encouraging a short sale. Read more about loan modifications and other free resources here, it may be just what you need to save your home.

In part one of this post “Does credit repair really work? Part I” I talked about some of the situations in which credit repair can help you. Again, if your credit report shows negative entries that accurately reflect your credit history, it’s best not to begin a dispute with the help of an agency for it will only cost you time and money and the likelihood of those entries begin removed is very tough if the information is accurate. An honest and reputable company should be able to tell you that up front.

Credit can be complicated, most people are only concerned with learning the score system and know that as long as their score is above 620, they’re in good standing. But when your credit score drops because of real inaccuracies on your credit report, it’s best to get help to resolve and monitor your report from professional services. However there are things to be aware of when making your selection.

Credit Repair Scams – Because having bad credit and being in need of credit creates a bit of a desperate situation for some, there will always be someone who offers a service that can help. If you’re going to remember anything about this post, remember this: scrutinize a lot in this process. Ask a lot of questions and check the company’s that offer you services. Credit repair scams are everywhere, they advertise online, in newspapers and such. I personally would not trust a wooden stake sign written with a sharpie that says: “Credit Repair, fast and easy, guaranteed results 1-800-555-0000″ It just does not ring well to me and I see them everywhere here in Southern California. Learn to read these advertisements, the use of words like fast, easy, guaranteed, money back guaranteed and excessive use of testimonials can be a hint that these are not legitimate companies.

Ask the representative of the company to explain the methods they use to accomplish this, you need to know precisely what it is that they do. If they mention anything that sounds illegal, like changing your identity, or giving you a new social security number or simply disputing every negative entry regardless of the reasons they’re there, you might want to think twice about hiring them. The Fair Credit Reporting Act says that only items that are unverifiable can be disputed, if you did file for bankruptcy and you had late payments in the past, then these would be verifiable entries. Anyone who suggests that they can be disputed and removed more than likely has a less than agreeable method of doing this.

How does credit repair work? – Really there are only two ways. One is by simply contacting your creditors directly and conversing the situation with them about the entries they made being a mistake. This can work sometimes, but you must have proof that these are errors. No need to get into a screaming match with the creditors, that will not accomplish anything. Contacting the credit bureaus yourself is another approach, by using their dispute process. This will basically transfer the burden of having to verify these entries to the bureaus. This is an important benefit and you should use it. Here are the links to the dispute portals for each bureau:

TransUnion Credit Disputes

Experian Credit Disputes

Equifax Credit Disputes

Should these approaches fail, you need to consider hiring a professional firm to work this problem for you. Again in this process you want to be selective and concentrate on looking for companies that have the experience to take on your case. Their approach is similar to you disputing directly with the bureaus but a legitimate credit repair company makes use of legal procedures and creditors are more keen to listen and negotiate with them.

Selecting a credit repair company – This is one of the most important steps in the process of correcting those inaccuracies. Look for an established company with plenty of exposure that has a high rate of success and experience that can actually help you repair your credit based on inaccuracies. Don’t get sold on promises or silly guarantees. Read everything about them on their websites, do a search for the name of the company and see what other people are saying about them. Having a comprehensive range of services is a plus in any service I seek, and having a high quality ranking is even more important.

Begin your evaluation of these services by visiting the Better Business Bureau and becoming familiar with their rating system. Measure the companies you intend to use against these ratings and simply select the one with the best record.

LLCs or Limited Liability Corporations are legal business entities that offer limited liability ownership to its members, meaning that the owners or members are not personally responsible for the debts that the business incurs. At least in theory that’s the case. An LLC that finds itself in a situation where it is not being profitable and debts are running high, can also find relief in filing bankruptcy. However, it is often common that when LLCs are first formed, the owners don’t realize that they may have made themselves liable for the debts of the business by making personal guarantees for the debt that funded the company.

Normally lenders will use the Tax Identification Number of the LLC to extend credit. LLCs are not always profitable, especially when they’re first starting out, and in order for a lender to accept applications and begin processing the requested credit the business either needs to be profitable for the lender to proceed without any additional guarantees, of course these policies will vary by lender. When that criteria is different, normally the lender will still proceed with approval if the owners of the LLC are willing to make personal guarantees for the loans or credit lines. Often this is not explained in great detail or is in small print on the paperwork you sign.

Should this be the case with you, and you see your business taking a turn for the worse, you need to consider this option carefully before you continue with declaring bankruptcy for your LLC. This is something that’s often overlooked during the formation of such business entities. Again lenders don’t always emphasize this point because as long as they have good backing for their money, they don’t care who’s on the hook. So if your LLC files for bankruptcy this will likely extend to you, meaning you may also have to file bankruptcy, otherwise since the liability falls on you, you’ll have to repay the debts yourself.

Be 100% certain that you’re not personally liable for the debt before you proceed, review the paperwork you signed when your loans or credit lines were processed and see if your social security number appears anywhere on the application or approved paperwork.

Only when you find out the structure of the loans or credit on your business, you can begin addressing the problem with a new perspective. If your business debt has a personal guarantee then you should consult a bankruptcy attorney for a better approach to the problem. Your attorney will be able to study the paperwork more efficiently. In a case like this you would not want to prepare and file you’re own bankruptcy petition, you will run into too many obstacles and doubts and may end up filing the wrong paperwork or submitting the wrong information, which again only you will be responsible for.

At the very least consult with a bankruptcy attorney if you feel your LLC is in trouble and you need to get the debt sorted out. Your best option in this situation would be to file bankruptcy chapter 11, you can repay the debts of your business under more manageable terms while your bringing your business back to a profitable state.

I read a news report recently which I found somewhat shocking, but not that much. It’s a report from knoxnews.com, a small local news site from Knoxville Tennessee. Where the wife of a high ranking deputy sheriff in Loudon county was found guilty of identity theft. The article says that despite a previous conviction, the woman escaped a prison sentence.

Her sentence basically came to three years of supervised probation, a $1,000 dollar fine and 40 hours of community service. Even though her husband was not involved and knew nothing about the activities of his wife as concluded by an investigation, he was demoted because of his wife’s case.

The thief and the victim were actually friends in this case. The thief used the victim’s bank account to pay bills and other personal expenses. Yet the victim pleaded with authorities to stop them from prosecuting her friend, but because identity theft is a felony, charges were made and court procedures started.

Perhaps it would surprise most everyone that a friend would do this to a friend, but there really is no boundary when it comes to identity theft, it can come at you from any angle. I’m a little more surprised at the demotion of the deputy who was not involved in these actions and I imagine that to be a decision of the local sheriff’s office rather than the court. The fact that the case involves the wife of a high ranking deputy sheriff makes it hard to believe that the deputy did not know about this until too late.

In the short time that I’ve been blogging about bankruptcy and related subjects such as credit, credit repair and identity theft, I’ve discovered a lot of different facts about all these subjects and while reading news and posts from other blogs and it never really ceases to amaze me how wide open our personal information is and how easily it can be taken even by people we know and trust. Read the original article here.

Of the many ways this can happen, in this case it was a bank account number that was taken. Often times it’s a social security number that can be used to apply for credit under your name, and of course there’s always the potential danger of providing information via the internet.