January 6th, 2009 Admin
Forgiving Your Debt
Nowadays, lenders are much more willing to work with you if you come across a financially hard time. It wasn’t always this way. In fact, there was a time period when lenders wouldn’t work with you if you couldn’t pay. In order to avoid lawsuits, foreclosures and repossessions, lenders have changed their stance when it comes to working with you.
It used to be that lenders wouldn’t “work” with you because it was cheaper for them to just “write-off” delinquencies as bad debt. Default rates have recently soared to new heights. The economy has become extremely weak. Credit is much harder to come by. Because of this, the “rules” of working with the consumer have drastically changed.
Here are some interesting statistics to consider.
-During the second quarter of 2008, credit card lenders “charged off 5.47% of the total amounts owed on cards as bad debt.” Last year (during 2007), the charge-off rate was at only 3.85%
-Consumer bankruptcy filings experienced a 40% increase from last year during the month of October. During October of this year, more than 100,000 bankruptcies were filed. This is the highest number of filings since October 2005 when the Federal Bankruptcy Reform Law took effect.
-When it comes to being more than 60 days past due on mortgages, more than 2.2 million homeowners fall into this category.
-One in six homeowners owes more on their home than it is worth.
-”With home prices plummeting, every foreclosure now represents a loss of 44% of the original loan amount, up from 29% a year ago,” according to data from LPS Applied Analytics.
Can’t you see why lenders are more willing to work with consumers now? The more lenders work with financially-troubled consumers, the more revenue they are able stop from being lost. Some of the biggest relief programs are as follows:
-Fannie Mae and Freddie Mac will begin paying mortgage service companies $800 for every loan that is modified. This helps out the borrower in several ways. 1) Interest rates would be reduced 2) The borrower wouldn’t spend more than 38 percent of their “gross income on housing expenses.” 3) Home loan terms would be moved from 30 years to 40 years
-Citigroup also announced that it would suspend foreclosures for people who lived in their own homes, who had a good chance of making full, lower payments and who had decent incomes
-JPMorgan Chase also modified about $70 billion in home loans. This modification program could aid as many as 400,000 homeowners.
-Bank of America announced that it would modify 400,000 mortgages.
Yes, if you are upfront and honest with your lenders, chances are that you will end up just fine in this whole mess. Lenders are more willing to work with borrowers than ever before. Whether your loan is modified by your lender or your payment options are a little more flexible, it is certainly worth it to talk to your lender about your current situation.
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October 16th, 2008 Admin
The Truth Behind American Homeowners
America is the land of opportunity. Unfortunately, bad business practices by many mortgage companies and banks throughout the nation has left us in a major economic slump.
Some friends of mine have been trying to sell their home in St. George, Utah for almost a year now. Their home is currently listed as “For Sale By Owner.” I personally couldn’t understand this move because home are sold much faster and much closer to the asking price if sold through a Realtor. As I was discussing this with my friend one day, she told me why they couldn’t go through a Realtor. They owned too much on their home and couldn’t afford to pay the 3 percent commission to a Realtor.
Similar situations are rising throughout the country. People can’t afford to stay in their homes, let alone sell it through a successful realty network, and are living on credit cards right now.. A recent study by The Wall Street Journal lets us know exactly how bad things really are. One in six homeowners owes more on their home than it is worth.
Can you believe that number? Just imagine how many friends you have. Now, think of that statistic and count how many of your friends are upside down on their mortgage. Because this statistic is so high, it also raises the statistic for the possibility of home loan defaults. In all seriousness, our economy really can’t handle any more defaults.
The number of homeowners that are upside down on their mortgage loans is putting more and more pressure on our already weakened economy. People aren’t going to be spending as much if the value of their home is drastically reduced. Why? Because people aren’t going to feel as “rich” and they will be forced to do a better job at expense tracking in seeing where every penny is going.
As the number of homeowners that owe more than their home is worth rises, the number of eventual foreclosures will also continue to rise. It is much harder to refinance or sell a home if the value of the home is less than the debt. People nowadays just aren’t in a financial position to come up with thousands of dollars in cash to pay off their mortgage loan. This will lead to more people having to simply walk away from their home and let it go into foreclosure. Every time a home is foreclosed on, it weakens the value of the other homes in the neighborhood.
Imagine this epidemic that is sweeping across the nation. Over 75.5 million households in the U.S. own their homes. The value of homes has been reduced by 30 percent in some areas. This means that 12 million people owe more on their home than it is worth. That is roughly the same as the entire population of New York City, Los Angeles and Chicago (the three largest cities in the United States).
Hopefully, the new bailout bill will help keep people in their homes. Luckily, the vast majority of Americans are still paying their mortgages on time and still have equity in their homes.
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October 2nd, 2008 Admin
The Bailout Bill is Passed by the Senate
The U.S. Senate has now made it possible for the House of Representatives to vote on the bailout bill again. Many House members would rather avoid the subject, but can’t. The bailout bill is the largest proposed financial rescue plan in U.S. history. It has been a major topic of debate for the last several weeks. Millions of people are infuriated with the bill but lawmakers insist that it is absolutely necessary to ward off a deep, long financial recession.
The first time the bill reached the House of Representatives, it was just the plain old bill. House members were concerned about the number of taxes it would place on the taxpayer. This time around is a different story. The bill has been entirely revamped and loaded with tax cuts and other incentives. These incentives are meant to entice House members who voted against the original bill. The rejected first bill caused the stock market to face a record drop, something everyone is trying to avoid this time around.
The new bailout bill was passed in the Senate with a 74-25 vote. The House is expected to vote on the new package on Friday. Until then, lawmakers will hold their breath and hope fore the “best.” Today will be spend “sweet talking” those members who voted against the original bill. The problem is that the bailout bill was never in danger of being rejected in the Senate. So, just because the bill was approved in the Senate yesterday, doesn’t mean anything as far as the House of Representatives goes.
Here’s how the new plan works. It would allow the government to spend billions of dollars to buy bad mortgage loans and securities and other assets held by troubled banks and other financial institutions. If the plan works, it would help frozen credit to begin moving again. This would prevent a serious recession. The original bill was rejected because 133 House members feared that it wasn’t in the best interest of the tax payer. It allowed company CEOs to be rewarded even when their companies failed. CEOs would be rewarded while the taxpayer bailed them out.
This isn’t the case with the new bill. The newly approved bailout bill (by the Senate) does not allow these “golden parachutes” to continue. Instead, it implements “growth-oriented tax cuts.” The new bill seems to have a benefit for everyone. It provides help for rural schools for people in the West, disaster aid for people in the Midwest and South, and it extends the deductibles of state and local taxes to help states without income taxes (mainly Florida and Texas).
Lawmakers are trying to get the bill passed as quickly as possible in order to get our economy back on track. The financial crisis is already being felt by ordinary citizens like you and me. People are feeling the crunch in terms of hard to get credit and retirement accounts that really aren’t moving anywhere. Let’s hope that something can be done to get our economy rolling again.
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