Home Loan Modifications May Save The Farm

By Clint Goodwin

After being in the mortgage industry from 1999-2004, I became very familiar with what was actually going on. I often wondered how we'd get out of the bad loans that were being done by my clients by the thousands. After a great deal of financial pain, it sounds like there may be a solution via the "relatively new" home loan modification product.

Historically banks have been reluctant to cooperate with borrowers on loans they've signed off on. However, current economic conditions, coupled with the latest bailout bill Washington has recently passed, may make this a much more attractive offer to the banks. Let's face it, it's seldom in the bank's best interest to knock off 2 or 3 points on the interest rate, or even thousands of dollars on the principle of a loan. But it now looks as if this may not cost banks anymore than a little paperwork, thanks to the US taxpayer. Suddenly, this has never been a more viable option than it is now for both banks, and borrowers.

Despite the turmoil we keep hearing about the economy and the credit markets, this particular product may be the shining light that saves both parties. Although it seems the government is still hammering out the details, rest assure there will be a frenzy to see who can get in line to get money first. The rumor is that banks are readily taking these home loan modification applications, and prioritizing them based on who's in the worse shape, and making very attractive offers. That's right, the worse loans get to the front of the line, but this is not to say the better loans don't get help. If you can show some kind of hardship, such as lose of income or a medical disability (there's more), what was once signed off as "A" paper, is now on the table for renegotiation.

I've talked to a few of these loan mod outfits. They're seeing banks settle on 3% rates, and even knocking off 40-60% of the principle (on 2nd mortgages especially). Sound too good to be true? There's almost 1 trillion dollars to spend on saving the American farm, and chances are this may be one of the few opportunities left for the American taxpayer to get some of that money back from Uncle Sam in a very substantial way. Remember, a 1% drop in your rate equates to about 450.00 per month on your payment for every 100K you borrow. Get a 3 point adjustment, and you're getting a hefty monthly bailout!

You can count me in. I submitted my application to Safe House Inc.

http://www.loanrepaircenter.com

My loan is at 6.625%, and have a lose of income claim. They have a simple 3 page form you fill out, and then let you know if you're qualified to get a loan mod. They contacted me and said I was approved. They also have a team of attorneys, and former loan processors who used to be with New Century Mortgage. They can do loan mods for any bank and there's a fee of $2995.00, however, no closing cost. The process is much like a home loan in that you go to the closing table with your attorney to finalize the process. We'll see and I'll keep everyone posted!

Debt Payoff Strategy The Snowball

by Destroy Debt

When considering many of the inventions that we use regularly, the credit card is a relatively new idea; the first credit card that could be used at more than one merchant was issued in 1950. Frank McNamara started the “Diner's Club” credit card company with about 200 card holders, and it was also the start of the vicious cycle many credit card users fall victim to: charging purchases when you don't have the cash to buy them, and then struggling to keep up with the monthly payments because of high interest rates and spending outside of your means.

The average credit card debt held by the typical American is over $8500. As any credit card holder knows, the interest on a credit card causes you to pay more than double the amount you've spent on the card, if you only send the minimum payment and never make any late payments. That number increases when you are late sending payments, thanks to the addition of “late fees”.

Some people attempt to play “credit roulette” to pay down their credit. This is a game where you take out a loan to pay off a credit card, or you transfer credit card debt from one card to another, hoping to take advantage of a lower interest rate or promotional offer. While this will work for awhile, eventually you will have difficulty getting new offers and places to transfer the debt to, or you'll miss the fine print on one of the offers and end up paying more interest than you thought, defeating the purpose of the balance transfer.

So how can the average individual pay off their credit card debt without bankruptcy, without joining a credit counseling service (some credit counseling services are very helpful, but beware of others who charge high fees to combine your credit card debt and end up costing you more money than you would have paid on your own!) and without having to get second and third jobs?

One of the best techniques for paying off credit card debt (and other debts as well, for that matter) is the snowball technique. In the same way that a snowball gathers more snow and grows as it rolls down a hill, your payments to your creditors will grow as you pay off one debt and then apply that payment to your next creditor.

Make a list of each of your creditors, including their minimum monthly payment, the total amount owed, and the interest rate you are being charged. The debt that has the least amount owed will be the first creditor you will concentrate on paying off. You'll pay the minimum amount owed on each of your accounts except for that one, sending as much as you can to this creditor to pay it off.

For example, let's say you have three credit cards. Credit card one has $7,000 owed at 20% interest, and a minimum monthly payment of $80, credit card two has $5,000 owed at 18% interest and a minimum monthly payment of $45, and credit card three has $2500 owed at 21% interest with a minimum monthly payment of $30. You're going to send minimum payments to credit card's one and two, and send as much as you can afford to credit card three, until it is completely paid off. Let's say you can afford to send $100 to credit card three. Once you've paid the account off, write the company and cancel the account. This removes it as ”available credit” on your credit report and helps your credit score. So now you have an additional $100 a month. You'll now concentrate on credit card two, which is now your lowest debt, now slightly less than $5,000. The payment you'll send to credit card two will be $145, since you had already been sending the minimum amount of $45, and you're adding the payment from the first card that you paid off. The snowball has gathered more snow! Now, once you've paid off your second credit card, you will have an additional $145 per month to send to your last credit card, to which you had already been sending $80. The new payment to credit card one is $225 per month- almost three times the minimum amount due.

Using the snowball technique is not an overnight solution, but you most likely didn't obtain all of this debt in one night, either! It is an easy method to apply, and will get you out of debt much faster and at less interest than if you just sent the minimum to each card every month, and works much more effectively than trying to send an additional few dollars to each account every month.

How to Avoid Credit Limit Charges

by Latoya Irby

Most standard credit cards have a credit limit, the maximum amount you can charge without facing a penalty. Though creditors give you a limit for charges, they'll actually let you go over the limit, but charge you for doing so. Going over your credit limit can have some costly effects.

First, your creditor will likely charge an over-the-limit fee of as much as $39 each month your balance is over your credit limit.

Second, your interest rate can increase to the card's default rate, which in some cases is as high as 31%. This increased interest rate makes it more costly to carry a credit card balance beyond the grace period.

Lastly, your credit score takes a hit. Since 30% of your credit score compares your debt level to your credit limits, having an over-the-limit balance will cost credit score points. (See 15 Credit Score Killers.)

Here are some ways to avoid the costs of going over your credit limit.

* Know your credit limit. Not knowing your credit limit is a disaster waiting to happen. It's much easier to go over your limit if you don't know what it is. To find out your credit limit, look at your billing statement. Since creditors sometimes raise and lower credit limits, it's a good idea to monitor your limit regularly.


* Don't expect your creditor to stop you. It'd be nice if your credit card was declined for purchases that put you over your limit. Unfortunately, your creditor will let you exceed your limit. After all, they make money when you do it, so why would they stop you? It's up to you to avoid swiping your card when you're in danger of going over your limit.


* Enroll in balance alerts. Some credit cards send alerts to cardholders when their balance is within a certain percentage or dollar amount of their credit limit. If your credit card offers this type of alert, sign up for it.


* Keep your balance low. A low balance gives you room to make purchases without going over your limit. Not only that, it's better for your credit score. A good credit card balance is 30% of your credit limit or lower. That's a balance of $300 or less on a card with a $1,000 limit.


* If you're not sure, check. Anytime you're unaware of your balance and credit limit, check before making a purchase. Many credit cards have an automated line available 24/7 for checking this type of information. Use the customer service number on the back of the credit card. If you have a cell phone, you can even call from the store before making your purchase.

How to Survive the New Credit Crunch

by Lynette DeNike

If you breathed a deep sigh of relief, believing you escaped financial fireworks set off by the mortgage madness, that relaxing exhale might have been premature. Chances are you will soon be receiving fat envelopes from your credit card companies containing important changes to interest rates, fees, grace periods, and limits.

Why? The same banks that issue the most credit cards rank among the highest volume lenders of adjustable rate mortgages, also called ARMs. These loans typically start with low monthly payments and then reset higher -- sometimes much higher -- between two and five years later. As you've probably read, a growing number of borrowers are finding it impossible to pay the reset cost of these mortgages. Banks are experiencing an increase in delinquent accounts and foreclosures. They are beginning to lose money and are taking some of the following actions:

1. Increasing interest rates. You may see minor changes with interest rates rising only a couple of percentage points. Or you could be offered a new variable rate account with interest changing monthly. But watch out for this killer: a spike interest (up to 34 percent) if a customer makes one late payment on any credit account.
2. Higher late fees and over-limit fees. Because every credit card company is different, it's essential that you read the tiny, boring print explaining your fees. Be certain you know how to prevent these unnecessary charges.
3. Shorter grace periods. A grace period is the time between the date a monthly statement was prepared and the date the payment is due. For many years this was about 25 days. Recently, some lenders have been shortening this payment cycle. Beware of accounts with very short or no grace periods. You risk creating a history as a late payer, which will destroy your credit rating.
4. Lowered credit limits and less frequent limit increases.

If you receive notification of account changes, your recourse is somewhat limited. You have the right to reject the change. This choice will probably require you to close your account. If it is an account you've used regularly and paid on time for the past six months or longer, you want to keep it open because your credit history makes up approximately 30 percent of your credit score.

Purchases that were made under the original account terms will be paid off under those same terms. You can accept the new account terms, pay off the existing balance under the old rules and stop using the account to carry a balance from month to month.

After the old balance is paid off, use the account once a month to make a very small purchase and pay it off immediately. The account will remain active. On your credit report it will reflect an ongoing responsible use of credit. Buying small items that use a tiny portion of your account limit and paying it in full each month means you won't pay exorbitant new interest rates while you are taking action to raise your credit score.

If you must find an alternative to your current credit cards, an online financial data accumulator called Bankrate.com provides a no-cost service that allows consumers to compare credit card terms and availability nationally and by state. Unlike ad-sponsored sites, Bankrate attempts to provide accurate data for every reputable lender. If your credit scores are high, there are still zero percent introductory cards available, although many have shortened the initial low-interest period. Try to lock in the terms to follow the introductory period.

Bankrate negotiates interest rates and fees lower than those offered to the public by many banks. Be sure to mention that you're looking at the Bankrate Web site when you speak with lenders so you get their lower rates.

Do not give anyone your social security number or personal information until you’re ready to open an account. A company with a social security number will check your credit. Each time your credit is checked, between 5 and 30 points get shaved off your credit rating. When you decide which account you prefer, call that bank back and complete the application as a Bankrate referral.

Tighter credit requirements will be with us into the foreseeable future. Now is the time to reduce debt, manage credit wisely, and actively plan for ongoing restrictions.

What Does Bankruptcy Discharge?

by AllBusiness

For bankruptcy purposes, the term discharge refers to the legal eradication of a debt. A debt that is discharged can no longer be enforced against the debtor; however, any liens securing the debt may survive the bankruptcy case.

Normally, a bankruptcy discharge means that the individual debtor’s financial liabilities are erased or wiped out. When a discharge is granted, it protects the debtor from personal liability on the discharged debt. However, a discharge is only allowed for certain debtors and for certain debts. For example, non-individual debtors cannot obtain a discharge in a Chapter 7 bankruptcy. Additionally, if a partnership or corporate debtor is liquidating under Chapter 11, and will cease operations upon completion of the plan, the debtor cannot receive a discharge.

Debtors may be deprived of a discharge if they’ve committed fraud against the court by lying, being uncooperative, or concealing or destroying estate property. In these cases, debtors are denied bankruptcy and will remain liable for pre-petition debts.

Certain debts are not dischargeable under Chapter 7, including:
* debts resulting from fraud, misuse of funds, embezzlement, or larceny
* debts that arise under false pretenses, including bogus representation, fraud, or false financial statements
* debts for certain taxes
* certain debts that result from the purchase of luxury merchandise or cash advances
* obligations a debtor neglects to list in the bankruptcy schedules
* alimony, child support, and other debts arising out of a divorce or separation
* student loans
* orders of restitution and debts resulting from willful and malicious injury

In cases of Chapter 11, debtors may receive a discharge of all debts that occurred before the plan was confirmed. However, in cases of individual debtors, the exceptions to discharge established by Section 523 of the Bankruptcy Code pertain. For more information on this topic, check out Chapter 11 Bankruptcy and Discharged Debts.

In Chapter 13 cases, and with a few exceptions, obligations detailed within the plan will be discharged when all payments under the plan have been made. The only debts not discharged under Chapter 13 are:

* criminal fines and restitution
* obligations not listed on the debtor’s bankruptcy schedules
* debts for spousal maintenance, alimony, and child support
* student loans
* debts related to drunk driving convictions

These exceptions apply to individuals only; corporations are not eligible for discharges. That said, under Chapter 7 corporations are allowed an orderly liquidation directed by the trustee, and without shareholder expense. Creditors are guaranteed compensation in accordance with available resources and according to claim priority. In addition, the corporation’s previous management is assured that assets remaining after all Chapter 7 expenses have been paid will be used to pay taxes, for which they as individuals may be legally responsible.

Dischargeable debts for Chapter 7 include:

* auto accident claims
* business debts
* guaranties
* income taxes that aren't priority taxes
* judgments
* leases
* medical bills
* negligence claims
* personal loans and credit card debts
* tax penalties over three years old

Debts that are not dischargeable include:

* accident claims involving intoxication
* child or family support
* criminal fine or restitution
* debts listed in a prior bankruptcy where the debtor was denied a discharge
* penalties (other than tax penalties) payable to the government
* recent taxes
* student loans
* trust fund taxes
* unscheduled debts

A creditor who wishes to contest the discharge of the debts must promptly take the action necessary to advance his claim.

The Truth about Debt Settlement and Your Credit

by DebtShield

Misinformation about credit and an incomplete understanding of debt settlement can muddle facts about how this debt relief option can affect your credit score. Fortunately, as consumers learn more about their credit score, and its influence on their financial lives, they want to know how debt settlement could affect it. Financial education and awareness can build a better understanding of the real correlation between debt settlement and your credit.

Debt settlement can be a viable debt relief option for people who cannot manage to repay their debts and want to avoid filing bankruptcy. Many people who qualify for debt settlement already have poor credit because they are, or are about to, fall behind in their payments. For people who have maintained good credit, debt settlement can be damaging. Creditors send your account to their collections department, if they haven’t already, and they may report to the credit bureaus that you are missing payments. It is important to understand your credit may be negatively affected before enrolling in a debt settlement program.

But perceptive is important. Here are some points to consider:

• If you are behind on payments to your creditors, your credit is likely already damaged.
• You may be able to get out of debt faster with debt settlement than with credit counseling and rebuilding your credit may be easier once you’re out of debt.
• If you are truly in financial distress, your credit may suffer with or without debt settlement.
• As with debt settlement, other debt relief options can also have an affect on your credit.

If you have great credit and the ability to pay off your debts, you are probably not qualified for a debt settlement program. Otherwise, take a look at the larger picture to balance your desire for good credit and your need to reduce your outstanding debt.

Some people may have specific reasons for avoiding damage to their credit. For example, if you are planning to buy a home in the near future, damaged credit could interfere with your plans. The bottom line is to decide what’s more important: maintaining decent credit with the ability to obtain loans and additional credit, or, attempting to reduce your current unsecured debt.

Debt settlement programs are designed to settle all of your enrolled, unsecured debts, so you can begin rebuilding your credit right after you graduate. Depending on your situation and your goals, temporary damage to your credit may be worth it to get out of debt.

If your credit is your only concern, you may want to consider the bigger picture before you completely rule out debt settlement as a debt relief option. Your present and potential credit standing and your overall debt situation must all be considered before you commit to any debt relief option.

If you have questions about debt settlement, you can learn more about the process and learn whether it’s the right solution for you.

How to Stop Debt Collector Harrassment

by: Debbie Dragon

There are some debt collectors who take their jobs very seriously, but completely ignore regulations designed to protect consumers. They will do or say just about anything to get their clients (debtors) to repay their debts. Debt collectors are typically hired by lenders to attempt to collect a debt on their behalf, although sometimes, debt collectors are another department within the same company. In 1977, the Fair Debt Collection Practices Act was passed to provide protection from consumers from abusive third-party debt collection practices. Here is the protection this act provides to you – and what to do if a debt collector is in violation of any of these provisions:

What Debt Collectors CANNOT Do:

• Call you at work if you've specifically told them your employer doesn't approve of phone calls at the workplace.
• Call you before 8am or after 9pm.
• Lie to you
• Imply that you've committed a crime.
• Conceal their identity.
• Ignore a written request from you that asks them to stop contacting you via telephone.
• Harass or abuse you.
• Send you a notice about a court judgement that isn't real.
• Call someone else, other than your spouse, to talk about your debt.
• Use profanities when talking to you on the phone
• Threaten you or your personal property with violence.
• Publish a listing (except to credit reporting bureaus) regarding your debt.
• Contact you if you have an attorney to represent you regarding your debt.
• Threaten to garnish your wages if they have no intention of doing so.
• Add fees and additional charges to the amount you owe.

Are Your Fair Debt Collection Practices Act Rights Being Violated?

The Fair Debt Collection Practices Act offers protection to consumers who are in debt – but only if they know how to use it. If your rights under the FDCPA are violated, you have up to one year to file a lawsuit against the debt collector. If you are awarded the case, you will be reimbursed for attorney fees, actual damages, and up to $1,000 additional money.

If you think your rights have been violated by aggressive debt collectors, you can do something about it under the Fair Debt Collection Practices Act.