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Monthly Archives: November 2008

Top 10 Questions About Loan Modifications

When a homeowner is distressed, the loan modification process can be both confusing and frustrating. If you are thinking about asking your lender about a loan modification to keep your home out of foreclosure, you should start by doing as much research as possible in order to prepare yourself and present an excellent loan application.

In order to educate you about loan modifications and let you know what to anticipate, here are the Top Ten Questions people ask regarding the loan modification process:

1. What is the definition of a loan modification?

A loan modification permanently alters at least one term of a borrower’s home loan, allowing the loan to be reinstated and resulting in an affordable payment for the homeowner.

2. Is the lender allowed to add late charges into the loan modification?

According to HUD, the accumulated late charges should be dropped by the lender during the process of the loan modification — this changes depending on the type of loan, but will always require a complete breakdown and description of all fees and penalties from your lender.

3. Do banks have the right to force an inspection of the inside of a property if its condition is in question?

Certainly, a lending institution has the right to investigate anything the could materially affect the value of the property in a negative way.

4. What qualifications are required in order to obtain a loan modification?

The most important thing your lender will want to evaluate is your ability to afford the modified monthly payments, now and in the years to come.

The lender is going to request documentation of your income and a complete statement of your financial position, documenting your income and expenses, so the lender can determine if you will be able to make your modified monthly payments.

5. To qualify for a loan adjustment, do I need to be behind on payments?

Currently, many lenders will accept loan modification applications from homeowners who have not yet fallen behind in their payments, but who can prove that with upcoming interest rate increases, they will be unable to afford their loan payments under the existing terms of the loan.

You should contact your lender immediately so that you can begin the process of loan modification, no matter if you are delinquent or not.

6. What type of hardships are considered acceptable?

Every homeowner has their own personal reasons that caused them to fall behind on their home loan, but usually the lenders believe divorce/separation, loss of income, death of spouse, co-owner or family member, sickness, relocation of jobs, and military service are all acceptable reasons to qualify for loan modification. It helps to include a convincing letter in your loan modification application; this can prove to be a very valuable piece in successfully getting your loan modification approved.

7. Will this help me to avoid foreclosure?

Yes, the ultimate goal of a loan modification is to avoid foreclosure. While working with your lender to find a solution to your financial problems, your loan is brought up-to-date and the foreclosure process is stopped.

8. Is it possible to add my missed payments back into my new loan modification?

Yes, you can add your past due payments into the new loan; this way they can be amortized over the loan repayment period and your loan will be brought up to date.

9. Will I be able to complete a loan modification by myself or should I seek representation?

This is your choice and also depends on how comfortable you feel about dealing with your lender; your financial situation could also make this decision for you because most loan modification companies ask for a large upfront fee. No matter what, the first step is learning everything you can about loan modifications, your rights as a borrower, and how to successfully secure approval of your loan modification application.

10. How do I begin the process to have my loan modified?

Educate yourself as much as possible about the process involved in loan modification before you get in touch with your bank’s loss mitigation department or a loan modification company.

The Internet is loaded with information about loan modifications, and it can be quite daunting to wade through all of it and organize it into a format you can understand. A great source of information for you would be The Complete Loan Modification Guide. This is an inexpensive, user friendly, instructional guide that will walk you through the Seven Steps to a Successful Loan Modification; you will also receive all of the required forms with complete instructions on how to fill them out. Instructions will be given on how to write a hardship letter that is short and to the point, with sample letters added for your reference. Reading the Complete Loan Modification Guide is going to spare you a great deal of aggravation by walking you step by step through the process of securing a loan modification. Read it before you talk to your lender or loan modification company. Get moving and stay informed!

Larry Benton is a Certified Mortgage Consultant (CMC), with special training in forclosure abatement, loan modification, and other loss mitigation techniques and processes. If you, or someone you know needs assistance or more information contact Larry directly at 877.805.2905 or larry@themortgagecoach.net or www.themortgagecoach.net

 
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Posted by on November 23, 2008 in Forclosure Workout

 

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Protecting Your Credit During Divorce

When a marriage ends in divorce, the lives of those involved are changed forever. During this time of upheaval, one thing that shouldn’t have to change is the credit status you’ve worked so hard to achieve.

Unfortunately, for many, the experience is the exact opposite. Unfulfilled promises to pay bills, the maxing out of credit cards, and a total breakdown in communication frequently lead to the annihilation of at least one spouse’s credit. Depending upon how finances are structured, it can sometimes have a negative impact on both parties.

The good news is it doesn’t have to be this way. By taking a proactive approach and creating a specific plan to maintain one’s credit status, anyone can ensure that “starting over” doesn’t have to mean rebuilding credit.

The first step for anyone going through a divorce is to obtain copies of your credit report from the 3 major agencies: Equifax, Experian®, and TransUnion®. It’s impossible to formulate a plan without having a complete understanding of the situation. (Once a year, you may obtain a free credit report by visiting http://www.AnnualCreditReport.com.)

Once you’ve gathered the facts, you can begin to address what’s most important. Create a spreadsheet, and list all of the accounts that are currently open. For each entry, fill in columns with the following information: creditor name, contact number, the account number, type of account (e.g. credit card, car loan, etc.), account status (e.g. current, past due), account balance, minimum monthly payment amount, and who is vested in the account (joint/individual/authorized signer).

Now that you have this information at your fingertips, it’s time to make a plan.

There are two types of credit accounts, and each is handled differently during a divorce. The first type is a secured account, meaning it’s attached to an asset. The most common secured
accounts are car loans and home mortgages. The second type is an unsecured account. These accounts are typically credit cards and charge cards, and they have no assets attached.

When it comes to a secured account, your best option is to sell the asset. This way the loan is paid off and your name is no longer attached. The next best option is to refinance the loan. In other words, one spouse buys out the other. This only works, however, if the purchasing spouse can qualify for a loan by themselves and can assume payments on their own. Your last option is to keep your name on the loan. This is the most risky option because if you’re not the one making the payment, your credit is truly vulnerable. If you decide to keep your name on the loan, make sure your name is also kept on the title. The worst case scenario is being stuck paying for something that you do not legally own.

In the case of a mortgage, enlisting the aid of a qualified mortgage professional is extremely important. This individual will review your existing home loan along with the equity you’ve built up and help you to determine the best course of action.

When it comes to unsecured accounts, you will need to act quickly. It’s important to know which spouse (if not both) is vested. If you are merely a signer on the account, have your name removed immediately. If you are the vested party and your spouse is a signer, have their name removed. Any joint accounts (both parties vested) that do not carry a balance should be closed immediately.

If there are jointly vested accounts which carry a balance, your best option is to have them frozen. This will ensure that no future charges can be made to the accounts. When an account is frozen, however, it is frozen for both parties. If you do not have any credit cards in your name, it is recommended you obtain one before freezing all of your jointly vested accounts. By having a card in your own name, you now have the option of transferring any joint balances into your account, guaranteeing they’ll get paid.

Ensuring payment on a debt which carries your name is paramount when it comes to preserving credit. Keep in mind that one 30-day late payment can drop your credit score as much as 75 points. It is also important to know that a divorce decree does not override any agreement you have with a creditor. So, regardless of which spouse is ordered to pay by the judge, not doing so will affect the credit score of both parties. The message here is to not only eliminate all joint accounts, but to do it quickly.

Divorce is difficult for everyone involved. By taking these steps, you can ensure that your credit remains intact.


Larry Benton Is a Certified Mortgage Consultant (CMC), a Certified Senior Advisor (CSA) and affiliated with 1st Metropolitan Mortgage, a Licensed Broker in MD, DC, VA, DE, PA, TN, GA, AZ. & CA. If you would like to obtain a free Consumer Credit Scoring Booklet or learn more about how to protect your credit, please contact Larry at (877) 805-2905 or visit on the web at http://www.theMortgageCoach.net

 
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Posted by on November 23, 2008 in Credit Repair, Divorce

 

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Avoiding the scams of “FREE CREDIT REPORTS”

Did you know that identity theft often occurs when you are obtaining your Government Free Annual Credit Report? Therefore, you must protect yourself before you become another victim of America‘s fastest rising crime.

So How Is Identity Stolen With The “Free Credit Report” Scam?

1.  “Phishing” is the name of one of the primary scams. It has become increasingly popular. It happens when you receive emails requesting your contact and social security number from individuals pretending they are a legitimate company.  For instance, your bank will never request your social security number or private information so that they can verify your account or check your credit.

2.  Another popular way is to go to a website advertising a “Free Credit Report.”  It asks you for your name and social security number which you happily provide.  Well guess what?.. If it is a fake website, you have just had your identity stolen!

In either case, you may actually even receive a copy of your credit report, because they forward your information to a real website which in turn sends you a free copy of your report.  In reality, the identity thieves have started your nightmare and you don’t even know it.  This is a very good reason of why you should NEVER put your personal information into a form from an email.  If it is a link from an email, don’t share your info either.

Here are some obvious signs of Internet Identity Theft

  • Statements and bills are coming late or not at all to your home
  • Collection agencies or creditors will contact you about accounts you do not have or charges you have not made.
  • There are transfers or withdrawals that have not been made by you on your financial account statements
  • You have been denied credit or are being offered unfavorable credit terms (i.e. a high interest rate with no underlying explanation)
  • You are getting letters or calls from businesses or debt collectors about products or services that you did not purchase.

Identity Theft: How bad is it?

In the past year, 7 million people became identity theft victims. The average loss to an American is thirty hours of their time and over $500 in financial losses.

In the last year, total personal losses have been over five billion (with a “b”) dollars.

On average, one out of every seventy-nine shopping sprees is one involving stolen identity.

What you should do if you become the victim of Identity Theft:

  1. First, alert the fraud department of the three agencies which monitor credit. Tell them you are a victim of identity theft and ask them to put an alert on your credit information. (Unfortunately, you may be required to pay for this service.)
  2. In addition, get your credit report from these three large credit bureaus Experian, Equifax and TransUnion and closely scrutinize your credit reports looking for credit cards you did not order, inquiries you did not make and other suspicious activities.
  3. Next report your case, including all the details to your local police department.
  4. To report identity theft to the central department of the American government for fraud protection, call the toll-free hotline at 1-877-IDTHEFT.
  5. Close all accounts on the credit reports that you believe were opened fraudulently utilizing your name.
  6. If your bank or checking accounts, or even your ATM card, have been compromised then shut those accounts down as soon as possible.
  7. Your local postal inspector should be alerted, as they undoubtedly have used your personal address info, this address needs to be immediately terminated and you should create a new postal box.
  8. Contact the Social Security Administration to make sure that your name and earnings are all correct.

When trying to get a credit report it is important that you know the possible scams and how to avoid them.  You can receive a free credit report today by calling me at 877 805.2905 or email me larry@theMortgageCoach.net .  Together we can review your report and help you avoid an identity theft nightmare.

Larry Benton CMC, CSA of 1st Metropolitan Mortgage, is a nationally recognized expert specializing in helping release his clients from the “credit prison” that too many people find themselves in. More information is available on his website www.theMortgageCoach.net .

 
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Posted by on November 23, 2008 in Credit Repair

 

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Myths The Credit Bureaus Want You To Believe

Myth No. 1

It is easy to dispute a credit report. Consumers can resolve their own issues.

To be honest, it is simple to challenge a credit report. However, as an everyday person, it’s amazingly difficult and frustrating to get results from the credit bureaus. Here’s why.

This is a little-known fact. More complaints to the Federal Trade Commission involve credit bureaus than any other type of company. The major credit bureaus have paid fines of $2.5 million over the years due to failure to respond properly to charges.

The main objective of credit bureaus is to protect their profits. They are NOT government agencies. They are for profit organizations. Anytime they have to investigate a consumer disputes it eats into those profits. Investigations take up time and energy too. The credit bureaus do everything in their power to make restoring your credit exceedingly difficult, short of sparking more massive lawsuits.

Attempting to restore your own credit means you must be willing to spend time learning about the process. This is why it is so difficult when you are inexperienced.  It most cases you may be less effective than if you hired a professional. Realize that credit restoration will most likely take longer than you expected.


Myth No. 2

A negative item, successfully removed from your credit report will simply reappear again.

The reality is that a creditor has 30 days to verify a dispute.  If the credit bureau has not heard from the creditor within that timeframe, they must delete the item from your report.  Sometimes the bureaus will perform a soft delete.  This is where they delete the item from your report but, will reinsert the item if they hear from the creditor within a week or two of the 30 days.

If this happens, the item can be disputed again.  However, most of the time, once an item is deleted, it is gone for good.  By using our preferred attorneys, you can be sure your item will be disputed over and over again until it is removed.  We have experienced a 96% success rate with this.


Myth No. 3

Bankruptcies, foreclosures and tax liens can never be taken off your credit report.

Approached correctly, any negative listing can be removed.  That is why it is best to work with a professional.  They have the experience and know how to remove these items.


Myth No. 4

The credit agency permits a 100-word paragraph to be entered on an account to explain the situation. Creditor’s take this statement into consideration when they’re weighing their options about extending credit.

This seems reasonable, but it’s not correct. When we talk about creditors, we’re talking about companies who are loaning money for credit cards, mortgages, cars, department store credit cards. Very few of these companies will consider any information you submit in a paragraph explanation. The only items verified on the statement are the negative items on your report.

The first thing we want to delete from your credit file would be the 100-word explanation. In essence, the explanation is seen as an admission of guilt. It’s actually the last thing you want to do. It verifies that something happened. You don’t want to do that.


Myth No. 5

Paying off a past-due account (like a collection account or a charge off) will change your account to a “paid” status and it will no longer reflect negatively.

It is nearly impossible to completely fix your credit unless you settle your unpaid debts. However, as strange as it may sound, paying off a debt can have a negative impact on your credit rating. Aside from bankruptcy, which can appear on your credit report for up to ten years, negative items may be kept on your report for up to seven years. The date of last activity starts the 7 or 10-year time period. Making a payment “resets” the clock because it is considered new activity. So if this item was two years old, when you make a payment on the collection, the two years are wiped away and you start at day one again. It appears to the credit scoring computer as an item that happened yesterday.

Anything that happened yesterday affects your credit score more than something from two years ago does. This will damage your report, as it looks like the credit bureau forced you to pay up. Since you can do more harm than good, even though your intentions are right, it is always best to work with a professional when trying to restore your credit.


Myth No. 6

Some people believe that a poor credit report can be off-set by building new credit.

Even one negative item on your credit report can have serious negative consequences. In today’s computer world, the decision to approve a new loan is rarely made by a human being. Your score is determined by a computer program.  One negative item can send interest rates soaring.

You can have a small amount of negative credit a year or two ago. The last year or two has been great. A couple of those older accounts, regardless of how much good credit you now have, can cause you to be declined for additional credit, make you pay higher interest rates and waste thousands of your hard earned dollars.

Myth No. 7

Credit bureaus are part of the government and are unquestionable.

The credit bureaus are in business to make an impression on their stockholders since they are publicly traded companies. They are NOT agencies of the government. In fact, the industry is one of the most heavily regulated.   It has recently been revealed in a survey, by an independent group, that over 70% of all credit reports have an error on them.  Due to the prevalence of mistakes, consumer protection legislation has been drawn up which allows the consumer the right to challenge the bureaus and force them to remove any incorrect data, information that is out-of-date or data that cannot be verified.


Myth No. 8

It is against the law for creditors to remove a negative-listing on my credit record. Negative-listings are required by law to remain on the credit report for at least seven years.

When talking to collection agencies, credit grantors or the credit bureaus, keep in mind that you can expect to be given all kinds of quasi-legal drivel by people who are over worked and under trained. The law states that negative information must be removed after seven years.  It sets a maximum, but not a minimum.  The credit bureau can remove an item whenever it suits them.


Myth No. 9

Many people share a belief that by getting a federal tax ID or altering a few numbers of their social security number, a new credit file will be created.

It’s extremely difficult to create a new credit file by this scheming, not to mention illegal, activity. A lot of people do it, but a lot of people also get into big trouble for doing it. This is not something that you want to do.

It might have worked 10, 15 or 20 years ago. But because of all the computer linking systems now, giving fraudulent information on a credit report is nearly impossible to get away with, let alone the fact that it’s a criminal offense.

It’s in your best interest to hire adequate representation. Face the music and confront the credit bureaus, armed with the rights that Congress has granted you through the consumer protection laws.


Myth No. 10

Credit counseling services can help you restore your credit.

Credit counseling services are agencies that are set up to help you renegotiate your credit cards and other debt. They put you on a budget and you make one payment to them. They in turn pay all the bills for you.

People who are in debt or who are trying to avoid going bankrupt can seek help from these nonprofit consumer credit counseling services. (CCCS™) However, these companies are controlled and funded by the credit bureaus and the credit grantors, like the big credit card companies. They actually fund these agencies.

Your creditors will usually make a note on your credit report if you’re working with one of these consumer credit counseling services. Potential credit grantors are scared off by this almost as much as a Chapter 13 bankruptcy. Some of the worst credit reports out there have been participants in a credit counseling service or similar program.

Larry Benton CMC, CSA with 1st Metropolitan Mortgage, specializes in helping release his clients from the credit prison that too many people find themselves in. To learn more about professional, lawyer-facilitated credit repair visit

www.themortgagecoach.net

When you or one of your friends finds yourself needing real answers and real solutions to credit issues, you can confidentially contact him at 410.573.0909  or larry@theMortgageCoach.net

 
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Posted by on November 23, 2008 in Credit Repair

 

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New HECM Rules can help seniors

New rules make reverse mortgages a better deal?
Retirees concerned about their decimated savings should take a second look at reverse mortgages.

Beginning November 1, 2008, homeowners everywhere may borrow up to $417,000. Previously, the Home Equity Conversion Mortgage program assigned various lending limits, ranging from $200,160 in rural areas to $362,790 in the most expensive housing markets. Existing reverse-mortgage borrowers may be able to refinance their loans to take advantage of the higher lending limit. Plus, the new rules cap the origination fee, previously set at 2% of the loan value, at $6,000.

And, in a major policy change, retirees will be able to use a reverse mortgage to buy a new home starting in 2009. “This provision could really transform the industry, says Peter Bell, President of the National Reverse Mortgage Lenders Association in Washington, DC.

How it works

With a reverse mortgage, homeowners 62 or older can tap the equity in their home in the form of a lump sum, line of credit, monthly payout or a combination of all three. You retain the title to your property and must continue to pay property taxes, insurance premiums and home-maintenance costs. Payouts are tax-free, but the income you receive may make you ineligible for certain state and federal benefits, including Medicaid, which is a major payer of nursing-home costs.

A reverse mortgage need not be repaid until the last homeowner moves out or dies, at which point the home may be sold to pay off the debt. Interest and fees accrue over the lifetime of the loan and could wipe out any remaining equity. But the loan-repayment amount may never exceed the market value of the home; even if home prices decline, your heirs cannot be held responsible for any shortfall.

Retirement-income solution

John and Phyllis Farrelly decided to take out a reverse mortgage to tap the equity in their paid-off home near Richmond, valued at about $300,000. They’re using the money to finance about $60,000 worth of needed improvements and to boost their monthly retirement income. “We can do some extra things now, such as travel,” says John, 75, who enjoys working in his home sculpture studio and cruising in his ’82 T-top Corvette. “We discussed it with our children and they said, ‘It’s your money — enjoy it,'” says Phyllis, 72.

As baby-boomers move into their retirement years with fewer pensions, inadequate savings and increasing health-care costs, reverse mortgages are well positioned to serve as a financial solution, says Brian Montgomery, commissioner of the Federal Housing Administration. Bell agrees. “We expect the growth of reverse mortgages to accelerate as seniors look for additional sources of income,” he says, “and because the new provisions of the Homeownership Act of 2008 broaden the market and make them more attractive.” To estimate the potential payouts and costs of a reverse mortgage — which can be substantial — and compare actual offers from several lenders, use the Reverse Mortgage Cash Calculator at AARP (www.rmaarp.com)

Buying a new home

Although the Department of Housing and Urban Development hasn’t officially announced the change, new rules allowing a reverse mortgage to be used to buy a home are expected to take effect January 1, 2009. Like traditional reverse mortgages, the maximum loan amount will be based on a combination of the value of the home, the homeowner’s age and prevailing interest rates.

Say an elderly couple lives in an old, two-story house. The house needs repairs, and they’re having a hard time negotiating the stairs. Instead of having to stay in a house that no longer meets their needs, they could sell the old house and use a reverse mortgage plus cash to buy a new, single-story home.

Here’s how it works. Assume the couple’s current home is worth $700,000, and they want to downsize to one that costs $500,000. If they pay cash, which many seniors choose to do, they’ll have $200,000 left to live on. But if they use a reverse mortgage to cover some of the purchase price — say, $200,000 — and pay the $300,000 balance with proceeds from the sale of their old home, they’ll double their cash reserve to $400,000 without ever having to worry about repaying the reverse mortgage while they live in the house.


Beware of scams

But reverse mortgages also have a dark side. In recent years, some unscrupulous lenders have pressured elderly borrowers into using their new found cash to buy annuities and other financial products that imposed high fees and limited access to their money. The new rules prohibit lenders from requiring reverse-mortgage borrowers to purchase additional products or services as part of the loan agreement.

In a recent investor alert, the Financial Industry Regulatory Authority, or FINRA, warned seniors to consider all of their options carefully before committing to a reverse mortgage. “Home equity is often a homeowner’s most valuable asset and most precious source of retirement security,” the FINRA alert states. “Consider all the risks and explore all of your options before taking out a reverse mortgage, and even then, use the loan funds wisely.”

 
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Posted by on November 23, 2008 in Seniors

 

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