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Foreclosure MIGHT be the better option for you.

For most homeowners, bankruptcy is often the last resort to prevent foreclosure. If you are facing foreclosure, consider the other options before thinking of bankruptcy. Filing for bankruptcy can have a disastrous affect on your credit. In fact foreclosure might be the lesser of the two evils.

When you file for bankruptcy, you loose all control over your finances. A court appointed bankruptcy will administer all your financial activities. The bankruptcy trustee will take over all your non-exempt assets and sell them to pay off your creditors. Bankruptcy will discharge most of your debts. But some debts are non-dischargeable. The most common types of non-dischargeable debts are

• Certain types of tax claims,
• Debts not set forth by the debtor on the lists and schedules the debtor must file with the court,
• Debts for spousal or child support or alimony,
• Debts for willful and malicious injuries to person or property,
• Debts to governmental units for fines and penalties,
• Debts for most government funded or guaranteed educational loans or benefit overpayments,
• Debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated,
• Debts owed to certain tax-advantaged retirement plans, and
• Debts for certain condominium or cooperative housing fees.

When you file for bankruptcy, all your assets except the exempt properties become the property of the bankruptcy trustee. The Bankruptcy Code defines “property” very broadly as all legal and equitable interests of the debtor and any property that is community property of the debtor and his spouse.  Even the property that you select as exempt property is property of the estate until the exemption claims are confirmed. The exempt properties are necessary for your fresh start. The exemption claims are confirmed before the creditors are allowed to participate in the distribution of the non-exempt property.

Bankruptcy filing includes costs payable to the government in the form of bankruptcy fees. Besides bankruptcy fees, you may also have to pay attorneys fees if you hire an attorney. While the overall bankruptcy process is simple, it may get complex at times and it is best to hire an attorney to do the work for you. Bankruptcy proceedings must be filed in a federal court having jurisdiction over your place of residence. State courts cannot hear bankruptcy petitions. Bankruptcy is governed by federal laws.

Bankruptcy is a legal procedure for dealing with the debt problems of individuals and businesses and discharges financial obligations. This procedure is covered under Title 11 of the United States Code (the Bankruptcy Code). The vast majority of cases are filed under the two main chapters of the Bankruptcy Code, which are Chapter 7 and Chapter 13.

Chapter 7 is the more common form of bankruptcy filing. A filing under chapter 7 is called liquidation. It is a kind of liquidation proceeding in which the debtor is allowed to keep aside exempt property whereas a trustee appointed by the court collects his non-exempt assets, sells them and pays off the creditors through the sale proceeds.

Chapter 13 bankruptcy proceeding allows the individual debtor to pay down his debts, either the entire amount or a part of it, with the help of a payment plan under the supervision of the court. Debtors filing this chapter can keep their assets with them while they follow the plan or after they have paid off the required portion of debt. It involves the rehabilitation of the debtor to allow him or her to use future earnings to pay off creditors.

Chapter 7 bankruptcy dissolves all debt and absolves you of the responsibility to pay it. Chapter 13 bankruptcy will reorganize your debt and creates a payment plan.

Choice of these plans is never easy. In fact it is not easy to decide whether foreclosure is worse than bankruptcy! It is always advisable to consult an attorney with your specific problems.

Act Now To Stop Foreclosure And Save Your Home

The biggest mistake you can commit when you fall behind on your mortgage payments is to wait too long to tell your lender what is going on. It’s never too late to do anything but to prevent foreclosure, it is better to be proactive than reactive.

Acting fast is very important. It is extremely important to contact your lender as early as possible, after you find yourself unable to make your loan payments. Most of the major lenders have programs for mortgage modification, forbearance, or other remedies that can help you prevent foreclosure. More than half the people who go into foreclosure never respond to letters from the lenders, nor contact the lenders. Your options become limited as time passes by. Contact your lender immediately and tell the lender about your situation. Once you contact your lender, they can allow payment delays, mortgage modification, and come up with new repayment plans, or they may negotiate a lump-sum payment.

When it comes to preventing foreclosure, every minute counts. Early contact – within the first 15 days of missing a payment – is critical in saving homeowners from the devastation of foreclosure. More than half of those in foreclosure did not call for help when they fell behind in their mortgage payments. Do not hesitate to contact you lender. There is nothing to fear about or be embarrassed.

You can get emotional or fear contacting the lender when you face foreclosure. But you must contact the lender. You are not alone. There is nothing to be embarrassed about missing a mortgage payment.

Remember your loan servicer – who you get your monthly statements from may be different from the one who actually owns your loan. If you are not sure whom to contact, call the number on the statement and they will advise you.

Explain your situation to the lender. Once the lender appreciates the situation, he may come up with a workable suggestion. Remember, all this time his aim would be the same as yours – you are able to pay and the house remains in your hands. This can be done by increasing the number of installments which you were required to pay. This will ease the situation for your and lender’s money also remains the same. In fact, as a simple calculation may tell, the lender gains financially. Depending on your situation and the status of your mortgage, there may be different options available to you including

• restructuring

• refinancing

• selling your home

• deed in lieu of foreclosure

Be honest about your situation, so they can help you find the right solution. Lenders usually offer a variety of solutions for people who have fallen behind on their mortgages including temporarily reducing or waiving payments, setting up short-term repayment plans to help you make up the deficit, adding the unpaid balance to the principal of your loan and increasing your payments slightly to cover the extra amount, refinancing the debt, arranging a repayment plan or modifying the loan by adjusting the interest rate or extending the terms to make it more affordable. These options are discussed in detail in the following chapters.

However, if your situation is really bad, the lender may even agree to make other concessions. For example, the lender may be willing take less money in settlement of your dues. Once the lender realizes that the situation of the borrower has become very unviable, it is time for the lender to retrieve whatever possible from a potentially bad situation.

If the lender feels that the only way of saving the situation is to reduce the financial burden on the homeowner, the lender may also agree to reduce the interest.

The lenders have even been known to reduce the principal. It all depends on what sort situation the borrower finds himself in. It goes without saying that the lender will not be happy to do this, but then again, he has to reassess the circumstances and then decide.

 If you cannot keep your home, your lender can work with you to avoid foreclosure and reduce the negative effect on your credit reputation. For example, the lender can permit a qualified buyer to take over your mortgage debt and pay the mortgage payments, even if the mortgage is non-assumable. As a result, you may be able to sell your property and avoid foreclosure.

Don’t just sign your home away and walk out. Negotiate. Whatever be your situation, never ever enter into any deal without consulting an attorney. Never make an impulse decision. Your instincts will drive you to make quick decisions in order to resolve defaults as soon as possible. Before taking any decision, weigh the pros and cons.

US Unemployment Over 10% as Housing Tax Credit Passes Congress

By Chris McLaughlin

Tax credit

It’s here!  The U.S. House of Representatives has just voted (403-12) to extend and expand the homebuyer tax credit, and it’s on its way to the President for his signature…he’s expected to sign it today.  Not only does it extend the tax credit, but it expands it.  The items carried over until April 30, 2010 are:  Amount of Credit ($8000 or $4000 married, filing separate) and Definition for Eligibility (May not have had an interest in a principal residence for 3 years prior to purchase).  The items added to the credit, from December 1 to April 30 are, for current homeowners:  Amount of Credit ($6500 or $3250 married, filing separate); Effective Date (Date of Enactment); Definition for Eligibility (Must have used the home sold or being sold as a principal residence consecutively for 5 of the previous 8 years); Termination of Credit (Purchases after April 30, 2010); Binding Contract Rule (So long as a written binding contract to purchase is in effect on April 30, 2010, the p
urchaser will have until July 1, 2010 to close); Income Limits ($125,000 – single $225,000 – married Additional $20,000 phase out); Limitation on Cost of Purchased Home ($800,000 Effective Date of Enactment); Purchase by a Dependent (Ineligible Effective Date of Enactment); Antifraud Rule (Purchaser must attach documentation of purchase to tax return).

Unemployment over 10%

According to the long-awaited report from the Labor Department, in October unemployment rose to 10.2% for the first time since 1983 – much worse than expected.  There was a net loss of 190,000 jobs in October, an improvement from a revised estimate of 219,000 job losses in September, but far worse than the 175,000 jobs forecast by economists surveyed by Briefing.com.  This is the 22nd straight month of job losses.  The Obama administration estimated last month that 640,000 jobs were created or saved by the federal stimulus package passed earlier this year but, while that makes good politics, it’s nothing compared to the 7.3 million jobs that have been lost by the economy since the start of 2008.  Today’s report comes one day after Congress voted to extend unemployment benefits by up to 20 weeks.

There are now a record 5.6 million people who have been unemployed for six months or longer, as the average time an unemployed person has been out of a job hit 26.9 weeks. According to a survey of top forecasters by the National Association of Business Economics last month, the consensus estimate among economists was that unemployment would hit a high of 10% in the final three months of this year and the first quarter of 2010.  But get this – the five economists with the most bearish forecasts had expected unemployment to rise to 10.2% in the fourth quarter of this year before hitting 10.5% in the first half of next year.

Short sales don’t hurt credit scores

Sarah Davies, vice president of VantageScore, at the Loan Modifications Conference now underway in Dallas, Texas, says restructuring plans on a mortgage, whether in the form a forbearance, modification or short sale, have a relatively insignificant effect on the consumer’s credit score.  VantageScore measures the generic consumer’s credit score and his or her likelihood of slipping into 90-plus day delinquencies on a scale of 501 to 990. If a servicer reduces a consumer’s original loan amount from 10-to-30%, the consumer’s credit score is only increased by three to 18 points, depending upon the consumer’s initial standing. Borrowers in the top-tier of credit scores, averaging an 862, receive only a three-point increase. Lower tier borrowers, in the 625 range, can receive an 18-point jump.  The credit score increases because the total amount of debt owed is reduced, and the borrower becomes inherently more reliable, Davies said.  However, foreclosure and bankruptcy c
an more severely affect the consumer’s credit score. If a borrower, who maintains good credit, is foreclosed, his or her credit score can decrease by as much as 140 points. Bankruptcy for someone in good credit standing results in a reduction of 365 points from the consumer’s credit and a mark on the file for seven to sometimes 10 years, Davies said.

Mortgages rates drop

Freddie Mac said the average rate for a 30-year fixed-rate mortgage (FRM) was 4.98% with an average 0.7 point, down from an average 5.03% the previous week. One year ago, the average rate for a 30-year FRM was 5.88%.  It said the average rate for a 15-year FRM was 4.4% with an average 0.6 point, down from 4.46% the previous week. A year ago, the rate was 5.88%. Freddie said the five-year Treasury-indexed adjustable-rate mortgage (ARM) was 4.35% this week, with an average 0.6 point, down from last week’s 4.42%. The one-year Treasury-indexed ARM averaged 4.47% with an average 0.5 point, down from last week when it averaged 4.57%. At this time last year, the 1-year ARM averaged 5.25%.  Bankrate.com’s survey of major US banks and thrifts put the 30-year FRM 5.35% with a 0.31 point, even with the previous week. A year ago, Bankrate.com’s survey was 6.44%. It says the 15-year FRM is 4.72%, down from $4.74% in the previous week.  Bankrate.com put the five-year ARM 4.64% this w
eek, even with the previous week.

Commercial and Multifamily Mortgage Originations Remain Low

According to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations,  commercial and multifamily mortgage loan originations for the third quarter of 2009 were 12 percent lower than during the second quarter of 2009, and 54 percent lower than during the same period last year.  The 54 percent overall decrease in commercial/multifamily lending activity during the third quarter was driven by year over year decreases in originations for all property types.  When compared to the third quarter of 2008, the decrease included a 62 percent decrease in loans for retail properties, a 59 percent decrease in loans for health care properties, a 58 percent decrease in loans for industrial properties, a 56 percent decrease in loans for office properties, a 46 percent decrease in hotel property loans, and a 40 percent decrease in multifamily property loans.

Now on to our real estate investing educational arena…

Friday File – More Real Estate Humor

Ahhh…Autumn weekends. Chances are you might be out and about with family or friends, visiting fall festivals or simply cruising around the countryside searching for your next short sale. Whatever the weekend has in store, it’s sure to be just a little bit better if you start it with a smile on your face. To help, here’s our newest Friday File to help you make the most of government lingo and double-speak.

Filibuster = a well known stalling technique that allows government officials to read (at least partially) the bill before voting or, when used as a “sister” to the “dust buster”… a way of collecting (for the record) official sounding statements to eliminate personal responsibility in order to stay on the safe side for the next election.

Sustainable Communities – once put together, you have no hope of respite. They keep going and going and going…

War On = We need funding fast so declare a war in order to enact the emergency funding mechanism rather than go through the normal debate and votes…ie, the war on drugs, the war on poverty, etc…

Biosolid Fuel = Recycled sewage

Consumer = American citizen

Taxpayer = American citizen

Voter = American citizen

American Citizen = Endangered species being overtaken
by “citizens” (small case).

Competitive = Lowest bidder wins.

Satisfactory = It barely passes but with any luck, won’t kill the end user.

Revenue Enhancement = For us silly not you! We are going to raise your taxes till you squeal.

Change = Retroactive, future and present modification of the entire economy, healthcare system, tax structure and political system.

Double-Think = Modern day media literacy

See you at the top!

Credit Cards And Their Contribution To The Present Financial Crisis

The history of consumer credit can be traced back to the early 19th century. The average working man in the United States had the first taste of consumer credit when companies like Sears, Roebuck & Co and others lent money to consumers.

The initial credit cards were issued by the companies that sold the goods and were called merchant or retail cards. When Visa and MasterCard were established in the mid 1960s, banks joined in and started issuing the all purpose credit cards. The consumer could use the card to pay for any purpose…vacations, college fees, buying goods, etc. Over the years, the use of credit cards has become more popular. In fact today it is impossible to do a few things like renting a car or making an online purchase with a credit card.

Everyday Americans are bombarded with credit card offers through mail, flyers, email, etc. Everywhere you look, you will find a credit card offer. Gone are the days when only the privileged few could have a credit card. Today, just about anyone can have a credit card. Even those with bad credit can get a credit card these days.

For the average American, life without credit cards is unimaginable. Gone are the days when groceries were purchased with cash. Today everything is purchased on credit using credit cards.

As it became easier for everyone to get a credit card, credit card purchases increased and soon overtook cash purchases. It was a disaster waiting to happen. The reckless use of credit card has resulted in the many Americans facing financial ruin because they could not keep their credit card spending under control. There are many who borrowed from one credit card to pay another resulting in a debt pile up. Credit card debts have forced many Americans to file for bankruptcy.

Nothing is free in life. It’s the same with credit cards. Credit cards have changed our lives forever but uncontrolled use of the credit card can lead to financial ruin. To prevent financial ruin, you must take some hard decisions – reducing or eliminating the use of credit cards. Use the credit card wisely and you can enjoy the advantages of having a credit card. Use it recklessly and you might find yourself filing for bankruptcy.

Seek Help To Prevent Foreclosure

The harsh truth of uncontrolled credit spending

Mortgage debt in the United States has increased over the years. Second mortgages accounted for less than 4% of the total mortgage debt at the beginning of the 1980s. It increased to 12% during the 1990s. From the 1090s till this year, it has increased by double digits and it continues to grow rapidly. The easy access to home equity is the main reason for this rise. No other form of credit has seen such rapid rise except the credit card. 

A home equity line of credit is a form of revolving credit in which your home serves as collateral. With a home equity line, you will be approved for a specific amount of credit–your credit limit, the maximum amount you may borrow at any one time under the plan. Many lenders set the credit limit on a home equity line by taking a percentage (say, 75 percent) of the home’s appraised value and subtracting from that the balance owed on the existing mortgage. If you are careful and use a home equity line of credit or second mortgage carefully, you will only benefit from it but if you default on a home equity line of credit or second mortgage, you could risk loosing your home. Many of those who used home equity line of credit or second mortgage recklessly are now finding themselves filing for bankruptcy. Most make the mistake of using home equity to pay of debts like medical and credit card bills. Medical and credit card bills are dischargeable debts, but defaulting on a home equity line of credit or second mortgage can result in foreclosure.

When you own a home and if the home has equity in it, it can be tempting to make use of the equity. Lenders will bombard you with advertisements exhorting you to do so. But once again, remember, if you are not careful, you could loose your home. The present foreclosure crisis has thrown many such homeowners out of their homes. The end to the present crisis seems to be a long way of.

Your credit is like a rose. A rose is good when you smell it. It can hurt if you play with the thorns. Credit is good if used well but can cause your downfall if you misuse it.

The origin of the word “credit” can be traced to the Latin word “credo” meaning I believe. Credit is all about trust. Banks give you credit if they trust you.

The concept of credit is based on the notion of getting something now and paying for it later. Credit does not increase your income. It is however a convenient way of buying things now and paying for it later. But you must use credit carefully. If your credit spending exceeds your income or savings, you will be in big trouble.

All businesses need credit to grow and earn more. Creditors are happy to give you credit……..to buy things, to grow your business or use it for any legal purpose but nothing is more disappointing for a credit than a defaulting debtor. To avoid being a disappointment for your creditor, you must control your credit spending. 

Credit. Credit. Credit. And more credit. You keep hearing it all the time. Makes you wonder how many types of credit there is. There are two basic types of credit – secured and unsecured. Secured credit has some form of security, generally real property to back the credit. Mortgages and car loans are perfect examples of secured credit. The repayment schedule is spread over a long time and the interest rate is lower than unsecured credit. Unsecured credit as the name suggests does not have any form of security to back the credit making it a risky proposition for the lender. To offset the risk, the lender will charge a higher interest rate and the repayment period is also shorter. The best example of unsecured credit is a credit card.

There are many factors a lender will consider determine your risk. Your past performance plays an important role. Your ability to do what you promise is the key factor. Your income also plays an important role. The lender will also consider your assets – to find out if you can repay if your incomes stops. Before giving you credit, the lender will ask for your credit score and obtain your credit report from a credit reporting agency. Your credit report is a record of your past borrowing and repaying, including information about late payments and bankruptcy. It demonstrates your financial character.

Modern technology has made it easier to obtain credit. All you need to do is sign a few forms and your account gets credited. There are no restrictions on how you use the credit.

While it is easy to get credit, it is easier to let your credit spending go out of control. Keep your credit spending under control or you could face financial ruin. 

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