Wish I Could Smile

I'm not smiling at the prospect that the Stock Market is up for the third day in a row. I should be grinning ear to ear as the Fed comes marching down the road with more rate cuts all designed to stop the runaway train. I have been told many times over the years that the Federal Reserve and other government agencies all had systems in place to keep us all out of harms way. Recession, yes we could have those, but never again anything as serious as the Great Depression.
I can't smile because I don't believe the talking heads when they say there is only a "correction" about to take place. There is a little dark humor in it all, as you notice "correction, recession, depression," all seem to rhyme. I used to think maybe the powers to be were right, until it was revealed there really is no money in the Social Security fund. We always knew there wouldn't be any for us when we got there anyway.
The problem as I see it, is we've never been immersed in a World Economy to the degree that we are today. I know that our own good old ingenuity might not be enough to save us. I have written before about the derivitive market and the investment's that they were a part of. I wrote yesterday that Greed was a big player in the subprime mess but one must also add leverage as a willing partner to this loan implosion debacle. Asking one dollar to support fifteen, is like asking three workers to support fifteen social security recipients. How is that going to work?
The first Boomer is elligible to draw their social security a little over a month from now. Bankers and credit markets will eventually be forced to reveal the truth in February and March 2008 when the fourth quarter figures come out. Do you think those numbers will be good? Those numbers will come at a time when the greatest amount of subprime loans will be scheduled to reset for next year. Do you think the price per barrel of oil will be down by then? Hope it doesn't get too cold up north this winter.
I should be smiling though because the early numbers for the holiday season are out and the stats are good. Merchants are allegedly happy, but did they spend more than usual? I didn't hear those numbers did you? The reason for this article is to warn you that the numbers are not good. The numbers will get worse. There is still time for you though to protect yourself and make the financial moves you need to make. We are only at the start of the game in the great unraveling mess yet to come.
The Fed will do it's best in reducing rates to prop us up. I feel it will be of little use. Can anyone say "JAPAN." If you are in a great job with good security, buy now. Use Government financing, because soon that will be your only option. If you get out there and warn your friends and family, and I can warn my friends and family, I will SMILE.

Now What?

As we enter the holiday season of 2007 the news on the mortgage front is
being portrayed as grim and grimmer. The projections for 2008 are
starting to come out and the realization is beginning to set in that tougher
days in the mortgage world will be with us for awhile. No worries for you
though, as you are a reader here. The information that you get here will help
you navigate through the troubled waters ahead.

You need to know that in 2008 there are still over 300 Billion dollars in
mortgage loans that are due to reset. There are people out there trying
to place blame for the mortgage mess situation that is at hand.
Second thing you need to know is that it isn't as serious as the media
would have you believe. Greed is the reason for the situation in the
sub-prime mortgage business. It is a complicated mess to be sure,
with terms like " CDO'S", "DERIVITAVES" and other complicated things
that involved business on Wall Street. To make it short and sweet
kid's weren't playing nice on the "street." Some of those kid's
shouldn't have been playing in the same sandbox.

If you would believe the media, you would think that much of the blame
lies at the feet of Wall Street. The stock market is a big deal to be sure, but not nearly as big a
deal as the credit markets. As is usually the case, deals were made,
expectations were raised, then along comes the Fed, makes some moves
that aren't expected, "not in the script" so to speak, and thing's begin
to come apart.

Reminds me of several things. Foxes watching the chickens? Does the
name Enron come to mind? I'm guessing a Congressional investigation isn't far away.

I'm saying that all of that is good for you. I also say that the mortgage
business is healthy. The entire lending industry is not on the verge of collapse,
not even close.

The kids that played with matches, got burned. The lending rules will
change, but they always change. New rule will appear. Old rules will return,
policies and programs will change. All you need to do is learn what the
changes are and prepare your plan accordingly. If you are not prepared,
get prepared.

The best friend you can have, my opinion, is a mortgage professional. A
mortgage broker is vital to the process, a good one, not a bad one.
Have them thoroughly checked out.
The great thing about the internet, is it gives you an edge in verifying
information. Check out what they tell you. Make sure it's straight up.
We provide additional info in a great little ebook that we've just finished
called "Surviving the Mortgage Massacre of 2007." It's available at
http://shop.tampabaycreditdoctor.com

Is It Real or just Hype?

The word is out and the pundits have been pounding you for month's. If you have been paying the slighest bit of attention, then you've heard the mortgage business is dead in the water. It is not true my friend! Have some players in the mortgage industry gone out of business? You bet they have. Has the mortgage industry toppled over as a result? Hardly!It all comes down to greed. Always has, always will. It always comes down to affordibility. I guess another way to say it, is it all comes down to cash! Money! Moola! Dinero! King of the Mountain! Mounds of cash, piled as high as the sky! I think you catch my drift. We didn't get to where we are over night. Where are we anyway? There are those out there that say this "sub-prime meltdown" will throw us into the biggest financial fiasco of all time. The year 2005 will be remembered as the year when the "grim reaper of housing " first appeared on the scene. Did anyone notice? I think not. The builders, speculators, flippers, and other "players" were way too busy stuffing their pockets with cash, to even see him.The "players" failed to sense the faucet would soon be turned off. It happened over night. Not everywhere. The biggest downturns came where most of the hottest markets had been. Double digit appreciation became a memory. Everyone was affected and will be for years. There is no reason to worry though, as the playing field is still there. The people that turned real estate into a shell game are gone.I like to refer to this downturn in housing as the "crash of cash." Is there a downturn? If you are a seller, yes you think there is. If you are a buyer, you see no downturn, you see a leveling of the playing field. It all comes down to physics my friend. You know that age old adage " for every action there is a reaction."The market will always dictate the price a commodity will be bought or sold for. When the price of a house gets to where the buyer can afford it, a sale will happen, a mortgage will be made. It will be made to a buyer that is able to obtain it by good standards in place. As for the builders, speculators, investors, and others, many fell off the Merry Go Round. You see, we really did learn all we need to know in kindergarten.

Trick or Treat from the Fed?

The financial markets eagerly await the much anticipated action of our Federal Reserve cheif this coming week. Many pundits out there think we might be looking at another one half per cent decrease in the funds rate. What does all that mean to you and me? I'm afraid it might not mean a whole lot. How can we possibly expect to make up for the actions of of the past? How do we make right the dollars that went into bank accounts when greed was the ruler of the day? How do we make right the actions of builders suddenly turned mortgage originators, after they have admitted to out right mortgage fraud? To make a sale? To ruin someone's life? Are you kidding me? When did we get to that point?

The sun will come up tomorrow. It's Saturday, you might not have to work today. Monday will be here before you know it. The Halloween holiday will be upon us and the Fed will make it's move. What you need to know, is how to protect yourself and your loved ones in the coming tough days ahead. It will be "trick or treat" this coming week, for real and for the future. If you have questions, I hope you leave a comment here. We've been at this over 29 years, there isn't much the Fed can do we haven't seen before.

We hope you enjoy this coming week and the holiday season ahead, pumpkin pie, snow, a crackling fire, isn't it great to be here?

Collections And Your Credit.

Some of the things that get reported on your credit report can later turn into much more serious things on your report and we'll discuss those as we go along. Once those things find their way to your credit report, your scores will drop, the damage will be done, and there will be very little that you can do, other than prevent them from showing up in the first place. That is where your vigilence should begin, prevention! The first negative item you don't want to see is a COLLECTION. You can have a collection reported to the bureaus and not even know it! How is that possible? Let's imagine you go to the emergency room at your local hospital. You think something might be broken, it hurts like crazy and the pain is not going away. The ER staff goes into action, x'rays are taken, nothing broken and everything is cool. It's only a major sprain and time will heal you. This seems like a pretty harmless situation, you have great health coverage and you're happy you don't anything broken. You leave the hospital and go on your merry way. It is now nine month's later, you have decided to buy a house, and there are no repercussions from your old injury, or are there? You, being one of my readers, have pulled your credit report before you make an offer on that house you like and you find out that your credit scores aren't where you think they should be. How can there be a $75.00 collection from a Dr. ........... on my credit report?I don't know this doctor, what is going on here, it has to be a mistake? You call up the hospital where you were treated for your old injury and they tell you Dr. .............. is the doctor that read your x-ray, you never even saw him, didn't know he was involved in your process at all. The doctor never submitted any invoices to you, they went right to your insurance company and for whatever reason the good doctor didn't get paid. A few month's passed by and the doctor, still unpaid, filed a collection. Oh my! The damage has been done now. Your scores will drop on all three reports. It is at this time where you might begin receiving letters from the collection agency people, and maybe they've also tracked you down and you're getting phone calls too. Atthis point know there is a situation you need to handle. The important thing to remember is that once that collection gets filed things will not get better for your scores. People may try to tell you that if you pay that collection agency your scores will improve because now that collecion gets shown as a 'paid collection.' I will tell you that it will not matter, the mere filing of that derogatory information will harm your scores whether it gets paid or not. I will also tell you how I would handle that same situation. The first thing is not deal with the collection agency. They may tell you 'we'll settle this account for $50.00.' Cool right? You've saved $25.00 and you get reported as a 'paid collection.' If your scores don't go up as a result, how did that help you? Instead of dealing with the collection agency go directly to the doctor's office and with hat-in-hand express your regret that you had no idea they didn't get paid and pay the full amount owed. You see when the doctor turned you over to collection agency, it was done with the knowledge that the collection agency would charge a percentage of what they collected and send the doctor the balance. You will want to take this action for one very good reason. The reason being that the only people that can remove that negative collection information are the ones that put it there! The collection agency doesn't have that power so why would you deal with them? The doctor has the power to remove it and I'm saying that in my opinion, you go there and pay the full amount that you owe, and ask 'I'm sorry this happened, I didn't know about it, will you please remove it from my credit report?' My point is that there is a very good chance they will remove it and by so doing, it will be as if it was never there!! I've seen it happen the way I've just described to you.

Before you send that Jingle Mail

You've just come back from the mail drop at the post office where you have put your house keys in an envelope and mailed them back to the lender. In mortgage business lingo, what you've done is known as "jingle mail." You are feeling a great sense of relief because those payments that you are behind on and have not been able to make, are no longer your concern. You are walking away and it's the lender's problem now. Or is it?
In my opinion, your problems may have just become more severe. Remember that the house you just gave up control of, is an asset. You should never give control of an asset you are financially responsible for, over to someone else. If you communicate with your lender before your situation get's out of control, you may find there are many things that can be done to improve the situation.
Your first contact should be with the "loss mitigation" department at either your lender or loan servicer. You will need to know, or ask about, options that might be available to you. Foreclosure should be your last choice. It is your worst choice and certainly one your lender doesn't want to make.
When you execute a mortgage, you are becoming personally responsible for the debt that will be created when funds are disbursed to pay for your house purchase or your refinance. We're not attorney's, we don't issue legal advice, but let me point out what might happen.
You've mailed back the keys on a house you owe $200,000.00 on, you're done! Several month's later at the foreclosure sale, your house is purchased by an investor for $150,000.00. Your lender didn't choose to bid to get the asset, because they had too many on their books as it was, and those empty houses were bleeding cash in expenses and upkeep.
I'm guessing you weren't at the sale. You were out of that mess, not your concern. You are fortunate that your lender chooses not to come after you for the $50,000.00 shortage. They could, they have legal recourse should they choose. You are in the clear, or are you? The lender has chosen to forgive your debt. Things are cool, getting back to normal.
One day you go to that same postal facility where you sent the "jingle mail" from and hhmm....."What is this?" The return address is IRS and you open the letter slowly. You are stunned. How can this be? They say you owe income tax at your tax rate on $50,000.00!!!! Your tax rate is 20%. What? How can I owe this? What do they mean,"discharge of indebtedness income?" I mailed in my keys. The lender forgave me. Guess the IRS didn't. Did your worries really end when you mailed in your keys?
If you think it can't happen, ask your attorney. Watch this blog or our newsletter for future articles and posts of tips to help you.

Renting, Thinking of Buying?

If you are renting and thinking of buying there are several things that you should know. When you get involved in the buying a house process, you will be asked to provide information about your rental situation.
A short time ago when all types of mortgage loans were plentiful you might be able to slide by without having to prove or verify much about your rental situation. Due to the implosion of the Subprime side of the mortgage world the emphasis will swing back to the Conforming side of the mortgage business.
The conforming side of the mortgage business has always been there in the sense that people that had good credit, a sizeable down payment, were good candidates for financing from an institution that provided mortgage financing.
There are two sides to the mortgage business. The conforming side, that I just mentioned and the non-conforming side that I'll discuss now. Another way to label those two sides is "prime" and "sub-prime." As you might guess the prime is the label for the conforming side and "sub-prime" is for the non-conforming side.
It has been the "Sub-prime" business that has fallen on hard times as of late. I'm sure you've seen the news reports about the massive job losses, layoffs, and closings that have occured there recently. There is an entire other story that can be devoted to what happened there.
Many apartment buildings or complexes are managed by a management company. In most cases, a lender will accept a verification of rent from the management company. If you have paid on time, you'll have no worries, but the lender will be looking to see where you've lived for the last two years, and how you've paid. One thing that can hurt you here is that if you've signed on a lease with another party and the rent ends up not getting paid as agreed, it can come back to bite you. The management company might turn it in to the credit bureaus as a collection, worst case they go to small claims court and a judgement is obtained. In either case it spells trouble for you.
If you are renting a single family residence or another type property from a private owner, absolutely never pay CASH! When you pay by cash, a paper trail is not established. Your loan underwriter has to see proof. People can go get a receipt book and make up fake receipts. Now you see why they will not accept rent receipts. The two best things you can do is pay by check or money orders, the best way being by check. The lender will want to see the front and back side of the cancelled check. Checking accounts show stability. If you don't have one, please get one. Ask for your checks to begin with a high number.
If you don't get your cancelled checks you can still prove your rent history by getting copies from where you do your banking. You should never throw away your bank statements. Many banks, credit unions, will want to charge you for those documents. If the underwriter is asking for 24 months worth, it can get costly. Ask your mortgage person if the underwriter will accept your own copies of your bank statements where you can prove the same amount came out of your account every month.
In the coming month's it will become increasingly tougher to get approved for financing. If you know what will be required and you plan for it, you'll be okay.