Real Estate Investing

A mortgage lender wrote a post about his experience with a caller named Darren, who was losing his home to foreclosure.  Unfortunately Darren’s experience is no longer unique, but Jason’s words at the end of his post were inspirational,

And Darren, try to relax.  This isn’t the end, it resembles more of the beginning.

Truer words were never spoken.  While Darren will face an uphill struggle to defeat his financial demons, he can use this experience to rebuild the character of his credit scores in the coming years.  Any reader can go online and search “repair your credit score” to find hundreds of pages that will tell you how.  One writer, Richard Lakin, tells how to improve your credit rating in six months. 

• Lower Your Debt
• Correct Mistakes
• Make Contact with your Creditors
• Do Not Use a Quick Fix Service 

His tips are right on the money, but don’t expect your credit score to vault into the 700’s if it’s already in the 500’s.  Rebuilding your credit does take some time.

For example, when a collection shows up on your credit report and you pay it off, it doesn’t automatically fall off the report.  That ding on your credit score can stay for up to 7 years.  You should also strive to keep your debt balances low because whether they’re on a low-interest credit card or a higher interest, the debt is still the debt. 

Finally, who here has gone to a department store and been tempted by “If you open an account with us today, we’ll give you 10 percent off your purchase?”  I urge you to not let the emotions of saving $20 propel you into opening yet another credit card.  The more credit you have available, the more potential debt lenders see.

Time heals all wounds.  If you’ve had a foreclosure, bankruptcy, short-sale, or other credit problems, remember this is the beginning of your healing process.  Don’t be afraid to dig in for the long haul of repairing your financial situation.  But do take the long view by making the efforts to improve your future living situation.

Photo from here.

With foreclosures up 121 percent since this time last year, the bill riding through Congress may be a huge lifeline for tens of thousands of families.  My friend Mary missed the deadline - January 2005 to January 2007 - by two months.  She bought her home in November 2004 therefore is ineligible for help through this bill. 

According to CNN Money, there are additional requirements if you need mortgage rescue,

[Homeowners] must be spending at least 31% of their gross monthly income on mortgage debt to be eligible for the program.  They can be up to date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage - and attest that they are not deliberately defaulting just to obtain lower payments.

This is a solid first step to stabilizing the housing market.  Coupled with a sudden drop in gas prices, perhaps the economy can make a positive turn.  Of course, oil dropped because new home sales were stronger last month than what was predicted … a virtual economic merry-go-round.

With a return of consumer confidence, partly credited to the economic stimulus checks sent by the Feds these last few months, spending is up!  I’m looking for a used table to give as a closing gift to a friend of mine.  Where am I looking? Yard sales.  (MSNBC has provided more tips to find affordable furniture.)

That’s how I’m spending my weekend.  That and watching some Batman movie everyone is talking about!

Enjoy your weekend!

For what seems like forever now, I’ve questioned why Realtors are so heavily monitored by our brokers, by local, state and national associations, and by the state while the oversight of mortgage lenders is so light nonexistent.

Realtors undergo massive training.  While we don’t study for years and years like a medical doctor, we must take ethics classes and it is drilled into our heads about the laws we must obey that protect customers and clients - all consumers.  I get a little bulletin from the state of Tennessee every three months that contains a long list of the brokers and affiliate brokers who’ve done wrong, what law they broke (it could be as simple as not providing a new address within a certain timeframe to not depositing escrow money within two or three days), and how they are being punished.  Punishments range from fines of $250 to $10,000 to loss of license.

And you know what?  I’ve never seen this happen to the lenders.  Matt Padilla, a reporter with the Orange County Register, put on his newspaper blog how his expose’ on the lack of lending oversight is resulting in more investigative articles.  One of his commenters wrote,

“I am an account executive and have seen numerous broker shops using only the brokers name on the application. In some cases the entire shop was not licensed but doing business under the brokers name…”

I think it’s about time the Feds are stepping it up a notch.  It appears they are now ready for new rules that should slow mortgage fraud.  According to CNN Money, the new rules governing “higher-priced,” or subprime, loans will:

• Prohibit creditors from extending credit without regard to a consumer’s ability to repay the loan from income and assets other than the home’s value. The lender complies, in part, by assessing repayment ability based on the highest scheduled payment in the first seven years of the loan.
• Require creditors to verify income and assets they rely upon to determine repayment ability
• Ban any prepayment penalty if the payment can change in the initial four years. For other higher-priced loans, a prepayment penalty period cannot last for more than two years.
• Require creditors to establish escrow account for property taxes and homeowner’s insurance. This rule will be phased in during 2010.

Clap! Clap! Clap!   What took so long?!  PLEASE read the entire article by CNN Money because there are many more rules that apply to all loans (for example, the rule also bans seven deceptive practices, such as saying a rate is fixed when it can change - remember my friend Mary?  That happened to her.).

Sadly, the new rules won’t help home owners who are already behind on their mortgages, a kiss away from foreclosure.

Cartoon from here.