South Florida Mortgage Insider Blog

More Internet Mortgage Lawsuits

2006-10-25T15:08:00.000-05:00

A while back, I wrote about a lawsuit brought by an
advertiser on Bankrate.com, one of the most popular
internet sites for mortgage rates. The advertiser sued
other advertisers for offering false and deceptive
rates that could not be honored. (Ultimately, Bankrate
was sued for allowing this practice. Just last week,
they announced a $3,000,0000 settlement, neither
admitting or denying wrongdoing.)

So here's a sequel to this lawsuit - Lending Tree was
just sued. Here's an excerpt from a mortgage industry
publication.

*************
A recent class action suit filed in Orange County,
California Superior Court alleges that LendingTree
diverts LendingTree.com leads to its subsidiary, which
conducts business under the name LendingTree Loans
without any competition.

The suit further claims that loans originated by
LendingTree Loans are originated at inflated prices,
based on the false representation that competition for
the business has occurred among lenders.

2006-09-28T16:52:00.000-05:00

Here's a great article you'll want to read if you
suspect that your credit score is not as high as it
should be. The lower the score, the more expensive
everything is for you: mortgage rates, equity lines,
credit card interest rates, etc. Great job by one of
my favorite personal finance writers, Liz Pulliam
Weston!

Weird stuff that hurts your credit
Cards that don't report credit limits are just one of
the hidden threats to your credit score. Here are some
of the potential hits you might be taking, and how you
can fight back.
Liz Pulliam Weston

Accountant John Johnson of Springdale, Ark.,
painstakingly rebuilt his credit after some business
reversals several years ago. But the credit-card issuer
that initially helped him is now standing in his way.
Capital One <http://www.capitalone.com/> refuses to
report its customers' credit limits to the three major
credit bureaus. Instead, the bureaus use the highest
balance a customer has charged as a proxy for the
limit.
As a result, the customers' all-important "debt
utilization ratios" -- the portion of their available
credit these borrowers are actually using -- can appear
artificially high. That can depress borrowers' credit
scores, the three-digit numbers lenders use to help
determine creditworthiness.
Lower credit scores can mean higher interest rates on
mortgages, car loans and other borrowing, as well as
potentially higher insurance premiums, since many
insurers also use credit-scoring systems to help gauge
risk.
Hidden threats
Making on-time payments to Capital One cards over the
years has helped Johnson rebuild his credit scores, but
he says its policy on credit limits is hurting him now.
Capital One's practice makes Johnson appear to be using
more than 60% of his credit limit, when in fact he's
using less than 40%. He tried disputing the issue with
the credit bureaus, to no avail.
"I got pretty hostile after awhile," Johnson admits. "I
just don't understand why they (Capital One) would do
that."
Cards that don't report credit limits are just one of
the hidden threats to your credit. Here's what you need
to know about some of the potential hits you might be
taking, and how you can fight back:
Missing limits
Two basic types of issuers tend not to report limits:
Companies that offer cards with no preset spending
limit, like American Express
<https://www124.americanexpress.com/cards/cda/dynamic.j
sp?name=CCSGMultiCardLandingPage&type=intBenefitDetail>
, and companies, including Capital One, that have a
corporate policy to keep the information secret. Not
reporting the limits can prevent competitors from
spotting a company's more creditworthy customers, since
those tend to be the ones with higher limits. (A South
Carolina consumer, by the way, has filed lawsuits
against the three credit bureaus alleging this practice
violates federal fair credit reporting laws.)
As a proxy for the credit limit, card issuers may
report the highest recent balance, the highest balance
ever or some other number of its choosing. You're most
likely to be hurt by a missing or inaccurate credit
limit if you haven't had credit for very long, you have
a troubled credit history or the cards with missing
limits are the only ones you have

You can check which number your lenders are using by
viewing copies of your credit reports. By federal law,
you can get one copy free annually from each bureau;
the site to use is www.annualcreditreport.com
<http://www.annualcreditreport.com/> .
If your limits aren't being reported accurately, you
have a few options:
* Fight. Ask your issuer to report your correct
limit, or to at least use a more favorable number.
You're not likely to get Capital One to change its
policy, but another lender may be willing to substitute
your actual limit or your highest balance charged for
the lower number it's been reporting.
* Reset. If your lender reports the highest
balance charged, you can reset the number reported to
the bureaus by running up a big balance one month. Just
make sure you can pay this hefty number off in full
when the bill comes to avoid unnecessary finance
charges. And don't do this when you're in the market
for a loan, since you could sustain some short-term
damage to your credit scores.
* Switch. Use cards that properly report your
limits to the credit bureaus.
Switching scorecards
The FICO scoring system groups people with similar
histories together when rating them. These groups are
called "scorecards." If you have a bankruptcy on your
report, for example, you'll be grouped on a scorecard
with other bankrupts. Your credit habits may look
pretty good compared with theirs, but if the bankruptcy
were to disappear from your record you'd be lumped in
with people who have stronger histories. Your credit
behavior might not look so good compared with this new
group.
That's apparently what happened to Carmen Georgescu,
who had $51,000 of credit-card debt and a 710 FICO
score. After paying off $17,000 of debt in a few
months, her score rose to 726. A few weeks later,
though, her score suddenly plunged to 686.
Such abrupt drops can often be traced to a negative
item, like a delinquency or a bankruptcy, disappearing
from a borrower's credit report. In this case, though,
the change was even more subtle. Let's let a Fair Isaac
expert explain it:
"Carmen had opened a new account last year which, at
that time, put her in a different scoring group
consisting of consumers who had newly opened accounts
on their credit files," explained Barry Paperno,
manager of customer service for Fair Isaac. "Then when
this recently opened account had aged enough to take
her out of this scoring group and put her into one with
consumers who had not opened any accounts recently, her
score dropped."
Carmen's still-heavy debt load hurt her worse with this
new group than it had with her previous scorecard group

There's not much you can do about this weird quirk in
the scoring formula, other than brace for the potential
effect. The good news: If Carmen keeps paying down her
debt, she should see a pretty quick resuscitation of
her score, Paperno said, "as long as she holds off on
opening anything new for awhile."
Balance transfers
Lower interest rates are generally better when you're
trying to pay off debt, but taking advantage of a
balance-transfer offer can wallop your credit scores in
a number of ways.
Just opening a new credit card to take advantage of the
offer can ding your scores by 5 points or so. If you're
transferring your balance to a card with a lower limit,
that also can hurt your scores, as can consolidating
debt. The FICO formula typically would rather see
$1,000 balances on five cards than a $5,000 balance on
one card.
You can compound the damage by closing the old card,
since shutting down the account trims the amount of
available credit that's used in the credit-scoring
formula.
Typically, lenders won't tell you the credit limit on a
new card until after you've applied and agreed to
transfer the balance. If you're planning to take
advantage of a balance transfer offer, read all the
fine print and consider the following:
* Limit the number of new accounts you open. If
you want to improve your credit scores, don't keep
bouncing your balances from card to card.
* Pay down your debt. Use the lower rate as an
opportunity to reduce your debt load. Paying off debt
is good for your wallet and good for your credit
scores.
Settling debts
In the latest versions of the FICO formula, score
creator Fair Isaac Corp.
<http://www.fairisaac.com/fairisaac> fixed a glitch
that often penalized folks for paying old debts that
had been charged off and sent to collection agencies.
(See "When paying old bills can hurt your credit
<http://articles.moneycentral.msn.com/Banking/YourCredi
tRating/WhenPayingBillsCanHurtYourCredit.aspx> .")
But you can still do substantial damage to your scores
if you settle a current debt for less than you owe. If
an account hasn't been charged off and you're dealing
with the original creditor, Fair Isaac officials say, a
settlement can be worse than leaving the account open
and unpaid. Of course, leaving an account unpaid will
eventually result in a charge-off and a referral to a
collection agency, which isn't good for your scores,
either.

There's no easy solution if you haven't got the money
to pay your bills. Filing bankruptcy is an option,
although it's likely to have a far more devastating
effect on your credit than a settled account or two.
You also might investigate a debt repayment plan
through a legitimate credit-counseling agency (read
"The consumers' guide to credit counseling
<http://articles.moneycentral.msn.com/Banking/YourCredi
tRating/TheConsumersGuideToCreditCounseling.aspx> "
first).
Traffic tickets and library fines
I wrote about this issue in "New threats to your credit
score
<http://moneycentral.msn.com/content/Banking/Yourcredit
rating/P121551.asp> ," and the trend has gained
momentum since then. Local governments are determined
to recoup some of the $40 billion in unpaid debts
consumers owe, including unpaid library fines, parking
tickets and traffic penalties. So these governments
increasingly turn to private collection agencies, which
typically report the unpaid amounts to the credit
bureaus as part of their efforts to pressure consumers
into paying the fines. The collectors may add late fees
or other charges that increase the balance.
The bottom line:
* Pay your fines promptly. Don't wait for
follow-up notices, since they can easily go astray.
Many libraries allow you to review your library record,
including unpaid fines, online, while municipalities
typically have a Web site or a phone number allowing
you to check for traffic or parking fines.
* Don't let a dispute fall through the cracks. If
you're disputing a traffic or parking ticket, note the
applicable deadlines on your calendar and make sure the
issue has been resolved.
* Don't move away from a problem. If you plan to
move and believe you may have unpaid fines, contact the
relevant municipality or library and make sure you've
squared your account with them. Don't expect a
government agency to spend much energy tracking you
down; it's much easier to turn a delinquent account
over to a collection agency, and once that's happened,
your credit is at risk.

Andrew Lockwood, J.D.
Mortgage Expert

Blackacre Mortgage
Tel: 954-389-7011
Fax: 954-337-0916

www.FloridaLoanAdvice.com

Licensed Mortgage Brokerage

Shocking Debt-Collection Information

2006-08-13T06:55:00.000-05:00

Here's a great piece by MSN.com columnist Liz Pulliam
Weston, one of my favorite personal finance writers. In my
mortgage practice, I've come across almost all of these
issues described in the article. If you're facing credit
issues please contact my office at 954-236-4500 ext. 202 for
a free 1/2 hour consultation. As of the date of this
writing, I have four spots left, so call today!
Sleazy new debt-collector tactics

It may not be your debt, but it could be your problem.
Collection agencies are bullying blameless consumers into
paying debts they never owed.

By Liz Pulliam Weston

Lisa Burk isn't Lisa Sterns, but Allied Interstate refused
to believe her.

The Minneapolis collection agency repeatedly called Lisa and
her husband, Michael, according to a lawsuit filed by the
Minnesota attorney general, and demanded that the couple pay
a debt owed by one Lisa Sterns. The couple, just as
repeatedly, told the collector they didn't know any Lisa
Sterns and asked the company to stop calling.

Allied ignored the couple's requests. At one point, the
collector insisted that the Burks were lying or, if Lisa
Burk were not Lisa Sterns, that she knew Sterns and could
tell Allied Interstate where to find her. It took
intervention by the attorney general's office for the calls
to finally stop.

The Burks' experience with abusive collection agency tactics
was annoying. Paul Alappat's encounter with a collector was
expensive.

Alappat said he was called two or three times by Buffalo,
N.Y., collection agency Capital Management Services about a
Chase Bank credit-card debt. Alappat told the collector he
had never possessed a Chase Bank card and asked them to stop
calling him.

When he applied for a home-equity loan two years later,
however, the collection showed up on his credit report. His
lender told him that if the $394.74 debt were not resolved,
the loan couldn't be made.

"Since I was in a hurry to get the loan approved," Alappat
said, "I paid the full amount, including the interest."

Bullying the innocent

Alappat's got company. Regulators say collection agencies
increasingly are harassing innocent people and badgering
consumers into paying money they don't owe. More people
complain to the Federal Trade Commission about debt
collectors than about any other industry, and consumer
attorneys say a booming trade in old, poorly documented
debts is fueling the problem.

Consider:

a.. The FTC charged that as much as 80% of the money
collected by Capital Acquisitions and Management (CAMCO), a
large debt-collection firm, came "from consumers who never
owed the original debt in the first place." These consumers
typically paid the company to stop its harassment of
themselves, their families, their friends and their
co-workers. CAMCO agreed to a $300,000 civil penalty in
March 2004, but in the ensuing eight months the problems
continued. The FTC received more than 2,000 additional
consumer complaints about the company -- three times more
than the agency received in the two years prior to the
settlement. The FTC eventually succeeded in shutting CAMCO
down.
a.. In July 2005, the FTC won a record $10.2 million court
judgment against National Check Control after accusing the
debt collector of illegally threatening consumers with
arrest and wage garnishment. Again, many of the consumers
targeted by National Check Control didn't owe the original
debt, the FTC said.
a.. Allied Interstate, the company that contacted the
Burks, was sued by the Minnesota attorney general for
repeatedly calling innocent consumers despite requests to
stop. Allied eventually agreed to a settlement that
prohibits it from contacting such consumers after being
orally told that they don't owe the debts in question.
a.. Applied Card Systems hassled relatives, neighbors and
employers with repeated phone calls in its efforts to track
down debtors, according to the FTC. The company ignored
requests to stop calling, and its representatives sometimes
used obscene language when its hapless targets protested
that they didn't know how to contact the debtors. The
company agreed to a consent decree that prohibits it from
harassing consumers.
Collectors cross the line

Debt collectors protest that most firms are ethical,
law-abiding and provide a needed service that helps reduce
borrowing costs for all consumers. But the new economics of
debt collection can encourage belligerent campaigns,
including dogged pursuit of innocent consumers.

As I discussed in "Zombie debt is hard to kill," there is
now a booming market in the pursuit of debts so ancient that
they used to be considered uncollectible. This year a
whopping $110 billion of such debt is expected to be sold to
collection agencies, up from virtually nothing 10 years ago.

Because the old liabilities cost collectors as little as 25
cents for each $100 in face value, companies can make a
profit if they can get debtors to repay even a tiny
fraction. Along the way, some collectors realized they also
could squeeze money from people who didn't even owe it.

Some consumers pay because their finances are so
disorganized they don't realize the debt isn't theirs.
Others are coerced into paying by illegal threats of
lawsuits or ruined credit. Some, like Alappat, pay rather
than risk losing a desired loan.

'Why are they allowed to do this?'

The collectors are nothing if not persistent. Mary Kitzmann
of Alexandria, Minn., endured four months of calls from
Allied Interstate over a debt she didn't owe before the
state attorney general's office succeeded in getting the
company to admit it had made a mistake. Five months after
that admission, Allied called Kitzmann again, trying to
collect the bogus debt.

Some consumers endure collection attempts from a string of
different companies as one collector sells its uncollectible
debts to another.

A collector tried to dun Phyllis Maurice of Whittier,
Calif., for more than $23,000, saying she owed the money in
advertising services for two businesses: a detective agency
and a psychic consultancy.

"I have been a preschool teacher for over 30 years and have
never owned (either business)," Maurice said.

Maurice enlisted the help of an attorney friend who wrote
the collector a strongly worded letter, demanding proof that
the debt was Maurice's. Maurice hasn't heard from that
collector, but later she got a call from another collection
agency about the same debt.

"Why are they allowed to do this?" Maurice fumed. "What can
we do to stop these scoundrels?"

Maurice was actually fortunate because she had access to an
attorney who could advise her of the law. Many consumers
have no idea of their rights in such situations, Cox said.

Your rights and how to use them

Under the Fair Debt Collection Practices Act, collectors are
supposed to advise consumers that they have a right to
dispute the debt, but that if consumers don't do so
promptly -- and in writing -- the collector can assume after
30 days that the debt is valid.

Once collectors are notified that they've contacted the
wrong party or that the consumer denies owing the debt, the
companies are supposed to provide proof of the debts'
validity. If they can't supply the proof, collections are
required by law to cease.

Of course, some collectors simply ignore laws designed to
protect consumers. But debt experts say your chances of
getting a collector to back off improve when you know your
rights and assert them forcefully.

If you're contacted about a debt you don't owe:

Know your rights. The Privacy Rights Clearinghouse has
prepared a fact sheet for consumers dealing with third-party
debt collectors.

Get the name of the collector, its address and a telephone
number. You can tell the collector on the phone to stop
calling, but that won't preserve your rights under federal
law.

Send a certified letter, return receipt requested. Make it
clear the collector has contacted the wrong party, that you
don't owe the debt and that you don't want to be called
again.

Contact regulators. If the collector continues to call, seek
help. Typically, your state's attorney general's office
handles complaints against collectors. You can also complain
to the Federal Trade Commission, which typically doesn't
intervene in individual cases but may act if it sees a
pattern of abuses.

Monitor your credit reports. If a collection agency posts a
bogus debt on your credit report, dispute the item
immediately with the credit bureaus. Include copies of the
certified letter you sent the collector and any complaints
you filed with regulators. Don't wait until you're about to
apply for a loan to check your credit report; you'll want at
least a few months' head start to dispute any errors.

Consider a lawsuit. Consumers can bring lawsuits against
collectors that violate the Fair Debt Collection Practices
Act, either on their own behalf or as part of a class
action. Contact the National Association of Consumer
Advocates for referrals to attorneys who handle such cases.

Liz Pulliam Weston's column appears every Monday and
Thursday, exclusively on MSN Money. She also answers reader
questions in the Your Money message board.

I hope you found this article to be helpful. Contact my
office today for a free 1/2 hour consultation that could
literally change your life by putting you on the path to
financial freedom - 954-236-4500 ext. 202!

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

1290 Weston Rd. Suite 300
Weston, FL 33326
*Licensed Correspondent Lender

CitiMortgage Settles RESPA Kickback Case

2006-08-03T04:23:00.000-05:00

Here's an article I came across in an industry publication. It goes to show you that even one of the biggest names in banking was alleged to do the same unsavory things as the little, scummy bucket shops that give our industry a bad name.

Incidentially, that's why I founded and sit on the board of the National Association of Responsible Loan Officers, (www.NARLO.com), an organization of individual loan officers dedicated to making sure the mortgage consumer receives fair, open disclosure and education about the entire loan process. For more information about how you can prevent being ripped off through excessive closing costs, check out my website, www.FloridaLoanAdvice.com and get my FREE, insider report on How to Avoid Closing Cost Surprises!

Here's the article.

CitiMortgage and Others Nailed For RESPA Violations
Tuesday, July 18, 2006 -

WASHINGTON, D.C. - The Department of Housing and Urban Development announced $1.6 million in settlements under The Real Estate Settlement Procedures Act (RESPA) with a national mortgage lender and two major homebuilders that engaged in business practices involving captive title reinsurance.

The agreements included a $650,000 settlement with CitiMortgage, Inc., and its captive title reinsurance company Chesapeake Reinsurance; a $675,000 settlement with M.D.C. Holdings, Inc., certain of its Richmond American Homes homebuilding subsidiaries and AHT Reinsurance; and, a $305,000 settlement with WL Homes, which does business as John Laing Homes, a California and Colorado builder.

Captive title reinsurance is a practice whereby a title insurance company transfers a portion of the risk and title premium to a company owned by the builder, lender or real estate broker referring the title business. In HUD's view, any captive title reinsurance arrangements in which payments are not bona fide and exceed the value of the reinsurance are a violation of RESPA. There is particular concern when these arrangements involve an entity that is in a position to refer business to the primary title insurer. There is also strong evidence these arrangements are designed to generate referral fees when there is a history of few or no claims paid.

"There is almost never any legitimate need or business purpose for title reinsurance on a single-family residence," said HUD Assistant Secretary for Housing Brian D. Montgomery. "HUD will continue to work with the states to investigate captive arrangements to make certain that they aren't created for the purpose of obscuring referral fees."

The companies came forward and cooperated with HUD in reaching these settlements. In addition to the settlement payments, the companies agreed not to enter into any new captive title arrangements and to cease writing new captive title reinsurance business.

These are the first settlements in the nation involving the recipients of payments made by title companies to captive companies for reinsurance. The settlements come in the wake of recent settlements states have obtained from title insurance companies who paid significant portions of the premiums they received to such captive companies.

The Real Estate Settlement Procedures Act was enacted in 1974 to provide consumers advance disclosures of settlement charges and to prohibit illegal kickbacks and excessive fees in the home buying process. Section 8 of RESPA prohibits a person from giving or accepting anything of value in exchange for the referral of settlement service business.

Originator Times, a BEXT Inc. publication
http://originatortimes.com/
Copyright 2006 BEXT Inc. All Rights Reserved

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

1290 Weston Rd. Suite 300
Weston, FL 33326
*Licensed Correspondent Lender

Bankrate Bait and Switch Lawsuit

2006-07-20T06:17:00.000-05:00

The following piece appeared in a mortgage industry trade publication and confirmed the dark 'secrets' that many already knew about internet advertising. (I've inserted my comments in bold).

But you may be surprised to learn about the inner workings of one of the internet's most popular mortgage sites! And Kudos to American Interbanc Mortgage, the plaintiff and an ex-advertiser with Bankrate, to bringing this surprising issue out into the open!

Enjoy the article!

-Andy

***************

STUART, FL - A lawsuit against Bankrate Inc. claims that the popular website, intended to help borrowers, actually misleads them because some lenders posting rates dont really honor those rates. [Is anybody really shocked by this?] The lawsuit alleges that this also puts honest advertisers on the website at a competitive disadvantage.

American Interbanc Mortgage LLC, an ex-Bankrate.com advertiser, is suing Bankrate and seeks $16.5 million in damages and a $33 million in punitive damages. [Pretty soon, we're talking real money!] The lawsuit began back in 2002 when American Interbanc Mortgage sued other Bankrate advertisers claiming their rates were unrealistic and put American Interbanc Mortgage at a disadvantage. Later, American Interbanc Mortgage added Bankrate to the lawsuit, after Bankrate did not renew American Interbanc Mortgages advertising agreement. [I'm curious if American Interbanc really thought Bankrate would keep them after they sued the other advertisers - that's not exactly good for Bankrate's business!]

American Interbanc Mortgage alleges Bankrate knew what some dishonest advertisers were doing and let it happen. Court documents indicate that Bankrate has had hundreds of compaints about advertisers posted rates. The Wall Street Journal reports that one Bankrate advertiser confided to a Bankrate employee saying the borrower would require a direct pipeline to God to get the rate they had posted. [Now THAT's funny! I didn't know God was in the mortgage business....but here's a thought: one of these days, I may put out my '10 Commandments of Mortgage Lending.' Thou Shalt Not Bait and Switch. Thou Shalt Honor Thy Good Faith Estimate. Thou Shalt Consider Neg. Am. Loans Only for Short Term Purposes. Etc.]

Bankrates reach is wide. Their partnerships with Yahoo and AOL along with their newspaper presence allow their rate tables to be displayed to millions of people on a daily basis.

The case is expected to go to trial this fall.

**********************************

This article highlighted a serious issue in the mortgage business - false advertising by online lenders. You need to guard yourself every day against 'bait and switch' tactics, both online and offline.

How can you do this? Ask questions about every fee and cost. Ask for a closing cost guarantee. (If your loan officer looks at you like you have three heads, tell 'em that Blackacre Lending offers a "No B.S. $1,000 Closing Cost Guarantee", why don't you?)

And look into the reputation of your loan officer. Ask if he's a member of the National Association of Responsible Loan Officers (www.NARLO.com), a nation-wide association of individual loan officers who advocate the full and fair disclosure of and consumer education about the mortgage process. I'm a founding member and head of the Florida Chapter.

If you have any questions about your mortgage, whether for purchase or refinance, call me at the office - 954-236-4500 or visit my website, www.FloridaLoanAdvice.com. The first 3 clients to mention this blog each receive a $20 gift certificate to Starbucks! And that's no bait and switch!

Sincerely,

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

1290 Weston Rd. Suite 300
Weston, FL 33326
*Licensed Correspondent Lender

Foreclosure Crisis Intensifies!

2006-07-16T07:33:00.000-05:00

[Here's a recent story from the Sun-Sentinel about the increasing foreclosure crisis. I've written and spoken on the radio about it many times. My comments are inserted throughout the column. If you are behind on your mortgage payments or know someone who is, feel free to ready my Free Report, "Foreclosure Help" on my website, www.FloridaLoanAdvice.com. Or you can contact me directly at the office (number below).]

South Florida owners are losing their homes; foreclosures rates rise nationally

By Robin Benedick and Andy Reid
South Florida Sun-Sentinel

July 9, 2006

The number of foreclosures is ballooning as strapped homeowners can no longer make their mortgage payments or quickly unload properties in a cooling housing market.

Among those most at risk: owners who used creative financing to stretch their budgets in the 2000-2005 housing boom. Buyers who took out a five-year adjustable-rate mortgage in 2000 are seeing their house payments rise for the first time.

The new payments usually are much higher, and homeowners looking for a way out typically can no longer sell in a few days or weeks, as they could during the height of the market. Today, a large inventory, high prices and rising interest and insurance rates make selling difficult. Those who can't hang on often have their homes taken over by their lender.

"I'm seeing foreclosures in many areas where they just weren't prevalent before,'' said Rhonda Light, who operates Foreclosure Reporting Service, a Hollywood firm that annually tracks thousands of foreclosures in Broward and Palm Beach counties. "The foreclosures we're seeing now are all over the board and in all different price ranges.''

Nationally, foreclosures were up 72 percent in the first quarter of this year compared with the same period last year, according to RealtyTrac, a California firm that monitors the market.

The pace of foreclosures in South Florida seems to be accelerating. Almost a third of Florida's 29,636 foreclosures were in South Florida in the first quarter of 2006.

In Broward, foreclosures were up in the first quarter over the end of last year by 57 percent. In Palm Beach, they jumped 69 percent, and in Miami-Dade, they were up 17 percent.

Overall, South Florida had about 3,000 more foreclosures than at the end of 2005 -- a jump of 40 percent.

"We're seeing people who have overbought and their rates are going up now and they can't afford their houses,'' said Brad Geisen, president of foreclosure.com, an online foreclosure listing service based in Boca Raton.

For some, refinancing mortgages can prevent foreclosure.

That worked for Dalia Hartwig of Boynton Beach.

Hartwig said she and her husband fell behind on mortgage payments after injuries left them unable to work. When disability payments finally kicked in, they were too far behind to catch up. So they refinanced their loan to avoid the home being auctioned at the courthouse. Now, they can sell the house, pay off their debt and search for a smaller, more affordable house.

"We got behind on a couple of payments. ... It just got worse instead of getting better," said Hartwig, 53. "Thank God we were able to refinance."

Others aren't so fortunate.

Molly and Yvette Sealey of Miramar surrendered ownership of their home last year with the hope of being able to buy it back.

The mother and daughter had fallen $15,000 behind on their mortgage, and turned to investors to help them keep their 3 1/2-bedroom home of 20 years. They agreed to become tenants, receiving no credit for the equity in their house.

Meanwhile, they struggle to pay the rent, which is $1,500 a month. That's $425 more than they paid on the mortgage when they owned the home.

"This has caused me to cry every day,'' said Molly, 74, a retired nurse. "I wish I had never gotten behind in my mortgage. That was my biggest mistake.''

Some struggling homeowners have paid high fees to would-be rescuers, only to find they were scammed. Lawyers, financial counselors and government agencies report an explosion in such complaints as more homeowners find themselves unable to keep up with their payments. [Andy's note - this is a serious problem. Make sure you're dealing with a reputable firm and get a chance to review whatever's being offered you in writing. Make sure you understand exactly how the proposed terms work. Consult an attorney if you can!]

"We've been warning people that this is coming,'' said Doug Duncan, senior vice president and chief economist at the Mortgage Bankers Association in Washington. He said more than half the loans on the books today are less than three years old, and the peak delinquency period for loans is when they are three to five years old.

In Miami, economists and real estate experts fear a glut of new condos hitting the market could cause a wave of foreclosures if investors can't sell their units or make the monthly payments.

Eventually, perhaps in two to five years, the tens of thousands of condos being built will sell, perhaps at lower prices, predicts economist Stan Geberer of Hank Fishkind & Associates in Orlando.

Stanley Gordon is in the foreclosure business, trying to make money off the homes other people couldn't afford to keep.

He shops for bargains at foreclosure auctions held twice a week at the Palm Beach County Courthouse in West Palm Beach. He said he buys about one home a month and either fixes it up for a quick resale or holds onto it as rental property. Investors have to pay the full cost of the home the day they bid on it and risk shouldering the cost of unforeseen repairs.

Gordon said he can't help but wonder why the previous owners of the homes he buys did not sell the properties before losing them.

"That is too emotional to think about," Gordon said. "It is just business. We did not cause it."[Andy's note - this is an important point. If you're behind on your payments, don't be an 'ostrich' and stick your head in the sand...you've got to take immediate action to recognize your situation and do something about it! Check out our Free Report, "Foreclosure Help" available for a limited time or call our office, 954-236-4500 ext. 202 to schedule a free 1/2 hour consultation with me. This problem will NOT fix itself!]

I hope you found this article to be of interest.

Sincerely,

-Andy

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

1290 Weston Rd. Suite 300
Weston, FL 33326
*Licensed Correspondent Lender

How to Avoid "Bait and Switch" by the Big Banks

2006-07-13T05:17:00.000-05:00

This week, the Atlanta District of the Federal Reserve heard testimony by the National Association of Mortgage Brokers on some items that were not exactly new. Here's an exerpt from the testimony:

Kate Crawford, Chair of NAMBs Consumer Protection and Affordable Housing Committee, represented the association and stated that one of the toughest hurdles in the home buying process is shopping for the right loan.

Unfortunately, the approved disclosure documents for rate, fees, costs and points can be confusing and overburdened with legalese, said Crawford. In addition, only mortgage brokers disclose all costs to the consumer. Until there is a uniform way to disclose costs and everyone is fully transparent about their fees it will continue to be difficult for consumers to comparison shop in a meaningful way.

So it's not exactly a newsflash that the mortgage process is confusing. But most people don't understand that only mortgage brokers, not banks, are required to disclose all costs to borrowers! That means that you're more likely to be bait and switched by the big banks than a little 'ol mortgage broker like yours truly.

But here's what you should be looking for. My firm, Blackacre Lending, offers a 'No B.S., No Weasal Clauses $1,000 Closing Cost Guarantee' that gives our clients the comfort of knowing that what they applied for is what they get. Details are available to all applicants.

In addition, I'm a founder and member of the board of the National Association of Responsible Loan Officers, an nation-wide organization of loan officers that advocates full and fair disclosure and education for persons obtaining mortgage financing. (Check us out at www.NARLO.com).

So if you're nervous about understanding all rates, terms fees, etc., give me a call at 954-236-4500 or visit my website, www.FloridaLoanAdvice.com. Mention this Blog and I'll waive my consultation fee (a $175 value).

-Andy

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

1290 Weston Rd. Suite 300
Weston, FL 33326
*Licensed Correspondent Lender

Has Anyone Tried to Pull These Scams Over on You?

2006-07-06T09:16:00.000-05:00

Here's a recent piece on MSN.com - I hope you find it helpful.

Don't hand your house to a thief

Mortgage scams are like Baskin-Robbins offerings -- they come in 31 flavors. Here are three top choices of con artists and how to avoid them.
By Christopher Solomon

If owning a home is the great American dream, then swindling people out of their prized possession is one of the great, lucrative American scams. Mortgage fraud is on the rise, thanks to the tremendous value that's locked up in real estate today and to the increasing number of people who are struggling to pay their mortgages.
"It's kind of become the new get-rich-quick scheme out there," says attorney Rachel Dollar, publisher of Mortgage Fraud Blog.

More than 323,000 properties entered some state of foreclosure in the first quarter of 2006, a 72% increase over the same period a year ago, according to RealtyTrac. And things could get worse: Nationwide, more than one in three outstanding mortgages has an adjustable rate and interest rates have been rising. "Nobody really knows what's going to happen," says RealtyTrac's Rick Sharga, vice president of marketing.

But scammers know that people in trouble make easy victims. They're swooping in and offering to "help" beleaguered borrowers -- and ending up with their house keys. Victims sometimes spend years fighting to get their homes back and some never succeed.

***If You or Someone You Know Are Having Credit Difficulties or Unable to Pay Your Mortgage, email me, Andy Lockwood (andy@BlackacreMortgage.com) and describe your situation. I will give you a FREE, ½ hour consultation, a $175 value. I specialize in slashing my client's overhead and cleaning up their credit by obtaining low, single rate mortgages. Contact me now - I have only 4 reserved spots as of the date of this email!***

Meet Carol and Anthony

Carol and Anthony Calvagno of Deer Park, N.Y., on Long Island are in a hell like this right now. In 2003, the Calvagnos were in trouble. Anthony Calvagno had health troubles and had lost his job. In order to pay their bills, the couple took out a home equity loan on the Cape Cod-style house that had been in the family for three generations. (At the time, the couple had a $125,000 mortgage on a house worth about $290,000 -- a high-equity target.) But even the home equity loan wasn't enough.

That's when Mitchell Sims swooped in, offering to help, says the couple's attorney, Arshad Majid.
Sims told the couple that he would arrange a bailout, and that they should stop making mortgage payments while he worked out the details. When foreclosure notices started showing up, he told the couple to ignore them, saying he'd take care of it.

Nearly eight weeks after Sims had entered their lives, and the day before their foreclosure was scheduled, Sims told the Calvagnos that the arrangement hadn't worked. Instead, he said they'd have to file for bankruptcy and enter a "special program" in which they'd sign over their house's title to one of Sims' employees and another of his business associates, who also happened to be Sims' brother. They'd be allowed to live in their home as tenants, Sims told them, and their rent payments would go toward buying their home back from him, says Majid. "They were put in the position where they didn't have any choice" but to sell their deed, Majid says.

But Sims never made any mortgage payments. He kept the Calvagnos' rent money and about $50,000 of the couple's money that remained after their creditors were paid.

The Calvagnos had fallen victim to a scam known as equity stripping -- just one of the many flavors of mortgage fraud. Their house was sold. Sims and another person have been put in prison for their crimes. The couple has successfully fought eviction -- so far -- but not everyone is so lucky. Here's a quick look at three of the main ways scammers can steal the roof over your head.

Scam No. 1: The bailout, aka 'equity stripping'
As the Calvagnos' case shows, this scam is particularly ingenious -- and humiliating for the victim. In theory, a person or company could help a homeowner keep his house via a process in which the homeowner sells the house very cheaply to them while the homeowner gets his finances in order. The new owner pays the mortgage, and the old homeowner pays to live in the home in the meantime, buying back the home (with interest) in a fixed amount of time. If the financial setbacks are temporary, and the company is above-board, everybody can win: The homeowner keeps the

house and the company earns a profit for its role as rescuer.

But "reconveyance," as it's sometimes known, is ripe for abuse.

Attorney Leah Weaver, who focuses on fighting the scams as an Equal Justice Works Fellow at the Legal Aid Society of Minneapolis, explains how scammers work this fraud:
Suppose you've got a $200,000 home, with $100,000 of equity in it. A divorce and medical bills have you facing foreclosure. Suddenly, the phone rings with a bailout proposal.

So you sell your home, for $120,000 -- not much more than what's owed on the mortgage. Why sell for so little? "Because it's never intended to be a true sale," Weaver explains; remember, you don't think you're selling the house permanently, but buying it back in a short period, right?

The new purchaser, meanwhile, takes out a $120,000 loan, wipes out any liens on your property and even gets you a little cash back; and you get a two-year lease with a purchase option at the end.
But soon you realize you're in trouble. Why? Because scammers aren't about to let you get your home back. Often, the lease terms desperate homeowners agree to turn out to be as onerous as their previous mortgage payments that helped get them into trouble. Con artists also manipulate victims when facing crucial deadlines.
"One of my clients was told that payments were going be to under $1,000 a month," Weaver recalls. But the criminals dragged out the process until the foreclosure was imminent and she was backed into a corner. "When she got to the closing they were like, 'Oh, no, the payments are going to be $1,150.'
"Inevitably," she says, "you're going to default."

And default isn't pretty. The new purchaser evicts you as soon as possible, sells your $200,000 house, pays off the $120,000 loan and pockets about $80,000 -- all for a few months' work, says Weaver. Some people don't even fight back because they don't know they have options -- such as calling a lawyer, says attorney Dollar.

Do's and don'ts:

o Don't fall for promises like "We'll save your credit"; "We'll buy your house 'as is'"; or "We'll get you a new mortgage with low monthly payments."

o Don't sign away ownership of your property (sometimes called a "quit claim deed") to anyone without the advice of lawyer you trust. "When people get behind on their loan payments, they get a bit desperate, but the answer is not putting someone else on your title," says Oakland real-estate attorney James Hand.

o Beware of any home sale contract where you aren't formally released from liability for your mortgage. Also, make sure you know what rights you're giving up and that you agree to giving them up.

Scam No. 2: Phantom help

This scheme is fairly simple: Let's say you're way behind on your home payments and facing foreclosure. An individual or group approaches and offers to help -- then charges you thousands of dollars for various administrative duties like filing forms and phone calls, or else keeps simply promising a big rescue later. You can probably guess what's really going on: The "helper" isn't really doing anything at all to stop your foreclosure despite collecting thousands from you. By the time you figure out you've been hoodwinked, it's often too late to stop the loss of your house.

How did the scammer know to target you, anyway? That's easy: When a lender schedules the home for public auction, the matter becomes public record. In just more than half of the states, a lawsuit must be filed in order to spur a sale. Anyone can check the court documents to find the list of lawsuits, says Elizabeth Renuart, an attorney with the National Consumer Law Center and co-author of a major report last year on mortgage fraud called "Dreams Foreclosed." Soon, a letter or phone call comes like something from a guardian angel -- only it's a vulture.
In the other states (including California and Massachusetts, for example), the process doesn't go through the courts; foreclosure sales simply must be advertised publicly, as in the local newspaper. This latter process usually moves faster -- and makes an already-stressed homeowner even more vulnerable to a scam, says Renuart.

Do's and don'ts:

o Do call your mortgage company or lender if you're in trouble. Ask for the loss mitigation department. Contrary to popular perception, lenders don't want to steal your house, says attorney Dollar. They want to work with you. Why? "Lenders always lose money on foreclosures, even in a rising market," Dollar says. Scammers, on the other hand, will try to keep you from communicating with your lender.

o Don't call for assistance from one of those ubiquitous signs on telephone poles that advertise help. Chances are, that's not where help lies.

o Do proceed with caution, if a company or person:
    o Describes itself as a "mortgage consultant," "foreclosure service," or something similar;
    o Collects a fee before giving any services;
    o Advertises to people whose homes are listed for foreclosure, including anyone who sends flyers or solicits door-    to-door; and
    o Says you should make home mortgage payments directly to them or to their company instead of your mortgage         lender.

o Don't panic. Get full information on the foreclosure process in your state. Make sure you know ALL deadlines -- for court, for document filings, etc. States usually have associations that can offer free advice. Minnesota, for example, has the Minnesota Housing Finance Agency as well as the Minnesota Mortgage Foreclosure Prevention Association, which has federal Housing and Urban Development counselors available. For who to turn to for advice, click on your state here.

Scam No. 3: The bait-and-switch
In this scam, which NCLC calls the "bait-and-switch," con artists actually trick a homeowner into signing over the deed to a home -- without his knowledge.

How could somebody fall for this?
Attorney Hand gives an example. Hand is dealing with 10 cases involving the same real estate loan broker, Kaseem Mohammadi of Union City, Calif., who has been charged with 13 counts of real estate fraud. One of Mohammadi's strategies, Hand says, was to visit his alleged victims armed with a load of documents on a clipboard and places marked with Post-It notes indicating where to sign. His victims -- some of whom were elderly, or didn't speak English well -- were usually overwhelmed by the documents and also couldn't exactly see what they were signing thanks to the clipboard. And one of the things Mohammadi allegedly got them to sign was a "grant deed" that passed their home's title to a third party.

You don't have to be old or a non-English speaker to be stymied by the legalese. Attorney Renuart says she has seen shysters get their victims to sign incredibly complicated legal documents that resulted in their property being transferred to entities such as trusts. "These trust agreements, I can't understand them -- and I'm a lawyer."

And if a criminal can't get the signature? Forgery goes a long way in real estate these days, experts say.

Do's and don'ts
o Don't sign anything that has any blank spaces. Information could be added later that you didn't agree to. (Yes, it happens.)

o Never sign a contract under pressure. Always know exactly what you're signing. Take your time to review the paperwork thoroughly -- ideally with a lawyer who only represents your interests.

o Never make a verbal agreement. Get all promises in writing and get full copies.

o Cast a jaundiced eye at deals that sound too good to be true. Lately, some scam artists promise they'll wipe out or pay off your home's debt for you (so-called "debt elimination"). Some flustered homeowners bite. Just remember the free lunch rule: There isn't one.

A final thought: Remember, if you can't fix your finances, selling your house (on the normal market, that is) may not be the end of the world. Sure, you'll be a renter again. But given how much homes around the country have appreciated in the last several years, chances are you've made some money, which you can use to get back on your feet.

***Andy's note: I hope you found this article to be helpful. If your experiencing financial challenges, don't despair - contact me at andy@blackacremortgage.com or visit my website, www.FloridaLoanAdvice.com for FREE reports on how to lower your expenses, clean up your credit and get cash, typically within 7 business days! Contact us today!***

-Andy

P.S. If you can't wait, contact our office today to schedule an appointment with me: 954-236-4500 ext. 202!

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

1290 Weston Rd. Suite 300
Weston, FL 33326
*Licensed Correspondent Lender

100 Year Mortgage?

2006-06-12T10:50:00.000-05:00

No, there isn't such a thing yet, but it kinda feels like
we're getting there!

It seems like just yesterday they introduced the 40 year
mortgage. Now, there's talk about the 50 Year that some
lenders have begun offering earlier this year. But are they
a good thing?

Don't jump on them so fast. Sure, the payment is slighly
lower, but the 50 year mortgage is adjustable. Most 40's
are fixed. Also, don't expect to build equity up so fast
with either of these products. Many mortgage experts equate
this to renting, not buying, your home. Could be a problem
if real estate prices dip - these loan holders' equity could
get sucked right out if they're not careful.

I think there are better options. If you're going to sell
your home in the near future, consider a hybrid ARM that
amortizes over 30 years, or even an interest only mortgage.
You should always think about getting the cheapest interest
rate available and the shortest term possible.

But it all depends on your particulary financial profile,
your goals, the time you'll 'need' the mortgage money.

Speak to a qualified mortgage professional to make sure you
cover these issues throroughly.

My number is 954-236-4500 ext. 202 and I'd be happy to help!

-Andy

P.S. Don't be shy about moseying over to my website,
www.FloridaLoanAdvice.com for Free Reports, such as "The
'Secret' Rate on those 1% Loans" and "Escape the Debt Rat
Race."

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

1290 Weston Rd. Suite 300
Weston, FL 33326
*Licensed Correspondent Lender

How the Fed Rate Increase Affects Your Credit Card Rates

2006-05-15T10:23:00.000-05:00

Well, the Fed's at it again -

For the 16th consecutive time, the Federal Reserve jacked its rates up again. The Prime Rate, which moves in lockstep with the Fed. Funds rate, is now 8% -it's highest number in two years.

But what does that mean for us consumers? On the 30 year fixed rate mortgage, it doesn't necessarily mean anything. Frequently, the average rate on the 30 Year Fixed drops after the Fed raises it's rates, believe it or not. The reason why is outside of the scope of this entry, but suffice it to say that the 30 Year Fixed is tied more to the the way bonds and mortgage-backed securities are traded, not what the Fed does.

Where will most Americans will feel the effects of the Fed rate hike: credit cards!

Most credit cards are variable. And, hidden in the small print of your credit card agreement (you read it and 'agreed' to the terms, right?) is a provision that states that your rate can change without being notified in advance.

Credit card rates lag the Fed. rate movements, because they typically adjust four times a year. But that means a big increase in a rising rate environment such as our current one, since the last two quarters saw two rate hikes each.

Today's average rate on credit cards is approximately 14%! If a consumer pays only the minimum payments, a $5,000 debt will take more than 25 years to repay!

So take a look at your home equity. If you can exchange your high, non-tax deductible credit card debt of 14% or higher for a fixed rate in the mid 6%'s, you could save tens of thousands of dollars in interest! I urge you to take a look at your finances today!

So call my office, 954-236-4500 ext. 202 or email me at: andy@blackacremortgage.com to set up a free 1/2 hour consultation on your mortgage. I've blocked 7 spots off for the month of May and 2 are already taken, so hurry!

-Andy

P.S. Don't wait for the next Fed rate hike or for mortgage rates to go up - call today: 954-236-4500 ext. 202!

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

Credit Card Tricks

2006-05-01T10:29:00.000-05:00

Here's a great piece on the latest tricks the credit card companies are pulling on us - be wary of them! If you're a homeowner with equity in your house, I urge you to check out our free reports on www.FloridaLoanAdvice.com - particularly, Escape the Debt Rat Race and 9 Dirty Little Secrets the Credit Card Companies Hope You Never Find Out! Or call me today for a free 1/2 hour consultation. I've put aside 4 spots this month so pick up the phone - 954-236-4500 and call me today!

-Andy

The Basics

Don't fall for these stupid credit card tricks

Lenders are counting on you to fatten up their profits -- with higher rates, new fees and more fees -- all hidden in the fine print. Here's how to fight back.

By Liz Pulliam Weston

The competition among credit card companies has rarely been fiercer. So why are your credit cards costing you more than ever?

A nearly saturated credit card market means lenders are looking for new ways to boost their profits, and that often means bigger fees and higher interest rates for all but the most careful consumers. A rash of consumer bankruptcies has lenders wary as well; even though the bankruptcy laws got tougher in 2005, credit card issuers are still likely to penalize customers they think are higher risk.

What follows is a sample of the stupid credit card tricks lenders are using to ding you, and what you can do to fight back.

Fees, fees and more fees
Fees are a huge part of lender profits these days. Card issuers are hiking them, eliminating caps and generally looking for ways to zap the unwary.

"No issuer that we know of has broken the $40 barrier yet on either late or over-the-limit fees," said Justin McHenry, research director for IndexCreditCards.com, "but the $39 mark is showing up more often, so it’s probably only a matter of time."

It’s not that we’ve suddenly become more remiss about our payments. When we lapse, however, the penalties are much greater. Consider:

The average late fee is now $34.42, according to credit card tracker CardWeb, nearly three times the $11.96 average charge in May 1994. Many lenders use a tiered fee system, so that balances of $500 or less trigger a $15 fee, while higher balances reap fees of up to $39.
Over-limit fees, which are added to your bill when you exceed your credit limit, crossed $30 a couple of years ago and now average $31.22, up from $12.56 in 1994.
Cash-advance fees used to average about 2% with a $2 minimum and $10 maximum; today, those charges average 3% with a $10 minimum and no maximum. Cash advances also come with high interest rates that kick in immediately, with no grace period.

Meanwhile, lenders are reducing grace periods, the time you have to pay your bill before finance charges and late fees apply. The average grace period is just over 21 days now, compared with nearly 30 days in 1990. Issuers that used to offer a little leeway -- not charging late fees if the payment was received within a week or so of the due date -- now slap on fees if your payment didn't arrive by a certain time on the due date.

That means more of us are getting slapped with charges. Two out of three people, in fact, paid a late fee last year. Late payments also typically trigger so-called "punitive" interest rates that can exceed 30% and last six months to a year.

That's true even with cards that are trying to tap into consumers' frustration with ever-rising fees. The Citibank Simplicity Card and Clear from American Express, for example, both promise no fees of any kind. The stinger lies in what happens if you actually miss a payment or exceed your limit: a punitive interest rate that will take your breath away. The Citibank card's rate soars to a variable rate of 31.74% after one infraction; Clear rises to 29.74% after two lates. [That means close to every one dollar out of three goes to your debt! - Andy]

Those rates "are not exactly what I would label as consumer-friendly," said Curtis Arnold, founder of CardRatings.com.

How to fight back:

Set up an automatic debit with the issuer or use the recurring payment feature of your online bill-pay system to ensure that at least your minimum always gets paid before the due date and time.
Monitor your balances so you don't go over the limit. In fact, using more than 30% or so of your credit limit can ding your all-important credit scores, so aim to keep your balances below that point on all your cards.
If you’re charged a late fee, call the card issuer and protest. Many are willing to remove the fee if you’re a good customer and not habitually tardy. Try to get the punitive interest rate reduced as well.
Don’t use a credit card to get cash. It was always a bad deal and now is even worse.

Your credit card company is watching you
So you know that credit card companies will jack up their rates if you miss a payment or two.

But more people are now discovering they can lose a great rate if they miss a payment on any account -- or if they open too many new accounts or charge too much on any of the cards they have. Lenders routinely scan credit reports, said CardWeb President Robert McKinley, looking for evidence that their customers are piling up too much debt or having trouble paying their bills.

“Creditors are looking for late payments, collection accounts, too much available credit or a high credit utilization -- maxing out cards -- as a basis to raise interest rates,” McKinley said.

Even customers that credit card companies used to love -- those not-so-savvy folks who pay only the minimum each month -- are now regarded with suspicion.

Paying only the minimum means paying lots of interest, since it can take years, if not decades, to retire your debt this way. In the past, some lenders were so eager to encourage this behavior that they lowered their minimums from 2.5% or 3% of the balance to as little as 1%.

Now, though, some lenders have decided that people who consistently pay only the minimum are actually risky customers who are more likely to default, McKinley said. A few have responded by slapping punitive rates on those who pay only the minimum.

Also, regulators have been leaning on lenders for the last couple of years to boost their minimums so that consumers pay at least 1% of their principal balance, plus any accumulated finance charges and fees, each month. That has led to higher minimum payments for some customers.

How to fight back:

Be vigilant about your credit. Pay all your bills on time, apply for credit sparingly, and don’t max out your credit cards. For more information, check out MSN's Decision Center on credit scores.
Always pay more than the minimum. Paying an extra $25 a month on a $5,000 balance can shave nearly 16 years off the time it takes to pay back the debt, according to debt expert Gerri Detweiler of UltimateCredit.com. You’ll also save more than $3,000 in interest costs.
Check your credit report at least once a year and challenge any erroneous information. (Consumers are entitled to one free annual look at their reports from www.annualcreditreport.com.) Credit bureaus are required by law to investigate any item you dispute and to remove it from your record if it’s not accurate.

Balance-transfer roulette
You may not see as many 0% balance transfer offers as in years past, but card issuers are still trying to get customers to move their debt from one card to another with low-rate offers. Unfortunately, many of these seemingly tempting offers are studded with traps for the unwary. Among them:

Low rates for "life": What this usually means is a low rate -- usually 2.9% to 5.9% -- for as long as you carry a transferred balance. The problem is that any new purchases will get charged a higher rate, and your payments will go to paying off the lower rate balance.

Caps on balance transfer fees may be disappearing: Balance transfer fees of 2% to 3% have long offset some of the benefit of lower rates, but those fees were traditionally capped at $75. Now Chase and MBNA are experimenting with eliminating that cap, said CardRatings.com's Arnold. On a $10,000 transfer, that could mean paying an extra $225.

Bait and switch. Some lenders may offer a great rate for a balance transfer to a new card, but that doesn’t mean you’ll get it -- even if the card issuer tells you you’re “pre-qualified” for the new account. Once you apply, the lender might approve you, but only for a higher-rate card.

To make matters worse, bouncing a balance from card to card can hurt your credit score. Opening a new account can ding your scores, as can transferring a balance from a higher-limit card to a lower-limit one.

How to fight back:

Read the fine print. Try to avoid balance-transfer offers that only apply for a few months and lenders who might give you a higher-rate card than the one they’re advertising.
If the card charges a fee to transfer your balance, know what it is and make sure the interest savings will be more than the additional charge.
Use one card for balance transfers and another one for new purchases.
As always, try to pay off your balance as soon as possible. The only way to win the credit card interest game is not to play.

Rethink which card you take overseas
Once upon a time, credit card users who traveled abroad got a great deal: their purchases qualified for institutional exchange rates that were much lower than the ones tourists found at exchange kiosks.

Today, though, most cards tack on a 3% fee, which includes the 1% charged by Visa or MasterCard for processing the transactions and 2% for themselves. That 3% represents $150 on $5,000 worth of transactions.

Still, there are a few cards charging less:

Capital One has a 0% transaction fee, which means it not only avoids tacking on an extra fee but absorbs the 1% that its networks charge.
Providian charges just the 1% transaction fee.
American Express levies a 2% fee.
HSBC charges 1% to 3%, depending on the card.

How to fight back: Even with a 3% fee, you're still getting a better deal with a credit card than you would at most exchange counters overseas. But if you travel abroad frequently or spend a lot while you're there, a lower-fee card could be a good idea.

(A tip: Always take at least two major credit cards abroad, just in case one is lost or stolen.)

Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.

I hope you found this article to be instructive.

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

The Dark, Unspoken Truth About Those 1% Loans!

2006-04-17T09:09:00.000-05:00

Here's a great piece by Liz Pulliam Weston, MSN.com's personal finance writer, warning about the dangers inherent in those 1% Option ARM loans that are so hot now. If you're considering one of these loans, or you're presently in one, you need to read this bit. Also, I urge you to read something else - I've written a free report, "The 'Secret' Rate On Those 1% Loans," that is available on my website, www.FloridaLoanAdvice.com. If you're thinking about this type of loan, you need to understand it!

-Andy

The negative equity epidemic

All those ARMs and teaser rates are coming home to roost. 1 in 10 homeowners has no equity or is even 'upside down.'

By Liz Pulliam Weston

Rhonda is in a panic.

The two-year introductory rate on her adjustable mortgage is about to expire and send her payments soaring. She thought she could refinance to a more-affordable loan, but the rates she's being quoted are just as high.

"So I then decided I would just sell the house and get out of it," Rhonda wrote in an e-mail. "WRONG! The houses in my area are selling for around $20,000 less than what I owe!"

The 'Secret' Rate on Those 1% Loans -available for a limited time on www.FloridaLoanAdvice.com

Rising interest rates would put a strain on homeowners with adjustable-rate mortgages in any economy. But the situation is growing critical for millions of borrowers who are "upside-down," owing more on their homes than they're worth.

Many of these homeowners may soon face a "can't pay, can't sell, can't refi" situation that could lead them to lose their homes.

Consider:

Nearly one in 10 households with a mortgage had zero or negative equity in their homes as of September 2005, according to First American Real Estate Solutions, an arm of title-insurance company First American Corp. The study of 26 million homes in 36 states and the District of Columbia found that one in 20 home borrowers was upside-down by 10% or more.
The situation is even grimmer for recent borrowers. Of those who bought or refinanced homes in 2005, 29% had zero or negative equity, and 15.2% were underwater by 10% or more.
Interest rates on about a quarter of all mortgage loans outstanding, or $2 trillion, are scheduled to reset this year and next, according to Economy.com. Homeowners who opted for extremely low teaser rates in recent years could see their payments eventually double, said Christopher Cagan, First American's director of research and analytics.
Defaults and foreclosures are already on the rise, thanks in part to higher interest rates, cooling real-estate markets and overextended borrowers. Nationally, 117,259 properties entered some stage of foreclosure in February, according to foreclosure-monitoring firm RealtyTrac, a figure that's up 68% from February 2005.

Submerged
Any homeowner with negative equity is at risk of foreclosure if hit with a job loss, divorce, death or other catastrophic event. But homeowners with no equity and adjustable-rate mortgages face additional risks from the loans themselves, since their payments could rise 50% or more in coming years as interest rates reset to higher levels.

In addition, borrowers with adjustable-rate mortgages are more than twice as likely to be underwater on their loans as those with fixed-rate mortgages, Cagan found.

Adjustable-rate borrowers have less equity

Equity level	Fixed-rate	Adjustable-rate
Less than -5%	5.2%	12.3%
Less than 0	7.2%	17.0%
Less than 5%	10.1%	23.1%
Less than 10%	14.0%	30.6%
Less than 15%	19.0%	39.1%
Less than 20%	24.9%	47.8%

Source: First American Real Estate Solutions

Borrowers who chose ultra-low teaser rates of 1% to 2% in the last couple of years could be among those most at risk, Cagan said. One in five such borrowers who took out loans in 2004 and 2005 was underwater as of September. These borrowers face the sharpest payment increases as their loans reset to market rates.

A 1% teaser rate on a $300,000 mortgage that rose to a market rate of 6%, for example, would increase a family's monthly payment by 86%, from $965 to $1,799 a month. If the old payment represented 30% of a family's gross income, the new payment would represent over 55% -- a squeeze that few families could endure for long, Cagan said.

But even borrowers who opted for more-conventional loans could face unaffordable increases. Rhonda's rate, which was fixed for two years at 7.8%, is scheduled to rise to nearly 10% and will continue increasing every six months for the foreseeable future.

The pressure on borrowers' finances will be so intense, Cagan said, that many will lose their homes. Cagan predicted that one in eight homeowners with adjustable-rate mortgages that originated in 2004 or 2005 eventually could default.

Little chance of national rout
Big upticks in foreclosures have repercussions that extend beyond the families that lose their homes. Lenders that wind up with too many foreclosed properties may cut prices by up to 20% to sell the houses quickly, which can depress house values in surrounding neighborhoods.

For a glimpse of what could happen, take a look at Michigan. Foreclosure rates there have soared as the auto industry sheds jobs and reduces paychecks. One of every 408 Michigan homes was in some stage of the foreclosure process in February, RealtyTrac said.

The uncertain local economy and a huge inventory of unsold and bank-owned homes are depressing real-estate values throughout Michigan.

When Robert Darmanin refinanced his mortgage earlier this year, for example, he was told his home was worth $12,000 less than a year ago. His appraiser said her situation was even worse; her home had lost $20,000 in two years.

"We had all gotten so used to house appreciation," said Darmanin, director of corporate relations for LaSalle Bank in Troy, Mich. "It's quite shocking."

Dropping home values put even more borrowers underwater. If home prices nationally were to fall by 10%, Cagan said, nearly half of last year's borrowers and 17.7% of borrowers overall would owe more on their homes than they're worth.

Cagan, however, doubts we'll see a nationwide real-estate rout. If defaults rise to the level he predicts -- about $110 billion, or 1% of total homeowner equity, spread over five or six years -- economic growth might slow by about 10%, he said. Regions that have strong local economies and that aren't overbuilt should survive the defaults without falling into real-estate recessions.

"It won't break the market," Cagan said, "but it will be painful for the homeowners involved."

How to hang on
If you want to make sure you can hang on to your home in good times and bad, consider the following:

Avoid risky loans. Low teaser rates may sound appealing, but you may not be able to survive the sticker shock when the rates eventually adjust upward. If you're considering an adjustable-rate loan, check to see how far your payments could rise in the future. Don't rely on the assurances of a lender or broker that a loan won't hit its caps --nobody has a crystal ball.

Consider locking in. Fixed-rate loans have moved up from their generational lows, but they're still low in historical terms. [Andy's note - for nearly the same payment, you can lock into a 30 Year Fixed Rate Loan in most cases. Call me at 954-236-4500 ext.202 if you'd like more information!]

Protect your equity. Now is not the time to be draining your home's value through reckless home-equity borrowing. Aim to keep an equity cushion of at least 20%.

Control your debt and protect your credit. Even if Rhonda had enough equity to refinance, her high debt-to-income ratio would prevent her from getting the best rates. [Andy's note - she'd probably still qualify for a great rate on a 'stated income' loan as long as her credit is good. For more info, call me at 954-236-4500 ext. 202] The borrowers who will have the most flexibility to refinance are the ones who keep their overall debt loads down and who maintain sterling credit. For more information on ways to burnish your credit scores, see MSN's Decision Center on credit ratings.

Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.

I hope you found this article to be informative!

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

Protect Your Private Information

2006-04-02T07:27:00.000-05:00

Weston -April 2, 2006

My last entry covered some new, creative (in a sick way) ways identity thieves are stealing private information. If it happens to you, your credit rating will plummet, making everything more expensive - higher mortgage interest rates, higher car lease and loan rates, higher credit card interest rates, too.

Do yourself a favor and pay attention to these tips:

don't give out personal info over the phone or internet unless you've initiated the contact
check your credit rating once a year (it's free - there's a link on my site, www.FloridaLoanAdvice.com) to look for anything 'unusual."
Report suspicious activity IMMEDIATELY -call the police, the credit bureaus, the FTC (www.consumer.gov/idtheft).
Shred, shred, shred! Spend the $40 and buy a shredder for all your old bills, new credit offers, etc. that you get each day and toss. Trash-picking thieves can easily obtain your personal information by spending 5 minutes in your garbage. (Plus, have you ever operated a shredder? It's fun!)
Drop mail inside a U.S. postal service box, not in your own mailbox.

Source: National Crime Prevention Council

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

Protect Your Identity This Tax Season

2006-03-26T08:30:00.000-05:00

Weston - Sunday, March 26, 2006

It's tax time, and the phishing is easy...

The identity thieves are out in full force and effect! They're sending emails that appear to come from the IRS, asking people for their social security numbers or other personal account numbers, according the National Crime Prevention Counsel. They're ruining innocent people's credit rating, preventing them from qualifying for the best interest rates available (or at all!) for mortgages, home equity lines, auto loans and leases and credit cards.

The IRS and Treasury Department reports that "phishers," or identity thieves, are using the IRS logo and email addresses like tax-refunds@irs.gov or admin@irs.gov to dupe people into giving up their sensitive information.

What are the phishers doing with the info they're duping people out of? You guessed it, applying for mortgages, lines of credit, credit cards and so forth. Some research indicates that the number of victims is in the millions!

Phishers also have used fake emails from the Social Security Administration to entice hapless email recipients to divulge their social security numbers.

You need to protect yourselves against this type of activity. First, check your credit report at least once per year, it's free. (I have a link for a free credit report on my website, www.FloridaLoanAdvice.com).

Second, do not, under ANY circumstances, give out your social security number, account information or any other private, sensitive information to anyone over email or the phone. Think about it - your bank, the IRS and the Social Security Administration already have your information, why would they ask you for it?

In my next Blog entry I'll discuss steps to protect your personal information.

-Andy

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Sundays, ESPN Radio, 10-11am (WFLL 1400am)

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

Do You Have a Tax Refund Coming?

2006-03-22T17:55:00.000-05:00

Here's another bit by Liz Pulliam Weston, one of my favorite personal finance writers. If you have any credit card debt, I strongly urge you to pay off as much as you can with your tax refund. Liz agrees, too!

7 smart ways to spend your tax refund

The average refund could be gone in a blink, or it could go a long way toward changing your future. Don’t worry -- you can blow some of it, too.

By Liz Pulliam Weston

Four out of five workers say they'll get a refund this year, and most of those say they'll do something responsible with the money, like pay down debt (44%) or save or invest (38%). That's according to the latest Principal Financial Well-Being Index, a survey of 1,374 workers.

We'll see. The latest IRS estimate is that the average refund will be nearly 5% higher this year, with an average $2,480 returned to taxpayer's hands. That's a big chunk of temptation.

If you're on the fence about what to do with your refund, here are some ideas to consider, including at least one I know you'll like.

Blow (some of) it
Seriously. I firmly believe in frittering away 10% of any windfall as an incentive to be responsible with the rest.

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Check out

www.FloridaLoanAdvice.com!

Your refund isn't exactly unexpected money, of course, but it does tend to be a big chunk of change. You'll probably be tempted to blow all of it (indeed, that's exactly what 7% of those in the Principal survey intend to do with theirs: buy some big-ticket item). By limiting your splurge, you'll feel rewarded while still having the bulk of the money to pay off debt or invest.

So that means you'll have about $250, on average, to spend. Take your kids to a theme park or your partner to a weekend getaway. Buy that outfit or that tool you've been lusting after. Just pay cash and have fun.

Pay your credit cards. (Andy's note - I think this should be number 1. I hate debt!)
You knew that was coming. You'll have a bit more than $2,200, on average, left over after your splurge. That just happens to be the median amount owed on credit cards among families who carried a balance, according to the Federal Reserve's latest Survey of Consumer Finances. With average rates on credit cards hovering around 16%, that $2,200 balance is costing you more than $350 in interest each year.

Paying your cards off, or at least down, will save you a big chunk of change and free up space on your cards for emergencies. Since most U.S. families have woefully inadequate emergency funds, those cards could be your backup in case something goes wrong.

Fund your retirement
Here's where an investment of tax money can really pay off.

You'll get the biggest bang for your buck if you've got a 401(k) plan at work and you're not already contributing enough to get the maximum company match. With the typical matching system, you'll get an instant 50% return on your money, plus years of future tax-deferred growth. Over a 40-year working career, that extra $2,200 annually could turn into a nest egg worth $850,000, assuming average 8% annual returns (which is a reasonable assumption with a balanced portfolio of stocks and bonds).

The problem is that you can't just dump your refund directly into a 401(k). But you can ask your human-resources department to increase your contribution from your paychecks (it works out to about $85 more a check if you're paid every two weeks). Then you can stick your refund into your savings account and have $85 transferred every two weeks to your checking account for the next 12 months. The result: You boost your retirement kitty without feeling the pinch.

If you can live without that $85, or you don't have a 401(k) match to gain, you can contribute the $2,200 to an individual retirement account. Over your working career, those annual contributions could grow to $570,000.

Your contribution is deductible if you don't have a retirement plan at work or if you do but your income is under certain limits. (The ability to deduct an IRA contribution phases out at between $50,000 to $60,000 of adjusted gross income if you're single; the phase-out range is $70,000 to $80,000 for married couples for 2005 and $75,000 to $85,000 in 2006.)

If you can't deduct your contribution, consider putting the money into a Roth IRA instead. There's no tax break when you contribute, but your money comes out tax-free in retirement. The ability to contribute to a Roth phases out between $95,000 and $110,000 for singles and between $150,000 and $160,000 for married couples.

You have until April 15 to fund an IRA or Roth IRA for 2005. After that, you can fund one for 2006. The annual contribution limit for either year is $4,000. If you're 50 or over, you can make an extra $500 "catch-up" contribution for 2005 or an extra $1,000 for 2006.

Boost your emergency fund (Andy's note - fellow South Florida residents -pay attention to this one! The next hurricane is around the corner!)
If you're already maxing out your retirement-savings options, the next place you should look is your savings account.

Only about three in 10 U.S. households have enough liquid savings to get them through three months of unemployment. That's a little scary, given that the U.S. Bureau of Labor Statistics says the average length of unemployment in the past year has been between four and five months.

You may not be able to survive long on whatever's left of your refund, but it's a start. And having a little spare cash on hand might help you avoid using credit cards to pay for the inevitable crises like auto repairs. You can squeeze a little more interest out of your account by using an online bank such as ING Direct, UFBDirect, NetBank or HSBCDirect.com, which pay higher-than-average rates with no monthly account fees. Bankrate.com can help you compare banks.

Contribute to a college fund
Got kids? They'll probably go to college someday, and every dollar you save for them now could spare them from a buck or two of student loan debt later. (Andy's note - this one hits home hard for me. Why? My parents never did this. Between undergrad and law school, I ended up with north of $100,000 of student loans, plus credit cards! Now, I have four kids. They're going to college if I have something to say about it - and debt free!)

You can put up to $2,000 a year into a Coverdell Education Savings Account (read "College plans for the rich, poor and in-between") and withdraw the money tax-free for qualified elementary, secondary or college expenses. (Unless Congress renews the legislation, the ability to use Coverdell money for elementary and secondary school costs is scheduled to expire after 2010.) The ability of parents to contribute is phased out when modified adjusted gross income is between $95,000 and $110,000 for single people and between $190,000 and $220,000 for joint filers. But parents can always gift the contribution money to the child, then have the child make the contribution.

Another good option for many families: state-run 529 college savings plans. Some states offer tax breaks for contributions, and the money grows tax-deferred. (The ability to avoid taxes on withdrawals is scheduled to disappear after 2010, but again, Congress may act to extend the legislation.)

For more information on picking a plan or on college savings in general, visit MSN Money's Saving for College Decision Center.

Continue your education
When your other financial ducks are in a row, it's time to look at your earning power.

The economy can be a scary place, as it constantly destroys or outsources old jobs and comes up with new ones. If you want to keep yourself employed and maximize your earnings, you may need to learn new skills.

That may or may not mean getting another degree. If you've only got a high school diploma, you probably will get a payoff by attending night school to get your associate's degree. (Conveniently enough, the average cost of a year at a community college for 2005-2006 was $2,191, according to the College Board, which you could neatly cover with your refund). The payoff from other degrees may not be as assured, as I wrote in "Is your degree worth $1 million -- or worthless?"

You may be able to expand your skill set profitably with just a course or two. Maybe you need accounting chops for the next move up the ladder, or a class in marketing. If you're not sure, talk to your boss about what skills seem to be in short supply at your company and in your industry.

Attend a conference
Most jobs are represented by some kind of trade or professional group that holds regular conferences or conventions. These can be a great place to network, add new knowledge and skills, or even find your next job.

If you figure you'll spend $400 or so on airfare, $500 or so on conference fees and $200 a day on hotel and meals for three days, you should have plenty of cash left over for drinks or a little sightseeing.

Just make some time to actually attend the conference. You can't learn or schmooze if you're not there.

Finally, consider adjusting your withholding so your refund isn't quite so spectacular next year. The IRS has a withholding calculator that can help you fine-tune your taxes so you get more in your paychecks. Then set up an automatic transfer so this extra money is promptly whisked away into your retirement, college or savings accounts so it can start working for you year-round.

Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money.

I hope you enjoyed this column!

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

Dead Man Closing!

2006-03-15T08:15:00.000-05:00

Wednesday, March 15, 2006, Weston:

Here's a report from one of my favorite websites, www.mortgagefraudblog.com. It describes one of dumbest legal defenses I've ever heard of from a New York attorney wrapped up on a fraudulent scheme. Unbelievable!

Check out my Free Reports on www.FloridaLoanAdvice.com, including "How to Beat a Chapter 13" and "9 Dirty Little Secrets the Credit Companies Hope You Never Find Out."

Here's the story about the stupidest lawyer in New York.

-Andy

Monday, March 13, 2006

Disbarred Attorney Convicted of Fraud

Howard Thaler, 61, a disbarred New York Attorney was sentenced to seven years in prison and ordered to pay restitution of $523,000 in connection with his role in fraudulent real estate deals. He was also found guity by a federal jury in White Plains, New York, last year in connection with fraud and false statements relating to his procurement of numerous bank loans through fraudulent means and for deceiving individuals for whom he acted as their attorney even though he was already disbarred.

Salvatore LoBreglio, a former Westchester County Independence Party official and former New York City police officer, had previously been sentenced to probation after pleading guilty to instructing a witness to lie to federal investigators in connection with the investigation.

In one of the deals included in the current sentencing, Thaler had a man impersonate a deceased man at a closing so that Thaler‘s client could purchase the property from the deceased individual.

According to The Journal-News, Thaler told the sentencing judge that he did not believe, at the time, that he was doing anything wrong. The judge apparently did not give much credence to Thaler’s assertions, stating:

“I find it hard to believe that a trained lawyer doesn’t know that you can’t lie to a lending institution and encourage your clients to do so.”

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

"Spoofing:" A New Credit Card Scam!

2006-03-12T08:40:00.000-05:00

Weston, March 12 2006:

Just read an interesting piece about Phone "Spoofing:" the practice of making a false caller ID appear. There are companies out there like Spoofcard.com that sells a virtual 'calling card' for 10 bucks that allows the user to send fake caller ids and even scramble his or her voice!

This practice is currenlty legal. But one illegal area it's being used: credit card scams.

Caller ID spoofing is being used by people who buy stolen credit card numbers. They call cash transfer companies, like Western Union, and set up cash transfers using the stolen credit card numbers.

Credit card companies use Caller ID to confirm the identity of a the user of a newly-issued card. Spoofing undermines these efforts, too.

Even celebrities aren't immune from Spoofing's effects - there was a report that Paris Hilton was duped into giving up a cell-phone voicemail password by someone posing as technical support!

So be on the lookout for this type of fraud. And don't give out your password to anyone, whether over the phone, online or some other way.

-Andy

P.S. If you're credit is blemished due to credit card fraud or any other reasons, but you still would love to slash a couple hundred bucks or more from your monthly payments, mosey on over to www.FloridaLoanAdvice.com and check out our free reports, like "Escape the Debt Rat Race!".

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

How Paying Your Debts Can Actually Lower Your Credit Score!

2006-03-09T08:12:00.000-05:00

Here's another piece by Liz Pulliam Weston, the MSN columnist on credit and other financial matters (she's one of my favorite writers in this area).

I guarantee that you'll be surprised at some of the points she makes here...some of the things you might do to repair your credit can have the opposite effect!

If you have any questions about this post or other issues related to credit, bankruptcy, applying for a mortgage, etc. please check out our website, www.FloridaLoanAdvice.com for free reports (such as "9 Dirty Little Secrets the Credit Card Companies Don't Want You to Know," "Escape the Debt Rat Race" and "How to Beat a Chapter 13" or call me at the office, 954-236-4500. Calls are typically returned within 24 business hours.

-Andy

Andy Lockwood

Host - The Best Damn Real Estate and Mortgage Show, Period

Sundays -10-11am, WFLL 1400 AM (online- follow the links on www.FloridaLoanAdvice.com).

Here's the piece.

The Basics

When paying bills can hurt your credit

Settling some old debts can actually harm your credit score. Here's how to do the right thing the right way.

By Liz Pulliam Weston

Cynthia worked hard to improve her credit scores. She was careful to pay her bills, including an auto loan and a credit card, on time every month. Finally, in December 2004, she decided to pay off the one old debt on her credit reports.

Her scores promptly plunged by as much as 95 points.

"I spent over $1,200 in paying off hospital bills from six years ago, thinking this would help," she wrote in an e-mail. "Did this hurt me instead?"

Borrowers who try to pay off old delinquencies, charge-offs and collection accounts often learn the hard way: Sometimes, doing the right thing does the wrong thing to your credit.

visit www.FloridaLoanAdvice.com! for other info you need to know about credit!

(Andy's note: lots of potential borrowers try to raise their scores by paying off debts and/or closing their accounts...but this can hurt their scores, believe it or not!)

Quirky credit scoring system
Thanks to the sometimes bizarre quirks of credit scoring, state statutes of limitations and the federal Fair Credit Reporting Act, consumers cant always assume that paying off old debts will improve their financial situation or make them a better risk in lenders eyes. Add in the tactics of some unethical collection agencies, and you have a real quagmire.

The one bit of good news, though, is that what happened to Cynthia -- a score plunge because of a new payment on an old debt -- is much less likely to happen today. That's because the company that creates the leading credit score, the FICO, worked with credit bureaus to iron out that particular wrinkle in the formula.

But there are still other problems that can arise:

Settling accounts for less than you owe can often hurt your credit scores.
Arranging a payment plan or even inquiring about an old debt can restart the statute of limitations in some states, allowing creditors to sue you.
Simply contacting a creditor about a past-due account can revive its interest in trying to collect, leading to harassment and hardball tactics.
Unethical collection agencies may promise to upgrade how your debt appears on your credit report in exchange for payment -- then not follow through or make matters worse by making the debt seem more recent than it is.

To understand how these things happen, you need to understand some of the practices of the credit industry, such as:

How delinquencies and charge-offs are handled
A lender will generally write off an account as a bad debt within six months after it becomes delinquent -- in other words, six months after the borrower stops paying. The write-off is reported to the credit bureaus as a "charge-off."

Some people incorrectly believe that a charge-off means they no longer have to pay their debt. But "charge-off" is basically just an accounting term, notes debt expert Gerri Detweiler, author of "The Ultimate Credit Handbook. It doesnt relieve you of the legal or ethical obligation to pay the loan, and the lender or a collector can still come after you.

Usually, a lender will turn the charged-off account over to its collections department or a collection agency, and youll have two entries for the same account on your credit report: one from the original creditor showing the accounts status as "charged-off" and another from the collection agency showing the accounts status as "in collections."

(If you have more than two entries for the same debt, which sometimes happens when an account is passed from one collection agency to another, you can demand the credit bureaus remove the extra entries.) (Andy's note - I see this ALL the time on credit reports. It's an easy fix and practically guaranteed to boost your scores.)

How your credit score views old debts
Not paying your bills is a big bad when it comes to your credit. Delinquencies, charge-offs and collections all seriously hurt your score.

But heres something thats really important to know:

When it comes to your FICO credit score, the one most used by lenders, what matters most is what the original creditor says on your credit report. The status and amounts owed shown on that entry will figure more heavily in your credit score than what a collection agency reports.

If the original creditor shows a charge-off with a balance still owed, you might be able to boost your score by paying off the bill and getting the original creditor to reset the balance to zero.

If the balance is already zero -- which credit bureaus say is typical when a collection agency takes over an account -- you cant improve your score by paying up.

"If the trade line balance is showing zero, youre not going to help your FICO score by paying off a collections account," said Craig Watts, spokesman for Fair Isaac Corp., creators of the FICO credit scoring methodology. (Andy - this is an important point! Do not pay accounts that are reported as 'zero.' Better yet, call me before you do anything! 954-236-4500.)

'Settling' an old debt can hurt your score
In the past, making any payment on an old, past-due debt could actually make matters worse because the action "updated" the negative mark in the eyes of the credit-scoring formula, making it look more recent than it actually was.

"Recency," or how long its been since youve had a negative mark, matters a lot to your credit score. The more recent the problem, the more heavily it weighs against you.

In the last couple of years, however, Fair Isaac worked with the credit bureaus to change how new payments on old debts were reported, said Tom Quinn, the company's vice president for scoring. Now, the scoring formula can distinguish between the new payments and actual new delinquencies.

"If you're making a payment (on a past-due account)," Quinn said, "that will not negatively affect your score, in and of itself."

You still can hurt your score, however, by "settling" an account for less than what you owe. Such settlements may get the creditor off your back, but the notation of "settled" on your credit report can sometimes be worse for your FICO score than just leaving the account open and unpaid, said Barry Paperno, a Fair Isaac manager.

"Settling the account can add a new element to its record at the bureau," Watts said. "Since that element's date would be more recent than the original item, it can end up lowering the score."

Now, this assumes youre still dealing with the original creditor. If youre dealing with a collection agency, a settlement can be more of a wild card: It could help your score, it could hurt your score or it may have no affect.

Lenders may require you to pay old debts
Of course, just leaving the account unpaid might not be an option if you want to buy a house. A mortgage lender may require that you pay off or settle any open collections that show up on your credit report as a condition of getting the loan. (Andy - actually, this is frequently NOT the case. We have many programs that permit collections, judgments, chargeoffs, etc. to remain open! Don't let these things stop you from applying for a loan with us.)

If youre interested in a settlement, credit repair experts suggest that, as part of your negotiations, push to have the creditor or collection agency either stop reporting the account altogether or demand that the account be reported as "paid in full" rather than "settled." Such treatment might not help your score, but its less likely to hurt it. Youll have more clout if youre able to pay a lump sum than if you have to set up a payment plan.

Credit bureaus really hate it when collection agencies agree to these demands and have even banned companies for failing to properly report transactions. But that doesnt mean you cant try.

How long credit bureaus can report your accounts
Your credit score is based on information in your credit report, and there are limits on how long your bad marks can be used against you. Once a negative item is on your file, it generally can be reported for 7½ years from the time you stopped paying on the account. (Bankruptcies can be reported for up to 10 years.)

So, if you stopped making payments on your Visa bill in January 2004, the lender can report a charge-off the following June. The account can be reported to the credit bureaus until June 2011, when it must be deleted from the bureaus records.

How letting sleeping dogs lie can affect your credit
You can see why some borrowers choose to just let their old debts "fall off" their credit report rather than try to repay. Once the bad marks are gone, your credit score probably will improve, and youll still have the money you would otherwise have sent to your old creditors.

Note the word "probably." In credit scoring, little is certain. Thanks to the way the FICO is designed, sometimes a score actually drops after old, bad accounts disappear.

Thats because the FICO formula groups borrowers based on certain characteristics, such as whether theyve had a bankruptcy or other credit problem. You could rise to the top of the "had-a-bankruptcy" group but, once your bankruptcy drops off your report, be "transferred" to another group, where youd rank near the bottom.

"That move (from one group to the next) can sometimes be pretty graceless," Watts concedes. "Its as though you fell off a chair. Your score can change a couple dozen points for no apparent reason."

Fair Isaac attempted to ease this transition with its "next generation" credit-scoring model, known not surprisingly as NextGen. (Andy's note - did these guys hire an ad agency or sponsor a contest for the new name! Brilliant!) But most lenders still use the classic FICO scoring formula, so a sudden score drop when a negative item disappears is still a possibility.

Know your state's statute of limitations
Thats not the end of the complications. Each state limits the amount of time in which a creditor can sue you after an account becomes delinquent. Sometimes the statute is longer than the credit reporting limits, sometimes shorter.

The statutes of limitations for written contracts, for example, range from three years in Delaware to 15 years in Ohio, although the typical limit in most states is five or six years. The rules vary widely, but, in some states you can inadvertently extend the statute of limitations by entering into a repayment plan with a creditor or even by acknowledging that a debt is yours. Getting dragged into court and having a judgment entered against you could further hurt your credit score and your efforts to rehabilitate your credit.

Before you contact your creditors, you should know the details of the statute of limitations in your state. (If youve moved, it may be the state you live in now whose law will apply, even if you entered into the credit agreement in another state.) Your best bet may be contacting a consumer law attorney for help; you can get referrals from the National Association of Consumer Advocates. (Better yet, call me at 954-236-4500!)

You might also want to take a look at "12 tips for negotiating with debt collectors" for some ideas about how to conduct your negotiations. Several Internet sites, including CreditBoards.com, have message boards whose members share advice and tactics.

In the end, you may decide that trying to pay off your old accounts isnt worth the hassle -- or you may decide just the opposite. You may decide the ethical obligation to pay what you owe outweighs any short-term concerns you have about your credit.

"If you can afford to pay, pay," said Steve Rhode, chairman of the credit-crisis counseling firm MyVesta.org. "Too many people live and die by what their credit report says." (Andy - actually, great advice! Hardly ever given, candidly.)

Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.

Life Post-Bankruptcy

2006-03-06T09:08:00.000-05:00

Here's one of the better pieces about how to repair your credit and rebuild your financial life after filing bankruptcy. I read it on MSN.com.

Most people who have filed bankrupties or with other credit issues just don't know how easy it is to make a "comeback!"

I specialize in getting low, single-digit mortgage rates for folks in bankruptcy or with other credit issues. In addition to this and other articles appearing on my blog, you can find great info on my website, www.FloridaLoanAdvice.com. Check out "How to Beat a Chapter 13" and "9 Dirty Little Secrets the Credit Card Companies Don't Want You to Know." Check it out and learn how you can save hundreds, maybe even thousands of dollars per month!

Here's the article.

-Andy

Andrew Lockwood, J.D.

Host - The Best Damn Real Estate and Mortgage Show, Period

10-11am, Sundays -ESPN Radio 1400AM (listen online through the link on www.FloridaLoanAdvice.com)

Bounce back fast after bankruptcy

Carefully rebuild your credit and you could qualify for almost-normal rates, even a mortgage, in a year or two. Here's what you need to do.

By Liz Pulliam Weston

Anita Burleson has had trouble getting credit since her bankruptcy two years ago, but she knows that's not true for every filer. The fact that there are repeat bankrupts tells her that.

"When I was in bankruptcy court, there was a couple that had filed for bankruptcy twice prior to this one," said Burleson, who lives in Emerson, Ark. "How could they get enough credit to get them into this much debt (three times)?"

Actually, almost anyone can get credit soon after a bankruptcy. It's just a matter of knowing how.

It's true that bankruptcy deals a devastating blow to your credit and your credit score, the three-digit number lenders use to gauge your credit-worthiness. But the effects don't have to be lasting. Long before the bankruptcy drops off your credit report, you could be qualifying for loans with good rates and terms.

Nothing is forever
Ken from Chicago filed Chapter 7 liquidation four years ago after unemployment and overspending caused him to rack up more than $20,000 in credit card and other unsecured debt. Today his credit scores range from 655 to 719, decent numbers that are just below the cutoff to get most lenders' very best rates.

"I recently applied for a secured credit card (usually reserved for people with troubled credit) and was informed that I qualified for an unsecured card -- a possibility I hadn't even considered," Ken said. "While I am going to be very careful with my new credit (card), I am heartened that creditors consider me an acceptable risk."

If you're a recent bankrupt, here are two things you need to keep in mind:

Nothing in credit is "forever." A bankruptcy legally can remain on your credit report for up to 10 years, but its effect on your credit score can start to diminish the day your case is closed -- if you adopt responsible credit habits such as paying your bills on time, using only a small portion of your available credit and not applying for too much credit at once.
You have to get and use credit to build your credit score. Living on a cash-only basis may be a smart choice for those who really can't handle credit. But if you want to rebuild your credit score, you can't sit on the sidelines.

Learn from your mistakes

Although repeat bankrupts show that getting credit after a Chapter 7 or 13 filing is possible, you shouldn't want to emulate those who file more than once.

At first glance, people who file more than one bankruptcy seem to be beating the system: They run up big bills and then walk away.

Think about it a little more, though, and you'll see these multiple bankrupts are really defeating themselves. Their debts and credit history often mean they're paying out big bucks in high interest payments during the time when they're prohibited from filing another bankruptcy (The 2005 bankruptcy law provides that, under Chapter 7, eight years must elapse before you can re-file. If you go for Chapter 13 after a Chapter 7, you must wait four years. Going from one Chapter 13 to another, two years must elapse.)

And most people can't file for Chapter 7 liquidation if they have significant assets to protect, such as home equity or savings. So these folks who are repeatedly going broke often have little to show for all the money that's leaving their pockets. Instead of building wealth over time, they're losing ground.

Instead, use your bankruptcy as a wake-up call to figure out what's wrong with your finances and fix it.

If your problem was overspending, you'll find plenty of information on this site about creating and sticking to a budget. (See our Decision Center: Learn to budget).
If you didn't have enough savings to survive a job loss or other setback, get serious about establishing an emergency fund.
If you were sunk by medical bills, seek a job with insurance coverage or check to see if your state offers coverage.

Clean up your credit report
One of Burleson's biggest problems is that her credit reports still show several accounts as open and overdue -- when in fact they were closed and the obligations wiped out as part of her bankruptcy.

In order for her credit to recover, she needs to contact the credit bureaus and insist that those accounts be properly reported as "included in bankruptcy."

If you have other serious mistakes on your credit report, those need to be corrected as well. Your credit score is based on information in your credit report, so errors on your report can seriously dampen your score.

Get a secured credit card
You need two types of credit to quickly rebuild your credit score:

Installment: Auto loans, student loans or mortgages
Revolving: Credit cards or home equity lines of credit

Most recent bankrupts have trouble qualifying for a regular, unsecured credit card. So the best solution usually is a secured card, which generally gives you a credit limit that's equal to an amount you deposit at the issuing bank.

Typically, that's $200 to $500, which may seem like a pittance compared to the credit limits you enjoyed before your bankruptcy. But don't make the mistake of using your available credit. Maxing out your credit cards hurts your credit score.

You don't want to charge more than 30% or so of your credit limit, and you want to pay the balance off in full each month. Light, regular use of a credit card is what helps build your credit.

And contrary to what you might have heard, you typically don't need to carry a balance or pay credit-card interest to build your score, since the leading credit scoring formula doesn't distinguish between balances that are paid off and balances that are carried month to month. Get in the habit now of not charging more than you can pay off every month; your credit score and your finances will be the better for it.

You also shouldn't just grab any secured card. Look for the following:

No application fee and reasonable annual fee. Some secured cards tack huge upfront and annual charges onto their accounts; you don't need to pay these to build your credit.
Reports to the major credit bureaus. You're not doing your credit score any good unless your payment history is being reported to the three major bureaus: Equifax, Experian and TransUnion. Call and ask if the card issuer regularly reports to all three before you apply.
Converts to an unsecured card after 12-18 months of on-time payments. Good behavior should get you upgraded to a regular credit card within a year or two.

Get an installment loan
If you still have student loans (which typically aren't dischargeable in bankruptcy), you can use them to rebuild your score. Make your payments on time, all the time, and try to pay more than you owe whenever possible. Next to making on-time payments, paying down your existing debt is one of the best ways to improve your credit score.

Ken of Chicago took this to heart, making double or triple the minimum payments required to retire his $23,500 student loan debt within three years of his bankruptcy filing.

"The fact that I had to repay my student loans (rather than having them discharged) might have helped me in the long run," he said.

Ken's credit has recovered enough that he's scheduled to close escrow on a condo purchase later this month. He qualified for a 6.4% interest rate on a 30-year fixed mortgage.

Another option: a mortgage. Interestingly, it can sometimes be easier to get a mortgage after a bankruptcy than to get other types of installment loans. Andy's note - this makes sense because lender's are secured by real estate - your home - the best type of collateral. A car is another common type of collateral, but, unlike real estate, it moves!

You may be able to qualify for a high-rate loan as little as six months after a bankruptcy, but you're probably better off waiting until you can qualify for an FHA loan. You can typically get one just two years after your bankruptcy case has closed, as long as you've maintained good credit habits since then. FHA loans have interest rates that are usually only half a percentage point higher than regular mortgage rates. Andy - I can qualify you for a purchase loan one day out of bankruptcy...and I can refinance you WHILE IN THE MIDST OF A CHAPTER 13 BANKRUPTCY! Check out www.FloridaLoanAdvice.com for more info!

Just make sure you really can afford a home before you buy one. Many people wind up in bankruptcy court because they stretched too far to buy a house and can't keep up with all the attendant costs of homeownership, said bankruptcy expert Elizabeth Warren of Harvard University. (See "Don't bite off too much house" for more details.)

Auto loans can also help you rebuild your credit -- just be prepared to pay nose-bleeding rates at first.

"My first vehicle out of bankruptcy (had an interest rate of) 21%," said Chance Nelson of Indianapolis, who applied for the loan just a few months after his debts were discharged. "After paying this for about 2 years, I went and traded it in and purchased another (at) 13.99%."

Nelson refinanced this second loan a year later at 7.95%. Today, five years after his bankruptcy filing, Nelson is paying a reasonable 6% rate for his auto loan.

If you go this route, try to make a big down payment and choose a loan that doesn't have a prepayment penalty. That way, you can refinance the car to a lower interest rate as your credit improves.

Just don't forget: The key is to make sure all your payments are made on time, all the time.

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Debt, Bankruptcy and the Great Bjorn Borg

2006-03-05T14:42:00.000-05:00

Subject: Debt, Bankruptcy and the Great Bjorn Borg

March 5, 2005:

Here's an article from one of London's biggest papers, The Guardian about the Swedish tennis legend, Bjorn Borg. Borg recently decided to sell some of his invaluable trophies and raquets in order to raise cash.

It's a sad story - this man was once at the top of the tennis world at the age of 24. But he lost his passion for the game, retired, and embarked on a series of life events such as failed marriages, failed businesses and a bankruptcy.

If you're interested in learning how to escape the crushing burdens of debt, I suggest you mosey on over to the Free Report section on www.FloridaLoanAdvice.com and select the report entitled: How to Escape the Debt Rat Race.

Here's the article.

-Andy

Andrew Lockwood, J.D.

Host - The Best Damn Real Estate and Mortgage Show, Period!

Sundays, WFLL 1400 AM (10-11am)...Also listen online @www.1400thefan.com!

Borg to sell his Wimbledon trophies

Robert Booth
Friday March 3, 2006

Guardian

The Swedish tennis star Bjorn Borg is being forced to sell the five silver-gilt Wimbledon trophies he claimed in a glorious run of consecutive victories at the All England Club between 1976 and 1980.

It emerged yesterday that Borg, 49, has instructed the auctioneer Bonhams to sell off the prizes in June. Bonhams said they are the first Wimbledon winner's trophies to be sold so there is no precedent, but the unique lots are expected to fetch between £200,000 and £300,000.

Since he retired from his 11-year career in 1984 Borg's personal and business life has been turbulent. His company, Bjorn Borg Design Group, fell apart and he was forced to sell his Swedish home, speedboat and three life-insurance policies to pay off millions of pounds in tax and business debt.

During his career he racked up professional winnings of nearly $3.7m which pale against the riches available to more recent tennis stars. The American Pete Sampras earned $43.3m during his career with substantial commercial endorsements and sponsorship deals on top.

The trophies that Borg is selling will be miniature replicas of the much larger cup that was first presented at the All England Club in 1887.

Borg is also selling two rackets used in Wimbledon finals. He used one to beat Ilie Nastase in 1976, and the other is from his epic final against his long-time rival John McEnroe in 1980, which Borg eventually won in the fifth set. The signed rackets are expected to sell for at least £10,000 each.

"It's not easy to part with the trophies," Borg, said in a statement. "However, I do need to have some long-term financial security for those close to me and now believe that the time is right for the trophies and rackets to pass either to a tennis collector or to a suitable institution."

After his retirement from a career studded with 11 grand slam singles titles and 46 other singles titles, Borg embraced the life of an international playboy. He mingled with the jet set and sold himself to advertising campaigns. His marriage broke down when he fell for a 17-year-old, Jannike Bjorling, with whom he had a son, Robin. They split and a second marriage to an Italian singer 10 years his senior soon fell apart.

Borg made his professional debut in the Davis Cup at the age of 15 and quickly went on to become one of the biggest stars the sport has seen, becoming one of the first sex symbols on the tour and giving birth to the phenomenon of "Borgmania".

His trademark long hair and headband made him instantly recognisable, but he was also known to be ice cool on court. Guardian Unlimited © Guardian Newspapers Limited 2006

Fraud by Foreclosure "Rescuer"

2006-03-01T22:34:00.000-05:00

Below is an article I read about a supposed foreclosure "rescuer" in Maryland. It features an all-too-common example of the conduct of some of the scumbags out there who take advantage of folks in dire straights.

Before you sign anything, please consult an attorney or a financial advisor that you trust. If you're facing foreclosure and you live in the State of Florida, please call me with any questions, including how we might be able to help you stay in your home with our HomeSaver program - 954-236-4500 ext. 202.

Here's the article.

Maryland Court Awards $500,000 Punitives Against Foreclosure Rescuer

The Circuit Court for Prince George’s County, Maryland issued an opinion and order in the case of Tommie Mae Smith v. Vincent Abell. Abell has named as a defendant in numerous lawsuits that allege he engaged in foreclosure rescue. He is currently a defendant in a lawsuit involving nineteen plaintiffs and the AARP has brought a class action lawsuit against Abell wherein six plaintiffs are seeking recovery.

According to the court’s Opinion in the case of Smith v. Abell, Ms. Smith is an 83 year old woman in poor physical health but good mental health. Her total income each month was approximately $1,300.

In 1993, Ms. Smith purchased a home at 6104 Tarquin Court, Temple Hills, Maryland with her daughter Bernice Smith and mother and daughter lived in the home together for almost ten years. Bernice Smith died in 2003 and Ms. Smith became the sole owner of the home. The mortgage on the home was over $1600 per month. Ms. Smith had approximately $200,000 of equity in the home. In 2004, with the mortgage substantially in arrears, the mortgagor initiated foreclosure proceedings.

Abell’s agent, Calvin Baltimore, went to Ms. Smith’s home and spoke to Ms. Smith’s niece. He offered to purchase the home, bring it out of foreclosure and allow Ms. Smith to continue to live the home for one year at a rent of over $1900 per month. After one year, Ms. Smith would have the option to repurchase. Ms. Smith’s niece signed the Agreement to Sell Real Estate. Ms. Smith never signed the sales agreement nor did she ever sign a deed transferring the home. The buyer’s obligations under the sales agreement were not complied with.

In January 2005, Abell’s company, Modern Management, Inc., filed a lawsuit to evict Ms. Smith from the home. The lender initiated foreclosure proceedings in March 2005 due to arrearages in the mortgage.

In April 2005, Abell recorded a deed (dated May 1, 2004) to the property.

In May 2005, Ms. Smith filed for bankruptcy protection. She made all the required Chapter 13 payments to cure the deficiency to the mortgage company. The bankruptcy court did not allow the eviction proceedings to continue and Ms. Smith remains in possession of the home.

The court awarded Ms. Smith $10,968.28 in actual damages – the amount that she spent to pay the attorney for the mortgage company and her own attorney. The court also awarded $500,000 in punitive damages finding that there was clear and convincing evidence that Abell’s conduct was motivated by actual malice in that there was clearly ‘conscious and deliberate wrongdoing’ emanating from an ‘evil or wrongful motive.’ In determining the degree of reprehensibility of the conduct in connection with setting the amount of the award, the court stated:

The Defendant, Mr. Abell’s tortious conduct in this case constitutes the most reprehensible actions this Court has ever observed in his 28 years on the Orphans Court, the District Court, and the Circuit Court save only the physical violence and death routinely visited on the Court’s conscious in criminal cases. On a scale of one to ten as to reprehensibility ... the Court rates this an eleven. If the Defendant sleeps at night, the Court can’t help but wonder how.

In order to reach the punitive damage figure, the court added the restoration of the $200,000 in equity to the $10,000 actual damage award reasoning that Abell had deprived Ms. Smith of ownership of her home until the court restored it by finding the deed and sales contract of no force or effect.

Both Abell and Calvin Baltimore, the man who initially visited Ms. Smith’s home, have prior criminal records for mortgage fraud. In the late 1980s, Abell, then a real estate agent in Silver Spring, Maryland pleaded guilty to making a false statement and “causing an act to be done” following a criminal investigation into FHA loan-insurance fraud. In connection with that conviction, he was sentenced to two years in prison (eighteen months of that was suspended) and was ordered to pay $20,000 in restitution. In 1990, Baltimore plead guilty to one count of conspiracy in connection with allegations that he solicited consumers to borrower money from lenders at interest rates from 38 to 50 percent. He was sentenced to five years in prison (suspended) and was ordered to pay restitution of $8,000.

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

Bankruptcy and other Credit "Blemishes"

2006-02-20T07:59:00.000-05:00

Monday -February 20, 2006

Weston, Florida

Have you been watching the Olympics? I find the telecasts to be fascinating. But I'm not talking about the athletic stuff (actually, I find most of the ice dancing, luge and other obscure sports kinda boring). Nope, I'm talking about the commercials.

In particular, I'm obsessed with the credit card commericals.

Why? Well, as someone who specializes in helping people with bad credit, including those in bankruptcy and foreclosure, I find the credit card commercials a little upsetting.

Credit card debt is out of hand in this country. Under the current rules, it's shockingly easy to run up massive amounts of credit card debt that can never be paid off!

Two days ago I consulted with a potential client, "Stav" (name changed for privacy concerns). Stav had filed a Chapter 13 Bankruptcy two years ago. (A Chapter 13 is where you enter into a payment plan to repay your creditors - a Chapter 7 Bankruptcy is where you walk away from all your debts, discharging them completely.)

I asked Stav what led to his bankruptcy. He told me he moved from another part of the state to take a job in Broward County. Along the way, he told me he bought a home but had racked up some debt in the move. How much debt? $100,000.

One Hundred Thousand Dollars! And this is a guy who makes a decent, but not outstanding, salary.

I realize that the credit cards didn't spend themselves...Stav used them in an irresponsible manner. But I can't help but wonder how the credit card companies allowed this to happen? Lending more and more, extending more and more credit. They're not without guilt!

So now Stav has been in a Chapter 13 Bankrupcty Payment Plan for two years, his credit is ruined. It's hard to get a car loan (forget about a getting a decent rate!) making his payments and paying his price for his past transgressions.

I help clients like Stav pay off their Chapter 13 payment plans early, sometimes saving more than $1,000 per month and more than $20,000 over the life of their plans. For more information, check out our Free Report, "How to Beat a Chapter 13" available on our website, www.FloridaLoanAdvice.com.

I'm not defending Stav's past behavior. He's not either. My point - Stav is to blame, but he could not have created this mess without an accomplice - the credit card companies.

-Andy

P.S. I have other Free Reports available, such as "9 Dirty Little Secrets the Credit Card Companies Don't Want You to Know" - also available on www.FloridaLoanAdvice.com. Take a look!

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Free Reports From a National Mortgage Expert:
www.FloridaLoanAdvice.com

Foreclosure Help

2006-02-11T12:27:00.000-05:00

Hi again -

Recently, we beta-tested our HomeSaver program for those homeowners close to 90 days late on their mortgages. The response has been overwhelming, to say the least.

I'm offering a Free Report on our HomeSaver program on our website, www.FloridaLoanAdvice.com. In that Free report, you'll see specific examples of how we saved our clients, such as Rachel, a county employee from the Foreclosure Sharks!

Rachel and many other of our client fell behind on their mortgages because of things out of their control - divorce, job layoff, unexpected medical expenses, etc. But the Realtors and other "Shark" investors don't care - they want to buy the house on the cheap and sell it for a quick profit!

We'd rather try to keep folks in their home by bringing them current on their mortgages, giving them several thousand dollars in cash in many cases and cleaning up their credit.

If you, a family member or friend is behind on your mortgage payments or facing foreclosure, check out our Free report on our HomeSaver program on www.FloridaLoanAdvice.com!

-Andy

Andrew Lockwood, JD.
Host - "The Best Damn Real Estate & Mortgage Show, Period!"

Blackacre Lending Corp.
Tel: 954.236.4500
Fax: 954.236.6878

Plop, Plop, FSBO - Has the FSBO Market Fizzled?

2005-11-26T10:15:00.000-05:00

Weston - November 25, 2005:

The purchase market has changed. Mortgage interest rates are up; prices are leveling off.

What does this mean for those sellers of homes electing not to use the services of a Realtor? That collection of folks listing their homes themselves, a/k/a, "For Sale by Owner" ("FSBO")?

One thing's for sure. It's not a seller's market anymore.

Gone are the days when a FSBO could list his home in places like Coral Springs, Weston, Parkland, Plantation or Boca Raton and receive 5 full price offers within a matter of hours.

It's more difficult now. Homes are staying on the market 30, 45, 60 days and longer.

How does a FSBO market his home? It ain't easy. He's competing with homes featured on the multiple listing service, ads in newspapers, magazines and so forth. It's not a fair fight!

So many FSBO's are doing the unthinkable -they're calling up the Realtors that they shunned, hats in hand, and asking for a little expert help. It's not as easy as they thought.

And you know what? Most Realtors don't hold any hard feelings. They're here to lend a hand.

We're priviliged to work with several smart, high-quality Realtors. If you need the name of a good Realtor specializing in your area, call us at the office - 954.236.4500.

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South Florida's Hot Real Estate Market - On the Air

2005-11-23T08:58:00.000-05:00

Today's blog is a blatantly self-serving entry to promote our new radio show, modestly entitled, "The Best Damn Real Estate & Mortgage Show, Period!"

It airs every Sunday from 10-11am on ESPN Radio: 1400 AM (www.1400theFan.com for those out of range.) I co-host with Jason Kapit, a realtor (www.JKTeam.com) who specializes in Weston, Parkland and West Broward County.

Last week's guest was Seth Friedman, an Allstate agent and the owner of the Weston Agency, here in town. Mr. Friedman held up admirably under our "Category 5" strength questioning regarding homeowner's insurance, adjusters, claims and so forth. Mike Wallace was smiling, somewhere.

In addition, Mr. Friedman gave inside information on what insurance he, an insurance insider, personally has. The answer surprised us!

In the coming weeks, we'll post a recording of the show on our website. Check out this blog to be notified when we post it.

-Andy

Credit and Divorce

2005-09-01T06:07:00.000-05:00

September 1, 2005 - Weston, Florida

I was driving around South Florida yesterday between closings in Ft. Lauderdale, Boca Raton and Plantation, and had time to reflect on a conversation I had with a Realtor at the closing table about certain credit issues he's having. It got me thinking about a client of mine, a young lady in the process of getting divorced.

Nora was a stay at home mom for almost 8 years before marital problems forced a split from her husband. She hadn't worked since right before the birth of her first child, almost 9 years ago. During that time, her husband handled all of the family finances. Now, she was getting divorced and applying for a mortgage to pull cash out of her house as part of the settlement.

Despite being a smart, level-headed person, Nora was in a dicey situation because she had no control over her finances. The crux of her problem was that she had never gotten herself involved in the family finances.

This presented problems relating to her mortgage application. She had a good credit score, but very little credit history -the "depth" of her credit was not impressive. Since the current mortgage on her home was in her husband's name only, it would be difficult for an underwriter to evaluate how likely she would be to repay a new, larger, mortgage debt.

Think about it - would you lend money to someone without knowing much about how they repaid debts in the past, while knowing that they haven't worked for almost 9 years? How would you expect to be repaid?

The key is to not allow yourself to get into this situation. A recent article in the New York Times listed the following steps that should be taken by every spouse to prevent this:

Get Involved - this means knowing where all statements, accounts, etc. are. Force yourself to read and understand them. Know where the money is: how much comes in, how much goes out and where it comes from and goes.
Establish Credit - have some credit in your name only
Title Your Assets Properly - Make sure your name is on all real property. If you're luck enough to have received an inheritance or gift from a family member, keep copies of all checks.

(By the way, the article recommended that, if separation is imminent, copy your last three years' tax returns and bank/investment statements, take inventory of your valuables and copy important records and correspondence from your home computer.)

I bet you're wondering what happened! At the end of the day, Nora qualified for financing with us because we have a special, "niche" investor who purchases mortgages we write for people with good credit scores but no verifiable source of income - No Doc borrowers. Although she got a great rate, she would have qualified for perhaps 1/4 of one percent lower had she taken the steps listed above.

(For more information on credit issues, divorce and other Mortgage-related topics, check out past Blogs and our website, www.BlackacreMortgage.com).

A Quick Note on the Savings Rate

2005-08-24T06:24:00.000-05:00

August 24, 2005: Weston, Florida

This weekend, I came across an article about the alarming lack of savings rate of Americans, compared to historical savings rates and to our European counterparts. I've seen several articles like this lately, bemoaning how Americans used to save something like 20% of their income; now we're spending 102% of what we earn. We've been racking up debts at a rate equal to the growth rate of Brittney Spears' belly.

We're a consumer culture - thanks to the good people of Visa, American Express, Mastercard and the like, it's easier than ever to buy on credit. Think about the commercials for credit cards - the industry has been on a successful P.R. campaign to change our mindset from being credit-adverse a few decades ago to extremely comfortable with this spending as a normal, everyday thing. I'm in awe of the job done by the advertising geniuses to change public opinion.

But the flip side of the glamor of using credit cards is laid out these articles. They point out that spending instead of saving will result in baby boomers and the next generation being unable to afford to retirement. (What's in your wallet? Food stamps!)

When I take an application, I look at the person's assets and liabilies. As a mortgage planner, I try to look past the four corners of the application to see where the mortgage fits in the person's overall financial picture. During an application, before we get to discussing how the person can get a 30 year fixed for .125% lower on the internet or $2.50 less in closing costs, I will ask questions about issues that are more important, such as "What is your retirement plan?"

Frequently, that question produces mumbling, eye-contact aversion and a guilty admission that there is no plan in place. But I'll tell my client, to the contrary - your plan, based on your thin assets and heavy liabilities, can be summed up as follows:

"Your retirement plan is death!"

You're going to work until you die, unless we re-structure your debts so that they're tax-advantaged and bulk up your assets. Sure, I say this for shock value, but I want to get an important point across about what the true focus should be - planning for a comfortable future.

This means consolidating or paying off high interest rate credit card debts by wrapping them into the mortgage, which can save several hundred or more than a thousand dollars a month in cash flow. The excess cash flow needs to be applied in the right way - building an investment portfolio, paying down the mortgage or taking care of other important financial planning issues. (Not buying jet skies, in other words.)

Realizing your top priorities is the first step. Coming up with a plan is the next. Executing your plan is the last and most crucial part of the equation. It takes honesty and discipline.

Gas Used Driving Your Rear End to An Appointment with a Qualified Mortgage Planner: $2.00
Beverage Consumed During Appointment: Free**
Knowledge of How to Secure Your Financial Future: Priceless!

_________

**Take it easy -don't get excited about this feature. Typical choice of beverage includes water, tea or cofee (no espresso, latte's or anything that fancy!).

100% No Doc Investor Financing - Are Lenders Like Me Nuts?

2005-08-21T06:38:00.000-05:00

100% No Doc Investor Financing – Have Lenders like Me Lost Their Freaking Minds?

August 21, 2005 – Weston, Florida

I guess you could say that I’m somewhat experienced with investor financing. But my experience did not prepare me in any way for the onslaught of super aggressive, high loan-to-value, no documentation investor property programs that have been introduced recently! I can’t believe what’s out there?

I mean, I though the program that I used to close on my Port St. Lucie home was pretty strong – stated income, investor property, 90% financing. Start rate – 2%. But these new programs, including 100% financing for investor properties – no doc! – have me worried about my industry.

Incidentally, for those of you who read my blog on my acquisition of the Port St. Lucie investment property, I now have a tenant in there. He’s paid me first and last month’s rent and a security deposit. All this before I made my first mortgage payment.

I looked at his credit report and checked his references. I’m slightly cash-flow positive on the property between my ridiculously low mortgage payments, taxes and insurance and I have approximately 67% equity in the property. So far, so good. I’m still planning on holding this place for a year and one day, then selling for a nice profit with favorable long term tax consequences. (Although with prices going up almost daily, it's becoming increasingly more tempting to sell now!) Maybe I’ll roll the profits into another property via a 1031 Exchange.

Back from my digression – I’m dumbfounded at these new, risky programs that I’m able to offer. I have investors to whom I sell my mortgage paper that I think are flat out nuts – but that’s good for you, me and the rest of the Florida real estate investment world!

Think about it – they’re offering 100% financing on investor property with no, I mean zero, documentation: no income, no assets, no source of income disclosed! This means, effectively, that these programs say – go ahead, if you’re credit is decent, go buy an investment property. I don’t care how much you make. I don’t even care where you work, or if you even have a job! And don’t bother showing me whether you have any money in the bank, either.

Keep in mind that investor property presents more risk to a lender than owner-occupied property. Why? If something bad happens in a borrower’s life – decrease in income, sickness, etc., the first mortgage payments to go are those for the investment property. Most people will scratch and claw to keep their homes while letting everything else go first. That’s why investor property carries more risk, and features higher rates, than mortgages on primary residences.

That’s a nice segue to a discussion on rates if I say so myself. Of course rates for these products are not pretty, compared to what’s currently available for less risky borrowers. But in many instances, it makes sense to pay the higher rates instead of tying up cash that you’d rather not use.

I just ran an analysis for an investor who was contemplating putting down 10% on a $350,000 property, or $35,000. She needs this money for six months, because she will commence building on the property then via a construction loan. I showed her that it would cost her an extra $6,000 in interest payments over a six month period to obtain 100% financing. In other words, it costs $6,000 to get $35,000! A no-brainer.

One thing that bothers me as a mortgage professional – how do these investors of mine make any money? Are these products a loss leader for them, or is there something that I’m overlooking? I’m really scratching my head.

But if I’m in investor, who cares? The money is out there for you! Take advantage of these 100% no doc investor programs while they last! In a future blog, I’ll cover some of the pros and cons about 100% financing.

On Choosing Your Advisors During a Divorce

2005-08-17T07:44:00.000-05:00

August 17, 2005: Weston, Florida – Very, very early in the morning….

Got up before five this morning, thanks to an unexpected nighttime visit from Jack Lockwood, our oldest son and recent 1^st grader. Seems that Jackie boy’s sleepover with his 4 year old brother, Harry, turned ugly when Harry whacked him in the face while sleeping next to him in bottom bunk in their room. Mercifully, our two girls are still asleep in their respective rooms (they each get their own rooms, of course – they’re girls!).

Anyway, once I’m up, my mind starts working overdrive on mortgage related issues, especially stuff that’s been bothering my subconscious for a while.

As previously discussed in this Blog, divorces are almost always stressful. Contributing to the stress is conflicting advice from friends, family, co-workers and professional advisors. That’s why it’s so important to choose your advisors carefully.

I have a client, whom I’ll refer to as Mona, who is a case in point. Her husband decided to leave her after being together for 18 years, and informed her of this decision while she was recovering from her C-section after giving birth to their second child. It’s embarrassing to be a male when I hear stories like this.

I spoke to Mona a few times on the phone to determine her needs. As a newly single mom on a severely reduced income, Mona needed a cash cushion as emergency reserves, but had significant limits on what she could afford in mortgage payments.

Because she had excellent credit, but no provable income or employment, Mona qualified for a no doc loan. I recommended a 7 year ARM, interest only to keep her payments low for what we both felt was a long time. A lot could happen in 7 years, including getting re-married, she’d be well underway in her new career with a higher income, etc.

As I always do, I asked Mona if she had a financial advisor that she was currently working with whom we might bounce ideas off of. She put me in touch with her neighbor and “friend,” whom I’ll call Dirk. This is where the story gets a little dicey.

But first, a few words on Dirk. I’ve run across plenty of Dirks in my 13 years in law and finance. I think he wanted to impress upon me how much he knows about my business at least as much as he wanted to help Mona. Dirk works for a national financial services firm. He used to be a compliance associate (i.e. he spent his day making sure his brokers didn’t break any rules and documenting any transgressions) but recently made the transition to sales after 20 years, according to him.

After I called him a couple of times to introduce myself, Dirk returned my call and apologized for being “slammed” with client business. Then, it didn’t take long before he started challenging me on the interest rate I offered Mona. He told me that he saw lower rates online and in other advertisements, in billboards, newspapers and television.

I spent a little time explaining to Dirk that frequently, those rates were “teaser” rates that were offered as an enticement to get people to respond. More importantly, those rates were for borrowers who could verify their income, were putting 20% down, had good credit, etc. Our mutual client, Mona, could qualify for a No Doc loan only, because she didn’t work anywhere and her verifiable income was too low to support the loan payments.

I wasn’t sure if I got through, particularly because Dirk kept reminding (bragging?) how he got his personal mortgage online at 5.0%, no points, 30 Year Fixed over a year ago because his income, assets and credit were perfect, thank you very much.

Up until now I was vaguely annoyed, but here’s where the conversation took a turn for the worse. Dirk told me that, instead of borrowing 65% of the value of the home, Mona needed to borrow 80%, which represented almost $80,000 more.

That was news to me!

I explained to Dirk that the higher the percentage of the appraised value (what we call the Loan to Value), the higher the interest rate and obviously the higher the monthly costs of the mortgage payments. The payments under his plan would be well beyond what Mona told me she could afford, according to our initial mortgage planning session.

Dirk reassured me that he would be investing the difference, so Mona could make money on the “spread” between what it cost her to borrow (the interest rate) compared to the outstanding returns Dirk expected to obtain for her.

Whoa Nelly!

I paused and chose my words carefully – this guy was a friend and neighbor of Mona’s for several years, I didn’t want to create a stir by insulting him and lose an opportunity to help Mona. I asked him kind of returns he thought he’d achieve. “Well, in any 20 year period the stock market has averaged no less than 9% per annum.”

“But Mona has short term needs for this cash – she’s completing her degree and won’t be earning a good living for 3 years,” I said. “This money needs to be kept safe in liquid, short term investments, not riskier long term products.” Look at the S&P 500 over the last 4 years – it ain’t pretty!

Dirk replied, “Hey, I’ve been in this business for a long time and I know how to manage risk. I’ll put her in short term Treasuries.”

I noted, “Last time I checked, and I’m not a money manager, you couldn’t do much better than 3-4% in those kind of investments. If it costs Mona approximately 6% to borrow, she’s losing 3% per year with your strategy. This doesn’t make sense to me.”

I tried to bite my tongue, which is a major undertaking if you ask anyone who knows me. I suspected that Dirk, who is compensated by a percentage of the assets he brings under management, was trying to gather Mona’s assets into his firm. No, I didn’t say that to him, luckily our conversation concluded soon after my last comment.

Four days later, I met Mona face to face for our final planning session. First, I noticed that she’d have no problems getting re-married, because she was quite fetching, a lovely lady. So that reinforced my recommendation of a 7 Year, Interest Only ARM. More important, her divorce attorney, Deb Byles, previously had a heart to heart with her about her financial “advisor’s” advice.

I explained to Mona that I could do whatever she wanted. In fact, the more money I lend, the more money I make! But, as a fiduciary of hers, I would not recommend something that was not in her best interests.

At the end of the planning session, Mona decided to borrower the lower amount, so she wouldn’t strap herself needlessly. Although much of the post-decision visit was taken up by a vigorous, impromptu man-bashing (and male lawyer bashing) free-for-all between Mona and my assistant, Gwyn, I still felt great that I was helping Mona do the best thing for herself given her circumstances. I fled the scene for lunch to protect my tender ears.

Lose My Number, Part Deux

2005-08-10T06:12:00.000-05:00

August 10, 2005: Weston, Florida

In my last blog/rant, I described my frustrating experience with Moonbeam and her husband, who were shopping my services against a random mortgage broker who was not recommended by anyone they knew or trusted. Not that I had anything against shopping – a smart consumer makes sure that she gets the best deal.

It’s one week later and things have changed dramatically. More on that below; let’s briefly recap what happened.

My big issue was not that Moonbeam was trying to get the best deal for her family -rather, that's just being careful and smart about a big, big purchase. I was uptight that this other guy did something all-too-common in the mortgage business, the “bait and switch:” an initial low-ball quote, followed up by an excuse why he couldn’t live up to his offer and three successive revised quotes.

Truthfully, I’m not even sure if this guy meant to bait and switch; I think that he did so unintentionally because of his inexperience putting together a file. I’ve seen this type of mistake hundreds of times, even with my own loan officers who work for me. Not that it matters to the client whether the broker deserves the benefit of the doubt, by the way. The client has a right to rely on the quote.

So that’s why I was so frustrated and told off Moonbeam. I had given one solid quote, my best deal. That's what I always do - rather than play games trying to find out what my competition offered, I give my best deal right off the bat. I don't want to waste the client's or my time.

My quote happened to be competitive with the first three quotes given by the other guy, but was subsequently “beaten” by a fourth quote from the same schmuck. Plus, I didn't like the feeling of being "played" against a mortgage broker, but, hey, that's the business.I thought it was obvious that this guy was saying anything he could to “get” the deal and I wasn’t sure that Moonbeam saw that.

Actually, I was pretty sure that Moonbeam didn’t see that because she sent me the equivalent of a “Dear John” letter via email that touched off my last blog and an angry response by me last week while on vacation.

Update: In the period since my hissy-fit email to Moonbeam and now, she and I exchanged two conciliatory emails about how nervous she was about moving, about how her mom was very disappointed in her (her mom referred her to me, by the way), and so forth. I asked her to excuse me for my tone, but that I hoped she understood that I was concerned that she was setting herself up for a disappointing experience despite my warnings. And I opened the door to helping them if things didn’t work out with the other guy, out of deference to her mom.

So I was slightly surprised and gratified this morning when I read an email from Moonbeam’s husband informing me that they had decided to go with me after all, and apologizing for the misunderstanding. I think they lost confidence in the other mortgage broker. In one man’s humble opinion, they made the right choice!

Do Me a Favor, Lose My Number

2005-08-05T11:46:00.000-05:00

August 4, 2005: The Hamptons, NY

From the “People can be Idiots” File:

I’m on vacation with my family in the Hamptons (Long Island, NY), but I’m so aggravated that I had to sit down and rip out this blog. Forgive me for the bitter tone.

I just finished emailing someone, whom we’ll call “Moonbeam.” I told Moonbeam to lose my number. Let me explain.

A few months ago, Moonbeam called me. Her mom, a client of mine from a couple of years ago, referred her to me. Moonbeam was relocating from one part of the state to another, and wanted to find out how much she could afford before shopping for a house. Smart, right?

We made an appointment. We spent approximately one hour, plus follow up calls and emails, discussing her situation. We came up with a mortgage plan for her and her husband.

After hearing nothing from her for over a week, I called her to check in. She told me that she and her husband hadn’t started looking yet, but would soon. Then she’d call me. Moonbeam also mentioned to me that the realtor who found her the house recommended that she speak to another mortgage broker.

I told Moonbeam that it is smart to shop around, and that the other mortgage broker was probably decent, since it was a referral from a Realtor. Realtors only get paid when a transaction closes, so chances are, the other mortgage broker was competent, since he held the Realtor’s paycheck in his hand, for all intents and purposes.

We left it that Moonbeam would keep me in the loop and give me the opportunity to compete with the other mortgage broker. If I could offer a better mortgage plan, than I would handle her financing. If I couldn’t, than the other guy would. No problem, it’s only fair and the best way for Moonbeam to get the best deal for herself.

Fast forward three weeks. Out of the blue, I get a call while on vacation, Gwyn, my office assistant relays the message to me – it’s a mortgage emergency! I called Moonbeam from New York. She unloaded a sad, but common story on me.

Apparently, the other mortgage broker promised a deal verbally, that, once the paperwork came, didn’t match up. Higher closing costs, higher interest rate, etc. and so forth. Moonbeam and her husband put up a stink (she threw a “hissy-fit,” in her words), and the paperwork was revised. The second version of the paperwork arrived and, OOPS! The deal was still different than what was promised! To the tune of an additional $3,500 in closing costs!

I asked Moonbeam what she wanted me to do; how could I help her? She told me to redo the numbers based on the new purchase price. I told her that I would be happy to do that for her even though I was on vacation, out of deference to her mother. I reminded her about what we had previously agreed to: if I could come up with a competitive mortgage plan, she would retain me to arrange her financing. Moonbeam agreed again, strenuously.

I emailed her the deal. It was the same “80-10” deal (80% first mortgage, 10% second mortgage/equity line) that the other mortgage broker quoted her with a few key differences:

q The rate on my equity line was a full 2% lower than the other quote (representing more than $3,000 savings in three years); and

q My closing costs were $3,000 lower than what she had been verbally quoted post-hissy-fit.

We spent time on the phone going over the structure. She asked me to speak to her husband to button things up. The next day, on the way to golf with my six year old, I took 20 minutes to walk the husband through everything, again. He liked everything and told me to send the paperwork to Moonbeam, who would handle everything. I called Gwyn and asked her to overnight it to her.

Although I had taken approximately 3 hours away (between the research, paperwork, phone calls and emails) from Pearl and the kids in the last 12 hours, I was happy that I could help Moonbeam and her husband turn a stressful situation into an easy one, and save them thousands of dollars. And, I’d earn my fee for my services - this is how I make a living, after all. That was worth interrupting my vacation, I thought.

My mood changed the next day when I checked my email. I learned that Moonbeam and her husband had decided to go with the first guy, after all. Why? She gave some vague reason about not wanting to fill out any more paperwork! But she did say that she would use me if she ever needed to refinance. Oh yeah, she told me that she didn’t want to “waste” my time.

I was dumbfounded. I did something I’ve never done in my four years in the mortgage business – I told her off! Isn’t it worth an extra 30 minutes of paperwork and gathering bank statements and the like to save more than $6,000? What about the fact that she agreed to go with me if I could beat the other deal? How could you go with a guy who won’t shoot straight with you, who changes his story every time you communicate with him? Not to mention that I took time away from my family to step into a situation that could have been easily avoided if she kept me in the loop when she agreed to.

Here’s the lesson anyone shopping for a mortgage needs to learn. Get a referral from someone you know or have reason to trust. If you can’t get a referral (not Moonbeam’s case – her own mother referred her to me!) scrutinize everything with a sharp eye and open ears. Changing interest rates, higher closing costs, inconsistent statements are all major red flags. If something doesn’t smell right, trust your instincts. If someone is trying to confuse you with strange terms and brushing off your questions, you’d better think twice about whether this is the right person to handle a transaction of this magnitude for you. Don’t go through with anything that doesn’t feel right, just because it may seem easier at the time.

Moonbeam and her husband made the wrong choice, even after they had an opportunity to rectify things. Plus, they demonstrated little regard for my time, which personally irked me– having me quote them, agree to move forward, send out a package - only to decide that it was too much paperwork after all!

In general, I don’t like being treated like dog excrement. I’ve lost plenty of deals before, sometimes for good reasons. Like a brother-in-law was a new mortgage broker and would do the mortgage for free. I’ve seen a lot of lies and strange things in this business, too – South Florida is a strange place where characters from all over the country and the world come. But this was one of the most annoying things that had happened to me in a long time. I told Moonbeam to lose my number the next time she needed a mortgage.

(Divorce) Lawyers, Guns and Mortgage Money

2005-07-25T17:32:00.000-05:00

Divorce and Mortgages

July 25, 2005

Divorce and mortgages are closely related in many situations. Why? Frequently, when spouses call their marriage quits, one spouse must pay off the other according to a settlement agreement. One of the most readily available sources of funds is the equity in the home.

Let me tell you a little story about a client of mine, whom we’ll call Bobbi. The story involved divorce lawyers, no guns and a mortgage. Bobbi’s deadbeat, good-for-nothing husband (hey, she’s my client, don’t expect me to be impartial!) woke up one day and decided that he no longer wanted to be married. So they decided to end their marriage.

Neither Bobbi nor Deadbeat had much in the way of assets other than their home. According to their settlement agreement worked out by their lawyers, they had to split everything down the middle.

So Bobbi and Deadbeat agreed that Bobbi would get the house but refinance the mortgage to take cash out to pay Deadbeat. Deadbeat was to pay closing costs.

Bobbi and Deadbeat both worked (for the same company, interestingly). Although Bobbi made a good living, she was nervous about the costs involved with tacking on an additional $50,000 to her mortgage. She was nervous about being able to stay in her home with her two children. Her youngest was 4 and Bobbi wanted to be able to stay in her home until her littlest graduated high school.

I took a look at her entire financial picture – income, assets, anticipated time in the home, retirement assets, etc. and worked up a mortgage analysis for her. I compared a 30 Year Fixed Mortgage, a 5 Year Interest Only Adjustable Rate Mortgage, and a 1% Pay Option Adjustable Rate Mortgage.

We were torn: Bobbi intended to be in the home for more than five years, but liked the lower payment offered by the 5 YR ARM. She wanted the long term security of the 30 YR Fixed - it certainly was a good time to lock in to a long term mortgage.

I suggested wrapping her car payment into the mortgage and WHAM – we saved $375 per month. This closed the gap between a 30 YR Fixed and the original payment on that tempting 5 YR Interest Only ARM.

Then, a miraculous thing happened! Rates dipped by nearly a quarter of 1%! Yatzee! Because I monitor interest rates and the financial markets for my clients, I quickly called Bobbi to tell her the good news.

I locked her into a 30 Year Fixed Mortgage, we paid off her auto loan and quickly closed her loan. Her final mortgage payments, including taxes and insurance, were $300 less her original budget!

Although Bobbi cried a little at closing, I was pretty sure that it wasn’t because of me. (I don’t think that I was particularly offensive or mean that day, and I’m pretty sure that I brushed my teeth that morning.) I did what I could to make part of her very stressful experience as easy as possible.

So, to sum up, here are some important things to consider regarding a mortgage when you are in the middle of a divorce:

How long will the spouse staying in the home “need” the money? In many cases, the mother stays in the home and brings up the children. But if the mortgage balance is higher as part of the divorce (because the wife borrowed more money to pay off the husband), then it’s a real possibility that the payments could be higher, while the income could be less!
What level of income will the spouse earn, through work, child support, etc.? Often, there’s a dramatic drop in income after a divorce, particularly when a deadbeat husband leaves a stay-at-home mom. Then the question is; how will the mom make the payments on the new mortgage?
Are there any ways to cut overhead? As in Bobbi’s case, are there other debts that the wife might be able to save money on by wrapping them up into the mortgage?

More On Credit Counseling - You're Not Going To Believe This!

2005-07-20T19:10:00.000-05:00

The Truth is Stranger (and Funnier) Than Fiction

From the “I Told You So!” Files – July 20, 2005:

I nearly soiled my shorts from laughing this morning when I read the local business papers. No, this is not a typical thing at the Lockwood house, at least for me. (Most of the soiling is done by our 7 month old or 2 year old; Pearl, I and the 4 and 6 year olds are fairly well toilet trained.)

What was so funny? A short piece about the sale of Professional Credit Consultants, Inc., a credit counseling service, to Consolidated Credit Counseling Services, a larger credit counseling business. It seems like Professional Credit Consultants had to sell because, and I did not make this up, it filed bankruptcy earlier this month and was selling its assets!

I almost fell off my chair when I read this. This company, which made a living advising other people how to handle their debt, went under because it couldn’t handle its own debt-load!

The point of this blog is not to gloat or revel in the misfortune of others (although that’s a standard technique I employ regularly to make me feel better about myself). The article said that it was uncertain whether people who put down deposits to have their credit repaired would get them back. I'm not sure what's so uncertain - those poor folks are certain to never receive a penny of their deposits back, unfortunately.

Rather, the argument that I made in my last blog, that the so-called experts really do nothing that you can’t do, was bolstered in a big way by this news story.

Think about it – you hire a company to help you get of debt. But the liabilities of this company exceed its assets, but only slightly: $43,457 in assets, $914,198 in debts! How can you trust the people you hire to help you with your credit situation if they cannot handle their own?

Oh, and perhaps my favorite quote from the article, courtesy of Professional Credit Consultants’ attorney: “Clients have the option to cancel their service with the company at any time.” Please note that exercising the option to cancel has nothing to do with a refund!

All the more reason to do it yourself: get off your arse, quit feeling sorry for yourself, obtain a copy of your credit report, write a few letters, don’t trust anyone to do it other than yourself. You just can never be too sure about the qualifications of the “experts,” can you?

How To Fix Your Credit Yourself By Doing What the So-called Credit Repair Experts Do

2005-07-19T13:35:00.000-05:00

Repairing Bad Credit

I am not a big fan of credit reporting. This may seem like a strange thing for a guy in the mortgage business to say. We rely heavily on credit reports to grade loan applicants to offer interest rates and terms. In my four and one half years in the mortgage business, I’ve seen a lot of people with poor scores. Many folks have scores lower than they deserve! Why? Many times, the low scores are due to mistakes in the credit report that could have been easily corrected.

But there are other reasons why your score could be low. If your scores are low, you should know that you join tens of thousands of Americans with the same problem. Low scores are so common that some commentators have labeled this situation a national epidemic. Credit scores are used by mortgage lenders, automobile lenders, apartment landlords, employers and a range of other types of businesses that impact our day-to-day lives significantly. The higher your score, the better terms you will receive from all these creditors. The lower the score...well, you get the picture.

This blog presents some easy, effective ways to repair blemished credit. These solutions will not result in an instant cure, but will become increasingly effective over time.

Get the Skinny

The first thing you need to do is order your credit report from one of the three main credit reporting companies: Equifax, Experian , or TransUnion. In fact, I would recommend getting copies from each of the three bureaus, since they can each report things differently. You can write to each bureau directly or visit innumerable websites that offer credit reports. Or you can visit a local mortgage lender with expertise in this area (hint, hint!). Also, if you have recently been denied credit, the law says that you can get a free report from the same credit bureau the lender used to reject you if you request the report within 30 days of the rejection.

Credit Scam Alert – Repair Clinics

Sorry to disappoint you, but there is really no legal way to 'repair' your credit. (By the way, there’s no Tooth Fairy or Easter Bunny. I’ll cover these and other myths in another blog.) I know of several credit repair companies that claim they have the inside track on loopholes and miracle cures. Keep in mind that these companies are in business to make money and they market themselves to folks in desperate situations. Sure, there may be some legitimate ones that perform a real service for you, but I’m particularly wary of the ones that recommend that you fudge facts or they create a whole new credit file for you. If you devote an hour or two to helping yourself, you can repair your credit just as efficiently as a clinic, but without the cost of 'professional' help.

Honesty is a Such a Lonely Word

I don’t think Billy Joel was thinking about credit when he wrote that lyric, but it applies to many folks with credit blemishes. You need to take an open, rational look at your financial situation. Frequently, it helps to speak with an independent, outside advisor – such as a mortgage planner or other financial planner. Don’t blame others for your situation. Even if it’s not your fault, blaming others will not help you get out of your jam. Understand your situation, devise a plan to get out, and take action!

Create a Plan and Take Action! ACTION, ACTION, ACTION!

Whew, I sounded a little like the Action Governor of Cal-ee-fornya, the Governator, Ah-nold himself. But listen to me now and believe me later – whatever plan you come up with - paying your bills your bills a little at a time, taking a second job, going to credit counseling or filing bankruptcy, you need to stick to it. You can plan and pontificate all you want but you will get exactly zero results without implementing your plan. Be like a postage stamp – stick to one thing until you get there!

Put the Credit Card Down and Walk Away! Nothing to See Here Folks - Move Along.

Stop using your credit cards immediately. Put them somewhere where they will not tempt you. I’ve heard of people sticking them in plastic baggies of water and putting them in the freezer. This is drastic, but effective. You may consider keeping at least one card for emergency purposes. Additionally, with poor credit, you may find it more difficult to get a credit card in the future. But don’t be so quick to close out all those accounts – a big factor in your credit score is the amount of credit you have available: so if you close accounts, you have less credit available. This could lower your score.

Those Damn Mistakes

I’ve read statistics that indicate that more than 40% of credit reports contain significant errors! If you discover a mistake in your credit report, send a certified letter mail to the credit bureau reporting the error. Request politely that the credit bureau send a corrected report to anyone who has requested a report on you in the last 6 months. Keep track of whom you wrote to, when, the response and the results.

C’mon, this is easy! It might take you 30 minutes or so to read your reports and make a list of items that are incorrect. You might spend a few dollars on the certified mail. But do it – chances are, this is all a repair clinic would do for you, but charge several hundred dollars for the service.

An Omission is a Mistake, Too

One strategy overlooked by many “experts” is the addition of information to the credit report. By law, consumers can add information their reports that help their ratings. This information could be related to repayment of a loan, good credit you have with companies that do not report to the credit bureau, or salary increases.

You Can Run But You Can’t Hide. So, Don’t Try to Hide!

You might be embarrassed, sheepish, mortified or whatever. But get over it. Start a dialogue with those whom you owe money to.

Why? Put yourselves in your lenders’ situation. Creditors want their money. They do not want you to default. Contrary to belief, most mortgage lenders don’t want to own property – they’re in the lending, not owning business. Most creditors will “play ball” to allow you a reduced payment schedule. Think about it – wouldn’t you rather receive something than nothing?

Although your creditors may be legally obligated to report your non-payment to the credit bureaus, if you can legally keep them from reporting you to the credit bureau, then your credit won’t suffer. The most important item to remember is to be sure to stick to the new negotiated plan – they won't renegotiate if you fail to comply. So don’t agree to a plan that you can’t uphold.

Time is On Your Side

The most important factor in credit repair is time. This is a chief reason why there are no credit magic pills or silver bullets. After seven years, most derogatory items drop off your credit report. If you do a good job paying your bills, time will heal your credit wounds - more bad items will drop off while more good items will be included. It’s simple – as time goes by, your credit score will improve.

I hope this piece helped debunk some of the myths about credit repair. If you need any assistance understanding credit, send an email to Andy@BlackacreMortgage.com.

To Flip or Not To Flip

2005-07-17T08:58:00.000-05:00

More Flip Fluff

In my last blog, I wrote about real estate investors playing in the condo flip market. It got me thinking further about flipping, especially as it applies to me, personally.

I, like a lot of my clients, have dabbled in the pre-construction real estate investment market. My wife and I bought a pre-construction, four bedroom home in Pt. St. Lucie, Florida. We’re closing on it this month.

We purchased the home for approximately $204,000 when we went to contract some nine months ago. Just last week, our realtor told us that she had resold three identical or lesser upgraded models for $270,000, last week, within four days of listing.

Of course we’re excited about our more than 30% paper profit. We’ve gone back and forth on whether or not to hold it as a rental property or to sell it immediately. It’s pretty tempting to sell it right away and lock in a nice return on our real estate investment. Here is the back of the napkin analysis we performed to help us make our decision on what to do with the property.

If we sold now, our numbers would look something like this:

Sales Price: $270,000

Acquisition Price: $204,000

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Subtotal $66,000

Less 5% RE Commission: -$13,500

Less Ord. Inc. Tax , misc exp. -$20,000

=================================

Net Profit $32,500

While that’s certainly a nice amount of money to make, we compared the investment return if we held the property for a year and a day (to establish a long-term gain and reduce our income tax percentage) and rent the property out, covering our mortgage carrying costs. We thought the numbers would look like this, conservatively:

Sales Price: $300,000

Acquisition Price: $204,000

------------------------------------------------------------

Subtotal $96,000

Less 5% RE Commission: -$15,000

Less LT Inc. Tax, misc. exp -$14,000

=================================

Net Profit $67,000

So we could more than double our profits if we hold the house for a year. Other considerations:

We’d save 15 grand if we went the FSBO route, selling the home ourselves.
We would become a landlord, dealing with potential headaches such as finding a tenant, late rental payments, complaints about appliances, etc.
We’re hoping that the real estate market in South Florida is not a bursting bubble and continues to increase – although the affordable housing , single family home market seems to be very strong in St. Lucie County, the way it is in Broward, Palm Beach , Martin and other nearby areas
if our investment increases 20% in the year after we close, our sales price will be greater than $320,000
We’d carry the home with a stated income, 80-10-10 interest only adjustable rate mortgage (ARM) first mortgage and a 10% equity line second mortgage because interest rates are so low, our cash can be better used elsewhere than tied up in a real estate investment

Based on analysis nearly identical to the above, we decided to find a tenant and hold this real estate investment for at least a year and a day. The potential for increased profit is very, very real and, in our opinion, outweighs the risks. With the real estate market this strong, who knows, maybe we’ll keep if for several years?

Are These Miami Flippers Going To Swim With the Fishes?

2005-07-15T06:56:00.000-05:00

I just finished reading what feels like the 186^th article I’ve come across about the danger of investing in pre-construction condos. You know, about how the condo market is over-saturated, how investors are “flipping” property to other investors, who in turn are flipping to others, and so on.

It seems like every time I open a newspaper or real estate trade rag there’s a front page article blaring away in National Inquirer-style headlines about the inevitable collapse of the condo market. “Vulture Funds,” pools of money put together by Wall Street guys and the like are being formed to swoop down and purchase condos at below-market prices from burnt investors or foreclosing lenders.

This all seems a bit silly to me. I’ve always been a big fan of one of the cardinal rules of investing: ignore the majority and follow a contrarian path. But don’t get me wrong, I’m not a cheerleader for investing in flips, but I’m no Chicken Little, either.

Of course, at some point, there will be a slowdown, or worse, a “bubble,” created by the simple laws of supply and demand: builders are creating a glut of product that will exceed buyers’ demand. The result will be that the mind-boggling price increases we’ve witnessed over the past few years will slow, perhaps stop, or even dip.

But is the sky about to fall on the condo flippers? I don’t think so. Why? In my opinion, this market has a lot of legs left in it mostly because it’s fueled by a few fundamental ingredients, including the following:

Money. There is a ton of money involved in the creation of this market. Builders and developers who spend millions of dollars promoting their products in upscale magazine spreads, television and radio ads, production costs, bribes to municipal officials, etc.
Mo’ Money. There are super wealthy people from all over the United States and all over the world, particularly unstable Latin American countries, who are not particularly sensitive to “market prices.” In other words, they’re not so concerned with “overpaying’ in the manner that you or I might be.
Geography. South Florida boasts a bundle of attractive features that are hard to find elsewhere –

Climate. Between October and May, there is no nicer climate on the face of the earth
Energy and Cultural Amenities. South Beach and other pockets of South Florida are known for their clubs, parties, beaches, restaurants, spas, shops, sports teams and more. Where else on Earth can you find this?

Cross-generational appeal. South Florida has something for every age category –

Retirement communities
Family oriented communities with good public schools
A pulsating scene for recent college grads
Good (and improving in prestige) colleges and universities

In short, wealthy people from all over the world are coming here in droves, sinking hundreds of millions of dollars into real estate. That’s not going to stop so easily.

The real danger for the condo investor in my opinion is over-leverage. I see many folks who are swinging for the fences in a desperate way, borrowing against their homes, sucking the equity out to speculate in the condo market.

Condo flip investing should be done sparingly, in small increments, with money that really, truthfully wouldn’t hurt you to lose. It’s taking a flyer on something that is risky. Use low down-payment programs if you qualify. Look at the total costs of your mortgage, taxes, insurance, condo association fee, etc. that you might have to carry if you can’t find a buyer quickly.

Home equity is serious, serious money that should be used for only conservative, near-sure thing investments, in my opinion. While I believe that there is still money to be made speculating, condo flip investing is not a “sure thing,” no matter what your friend, neighbor, co-worker or Realtor tells you.

Appraisals and “Fair” Market Value – Can an Appraisal Really Tell You Whether You’re Overpaying for a Home?

2005-07-14T13:31:00.000-05:00

In my last blog, we discussed why appraisals are an issue whether you’re buying or selling a home.

This entry will discuss, in basis layman’s terms (my weasly way of saying that I’m not an appraiser and by no means holding myself out as an expert on appraisals) why appraisals in south Florida are such an issue and what, if any, meaning that holds for buyers and sellers of real estate.

I think of the problem in the following manner – appraisals have an inherent tension with the market: under the standards of the self-governing body that regulates appraisers, the _______ (AL to fill in), fair value of a home is determined by several factors, most of which are based on closed sales of nearby, similar sized and situated homes.

Market prices these days are being set with practically every new sale – owners and listing agents are saying things like – “The Smith house just listed for $550,000 and it’s 100 square fee smaller, so let’s ask $600,000!

So an appraiser will look backward at closed sales to determine value; sellers and listing agent Realtors will look forward to estimate value. This is natural, but in a rapidly increasing market, problems exist.

So what can you do if you’re buying or selling a home? Ask your Realtor or other real estate professional whether there will be an appraisal issue. If you’re buying a home, be prepared to walk away or put more money down (lenders lend on the lower of the sales price or the appraised value – see my previous blog [link] on this topic)if there’s an appraisal issue.

If you’re selling a home, be aware that your buyer might not qualify for the financing he applied for if the appraisal comes in short. Of course, if the buyer is paying cash, or putting down a substantial down payment (greater than 25%), there is less of a likelihood that the appraised value will derail the mortgage process.

What is the deal with appraisals in South Florida?

2005-07-14T13:23:00.000-05:00

It seems like every transaction, whether it’s a purchase or a refinance, has appraisal issues. Because home prices in south Florida are growing at a speed like Michael Jackson’s legal bills, it’s getting harder and harder for appraisals to come in at the “correct” price.

In other words, a home may sell for $500,000, but may appraise for only $475,000. Why is this a problem? Does this mean that the buyer for this house is overpaying at $500,000?

The main reason that this is a problem is that lenders will lend on the lower of the appraised value or the sales price. In the above example, the lender will lend on $475,000.

So if the buyer wanted 90% financing, he was hoping to put down $50,000 (10% of $500,000) and borrow the rest - $450,000. Now, with the “low” appraisal, the lender will only offer 90% of $450,000, or a loan of $405,000.

So the borrower is short $45,000 ($450,000 old loan minus $405,000 post-appraisal loan). Since not every person has a spare $45,000 lying around, this development might really kill this deal.

If you’re buying a home , do yourself a favor, make sure that you ask your Realtor if there will be any appraisal issues. A good Realtor will do a comparative market analysis and be able to spot an appraisal issue. (Call our office if you need a referral for a good Realtor).

If you’re selling your home, whether it’s with a Realtor or by yourself , this is an issue in the reverse – if you ask for and receive a price waaaaaaay above what the fair market value is based on recent, closed sales in your neighborhood, you might have problems because your buyer may not qualify for a mortgage to purchase your home. (Note – there is no issue if you have a “cash” buyer.)

Whether you’re a buyer or seller of real estate in South Florida, appraisals are an issue.

Next –Part 2 – Appraisals and “Fair” Market Value – Can an Appraisal Really Tell You Whether You’re Overpaying for a Home?

2005-06-29T13:11:00.000-05:00

Recently, I consulted a client of mine named Jimmy. I’ve written about Jimmy before, in one of my free reports but his story is so powerful and so common that I thought it would be worthwhile to tell it again.

Jimmy came to me because his divorce attorney, Deb Byles , referred him to me. He’s a giant of a man – about 6’8” in my estimation and big boned. A hardworking guy – a throwback to an earlier time, really. Worked for the same retail chain for 30 something years, working his way up to management.

As I’ve written before, he’s a warm, outgoing guy – the kind of fellow you’d want to sit down at the local watering hole and enjoy an adult beverage or three with.

Anyway, Jimmy was on his 2nd or 3rd divorce. His latest ex had taken the liberty of running up their jointly-held credit cards so that Jimmy was crushed by the debt load - so much so that he was considering filing for bankruptcy protection.

In my opinion, he would have been entitled to do so – the bankruptcy laws exist to give people a fresh start and Jimmy certainly deserved one, in my opinion. It wasn’t fair for him to be stuck for debts that he really had nothing to do with.

But I told you, Jimmy’s a throwback – he was too proud to file because he felt that it was not the right thing to do. But he didn’t think anyone could help him.

As it turns out, after about 20 minutes of asking few, key questions, I was able to show Jimmy on paper how he could restructure his Everest-size debt-load into a scenario where he was saving close to $2,000 per month and pay off his mortgage in less than 13 years – all with zero out of pocket cost.

Well, you should have seen the look on his face – like many, he couldn’t believe that this was for real! It looked too good to be true.

Candidly, I don’t come across scenarios this dramatic every day – it’s more typical for me to create savings of $500, $600, $700 per month. But $2,000? I double checked, triple checked even, but I was right!

A couple of weeks later, we closed his transaction. At the closing, Jimmy was a new man – the weight of the world had been lifted from his shoulders. He was overjoyed – I was a little nervous – at one point it looked like he was going to bear hug me and I wasn’t sure that I’d survive to see my kids again – but he defaulted into a bone-crushing handshake before practically sprinted away.

After the numbness in my hand turned to soreness, I was better able to reflect on how good it made me feel to be able to have that dramatic an impact on my client’s life. That’s what the mortgage business is all about for me.