Taking A Closer Look At Foreclosure

A situation where a loan is recovered, given on a defaulted property either by selling the property or by taking possession on it, is known as foreclosure.

If you are facing foreclosure, filing for bankruptcy will delay the process. However, this is only a temporary delay as until the mortgage is either refinanced reinstated, or the house is sold, the auction is bound to happen sooner or later. Filing for bankruptcy will not indefinitely delay or prevent the foreclosure of your house, but it will certainly delay the process to a very large extent.

Since your mortgage is on your home, filing for bankruptcy does not guarantee that your house will not undergo a forced sale. If you have income after filing for bankruptcy, you can arrange for your debts to be paid off in a certain fixed period of time. Under chapter 13 bankruptcy you can make up for all the times that you defaulted on your repayments, but the problem is that if you default under this program, your lender can legally facilitate the foreclosure of your home. On the other hand, chapter 7 bankruptcy is the stage where you can be forced to sell your assets to pay for your liabilities, and all the home equity will go to your lender.

Since these are huge steps, never be forced to file for bankruptcy and discuss your options with a reliable and recommended bankruptcy counselor. Also, beware of scams such as ones which tell you that you will receive a certified copy of your deed if you pay a certain amount of money. Your local deed recorder or county will give you a certified copy of your deed for about ten dollars, while scammers will ask you for much more money than is fair. You should consider a home equity line of credit when debating between the same and a fixed rate mortgage, as the line of credit is much more flexible. It is easy to get and no closing costs are involved. Unless you write a check to use the money, you are not charged for it.

Then after you have paid it off, you can decide whether you want a new first mortgage. If an elderly citizen passes away without a will, a local probate court will decide who will inherit the deceased’s assets. The surviving family members will be seen in a specific order with regard to who is considered first as entitled to the inheritance. A will can be prepared for as low as a hundred or a couple of hundred dollars and will ensure after your death that your assets and money will go to the individuals you want them to go to.

If someone remarries, their new spouse’s name is not required on the mortgage loan papers. However, the spouse who legally owns the house can sign and record a quitclaim deed, thus giving the other spouse part of the interest in the house. Joint tenancy has many advantages, two of which include equal rights to joint tenants and the avoidance of probate if one of the joint tenants dies. The title can even be put into a revocable living trust.

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Getting A Home Equity Loan Tax Deduction

Home equity loan become very popular among people because of its low interest rates and the rising of the values of properties. Home equity loans have lots of advantages over other loan type. One of these advantages is that the interest rates of home equity loans are very competitive. One of the most essential advantages is that home equity loans are tax deductible. On top of all that, the home equity loan tax deductions are also very hard to beat.

The amount of the home equity loan tax deductions apply on some certain circumstances. The interest rate of the home equity loans is a detailed deduction if you paid the interest and secured the home equity loan with your property. There are some conditions set by home equity lenders so that if you can not meet their conditions, you can still be able to deduct the interest that are set on another category.

The Internal Revenue Service has set three basic requirements that a borrower require, in order for the borrower to qualify for a home equity loan tax deductions. The first basic requirement is that the borrower will held legal responsibility of the home equity loan so that the borrower will not qualify additional home equity loan tax deductions even if the borrower is paying for the home equity loan of another person. The second requirement in order to be qualified for home equity loan tax deductions is that the home equity loan will be a secured debt for a qualified property. The property will be either being your main home or second property. It will not be leased or used for business uses. In an event that the borrower is using any part of the property of the house as a business office, then that room or that part of the house will be stated as a business expense. And the last rules in order to qualify for home equity loan tax deductions is that the borrower must file the form 1040 with all the details of the itemized deductions.

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Finding The Fairest Prices For Student Loans

Lynn O'Shaughnessy

Can you imagine someone ripping you off for a Payday candy bar? Something close to that apparently has been happening at the University of Texas, where the financial aid office maintained a list of the freebies showered on the staff by student loan companies. Payday candy bars caught my eye; however, there were other goodies, including barbecue lunches, lasagna, cakes, popcorn and ice cream.

Why would student loan companies want to give these folks sugar highs? Think about it for a second. Student loans are an $85 billion a year business and companies want to get their names on college and university preferred-lender lists.

Many colleges hand these lists to parents who need to borrow money and wonder where to turn. Families aren't obligated to obtain loans from these anointed firms, but the overwhelming majority does. After all, why wouldn't you trust a college to direct you to the best loans?

Maybe the better question, in light of the unfolding student loan scandal is this: Why should you trust your son or daughter's school?

The University of Texas student newspaper uncovered the candy bar shenanigans in May. The lenders on the university's list knew how to pamper college staffers, but some of their loans should never have been recommended to students. The resulting fallout led to the resignation of the university's director of financial aid after it was discovered that he owned stock in the parent company of a student lender he was recommending to students.

Unfortunately, this is not an isolated case. The scandal came to light this year when New York Attorney General Andrew Cuomo started examining the relationships between schools and lenders. While the investigation isn't complete, it's clear that many schools have put financial institutions on their preferred-lending lists in exchange for perks and financial kickbacks. Students be damned.

Obviously, this behavior is despicable. And if the people responsible aren't fired, they should at least be required to share face time with the professors who teach ethics on their campuses.

While it's discouraging to discover that financial aid offices are sometimes more interested in aiding themselves, there are steps that parents and students can take to find the lowest-priced loans:

Let students borrow first.

You are going to find the best interest rates on student loans backed by the federal government. These are called Stafford loans, which require students to act as the borrowers. The other federally backed option is the PLUS loan, which is used exclusively by parents.

Even if the parents help, it's better for students to take out a Stafford loan first because it carries a lower interest rate. The maximum interest rate now for a Stafford loan is 6.8 percent versus 8.5 percent for the PLUS loans. These rates are just ceilings, so you'll want to borrow from lenders with much lower rates. If a family needs more money after a Stafford is maxed out, parents are going to have to decide whether to use a PLUS loan or perhaps dip into a home-equity line.

Be careful where you borrow.

Obviously you don't want to limit yourself to the preferred list provided by your child's school. Maybe the lenders who wormed their way onto the list do offer the best deals, but you won't know for sure until you do your homework.Unfortunately, most lenders have made it difficult to compare their loans. To confuse you, loan companies offer all sorts of hocus-pocus discounts that look impressive but often aren't. Here's one of the most common: Students are promised a 2 percent interest rate drop on their Stafford loans if they make timely payments for 48 months.

Sounds great, but hardly anybody qualifies for this. Four years provides plenty of time for kids to mess up. In fact, only 3 percent of students snag this discount, says Mark Kantrowitz, the founder of FinAid, a financial aid Web site. And because a student has to wait four years into the loan to earn the discount, its actual value will drop to 0.63 percent.

To decipher what these discounts really mean, head to FinAid and use its loan-discount calculator.

The superior loans provide significant interest rate discounts that you can immediately earn once you begin making payments. Where can you find these loans? You should check out governmental, quasi-governmental and nonprofit lenders, such as ALL Student Loan in California, www.allstudentloan.org, 877-255-0006.This nonprofit lender, based in Los Angeles, offers a 2.25 percent up front rate reduction on Stafford and PLUS loans for any student attending school in California. The rate discounts from ALL Student Loan are nearly as good for borrowers outside California.

Another resource is the Missouri Higher Education Loan Authority, www.mohela.com, 888-866-4352.

A private lender worth checking out is MyRichUncle, www.myrichuncle.com, 888-697-4248.

By the way, not all students will need to shop for federally backed loans. A minority of schools, including most of the University of California campuses, offer loans direct from the federal government, so there will be no preferred-lender list. The direct-loan approach is vastly cheaper for taxpayers - since it cuts out private lenders as intermediaries - and it can often be a better deal for students.

Only the direct-loan program, for instance, provides a financial safety valve that allows borrowers who choose lower-paying careers to make monthly payments based on their income, says Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers. The so-called income-contingent repayment provision, he says, "is worth its weight in gold."

Avoid private loans.

Unless you've maxed out the Stafford and PLUS, stay away from private loans. If you're a graduate student, there is no reason to obtain a private loan because Grad PLUS loans impose no lending limit. Unlike federally backed loans, private loans have no caps and the interest rates are variable. Some of these variable rates can be as bad as the subprime loans that have been burning homeowners.

What's more, private-loan lenders don't treat all borrowers equally, as the federally backed program does. Families with better credit ratings will receive better deals. Beware of private loans masquerading as school loans; they are nothing more than "marketing ploys," advises Robert Shireman, the executive director of the nonprofit Project on Student Debt, which promotes student loan reform.

Students will assume that school-branded loans are more favorable, but, Shireman warns, "most of these loans are just like any other private loans and in some cases they could be worse."

Because this is the third column in a row on college, I promise to move on to other subjects next week. But for those who can't get enough of this subject, I'm working on a book about college strategies.

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The Lasting Pains Of Foreclosure

SANDRA BLOCK
USA TODAY

If you're lying awake at night, fretting about whether you'll lose your house to foreclosure, you may not be the only insomniac on your block.

More than 2.1 million Americans with home loans missed at least one payment last year, according to the Mortgage Bankers Association. Even more troubling, the rate of new foreclosures hit a record.

The problem is likely to get worse. As adjustable-rate mortgages adjust to higher rates, many borrowers are finding they can't afford their payments. And the collapse of the subprime market has made it harder for those with tarnished credit to refinance.

But be aware: Even if your mortgage has become an intolerable burden, letting the bank foreclose could lead to a lifetime of hurt. Losing your home is just the beginning. A foreclosure will wreck your credit report for years, making it impossible — or at least extremely expensive — to buy another home.

Many borrowers who lose their homes to foreclosure haven't tried to negotiate with their lenders. That's unfortunate, because lenders are usually willing to work with borrowers to avoid foreclosure, says John Lamb, co-author of "Solve Your Money Troubles." "Lenders are going to be more willing to work with people, because it doesn't do anybody good to have a glut of foreclosed houses on the market."

Ideally, you should call your lender before you miss your first payment, says Bob Walters, chief economist for Quicken Loans. If your payment is due on the first of the month, call before the 15th, which he says is usually when your lender will report the late payment to credit-reporting agencies. Once your loan is declared in default, typically after you've missed three or four payments, you're "past the point of no return," Walters says. Unless you can come up with the money to cover all your missed payments, plus any late fees, your lender will start foreclosure.

Avoiding default

If you're suffering a temporary financial setback, your lender may offer programs that will help you get back on track. They include:

# Forbearance. This is an agreement that lets borrowers make a reduced payment, or none, for a specific period. You might have to make larger payments once the crisis has passed. To qualify, you might need to show that you're expecting a bonus, a tax refund or other income that will let you catch up.

# Reinstatement. You agree to pay the full amount of your missed payments by a specific date. Reinstatement is sometimes combined with forbearance.

# Modification. Your lender agrees to change the terms of the loan to make payments more affordable. Your lender may agree to add missed payments to your loan balance or extend the term of your loan, reducing the size of your payments.

Before asking for forbearance or loan modification, be prepared to show that you are making a good-faith effort to pay your mortgage.

Moving on

If you're in a home you can't afford, loan forbearance won't help. But even if you have to move, you can take steps to avoid foreclosure:

# Put your home up for sale. This may be the best choice, Walters says, if you've been in your home for several years and have built up some equity. The proceeds from the sale might cover your mortgage and selling costs.

# If you have no equity or your local real estate market is depressed, ask your lender to consider a "short sale" where the lender agrees to accept the proceeds from the sale of your home, even if they don't cover the amount you owe.

# Ask your lender to accept a deed in lieu of foreclosure. If you can't sell, your lender may agree to take the deed to your home and cancel your debt.

There's one serious drawback to a short sale or a deed in lieu of foreclosure: You could find yourself stuck with a hefty tax bill. In most cases, debt forgiven by a lender is considered taxable income.

So why opt for a short sale or a title transfer instead of foreclosure? For one thing, foreclosure won't get you off the hook, either. If the lender sells your foreclosed house for less than you owe, it might sue you for the balance. And if the lender writes off the remaining debt, you could still end up with a tax bill, Roth says.

Though a short sale or a title transfer will hurt your credit report, you might still be able to work with your lender to reduce the damage — which isn't possible with a foreclosure, Lamb says.

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Subprime Mortgage Sudden Collapse Open Doors To Careers

It's certainly not "business as usual" in the residential mortgage industry. For some time now, the pressure has been mounting in numerous ways. More brokers than ever are competing for fewer and fewer deals. Loan fees are getting squeezed. More and more borrowers are turning to online lenders who do loans very cheaply.

And now, to put the icing on the cake, there's the subprime implosion. Because of secondary market pressure, the most aggressive loan programs are already beginning to disappear - and more will certainly follow. Underwriting guidelines are tightening. Because of this, the pool of borrowers that qualify for loans will continue to shrink even further.

"One path that leads to increased income is the commercial mortgage business," says Joe Mardesich, president and CEO of Nationwide Commercial Funding, a national mortgage brokerage. "It is the ideal arena for accommodating the skills and experiences of residential mortgage brokers. There are numerous advantages for being in the commercial mortgage business and I have put together a list of those advantages."

LESS SENSITIVE TO INTEREST RATES
The residential loan business is highly sensitive to interest rates. The higher rates, the lower will be the number of homeowners who refinance, take out equity loans, or consolidate debt. And though the purchase loan business is still available, it may eventually slow if rates rise to a point where fewer people will be able to qualify as home purchasers.
In the commercial mortgage sector, however, rising rates do not have the considerable negative impact that exists in the residential mortgage sector. Here is the reason: First, most commercial mortgages have balloon payments. Most commercial borrowers have no choice but to refinance or to sell, regardless of where rates may be every 5 to 10 years. Both selling and refinancing result in new loans, which - of course - mean income for the commercial broker! Second, commercial real estate owners and investors make their money by buying, selling, exchanging, developing and refinancing. They don't stop doing deals as rates move up or down. They find ways to have increased interest costs covered by their tenants or other end-users of their properties. Homeowners, by contrast, want to buy a place in which to live and must factor interest costs into their budgets. If interest rates put homeownership out of their reach, they will remain renters, tenants of those who utilize commercial mortgages!
Third, as indicated above, rising rates can actually increase rental demand and revenue for the owners of apartments, mobile home parks, and certain other types of properties. The beneficiary is not only the owner, the developer of apartments, and the developer/owner of mobile home parks, but also the mortgage brokers who help to finance those properties.

GROWING COMPETITION IN THE RESIDENTIAL MORTGAGE BUSINESS
In the residential real estate market, more and more realtors are competing with mortgage brokers. The numbers increase daily. With the internet, people can shop online and have 5 or 6 lenders or brokers competing for their business with a mouse click. The loan products you and your competitors sell are all the same, because the secondary market is so consolidated in the residential industry. The residential mortgage business has become a frantic "commodity" business, providing revenue to the lowest bidder.

In the commercial mortgage business, the lowest bidder is not necessarily king. There is much less competition than in residential real estate. And there are many portfolio lenders who do not sell their loans to a consolidated secondary market, i.e. there are a great variety of available programs from one lender or broker to another. As a result, by specializing and developing a niche, you can develop a meaningful competitive edge.

LESS REGULATION IN COMMERCIAL
The residential industry is chock full of rules and regulations. Brokers have to disclose every penny they make, even in a yield spread. The number of disclosures that borrowers must provide seems to increase daily. Furthermore, licensing laws and regulations restrict where a residential broker may do business.

On the other hand, in the commercial mortgage business, you don't have to worry about RESPA. There are no Good Faith Estimates. No TIL's. You can pay referral fees to anyone, regardless of the service they may perform. Yield spreads are generally not disclosed. Most states do not require any licensing for commercial mortgage brokers. (These are observations, not legal advice).

THE REWARDS OF COMMERCIAL
The rewards of the commercial mortgage business can be substantial, impacting income and lifestyle. Yet, comparatively few residential brokers are reaping the rewards that await them in the field of commercial mortgages."

As a consultant-coach, who has helped countless numbers of residential brokers successfully make the transition to commercial mortgage brokering, Joe was often puzzled by why so few made the transition.

"It is because most brokers begin their careers in the residential mortgage business and attempt to do the commercial business from a residential frame of reference," explains Mardesich. "Unfortunately, that doesn't work. In fact, the better a residential broker is, the harder it can be to make a successful transition. Some of the elements that go into making a successful residential broker are precisely those elements that will hamper a commercial broker. Does that mean all is lost if you started out as a residential broker? Not at all! A lot of residential brokerage skills are transferable. You simply need to learn which skills are and are not applicable, and be prepared to learn not just new program guidelines, but also the entire process and mindset for being a successful mortgage broker."

As a service, Mardesich prepared a free Tip Sheet on the key differences that should help residential brokers make the transition to commercial mortgage brokering.

One can obtain a free copy of it by sending an e-mail to tipsheet@nationalapartmentfinance.com

Nationwide Commercial Funding, Inc specializes in commercial owner and non-owner occupied loans nationwide. Its website is www.nationwidecommercialfunding.com

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How To Say "NO Thanks" To Predatory Loans

Janice Martin

It has come sadly to my attention home buyers right here in Chaffee County have fallen victim to possible predatory lending practices.

It also happened to my niece in Denver.

This abusive lending practice can have many forms, but usually preys on individuals with weak or blemished credit scores. A typical predatory loan may look like an interest only loan or a loan with very high fees attached.

On competitive loans, fees should be at or around 1-2 percent of the loan. On predatory loans, fees can total anywhere from 2-5 percent of the loan balance.

This practice often surfaces when a builder attempts to keep their staff employed, even though the market is flat or soft. To create a false demand, the builder will also become the banker.

This strategy is really very smart "if" you are the builder. The builder gets the money for building the home, plus the money for being the banker.

However, it is not good for the ill-informed consumer or the surrounding community. These types of loans make it nearly impossible for the homeowner to build any equity in their house.

Obviously, if a home owner never pays the principal down, and at the same time a market is being flooded with similar newer homes, they will actually end up with a mortgage product that has a higher loan balance than the value of their home.

Many homeowners have been misled to think a house is their greatest asset. I have argued for years that if homeowners have zero to very little equity, their house is actually their largest liability.

The banker will show an asset on their balance sheet called mortgage receivable for the entire value of your home. (Yeah, lender!) The homeowner will show a liability on their balance sheet called mortgage payable for the entire value of their home. (Boo, homeowner!) I know what you are thinking, "but Janice what about appreciation?"

Again, that sometimes works, but not when the supply exceeds demand, or if the "builder/lender" is predatory. We certainly have plenty of homes on the market in all price ranges in this county.

Therefore, if predatory builder/lending practice continues to be tolerated in this small fragile market, serious harm will result.

The only ones who will be immune from such a downturn will be home owners who have either a very special lot or live in a special neighborhood like Cottonwood Meadows or South Main.

Supply is being supported by a false demand, but can come crashing down like a neighborhood made of cards. So, buyers beware before you buy!

Predators will also convince home buyers of all the taxes they are going to save by buying their home and paying thousands of dollars of interest to the builder.

First, usually home buyers with tarnished credit who require builder financing, do not have a big end of year tax burden and may even be in an income tax bracket where they do not pay any income tax after all the child care tax credits and so on.

So this is another ridiculous selling point to create false demand and trap a home buyer with tarnished credit.

This type of unethical lending practice is being addressed at the state level through Senate Bill 203 and House Bill 1322. Colorado is experiencing one of the highest foreclosure rates with most of the foreclosures occurring in these exact types of developments.

Real estate agents should be careful since Senate Bill 203 and House Bill 1322 will also allow the unsuspecting buyer to sue the real estate agent who sold the house if the agent knew that the loan was "unconscionable."

That's the tough part I guess, the courts will determine what is unconscionable. However, if I was a real estate agent I would take the high road and follow my conscience before I would recommend a builder/lender combination or at least check your liability insurance coverage.

If you feel you may be a victim of predatory lending, you may file a complaint with the Attorney General's Office at http://www.ago.state.co.us/consumer_protection. I hope this helps.

Janice Martin is co-owner of Headwaters Energy and Finance in Buena Vista.

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