Debt Settlement Blog

Debt settlement plans, chapter 7 bankruptcies and loan modifications continue to implode as unemployment rates rise and home equity decreases.  Borrowers are modifying their second mortgages in high volumes as well.  Second mortgage lenders are typically quick to renegotiate terms, because bankruptcy and foreclosures yield huge losses.

A sudden, drastic drop in income last year had Bob and Roxanne Curry fearing they would become another foreclosure statistic.  He works at a brokerage firm and she runs a child care business out of their Queen Creek home. In mid-2008, her weekly income fell from $1,000 to $300 as fewer parents could afford day care.“I was robbing Peter to pay Paul to make ends meet,” Bob Curry said. “I started charging up credit cards and taking money from my 401(k), and then, in November, there was finally no more money to rob Peter from. That’s when we started to get behind on our mortgage.”  

The couple’s loan servicer wasn’t interested in working with them until they were at least two months behind on the home loan. Bob Curry then compiled a 39-page document requesting a loan modification, with advice from Jeff Underwood, vice president for the Central Chapter of the Arizona Association of Mortgage Brokers. Underwood is also with AmeriFirst Financial in Mesa.  “It took two months from the time that we first faxed in the paperwork for it to finally come to a close,” Curry said. “We did all that we could do. We didn’t get into a home we couldn’t afford.”  The couple was able to get their mortgage interest rate cut from 7.45% to 5%, and all late fees and charges were moved to the end of the loan.“Basically we saved about $700 a month,” Curry said. “The mortgage loan is fixed for five years, and so hopefully when that time comes we’ll be able to do what we need to do.”

The Currys are part of a growing trend of distressed homeowners reaching deals with their lenders to get back on track with their mortgage payments and remain in their homes. “We’re seeing more (mortgage) modifications and we’re also seeing for the first time … balance write-downs as part of a modification to avoid any sort of foreclosure,” said Andrew Loubert, vice chairman of the Arizona Foreclosure Prevention Task Force. “What didn’t work six months ago is working today. We are seeing the lenders more proactive in their understanding that the market has substantially dropped and as a result they need to be more flexible with how they handle balances and things like that.”

In April, 270,000 modified mortgages and repayment plans were completed nationally, according to Hope Now, a private sector alliance of mortgage servicers, nonprofit counselors and investors. It was the largest number in any month since Hope Now began compiling data in July 2007. It has not yet released any 2009 figures for Arizona.  In the Valley, President Barack Obama’s Homeowner Affordability and Stability Plan prompted some increase in mortgage loan modifications, Underwood said. “I do think that banks have opened up a little bit to the reality that if we don’t work with these folks, it’s most likely going to go to a foreclosure process and that’s not what the housing market obviously needs,” he said.

The major difference between a Debt Management Program and Debt Settlement Program is that through a debt management option, creditors are being paid monthly whereas in debt settlement options the creditors are no longer being paid until such time as the debtor has built up sufficient funds to allow the debt settlement company to initiate negotiation procedures to reduce the amount of the debt and enact a lump sum settlement.  

Either way, in most cases, settling credit card debt or enrolling in a credit counseling program should eliminate harassing phone calls from bill collectors and collection companies.

Debt settlement can have a significant effect on a debtor’s credit score and rating as a whole, whereas a debt management after a period of time may have a positive effect on a debtor’s credit score, but may still be damaging to the debtor’s credit worthiness.  The good news is that credit can be repaired and credit repair solutions are affordable.  Take your time, when considering debt negotiations or any type of credit counseling.

Suze Orman was wondering if you have you ever wondered why people continue to use credit cards even after letting them bury you in high rate interest? In this video Suze seems to be backing CCC (consumer credit counseling over debt settlement because the debt negotiation firms usually trash their credit. First of all Suze, as an experienced mortgage broker I have seen hundrerds of borrowers with credit that was significatntly impaired from consumer credit counseling, because with their programs the consumer stardts paying the creditors less than agreed.  Their credit rport starts reflecting that each month and it lasts a heck of a lot longer than debt setttlement. Second of all, the consumers that incurred the debt should have some responsibilty with regrads to their credit scores being trashed…

To your surprise, you actually need to have a credit card these days. But you do want credit card debt. Suze Orman explains the benefits of credit cards, but warns about carrying adjustable rate debt from these credit cards.

Is Debt Consolidation a SCAM?

If you really want to work with an company, look for one who can help you reduce your debt.  Consider, Debt Settlement, Consumer Credit Counseling or an Unsecured Bill Consolidation Loan or a Secured Home Equity Loan.

The increase in debt settlement and home loan delinquencies and foreclosure actions in the state came as no surprise to Joe Cox, a community organizer for housing advocate group Maryland ACORN.  “Mortgage service companies and home loan lenders have been avoiding meaningful loan modification at every step of the way,” Cox said yesterday.

Chris Traczyk, a real estate agent with Long & Foster in Elkridge, said most of the listings he has been showing to new home buyers recently have been foreclosed properties.  With several of his clients, “that’s all they’re requesting to see because they’re thinking they’ll get a great deal,” despite knowing the house must be bought in as-is condition, and the bank must approve the price.  But the competition from home foreclosures makes it tough for sellers of other homes, who often have to settle for reducing their sales prices, Traczyk said.

Banks have said they are taking steps such as Citigroup’s plan, announced earlier this week, to lower mortgage payments for some borrowers to an average $500 a month for three months if they lost their job. But ACORN contends banks are just offering short-term solutions, such as tacking a missed loan payment to the end of the mortgage balance, that do little to help borrowers.  Many homeowners come to ACORN fearing they will become late on payments but say their lending company will not consider a mortgage modification unless their payments become delinquent, Cox said. The group says it wants to see mortgage loan modification programs offered more with terms like lowering the mortgage rate or reducing the monthly payments simply by extending the amortization schedule of the mortgage.  “The message people are getting is ‘Don’t try to work this out ahead of time. Wait until you have a problem,’” Cox said.   Sun reporter Jamie Smith Hopkins and the Los Angeles Times contributed to this article

I saw some credit related news this morning that was SO shocking that I felt I should share. On Good Morning America there was a segment about a man named Kevin Johnson. His father worked in the credit card industry, so Kevin is a very financially savvy guy because his dad taught him to manage his credit wisely. He pays his bills on time EVERY month and keeps his balances down. He is a homeowner and does everything that a consumer should do to keep his/her FICO credit scores up – keeping his debt to income ratio down, paying his bills on time and applying for credit only when he needs it. He got the opportunity to apply for an American Express Blue card and was approved. He had a credit line of $10,000, but was shocked to find that his credit line was recently slashed to $3,800 (probably what he owed them). The reason for this: WHERE he used the card.

When American Express slashed his credit line, they gave him the lame reason that he used his card somewhere where it has been observed that other people who have problems paying their bills have used theirs. Thus, they claimed he now is a risk of not paying his bills. They are engaging in behavioral analysis now. Apparently, now WHERE you shop and use your credit card can affect how much of a risk your creditor thinks you are. Because this has happened to someone with a stellar credit score, Good Morning America took it to House Speaker Nancy Pelosi because American Express received TARP funds. American Express was contacted for a comment, and they said they were trying to “balance servicing their card members while monitoring risk.” This is a company that took taxpayer money because they can’t manage their debt, but instead of using it to be able to lend to consumers, they, like other TARP recipients, are hoarding the money and coming up with MORE reasons to slash credit lines and NOT lend to consumers.

The credit card companies have been able to run carte blanche on consumers, slashing their credit lines for the lamest reasons. Mine have been repeatedly slashed because my creditors claim I have “seriously delinquent accounts”. These “seriously delinquent accounts” to which they are referring are ones that are 4.5 years old or older. Three of them are due to fall off my credit reports THIS YEAR due to age. I have one that drops off in May of this year, one in July and one in November. But, yet, the creditors are allowed to continue to punish me for these past financial problems that were actually a result of identity theft. Credit card companies REALLY need to be monitored, and now they are on the radar screen. Now, that it has happened to someone who is high-profile enough to have drawn attention, it will be interesting to see if these practices stop.  The Debt Settlement Nationwide Blog, recently posted some similar comments.

The key to all of this is that creditors have been doing behavioral analysis, which apparently affects people’s credit scores, without telling their customers. Kevin Johnson has created a website called “New Credit Rules” as a result of this.

Kevin Johnson apparently created a blog as a result of what happened to him. Here’s where the debt story came from:

I also checked and found out that MARKET CONDITIONS are among the ways creditors determine lending risks. So, with the market being in bad shape, consumers are taking it up the rear. Consumers are now also being punished for high balances and past financial mistakes, even if those mistakes are several years old or, in my case, the result of identity theft. Banks are getting away with writing their own rules on how they assess credit risk.

In the criminal justice system, a person cannot be punished twice for the same crime. It’s called “double jeopardy”. But, banks are allowed to continue to punish consumers again and again. Plus, they can also continue punishing for high balances that resulted from another creditor cutting credit lines down to what the balance is on a consumer’s credit card. Thus, the endless loop of having credit lines slashed and interest rates and fees jacked up to phenomenal rates on not just new purchases but also old balances continues. This makes it even more impossible for people to pay off their balances. I’m a good example of that because on one of my credit cards I quite literally pay more than twice the minimum payment each month, but my balance never goes down. My minimum payment on the card in question is $84. I pay $200 each month, but it doesn’t bring my balance down. Maybe this would somehow make a great article with a headline something like this: Banks Go Carte Blanche on the Taxpayer’s Dime

And, the article can go into some of the new ways banks scalp consumers and force them to pay for the bank’s mismanagement of their bottom line. Let me know what you think. – Maria Ny

Bloomberg recently examined trends with consumer debt and savings. Many people believe that bankruptcy is a four letter word, but if you’re drowning in debt, it may offer you the chance you need to regain your financial footing.  Larn exactly what bankruptcy is and how it affects your life. 

Our debt relief specialist will review your finances and then quickly provide you with solutions that will reduce your monthly payments and increase your cash flow.  Credit card debt settlement services may provide you with a solution that gets you out of debt quickly without needing to file for a bankruptcy. 

Question: Does debt settlement help credit scores?

Answer:  In most cases, debt settlement plans tell you to stop paying your debts to the creditors and instead deposit the money into a separate bank account created for your debt negotiator to use as leverage to settle with the credit companies once you have 40-50% of the outstanding balance saved.  This type of debt settlement usually will hinder your credit scores in short term.  However, in the long run, debt settlement will look better than consumer credit counseling or bankruptcy if you hire an effective credit repair company.

USOBA announced they will be hosting their biannual 2008 Winter Conference in San Diego, CA on November 9-11. USOBA provides information regarding laws and regulations on both a state and federal level to the debt settlement or debt negotiation industry, outside of credit counseling. Two times a year, member and industry-related companies convene to increase their knowledge, education and debt relief experience in a networking atmosphere. The theme of this conference is: Back to the Foundation, How Can Companies Ensure that they are Compliant?  .

USOBA – The Highest Standard in Debt Settlement

On September 25th, the Federal Trade Commission (FTC) hosted a workshop that addressed debt settlement and protection of consumers, and USOBA’s 2008 Winter Conference will focus primarily on these issues and concerns. This event will provide a venue for members of the debt settlement community to get back to the foundation of compliance through the examination of the following topics:

o    Legal Compliance Panel – Risk management, solidifying your business practices

o    Marketing – Compliant Marketing Strategies

o    Legislative Evaluation – New statutes that affect your business

o    Consumer Education Panel– Theory and implementation

o    Communication – Is your message clear and reaching your audience

o    HR 1424 – Bail out and its affect on loss mitigation

o    California Legal Landscape and Legislative Process Update

o    Consumer Education Panel Presentation/Discussion

o    Web 2.0 – Use the internet to drive business and spread awareness

o    The Necessity of Auriemma Consulting Group Benchmarking and Statistics

o    Front Office Compliance – How to convey debt settlement in a clear and concise manner

o    Complete Legislative Update – Review state trends and how to prepare for them

o    Legislative, Regulatory and Litigation Update – Critical lessons and strategies for debt settlement companies

o    Effective Approaches to Maximize Settlements from Creditors, Collection Agencies and Debt Buyers

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