Debt Settlement Blog

Credit card debt continues to calculate negatively for consumers straddled with high rates.  With delinquencies soaring the banks have been forced to cut available credit line for consumers across the country.  Consumer credit fell $10.3 billion in the U.S. in June, or at a 4.92 percent annual rate, to $2.5 trillion. It was the fifth straight month of decline, as banks cut limits on credit cards and some consumers remained wary of borrowing money for big purchases.  Home foreclosures have not slowed down and fears of more job losses have contributed to the credit reduction from banks and lenders

Economics blog Calculated Risk has this chart (it gets bigger each time you click on it) showing that in percentage terms the declines in consumer credit are the worst in at least the past four decades:

Looking at subcategories within the Federal Reserve report, credit-card debt fell $5.04 billion, or 3.8%, to $1.59 trillion — a record 10th straight monthly drop in credit card debt. And non-revolving credit, such as auto loans, fell $5.04 billion, or 3.8%, to $1.59 trillion.  Doesn’t seem consumers are ready to save the economy quite yet.  — Article written by Mathew Padilla

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