By Ryan Morrow, Loan Officer Skyline Financial Corp
Lancaster, CA. - Bankruptcy is an uncomfortable subject for a variety of reasons. The most obvious is the potential havoc it can wreak on your finances. Running a close second is the negative stigma which is often attached to the process. This negativity is important to mention because strong emotions can sometimes lead to unsound financial decisions with devastating results.
Bankruptcy becomes a viable option for someone who is "upside down" in terms of cash flow. In other words, when a person has more money going out each month than coming in, bankruptcy should be considered if no reversal of this negative cash flow is within sight. The longer someone waits to explore the various options available, the more serious his or her situation may become.
One of the worst things people can do in this situation is to borrow more money to try and pay off their debts. On paper, this is clearly an unwise financial decision. In the real world, however, it is very common for individuals to pursue this strategy in an attempt to buy time and hold off on filing for bankruptcy. On the surface, this is certainly a noble notion; however it can often compound the problem and serves only to delay the inevitable.
For many homeowners in the midst of this upside down cash flow, speaking to a qualified mortgage professional is a much better option. An experienced loan officer can objectively look at your finances and help you determine if restructuring your mortgage would not only help, but possibly even alleviate any need for bankruptcy.
If bankruptcy is the only option, seek out a reputable bankruptcy attorney and credit counselor. A qualified mortgage specialist can provide references for you as well, as he or she works with these professionals on a regular basis. Reliable references are essential in this case because experienced professionals greatly increase the odds of a successful bankruptcy experience. It's that simple.
When filing for bankruptcy, be completely honest and accurate regarding every aspect of your financial situation. This includes any changes to your income which may occur throughout the process. Bankruptcy is a federal procedure, adjudicated by real judges, and scrutinized by representatives who coordinate with the Department of Justice, the FBI, and the IRS.
Here are some additional steps you can take to make the bankruptcy process as painless as possible:
Save all paperwork regarding your bankruptcy, and keep it organized. This will prove beneficial after your bankruptcy as you now have all of the pertinent information in one place. Also, be sure to write down your discharge date. It's surprising how many people forget to do this.
Establish a household budget. This can be accomplished in many ways, but there are several inexpensive computer programs available which do an excellent job.
Throughout the bankruptcy, do your best to not only live below your means, but to save as much cash as possible. You never know what you may need it for once the process is completed.
Be prepared for a barrage of junk mail. There will be sharks on the loose who are hoping to capitalize on your need for credit.
Tips for Rebuilding Credit:
If you must buy a car, focus on transportation as opposed to style. Buy an inexpensive, used car, and try to get a loan for it. It's a good idea to figure out what your budget allows in terms of a dollar amount first. This means obtaining financing prior to looking for a car.
Get a secured credit card. Secured credit cards allow for the cardholder to deposit a said amount of money into an account, thus establishing the spending limit of the card. Missed payments result in deductions from the account. Some of these cards will reward responsible borrowers by upping the limit without an additional deposit. Some will even convert the account into a traditional credit card. (Be wary of offers of "easy credit" or any card which asks you to call a 900 number. You will be charged for the call.)
Meet with a credit repair specialist. Not only can they help you clean up the damage to your credit report, they can advise you on specific ways to rebuild the credit you lost as well.
While it does take time, there is definitely life (and credit) after bankruptcy. Some mortgage lenders will even lend to you within a year or so after a bankruptcy. If you're in serious financial trouble, the trick is to get the help and advice you need from professionals you trust.
[Ryan Morrow] is affiliated with [Skyline Financial Corp], a Licensed Broker, [CA] Department of Real Estate. For a free copy of our Consumer Credit Scoring Booklet, contact [Ryan Morrow] at [661-723-1232 ext. 6183].
There's a growing trend among lenders that I feel compelled to tell you about.
Several major lenders are freezing withdrawals from Home Equity Lines of Credit (HELOCs) - and I don't want you to be caught off guard by this development.
Don't Get Burned by the HELOC Freeze HELOCs, though secured by your real estate, are treated by lenders as consumer credit. And just as a lender can revise the terms of your credit cards, or even cancel them, the same can be done with your HELOC.
Previously, HELOC withdrawals were usually only frozen for reasons such as bankruptcy, declining credit and payment problems.
While these events can still cause a freeze, there's another factor that lenders are considering more often today: the value of your property. You should be aware that the lender retains the right to suspend or reduce the line of credit available if your property value falls below the appraised value used to originate the loan. Lenders are actively assessing properties and then suspending access for account holders who have seen a downward slide in their home value.
If you're in a market that has seen real estate values decline, then access to your HELOC may be at risk. Your financial security and success are my highest priority. Please call me to discuss your options in this rapidly changing marketplace.
In a recent New York Times article, the subprime lending collapse was faulted for "industry-wide problems" that affect more than just those borrowers with poor credit or subprime Adjustable Rate Mortgages (ARMs). Now, because of credit tightening, even borrowers with good credit and A-paper ARMs are expected to feel the effects of the changing market.
If you or someone you know has an ARM that is scheduled to reset anytime in the next 18 months, I urge you to share with them the following worksheet for estimating the new interest rate they will face once their ARM resets.
Unfortunately, foreclosures are on the rise throughout the country, and many of these situations could've been avoided if the borrowers better understood how to read their loan documents and anticipate the fluctuating component of their home loan. Don't let this happen to you, your friends, or your loved ones.
If you have any questions or trouble filling out the ARMs worksheet, please do not hesitate to call me. I'll be glad to sit down with you or your loved ones, and we can complete the worksheet together.
Call me and set up a free consultation.
Sincerely,
Ryan Morrow Skyline Financial Corp ryanmorrow@skylinefinancialcorp.com
Adjustable Rate Mortgage Worksheet Calculating Your Risk
Congress, many state legislatures, and the Federal Reserve are currently reviewing how ARM disclosures are presented to borrowers to ensure a better understanding of the mortgage process. Until then, it's up to you to protect yourself and your family. Don't get caught off guard. Pull out your ARM loan documents and use this worksheet to estimate what your payments will be when your ARM resets. (Note: If you have an Option ARM, please call me right away. Option ARMs have special features not covered in this worksheet.)
As you know, the initial interest rate on an ARM is generally locked for a predetermined period (typically between 12 months and 120 months). When this fixed-rate period of the ARM expires, the interest rate is then subject to change. Find your initial interest rate on your paperwork and write it down in the space provided.
Now let's examine the initial interest rate cap, which is the highest rate your ARM can reach on its first adjustment. This interest rate cap typically ranges between 2 to 5 percentage points, depending on the terms of the note. The initial interest rate cap will be in effect for 6 to 12 months before it is subject to adjust or reset. (The cap on all subsequent adjustments to the interest rate should be either 1.00% or 2.00%.) If this is the first adjustment to your ARM, write in your initial interest rate cap in the space provided.
Be careful not to confuse this with your life-time cap, which is the highest rate your loan can adjust to throughout the life of the loan. If you have a life-time cap on your ARM, write it in below.
Initial ARM Interest Rate Adjustment
__________________ Initial Interest Rate
_____________________ Initial Interest Rate Cap
__________________ Life-Time Cap
_________________ Interest Rate Index
+
_______ Margin
=
_____________ Adjusted Rate
(or Initial Rate Cap, whichever is less)
Subsequent ARM Interest Rate Adjustment(s)
____________________ Current Adjusted Rate
__________________ Adjustment Cap
__________________ Life-Time Cap
_________________ Interest Rate Index
+
_______ Margin
=
_____________ Adjusted Rate
or (whichever is less)
____________ Current Rate
+
_______________________________________ 1% or 2%, depending on terms of your loan
=
_____________ Adjusted Rate
(must not exceed Life-Cap)
In addition to the initial interest rate cap, there are two other components that determine the interest rate when the ARM adjusts. The first component is what is known as the interest rate index. The index is the fluctuating component of the new interest rate and is based on, or tied to, any one of several indices tracked by the Wall Street Journal. These include, but are not limited to: the various London Interbank Offer Rates (LIBOR) and U.S. Treasuries, as well as the Prime Rate. Locate your interest rate index and write in the current rate above.
Finally, we have what is known as the margin. The margin is the fixed number that, when added to the index, determines the interest rate the borrower will be charged upon adjustment. Locate your margin and write it in above.
To calculate your adjusted rate, add the interest rate index to the margin and, if the rate is less than your initial interest rate cap, this is your new rate. Remember, your first adjusted rate cannot exceed your initial interest rate cap. If your adjusted rate is higher, then your initial cap rate will be your rate until your next adjustment.
The cap on all subsequent adjustments to the interest rate should be either 1.00% or 2.00%, depending on the terms of your loan. In addition, your adjusted rate cannot exceed the life-time cap. Insert the appropriate figures into the table above. If your adjusted rate is less than your life-time cap, then this is your new rate. If your adjusted rate is higher than your life-cap, then your new rate is the life-cap rate.
Below is a sample ARM with the first two adjustments calculated for you. Notice the change in the monthly mortgage payments! Don't let this happen to you or someone you love.
If you don't like what you see, or you're still having trouble working out the numbers, call me for a free consultation right away. There are a variety of fixed-rate products and government programs designed to help you get out of your ARM today.
The Federal Reserve surprised everyone Tuesday with an emergency intersession rate cut of .75%, the deepest cut in the Fed Funds Rate since 1984. The Fed Governors are acting in direct response to recent reports that the country is on the brink of recession.
If you have credit cards, auto loans, HELOCs, or an Adjustable Rate Mortgage, the Fed's decision to cut this key interest rate is great news. For long-term mortgage rates however, this could signal the beginning of the end for the lowest 30-year home loan rate borrowers have experienced since 2005.
Let's look at the impact of a few recent Fed Funds Rate cuts and the corresponding impact to home loan rates to see what this could mean for you:
Period
Fed Funds Rate Cut
Impact to Home Loan Rates
January to June 2001
Down 2.25%
Rose 0.10%
October to December 2001
Down 0.75%
Rose 0.45%
May to August 2003
Down 0.25%
Rose 0.78%
Rates are predicted to be cut again when the Federal Reserve meets at the end of this month. Many believe Tuesday's action was taken because of a dramatic downturn in the stock market, where the Dow dropped 464 points, the worst single day drop since September 11, 2001. Since the Fed's announcement, the Dow has recovered much of those losses but volatility is likely to remain a consistent theme throughout the week.
If you are waiting for long-term mortgage rates to fall further from here, don't count on it. Your best chance to lock in the lowest mortgage rates since 2005 is now. Getting your application in process will allow you to capture a rate near all time lows and, with many experts predicting home values could continue to decline, waiting could kill your chance to capture a great rate if your home doesn't appraise.
This is an unprecedented market and things are moving fast. Regardless of your current mortgage, please give me a call so that we can review your current financial situation in light of these market movements.
Call today to discuss how I may assist you. Not calling today could cost you tens of thousands of dollars in the next few years. Don't let this happen. I look forward to hearing from you.
Looks like we are starting out the year on the right foot. The Bond market has rallied after the recent job reports came in poor and the unemployment rate rose slightly. Remember bad economic news is generally good for mortgage interest rates.
The timing is perfect for those who are currently seeking financing, but this good news may not last long. Many fear that this recent drop in rates will not last as the bond seems to be way over valued and their is fear that investors may sell off resulting in higher interest rates.
With housing prices continuing to decline now is not the time to wait if you have an adjustable rate mortgage. If your rate will be adjusting call me and Ill provide you with an adjustable rate worksheet that will help you predict the increase. Not sure what type of loan you have call me and Ill help you read through your loan documents to find out.
Those looking to buy now can take advantage of the recent dip in both rates and housing prices allowing them to afford much more home for their money. Keep in mind many of the 100% loan programs will be going away after Jan 14th 2008. If you are in need of 100% financing you must be looking NOW! Your escrow can close after Jan 14th but we will need a property address prior to get your eligibility locked in.
Feel free to pass this information along to others who may need some assistance. Below is an example of what rates are available to you right now. Here's to a great start in 2008!
Mortgage Interest Rates*
Rates as of 01/04/2008:
Conforming
APR
Payment per $1,000
Jumbo
APR
Payment per $1,000
30yr. Fixed
5.625%
5.728%
$5.76
6.375%
6.497%
$6.24
30yr. Fixed Interest Only First 10yrs
6.00%
6.105%
$5.00
6.625%
6.749%
$5.52
5yr. Fixed
5.25%
5.351%
$5.52
5.5%
5.615%
$5.68
5yr. Fixed Interest Only First 10yrs
5.25%
5.334%
$4.99
5.5%
5.597%
$5.16
5yr. Fixed Zero Down 100% Financing
5.75%
5.854%
$5.84
NA%
0.000%
$0.00
CALHFA 35yr. Fixed 5yr. Interest Only
6.25%
6.348%
$5.21
6.5%
6.612%
$5.42
CALHFA 40yr. Fixed
6.5%
6.593%
$5.85
6.5%
6.605%
$5.85
FHA 30yr. Fixed
6.00%
6.105%
$6.00
NA%
0.000%
$0.00
CHDAP Second Mortgage
3%
3.088%
$4.22
NA%
0.000%
$0.00
*Rates are subject to change due to market fluctuations and borrower's eligibility
A major change to the FICO® credit score formula was announced by Fair Isaac Corporation earlier this week. FICO scores will no longer factor authorized user accounts into their credit scoring formulas.
This change was scheduled to be released to one of three repositories in September. The remaining two repositories will get the release in early 2008.
Consumers who are listed as authorized users on credit card accounts will likely see a significant change in their credit scores when this modification takes place later this summer.
For most consumers, this change will have a negative impact on their credit scores. Only consumers who are listed as an authorized user on negative accounts or accounts that have balances that are close to the credit limit will possibly see an increase in their credit scores.
Adding a family member or friend as an authorized user on an existing credit card account has long been used as a way to establish credit. Many parents added their children as authorized users in order to help them build their credit history.
Recently though, unscrupulous organizations started using this system as a way to fraudulently sell authorized user account access to consumers with credit problems. This credit repair loophole was part of the motivation for the FICO score change.
Borrowers who are benefiting from authorized user accounts on their credit reports will see their credit score decrease when this change takes effect. They will essentially be "losing credit" for these accounts. Some borrowers with authorized user accounts that have late payments or high balances could possibly see an increase in their score. Fair Isaac has reported that 30% of the population has an authorized user account listed on their credit reports. That means that between 60 and 75 million consumers will be impacted by this change.
When inflation fears recently led central banks in New Zealand and Europe to suddenly increase their short-term interest rates, the repercussions were immediate. Interest rates soared around the globe - especially in the US.
According to the Chicago Tribune, mortgage interest rates have reached their highest levels in nearly a year! In fact, Freddie Mac recently reported the fifth consecutive week of rate increases across the board since May 15th!
If you or someone you know is considering a new home purchase or refinance in the next 12 months, I urge you to investigate all available options now instead of waiting any longer.
Yes, it's true. Mortgage interest rates are currently under 7.00%, but they may not remain there for long. As history has demonstrated, a rapid rise in interest rates is sometimes a precursor to even higher rates in the coming months. In 1993, interest rates on a 30-year fixed rate mortgage jumped from 6.69% to 8.23% in just five months. With this latest surge in interest rates, can you really afford to wait any longer?
Remember, mortgage rates are based on mortgage-backed securities, which investors buy and sell like stocks on the stock market. If returns are more attractive in other countries and other markets, investors and their capital will follow - and rates will likely increase. It's that simple. Combine this with the present turmoil of the post subprime housing market, and it really does make sense to at least consider all of your available options now.
Honestly, if this sudden surge in interest rates was the only sign of a changing market, I wouldn't waste your time. But, growing concern about inflation and how the Federal Reserve might respond, combined with increases in housing inventories, decreases in home values in many neighborhoods, and the tightening of credit standards and guidelines is just too much evidence to ignore.
While no one can predict exactly what will happen, including me, experts in the bond arena have expressed concerns that rates will continue to increase throughout the rest of the year. Some believe that the Federal Reserve will be forced to raise interest rates prior to year's end. This would increase interest rates for existing Home Equity loans, credit card loans, and potentially existing ARMs. Find out how these and other changes could affect your financial situation.
Please contact me as soon as possible. I will provide you with a Free, No Cost Analysis of how I can improve your financial position today and save you from a potential increase in monthly payments.
1. Carpool lane - 1st time $1068.50 starting 7/1/07 (The $271 posted on the highway is old). Don't do it again because 2nd time is going to be double. 3rd time triple, and 4th time license suspended.
2. Incorrect lane change - $380. Don't cross the lane on solid lines or intersections.
3. Block intersection - $485
4. Driving on the shoulder - $450
5. Cell phone use in the construction zone. - Double fine as of 07/01/07. Cell phone use must be "hands free" while driving.
6. Passengers over 18 not in their seatbelts - both passengers and drivers get tickets .
7. Speeders can only drive 3 miles above the limit.
8. DUI = JAIL (Stays on your driving record for 10 years!)
9. As of 07/01/07 cell phone use must be "hands free" while driving. Ticket is $285. They will be looking for this like crazy - easy money for police department.
Ryan Morrow
;)
;)
