Bill 's Blog

Are you financially ready to raise a child?

Bill Stafford (Mortgage Options of America) — Wed, 18 Jul 2007 12:57:55 -0500

July 18, 2007 Are you financially ready to raise a child? It is so hard to believe that my daughter is already 16 weeks old next week. It seems like every parent I speak to say enjoy these months, every moment, because it goes by so fast! It is amazing watching Mia’s face as she looks at the world with her big round eyes. Everything is a first for her. I have also been amazed on how having a baby or another baby it also changes your finances and how as parents we must be aware and plan for those changes. Below I wrote an article called, "FAMILY PLANNING FROM THE PIGGYBANK’S POINT OF VIEW", I hope parents enjoy it! Family planning often means financial planning … and quite likely, a change in the way you see your finances. Whether you are starting a family or welcoming a new addition, there are financial realities you can’t ignore. Planning and saving for those realities can help to reduce anxieties, and help to make the financial side of the experience easier. If you’re expecting a new child, one of the first things you’ll want to consider is any loss of income that will occur during and after pregnancy. (Maternity leave policies can vary, so be sure to review your company’s policy in advance.) Parenting and Lamaze classes carry expenses. Review your health insurance to verify coverage for childbirth, especially if you are planning an out-of-hospital birth, such as at a birth center. Some hospitals and fertility clinics now have financial coordinators who can help maximize the insurance benefits available to you through your insurance plan. A new baby means some new day-to-day expenses. Your baby’s food, clothing, and especially diaper costs will increase your household expenditures. Another consideration is the cost of childcare. Study your daycare options early, and plan beforehand. It’s wise to plan for “unforeseen expenses” … and while there’s no way to know exactly what those will be, I can tell you from experience … you’ll have them. Finally, you’ll want to consider your baby’s future. Education planning can never start “too early” – in fact, you can actually start planning for college even before a child is born. If your parents have an estate plan or an IRA, they may want to direct wealth toward their new grandchild someday, so estate plans and beneficiary designations may need to be revised. Ask many financial analysts, and they’ll tell you a home is a family’s biggest investment … but can any material investment compare to the investment we make in our children? Is there ever an investment more valuable? If you’re starting a family, think about setting a financial plan in motion, so you can welcome the new baby with less financial stress and more capability to meet the expenses that come with the most rewarding investment of all, holding that beautiful child in your arms. From my family to yours Bill Stafford Trusted Advisor 401-365-1908 T.F. 888-729-9109 ext. 208 Visit my website at www.billstaffordfinancial.com

Interest-Only Home Loans Pave Path to Riches

Bill Stafford (Mortgage Options of America) — Fri, 02 Feb 2007 10:04:01 -0600

Interest-only home loans pave path to riches

New book explains how to build wealth by never paying off mortgages
Tuesday, January 30, 2007
By Robert J. Bruss
Inman News

If you are adverse to new ways of thinking about your mortgage and building wealth, don't read "Untapped Riches" by Susan and Anthony Cutaia. This new book will challenge your thinking about mortgages.
Instead of making extra mortgage principal payments to own your home and investment properties free and clear as fast as possible, the mortgage broker authors advise never paying off your mortgage and building wealth instead.
Purchase Bob Bruss reports online.
This book is not for typical homeowners who think it's smart to pay off their home loans as fast as possible. Instead, the husband and wife co-authors explain why interest-only, so-called "option mortgages," and even negative-amortization mortgages cut monthly mortgage payments, enabling borrowers to acquire more properties.
Contrary to what most mortgage advisers suggest, the Cutaias are big advocates of using the leverage of borrowing and periodic refinancing to use tax-free cash to acquire more properties. They recommend interest-only adjustable-rate mortgages (ARMs) with maximum payment increase "caps," and making 20 percent cash down payments to obtain 80 percent loan-to-value mortgages.
The book's themes are (1) minimize your mortgage payments, (2) maximize the use of leverage and the use of compound interest, and (3) pay yourself first before you pay the bank.
The authors show how savvy wealth builders pay minimum interest-only mortgage payments and then use the excess cash they would have paid on a fully amortized 30-year mortgage to deposit into their savings account earning at least 5 percent compound interest. They explain how the cash in a savings account earns money for the borrower instead of earning profits for the bank.
Susan and Anthony Cutaia emphasize putting money into other realty investments, rather than paying off a mortgage rapidly, will yield far more profits. They see no future in pouring "dead money" into monthly mortgage payments higher than minimum interest-only payments.
A controversial part of the book extols the advantages of the negative-amortization mortgage. "Neg am" means the monthly payment is less than the interest earned by the lender, and the unpaid interest is added to the mortgage principal instead. Most borrowers don't feel comfortable with this concept, however, especially if property values are not rapidly rising.
Even readers who don't embrace the authors' concept of "keep your money out of the bank's hands, never pay off your mortgage" can still accept the advice to "find a mortgage first, then find the property." This simple, sensible suggestion means borrowers should get pre-approved in writing first by a mortgage lender so they know how much they can then afford to pay for their home or investment property.
Just in case readers don't agree with the authors that ARMs are good, not bad, one of the chapters is titled "The Single Worst Mortgage in Creation: The Fixed-Rate Mortgage." For borrowers who already have fixed-rate mortgages, the authors suggest never making extra mortgage principal payments and instead putting extra cash into a compound interest savings account.
The authors point to the 2005 hurricanes as an example of how little advantage there is in having a paid-off home. When homeowners build up too much equity in their homes, the authors suggest, the mortgage should be periodically refinanced and the tax-free cash taken out should be put into investment accounts, but not with the same lender.
The second half of the book explains the tax advantages of owning real estate investment properties. Most of these explanations are excellent. However, the chapter about using a "cost segregation study" to accelerate depreciation deductions for short-life components of an investment property is nice to know but a bit beyond the tax sophistication of most investors and their tax advisers.
Chapter topics include "Never Pay Off Your Mortgage"; "Don't be House Rich and Cash Poor"; "Create the Ideal Exit Strategy"; "What are New Smart Loans?" "Interest-Only Mortgages: the Increasingly Popular Way to Free Up Usable Cash"; "More on Neg Am Mortgages and Why They Are Gaining More Adherents"; "Gaining a Tax Advantage: Tenant in Common Real Estate Transactions"; "1031 Exchanges to Defer Paying Taxes"; and "Personal Strategies for Real Estate Transactions."
This is far from an average "how to get a mortgage" book. It explains why the authors recommend interest-only ARMs rather than traditional fixed-rate mortgages, and why paying off mortgages early makes no sense. This thinking person's book is sure to be challenged, but the authors do an admirable job of explaining their viewpoints. On my scale of one to 10, this controversial book rates a solid 10.
"Untapped Riches," by Susan and Anthony Cutaia (AMACOM Publishing, New York), 2007, $18.95, 179 pages; available in stock or by special order at local bookstores, public libraries and http://www.amazon.com/.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
***

William R. Stafford
Trusted Advisor
1270 Mineral Spring Ave.
North Providence, RI 02904
Direct Office Line--401-365-1908Toll Free--888-729-9109
Cell--401-290-8897
Fax--401-365-1958Visit my website for more information http://www.billstaffordfinancial.com/

Copyright 2007 Inman News

Home Loan Traps

Bill Stafford (Mortgage Options of America) — Tue, 12 Dec 2006 11:17:34 -0600

"Bill Stafford reveals! Home loan traps 'they' hope I won't tell you about!"

Home Loan Trap #1:

Something I learned about years ago is a dirty little secret of many loans, it's called "negative amortization." Today many mortgage brokers try to sell you on "interest only loans" but they are really negative amortization loans.

Fancy name for a lender giving you a loan where each month your monthly payment not only doesn't pay down your principal balance, but it doesn't even pay for all of the interest you owe for that month!
With a "negative amortization" loan, your loan balance actually goes up every month! Not down! Lenders who sell you on "negative amortization" loans oftentimes never explain this to you, and oftentimes don't even tell you that you're getting a "negative amortization" loan! How you find out really sucks!

You find out by experience! And it's a bad experience too! One day you check on your loan balance, and it's gone up by thousands of dollars!

You can even end up owing more on your house than it's worth! Your home can become a prison cell! I promise to never give you a "negative amortization" loan!
Home Loan Trap #2:

Watch out for mortgage companies who advertise on the radio for their "interest only" programs! These crooks promise you a lower monthly payment than with a principal and interest loan, but your loan balance never goes down! Almost as bad as a "negative amortization" loan!

Two types of mortgages that are "interest only" oftentimes (buyer beware!):
First mortgages (including refinanced first mortgages) given to you by people other than Bill Stafford!

Almost all "home equity lines of credit!" Most often given to you buy your own bank! The rest of the time given to you by unscrupulous mortgage lenders! "Home equity lines" are almost always "interest only!"
Should You Decide You Want an "Interest Only" loan, find out the 3 things that must exist for it to be a safe loan!
Home Loan Trap #3:

Most lenders, when you borrow or owe more than 80% of your home's value to a first mortgage, they slap a monthly "private mortgage insurance" premium on you!

This is a wad of money you give to their private mortgage insurance company to insure the lender! Doesn't cover it for you!

You pay to cover their ass!

I promise to never give you a loan that requires "PMI!" I have found a few lenders who have agreed to waive it for my folks!
Home Loan Trap #4:

If you have a "FHA" loan, there is something you might not be aware of! When you refinance with Bill Stafford, you get an "FHA Refund!"

You get a full refund of all the FHA insurance premiums you've paid to your lender over the years! And, I get this refund for you within 45 days of the funding of your new loan with me!

Many of the folks I've helped to get rid of FHA insurance and it's steep premiums, have gotten FHA refunds equally thousands of dollars! Money that's been held hostage by their old FHA lender! Without ever paying the home owner any interest at all! Ought to be illegal! But it's not!
Home Loan Trap #5:

I have also helped hundreds of veterans over the years.

That's why this home loan trap really ticks me off big time. When you get home, and try to buy your first house with a VA-guaranteed loans, just like they promised. But you get stuck with a monthly "VA insurance premium!"

That's right! Uncle Sam is sending the bill for guaranteeing the repayment of a vet's loan to the vet who served and put his or her ass on the line! It's total B.S.
Home Loan Trap #6:

"Pre-payment penalties" are probably the worst of the worst! Maybe I should have made them "#1" on my list?

Even though these nasty penalties have been limited in size and length of time by the State of Rhode Island, I know of lenders who are still lending money with pre-payment penalties that would violate Rhode Island and Massachusetts state law, where it not for these lenders' federal bank charters!

What I mean is that they get around the state law by having a federal bank charter! And the penalties that federal law allows can be fierce!

*You can also call Bill right now at 401-365-1908 for Help!!

Scare Teens Away From Credit???

Bill Stafford (Mortgage Options of America) — Tue, 12 Dec 2006 10:58:27 -0600

October 27, 2006

Scare Teens Away From Credit?

This is great article I recently found about Teens & Credit. Credit & Teens is like a ticking time bomb! Enjoy. Carlos MONEY SMART KIDS Scare Teens Away From Credit? Putting a little fear of credit into teenagers is probably a good thing. But remember to point out the positive, too. You want them to be able to make wise decisions when the credit offers come rolling in. By Janet Bodnar October 25, 2006

I teach a class in personal finance to ninth graders, and I have an unusual problem. In trying to warn my students about the pitfalls of credit, I'm afraid I've gone too far. The kids tell me they're so afraid of getting into trouble that they aren't going to use credit at all. It wasn't my intention to scare them. I want them to know that credit can be a useful tool when it's used wisely. But they don't seem to be getting that message.

Relax. Putting a little fear of credit into your students at this age is probably a good thing. Better to err on the side of caution than to encourage them to get into debt when they're not mature enough to handle it.

Besides, your students are still young and haven't been exposed to the credit marketing blitz they'll face when they turn 18. Instilling some skepticism now will make them better able to withstand the pressure and make wise decisions when the time comes.

And keep on delivering the message that credit is a useful tool. Tell your students that borrowing money to buy an asset that appreciates in value -- a house, for example -- makes sense. So does borrowing money judiciously for their education, which will result in higher earnings over their lifetime.

It can even make sense to pull out your credit card if you use it as a convenience, pay the bill in full each month, and rack up rewards points.

Last week I had the pleasure of addressing a statewide meeting of teachers sponsored by the Utah chapter of the JumpStart Coalition for Personal Financial Literacy. I also had the pleasure of watching Dr. Ruby Ward of the state extension service demonstrate educational software that helps kids see the additional cost of buying something on credit.

To make her point, Ward translated the cost of buying a $500 iPod (with case) into hours worked. Assuming a student cleared $5 an hour working at a part-time job, it would take 100 hours on the job to make the purchase.

If the student bought the iPod with a credit card charging an annual interest rate of 18% and paid the bill over 12 months, he or she would pay an extra $52 and have to work an additional 10.5 hours. That puts the cost of credit into language that's non-threatening yet effective.

Use our calculator to illustrate what it takes to pay off a credit balance.

Interest Only is a Time Bomb!!

Bill Stafford (Mortgage Options of America) — Tue, 12 Dec 2006 10:51:15 -0600

Interest-Only Loans Are Potential Time Bombs!!!

Interest-Only Loans are Potential Time Bombs
By Kenneth R. Harney

One of the most popular home mortgages this year could also prove to be one of the most toxic to the unwary: low-down-payment, short-term "interest-only" adjustable-rate loans.

Designed to allow consumers to stretch their incomes and qualify to buy homes at below-market starting rates in the range of 4 to 5 percent, these mortgages come with built-in time bombs: After the initial three- or five-year fixed-payment, interest-only period ends, they morph into standard-payment adjustable with full contributions to principal. The biggest time bomb is the first monthly payment after the interest-only period, which may be 30 to 70 percent higher than earlier payments.

Mortgage brokers say that many buyers are oblivious to the lurking payment shocks or simply have no plan to deal with large increases in monthly expenses. Other buyers appear to be betting on real estate appreciation to bail them out -- not a wise strategy at the end of a decade-old price boom.

Interest-only mortgages traditionally came with extended periods -- 10 years or more -- where no principal reduction was required as part of the monthly payment. But lenders have begun pushing short-term, interest-only plans to qualify more home buyers in a rising-rate environment.

In an interest-only plan, the lender sets a come-hither fixed payment rate -- for example, 4.5 percent -- to pull in customers. During this initial period, payments are low because none of the payment goes toward reducing the principal balance. Most interest-only three- and five-year plans convert from fixed-payment to an adjustable rate -- reset annually or monthly -- for the remaining term of the loan, usually 25 to 27 years.

After the initial period, contributions toward principal reduction begin. That feature alone almost guarantees higher monthly payments. Also, in an environment of rising interest rates, the index governing the loan payments can jump unpredictably, sometimes raising the mortgage rate as much as 5 percentage points, the "cap" typically included in the plan.

Even a modest 1-percentage-point increase in market rates at the end of the interest-only period can produce hefty jumps in monthly principal and interest payments.

Consider this illustration: Your lender offers a five-year interest-only loan at 5.25 percent that converts to a one-year adjustable after 60 months. Even if rates stay flat during the 60-month interest-only period -- not likely in the current economic scenario -- you will still get hit with a 30 percent payment spike when principal reduction kicks in. If market rates increase just 1.5 percentage points, your monthly payment will jump 50 percent. A 2.5-percentage-point jump would push your payment up 64 percent.

Could you afford a mortgage payment that is 64 percent higher 60 months from now? Some mortgage brokers and lenders say they worry that many home buyers who are now taking out short-term, interest-only loans could not. Nor would they necessarily have easy refinancing or resale options, especially if home real estate appreciation rates flatten out or fall.

"Some of these people think real estate values can only go up and interest rates only stay low," said Philip X. Tirone, executive loan officer with First Capital Mortgage in Santa Monica, Calif. They don't realize how quickly superheated housing markets can cool off, he said, noting that Southern California home values fell 20 to 30 percent in the early 1990s following the sizzling 1980s. Though Tirone says he frequently talks clients out of short-term, interest-only programs, some tell him that they have no other way to "get in on this real estate boom and make a lot of money quickly."

Without substantial increases in household income, Tirone said, "a lot of these [interest-only] borrowers could be looking at potentially big trouble" in three to five years.

Some major institutional players in the home mortgage market agree. The top credit official for mortgage insurance giant MGIC Investment Corp., David Greco, believes that while short-term, interest-only adjustable "can be very useful tools" for well-informed consumers, "they can pose a substantial risk to an unknowing, unprepared borrower."

The risks of payment-shock blowups and foreclosures on today's interest-only deals multiply when borrowers take advantage of lenders' zero-down-payment, low credit score and high debt-to-income add-on features.

What does this all mean? Never focus solely on the upfront qualifying rate that gets you into the home. Ask yourself how and where you are going to come up with 50 to 60 percent higher monthly payments three years from now.

If you don't have an answer, maybe interest-only isn't the game for you.

Apply online right now for a free credit reportFree Credit Report !!!

Wall Street's Subprime Appetite!!

Bill Stafford (Mortgage Options of America) — Wed, 29 Nov 2006 12:18:09 -0600

CDOs Wet Wall Street's Subprime Appetite

Dow Jones Monday, November 27, 2006 10:24 AM

By Steven D. Jones

Wall Street thrives on risk taking, and so what better investment these days than an arbitrage built around sub prime mortgages.

That is the engine driving consolidation of lenders that make home loans to buyers with credit trouble. Sub prime lenders sprinted ahead during the housing boom, only to see prospects wane as interest rates rose. With losses mounting, consolidation is sweeping the industry, but it's Wall Street that is emerging as the consolidator, not the banking industry.

In the past three months, Morgan Stanley agreed to buy Saxon Capital Inc.

for $706 million. Merrill Lynch & Co. struck a $1.3 billion deal to buy National City Corp.'s First Franklin lending unit, and Bear Stearns Co.

buying the mortgage unit of ECC Capital Corp. for $26 million in cash.

"Clearly the broker dealers are leading the charge," says Matthew Howlett of Fox-Pitt Kelton, an investment bank that specializes in financial institutions world-wide.

The reason is that Wall Street firms have built large businesses creating asset-backed securities, or bundles of sub prime loans that they sell to investors. And more importantly, asset-backed securities are a key component in another even more profitable product Wall Street sells called collateralized debt obligations.

"They need to be able to source assets to feed the CDO underwriting machine, and what better way to feed the machine than create more sub prime assets,"

Howlett says. "They can kill two birds with one stone."

Most asset-backed securities are priced in relation to the London Interbank Offered Rate. High-quality debt issues are priced at Libor, or a few basis points above it. Low-quality debt is priced one hundred to two hundred basis points higher.

Creating an arbitrage between those rates of interest is what is driving Wall Street investment banks to buy sub prime lenders.

Here's how it works.

Investment banks create CDOs and sell them to investors at, for example, Libor plus 70 basis points. Then with the proceeds, the banks turn around and buy asset-backed securities that are paying Libor plus 150 basis points.

The difference is 80 basis points before expenses, which is a gain for CDO equity investors.

But in addition the banks borrow money to leverage every dollar invested in the CDO by five, 10, or even 20 times. At 20-to-1 leverage investors in the example above would earn a 16% return before expenses.

"It allows investors to take a position in credit risk different than we have seen before," says Howlett.

CDOs are a way to repackage and transfer credit risk. While it is possible to issue a CDO backed by high-quality bonds, the structure is more relevant for marginal assets such as subprime home loans where the arbitrage is larger, says Howlett.

Because CDOs are a type of derivative, they sidestep limits on investing in low-grade debt that many institutions face. That opens the CDO market to insurance companies and pensions among others. And because of their potential for double-digit returns, CDOs are a favorite among hedge funds.

Profitable Investments

And of course another reason Wall Street really likes this process is because it's very profitable. Firms can pinch off a few cents of every $100 invested in the process in fees.

"Wall Street makes anywhere from 30 to 60 basis points on this entire process of securitizing loans and collateralized obligations," says Howlett.

"It's a very lucrative business for this industry."

Howlett estimates there were about $300 billion of CDOs outstanding at the end of 2005. Bankers issued about $70 billion of the obligations that year.

This year, he estimates the industry is on pace to issue up to $120 billion in CDOs.

The banks lump their revenue from asset-backed securities and CDOs into larger business units, but some hints of their profitability are emerging.

"Mortgage and CDO net revenues increased significantly when compared to the prior year," Sam Molinaro, chief financial officer of Bear Stearns, told analysts during an earnings conference call in late September.

Revenue in its fixed-income business was $878 million in the last quarter, up 19% over the same period the prior year.

The story was similar at Lehman Brothers Holdings Inc. (LEH), which has snapped up eight mortgage firms in the U.S. and Europe in the past three years. Revenue in its fixed-income origination business was $348 million in the last quarter, up 4% over the prior year and up 20% sequentially.

CDOs

are also known as CLOs, or collateralized loan obligations.

"Stronger demand for CLO products globally has helped us optimize terms on pricing and leverage loans," Chris O'Meara, chief financial officer of Lehman Brothers, told analysts during a September earnings call.

Lehman recently said its appetite for subprime lenders remained keen, even though it didn't emerge as a bidder in the past three months. But there may be more buying opportunities soon.

H&R Block Inc. recently disclosed it might sell its Option One lending unit, which last year made about $40 billion in loans. It was ranked as the fifth largest subprime lender with 6.4% of the market, by Inside Mortgage Finance, an industry trade journal published in Bethesda, Md.

Closely held Ameriquest Mortgage was the largest subprime lender last year, according to the magazine, with a 12.7% share of the market. Others in the top five were New Century Financial Corp. with 8.4% of the market, Countrywide Financial Corp. with 7.1%, and Wells Fargo Home Mortgage Inc., a unit of Wells Fargo & Co., with 6.8%.

More lenders may come on the market, as subprime borrowers, many of whom pay adjustable interest rates, are unable to pay. Recently lenders have even experienced defaults within the first few months of origination, so-called early payment defaults. But industry watchers say that won't deter Wall Street, which views the industry's problems as a buying opportunity.

"We're starting to see bigger deals now with Option One coming up for sale,"

says Howlett of Fox-Pitt Kelton. "We think we will begin to see over the next 12 months even larger deals."

When Should You Settle A Collection

Bill Stafford (Mortgage Options of America) — Tue, 28 Nov 2006 17:12:05 -0600

When Should You Settle a Collection?

All collection agencies and creditors will settle for less than the full balance, except collections on student loans and unpaid child support, which must be paid in full due to government regulation imposed on the collecting authority. With the right person negotiating the debt, a good settlement can be obtained at 35 to 65 cents on the dollar on the balance owed depending on the company and their policies. But remember, any collection or charge-off that is paid or settled WILL NOT get deleted from the credit report by simply paying it; the account will only get updated as being paid or settled on the credit report and remain there for seven years from the time since the last time a payment was made before it went to collection or charge off ( Not 7 years from the time the person pays or settles the account, which many people falsely assume ) So now the question is; WHAT SHOULD YOU PAY TO SETTLE THE ACCOUNT? I always start answering this question by saying a client should be willing to pay 100 cents on the dollar if they are able to get the collection agency to agree to delete the account with payment in full. Although this is very hard to accomplish, it is possible. To do this the company usually wants payment in full if they are going to delete also. ( carrot on the end of the stick mentality ) If the client can afford to pay the particular account in full with a deletion then it is optimal because every removal counts when dealing with the credit score and the more points the better. I think that gaining a few extra points is worth the extra money spent since a few points can mean thousands in future interest savings on a loan. But the client can only do what they can afford to do. This deletion with payment theory only works with collection agencies and not charge-offs with credit card companies. It is almost impossible to get a deletion with payment from a credit card company because they never agree unless there is a very good reason, which is usually not the case for clients in most situations. On a side note, I do not suggest paying a collection in full even with an agreement to delete if the collection is over $2000. I only recommend paying in full with a deletion if the total debt is under $2000, unless the client has tons of money, which is usually not the case if they have unpaid collections. The reason it is important to pay or settle unpaid collections, is because the collection agencies usually sell the collection to other collection agencies in the future when the debt REMAINS unpaid. Worse yet, they may even sue you and get a judgment against you which will hurt your credit even more. That is why it is a good idea to settle collections if you have the money available. Here is my synopsis of when you should or should not settle these debts:

CREDIT CARD CHARGE OFF- Always try to settle for pennies on the dollar because deletion is nearly impossible with payment, even if paying in full. A settled account with a zero balance is not worse than a paid in full charge off for credit scoring purposes, which is why it is never a good idea to pay extra and settle it in full.

COLLECTION ACCOUNT UNDER $2000- Try to offer payment in full if the collection agency agrees to delete with payment. If the collection agency says no then I would suggest switching gears and try to get the best settlement possible because a paid in full collection or a settled collection are pretty much the same for the credit scoring effect.

Page 2

COLLECTION ACCOUNTS OVER $2000- Try to settle for pennies on the dollar because the benefit of deletion may not be worth paying the extra money; UNLESS of course the client has lots of money to spare.

UNPAID COLLECTIONS AND CHARGE-OFFS, NO MATTER WHAT AMOUNT THAT HAS BEEN OUTSTANDING FOR LONGER THAN FOUR YEARS, SHOULD NOT BE PAID OR SETTLED EXCEPT IN CERTAIN CIRCUMSTANCES- First-off, these accounts are 4 years or older and do not have a big effect on the credit score since they are old. Second, when you pay a collection or a charge-off sometimes your credit score will go down 10 to 20 points because the credit bureaus change the date of recent activity from 4 years ago to the present; which the Credit Scoring Software interprets as recent collection or charge-off activity, even though all you did was pay it. YOU MAY BE THINKING "IF THAT'S THE CASE, WHY SHOULD I PAY ANY COLLECTION, EVER? Answer: If you don't pay the collection you run the risk of getting sued if it is less than four years and also run the risk of the collection being sold several times which pollutes your report with negative collection accounts. But after the account is passed four years you no longer run the risk of being sued and collection agencies tend to not sell the debt as much after four years because they realize that their chances of collecting are slim which makes the debt worth very little on the consumer debt market. I would not pay these unless the company agrees to delete because most states have a four year or less statute of limitations to sue on unpaid contractual obligations ( check with your particular State to make sure the exact time for your State ); BUT BE CAREFUL, if you make even a $1 payment at any time before the four years passes, you re-toll the statute of limitations and the four year rule starts all over again. NEVER make a payment or agree to any new terms unless you are planning on paying in full, because if you do you will start the 4 year clock all over again. One of the big credit card providers ( name withheld, refer to as Company X ) is famous for duping people on this very issue. Company X buys debts from other companies that are past the four year rule and then they send the debtor a credit offer for $100 more than what they owe the previous company. For example, John owes Providian $8000 and has not made a payment in over 4 years. Company X buys the debt from Providian for 10 cents or less on the dollar and sends John a Company X credit card offer with an $8100 limit, provided he agree to include the Providian debt in the balance of the card Company X of course fails to point out that John is re-tolling the 4 year statute and just tries to make John focus on the big $8100 credit card limit. John signs the offer and mails it back to Company X who in turn has the right to collect and sue John for the $8000 from Providian; worse yet, they have four more years to do it. Once John realizes he can only spend $100 on the credit card before it is maxed, it is too late. John gets mad and doesn't pay Company X as a matter of principle and Company X in turn sues him and garnishes his wages after they get a judgment. BUYER BEWARE, this is extremely unfair, but at the same time legal. I think Company X could be challenged on this on a theory of Unfair Business Practices or False Advertising, but it would be an uphill battle which should be avoided if possible.

Visit my website for more info www.billstaffordfinancial.com

Can Credit Really Be Repaired???

Bill Stafford (Mortgage Options of America) — Tue, 28 Nov 2006 17:01:41 -0600

Can Credit Really be Repaired?

Contrary to what the credit bureaus would like you to believe, credit repair does work and can work for 100% of people in most circumstances. This is, of course, provided you are getting the best advice and have an experienced professional working on your case.

Anyone with a credit score below 720 can benefit long-term from the advice and information provided through credit repair; however, there are times when your own limitations make adhering to this advice impossible. The two limiting factors are: 1) your financial situation and 2) the time frame within which you need results. It is possible to remove anything from a credit report, even accurate items, if the creditor does not adhere to the law that outlines the steps of what needs to be done and by when. But just because you have a certain type of account removed at one time does not mean other, similar items are going to be able to be removed, even with the same circumstances. A hit-or-miss aspect exists in credit repair, because credit repair relies not only on the strategies of the person attempting to repair the credit, but also on the effectiveness or ineffectiveness of the creditors and credit bureaus in adhering to the laws. Sometimes you want the credit bureaus and creditors to follow the law, sometimes you don't-it all depends on the particular situation.

The reason credit repair has received such a bad name is due to the abundance of scam artists who flock toward the easy money made available by people desperate for this type of service. This unfortunate reality leads the credit bureaus and the FTC to make blanket, untrue statements such as, "Credit repair does not work ever and there is nothing a credit repair company can do for you that you can't do for yourself." Not only untrue, this statement is entirely misleading. However, given that more than 90% of all credit repair companies are scam artists promising the world but disappearing after you pay, the credit bureaus and the FTC are forced to make such bold statements. It would be impossible for them to explain the truth to consumers without causing them to make a bad choice that would result in getting scammed. As a result, the credit bureaus and the FTC must adhere to the "Credit repair does not work" position.

As I've stated, credit repair does work, but ... don't let anyone tell you that credit repair is effective every time, because its success varies with the number of players in the game, some of whom never perform consistently. Even if you have a true master of credit repair on your side, you have to take into account that sometimes the other players perform in a way that throws your master off his game. Take Shaquille O'Neal for example. Although he has the ability to win every game for his team, there are going to be times when the other side has a formation that takes him outside of his normal game and causes his results to be less than optimal. Given that fact, you still cannot predict with any degree of certainty whether or not he will perform well or poorly the next time he faces the same team. Credit repair is similar. Sometimes the opposing side shows up strong; other times they don't. Human error is always a factor at some level, and, even if you follow the same approach with every situation that arises when doing credit repair, your results will still vary due to the other players involved. So the next time someone tells you they can get everything repaired on your credit, run the other way, because, at best, the pendulum will swing widely both ways for the same situation.

Credit repair limitations occur almost 100% of the time under the following situations. These situations make it nearly impossible for credit repair to help someone needing results within six months to a year. Please keep in mind, though, that even when you can't be helped in the short term, the advice that can be given now, if coming from a professional, can prevent you from making a mistake in the near future that may worsen your situation. Here are examples of situations where not much can be done within a six- to twelve-month period.

1. If more than 50% of the negative accounts showing on your credit report appear as unpaid collections, charge-offs, repossessions, or foreclosures and you do not have the money to either pay the accounts in full or settle them, it is hard to significantly increase your credit score. Due to the accounts remaining unpaid, these items will simply reappear once they are removed. Any negatives, even unpaid accounts, can be removed-but, unless the account is current, paid, or settled, it will simply reappear in 10-90 days because an unpaid negative item that is in delinquent status usually gets re-reported each month or so with that same delinquent status.

The only way to prevent this is to bring the account current by paying the past due amount or, in the case of a collection, charge-off, repossession, or foreclosure, pay it in full or settle it for pennies on the dollar. Unpaid accounts that do not have a collection, charge-off, repossession, or foreclosure status require only that the past due balance be paid to be considered current. Unless the negative account is a public record, the only way to keep it from being re-reported is to make sure the status is "current, paid, settled, transferred, or sold." In other words, if deleted, any negative account that does not show at least one of those five statuses will most likely get re-reported, unless the account is a public record.

Public records are the only negative items that do not need to be paid to prevent re-reporting. Because they are only reported once, public records, such as unpaid judgments and tax liens, can remain unpaid and yet will not reappear once they are removed. In fact, the only time they reappear is when the initial reason for their removal was the public record agency's failure to respond to the credit bureaus' verification of dispute request within the 30-day period outlined by the Fair Credit Reporting Act, in which case the credit bureau would reinsert the public record if and when the public record agency responds to the credit bureaus after that 30-day period.

2. Credit repair is nearly impossible if you can't pay your minimum monthly payments and you keep adding new late payments as your other late payments get removed. This is a "spinning wheels" scenario that rarely yields much improvement to your credit score.

In conclusion, you can repair your credit yourself ( if you're skilled at credit repair ) or hire a pro and listen to his or her advice. The effectiveness of the credit repair depends not only on the skill of the professional you hire and your ability to cooperate with his or her advice, but also on a little bit of luck. Even if you have all of the above variables working to perfection, the only difference between a credit score increase of 30 points and 100 points is Lady Luck, and that is something no one can predict.

Please visit my website for more info on credit repair www.billstaffordfinancial.com

Can Credit Really Be Repaired???

Bill Stafford (Mortgage Options of America) — Tue, 28 Nov 2006 16:52:56 -0600

Can Credit Really be Repaired?

For more information on eliminating debt and repairing your credit please visit www.billstaffordfinancial.com