Mortgage by Randy
monthly update to our clients, colleagues, family & friends
By: Randy Mitchelson, February 2009
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In This Issue We Touch On:
Loan Modification Nightmares
Tips to Handle a Collection Agency
Benefit of Pre-Approval Letters
Is that a stimulus package in your pocket or are you just happy to see me? Just how many spouses of our elected officials used that line recently is the real $800 billion question! Now is a good time to buy stock in companies that manufacture printing machines. The government will be requiring a lot more printing presses to create all the money committed in this law. A necessary evil? Only time will tell, but no doubt our government has less than a stellar track record of positively impacting our economy with spending legislation. On to the news....
The current newsletter and all prior newsletters are archived at our blog space mortgagebyrandy.spaces.live.com. Bookmark it and share with your friends and family. You can enter your own comments and feedback as well. Time for the news...
Mortgage Market: Another Potential Homeowner Nightmare: Loan Modifications
In the right circumstances, a mortgage loan modification can be an effective strategy for a homeowner who is behind on their payments due to job loss or other catastrophic life events. However, with the massive amount of delinquent homeowners combined with the rash of media attention the housing and mortgage market is receiving, unscrupulous people have started cold calling homeowners to offer loan modification services and making thousands of dollars in fees, much of which is unearned.
The scam goes like this.....you, the homeowner, regardless of whether you are behind on your loan, receives a phone call or email from a loan modification "specialist" offering a service which will allow you to skip making mortgage payments and eventually reduce your mortgage balance and future payments. The "expert" informs you that it will take several months before the bank gets serious about collecting on your loan so you can pocket all those unpaid mortgage payments. Then, when the bank finally comes after you, the loan modification company promises to represent you to renegotiate your loan balance and payments to get you a lower balance and payment. Sound too good to be true? It is.
First, if you are not behind on your mortgage, why in the world would you let someone convince you to stop making your payments to the bank? This will ruin your credit rating for years. One thing is true: banks, due to their huge backlog of bad loans, will take several months to begin aggressively coming after you. So what? By then, your credit is tarnished, you are wearing the scarlet letter of being a delinquent borrower, and your family name is duly recorded in the county public records as being sued for foreclosure. Heck of a triple crown there. Oh, and by the way, your fate is in the hands of that loan modification company that you already paid $2500 or more to. If you receive an offer like this, run away.
For anyone that is legitimately in trouble with their mortgage, there are a number of FREE services available to try first. Previous editions of this newsletter have addressed some so visit our blog site to read the back issues. As a last resort, retaining a competent real estate attorney to represent you in a loan modification effort is ok and many lawyers are achieving success getting folks a revised loan. If you are ever in doubt as to what to do, just get in touch with me for advice. Note: for my Florida friends please note that Florida State law BANS the collection of any upfront fees for loan modification services.
Personal Credit: How to Deal with a Collection Agency
Collection agencies purchase delinquent accounts from creditors like Home Depot, Sears, Verizon, etc.
It takes 4-12 months before the creditor gives up trying to collect a bad debt and they sell the account for pennies on the dollar to a collection agency. At that point, it is usually too late for the debtor to deal with the original creditor. The first step in working with a collection agency is to validate the debt. This is done by written request. You can contact me for a template of the letter. The letter should be sent via certified mail so that you have proof of it being received.
The letter accomplishes several things to protect you. First, you will require the agency to send you written proof that the debt is indeed yours. Second, the letter will prevent you from receiving harassing phone calls at home or work. Third, it puts the collection agency on a 30 day deadline within which they must comply with your request. Finally, the letter is written in such a way to inform the collection agency that you know your rights as a consumer and will not hesitate to exercise those rights to the fullest extent of the law if the collection agency fails to meet your conditions.
Economy & Financial Insights: We Are In a Catch-22 Situation
Roughly two-thirds of our economy is driven by consumer spending. Since most of us are spending less these days, our economy continues to spiral downward. Does that mean we should spend again?
People are learning how to be more frugal. Consumer oriented websites like wisebread.com are educating people about how to save on food bills and other everyday expenses.
Debt is also an addiction that many Americans are dealing with (not to mention our government). Our collective savings rate was 0% during the "boom" years and now that our economy has gone "ka-boom", our savings rate has already increased to 2.8% as of November, according to a Kansas City Star article. Today, people are more focused on paying down debt, but only a few years ago they were using their homes as ATM machines and their credit cards like water to buy new cars, new TVs, bigger houses, stainless steel appliances, front loading washers, game systems, iPods and anything else their heart desired. Good for the economy? Not in the short term, but over the long run, a reduction in our collective $52 trillion in debt is good for our financial standing in the world and our moral fabric.
Question of the Month: Do I Need a Pre-Approval Letter When Shopping for a Home?
Most licensed real estate and mortgage professionals will advise that you obtain a pre-approval letter from a bank or mortgage broker. There are several benefits of doing this. First, when you are house shopping, a seller will take you more seriously. When a seller has more than one party making an offer, a buyer that already has pre-approved financing will oftentimes be awarded the sale even if their bid was slightly lower than a competing party without a pre-approval. Second, it saves time down the road. Mortgages, on a good day, take a minimum of 2 weeks to get done and in these times of super scrutiny, 2 weeks can often turn into 4 weeks or more. To obtain a pre-approval you will need to provide preliminary documentation like a W-2 and paystub and in most cases a credit review. Therefore, a pre-approval gets the ball rolling earlier in the home buying process. Pre-approvals should not take more than 24-48 hours once the required documentation has been provided. They should be free of charge too (except for the cost of pulling your credit report)
Giving Back: Supporting Our Communities - CCCS: A Reliable Resource for Financial Counseling
Consumer Credit Counseling Service (CCCS) is a nonprofit organization dedicated to financial wellness. Whether you need help getting out of debt, or into a new home, CCCS has a team of nationally certified counselors that undergo continuous training and education so that they are always in the best position to help. There are other companies out there that offer debt consolidation services, etc but some of them are scam artists and are simply trying to profit from those that are in trouble already.
Need volunteers? Do you have a fundraising event upcoming? Do you have a personal web site where you are raising donations for your cause? Submit the information to randy@mortgagebyrandy.com by the 5th day of each month and we will do our best to include your information in the next issue.
The boys of summer have arrived & spring training is underway....yet another perk of living in paradise.
Randy
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Mortgage by Randy newsletter, Copyright 2009 Randy Mitchelson. All Rights Reserved.
Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson. Recommendations may change and readers are urged to check with their financial advisors before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.
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You have permission to publish this article electronically or in print as long as the following is included:
Randy Mitchelson, of Estero, Florida, is a business professional, entrepreneur and author with 15 years experience in financial services. Mitchelson has served in leadership roles for Global & Fortune 500 firms like Bank of America, KeyBank and CIBC.
As a member of National Association of Mortgage Brokers, Randy has earned the Lending Integrity Seal of Approval. He educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy, accessible at mortgagebyrandy.spaces.live.com. A licensed mortgage professional, Mitchelson also founded Trinity Home Financing, LLC.
He is owner of Estero, Florida based National Web Leads, LLC (www.nationalwebleads.com), an Internet lead generation service matching consumer finance lenders with customers. Through its network of partners, National Web Leads, LLC delivers innovative Web 2.0 software solutions such as lead generation platforms and real time desktop widget and mobile reporting tools for internet marketers.
Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY. He is a founding member and Finance Chairman of the Southwest Florida Regional Technology Partnership (www.swfrtp.org) and Strategic Planning Director for the Michelle's Angels Foundation (www.michellesangels.com). He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.
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