From MarketWatch.com

From The Boston Herald

By Amy Hoak / Marketwatch.com
Friday, November 20, 2009

Mortgage giant Fannie Mae has decided to let thousands of Americans who lose homes to foreclosure rent their properties back.

“This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period and helps to stabilize neighborhoods and communities,” Fannie Mae’s Jay Ryan said in unveiling a new “Deed for Lease Program” earlier this month.

The initiative aims to help homeowners who either don’t qualify for or haven’t been able to negotiate loan modifications. (Those are deals where lenders unilaterally cut homeowners’ monthly mortgage bills to prevent foreclosure.)

Under the Deed for Lease Program, homeowners facing foreclosure can voluntarily sign their property deeds back to their banks. In exchange, lenders will lease the houses back to former borrowers at market-rate rents for up to a year.

Rental arrangements beyond one year are also possible but not guaranteed.

However, the program only applies to borrowers or tenants facing the loss of primary residences. Second homes don’t qualify.

Consumers seeking Deed for Lease deals must also:

be no more than 11 payments behind;

have made at least three payments since getting or modifying mortgages;

receive releases from any second mortgages or other subordinate liens;

prove that market-rate rents don’t exceed 31 percent of applicants’ gross incomes.

Additionally, the plan only covers mortgages controlled by Fannie Mae.

Fortunately, millions of homeowners have Fannie Mae loans without even knowing it.

That’s because the firm buys up thousands of mortgages each year from lenders that no longer technically own the loans, but keep collecting mortgage payments on Fannie’s behalf.

To see if you have such a mortgage, go to FannieMae.com.

Dean Baker of the Center for Economic and Policy Research calls the Deed for Lease Program a “very big step” toward helping people who face foreclosure.

From MSNBC.COM

Why some people cut up their credit cards and live a cash-only lifestyle

Since then it’s been cash and debit cards only for Brough, 50, who has no debt of any kind.

How does she do it? She buys secondhand furniture and electronics, gets her husband’s medicines from Canada at cut rates, has a $10,000 emergency fund and thinks long and hard before she opens up her wallet.

“When you use cash you think about what your needs are because you’re paying a big chunk of money at once,” she said.

This concept is probably a foreign one to many Americans who are addicted to buying almost everything on credit. But believe it or not, it is possible to survive and thrive without depending on credit cards. In fact, Brough is part of a small but growing debt-free movement, some joining because of personal or economic hardships, and others just looking to simplify their lives.

It’s all about economic empowerment. “Times are tough and people want to take control of their finances,” says Denis Cauvier, a financial psychologist and co-author of “The ABCs of Making Money.”

“When people look at what’s happening, all the ups and down of the stock market, housing prices, people getting laid off, they get a sense they are out of control,” Cauvier says.

As a result, “we’re seeing a huge rise in the use of cash and debit cards,” he says. “It’s a positive way of gaining self control.”

While there are no hard numbers on how many people are giving up the credit-card lifestyle, more consumers have been trying to reel in their debt levels.

Consumer credit has been falling at record levels after years of climbing. In April, credit card borrowing fell at an annual rate of 7.5 percent, and revolving credit, mainly credit card debt, decreased 11 percent, according to the Federal Reserve.

JD Roth, who writes the “Get Rich Slowly” blog, says more of his readers want to move in the debt-free direction. “It’s this whole movement back to basics,” he says.

However, he adds, “Our culture is so accustomed to getting what they want right now and using debt to do that, it may not be realistic for every individual.”

Indeed, going debt-free is no cakewalk.

“We have to always plan ahead now and make sure we have the cash,” says Jeff Pelletier, who stopped using credit cards after a series of unfortunate financial events. He lost his job nine months ago producing training videos for a St. Louis company, lost his house to foreclosure,   ended up $50,000 in debt and filed for personal bankruptcy late last year.

Without credit cards, he has been unable to make major purchases. “We’re sort of living hand to mouth,” says Pelletier, who relocated to Boise, Idaho, for a job with a general contractor and is renting a home with his wife and two sons.

“The thing that hit me the hardest was that plastic has no emotion to it. Whip it out, use it, done,” he says. “Cash is harder to part with.”

The couple also has had to be creative. It’s a bit easier today to do things like rent a car or buy things online without a revolving credit card, say experts, because you can use a debit card instead.

But Pelletier still sometimes has to find alternative payment methods.

“My wife is going to see a dying friend in Texas, and we had a friend put it on her credit card and we gave her the cash,” he says.

Brough, of Cary, does use her debit card for some online purchases, but she’s more likely to use sites such as Craigslist that allow her to meet sellers in person and pay them cash.

Her daughter recently wanted a new, lime green Dell Inspiron laptop, and Brough went on Craigslist and found one for $1,000 slightly used. “I offered him $500 cash, and he took it,” she says.

Ironically, one drawback of living debt-free is that it can hurt your credit score, which could affect your interest rates if you ever want to borrow again, says Howard Dvorkin, founder of Consolidated Credit Counseling Services Inc. and author of “Credit Hell – How to Dig Out of Debt.”

“A lack of a credit history is sometimes as bad as having a bad credit history,” he says.

But even if you stop using credit right now it will take eight years before you have no credit history, he said. In any case, he added, the positive impact of being debt free on overall economic health generally outweighs any negatives.

“I don’t see a need to have a credit rating,” says Jay Craig, 44, of Seattle, who has been cash-only since 2003. “I used to have a house, a couple of car payments and some credit cards, but over time and through a series of events I got back to where I was before I got married and started a business — cash-based and stress-free.”

Craig, who is divorced and lives on a boat, didn’t even have a bank account until earlier this month and has been using a Western Union debit card for any shopping needs.

While he’s never been big on debt, he does miss having a credit card for emergencies.

“I still have a little bit of debt from my business and from a few hours in the hospital — I have no health insurance, which is stupid — but I should be free of all that by the end of the year,” he says. “And without debt or credit, I can live very well on under $40,000 a year.”

Craig admits it would be harder if he had a wife and kids.

Indeed, as life and responsibilities change, some debt-free zealots wonder if they’ll be able to keep it up.

Brough’s post-owing lifestyle is going well right now, but she said paying for her kids’ college education may send her back to the debt till.

She’s hoping her kids can get scholarships and she’s launching a nutritional products business that may help handle some of the costs. There may also be a need for more family budget cuts and jobs for the kids to cover some of the tuition costs.

“But worse comes to worse, if they need a college loan, the debt will be in their name,” she says.

From the Boston Globe

By Megan Woolhouse Globe Staff / November 6, 2009

Some top 30% as new rules loom

Credit card companies are rushing to increase interest rates to historic highs of more than 30 percent, cut credit limits, and add new fees, even for customers who pay their bills on time.

Lenders are making the moves in advance of tougher federal regulations for credit cards scheduled to take effect on Feb. 22. The new rules will limit how companies can modify credit card agreements, specifically prohibiting them from retroactively raising interest rates and fees on existing balances.

After years of complaints from consumer advocacy groups about credit companies’ pricing practices, some rules have already been changed. For instance, portions of the new law enacted in August require banks to give customers 45-day notice of any changes in an agreement. Consumers can opt out of an impending increase, keeping their card at the lower interest rate, but only until the card expires. After that, they must apply for a new card. They can also avoid the interest hike by closing the account and arranging to pay off the balance at the lower interest rate.

Ken Clayton, a senior vice president of the American Bankers Association, a trade group, said recent rate increases were not an effort to circumvent the new regulations, but the result of massive losses faced by the credit card industry because of the recession. More than 10 percent of all credit card customers have defaulted on payments this year, he said. “There’s a shared risk here,’’ he said. “Credit card companies are making loans to people every day and the rates people are charged are affected by whether people are paying them back.’’

There are no limits on how much interest a credit card company can charge, and the new law, passed in May, will not change that. Some consumer groups called for a 36 percent cap on credit card rates, but Frank said legislators did not institute a limit because most credit card companies would immediately “go up to that rate.’’