Fixed-Rate Credit Cards May Vanish

From the Wall Street Journal:

Could fixed-rate credit cards soon be a thing of the past?

In June, Bank of America Corp. and J.P. Morgan Chase & Co.’s Chase Card Services notified some cardholders that their fixed rates were being converted to a variable rate tied to the prime rate. In March, Discover Financial Services also notified some customers that their fixed rates were changing to a variable one.

Spokespersons for the banks—who declined to provide details on the numbers of cardholders affected—said the changes were an attempt to better manage the businesses’ costs as market conditions change.

Nearly all of Bank of America’s fixed-rate cards will be converted to a variable rate. The exceptions: some student accounts, accounts in debt-assistance programs and some newly opened accounts, says spokeswoman Betty Reiss. At BofA, customers will not be able to opt out of the changes, which they will start to see with August statements.

Chase customers, however, will be able to opt out of the changes, although they will have to close their accounts. Chase spokeswoman Stephanie Jacobson said the switch was prompted by the company’s “changing costs for funding credit-card loans.” Discover cardholders were also allowed to opt out of the changes, which took effect May 1, but had to close the accounts.

With a variable rate, rates generally rise as interest rates rise, and fall in a declining-rate environment. With rates already near a bottom and expected to rise, most consumers probably won’t see their rates fall further.

The changes will make it easier for issuers to bump up the rates they charge without notifying cardholders. By contrast, fixed-rate cards typically must first mail a notice to clients announcing any rate changes. The changes come at a time when issuers are rushing to comply with new legislation that will soon limit their ability to raise rates on existing balances, require them to notify customers at least 45 days in advance of any changes to their terms, and make them eliminate other confusing practices.

Write to Jane J. Kim at jane.kim@wsj.com

Bright spots on housing horizon Future ‘demand strong’

From the Boston Herald:
By Jerry Kronenberg
Monday, June 22, 2009 –

Harvard University housing experts don’t know when the U.S. real estate market will bottom out, but say some positive signs are emerging.

“While it is too soon to tell whether housing markets will stabilize in 2009, conditions that could support a recovery are taking shape,” researchers at Harvard’s Joint Center for Housing Studies wrote in a “State of the Nation’s Housing” report due out today.

The study noted that low sale prices and mortgage rates are making homes more affordable in many U.S. cities.

At the same time, new-home construction has “dropped so dramatically that long-run supply and demand are now approaching balance,” researchers wrote.

Over the long term, the experts also expect strong housing demand from immigrant families and “echo boomers” – the children of the post-war “baby boom” generation.

“The echo boomers are entering their peak household formation years of 25-44 with more than 5 million more members than the baby boomers had in the 1970s,” researchers wrote. “(This) will help keep demand strong for the next 10 years and beyond.”

Boston Globe Article: Debt Collection Agency Advice

From the Boston Globe

I got a letter this week from a debt-collection agency, claiming that I owe a cable and Internet company $40. The letter also claimed it was the third time the agency had contacted me. Neither is true – if anything, the cable company owes me money after the five (yes, five!) times I had to call to discontinue my service after I moved.

A cheery “PAY NOW!’’ was stamped in red on the front of the envelope.

I’m not the only one in this situation. The economic downturn continues to result in a rising number of consumer loan delinquencies. That has helped spur an uptick in business at collection agencies, which buy your debt outright or get a cut of any collections. They have a vested interest in getting you to pay.

I called the National Consumer Law Center, an advocacy group, to find out what folks should do when they’re confronted by a collection agency. Bob Hobbs, deputy director of the center, gave me this advice:

Make Sure they’re Being Honest

The number one rule that collection agencies have to follow is to tell the truth. They cannot pretend to be someone they are not or threaten to sue you if they do not intend to.

Protect Your Inner Circle

Debt collectors are not able to call your friends, parents, or kids to get you to pay your debt. They can talk to you, your spouse, and your attorney.

Tell Them You Can’t Talk

Debt collectors are allowed to call you only at “convenient’’ times. If you tell them you cannot speak to them, they are supposed to end the conversation – and contact you at another time.

Make Them Verify the Debt

If you dispute the debt (as I do), you have 30 days to notify them in writing of your claim. The debt collector then becomes responsible for finding the paperwork to back it up. If they can’t verify it, they can’t contact you anymore.

Tell Them to Stop

If you continue to feel harassed by the collection agency, you can send a cease-and-desist letter. The rub is that creditors often change collection agencies, and you may have a new one calling up eventually.

You Still Have to Pay

This is important. Just because your debt has gone to collections and the person on the phone may be really annoying or worse, you are still liable for your debt. Not paying could harm your credit score and prevent you from getting loans in the future.

The NCLC produces a pamphlet, called Dealing with Debt Collection, that includes templates for the two letters. Bankrate also lists 10 steps for dealing with collection agencies. And Broke-A*$ Student (sorry, we’re a family publication) has some real-world tips from her own battle with collections.

Ylan Q. Mui is a Washington Post financial reporter.

House Passes Bill Imposing New Rules on Credit-Card Industry

From the Wall Street Journal

Obama Expected to Sign Measure Soon

WASHINGTON — The House overwhelmingly approved legislation Wednesday imposing new restrictions on credit-card companies, sending the measure to President Barack Obama to sign in the coming days.

The 364-61 approval, following the Senate’s 90-5 vote Tuesday, will ban several of the industry’s most profitable practices and require clearer disclosure to cardholders about the interest they are paying.

Mr. Obama has pledged to sign the measure, which would take effect in late February 2010. One of the toughest provisions: Cardholders won’t see interest-rate increases on existing card balances unless they are 60 days late on payments. And if the customer pays on time for six months after that, the prior rate must be reinstated.

The new rules also would ban some fees, provide more notice for customers to pay bills and require clearer disclosures. For instance, credit-card statements will have to tell customers how long they would need to wipe out their balance if only paying the minimum each month, and how much interest they would incur along the way.

The legislation will force broad changes in the credit-card business, many of which were under way after the Federal Reserve approved similar — though less stringent — regulations in December. Industry officials say the most stringent elements of the legislation will constrain their ability to adjust prices for the riskiest consumers. Card companies have said they are considering shorter introductory rates, higher interest rates and more annual fees for some consumers as a result of the new restrictions.

By blocking many practices that aggravate consumers, however, lawmakers said the new provisions would help the economy in the long run.

“Consumers will have more money to invest in the economy instead of paying off debt,” said Rep. Carolyn Maloney (D., N.Y.), who co-wrote the legislation.

Over the past year, credit-card issuers have seen their losses mount as customers default on their bills. Many companies have been protecting themselves by raising rates and cutting credit lines in recent months, even for customers who pay their bills on time, at the same time the government stepped forward with expensive bailouts of the financial sector. “It absolutely inflamed the public,” Ms. Maloney said.

The industry found itself isolated on the issue as other business interests — and most Republicans — stepped forward to support the card legislation. But some members warned it could lead to unintended consequences, such as cutting credit to more consumers as card companies aim to protect their bottom lines.

“We don’t need to take away consumers’ credit opportunities at a time when the market is already contracting from the economic recession,” said Rep. Jeb Hensarling (R., Texas), who said he backed the clearer disclosure about terms.

The credit-card bill included an unrelated measure, attached in the Senate by Sen. Tom Coburn (R., Okla.), to allow loaded firearms on federal parks in areas where state and local laws would already allow it. The House carried out an unusual separate vote on the gun provision, which passed 279-147, allowing members to object to it while still putting their names on credit-card legislation.

Tax credit for buying home worth cashing in By Barry Armstrong / Money Matters Tuesday, May 19, 2009 –

Article from the Boston Globe

Is now the right time to buy a home?

The national median home price has fallen 26 percent since its peak in early 2006. Nearly all sales in the fourth quarter of 2008 were distressed sales, including foreclosures and homeowners selling their homes for less than they owe on their mortgage.

Homes have not been this affordable since the 1970s, and you can still get a 30-year, fixed-rate mortgage in the 4 percent range. This may be a good time to snag a bargain if you are confident in your job prospects and you don’t plan to sell for at least five years.

From a tax perspective, this is a great time to purchase your first home. Home purchases made before Dec. 1, 2009, may qualify for a first-time home buyer credit of $8,000 or 10 percent of the price tag, whichever is smaller. As long as you own the home for three years, you don’t need to repay the credit.Many buyers aren’t aware that they can re-file their 2008 taxes and claim the credit now, even if they bought their home after Dec. 31, 2008. That means you don’t have to wait until 2010 to receive the credit.

Everyone’s situation is different so talk to your tax adviser to see if you qualify for the credit.

E-mail questions to barry@moneymattersradio.net. Barry Armstrong is the host of “Money Matters with Barry Armstrong” on WCRN-AM (830) and a registered representative with Securities America Inc.

$50M Home Rescue Pact

Article that appears in The Boston Herald

By Thomas Grillo
Tuesday, May 12, 2009 –

More than 700 Bay State homeowners on the brink of foreclosure could be rescued by a $50 million settlement with Goldman Sachs, Massachusetts Attorney General Martha Coakley said.

Under the terms of the agreement, Goldman will reduce the principal of 714 first mortgages they hold (or service) by up to 30 percent and reduce second-mortgage amounts by 50 percent or more. This will allow borrowers to replace troubled mortgages with more affordable loans that take into account today’s value of their properties.

“There’s no dispute that Goldman Sachs and other securitizers have been involved intricately in this whole process by which loans were made to homeowners and, as we have argued, in many instances destined to fail,” said Coakley – referring to the practice of offering mortgages to prospective homeowners who lacked a realistic means to pay them back.

Goldman and others further imperiled the financial system by bundling those very risky mortgages and selling them as mortgage-backed bonds, or securities. Coakley said that Goldman, a powerful and politically wired firm, has been cooperative and wasn’t asked to admit any wrongdoing.

Under the deal, borrowers whose first mortgage is significantly delinquent will be required to make a reasonable monthly payment while seeking refinancing or until they sell their home, Coakley said.

The attorney general acknowledged that Goldman was not the only company that profited from selling off subprime loans destined to fail. She declined to mention other firms under investigation.

“I cannot name names and I can’t comment other than to say that this was opened as a broad-based investigation and it’s ongoing,” she said.

Coakley has probed Fremont Investment & Loan, now defunct, and H & R Block Inc., owner of Option One Mortgage Corp., for making the types of mortgages that Goldman then securitized.

In addition to the cost of reducing the principal of the troubled loans, Goldman has also agreed to pay the state $10 million.

Michael DuVally, a spokesman for Goldman in New York, said: “Goldman Sachs is pleased to have resolved this matter.”
Herald wire services contributed to this report.

Still There, Foreclosed No Longer Nonprofits Help Occupants Buy Back Homes

An article that appeared in the Boston Globe.

Still there, foreclosed no longer Boston Globe Thomas Quinn did something that most people who lose their homes to foreclosure can only dream about: He bought back his family’s Hyde Park house. Jenifer B. McKim May 11, 2009

Thomas Quinn did something that most people who lose their homes to foreclosure can only dream about: He bought back his family’s Hyde Park house.

Quinn, 48, a father of two teenage daughters, was forced to give up the deed to the 1920s bungalow last year after his wife died of cancer and he could no longer afford the payments on their subprime loan. But he refused to leave the property, outraged that his lender wouldn’t rework the mortgage. And then, with the help of a local nonprofit, the fire pump salesman was able to repurchase his home and secure an affordable 30-year, fixed-rate mortgage nine months after the foreclosure.

“I’m a happy homeowner again with a payment I can live with,” he said. “It is saving me over $1,000 a month.”

Quinn is one of a small but growing group of former owners who are not only staying in foreclosed homes but are buying them back, with the help of nonprofit groups and housing advocates. And in some cases, they are getting their homes at significant discount the second time around, because real estate values have plunged.

“We are in the process of helping a lot of people buy back their homes,” said Zoe K. Cronin, a housing attorney for Greater Boston Legal Services. “There is not likely going to be another buyer. If there is someone willing to buy it back at a real value, that’s probably the best option” for lenders, she said.

Boston Community Capital, a 25-year-old agency with a mission to help create healthy communities, is at the forefront of the effort, with about 30 borrowers – tenants and former homeowners – already in the process of purchasing their homes. In Quinn’s case, the nonprofit bought his house from Wells Fargo Home Mortgage in February and weeks later sold it back to him for $198,750 – about what he owed the bank.

Elyse Cherry, the nonprofit’s chief executive, said it wants to keep residents in their homes and prevent foreclosures because abandoned homes fall into disrepair, scarring neighborhoods. Funded by private and public sources, Boston Community Capital has over the past 25 years invested more than $423 million to help low-income communities across the nation.

Without such help, former homeowners can find it daunting to buy a new home or buy back their old home. With damaged credit, it’s nearly impossible for them to get another loan.

“The folks we are dealing with, they can’t get any debt at all because their credit ratings are ruined,” said Cherry. “Neighborhoods can turn back into blighted areas really quickly if the vacancy rate rises too much.”

The effort comes as the number of foreclosed properties in Massachusetts mounts. Last year, foreclosures jumped to 12,430 – a 62 percent increase from the year before. During the first three months of this year, 2,755 homeowners lost their properties to foreclosure.

To address the problem, government officials, housing advocates, and banks are promoting loan modifications and refinancing for struggling homeowners – who have seen their incomes drop, property values plunge, or mortgage rates jump.
President Obama in February unveiled a $75 billion plan to help 4 million homeowners modify loans and let another 5 million refinance into lower-cost loans.

But much of that help has not yet reached the streets, and many distressed homeowners still struggle to get assistance. Home values have dropped so low in some communities that borrowers simply are unable to refinance. In other cases, borrowers don’t earn enough to meet a bank’s income requirements.

Bruce Marks, chief executive of the homeownership organization Neighborhood Assistance Corporation of America, based in Jamaica Plain, said banks are flooded by requests for help and struggling with a growing portfolio of bank-owned homes. Marks said his corporation has even managed to persuade some banks to rescind foreclosures in other states.

“Banks are overwhelmed,” he said. “They now recognize it is better to keep the existing homeowners or the existing tenants.”

In Dorchester, a group of tenants living in a foreclosed property spent months trying to persuade Wells Fargo that it made financial sense to sell them the home at a reduced market value rather than force an eviction.

The Meyers family, three sisters and a brother, were taken by surprise when the three-decker they rented from their stepmother was foreclosed upon in 2007. The siblings decided to fight the eviction with the help of City Life/Vida Urbana, a Jamaica Plain-based tenant organization that grabbed media attention last year after members chained themselves to several foreclosed homes.

Allister Meyers, 29, said that Wells Fargo eventually agreed to sell the property back to the family and dropped the price after months of negotiations. Wells Fargo officials declined to discuss the case, citing confidentiality issues.

In November, Meyers bought the house for $225,000, less than half the amount his stepmother had borrowed on the property two years before the foreclosure, according to public records.

“It must have been a miracle; our prayers came true,” he said. “I woke up and said, ‘You know what? This is my house. We are going to start doing work on it.’ ”

Sackie Freeman hopes Boston Community Capital will help him repurchase his foreclosed Dorchester home, which has been in his family for four decades. Freeman, a hip-hop DJ, inherited the property from his grandparents in 2004, but refinanced it partly to fund a juice bar and clothing store called All-Nite. When the business started to falter in 2007, Freeman had trouble paying his mortgage.

After foreclosure, Freeman refused to leave the home he shares with his 3-year-old daughter, his ailing mother, and an uncle.

“So we missed two or three payments, they are going to take my whole house?” he said. “Everybody deserves a second chance.”

Like Freeman, Quinn doesn’t understand why more banks don’t help families in his situation.

He and his wife, Raquel, bought their house for $160,000 in 1998. Five years later, Raquel was diagnosed with cancer. Nervous about money, she wanted to refinance. The couple signed a 15-year, adjustable-rate mortgage that folded in their car loan.

After his wife’s death, Quinn took a sales job with a pay cut and less traveling so he could spend more time with his daughters. His mortgage payments increased from $1,600 to more than $2,000. Quinn said Wells Fargo rejected his request to refinance to a 30-year, fixed-rate mortgage.

Wells Fargo officials would not comment on Quinn’s case, but said they do everything possible to help homeowners.

Nonetheless, the lender went ahead with the foreclosure last spring, and eviction proceedings soon began. Quinn contacted City Life to help him fight the eviction. That’s when Boston Community Capital stepped in to help.

Cherry said Wells Fargo agreed to stop the eviction process and sell the property to the nonprofit to keep Quinn in his home.

“We are really delighted to have banking partners that are willing to step up to the plate that way,” she said. “They need to clear out their inventory.”

Quinn’s is one of three mortgages – one for a tenant and two for former homeowners – the nonprofit has already financed. The company also is buying and financing the purchase of abandoned bank-owned properties.

To make sure homeowners who purchase properties at deep discounts don’t unfairly gain from a future sale, the company will require them to share any equity appreciation with Boston Community Capital.

Despite the nonprofit’s efforts, Cherry said, some people can’t afford to buy back properties, even at a discount.

“We can’t fix every problem, but we certainly can work very closely with residents with any loan we come to own,” she said. “Unfortunately, the laws of economics still apply.”

A Short Sale May Not Mean You’re Home Free

Here is an article from the Wall Street Journal on Short Sales.  The original article can be found at http://online.wsj.com/article/SB124104990739271023.html.

Financially troubled borrowers may think that foreclosure or a short sale of their home means their mortgage woes are over.

Not necessarily.

Some homeowners are finding that when they sell their homes for less than the outstanding mortgages — a so-called short sale — their mortgage companies are going after them for some or all of the difference. Mortgage companies are also sometimes taking legal action to recover unpaid amounts after a foreclosure is completed.

In a growing number of cases, holders of mortgages or home-equity loans are requiring borrowers in short sales to sign a promissory note, which is a written promise to pay back a loan or debt. Real-estate agents and attorneys say they have seen an increase in requests for promissory notes as mortgage companies look to short sales as an alternative to foreclosure.

In many states, lenders have always had the right to pursue former homeowners for unpaid mortgage debt. Yet until recently, most borrowers who ran into trouble were able to refinance or sell their homes and pay off their loans. Now, falling home prices are widening the gap between home values and mortgage balances, and the number of homeowners who can’t make their mortgage payments is rising as the economy has weakened. More than 3.8 million homes will be lost in 2009 and 2010 because borrowers can’t make their mortgage payments, according to forecasts from Moody’s Economy.com.

Some borrowers are surprised to find themselves on the hook. Jodie Byrd sold her home in the Los Angeles area in a short sale last summer after her husband lost his job and the couple realized they wouldn’t be able to make their mortgage payments. The sale price covered the $685,000 mortgage, but their lender, Washington Mutual Co., then began pursuing them for the $21,600 balance on their second mortgage.

Ms. Byrd says a clause in their contract gave Washington Mutual the right to pursue the debt, but adds that her real-estate agent said that wasn’t likely to happen. The couple eventually settled the claim for $4,000.

A spokesman for J.P. Morgan Chase & Co., which acquired Washington Mutual last year, says it’s the company’s policy not to comment on individual cases. Speaking generally, he says, “a short sale may resolve the first mortgage, but the second mortgage … would be a separate negotiation with the lender or servicer.”

Some experts say that mortgage companies may pursue leftover debt, or “deficiencies,” in greater numbers as the housing market settles. Lenders are “doing everything possible to work with their borrowers and trying to bring stability back to the lending and real-estate market,” says Marc Ben-Ezra, an attorney in Ft. Lauderdale, Fla., who represents mortgage companies in foreclosures. “However, the ability to get a deficiency judgment is a valuable right that I think lenders will pursue aggressively in the future as the market stabilizes.”

One-Year Moratorium

HSBC Finance, part of the North America unit of HSBC Holdings PLC, has implemented a one-year moratorium on the collection of deficiency balances for short sales and foreclosures that occur after April 1, “given the current economic environment,” a company spokeswoman says.

Other mortgage servicers say their actions are often dictated by their contracts with investors or mortgage insurers. Bank of America Corp., for example, will “attempt to seek a promissory note whenever it is feasible” in a short sale “in the interest of protecting investors and shareholders from the losses,” a spokeswoman says. In the case of a foreclosure, the investor or insurer “is generally the one who pursues the deficiency, but we do ourselves on some-bank-owned assets,” she says.

Not every troubled borrower is hit with such a claim. Often, mortgage companies don’t go after borrowers for unpaid amounts either because state laws prohibit or limit such actions or the cost outweighs the potential return. Borrowers subject to a deficiency may also elect to file for bankruptcy in an effort to have the debt discharged.

How a borrower is treated can depend on mortgage company policy, the size of the unpaid debt, whether the borrower has a job or other assets, or whether the home was bought as an investment. “If there isn’t a financial hardship … that’s where the investor or mortgage insurer will go after the homeowner for more,” says David Knight, a senior vice president at Wells Fargo & Co.’s home-mortgage unit.

A PMI Group Inc. spokesman says the mortgage insurer “primarily target[s] borrowers who are not experiencing hardship — but those who simply elected to walk away from the property due to its decline in value.”

Promissory Notes

Still, the number of short-sale agreements that are made with strings attached is increasing. In the past month and a half, “every short sale I have has had a promissory note or gives the lender the right to collect a deficiency,” says Pamela Simmons, an attorney in Soquel, Calif., who represents financially troubled homeowners. Often, the terms are buried in the sale contract, she says.

Regina Rivard, a real-estate consultant in Apollo Beach, Fla., has completed 22 short sales in the past six months. In half of them, the holder of the first or second mortgage required that the borrower sign a promissory note or retained the right to pursue the deficiency. The amounts borrowers were obliged to pay ranged from a few thousand dollars to as much as $100,000, she says.

Some borrowers are balking. Mack Ransom, a mortgage broker in Ashland, Ore., recently brought Countrywide Financial Corp. a short-sale offer for $279,000 — well below the roughly $415,000 he owes on his two mortgages. Countrywide countered that it would accept a $310,000 bid, provided Mr. Ransom signed a $48,000 promissory note, he says. Mr. Ransom rejected that offer and is pursuing a different short sale.

“I would take the foreclosure and the credit hit over that,” he says. A spokeswoman for Bank of America, which acquired Countrywide last year, declined to comment on a specific case, but said: “The company will ask the borrower to sign a promissory note during the short-sale process if dictated by investor guidelines.”

Going to Court

Other borrowers who have already gone through foreclosure are being taken to court by mortgage companies for unpaid debt, though such actions are still relatively uncommon. In Lee County, Fla., deficiency actions have increased in the past six months, with most filed by holders of second mortgages, says Charlie Green, clerk of Lee County Circuit Court. “The sale of the property was not enough to cover the total amount that was owed on the note or notes,” says Mr. Green, who recently began tracking such filings in response to the increase.

Dunstant King, a cab driver in Boston, refinanced his mortgage in 2007, thinking it would save him money. Instead, his payments increased as the economy slowed. In January, Mr. King, who had a $290,400 mortgage and a $72,600 home-equity loan, lost his home to foreclosure. In February, a lawsuit seeking $92,000 was filed in Suffolk County, Mass., Superior Court on behalf of the loan pool that holds the second mortgage, according to court records.

“I don’t have the money to pay them,” says Mr. King. “Business is really bad.” His attorney, David Dineen of Greater Boston Legal Services, says, “We believe Mr. King has legal defenses” to avoid that debt.

A spokesman for Deutsche Bank AG, the trustee for the loan pool, says that the decision to file the lawsuit was made by the mortgage-servicing company, Franklin Credit Management Corp. Franklin executives did not respond to requests for comment.

Blake Brewer, an attorney in Independence, Ohio, is currently representing a borrower who completed a short sale with the approval of his lender, National City Corp. The following year, Mr. Brewer’s client was sued for the $65,000 loan balance, plus accrued interest, on his home-equity line of credit. The borrower “fully believed National City understood they weren’t going to get paid,” says Mr. Brewer.

A spokesman for PNC Corp., which acquired National City late last year, said the company’s policy is not to comment on pending litigation.