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America On A Diet

The average American household’s debt is between $10,000 to $20,000. Please note that this does not account for their home mortgage. A continuing theme throughout the website is that we as Americans relied too much on debt and lived far beyond our means which was a major contributing factor to our country’s significant decline in standard of living. While it is easy to point a figure and blame big business for the recent demise of our country some of the burden remains with us as citizens of the United States. We were not acting responsibly and did not even take a minute to think if we should purchase that $350K house, that new BMW, or that Jacuzzi spa that would fit great in our backyard. Therefore, while fat greedy business rightfully bear the majority of the blame for our country’s current state as responsible citizens we need to step up to the plate and try to rectify our mistakes as irresponsible consumers. Below we have placed a video from Clark Howard stating that we the consumer have reduced our personal debt over the past five months. Therefore, as a country we have spoken through actions that we will make a strong attempt to rectify our mistake of reckless spending. So now the questions beckons will the big corporations of America do the same?

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Clark Howard: A lot of us are exhausted by the finances in our household and I’ve got great news on that front. For five months in a row the Feds report you and I have reduced the amount of debt we are carrying. We are steadily on a debt diet. And it is virtually all kinds of debts the amount of money we are taking out on credit cards going down. The amount of money we are taking out for things like car loans is going down and I hope this trend continues. Because we as Americans are in so over our heads with debt that we need to get healthy. I know economists want us to run out and spend money here, there, and everywhere shop till we dropped and all that to boost the temporary or hopefully the permanent recovery in our economy. But for long-term permanent improvement in our country and for yourself we need to reduce debt. I’m Clark Howard for more on my ideas about your wallet go to cnn.com/Clark Howard.

Ed McMahon Was He So Different?

In one of Ed McMahon’s last interviews he disclosed his frustrations of being forced to file for foreclosure over his $4.8M home.  Ed McMahon was a Superstar who made multi-millions of dollars over the course of his career.  However, during his last days he was forced to file for foreclosure because he was behind a reported $644K in mortgage payments.  To the everyday American the amount of money we are talking about is outrageous and not a realty.  However, Ed McMahon’s situation is not that different than the everyday American.  He owed money due to becoming divorced, he lived beyond his means, and he suffered a career ending neck injury in which he broke his back thus not allowing him to work anymore.  Many “everyday” Americans are experience the same problems.  They may be in endanger of foreclosure due to having an enormous amount of debt, lose of a job, or have come into a series of actions that have caused them to be in an extraordinary circumstances.  To relate to Ed’s circumstance to rest of America MF Report placed an example below:

Example: 

• ED McMahon
  • Ed’s mortgage was worth $4.8M and owed $644K therefore he was behind by 13.42% on his mortgage payments.
• Average Amercian Mortgage
  • The average American home was purchased for $247,900 in 2007 (height of market) according to the US census.  The average person in foreclosure is an estimated eight months or more behind on payments.  Therefore, average monthly mortgage $1,687 X 8 equals $13, 496 or 5.44%.

Ed was living far beyond his means.  His mortgage was greater because the value of his house was greater so his percentages may be greater than the average American, but he was a victim of circumstances just like every other American in financial distress.  His house was on the market for two years at the date of the interview and because he refused to lower the price of his house to a realistic market value he fell so far behind on his payments he had to foreclose on his home.  This is representative of a majority of Americans.  Many Americans are under financial duress, but because they believe the market will rebound or because they love their house so much they are not willing to lower the value of their home to be the market leader in their respective neighborhood.  As an owner you have to be able to bring money to the table if you want to sell your home in this economy or you may land up in foreclosure too.  If a person was certain the market would rebound or you were going to keep your job for ten more years then it may be worth fighting to stay in your home.  However, for most Americans it is to tuff to determine the next month. 

The idea MF Report is trying to convey is everyone is at the mercy of our current economic state.  If we live beyond our means and do not adjust our standard of living to our realty and current economic state then as individuals our lives may become an out-of-control rollercoaster which we are unable to regain control over.  Sometimes we may have to cut our losses to survive and be successful in the future.  Remember none of us have a crystal ball.

A Snapshot of the American Economy, Unemployment Rates, and Stock Market

Mortgage Foreclosure Report has been created with the intent to help Americans preserve the American dream.  We at Mortgagefloreclosurereport.com believe that America is the greatest country in the world and want to help Americans preserve that American dream.  It is undeniable that America has had a decline in prosperity over the past couple of years.  The weakening of our country has been caused by a combination of reasons such as:

• Legislation passed by the Executive and Judicial branches of government
•  Corruption and greed on Wall Street
•  Americans living beyond our means
• Banks providing substantial home loans to Americans who were never in a position to afford that home

According to the United State Department of Labor, when comparing January 2008 to January 2009, the unemployment rate and the percent of the force that is unemployed rose from 7.6M to 11.6M and 4.9% to 7.6%, respectively.  That is an increase of 4.0M unemployed Americans and an increase of 2.3% in the *percent of the labor force that has become unemployed over the past year.  (Note as of August 2009 unemployment has increased to ~11.00.)

Please note these numbers do not depict an accurate picture of the unemployment crisis in America.  The statistics do not take into account the following.

• Americans working part-time who are unable to find full time work (~8.0M)
• Citizens who desire a job, however they are not actively seeking employment (~5.6 million)

Therefore, ~25 million Americans are unemployed.  Per our research there only an estimated 3 million job openings in America as of December 2008.

In addition to the unemployment pandemic in America, the stock market (in reference to the Dow) has dropped below 7,000 points.  This is the lowest it has been 11 years.   (Please note we have seen a great recovery in the market since this article was originally written.  The Dow is now over 9,500 points).

Side Note: The events that led to the downturn in our market and the events that are currently happening after our market started to decline are vary comparable to the events that led to the stock market crash of 1929 and the Great Depression. 

• After the stock market crash in 1929 the Dow did not hit its lowest point until October 1932 (~3 years).  The market declined 89% in a three year period.  Mortgageforeclosurereport.com compared the highest point in the Dow over the past three years and noted it occurred in October 2007.  Since this peak the market has decreased ~50% over the past year and a half.
• Real estate values peaked in the mid 1920s and as the real estate values started to decrease the stock market then crashed.  The correlation between peaking real estate values followed by a sharp decline in the Dow during the 1920s is similar to the real estate bubble that peaked in the 2000s followed by the rapid descent of the Dow.
• Economists debate whether political legislation that was passed by the government may have provided an avenue for the market to decrease significantly in both time periods.  In the 1920s economists argued whether the Smoot-Hawley Act contributed to the stock market crash.  In our current times economists are debating whether the Community Reinvestment Act revisions in 2002 made by the Clinton administration contributed to our current situation.
• Banks over extended themselves in both time periods
• When the media reported the stock market crash in the 1920s to the American public there was national spread panic.  This panic led to a decline in market confidence, which led to the crash of the Dow, which led to the Great Depression.  This same panic the American Media created in the 1920s is tenfold in the present.  This media is able to reach out to the American public and the rest of the world 24/7.

By looking at history we can learn some valuable lessons.  First, the past is the past and we have to move on and work towards improving the future.  Second, the worst may have yet to come.  Therefore, we need to take precautions and seek help from professionals.  Finally, there has to be a personal responsibility by each individual American to take care of him/herself and their families. 

Our website is not designed to debate who or what created the financial crisis in America, but rather give the reader a background of what is going on in our country.  Additionally, we want to help the public gain a basic understanding of loan modification, foreclosure, debt consolidation, and a short sale.   

*The percent of the labor force that is unemployed is calculated by the following calculation:

                                Number of Civilian ** Noninstitutional Population in the labor force   

                                Number of Unemployed Civilian ** Noninstitutional Population in the labor force

** Civilian Noninstitutional Population – All persons who are equal to or greater than 16 years of age (aka “working-age population”) and are not members of the armed forces or persons who reside in institutions such as a nursing home, jail, prison, mental hospital, and juvenile correctional facilities.

Buyer Beware (New Scams)

During hard times untrustworthy people seek to prosper off others misfortune.  If you are a person who does not have a firm understanding of the credit crisis, the process to obtain a loan modification, or are desperate seeking help then we want to warn you of others trying to take advantage of the average person.  We want to mitigate the occurrences of people losing money to fictitious companies who have used the internet and other tools of communication to take advantage of you.

There are various types of scams that are popping up all over the internet.  Some of these websites that call themselves “foreclosure rescue services” prey on the innocent who have become victims of this troubling economy. 

• A first indicator of a company trying to scam a person is they ask for money upfront before starting to help a client.
• A second indicator is these companies may ask you to transfer the title of your home to a third party (DO NOT DO THIS).
• Third indicator may be the company is a for profit business.

Ever since Former President George W. Bush announced a free consultation service called the Homeownership Preservation Foundation which was to provide guidance to homeowners in suffering; many knockoff companies have arisen on the internet.

In most states such as California some “Loan Modification” companies may ask you to pay an upfront fee of amounts up to and exceeding $3,000.00 in order to begin negations with a bank on your behalf to stop foreclosure.  This is an illegal act in most states. Companies are not allowed to receive money until they have successfully completed the contracted services.  In these cases even if you signed a “legal” contract you may want to consult a lawyer because you may be entitled to money.

There are additional companies out there that will “help” the victim contact and begin negotiations with the bank.  At first you may believe this company may be able to help you because you have called your bank several times and you keep getting transferred to a call center in India.  This employee located in the call center of the bank does not seem to be any help because he/she appears to be answering your questions according to a script that the corporate office sent him/her.  Therefore, you seek help from a third party.

We reviewed several of these companies and noted that they do not provide help or guidance in the modification and are generally a waste an already struggling family’s income.  To prove that these companies are generally profiteers of others misfortune we posted some important excerpts from a “loan modification company”.

Excerpts:

Fees:  The companies are not doing this for free. They are for profit organizations.  If you are read what the contract they ask you to sign before they agree to help a borrower will noticed that directly on the first page of these companies have a section specific for the fees you will be paying them through this process.  It may read something like this depending on the company.

In consideration for the services provided by Company X (The Company herein) under this contract, Client (that’s you) agrees to pay The Company the total sum of ___________________.  Payments shall be paid in installments as noted below in addition to processing fees, which shall be paid by Client in a lump sum, upon execution of this Contract.  Client acknowledges that the (processing fee) is not refundable and is intended to cover The Company’s costs and labor in performing services under said Contract and that no portion of the processing fees is intended to be used for nor shall it be applied towards payment of any portion of the Client’s mortgage indebtedness or as any part of the Client’s Mortgage Modification.  Client acknowledge that The Company is not and shall not be held for the Client’s inability to raise any monies that may be required to be paid by Client in order to qualify or perform under any Mortgage Modification that The Company may procure for Client.

Upon obtaining a Mortgage Modification Plan deemed mutually acceptable to both the client and the Client’s Mortgage Lender, client shall pay The Company the remaining balance of __________________ as compensation for completion of service.

Mortgage Foreclosure Reports belief on the fees being charged to the customer:

Per our understanding of the Fee excerpt from the contract we believe it is imperative to obtain a trustworthy lawyer that can help you through this process. 

Note in the above excerpt they are charging you a nonrefundable processing fee.  We at Mortgage Foreclosure Report are not even sure we understand what a processing fee is for this company.  It is not as if the employees have to mail massive amounts of documents that would exceed anymore than five dollars via the United States Postal Service, and the employee of the company is only calling, mailing and e-mailing your bank.  Additionally, the company takes (after the processing fee) more funds from you by committing you, through the contract, to give them the remaining balance as compensation for their services. 

Cancellation:  All contracts have a cancellation policy embedded in the contract.  Please make sure you understand what happens if you cancel your contract.  Prior to entering into the contract determine if this is something you are serious about following through with the bank.  If it is not and you cancel you may lose a lot of money for no reason.  The cancellation agreement may read something like this:

Client may cancel this Contract by providing written notice to The Company.  Cancellation of the Contract prior to The Banks completion of 1 month(s) services is considered a waiver in favor of The Bank not to complete the 1 month(s) period of service, The Bank will be considered to have it earned it’s fees as stated in the Fees section of the contract.

Mortgage Foreclosure Reports belief on the cancellation policy being issued to the customer:

Maybe after reading the next excerpt you are starting to see a pattern from the company.  The company is looking to obtain their fees and as much money as possible.  If the company’s employee does do a significant amount of work and you do pull out at the last second then it is only fair to pay the company money for the use of their time.  However, if the paperwork sat on employee’s desk for weeks with no one working on your loan modification or you do fully go through the loan modification process is it fair for the bank to obtain a fee? 

Nonetheless, the important item to take from this paragraph is that if you have do decide to cancel the loan modification process you do it by their specifications.  Usually, the bank requires the client to submit their desire to cancel to be in writing during a specific time period. 

Our suggestion would be to submit this cancellation in writing via mail.  You should go to your local United States Postal Service office.  While there request a receipt which will prove the date and time you sent the cancellation policy.  If you would like further information on to develop a better understanding of the option the USPS offers for proof of delivery visit their website at _________________________.

 

Limitations: The limitation section of these contracts is very important as it states what services you are truly going to receive for your funds that you pay the company.

The Company is unable to guarantee that the Client’s Bank will accept a loan modification plan, therefore The Company will contact and submit the required forms and paper work and continue thereafter to contact the client’s mortgage lender (i.e. bank) at a minimum of four times in which they will document all communication with said lender in writing and phone call within a three month period.  If the lender does not return or inform The Company its denial of the loan modification for the Client.  The Company will inform the Client in writing that the services have been completed.  The Company is unable to guarantee that the Client’s mortgage will not default or their home will be foreclosed.  Under no circumstances will The Company be responsible for the client losing their home.  The Company’s only liable to the client will not exceed the total amount fees paid to The Company by the Client.

 Mortgage Foreclosure Report’s analysis of the Limitations:

Per our understanding of the above excerpt the company is only responsible to contact the Bank four times; whether it is through phone calls and or mail.  This is something you can do on your own everyday and save money.  You will eventually get through to your bank if you are persistent in the modification process.  However, if you need help we definitely recommend a trustworthy lawyer.  You may waste a month or two of mortgage payments on some company that will not be able to help you and in the end you still may get a lawyer.  Therefore, save all the trouble of losing money and get help from the correct person before even starting the process.

Disclaimer:  Finally, we will discuss the disclaimer of these companies.

Client acknowledges that The Company is not a law firm and that its consultants (i.e. employees with no education in loan modification) are not attorneys.  The Company does not provide legal advice.  Client acknowledges that the recommendations of The Company shall not be construed as legal opinions or relied upon as such.  The Company recommends that client consult with an attorney regarding the legal consequences of any foreclosure rescue option or loan modification services that client considers accepting.

Mortgage Foreclosure thought on this excerpt:

What they are truly saying in this paragraph is we do not know what we are doing, we are not lawyers, and you should consult a lawyer.  Therefore, what is the benefit in a company such as this one?  Nothing is beneficial. 

The rest of the contract discusses different ways they can extract money from you and how they are not responsible for any illegal actions you may commit or are they responsible financially if you lose your home.  Furthermore, do not go to a third party company like these go immediately to a lawyer for help.

 

Note that loan modifications have increased by 2000% in some states.  As such we have listed some red flag that could indicate a scam.  Please see below:

• Complex Acquisition Method: When a company’s proposal for loan modification is complex and suggests contemptible solutions such as transferring the title to a third party so the client can stay in the home without filing foreclosure is usually an indicator of a fraudulent company.
• Payment of Processing Fees Prior to Receiving Service:  In some situations many people feel they do not understand the loan modification process enough so they obtain a third party (that is not a lawyer) to help.  As we will discuss below this probably not the best option.  However, if you feel you must obtain a third party note the following: As noted above it is illegal for many states to ask for processing fees up front.  An attorney is usually the only person who can ask for a retainer.  The other companies can only collect fees once they have completed the job.  Note processing of a loan modification should not exceed $750.00.
• Quick Claim Deed: Under no circumstances YOU SHOULD NEVER SIGN A QUICK CLAIM DEED.  This is probably the worst scam in the market.  The fraudulent party coerces the homeowner to sign a quick claim deed.  All homeowner rights are transferred to the fraudulent party or an associate of theirs, however, the homeowner is still left with the financial obligation of the mortgage.
• Send Mortgage Payments to Only Lender:  If a person asks you to send your monthly mortgage payment to anyone other than your Lender (i.e. bank) immediately dismiss what the party is saying and understand it is a scam.

Prior to dealing with a modification specialist/company ask some simple question:

• Are they licensed; if yes what is their EID #.
• What is their mailing address
• Do they have 15 plus years of experience with Loan Modifications
• Are they formally Industry Professionals

If they answer yes to these questions then there is a high probability that they are partaking in fraudulent business practices and are looking to deceive their prospective clients.

Banks Profiting from Loan Modifications

There are a multitude of reasons why we are in this foreclosure pandemic. One reason is due to the banks having predatory lending practices. Banks were being dishonest in many ways, but the most common scenario was the lender granting a loan for house to a borrower who would not normally be approved for a loan. In addition to the borrower not being able to afford their house, the house they were purchasing was overvalued.  As the country has fallen into a recession/depression these homeowners are unable to sell their homes for the original purchase price and/or they are unable to meet the monthly mortgage fees. As a result borrowers have approached the banks to try and negotiate a loan modification. A loan modification does generally not reduce your principal. The loan modification reduces your monthly mortgage payment and annual interest rate. The bank reduces your monthly payment and interest rate by extending the life of the loan (i.e. a 30 year mortgage rate is extended to a 40 year).

Due to the greed of the banks and the public our county has been placed in a financial bind.  Obtaining a loan modification, foreclosure, or filing bankruptcy are the only options for many Americans. However, it is unfortunate that during this crisis banks are still trying to profit from the situation instead of trying to rectify their mistakes and aiding their clients.

Loan Modifications would help the homeowners and the banks would still profit for several reasons.

1. The borrower continues to pay interest on an inflated principle for a longer period of time (i.e. changing the life of the loan from 30 to 40 years). When the borrower purchased their home it was most likely 25% to 45% overvalued.

2. By allowing you to stay in your home they do not have another foreclosure that will sell for a quarter of its value.

3. Obtaining incentives from the government to help a distressed homeowner obtain a loan modification.

Lenders have created a win/win situation for themselves. Therefore, if you are going to obtain a loan modification you should try to obtain the best deal possible. The banks are dealing with this on a daily business and are going to try and profit as much as they can from the situation. As such you should seek help from a lawyer (professional negotiator). A lawyer who “specializes” in loan modifications deals with this situation on a day-to-day basis. The law professional should understand all the current loan modification regulations and should know how to negotiate your interest rate, monthly payments, and any fees associated with the restructuring.

The banks who are supposed to be helping the mortgagee are/were wealthy corporations that have unlimited resources and a team of lawyers that write each document. Therefore, whenever a person asks you to sign a document (loan modification application) you have to be careful and skeptical. Moreover, have a full understanding of what you are signing. This is why we believe it is the utmost importance for all persons desiring a loan modification to consult an attorney during each step of the process. The initial outlay of money a person may have to spend for a lawyer may seem expensive at first (especially during these hard times), however, the money you may potentially save in the long run or the restful sleep you will get from knowing you have secured a roof over your family’s head in the appropriate legal manner is priceless in comparison.

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