Payday Loans: Always a Bad Move

We’ve all heard or seen the ads and commercials for so-called payday loans. They offer to put a few hundred dollars directly into your bank account – just enough to get you over the financial hump until your next payday. With Christmas approaching and Black Friday around the corner, the temptation to use this dangerous financial “service” can be strong.

These loans are always deadly to your financial health! Don’t get caught in the payday loan trap. Here are the common dangers:

·      The interest rates are as bad as the worst credit cards, and the lenders will try to make you pay even more through “fees”.  The average APR (annual percentage rate) can be as high as 300% !

·      Once you are in the hands of a payday lender, it is very hard to get away. People remain indebted not just until their next payday, but often as long as 200 days, according to a government report. Even worse, these loans often result in a cycle of repeated debt that can affect you for a very long time.

·      By taking a payday loan, you’ve given an unscrupulous lender access to your bank account, and you may find that unauthorized or incorrect charges that you never knowingly agreed to have been sucked out of your account.

·      Payday lenders are notoriously difficult to contact if a problem arises.

·      While you may not be able to contact the lender, most payday lenders are extremely aggressive about contacting and harassing you if you experience a problem that delays your payments on the loan.

·      There have been many reported cases of payments you make not being credited to your loan, or even not receiving the money in the first place after you apply for the loan.

The Federal Consumer Financial Protection Bureau has been investigating payday loans, and recently filed its first complaint against one of them. You can get more information, or raise a complaint yourself, by contacting the Consumer Financial Protection Bureau toll-free at 855-411-2372. You can also file a complaint online at www.consumerfinance.gov/complaint

Investing in Foreclosed Properties

Buying homes in foreclosure continues to be a potentially lucrative investment. You have to be willing to do a lot of work in terms of finding the right opportunity - and maybe a lot of work in terms of physical repairs - but there is still money to be made.

According to nationwide data from RealtyTrac.com, foreclosed properties sell at an average discount to value of approximately 40%. For example, you might find a property fairly valued at $600,000 that you could obtain for less than half price. Moreover, the differential between value and price has been growing, making such opportunities more attractive.

For the knowledgeable investor - with equally knowledgeable legal counsel, of course - the opportunity to buy a distressed property, add value to it and return it to the available housing stock, while making a reasonable profit, is still there. Moreover, according to the data, the potential profit on such investments appears to be growing - at least in theory.

New Mortgage Rules Are On the Way

New Mortgage Servicing Guidelines Will Affect Everyone

One of the biggest changes to the financial landscape in our country was the recent creation of the Consumer Financial Protection Bureau (CFPB – online at www.consumerfinance.gov). New CFPB regulations will take effect in January 2014 that will affect how mortgage servicing companies interact with you, the property owner with a mortgage. In advance of those regulations taking effect, Fannie Mae and Freddie Mac, the two semi-government agencies that underwrite most of the mortgage market, have updated their loan servicing guidelines. Those guidelines are followed by all mortgage servicing agents, and if you have a government-insured mortgage, you are affected by these changes. Here are some of the more important provisions:

·  Continuity of Contact. In our firm we see dozens of cases where borrowers who could benefit from a loan workout are given an endless runaround by the servicer. It is common to get a new representative on every phone call, and of course each rep is never able to locate documents sent to the last one. Now there will be a requirement that the servicer develop systems that allow a borrower to have one constant point of contact, and that point of contact must be able to provide accurate information to the borrower.

·   Initiating Foreclosure. The new rules will prohibit a servicer from even mentioning foreclosure until a borrower is at least 121 days delinquent. At the 121-day point the servicer has five business days to refer a loan to its attorneys for foreclosure action.

·     Borrower Response Package. A borrower must be given an opportunity to submit a complete “Borrower Response Package”, and must give the borrower written confirmation of its receipt. Verbal confirmation will no longer be sufficient. The Borrower Response Package will be a set of official forms used all across the country. If the borrower provides this package early enough, and if it is complete, the servicer must delay taking foreclosure action.

·   Loan Modification Denial. Nothing can guarantee that your servicer will grant you a loan modification, but there are Federal and State laws that require your servicer to consider your request in good faith. If your modification request is denied, the servicer must tell you why, in writing. You then have the right to appeal the denial within 14 days. If you appeal, the servicer has 30 days to respond. In addition, no one who was involved in the original decision to deny your loan modification can be involved in the appeal.

If you would like to read about the changes on your own, you can download Fannie Mae’s Servicing Guide Announcement SVC-2013-20.

Bankruptcy Basics

Bankruptcy Can Give You a Fresh Start. Some basic facts:

·     You can choose which type of bankruptcy is best for you. The three main types:

o   Chapter 7: A trustee is appointed to take over your property, which can be sold to pay creditors. You can keep some personal items and maybe some real estate. You must pass a “means test” to verify that you really cannot afford to pay your creditors.

o   Chapter 13: You can usually keep all you rproperty, but you must have wages or other regular income, and you must agree to pay part of your income to creditors over time. The court must approve your repayment plan. A court-appointed trustee will collect the payments and monitor your plan.

o   Chapter 11: Mostly used by businesses (small or large), this option lets you continue to run your business. There is no trustee unless the court decides that one is necessary.

·     Your bankruptcy can appear on your credit report as long as ten years. This can affect your ability to get mortgages or other credit.

·     A bankruptcy discharge officially states that you do not have to pay most of your debts. Some debts generally cannot be discharged, such as many taxes, child support, alimony, student loans and court fines.

·     A bankruptcy discharge only covers debts from before you filed your petition, and only includes debts you included in your petition.

·     A judge can deny your discharge if your petition is incomplete, contains false information, or if you hide property.

·     You can receive a Chapter 7 discharge once every eight years.

·     Some debts are secured by property, such a mortgage or a car loan. You do not have to repay a secured debt after discharge, but the creditor can still take the property from you.

·     Even if you can discharge a debt, you may want to promise to pay it even after discharge. An example might be a car loan you agree to keep paying because you want to keep your car. You do this with a “Reaffirmation Agreement”, which must follow special rules.

·     If your bankruptcy petition and supporting schedules are true, accurate and complete, and you have all necessary backup documentation, you generally are only required to appear at a trustee’s meeting once in a Chapter 7 case, and you usually will never even see the judge.

Second-Chance Mortgages

New HUD Guidelines Offer Second Chance at Home Ownership

The U.S. Department of Housing and Urban Development (HUD) issued new guidelines in August 2013 designed to give a second chance at home ownership to people who have suffered through loss of a job or other one-time financial hardships.

Borrowers that may be otherwise ineligible for an FHA-insured mortgage due to recent bankruptcy, foreclosure or bad credit history may nevertheless qualify for such a mortgage if they can show that their situation was caused by an “economic event” beyond their control, they complete a housing counseling course, and they meet other regular HUD requirements.

What does HUD mean by an “economic event” beyond the borrower’s control? They mean things like loss of a job or other loss of income, or any other outside factors that cause a drop in household income of 20% or more, for at least six months.

One of the keys to this policy is that you must have recovered from your financial hardship. Recovery means that your credit history is clear of late housing or installment debt payments, clear of major negative issues on credit cards, and any open mortgage shows 12 consecutive on-time payments. Mortgages that are brought current through any temporary or permanent loan modification are OK.

Borrowers who have gone through a foreclosure, short sale or a bankruptcy (Chapter 7 or 13) can qualify after 12 months if the cause of their situation was the result of the kind of loss of income described above.

In short, these guidelines offer a second chance for people who have gone through bad economic times through no fault of their own, have recovered their financial footing and have been stable for a year. If that describes you, and you get the housing education and counseling HUD requires, any lender you apply to for a mortgage must look at you through the filter of these second-chance regulations.

Checklist
Do you qualify for a “second-chance” FHA mortgage?

q I lost my job, had a loss of income in my household or suffered some other financial hardship that was not my fault,

q If I lost my job, I can get proof of when that happened, or that my employer went out of business.

q My income was reduced by at least 20% and for at least six months.

q I can prove that I have a steady job or income now.

q I had a bankruptcy, mortgage foreclosure or short sale, but it’s been over for at least 12 months.

q If I had a bankruptcy, mortgage foreclosure or short sale, the reason it happened is because of the lost job/financial hardship.

q If I have a mortgage now, I have kept it current for at least 12 months in a row, even though I had some type of loan modification from my bank.

q I have received (or will receive) HUD-approved housing counseling in person, online or by phone, from an approved agency, at least 30 days before making my new mortgage application, but not more than six months before my application.

q My credit history over the last 12 months has no late housing payments.

q My credit history over the last 12 months has no late installment loan payments.

q My credit history over the last 12 months has no major derogatory issues on revolving accounts (e.g. credit cards).

In the Future "Privacy" Will be a Dirty Word

Way back in 1968, Andy Warhol said that in the future, everyone would have 15 minutes of fame. His prophecy has been reality for many years now, since the advent of reality TV shows, smartphones with cameras, YouTube, and the ability we all have to post any words, recording or video online, where it will live forever.

A few days ago I saw an amusing, clever and scary bit of  graffiti written on a wall. It said: "In the future everyone will be private for 15 minutes." I stopped in my tracks for a moment and realized that the unknown writer of those words was on to something.

There is a TV show on CBS called Person of Interest. Maybe you've seen it. The premise is that the government has a machine that spies on everyone 24/7/365. Every webcam, street camera, computer camera, internet device and microphone is somehow hooked into this machine. The machine analyzes everything and identifies threats. The two protagonists of the drama are the inventor of the machine and a former CIA operative. They've gone rogue, in that they use the machine to help ordinary people who are in danger - people the government considers irrelevant.

We may be closer to that reality than any of us care to acknowledge. Regardless of what you think of Edward Snowden, the contractor who fled to China, and now Russia, harboring untold secrets of the National Security Agency, his story has shoved the topic of government surveillance of everyone to the top of our collective awareness.

If we are in fact all being watched, and listened to, 24/7/365, as in Person of Interest, then our mystery graffiti writer may be correct. In the future, there will be no privacy, anywhere, anytime, and if we manage to get 15 minutes alone we'll be lucky indeed.

Surveillance is not just the domain of big governments and shadowy intelligence agencies, however. Anyone with a camera in his pocket - and who doesn't have a camera in their pocket - can record you without your knowledge or consent. Even if you manage not to post anything and everything about your life on Facebook, you still are potentially subject to Big Surveillance and individual surveillance.

The issue of individual surveillance came up this week with the arrest of a man who was charged with violating Article 250 of the New York Penal Code, which covers offenses against the right to privacy. I learned of the story at http://gothamist.com/2013/08/10/man_arrested_for_filming_woman_thro.php.

The defendant evidently was standing on an elevated subway platform in Brooklyn, where his eyes spied a woman in her apartment engaged in auto-erotic activity. (I am reminded of a scene in an old Woody Allen movie, in which a woman who has just made love with Allen asks him how he became such a skilled lover. He replied, "I practice a lot on my own".)

In any event, our subway platform observer decided to record the events unfolding before him with the camera in his phone. He later stated that he had no intention of posting the video online or doing anything nefarious with the recording. He merely found it intriguing and wanted to share it with his girlfriend.

Keep in mind that the defendant was standing in a public place, out in the open. All he did was to aim his phone at a window some distance away. The window apparently was bereft of blinds or curtains. The self-amorous occupant's doings were out there for all the world to witness - at least all the world that had the right line of sight.

If all the defendant had done was to watch and enjoy, he would have had no trouble with the law. The moment he decided to record the action for later replay, however, he was afoul of Article 250.

Whether he will eventually be convicted of any crime is an open question, for now. One can ask whether a person engaged in sexual activity - alone or in the company of others - in plain view of a significant chunk of the outside world - has a "reasonable expectation of privacy". Back in the old days, people had the good sense to close the window blinds before doing what people do. Now, not so much.

The moral of this urban tale is simply this: you are being watched, and not all the watchers have badges. So watch out, if you want to maintain what little shreds of privacy you have left.

Banks are still screwing up

This week a judge in Brooklyn dismissed a foreclosure case that a bank brought against a dead guy. Normally that doesn't fly.

The borrower died two years before the bank started the foreclosure lawsuit. When a person dies, generally any legal cases in which he or she was involved gets "stayed", i.e. stopped, until a representative of the person's estate is appointed in the Surrogate's Court (called Probate Court most other places). If there is no representative, there can be no lawsuit against the deceased person.

Banks have been known to file petitions in Surrogate's Court to force the appointment of an estate administrator so that a foreclosure could begin or proceed. That's what the bank in this case should have done. Instead, Justice Francois Rivera dismissed the foreclosure case, forcing the bank to begin at the beginning once an estate representative is appointed.