Credit Card Company Practices Curbed

The Senate approved sweeping restrictions on credit card companies. Under the bil. starting in February 2010, credit card companies will be banned from charging consumers to pay by phone and from making sudden increases in interest rates. Credit card companies will be required to give 21 days notification of payment due dates, identify how many payments would need to be made to pay off the balance if the borrower paid only the minimum payment due, and identify the total interest paid over time if only the minimum payment was paid. The general result will be increased transparency and fairness for consumers in the credit card industry.

Senate Rejects Mortgage Bankruptcy Bill

The Senate recently defeated a plan to spare hundreds of thousands of homeowners from foreclosure through bankruptcy, a bill President Barack Obama had embraced. This was a victory for the banking industry, who strongly opposed the bill. Meanwhile, the House overwhelmingly approved a bill backed by the Obama administration that would limit the ability of credit card companies to freely charge high fees and penalties.

U.S. DOJ Targets Loan Modification Fraud

The U.S. Department of Justice issued a press release today announcing a new coordinated effort between federal and state government and private sector agencies to target mortgage broker loan modification fraud. The FTC has filed 5 new cases to halt illegal practices of real estate brokers and companies offering loan modification scams, including one company that spent $9 million on TV and radio ads over the last year. The FTC also sent 71 warning letters to operations using deceptive tactics. Apparently, many "loan modification companies" offer guaranties that are too good to be true. Others fail to ever contact the lender and never attempt to obtain a loan modification despite their customers providing full payment and all requested information. Such companies that take advantage of vulnerable home owners will finally be punished. Borrowers needing loan modification assistance should obviously avoid these companies, and instead contact an attorney. Free assistance is also available, such as via the Homeowner's Hope Hotline or the governments Making Home Affordable web site.

GM May Be Saved By Bankruptcy

The Obama administration has recently urged General Motors to consider bankruptcy. GM is carrying too many bad assets on its books and is heavily in debt. A Chapter 11 bankruptcy will allow GM to stop its downward spiral and restructure its assets so that the new restructured company can survive. This is similar to what many individuals are now doing under Chapter 13, only on a much smaller scale. What is good for the goose is good for the gander. Our government knows very well that bankruptcy is not an end, but a means to an end, and that end is a fresh start. If GM is permitted to restructure it’s debts under bankruptcy laws, then individuals should have no shame in doing the same.

Borrower Beware of Loan Mod Companies

The California Department of Real Estate has issued warnings to consumers regarding loan modification companies. Some are practicing in violation of law, and the DRE is in the process of performing loan modification company investigations and audits. If an advance fee agreement is required, or if a company purport to assist borrowers even after a Notice of Default has been issued, then consumers should be wary to ensure the company is compliant with legal restrictions on advance fee agreements and post-NOD representation. Both borrowers and brokers should consult an attorney to ensure compliance.

Do You Qualify For A Loan Modification Under The Homeowner Affordability Plan?

The minimum requirements to qualify for refinancing under the Homeowner Affordability Plan are: 1) the loan must be guaranteed by Fannie Mae or Freddy Mac, 2) the home must be the borrowers primary residence, 3) the borrower cannot be more than 30 days late in the last 12 months, and 4) the amount refinanced cannot be more than 105% of the home value. Loan modification qualification under the Homeowner Stability Initiative is also limited to loans under $729,750, and loans that originated before January 1, 2009.

Lower Mortgage Payments Via Bankruptcy?

The House passed legislation to give debt-strapped homeowners a opportunity to obtain lower mortgage payments through bankruptcy courts. This is important legislation to encourage banks to negotiate more reasonable mortgage terms with homeowners stuck in high interest adjustable rate mortgages. The Senate is expected to consider its own version of the legislation in the coming weeks. Stay tuned.

Uniform Loan Modification Guidelines

The Treasury is currently developing uniform guidelines for loan modifications across the mortgage industry. The guidelines will be used for the Administration's new foreclosure prevention plan. Moreover, all financial institutions receiving Financial Stability Plan financial assistance will be required to implement loan modification plans consistent with the Treasury guidelines. The implementation of these guidelines should help homeowners who are seeking loan modifications, and should help provide some consistency in lender loan modification department procedures.

Homeowner Affordability Plan Summary

The Homeowner Affordability and Stability Plan is part of the President's broad, comprehensive strategy to get the economy back on track. The administration released an executive summary of the plan earlier this month. The goals of the plan are to 1) provide access to low-cost refinancing for responsible homeowners suffering from falling home prices, 2) create a $75 billion homeowner stability incentive to reach at-risk homeowners, and 3) support low mortgage rates by increasing confidence in Fannie Mae and Freddie Mac. America awaits implementation.