Beware of Bad Advice About Foreclosure

 

A very disturbing and potentially damaging trend seems to be emerging in several real estate markets across the country.  Especially those markets with flat or even declining values.

 

The trend?  Well, it seems that some very less than scrupulous folks have resorted to promoting foreclosure to people wishing to move and having trouble selling their current homes.

 

As a result of the slow market and people reluctant to hold two mortgages, a few "rogue" agents hungry for a commission are instructing people to move and just forget about their old house should it not sell in a reasonable time.  Just walk away and don't worry about it, some say.

 

Beware of that Very Bad Advice!

 

Here's what may happen if you go into foreclosure:

1. You lose all equity you've built in your home
2. Your foreclosure will stay on your credit report for 7 - 10 years and may damage your credit
3. You may not be able to get another mortgage until your credit is repaired
4. You may have trouble getting other loans, such as automobile and even student loans
5. You may still be held accountable for the debt of the foreclosure, including income tax obligations
6. Even when you do again finally qualify for mortgages and other loans, you will probably pay a higher rate and therefore have a higher payment than someone with undamaged credit
7. It's not worth it. Foreclosure is a terrible thing for you, your community, the mortgage company, and the economy in general. Advice to voluntarily go into foreclosure should be taken with a big grain of salt. Well, make that a truck of salt

 

 

Let's all hope this greedy practice of giving people really bad financial advice stops soon or people may be paying a high price for that bad advice - for years to come.

 

 

 

Recession in Johnson Co KS Real Estate?

 

What Happens When There is a Recession and No One Comes?

 

It looks like 73 out of 150 metropolitan statistical areas did not get invited to doomsday, showing increases in median existing single-family home prices from a year earlier, including 11 areas with double-digit annual gains and another 12 metros showing increases of 6 percent or more; 77 had price declines including 16 with double-digit drops.

 

It is believed that the Jumbo crunch last August has significantly slowed down the ability for one to purchasea in luxury & higher priced areas of the country.

 

NAR President Richard Gaylord says ,“Higher limits for FHA loans, which go into effect March 14, will be a big help to first-time buyers in high-cost markets.  Higher limits for conventional loans purchased by Freddie Mac and Fannie Mae will take a bit longer – when they become available, high-income, creditworthy borrowers in high-cost areas will have access to affordable and safer financing, and that will help unleash pent-up demand,” he says.

 

What do you think?  We'd love to get your feedback.  Just use the "comment" link below to leave us your thoughts.  Your email address will never be published here to protect your privacy.

 

 

Can't Make the Mortgage Payment? Just Walk Away?

 

More and more borrowers are watching their house values sink while the cost of their loans skyrockets.  What to do?  It appears that some are opting to skip out on the mortgage all together.

 

Homeowners are abandoning their homes and, more importantly, their mortgages, rather than trying to keep up with rising payments on deteriorating assets.  So many people are handing their keys back to lenders that a new term has been coined for it:  "Jingle Mail."

 

Current lending practices have created an environment where a measure as extreme as abandoning a home actually makes sense to some people.

 

Many home buyers put little or no money down, so they don't have much invested in them.  This leaves them with little incentive to keep making payments when a home's market value dips below the balance of the mortgage.

 

The most serious consequence is a tremendous hit to credit scores.  But for some, that's better than throwing away money they'll never recover by selling their home.

 

Credit scores are hurt much more by missing multiple payments - on credit cards, cars and so on - than by a single foreclosure.

 

According to Craig Watts, a spokesman for the credit reporting firm Fair Isaac, "The time it takes to regain your credit score [after foreclosure] can be shorter than after bankruptcy."

 

Lenders are afraid that borrowers may find it's worth the hit to their credit scores, if they can drastically reduce their housing expenses.  Someone with good credit and a $600,000 home in a town with sinking real estate prices could buy a similar house nearby for $400,000, and then let the other $600,000 mortgage go into foreclosure.

 

Now, skipping out on a home is easier, thanks to the Mortgage Debt Relief Act of 2007.  Previously, if a bank sold a foreclosed home for less than the mortgage balance and it forgave the difference, the borrower had to pay tax on that difference as if it were income.  Now the IRS will ignore it.

 

Here's a brief CBS News 60 Minutes clip that shows this is really happening (Clip only runs 1:10)

 

 

Leave us your comments on this article and the video below… we'd love to hear your thoughts on this topic.

 

 

 

Remodeling Your Insurance After Remodeling Your Home

 

The benefits of renovating your home make the expense an intelligent investment, but protecting that investment is paramount.  That’s why you should consider remodeling your homeowners insurance as well.

 

Renovations often result in homeowners insurance coverage shortfalls in two areas: dwelling protection—which involves structural improvements to your home—and personal property protection.  Built-in enhancements such as new windows, doors, custom cabinets, granite countertops, bars, islands, and flooring need to be brought to the attention of your insurance agent.  You also should discuss any major personal property purchases, including appliances, furnishings, and decorator curtains and blinds.

 

When insuring personal property—especially appliances and electronics—check to see that your policy covers replacement value of your property, rather than the actual cash value.  The actual cash value consists of the replacement cost of an item less the amount it may have depreciated.  Appliances and electronics depreciate quickly.  The amount your homeowners insurance will pay for a depreciated item usually is not enough to replace it with a new one.  Unless you enjoy cruising the thrift stores, you should opt for replacement value.  That way you can shop at Circuit City instead of the Salvation Army.

 

Keeping your homeowners insurance agent in the loop is a good practice in general, but a major remodel should prompt an immediate conversation.  If something happens tomorrow, you want to make sure your homeowner’s insurance will replace what you have today—not what you had yesterday.

 

 

 

Investing vs Paying Off Debt

 

If you carry a balance on one or more credit cards, you're not alone.  According to the Federal Reserve, nearly half of American families do. 

 

And nearly half of American families also have some sort of bank savings accounts.  If you have savings, should you use that money to pay off your credit cards?

 

Money Talks editor Stacy Johnson explains (video runs 1:15)

 

 

We'd love to get your comments on this video.  Just use the "comment" link below.  Don't worry, your privacy is protected.. we never publish email addresses of our readers when they leave us comments.