Credit and Loans

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(Best Syndication) Bankruptcy can be devastating for a consumer’s credit but it is not the end of the world. There are some steps you can take to improve your credit score and qualify for a loan. But there are some warnings when considering subprime mortgages.

A subprime loan is a loan offered at a high interest rate or higher than normal fees to a borrower with poor credit. According to Melvin List, you “can still get 100 percent financing on a purchase or mortgage refinance just one day out of bankruptcy court.” Melvin is President of Affordable Home Equity Loans, Inc. in Tampa, FL.

If you decide to pursue a subprime mortgage the FTC has some cautions. Beware of unscrupulous lending practices including packing, equity stripping and flipping. Packing involves a lender that loads the loan with extras like credit insurance. The FTC says that “lenders often stand to make significant profits from credit insurance and, therefore, have strong incentives to induce consumers to buy it as part of a loan.”

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(Best Syndication) The Federal Bureau of Investigation (FBI) has launched a plan to fight mortgage fraud. There are two types of mortgage fraud. The first is fraud for property where a buyer may lie about his or her income or debt or other information to buy a home. This accounts for about 20 percent of the mortgage fraud, according to the FBI.

The second type of fraud is for profit. There are numerous methods used to scam lenders including property flipping, fake identities, straw buyers, equity skimming and falsified appraisals. Property flipping involves property that is bought and sold several times to increase the value using appraisals. After a succession of sales the loan goes into default and the buyer disappears.

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(Best Syndication) Interest Only (IO) Loans are popular because of their low payments, but there are some disadvantages. The first obvious disadvantage is that none of your payments are applied to the principle. The whole payment is applied to interest on the loan – thus the term Interest Only Mortgages.

If you don’t plan on staying in a home for a long period of time, this loan may be for you. Many people may plan on moving up to better homes or may even plan on moving to a new area. Like adjustable rate mortgages, the low payments of a IO loan allow buyers to buy more-home with lower payments. So if you expect to make more money in the future, you may want to consider this type of loan.

Carl Levin

(Best Syndication) A Permanent Senate Subcommittee on Investigations looked into the practices of credit card companies Wednesday. The panel interviewed an Ohio man whose $3,200 credit card debt ballooned into $10,700 with interest and penalties. The heads of various credit card companies also gave testimony.

The subcommittee of Homeland Security and Governmental Affairs heard from representatives of Bank of America, Citigroup Inc. and Chase Bank USA. The Ohio man, Wesley Wannemacher, went over his $3,000 limit only three times but was hit with over-limit fees 47 times.

Even though Wannemacher paid between $140 and $210 per month, his total debt more than tripled over a six year period. Lawmakers worry that these practices and other exorbitant fines and interest penalties may be widespread in the industry.

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(Best Syndication) Many retired homeowners have found themselves in the position of being “house rich” and “cash poor”. Their home loans may be all paid off but inflation and other factors have widdled away at their savings and retirement. They, like many other retired folks, are looking for an answer to this predicament.

The Federal Trade Commission (FTC) says reverse mortgages “may allow some consumers to take advantage of their home as a valuable asset and convert it to a source of income without losing home ownership.” There are several types of reverse mortgages to choose from.

The homeowner can either take the money as a lump sum, a monthly advance, a line of credit, or a combination of all three. The borrower can continue to live in their home and he or she does not have to pay the money back as long as that home is their principle residence.