Consumer Inertia & Payday Loans

Consumer Inertia is when you buy the same thing all the time, never trying anything different or even considering other choices, similar to the cycle of payday loans. Sure, payday loans present an aroma of kindness and sensibility—instant cash for immediate use.  The TV ads look so sympathetic, plus cold, convenient cash freshens the situation with greenback gratification.  However, payday loans provide a false sense of wealth. The problem with payday loans is that they are habit-forming and tend to lead to greater poverty.   A payday loan is a cash advance secured by personal check or paid by electronic transfer.  You write a check for the amount you want to borrow plus the fee for borrowing the money.  The lender gives you the amount borrowed and agrees to hold your check until your next payday.  However, if you come up short on payday, you have to pay new fees to roll over the loan, thus making the borrowed money more expensive each time the loan is extended. The Federal Trade Commission gives the following example: Say you need to borrow $100 for two weeks. You write a personal check for $115, with $15 the fee to borrow the money. The […] Read More

Derby-Pie & Mortgage Modification

Derby-Pie got its name by putting different names into a hat, and then drawing one, similar to the way a bank seems to determine Net Present Value.  Net Present Value is an analysis the bank uses to determine if it is better for the bank to foreclose on a property or to modify the loan. The bank puts in the present value of the property, the mortgage debt, and the risk of the borrower’s re-default, but it is a secret recipe, like Derby-Pie.  It is not clear what the bank does with those numbers.  The ambiguity is what gives mortgage modifications their mythic proportions. To win the Kentucky Derby, it takes a lot of work and you may not make it to the finish line.  Similarly, getting a mortgage modification is no cakewalk.  However, our local St. Johns Housing Partnership (SJHP) has had some success stories. SJHP is non-profit agency whose services are offered to the public regardless of income.  They are sensitive to what their clients are going through, and they are knowledgeable and experienced negotiating with lenders on a loan modification that works for everybody.  SJHP does a background check on their clients without waiting for the bank […] Read More

Standard Operating Procedures in Foreclosure Mediation

Negotiations with your loan servicer is not neuroscience, but you do need to work with a brain that has the authority to make a deal.  In most cases, the loan servicer sends someone with as much creativity and signing power as a toenail clipping.  Let us say you are dealing with a large law firm that is representing your mortgage loan servicer, the standard operating procedure goes something like this: You send them something and it takes ten days to get to the right person.   The person you talk to on the phone is not the person in charge of your file.   The person (who is not in charge of your file) tells you, “We cannot give you what you want, but we’ll take your information”  (after you have already provided said information eight hundred times in triplicate).  That would not happen in Bankruptcy Court. Bankruptcy is becoming a popular standard operating procedure for borrowers because it motivates more meaningful conversations with the loan servicer. A Bankruptcy Mediation requires the representative to appear in person (not by telephone) and to have authority to make a deal.  Furthermore, there are monetary consequences for non-compliance with the rules, and there are audit […] Read More

Most Wonderful Time…In Foreclosure Defense

The time of gift giving often happens before a foreclosure trial, when you get a settlement instead of a sale on the courthouse steps.  It is the most wonderful time of the year no matter what season, but it generally is not going to happen without prompting from a foreclosure defense. If the loan servicer and the home loan borrower can come to an agreement before the trial, then they can avoid the time and expense of litigation.  It can be the best outcome for both parties in a non-ideal situation.  Usually it takes a foreclosure defense to facilitate this kind of result. Without a foreclosure defense, the loan servicer’s case is going to go through the court system unquestioned and therefore most likely unfulfilled by further generosity.  “No” is always the answer if you do not ask.  However, if the borrower raises a legal defense, then the loan servicer is more motivated to look deeper into the file and see how much they can give. Charity starts at home…but your loan servicer is not going to remember that without a foreclosure defense to remind them.  If you are facing foreclosure, seek competent legal counsel to open a dialogue of […] Read More

The Cost of Fast Cash

There are a lot of ways to spend insane amounts of money—marriage, alimony, and payday loans are among them.  The cost of fast cash may be a luxury you cannot afford. A payday loan is a cash advance secured by personal check or paid by electronic transfer.  You write a check for the amount you want to borrow plus the fee for borrowing the money.  The lender gives you the amount borrowed and agrees to hold your check until your next payday.  However, if you come up short on payday, you have to pay new fees to roll over the loan, thus making the borrowed money more expensive each time the loan is extended. The TV ads look so sympathetic.  Sure, everybody needs cash from time to time, but with payday loans, a little loan can cost a lot of money, and the more you cannot pay it back, the greater the amount becomes to borrow in the first place. According to the Center for Responsible Lending, the average payday borrower has nine transactions per year, and remains in payday loan debt for 212 days out of 365. Payday loans are not fraud, but they can cost consumers a lot.  […] Read More

Co-Signer a.k.a. ‘The Borrower’

What do you call someone who co-signs a loan:  borrower.  If you are a co-signer, then you are a borrower, you have a debt and it is your responsibility to make sure that the payments are made in full and on time.  Whether you sign or co-sign, that debt affects your credit score. If you sign your name on a loan, that loan is yours.  If the signer defaults, then your credit can be dinged, the debt sold, and your accounts or wages garnished before you are notified.  A signer and a co-signer are jointly and individually liable. Be careful who you co-sign for, you may get more than you bargained for. Read More

Good for the Goose & Good for the Gosling

Once upon a time Mother Goose ran a big commercial bank that made home mortgage loans.  She did well and had quite a number of nest eggs.  Then one of them hatched and wanted to be just like her. ‘Oh my dear, it is a very difficult market right now,’ she warned.  ‘How about you go off and become a nice attorney instead.’ Yet despite his mother’s honking, you Gosling Junior went out and made a private home loan to the first buyer he could find who was breathing.  He did everything just the way he had imprinted from his mother, including the loan interest calculation.  That was all very well and good, except he failed to disclose his methods. Sure enough, just as Mother Goose had warned him, the home loan market was tough and Gosling Junior’s borrower started missing payments.  The Gosling went to foreclose and that is when he got his feathers ruffled. The Judge agreed that the borrower owed money, but the homeowner cried foul when it came to the interest calculations.  The borrower accused Gosling of mallard-justed interest calculations. ‘Yes, but they are the standard calculations used by commercial banks,’ Gosling tried to explain. The […] Read More

Time Change

A Banker’s Dozen is not necessarily the same as a Borrower’s Twelve Months.  To simplify math in calculating interest, banks have a dozen months, equally divided into 30 days, giving them a 360-day year by which to divide interest on a home loan.  But they charge for 365 days each year.  The calculation is fine as long as both borrower and lender are aware of where the numbers come from. Mathematically, this is 1.014% more than the annual amount.  So if a person were to pay $100 in interest over a year, they would pay $101.39.  It does not seem like much, but if the loan amount were $100,000.00, the difference is almost $208.33 the first year. If you are still struggling with the time change to spring forward with your next mortgage payment, you may want to consider your choices.  Depending on your circumstances, you may be able to negotiate a forbearance, mortgage modification, or short sale.  Or you may be eligible for Florida’s Hardest Hit Fund. If you have received a foreclosure summons, your time is limited.  You only have 20 calendar days to make a proper response.  Seek competent legal counsel to pursue an outcome best suited […] Read More

Six Degrees of Separation from Bank of America

Most homeowners are closer to Bank of America than to Kevin Bacon.  As the largest US bank, most home loans have very little degree of separation (if any) from Bank of America, even if they did not start there. Bank of America took on the good, the bad, and the ugly when they took over Countrywide in 2008.  (Turns out there was a lot more ‘bad’ and ‘ugly’ than Countrywide ever disclosed.)  So far the tab is up to about $40 billion for Bank of America to settle claims of mortgage misconduct prior to the acquisition…and there are allegations that Bank of America continued some poor practices of Countrywide after the merger. You may not be able to blame Bank of America completely, but you can ask them to prove their foreclosure case against you.  While they are digging up records on your loan, you can pursue a short sale or loan modification—an outcome that will look better on your credit score than a big ‘F’ for ‘Foreclosure.’ You can probably reach Kevin Bacon faster than you can get a short sale or loan modification.  However, if you can complete an alternative ending before Bank of America finishes the foreclosure […] Read More

Not Too Late to File Your Claim on the National Foreclosure Settlement

Yes, the deadline has passed, but if you are one of the eligible borrowers, you can still file your paperwork to receive about $1,000.  At a press conference Thursday, Florida Attorney General Pam Bondi urged Floridians who have not filed their claim for the National Foreclosure Settlement against the five largest banks to do so, despite the January 18 deadline. An estimated 167,398 borrowers statewide are eligible to receive a direct payment sometime this summer from the settlement that was the result of a national lawsuit against Bank of America, JP Morgan Chase, Wells Fargo, Citigroup, and Ally Financial.  However, only about half of those borrowers have filed a claim as of the original deadline earlier this month. Eligible Florida borrowers lost a home due to foreclosure between January 1, 2008 and December 31, 2011 and had their mortgages serviced by Bank of America, JP Morgan Chase, Wells Fargo, Citigroup, or Ally Financial.  Settlement recipients are expected to receive about $1,000 (the amount depends on how many claims are filed). Contact the Florida Attorney General’s office for more information at Read More