You do have rights as a borrower

If your looking for a mortgage and at the end things don't look the way they were promised you do have a 3 day recission period in which after the loan documents have been signed, you have the right to change your mind. It is the job of any loan officer to fully disclose the terms and fees of any mortgage based product.

If your loan officer is trying to rush you through the process, it maybe time to set back and examine the loan offer and it's terms. If you don't understand the loan your looking at, ask a friend or relative to look over the papers, or seek advice from an accountant.

The mortgage rules have changed

With foreclosures at a record high, lenders have had to retool the entire mortgage lending proceedure. No more stated income loans, inflated home values. The one thing that really hasn't changed is the mortgage brokers ability to mislead you. Mortgage lenders do not have to adhere to the same guidelines and brick and motar lenders. The only goal for a mortgage lender is to get your name of the bottom line and move on to the next customer. I would say that the mortgage brokers could be blamed for the majority of the bad loans now being absorbed by banks and investors.

Driving habits will change

With oil at $140 today the way Americans drive will change. At some point the cost of fuel for personal vehicles will become so high it will require drastic changes in order for people to keep from going broke. Every dollar that is spent on fuel is one dollar less that can be spent on other things such as food, utility bills, clothing and so on. The average citizen only makes so much money every month and now with budgets being stretched, some will have to make critical choices.

80,000 jobs lost in March

If were not in a recession, then I don't know what you call it. With a recorded job loss figure of 80,000 jobs, that brings job loss to the highest point in five years. Most of those jobs were in manufacturing, financials and retail.

Housing values continue to drop

Today's news regarding home price was not encouraging. The value have dropped more than any time since they have been keeping track of the stats.

Eventually housing will turn around but things will be much different regarding the purchase and refinance of homes in the future

The new car mentality

We've all had it, just as winter comes to an end and the weather starts to change, flowers start to bloom. Suddenly this feeling comes over you. I sure would like to have the new car I saw on tv yesterday.

That all sounds fine up to the point where you actually take action and to into the dealers showroom. This place has more pitfalls than an Indiana Jones thriller. There is danger lurking around every corner, from the pushy car salesman who doesn't care what you drive as long as it shows up on his commission check.

Then you have all the different models and features, and of course if you buy this beauty you want to protect it with rust proofing, clear coat and that nice extended service protection. Guess what, you just made your local car dealer lots of money. But what did you get out of the deal?

First you got a new car that will depreciate thousands of dollars as soon as you drive off the showroom floor.
Second most new cars have adequate rust proofing from the factory, in fact adding after-market rust proof if not done properly can actually accelerate the rust process.

Then you have that nice big expensive service contract. Sure you may need service other than scheduled maintainence. But if you read the fine print there are stipulations and conditions that come with the extended warranty.

As I said in one of the earlier posts, the best weapon you can take with you to the dealership is knowledge. Knowledge of what the new car you looking at cost the dealer, look at reliability of that model (this can be done by going to consumer reports or even some of the car sites on the internet).

Don't just walk in unarmed because they will run the profit flag up to the top of the pole thanks to your lack of knowledge.

Car loans This is where you can get burned

When people ask me what the best strategy to use when buying a car. My answer is simply, knowledge is your best weapon against getting ripped-off by the dealer. It is important to know several key points. First there are plenty of sites on the internet where you can get an approximate value of your current car as a trade-in.

Second, car dealers make money in several ways, extended warranties, add-ons such as rust proofing, clear coat, sun roofs, you get the idea. You can do so pretty simple things to avoid getting ripped-off, consumer reports offer excellent tips when buying a car, and they can also give you good ratings based on model and year of car if you are buying a used vehicle.

We will cover other areas at a later time. But if you do your homework you can literally save $100's of dollars.

Credit the double edge sword

Credit is one of those things that sometimes you need to survive and then other times can get you in hot water. One of the biggest things you have to remember is it takes credit to get credit. What I mean by that is when you apply for any type of loan, one of the first they the potential lender does is pull a credit report. A credit report is like taking an xray of your financial condition. The three big things most lenders look for is payment history, Debt-to-income ratio and FICO score. Without know much about you they can make a quick determination as to your credit worthiness.

The other thing to remember is if you are one of those people who always pay cash for things, it's a good idea to put some things on credit and pay them off, so you can establish a pay history with the credit bureau.

Broker vs Direct mortgage lender

Keep in mind the mortgage industry is a very heavily regulated industry if your company is a direct lender. If you are a mortgage broker, you pretty much fly under the radar and anything goes and most of the time does. They can flatout lie to you regarding rate terms and conditions and if your not wise enough to catch it or have someone else look over the paperwork 1st your at their mercy. Also keep in mind that the only time a broker makes any money is when you put ink to paper. So most of them try to maximize profits, keeping in mind that once you sign those forms they will never see you again. So what do they have to lose if they shove you into a bad product.

Direct lenders are always the best bet. There are direct lenders in the form of banks, credit unions, finance companies and mortgage companies. These companies are bound by law to provide you with all the information prior to signing any papers. You should always receive a good faith estimate disclosing fees and terms of the loan and those companies will go through the terms with you so you both are comfortable with the product you are getting.

Let the buyer beware The mortgage mess

Caveot empter: Let the buyer beware.
That is a warning tag that should have been put on those mortgages that went into and are still going into foreclosure. In my mind ignorance is not excuse. I've seen people get put into programs that they must have signed in their sleep, because no sane person would have accepted the terms and conditions they ended up with.

Who's to blame: Well the majority of the blame falls on the mortgage brokerage industry. In the mortgage industry there are two types of lenders. First you have the true brick and motar lenders who not only originate the loans but service the loans from their companies.

Then you have the brokerage industry. I'm sure there are some good brokers out there but I never ran into any. The only thing a broker does for you is go out and shop for a mortgage. The same thing you can do for yourself. The problem comes in when they start looking for you they will throw out some unbelievable rate, that you probably don't qualify for or that rate doesnt exist. Then they start contact mortgage companies after pulling your credit bureau several times and lowering your score. Then when they finally do find you a loan, most of them never disclose the term and conditions required by law thru HMDA. Then I you hang on that long, during the closing process they hire an independent loan closer who rushes you through the paperwork, never mentioning you have a three day recission period in which to change your mind regarding the loan. If that's not bad enough large numbers of their clients were led to believe they were in a fixed rate mortgage, until the day they get a rate change letter from the mortgage company saying their rate is scheduled to go up 3% beginning next month. We will address additional difference between brokers and direct mortgage lenders later

The quick sand of consumer debt

We've all been there, you get credit card offers in the mail all the time. It's a pretty easy process. You pull the card out of the envelope call the 1-800 number activate the card and your off to the races.
Sometimes they intice you with low introductory rates, always read the fine print. The problem arises when everything seems to be going great and then the bills for the credit cards start rolling in. I've seen people from all walks of live with tremendous amounts of credit card debt. Sometimes we could help them and sometimes we couldn't.
Keep in mind if you run up a credit card balance of $5000 and make the minimum payments, you could be paying on that card for up to 25 years. Then if you miss a payment you accrue late fees and possibly higher interest rates. It's not a crime to have and use credit cards but you have to use them wisely and keep balances within reason.

Live within your means

Money is almost like an end-game. The goal every month is to have more money in your pocket than you did the previous month.

One of the biggest problems we faced as loan officers was people getting into debt and waiting too long before seeking help. Folks there is a time that you will hit the wall, meaning you can't go out and charge up all your credit cards, buy new cars and spend money like a druken sailor and then think someone is going to make it all go away!
The bankruptcy laws have been tightened up mostly for that exact reason, it was way too easy for people to go out and run up large amounts of debt and then run to the bankruptcy courts and make it all go away. Who do you think pays for all of that waste? We all do.
At some point you have to take responsibility for your own actions. If your not a good money manager there are programs and people who can help you.

Credit is a privledge not a god-given right.

Sometimes I think people get so caught up in life that they forget some of the fundamental laws. In finance you must prove your worthiness. I think one of the great pitfalls in the education system is that more schools don't teach basic financial skills regarding the management of money. We all work hard for what we have, but some people are better at hanging on to it than others. Money management requires discipline and common sense. If you are married it is always best that one of you act as money manager, but keep your partner abreast of current budgeting and spending habbits. Most financial advisors reccommend setting up a budget to help through the rough times. They also say you should have as a back-up in savings 18 mos of income in case of emergencies.

First things first

Keep in mind most people spend more time planning their vacations than they do planning their finances.

As a former mortgage loan officer, I felt it necessary to try and provide valuable and useful information based upon what I know and what I experienced trying to help others manage debt.

We will discuss topics ranging from mortgages to credit card debt and bill consolidation. My hope is that some of this information will help someone change the course of their financial lives and help survive what is becoming a more and more challenging economic system.