President Obama is encouraging homeowners to take advantage of record-low, 4.78-percent mortgage rates by refinancing their homes as soon as possible, The Associated Press reports (“Obama: Timing Right for Millions to Refinance,” April 9, 2009).

“The main message we want to send today is there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates,” Obama said at a recent photo opportunity at the White House. “That is money in their pocket.”

While the president highlighted the “good news” of such low mortgage interest rates and their potential to help more homeowners refinance, Housing and Urban Development Secretary Shawn Donovan cautioned that interest rates on most home loans will probably still fall even further than their current lows.

“I think you will see them continue to come down, based on everything that we’re doing, but recognize that they’ve already started to make a big difference,” Donovan said at a recent press conference promoting the president’s plan to rescue the housing market.

She commented that home purchases are up by 20 percent since the president’s February unveiling of the housing rescue plan, an indicator that the new government program — set up to help consumers modify their mortgages or refinance their homes — may already be positively affecting the housing market.

President Obama said that the government’s new strategy to help homeowners has contributed, at least in part, to the “recent surge in refinancing,” however Obama warned homeowners who are looking to avoid foreclosure through refinancing options or through other mortgage modification methods to be on the lookout for scams.
“If somebody is asking you for money up front before they help you with your refinancing,” he said, “it’s probably a scam.”

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A growing number of consumers whose outstanding debt has gone into collections are unexpectedly having their bank accounts seized by creditors after the debt collection companies creditors have hired to notify debtors of pending legal proceedings have failed to deliver the notices (more…)

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Citing the nation’s ballooning unemployment rate, Bank of America has decided against its plan to raise overdraft fees from $35 to $39 (more…)

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After receiving hundreds of consumer complaints regarding questionable debt collection companies, Oregon’s legislature has passed a bill that gives the state attorney general new authority to sue any U.S. debt collection agency engaged in unjust collection tactics with an Oregon resident, InsideARM reports (“Oregon Passes Bill Allowing State AG to Sue Debt Collection Agencies,” April 6, 2009).

The bill, which was sanctioned by current attorney general, John Kroger, will allow the attorney general’s office to address Oregon residents’ repeated complaints that collectors were calling them in the middle of the night, harassing them at work, threatening them with arrests, and using racial epithets in their calls.

“All of these [practices] are unlawful under the Unlawful Debt Collection Practices Act [sic]; however the state had no power to enforce it on behalf of the injured consumer,” said Tony Green, spokesman for the Oregon Department of Justice.

Senate Bill 328 gives the state’s attorney general authority where it formerly didn’t exist. Prior to the bill, Oregon’s attorney general could only request that collection agencies comply with fair debt collection practices under the Unlawful Trade Protection Act, Green said. However, a loophole in the UTPA essentially exempted collection agencies from the act, even though the act applied to many other industries in the state.

If the governor signs the bill into law the UTPA loophole will be closed, giving Oregon’s attorney general the needed authority to prosecute collectors who violate the law beginning Jan. 1, 2010.

Critics Question Effectiveness of Bill

Some collection agency representatives have said the bill won’t likely affect them and that it will do little to stop illegal collection tactics.

And David Cherner, the legislative director of state government affairs at ACA International, an association of credit and collection professionals, said the bill may not live up to legislators’ expectations.

“I’m not convinced that this type of authority that’s now given to the [attorney general] is going to result in complaints decreasing,” he said. “I think there are other ways to address the rise in complaints, and unfortunately I don’t believe that this proposal is going to necessarily do that.”

Industry insiders, including collection agency owners, tend to agree with Cherner’s assessment.

“The bill is not going to give [the Oregon attorney general] the power to take away unlawful debt collectors’ licenses in the state of Oregon to stop them from continued operation,” one owner said. “[The attorney general] hasn’t accomplished anything.”

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After some 10 million consumers with poor credit saw their credit lines reduced earlier last year, responsible consumers with good credit are now seeing the same credit card limit reductions as credit card issuers move to insulate themselves from defaults, reports USA Today (“Lenders Slash Credit for Responsible Borrowers,” April 2, 2009).

Approximately 22 million cardholders — all of them consumers who have kept up on their credit card payments, have paid their bills on time, and have maintained their credit — have had their accounts closed or credit limits cut, according to a recent report by Fair Isaac, the creator of the FICO credit score.

Typically, lenders have targeted those with poor credit but as the economy has continued to unravel, lenders have changed their definition of risk, says Josh Lauer, a professor at the University of New Hampshire who is writing a book on credit reporting.

Consumers who have high credit scores tend to use their credit cards less and carry low balances, says Fair Isaac’s Careen Foster, which may be why they’re now being targeted by lenders.

And consumers who pay their bills on time aren’t a very profitable demographic for lenders since these consumers tend to pay few credit card fees, adds John Ulzheimer, president of consumer education for Credit.com. Even though these cardholders are less likely to default, lenders must still set aside reserves in case consumers stop making payments on their loans.

When credit card companies close a consumer’s accounts or reduce a consumer’s credit limit, it can increase the proportion of available credit a consumer is using and bring down his or her credit score, making it harder to qualify for any type of loan in the future, especially for a consumer who already has bad credit.

The good news for those who have been responsible with their credit is that, according to the Fair Isaac report, card companies’ recent credit line reductions have had very little impact on these consumers’ credit scores, perhaps because these consumers have had their credit limits cut by only 5 percent.

Bank analyst Meredith Whitney estimates that by 2010 banks will have slashed another $2.7 trillion of available credit on consumer cards. With lenders continuing to tighten their credit standards, Ulzheimer says cardholders, even those with good credit, can’t afford to be complacent about their credit scores.

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With the number of jobless Americans growing every month – 663,000 workers lost their jobs in March alone – unemployed workers are facing stiffer competition for a limited number of open positions. (more…)

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Consumers are increasingly falling behind on their loan payments, and economists say the problem will only get worse as the recession continues to wipe out jobs at an unrelenting pace (more…)

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Huntsville, Ala., Provo, Utah, Yakima, Wash., and Lafayette, La., all have at least one thing in common: They’re the living, breathing proof that some cities have actually triumphed in the face of a recessed economy.

These mid-size cities — where real-estate bubbles were relatively non-existent and where local banks largely avoided the questionable loans that have undermined the stability of many commercial banks — are managing this recession better than the nation’s largest cities and rural towns, according to 2007 data analyzed by Moody’s Economy and the credit reporting agency Equifax.

The data revealed that mid-size cities have seen their employment rates buck national trends and their lending institutions’ consumer loan balances rise over the past year (“Many Smaller Cities Dodge Credit Crunch in Consumer Lending,” The Wall Street Journal, March 30, 2009).

“The medium-size metros that have done the blocking and tackling are better positioned during the downturn,” said Ross DeVol, director of regional economics at the Milken Institute, a California-based think tank.

Mid-Size Cities, Banks Poised to Avoid Economic Pitfalls

The success of these cities can be attributed, in part, to their retention of unique employers; many of these cities are home to specialized industries with strong staying power and have been fortunate to land long-term government contracts.

Huntsville, for example, boasts the headquarters of the U.S. Army’s Aviation and Missile Command and a 3,000-employee Boeing facility, as well as the Marshall Space Flight Center, the NASA flight center that’s planning a return trip to the moon. The unemployment rate in this city of 376,000 was only 6 percent in January, compared to the national average of 8.5 percent, and consumer loan balances actually increased 13.2 percent per household compared to last year’s fourth quarter.

And for their part, Huntsville’s banks and credit unions — where problem commercial and consumer loans only represented 2.2 percent of total fourth-quarter lending, compared to the 4.9-percent national average — haven’t just faired well, they’ve been breaking records. Redstone Federal Credit Union in Huntsville originated $43 million in mortgage loans in February, a one-month record for the company, and made $17 million in auto loans in January, which was the fifth-highest monthly total in the company’s 57-year history. And ServisFirst Bank saw a nearly 70-percent increase of total loan balances in 2008.

Lending Data Could Be Deceiving

The Wall Street Journal is quick to point out that numbers these cities are producing may only be giving the illusion that the cities are thriving and may not be “a pure reflection of new lending,” writes reporter Dan Fitzpatrick. Consumers in these areas may still be engaging in the types of consumer behaviors that contributed to the current economic crisis, drawing heavily on existing credit lines to help them pay off their mounting bills and help them find debt relief.

But Equifax Vice President Jim Powers is confident that this type of borrowing isn’t the norm. “Most lending these days is pretty tight,” he said. “Anyone that is getting a new loan, the bank deems pretty low risk.”

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After you’ve packed away all your winter coats, scarves, and turtlenecks and dusted off all your t-shirts, shorts, and flip-flops for spring, keep that spring-cleaning momentum going and tackle your bills, your financial files, and your debts. By taking better hold of your finances, you may be able to find ways to save throughout the rest of the year. (more…)

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At a time when thousands of homeowners are facing foreclosure and are desperately trying to hang onto their homes, bogus loan modification companies are continually popping up to scam homeowners, taking their money without actually doing any work to modify home loans, reports KCRA Sacramento (“Loan Modification Company Is a Scam,” March 31, 2009).

Most recently, the Better Business Bureau of Northern California has issued warnings to homeowners about the Roseville-based company ShortRefiNow.com, an unlicensed loan modification organization that has reportedly stolen thousands of dollars from struggling homeowners.

Kris Pinkney, one of ShortRefiNow.com’s clients, gave the company $3,000 upfront to modify her mortgage. When she contacted her lender later to see how the modification was going, her mortgage holder told her that ShortRefiNow.com called and asked a single question: “How do you do a refinance?”

When Pinkney attempted to follow up with ShortRefiNow.com about her mortgage modification, she got the runaround. “They said, ‘I’m not sure who’s taking care of it. The person taking care of it had emergency surgery,’ ” Pinkney said. “I knew — you know when someone’s lying.” Eventually, Pinkney did get a portion of her $3,000 payment back from ShortRefiNow.com.

Other homeowners weren’t as fortunate. According to the BBB, 14 other individuals who filed complaints against the company and paid between $2,600 and $5,300 upfront to have their mortgages modified never received the promised services or any payment refunds.

In February, the California Department of Real Estate issued a Desist and Refrain Order against ShortRefiNow.com, demanding that the company stop performing any and all acts requiring a real estate license until the company obtains that license, KCRA reports.

Although ShortRefiNow.com assured KCRA that in response to the order they were looking for attorneys to address their client’s claims, it now appears that ShortRefiNow.com has vacated its office.

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