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 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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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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In what some industry experts think may be the next wave of the foreclosure crisis, banks are refusing to take possession of properties after they’ve been foreclosed on, causing homeowners even further financial strain and distress, reports The New York Times (“Banks Starting to Walk Away on Foreclosures,” March 30, 2009).

Mortgage holders are most often abandoning homes in cities where homes are inexpensive to begin with, including Buffalo, N.Y., South Bend, Ind., and Kansas City, Mo, and where home prices have dropped so dramatically that banks no longer see the value in hanging on to a property even if only to strip it of valuable fixtures and appliances.

City officials in Buffalo, for example, say the number of lenders abandoning homes has reached “epidemic” proportions. Just last year the city sued 37 banks over 57 abandoned properties, although lenders actually walked away from far more homes.

“The whole purpose of foreclosure is to take title of the property, sell it and recoup what money you can,” said Guy Cecala, publisher of the industry newsletter Inside Mortgage Finance. “It’s just a sign of the times that things are so bad no one wants to take possession of the property.”

Homeowners Still Held Responsible for Their Foreclosed Homes

Lenders say that it is no longer financially feasible for them to repossess certain properties, claiming they would lose money once legal fees and ongoing maintenance costs are taken into consideration.

When mortgage holders refuse to take possession of properties after foreclosure, cities often force the homeowners — who have already walked away from their homes — to accept responsibility for properties that have often gone beyond repair.

“It’s just a crime the way it puts people in limbo, said South Bend Mayor Stephen Luecke. “They first off have gone through the grief of losing their house, then they move out and find out that they still own it and have responsibility for it.”

Technically, according to the Times, homeowners are also liable for continuing to make mortgage payments on the property. Yet, since it is almost impossible to figure out which company holds the loan on a property after the mortgage has been bundled and resold, homeowners rarely resume making monthly mortgage payments.

“Nobody has any idea who owns what or who’s responsible,” said Judy Fox, a lawyer at the Notre Dame Legal Aid Clinic in Indiana. “It’s a very common story.”

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JPMorgan Chase has dropped the $10 monthly service fee it began charging thousands of Chase cardholders earlier this year and is refunding an estimated $4.4 million to the 184,000 affected cardholders, according to a statement released by New York Attorney General Andrew Cuomo. (more…)

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Lawmakers are attempting to resurrect the Credit Cardholders’ Bill of Rights legislation that died in the Senate last year in an attempt to provide relief for indebted credit card holders, reports Inside ARM (“Credit Cardholders’ Bill of Rights Gets New Life in Congress,” March 25, 2009).

Introduced by Sen. Sheldon Whitehouse, D-R.I., and Sen. Richard J. Durbin, D-Ill., H.R. 627 would protect consumers from credit card companies’ predatory lending practices by limiting their exorbitant interest rate increases.

“The standard credit card agreement gives the lender the power to bleed their customer through evolving and ever more crafty tricks and traps,” Sen. Whitehouse said in a Senate hearing last week (“Debating a Ceiling On Credit Card Fees,” The Washington Post, March 25, 2009). “Under this business model, the lender focuses on squeezing out as much revenue as possible in penalty rates and fees, pushing the customer closer and closer to the edge of bankruptcy.”

The proposed legislation would apply to those companies that raise card rates higher than 15 percent plus the current yield of a 30-year treasury bond, which is currently set at 18.5 percent.

Federal Reserve regulations set to go into effect in 2010 that will target predatory lending practices by credit card issuers would be expanded under the new Credit Cardholders’ Bill of Rights:

• Prevent credit card companies from arbitrarily increasing interest rates on existing card balances

• End the practice of “double cycle” billing that currently allows creditors to charge interest on debt that consumers have already paid on time

• Prohibit lenders from advertising “fixed” rates unless the rates aren’t subject to change, or unless the fixed-rate period is clearly disclosed to the consumer

• Forbid lenders from applying cardholder payments to higher interest rate debts last

• Force creditors to accept payments made the following business day when the bills’ due date is a Sunday or a holiday

• Require creditors to offer more reasonable cut-off times for on-time mailed payments

While banking industry advocates admit that some card issuers have engaged in harmful practices , they say the industry as a whole has not overstepped its bounds and that cardholders issuers could be hurt rather than helped by the new legislation.

If the bill passes, “the market response would simply be to restrict credit, raise interest rates and fees or both,” said Kenneth Clayton, senior vice president and general counsel of the American Bankers Association’s Card Policy Council, in a letter to the Senate subcommittee. “This would significantly hurt tens of millions of Americans at the very time they can least afford it.”

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