Are FHA loans an endangered species?

This last summer of 2009 saw the U.S. real estate industry breath a sigh of relief. There was actually some money available for buying houses. At least there was FHA money. In Colorado, that meant a government backed mortgage up to $417,000 was available to a homebuyer. In addition, the Obama Administration put a cherry on top of the FHA cake by including an $8,000 tax credit for 1st time homebuyers. Things weren't rocketing up in the Real Estate Market but it looked like the hemorrhaging had stopped.

Now we are finishing up the first year of the Age of Obama and unemployment continues to rise. What has happened to housing? Click Here to Read More

Housing plan reaches 1 in 5 borrowers

WASHINGTON – The Obama administration's mortgage relief program has reached one in five eligible homeowners, a government report says, but most of those borrowers are on temporary trial plans that have yet to be made final.

As of the end of October, more than 650,000 borrowers, or 20 percent of those eligible, had signed up for trials lasting up to five months, the Treasury Department said Tuesday. The modifications reduce monthly payments to more affordable levels.

To make the change permanent, though, borrowers must complete a big stack of paperwork and show they can make their payments on time. At the beginning of September, only about 1,700 permanent modifications had been made. The Treasury Department expects to release updated data later this month. Click Here to Read More....

FAQ About the Move-Up/Repeat Home Buyer Tax Credit

The passage of the Home Buyers Tax Credit Extension with the addition of existing home owners being able to participate too has many people asking questions.

I'll try to answer as many as I can in this FAQ and also provide you with some links to additional information and forms.

• Who is eligible to claim the $6,500 tax credit?
  Qualified move-up or repeat home buyers purchasing any kind of home are eligible to claim this credit.
  
• What is the definition of a move-up or repeat home buyer?
  The law defines a tax credit qualified move-up home buyer (“long-time resident”) as a home owner who has owned and resided in a home for at least five consecutive years of the eight years prior to the purchase date. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.
  
• How is the amount of the tax credit determined?
  The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500. Purchases of homes priced above $800,000 are not eligible for the tax credit.
  Are there any income limits for claiming the tax credit?Yes. The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) above those limits. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

Click Here to See the Full FAQ

Expanded Homebuyer Tax Credit Passes House - President Obama's Signature Awaits

WASHINGTON – Buying a home is about to get cheaper for a whole new crop of homebuyers — $6,500 cheaper.

First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package enacted earlier this year. But with the program scheduled to expire at the end of November, the House voted 403-12 today to extend and expand the tax credit to include many buyers who already own homes. The Senate approved the measure Wednesday, and the White House said President Barack Obama would sign it Friday.

Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn't owned a home in the last three years — would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.

"This is probably the last extension," said Sen. Johnny Isakson, R-Ga., a former real estate executive who championed the credits.

"We are still in a world of economic hurt, and Congress must continue to act boldly and creatively," said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee. "With the right mix of tax breaks and investments we will get through this recession and get folks working again."

The real estate industry has been pushing to extend and expand the housing tax credit. About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.

Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes. While the measure passed the Senate by a 98-0 vote, Sen. Kit Bond, R-Mo., questioned its efficiency in stimulating home sales.

"For the vast majority of cases, the homebuyer tax credit amounted to a free gift since it did not affect their decision to purchase a home," Bond said. "And for the small minority of buyers whose decision was directly caused by the credit, this raises the question of whether we are subsidizing buyers who may not have been able to afford buying a home in the first place."
The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.

The credit would be extended an additional year, until June 30, 2011, for members of the military serving outside the United States for at least 90 days.

If you would like more information regarding the Homebuyers Tax Credit or need some help raising your credit score to take advantage of it call (702) 250-5001 or vist our website at www.nationalcreditrepairalliance.com.

Home Buyers Tax Credit Extension News

There's been a lot of talk about extending the First Time Home Buyers Tax Credit lately.

Senate leaders released more details about their compromise on the home buyer tax credit today. Among other things, the deal would give the IRS more authority to spot cheaters in advance and set an $800,000 price limit on all homes eligible for the credit.

The existing $8,000 tax credit for first-time home buyers (meaning those who have not owned a home in the previous three years) expires after Nov. 30.

The compromise would extend the existing credit and create a new $6,500 credit for move-up buyers. Both types of buyers must sign a binding contract to purchase a new or existing primary residence between December 1, 2009 and April 30, 2010. Buyers would have until June 30 to close the deal.

Move-up buyers will be eligible if the home they are leaving has been their principal residence for five years or more.

The cost of the newly purchased home may not exceed $800,000 for new or move-up buyers. There is no partial Read more...

Citibank shows why credit card holders need protection

Ed Myska works as executive vice president of El Segundo's Bank of Manhattan, so it's pretty fair to say that he knows a thing or two about keeping his financial house in order.

Yet he was among numerous people who have been notified by Citibank in recent days that the interest rate on their credit cards is soaring to almost 30%.

Letters being mailed out by Citi say only that the rate increase will allow the company "to continue to provide our customers with access to credit."

Myska seldom carries a balance for more than a couple of months and never misses a payment. He now plans to burn off the mileage accumulated on his plastic and then switch to another card."

If we ran our bank the way Citi runs theirs, we wouldn't be in business," Myska said. "Our clients wouldn't put up with it -- and they shouldn't have to. Fees and rates should be fair."

That's precisely the purpose of the Credit Card Accountability, Responsibility and Disclosure Act, which President Obama signed into law in May. Most of the law's protections aren't scheduled to take effect until Feb. 22. Some won't kick in until the end of next summer.

Now some lawmakers are weighing legislation that would accelerate introduction of the credit card reforms to Dec. 1 as banks like Citi turn the screws on customers with higher rates and less-favorable contracts.

Is that a good idea? Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee, put that question to Federal Reserve chief Ben S. Bernanke. And the Fedmeister issued his response last week.

Speeding up the law "could benefit consumers by providing important protections earlier than scheduled," Bernanke acknowledged.

But he said that "card issuers must be afforded sufficient time for implementation to allow for an orderly transition and to avoid unintended consequences, compliance difficulties and potential liabilities."

And I'm thinking, yeah, I'd sure hate to see any unintended consequences for the credit card industry. Like maybe having to treat customers fairly.

The sole reason lawmakers are cracking down on card issuers, and are now thinking about picking up the pace, is that banks have consistently proved themselves to be unworthy of consumers' trust.

Basically, if there's money to be made via some new fee or strong-arm practice, the banks have done it. Tony Soprano and his crew pretty much operated the same way.

Take the case of Sherman Oaks resident Sylvia Weishaus, who received word from JPMorgan Chase & Co. recently that the United Mileage credit card she'd carried for more than 25 years was being canceled.

The reason, according to Chase, was that Weishaus had too much debt on too many credit cards.

In fact, her credit report shows that she had seven active cards at the time Chase decided to play rough, with a combined balance of less than $7,000.

"I don't know what to make of it," Weishaus said. "I can't figure it out.

"It's not that hard, actually. With new consumer protections looming, banks are walking away from cards they deem too generous in terms or benefits, even if that means canceling the accounts of long-term customers who pay on time. Read the full article...

How Bad Are Your Credit Card Mistakes?

Grade yours on a 10-point scale.

Nobody's perfect. When it comes to our financial lives, we've all done things we later regretted -- whether it's getting slapped with a $3 fee for using an out-of-network ATM or going on a Las Vegas bender and losing the house on an overly aggressive poker bet.

The key is to understand the scale of the transgression. With credit card blunders, that's no easy task -- is it worse to take a cash advance or to pay a bill a day or two late? Experts graded a range of credit card mistakes on a scale from 1 (losing a few bucks to a cash machine) to 10 (losing the house). Find out which worry the pros most -- and which may (almost) get a free pass.

Paying LateHow bad is it? 6 The details: Credit card companies are notoriously prickly about late payments -- even a payment that's late by a few minutes can pile up fees, interest charges and other penalties. Depending on how late the payment is, your card issuer may also report the problem to any of the credit bureaus, which can wreak havoc on your credit score. The good news, is that the error may be reversible. You do have the option of giving the credit card company a call and asking them not to report it. If you've generally been an on-time payer, they may waive the fees and not report it.

Paying Only the Minimum on Your CardHow bad is it? 4 The details: Credit card companies love it when you pay off your debt slowly, but you should loathe it. It won't necessarily affect your credit score, but that doesn't mean it's a good practice. Sending in only the minimum payment is definitely going to keep you in debt longer, and you're going to pay a heck of a lot more in interest. You may be paying twice as much -- or more -- as you would by paying in cash.

Buying On a Card Just For RewardsHow bad is it? 1 The details: If you're paying off your balance on time and in full, using your cards to grab extra rewards isn't necessarily a bad plan. You can win the rewards card game if you know how to play. But you do have to know yourself. Because most people spend more when they're paying with plastic than with cash, be cautious and recognize when you're buying something only because plastic makes the purchase painless.

Missing a PaymentHow bad is it? 9 The details: Not only are you going to be slammed with fees, interest charges and other penalties when you miss a payment, but you'll likely see a rise in your interest rates. If that weren't bad enough, you'll also have to contend with a significant hit to your credit report -- about 35 percent of your credit score is based on your ability to pay bills on time. As a result, you'll pay more when you try to get a loan. Missing a payment has both immediate and long-term consequences. You may be dealing with the fallout for years.

Having Too Many CardsHow bad is it? 6 The details: If you're the type to apply for a card just so you can grab a discount on clothes or other merchandise, you likely have a huge stack of cards in your purse or wallet. You're probably not getting enough value from the card to make it worth the high interest rates or additional complications from additional bills and junk cluttering your mailbox -- and you're increasing the likelihood that a payment slips through the cracks or that you'll be a victim of identity theft. There's rarely a good reason to get a new card if you've already got a general-purpose card, a rewards card and a low interest card.

Maxing Out a CardHow bad is it? 7 The details: Maxing out a card can have a serious impact on your credit score, since about 30 percent of your score is based on "credit utilization" -- the amount of credit you've used relative to the amount you have available. More important is the fact that it likely signifies a distressing trend in your personal finances. Maxing out a card may not have an immediate financial pull, but it's a sign that you're not budgeting or spending your money wisely. It means you don't have enough saved up to cover unexpected expenses.

Playing the Balance Transfer GameHow bad is it? 5 The details: Moving your debt from a high-interest card to a low-interest card with a balance transfer isn't as smart a move as you think. About 15 percent of your credit score is affected by your recent credit applications. Pile up a few transfers and your score will take a hit. Credit bureaus don't (differentiate) that these cards are for the same [debt], they just see it as you getting pre-approved for more and more credit. Add in the fees that generally accompany balance transfers and you're not gaming the system -- you're getting hammered by it.

Debt Settlement PlansHow bad is it? 9.5 The details: If you're overwhelmed by debt, negotiating down your balance with the credit card company (also called debt settlement) sometimes helps you pay pennies on the dollar on your debt -- but you'll pay a steep price. First, there's the tax hit you'll take for the amount of debt that's forgiven -- it will count as income during that tax year. And your credit score will be decimated, so don't expect you'll be able to take out a loan soon after consolidation. Next to bankruptcy, debt settlement is the most negative thing you can do to your credit score.

Getting a Cash Advance?How bad is it? 8 The details: It may feel like free money, but the truth is that it's anything but: You'll likely have a fee associated with the advance, and you'll likely pay a higher interest rate than you would by using the card associated with it. You also have no grace period. You'll start accruing interest from the moment you get the money. While these are all dangerous attributes in and of themselves, they're not the worst part. When you start using cash advances, you have to understand why you're using them as they're likely symptomatic of a deep financial problem.

Using a Card in a PinchHow bad is it? 2 The details: If the fridge went on the fritz or the furnace conked out in mid-January, you might not have the means to fund its immediate replacement. Putting the bill on a credit card -- and paying it off quickly over the course of a few months -- is a pretty solid option. You don't want something like that to become standard operating procedure. But it's OK to have a balance on a card for a few months when you're going through a rough patch in your financial life. Just make sure it's on a card without an annual fee or with a very low annual fee.

To your good credit,

Mike

Congress looks to extend credit despite problems:

WASHINGTON — The Obama administration said Tuesday it was concerned about the cost of extending a popular tax credit for first-time homebuyers, a program already under scrutiny for fraudulent claims.

The Internal Revenue Service has opened 107,000 examinations of questionable claims and identified 167 criminal schemes involving the tax credit since it was expanded as part of the economic stimulus package enacted in February.

Key lawmakers said Tuesday they still wanted to extend the tax credit beyond the end of November, when it is scheduled to expire. But Housing and Urban Development Secretary Shaun Donovan said the administration is not sold on read more...

Tough Call: Keep your credit card after a rate increase, or close the account?

Ann has $10,000 in credit card debt. She was paying it off at an interest rate of 7.15 percent. “Then all of a sudden, when I received my September statement the APR had jumped to 14.99 percent,’’ Ann wrote to me. So she called the credit card company.

There was no mistake. Ann joined millions of other credit card users who have been notified that their interest rates are rising. They, like Ann, are being told to deal with it or get kicked to the credit card curb.

Ann has two choices. She can accept the higher interest rate, but she would only be able to make the minimum payment. Or she can reject the rate hike. But if Ann says “no deal,’’ the credit card company has told her it will close her account.

Under the new Credit Card Accountability, Responsibility and Disclosure Act of 2009 and Federal Reserve rules, a cardholder who is notified of a change in terms on or after Aug. 20 has the right to reject that change for the existing balance. If the consumer does so, the credit card issuer must either allow the cardholder to repay the balance on the existing terms, make minimum payments that include no more than twice the percentage of the balance included before the change in terms, or pay over at least five years.

Ann’s worried about her ability to get another credit card at a decent interest rate. She’s also concerned that canceling the card will lower her credit scores.

In advance of tougher regulations taking effect next year, many consumers have been receiving notices of lower available balances, interest rate increases, or a switch to variable rates.

What the companies are doing is wearing down a lot of good customers who, if left alone with decent rates, would have a better chance of paying off their debts.

The Federal Reserve Board’s rules implementing the CARD Act require that Ann be given the right to reject the 14.99 percent interest rate hike. However, as a general matter, the issuer is permitted to apply the 14.99 percent interest rate to new transactions.

Ann’s concerns are legitimate about getting another credit card with a rate as good as the one she had. She has less to be worried about concerning her credit score because she does not have any other credit cards.

What most affects a person’s score when an account is closed is the presence of outstanding balances on other open credit accounts. The scoring system looks at how much credit you are using compared with how much you have available.

Craig Watts, public affairs director for FICO, cleared up a common misconception. Closing a credit card account won’t affect the duration of someone’s credit history. That’s because credit reports include the history of closed accounts for a number of years, and FICO scores consider both open and closed accounts.

Ann, tell your credit issuer you won’t be played.

5 Steps to a Credit Makeover

See how much money you can save just by following these tips for raising your credit score.

Payment History

• Pay your bills on time to avoid late payments and collections that can have a major negative impact on your FICO score.
• If you have missed payments, get current and stay current.Be aware that paying off a collection account will not automatically remove it from your credit report. Consider hiring a professional as these can stay on your report for seven years.
• If you are having trouble making ends meet, contact your creditors or see a legitimate credit repair advisor.

Credit Cards

• Keep balances low in relation to credit limits on credit cards and other "revolving credit".
• Pay off debt rather than moving it around. The most effective way to improve your credit score in this area is by improving your Credit Utilization Ratio.
• Don't close unused credit cards, as a short-term strategy to raise your score. Make small purchases and pay off the balance.
• Don't open a number of new credit cards that you don't need, just to increase your available credit. This approach could backfire and actually lower your credit score.

Credit History

• If you have been managing credit for a short time, don't open a lot of new accounts too rapidly.
• New accounts will lower your average account age, which will have a larger effect on your score than if you don't have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.

New Credit

• Do your rate shopping for a given loan within a focused period of time. FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.
  Re-establish your credit history if you have had problems. Opening new accounts responsibly and paying them off on time will raise your credit score in the long term.
• Note that it's OK to request and check your own credit report. This won't affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.

Types of Credit

• Apply for and open new credit accounts only as needed. Don't open accounts just to have a better credit mix - it probably won't raise your credit score.
  Having credit cards and installment loans (and making timely payments) will raise your credit score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.
• Note that closing an account doesn't make it go away. A closed account will still show up on your credit report, and may be considered by the score.

If you have any questions about how to get the highest credit score possible, call me at (702) 275-5001 for a free consultation or visit www.nationalcreditrepairalliance.com

To your good credit,

Mike

Announcing National Credit Repair Alliance

Hello everybody,

My name is Mike Newman, and I would like to announce the formation of the National Credit Repair Alliance.

In the coming days we'll be adding lots of information about credit repair to this blog, launching our new website at http://www.nationalcreditrepairalliance.com and creating social media pages to help consumers raise their credit scores.

It's an exciting time for us, and I hope a valuable service for you.

Mike