Debt negotiation is a relatively new form of debt relief that is gaining popularity for its results in reducing credit card and consumer debt and because the process can also help homeowners avoid foreclosure by making home loan modifications more likely to be approved. There are two schools of thought on the subject; one that focuses on broken settlements, credit scores and direct negotiations while the other centers on the short and long term benefits of the practice. First, the arguments against debt negotiations:

* Broken settlements – A settlement can be broken by either the party executing the negotiation or the customer. True, there have been instances were companies didn’t follow through on their promises to see the negotiation from beginning to end. The percentage of customers involved in those situations has been small and could have been prevented with some due diligence. Many companies have been drawn into the debt relief industry by the sheer numbers of borrowers and their escalating debt starting in the late 90′s. What had started as debt counseling run by a few non-profits mushroomed into an industry populated with thousands of new and inexperienced companies offering services far beyond the scope of the original mandate of assisting indebted customers with their debts Within those thousands of companies were those that didn’t deliver on debt negotiations, counseling, or consolidation. Customers can also break a settlement by not making enough payments to settle the negotiation. Whether by circumstance or intention, some will stop making payments during the 18 to 48 months of the settlement process.

* Credit scores – A debt negotiation will likely decrease the credit score of a borrower that enters a debt negotiation, but it depends on what that score is at the time the process starts. A vast majority of borrowers that start a debt negotiation are already behind on payments and are consequently taking hits on credit scores so the negotiation won’t have as much of an effect. The second issue on credit scores is that the negotiation stays on the report for up to seven years. While that can be true, doing nothing will leave charge-offs and open balances on the report indefinitely. Finalized, settled, and closed accounts are ultimately a much better reflection on a credit report than accounts that appear intended and/or neglected.

* Direct negotiation – Borrowers can initiate direct negotiations and, in fact, may be contacted by their lenders to do so. One problem with going direct is that there are normally several accounts to be negotiated, all of which will need to be done independently. A second issue is that the offers in direct negotiations are usually for lump sums or for payoffs within a few months of agreement. Those types of payments are often unworkable for the borrower, especially if there is more than one lump sum agreement at a time.

The benefits of debt negotiations are as follows:

* Immediate relief – Upon initiation of the debt negotiation, the borrower will immediately experience an approximate reduction of 50% on payment obligations for all accounts involved in the negotiation. Reductions can vary, depending on the borrower’s ability to pay. By making payments in excess of the 50% reduction the borrower may be able to pay off the negotiated balances faster.

* Debt balances cut by 40 to 60% – Depending on the creditor, balances can be negotiated down by 60% or more. For a negotiation covering multiple accounts the average reduction for the total is 50%. Once the negotiated balances have been settled the accounts are considered to be paid in full with no further obligation by the borrower to the lender.

* A wide spectrum of accounts which can be negotiated – A debt negotiation can include credit cards, signature loans, department store debt, unpaid medical bills, unpaid utility bills, and more. This effectively gives the borrower a chance to wipe the slate clean without the disadvantages of filing bankruptcy.

* Paying off all debts within four years – As credit card balances have accumulated for consumers over time, making payments that materially reduce the principle balance has become difficult, if not impossible. For those that can only afford to make minimum payments, a full payoff could take twenty five years or more. Calculated out over that time a borrower would pay many times the actual balance in interest alone. Contrast that scenario with a full payoff of debts over four years or less at approximately half the balance amount and the merits of debt negotiation become very apparent.

* Increased odds of approval for home loan modifications – A debt settlement can enhance an application for a home loan modification by showing a reduction of consumer debt payments which allows for a greater availability of a homeowner’s income toward mortgage payments. In fact, a debt negotiation could be the difference between a successful loan modification and foreclosure.

You will continue to hear pro and con arguments regarding debt negotiations. One thing to keep in mind is that credit counselors have been and still are backed by credit card issuers. When listening or hearing about debt negotiations, always consider the source. If you are contemplating a debt negotiation, be sure to conduct some due diligence before selecting a firm to act on your behalf. Visit the firm and ask enough questions to get comfortable with the partnership. Insist on a law firm experienced in debt negotiations and, if applicable, home loan modifications. Getting back on your feet will take partnering with the right firm and a commitment to seeing the process through to its completion. Take care of those issues, and you’re on your way to financial freedom.

Debt negotiation is a relatively new form of debt relief that is gaining popularity for its results in reducing credit card and consumer debt and because the process can also help homeowners avoid foreclosure by making home loan modifications more likely to be approved. There are two schools of thought on the subject; one that focuses on broken settlements, credit scores and direct negotiations while the other centers on the short and long term benefits of the practice. First, the arguments against debt negotiations:

* Broken settlements – A settlement can be broken by either the party executing the negotiation or the customer. True, there have been instances were companies didn’t follow through on their promises to see the negotiation from beginning to end. The percentage of customers involved in those situations has been small and could have been prevented with some due diligence. Many companies have been drawn into the debt relief industry by the sheer numbers of borrowers and their escalating debt starting in the late 90′s. What had started as debt counseling run by a few non-profits mushroomed into an industry populated with thousands of new and inexperienced companies offering services far beyond the scope of the original mandate of assisting indebted customers with their debts Within those thousands of companies were those that didn’t deliver on debt negotiations, counseling, or consolidation. Customers can also break a settlement by not making enough payments to settle the negotiation. Whether by circumstance or intention, some will stop making payments during the 18 to 48 months of the settlement process.

* Credit scores – A debt negotiation will likely decrease the credit score of a borrower that enters a debt negotiation, but it depends on what that score is at the time the process starts. A vast majority of borrowers that start a debt negotiation are already behind on payments and are consequently taking hits on credit scores so the negotiation won’t have as much of an effect. The second issue on credit scores is that the negotiation stays on the report for up to seven years. While that can be true, doing nothing will leave charge-offs and open balances on the report indefinitely. Finalized, settled, and closed accounts are ultimately a much better reflection on a credit report than accounts that appear intended and/or neglected.

* Direct negotiation – Borrowers can initiate direct negotiations and, in fact, may be contacted by their lenders to do so. One problem with going direct is that there are normally several accounts to be negotiated, all of which will need to be done independently. A second issue is that the offers in direct negotiations are usually for lump sums or for payoffs within a few months of agreement. Those types of payments are often unworkable for the borrower, especially if there is more than one lump sum agreement at a time.

The benefits of debt negotiations are as follows:

* Immediate relief – Upon initiation of the debt negotiation, the borrower will immediately experience an approximate reduction of 50% on payment obligations for all accounts involved in the negotiation. Reductions can vary, depending on the borrower’s ability to pay. By making payments in excess of the 50% reduction the borrower may be able to pay off the negotiated balances faster.

* Debt balances cut by 40 to 60% – Depending on the creditor, balances can be negotiated down by 60% or more. For a negotiation covering multiple accounts the average reduction for the total is 50%. Once the negotiated balances have been settled the accounts are considered to be paid in full with no further obligation by the borrower to the lender.

* A wide spectrum of accounts which can be negotiated – A debt negotiation can include credit cards, signature loans, department store debt, unpaid medical bills, unpaid utility bills, and more. This effectively gives the borrower a chance to wipe the slate clean without the disadvantages of filing bankruptcy.

* Paying off all debts within four years – As credit card balances have accumulated for consumers over time, making payments that materially reduce the principle balance has become difficult, if not impossible. For those that can only afford to make minimum payments, a full payoff could take twenty five years or more. Calculated out over that time a borrower would pay many times the actual balance in interest alone. Contrast that scenario with a full payoff of debts over four years or less at approximately half the balance amount and the merits of debt negotiation become very apparent.

* Increased odds of approval for home loan modifications – A debt settlement can enhance an application for a home loan modification by showing a reduction of consumer debt payments which allows for a greater availability of a homeowner’s income toward mortgage payments. In fact, a debt negotiation could be the difference between a successful loan modification and foreclosure.

You will continue to hear pro and con arguments regarding debt negotiations. One thing to keep in mind is that credit counselors have been and still are backed by credit card issuers. When listening or hearing about debt negotiations, always consider the source. If you are contemplating a debt negotiation, be sure to conduct some due diligence before selecting a firm to act on your behalf. Visit the firm and ask enough questions to get comfortable with the partnership. Insist on a law firm experienced in debt negotiations and, if applicable, home loan modifications. Getting back on your feet will take partnering with the right firm and a commitment to seeing the process through to its completion. Take care of those issues, and you’re on your way to financial freedom.

As of Feb. 11, the Mortech-Mortgage Daily Mortgage Market Index was calculated based on the seven days ended Friday. It came in at 203. Before that point, the index was reported for the seven days ended each Wednesday. The Mortgage Market Index was 201 on Wednesday.

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If you have a credit card, a checking, or a savings account you’ve probably already noticed that the attached fees, charges, and interest rates are going up. Consider the first half of the year a warm-up for the really big increases going in effect between now and the end of February 2010. Financial institutions of all sizes are reacting to Congress’ passage of The Credit Card Accountability, Responsibility, and Disclosure Act (aka The Credit CARD Act) in May and the creation of the Consumer Financial Protection Agency by raising every charge they possibly can prior to the implementation of the bill next year.

The new bill puts in a list of protective measures preventing credit card issuers from raising interest rates without prior notice, and puts caps on fees, penalties, and other charges. The problem for credit card holders is that the issuers can do whatever they want before most of the protections take effect next year. Judging by their recent actions, rather than wait for regulations to limit what they can do starting in February, the issuers are going to make everything more expensive across the board over the next seven months.

Issuers have been relying more on fees, charges, and penalties and have steadily increased them for years. For example, penalties charged to credit card holders for late payments and over-limit charges totaled just under $11 billion in 2003. By 2008 those charges had swelled to $19 billion, an increase of 80%.

With the challenges facing financial institutions from all sides, expect aggressive increases in all areas including:

1) Interest rates – Already in motion, interest rate increases have been hitting card holders for months. Contrary to most of the restrictions which start in February, the requirement for a 45 day advance notice to the card holder prior to a rate hike begins in August. In advance of raising rates on an account, some issuers are allowing holders to opt out at the old rates by paying off the balance and closing the account. For card holders in good standing, closing and moving an account can result in transfer fees and lower credit limits. For high risk card holders there might not be a transfer option. Presented with those outcomes many will stay with their current issuer and pay the higher rates.

2) Interest rates (part 2) – Because the new law restricts interest hikes on fixed rate accounts, banks are switching client accounts to variable rates because there are fewer restrictions. It is assumed that the bill spells the end of fixed rate accounts. Chase and Bank of America have already sent notices their clients notifying them of the change.

3) Balance transfer fees – Depending on the issuer, balance transfers have already increased between 33% and 66%.

4) Over limit fees – Over spend a little and your rates can jump by 20%.

5) Inactivity fees – Not using your cards may be smart but it could still cost you $15 to $20 quarterly.

6) Elimination of grace periods – Banks are likely to start charging interest immediately on purchases. This will raise costs dramatically for those that habitually pay in full every month. This will effective end the free ride of zero interest for approximately 50 million card holders.

7) The reinstatement of annual fees – Abandoned by most issuers for competitive reasons, annual fees are likely to make a comeback as banks lock up customers that can’t transfer away due to fees, or threat of lower limits with a new, unseasoned credit card.

Higher minimum payments – Chase will raise the minimum payment percentage from 2% to 5% of the outstanding balance. This hike will pose immediate problems for those already struggling with payments.

9) Decreased spending limits – While not a direct expense, a decrease in the spending limit puts a credit card holder closer to that limit, which in turns hurts the credit score. For instance, if a card holder carries a $10,000 balance with a limit of $25,000, he’s at 40% of the limit. If the limit gets cut to $15,000, he’s suddenly at 66% of his limit and the credit score will take a hit. Decreasing credit scores make getting all kinds of credit more expensive. In fact, an issuer could justify a rate increase based on a decreased credit score caused by their own cut in the cardholder’s spending limit

10) Combinations of the above – Credit card companies wouldn’t game the system to generate fees, would they? Here’s one that’s already happening: The issuer cuts the spending limit on the card to a level below the outstanding balance and gives the holder a month to pay down the balance beneath the lowered limit. If the client can’t afford to do so he’s then slapped with over limit charges until he can.

With a charge-off rate that just hit 10% and continuing losses in mortgage portfolios, credit card issuers are looking to generate income in any way they can. In many ways their existing client base is a captive audience; unable to pay off balances and either unable or unwilling to transfer their accounts, the holders are in a position where they can complain but not much of anything else unless they initiate a debt negotiation process. Unlike a loan modification, there really isn’t a qualification or approval process so basically anyone with a five figure credit card balance can initiate a negotiation. With payments and balances usually cut by approximately 50%, should debt negotiations become popular, credit card issuers could find themselves in a position where increases in fees, penalties, and interest rates won’t be near enough.

Washington, DC, United States (AHN) – Homes depreciated by about 0.9 percent from November to December, losing 5.9 percent of their value compared to a year earlier.

The loss in value put more mortgage holders underwater as the value of their property was less than the amount owed on its mortgage. Some 27 percent of all mortgages were underwater in the fourth quarter of 2010 compared to 23.2 percent in the third quarter, according to a real estate market survey by Zillow.com.

In August, Zillow had predicted that the percentage of mortgages underwater would increase to about 30 percent.

In addition, home values are down by about 27 percent from their 2006 bubble-high prices.

Zillow said to expect further decreases in the aftermath of the expiration of tax incentives to buy a home as house prices find their natural levels.

“We expect this recovery to see further home value declines through at least the first half of this year but with monthly depreciation slowly receding to zero by the second half of the year (zero monthly depreciation indicating a definitive bottom in home values),” Zillow officials said in a statement. “As we’ve said amply before, unfortunately we expect home values to bounce around the bottom and not see appreciation that outpaces inflation for at least three years after the bottom.”

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A lawsuit filed by the Securities and Exchange commission claims that former IndyMac Bancorp executives Michael Perry and A. Scott Keys deceived investors. “Specifically, Perry and Keys regularly received information that IndyMac’s financial condition was rapidly deteriorating and authorized new stock sales as a result,” the SEC alleges. “Yet they fraudulently failed to fully disclose IndyMac’s precarious financial condition in the 2007 annual report and the offering documents for the new stock sales.”

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A surge in mortgage rates this week, according to Freddie Mac’s chief economist, was the result of “positive economic data reports.” But a 12-basis-point rise in the 10-year Treasury yield was less than the 24-basis-point increase for the 30-year mortgage. The disparate movement points to lower mortgage rates in the next set of reports.

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Struggling consumers have more choices today than ever when it comes to debt relief options. These choices include credit counseling, debt consolidation, debt settlement, and bankruptcy. Opinions vary widely on each option but making the right decision is a matter of assessing a borrower’s specific circumstances in relation to how each method works and what the ultimate result of each would be. The following are five questions to help get the decision making process started:

1) What types of unsecured debt are you struggling with? Consumers are struggling with all kinds of debt including credit cards, medical payments, department store, and revolving debt. If the answer includes more than just credit cards, consolidation, settlement, or bankruptcy could be viable options.

2) How many accounts are you struggling with? If you are struggling with payments on one or two accounts, especially if the balances are small, you might try seeing what those creditors might be willing to do for you directly. If your balances are larger (totaling over $10,000) you’ll want professional representation to guide you through the options for debt relief and the execution of the proper strategy.

3) Will you be able to pay off all your debts within five years? If the answer to this question is yes, then counseling or consolidation will be the right direction as both typically can reduced the overall interest rate on the debt but don’t reduce the outstanding balance. If the answer is no, debt settlement or bankruptcy will be the best choices.

4) How much can you afford to pay each month relative to your current obligations? If you are in a situation where you just need a small reduction in your payments, counseling or consolidation with incremental decreases in overall interest rates on the accounts could suffice. If you’re in a position where you could consistently make payments if they were cut by about 50%, then debt settlement will be the right the right choice. Being in a position where you can’t put at least $100 toward you’re debt each month could qualify you for a chapter 7 filing.

5) Are you struggling with your mortgage? Many borrowers that are struggling with credit cards and other unsecured debt are also struggling with making their mortgage payments. A new strategy being employed by firms with experience in multiple venues is to combine debt settlement with a home loan modification to reduce both payments and fortify the homeowner’s finances to the point that both payments will be sustainable for the long term.

When considering debt relief options, borrowers need to look at the plusses and minuses and make a full assessment of each to determine which one will provide the best outcome for both the short and long term. A full analysis is critical due to the fact that switching strategies can be costly and waste valuable time. For many, taking counsel from an experienced professional will be the best way to define the best path and the ultimate outcome. In a situation where getting it right the first time through is a necessity, getting the right advice up front can prevent mistakes, speed the process, and put you on the path to financial recovery.

Are you having a hard time refinancing your loan? Have you noticed that interest rates are fluctuating like crazy? Well, unfortunately, the real estate market is going nuts these days trying to find the top, the bottom or just some sense of stability.

Recent news coming out of Mortgage Finance magazine confirms that recent spikes in mortgage rates have consumers wondering whether they have missed the chance to refinance. After months, and almost years, of incredibly low interest rates, the declining rates seem to be at an end. However, no one knows what the situation is, and it has the entire industry in flux once again.

For example, some in government positions are saying that the housing crisis is almost over, while banking titans and Wall Street financial gurus are claiming the opposite. Mortgage interest rates are up one day, down the next, and homeowners are being slammed in the process. The interest rate you get this week might be worse than what you could get next week.

Solutions

If you are trying to refinance because you are in a difficult financial situation, a loan modification might be the answer you are looking for. Refinancing your house is incredibly difficult, especially if you have bad or poor credit. If you have not stayed on top of your credit score, or if your current financial troubles have affected every area of your life, refinancing might not be the option for you. A California loan modification does not hinge upon what your past credit score is, it hinges more upon your ability to continue to make payments throughout the course of your loan. If you have a subprime mortgage with payments that are ballooning, a loan modification might be a more effective avenue than refinancing.

Fluctuating interest rates means that lenders might just sit back and allow the rates to fluctuate until it serves them best. If this is the case, you could be stuck with a terrible interest rate for months, or even years. With a loan modification, you could hire a loan modification attorney to work on your behalf to get your interest rate lowered to something you can afford. As opposed to a spiking subprime interest rate, you might be able to get something substantially lower and/or a fixed interest rate. Either of these could go a long way towards lowering your monthly mortgage payments and giving you more financially flexibility and stability. Many analysts are stating that the interest rates will spike heavily once the government’s efforts to buy mortgage-backed securities ends. Any efforts to kick-start the economy will collapse if that happens, and refinancing will be near impossible.

A California loan modification attorney might just be your new best friend. They have options available to you that you may not have explored, or even thought about. While refinancing at times can depend upon the mood of the banker, a loan modification attorney will work aggressively to get you terms you and your family can live with.

Avoid the fluctuating interest rate game and contact a California home loan modification attorney today!

In one of several bulletins, United Guaranty said rate-term refinance rate adjustments will no longer apply on monthly rates as long as the minimum credit score is 720. Also being eliminated are rate adjustments on broker third-party originations. Another bulletin highlighted improvements to performance premium underwriting guidelines and eligibility changes.

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