Debt Relief: How to guide to get help

Debt Relief
Debt Relief: How to guide to get help

There’s no easy way to get out of debt, but following these six steps can help you better manage your money and find debt relief.

Let’s face it, Americans love to spend. Unfortunately, we often spend what we don’t have. At the end of February 2010, total U.S. consumer debt was $2.45 trillion, which works out to nearly $8,000 for every man, woman and child in the country. And this number only accounts for credit card debt; it does not include real estate debt.

If you need help reducing your debt load, there are options available for you. Here are six steps to help you find some relief from your debt.

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Co-Sign A Loan: What You Need to Know

Co-Sign a Loan
Co-Sign A Loan: What You Need to Know

Co-signing a loan can be a great gift for a friend or relative who would not otherwise be able to secure a loan. But, it comes with very serious risks as well. Here’s what you need to know before you co-sign a loan.

Banks and other lenders consider those with bad or no credit history to be a risk and may not approve loans for cars, homes or other items unless someone with good credit history cosigns the loan.

If you’ve been asked to co-sign a loan for a friend or family member, you need to weigh the risk you are putting on yourself with the reward you are providing for those you care about. Before you sign that dotted line, be prepared for all “what if” scenarios that could occur.

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Mortgage Fraud: How to Protect Yourself!

Mortgage Fraud
Mortgage Fraud: How to Protect Yourself!

Don’t become the victim of mortgage fraud. Learn about common mortgage scams and steps you can take to protect yourself.

Mortgage fraud is on the rise. In 2009, the FBI investigated 67,190 mortgage fraud cases, and in just the first two months of 2010 had 29,780 cases on the books. Estimated annual losses attributed to mortgage fraud range from $4 to $6 billion. Mortgage fraud not only affects financial institutions—it can affect home owners, buyers, and sellers as well as entire neighborhoods. But there are ways to protect yourself.

Common mortgage scams
First, you need to know what to watch for. Here are some of the more common mortgage scams, as well as a few that are on the rise:
  • Equity skimming: An investor obtains a mortgage by falsifying income documents and credit reports of a straw buyer (someone who falsely represents themselves). After closing, the straw buyer signs the property over to the investor in a quit claim deed. The investor does not make any mortgage payments and rents the property until foreclosure takes place.
  • Property flipping: Property flipping in itself is legal. Where the mortgage fraud comes into play is through falsely appraising the property for a high value and then quickly selling it, often multiple times. This scheme usually involves fraudulent appraisals, doctored loan documentation, and kickbacks to buyers or others involved.
  • Predatory lending: This typically affects senior citizens, lower-income individuals, and credit-challenged borrowers. Predatory lenders charge borrowers exorbitant fees or higher interest rates, which often result in the borrower defaulting on the mortgage payment and ending up in foreclosure.
  • Foreclosure rescue: Criminals target homeowners who are facing or are already in foreclosure and then offer “foreclosure prevention services.” In these mortgage scams, perpetrators promise to prevent foreclosure in exchange for up-front fees or a transfer of the property’s deed, usually in the form of a quit-claim deed. Then, they either take no action at all or use manipulated or forged deeds to either sell the home or secure a second loan on the home without the homeowner’s knowledge.
  • House stealing: A criminal assumes your identity through fake identification, purchases forms from an office supply store that transfer property, forge your signature to these forms and then files them with the proper authorities. They then sell your house without your knowledge.

Now Learn How to: Protect Yourself From Mortgage Fraud

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Does Mortgage Aid Hurt Your Credit Score?

Does Mortgage Aid Hurt Your Credit Score?

Homeowners seeking mortgage help through loan modification programs such as HAMP and HAFA, may face another issue—lower credit scores.

Loan Modification and Credit Scores
Homeowners on the verge of default have several loan modification programs now available to them, thanks to the federal government’s mortgage bailout plan. These programs are designed to help homeowners in distress stay in their homes by restructuring or refinancing their mortgages. As of February 2010, there were over one million homeowners in the U.S. seeking assistance through a loan modification program. But many are finding this silver lining has a dark side as well: lower credit scores.

Homeowners who are still making their payments on time but are on the brink of default and possibly foreclosure can take advantage of the Making Home Affordable program. The program offers several options to distressed homeowners, including refinancing and modifying mortgage loans. Qualified homeowners enter these programs on a trial basis, with the requirement to make at least three payments.

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HAFA: New Short Sale Options

HAFA Options
HAFA provides new short sale and deed-in-lieu options.

A new federal government program, called Home Affordable Foreclosure Alternatives, encourages lenders to pursue alternatives to foreclosure.

No homeowner wants to face foreclosure. It can be devastating both personally and financially. If you are faced with foreclosure now, or worried about it for the future, you’re not alone—15 percent of homeowners were either in foreclosure or delinquency during the last three months of 2009. Many homeowners are choosing to simply walk away from their homes and mortgages, but this can damage your credit score for years, making it difficult to get a loan in the future or even secure a job. A new federal government program can help, however. It won’t save your home, but will help you avoid some of the traumas of foreclosure.

Home Affordable Foreclosure Alternatives Program (HAFA)
Part of the Homeowner Affordability and Stability Plan (HASP), the Home Affordable Foreclosure Alternatives (HAFA) program will launch April 5, 2010. The program provides financial incentives to mortgage lenders to pursue other alternatives to foreclosure, such as a short sale or deed-in-lieu, allowing the homeowner to avoid the substantial costs of foreclosure. There is also a provision for the homeowner to receive up to $1,500 for relocation expenses.

These alternatives reduce the need for potentially lengthy and expensive foreclosure proceedings and generally provide a substantially better outcome than a foreclosure sale for borrowers, lenders and the neighborhood alike.

Read More About: The New Short Sale and Deed-in-Lieu Options provided by HAFA

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