Life After Bankruptcy
October 18, 2013
By Roy Sperr, President
Equity Source Mortgage, Inc.
ROGERS, MN – Bankruptcy is an uncomfortable subject for a variety of reasons. The most obvious is the potential havoc it can wreak on your finances. Running a close second is the negative stigma which is often attached to the process. This negativity is important to mention because strong emotions can sometimes lead to unsound financial decisions with devastating results.
Bankruptcy becomes a viable option for someone who is “upside down” in terms of cash flow. In other words, when a person has more money going out each month than coming in, bankruptcy should be considered if no reversal of this negative cash flow is within sight. The longer someone waits to explore the various options available, the more serious his or her situation may become.
One of the worst things people can do in this situation is to borrow more money to try and pay off their debts. On paper, this is clearly an unwise financial decision. In the real world, however, it is very common for individuals to pursue this strategy in an attempt to buy time and hold off on filing for bankruptcy. On the surface, this is certainly a noble notion; however it can often compound the problem and serves only to delay the inevitable.
For many homeowners in the midst of this upside down cash flow, speaking to a qualified mortgage professional is a much better option. An experienced loan officer can objectively look at your finances and help you determine if restructuring your mortgage would not only help, but possibly even alleviate any need for bankruptcy.
If bankruptcy is the only option, seek out a reputable bankruptcy attorney and credit counselor. A qualified mortgage specialist can provide references for you as well, as he or she works with these professionals on a regular basis. Reliable references are essential in this case because experienced professionals greatly increase the odds of a successful bankruptcy experience. It’s that simple.
When filing for bankruptcy, be completely honest and accurate regarding every aspect of your financial situation. This includes any changes to your income which may occur throughout the process. Bankruptcy is a federal procedure, adjudicated by real judges, and scrutinized by representatives who coordinate with the Department of Justice, the FBI, and the IRS.
Here are some additional steps you can take to make the bankruptcy process as painless as possible:
• Save all paperwork regarding your bankruptcy, and keep it organized. This will prove beneficial after your bankruptcy as you now have all of the pertinent information in one place. Also, be sure to write down your discharge date. It’s surprising how many people forget to do this.
• Establish a household budget. This can be accomplished in many ways, but there are several inexpensive computer programs available which do an excellent job.
• Throughout the bankruptcy, do your best to not only live below your means, but to save as much cash as possible. You never know what you may need it for once the process is completed.
• Be prepared for a barrage of junk mail. There will be sharks on the loose who are hoping to capitalize on your need for credit.
Tips for Rebuilding Credit:
• If you must buy a car, focus on transportation as opposed to style. Buy an inexpensive, used car, and try to get a loan for it. It’s a good idea to figure out what your budget allows in terms of a dollar amount first. This means obtaining financing prior to looking for a car.
• Get a secured credit card. Secured credit cards allow for the cardholder to deposit a said amount of money into an account, thus establishing the spending limit of the card. Missed payments result in deductions from the account. Some of these cards will reward responsible borrowers by upping the limit without an additional deposit. Some will even convert the account into a traditional credit card. (Be wary of offers of “easy credit” or any card which asks you to call a 900 number. You will be charged for the call.)
• Meet with a credit repair specialist. Not only can they help you clean up the damage to your credit report, they can advise you on specific ways to rebuild the credit you lost as well.
While it does take time, there is definitely life (and credit) after bankruptcy. Some mortgage lenders will even lend to you within a year or so after a bankruptcy. If you’re in serious financial trouble, the trick is to get the help and advice you need from professionals you trust.
Read MoreHomeowners underwater on their mortgages
September 10, 2013
Homeowners underwater on their mortgages received positive news today as the recent gains in home prices have lifted 2.5 million residential properties into positive equity in the 2nd quarter of 2013. However, CoreLogic reports that 7.1 million residential properties still have negative equity and as home price appreciation moderates in the 2nd half, the pace of improvement will likely slow. Negative equity means that a borrower owes more on a home than it is worth.
The Syrian crisis has somewhat abated today as the White House tells lawmakers diplomacy is priority on Syria. The news has shifted investing dollars out of the safe haven of the Bond markets and back into more riskier assets, such as Stocks. Oil prices are also declining on the news.
In corporate news, McDonald’s reported this morning that revenues rose in August, driven by a surge in sales in its European division. In addition, the International Council of Shopping Centers reported that U.S. chain store sales rose 2.3% year on year for the week ended on September 7.
Read MoreHome prices are expected to rise
August 07, 2013
Housing news dominated the headlines yesterday with positive home price data hitting the wires. First up was CoreLogic reporting that its national Home Price Index on a year-over-year basis in the month ended in June rose by nearly 12% as the sector continues to improve. From May to June, prices rose by almost 2%. In addition, home prices are expected to rise by 12.5% year-over-year basis in July. However, prices are still down 19% from their peak hit back in April 2006. All of the figures include distressed sales.
To further bolster price appreciations in housing, Clear Capital reported that national home prices surged 9.3% in July 2013 from July 2012 and gained 1.6% over the last quarter. Clear Capital did say that prices remain 33.4% below peak values. For the last half of 2013, the firm sees a moderation in home price trends.
President Obama will be in Phoenix, Arizona later today speaking on the housing market and in particular, the future fate of Fannie Mae and Freddie Mac. The government bailed out the two mortgage giants to the tune of nearly $200 billion after the housing market collapsed in 2008 and the plan is for their roles to diminish and let private sector capital take on a bigger role in the mortgage market.
On Monday, there was some good news and bad news reported in the past month if you are a potential homebuyer or looking to refinance your current home. The bad news is that home loan rates on the 30-year fixed conventional mortgage have gone from 3.5% to around 4.5% in the latest survey.
The good news is that mortgage lending standards eased for the fifth consecutive month, reports the Mortgage Bankers Association (MBA). The MBAs Mortgage Credit Availability Index report, which analyzes data from AllRegs Market Clarity product, the MCAI escalated to an index score of 112.3 in July, rising 2.2% from 109.81 in June.
The service sector of the U.S. economy perked up in July expanding more than expected rising to 56.0 from the 52.2 recorded in June. Readings over 50 indicate more companies are expanding instead of contracting. Of the 18 industries that were were surveyed, 16 reported growth last month. However, the employment gauge fell to 53.2 from 54.7.
Read MoreHomeownership rate
July 31, 2013
Housing data was plentiful yesterday with both good news and not so good news. Home prices continue to move higher as evidenced by the 12.2% year-over-year gain in the Case/Shiller 20-city Composite Home Price Index. It was the biggest annual gain since March of 2006. From April to May, prices rose 2.4% for the 20-city index.
Over in the foreclosure front, Corelogic reports that completed foreclosures dropped by nearly 20% from June of 2012 (68,000) to June of 2013 (55,000). The 55,000 in June was slightly higher than the 53,000 recorded in May. Since the beginning of this year, foreclosure inventories have declined by 14%. A completed foreclosure occurs when a property is auctioned and results in the purchase of the home at auction by either a third party, such as an investor, or by the lender.
The homeownership rate in the U.S. has now fallen back to levels not seen in two decades and is well below its record high of 69.2% hit back in 2004, currently at 65.1%. During the recent housing crisis, more than 7 million Americans were ripped from their homes after the bubble burst and busted. The rate is expected to fall to 64% due to foreclosures as people enter the rental markets.
Read MoreNew Home Sales surged
July 24, 2013
Despite the recent rise in home loan rates, New Home Sales surged by 8.3% in June from May to an annual rate of 497,000 units. The 497,000 was above expectations of 483,000 and sales are now up 38% since June of 2012, the largest annual increase since 1992. However, sales in May were revised lower to a 459,000 annual rate from the initial number of 476,000.
Within the New Home Sales report it showed that inventories are at 3.9 months, down from 4.2 months in May. A normal supply is around six months, which is considered a more healthy balance between supply and demand. The median price now stands at $249,700, up 7.4% from the $232,600 recorded in June of 2012.
Ford Motor reported earnings today that were well above estimates driven by record profits in North America. The automakers market share has now increased to 16.5% across the nation. Ford’s net income in the second quarter was $1.2 billion, up from $1 billion in the previous quarter. However, Ford does expect weakness in South America and the European markets.
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