DailyFinance.comhttp://www.dailyfinance.comDailyFinance.com%http://www.blogsmithmedia.com/BlogURL%/media/feedlogo.gifDailyFinance.comhttp://www.dailyfinance.comen-usCopyright 2012 Weblogs, Inc. The contents of this feed are available for non-commercial use only.Blogsmith http://www.blogsmith.com/A 4-Step Plan to Start Climbing Out of Debt Todayhttp://www.dailyfinance.com/2011/11/11/a-4-step-plan-to-start-climbing-out-of-debt-today/http://www.dailyfinance.com/2011/11/11/a-4-step-plan-to-start-climbing-out-of-debt-today/http://www.dailyfinance.com/2011/11/11/a-4-step-plan-to-start-climbing-out-of-debt-today/#commentsFiled under:

A 4-Step Plan to Start Climbing Out of Debt TodayIt can happen days, months, or years after getting your first credit card.

One day you look at the bill, and the minimum payment is almost out of reach. Years of purchases, enumerated monthly on sheets of paper, spell out what seems to be a lifetime of repayments and a small fortune in interest accrual. Maybe using those credit cards got you through college and you never broke the habit. Maybe you've got a sweet tooth for shopping. Or maybe, like so many people in this era, you and your family have fallen on hard times, and when the choice was between seeing your electricity cut off or putting the bill on credit, a little extra debt didn't seem so bad.

However it happened, now you're mired in debt and staring down a mountain of bills just as you're trying to position yourself for retirement. It's a horrifying situation, one you never expected to find yourself in, at least not now, when you should be dreaming about your upcoming golden years.

Take a deep breath. You're not alone. And you can dig out.

Step 1: Know thy enemy.

Before you can do anything about your debt, you've got to know where your finances actually stand. Map out your current financial status, including all those ugly bits you'd just as soon not mention.

First, write out a detailed budget for your regular expenditures. Of course you'll include the usual suspects -- mortgage/rent, utilities, telephone, and groceries. But don't forget to widen your budget to focus on other regular expenses.

Do you subscribe to Netflix (NFLX)? Pay a monthly fee for cable? How much are you spending on entertainment? Dining out? Shopping? What about those once-a-year expenses it's so easy to forget, like insurance, new eyeglasses, car maintenance, or new school wardrobes for the kids? Figuring in all of these numbers will help you determine the true state of your finances.

But you can't stop at a budget and call it a day. You need to map out the exact amount of debt you hold and itemize it based on its source. You've already plugged your cards' minimum payments into your budget. But now, take it a step further and create a new chart listing the balance, interest rate, and minimum payments for each of your debts. Don't forget to include student and auto loans, too!

Once you know what you're dealing with on both sides of the financial coin, you can begin your quest to drive down your debt.

Remember: It's not easy. But it is doable.

Step 2: Snowball like it's December.

Now that you know the cold, hard facts of your financial situation, it's time to get to work. You want to make your money work for you in an efficient manner -- after all, with interest rates bearing down on your accounts, time is of the essence!

One word: snowball.
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Now, in order to make good use of the snowball method, you've got to have the funds for your minimum payments well in hand. (If you don't, then scroll on down to Step Three and I'll meet you back up here when you're finished.) The key to snowballing your debt is to pay the minimums each month on every debt, but then take an additional amount and apply it to one predetermined debt -- let's call it Debt A -- until it dwindles down to nothing.

Once Debt A is gone, you take the money you were paying on it (minimum and extra together) and add it to what you were paying on Debt B until that debt is paid off. Lather, rinse, repeat until you're debt-free.

If you're looking for a quick win, select the debt with the lowest balance and work your way up. You'll feel a sense of accomplishment sooner, which will help keep you on track toward your long-term goal.

But even though I'm a fan of the quick payoff, this snowball method isn't my favorite. Find the debt with the biggest interest rate and get to work. It doesn't just pay down your debt; it also saves you all the extra interest you would be paying, and a few extra percentage points can really add up.

So if I had three credit cards that looked like this:
Credit Card
Interest Rate
Card A
14.5%
Card B
7%
Card C
29.99%
Then I would arrange my snowball like this:
Credit Card
Interest Rate
Card C
29.99%
Card A
14.5%
Card B
7%

This way, no matter what the balances are, I'm paying down Card C quicker so I don't have to sacrifice as much of my hard-earned money to interest alone. It takes diligence to pay in to a card that may not seem like the "quickest win," but it'll save you some cash in the long run.

Step three: Give your cash flow a nudge.

Use your current profession as a jumping-off point for additional work -- if you're a teacher by day, why not be a private tutor by night? Or set your alarm clock for the ripe old time of 3 a.m. and head out for a paper route (they're not just for kids on bicycles anymore).
In short, sometimes the key to debt reduction is to give your cash flow a quick infusion. It's often inconvenient, to be sure, but the payoff can be worth it.

Step 4: Invest in your future.

It may take months or even years, but if you consistently pay down your debt, you will eventually see the light at the end of the tunnel: financial freedom. It's not a bad place to live. But your journey doesn't end there.

Once you're debt-free, your former snowball can help manifest those golden years you've been dreaming about. You can save that money in a savings or money market account. Create an emergency fund that will sustain you through life's tough times (and life does bring with it some unexpected crises) so you won't have to load up your credit cards with expenses you can't afford to pay back. When you've got that under control, keep on saving -- with an eye toward a long-term account to fund your retirement dreams.

If you've got a long-term time horizon, you might want to consider investments that bring a higher return. If you're long on time but short on expertise, an index fund or ETF, such as the Vanguard Total Stock Market Index (VTSMX) or SPDR S&P 500 (SPY), may be a sensible choice. With one investment, you'll access companies spanning the breadth of the S&P 500, including ExxonMobil (XOM), General Electric (GE), and Microsoft (MSFT).

The path from the red to the black side of the ledger can be long, but take heart. With some deft financial moves and a basket of patience, you can climb back out -- and with money in your pockets, to boot.

Hope Nelson-Pope is online coordinating editor at The Motley Fool. She owns shares of Microsoft but none of the other companies mentioned in this article. The Motley Fool owns shares of Microsoft and has sold short shares of SPDR S&P 500. Motley Fool newsletter services have recommended buying shares of Netflix and Microsoft, as well as creating a bull call spread position in Microsoft.

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]]>budgetcredit card debtCreditCardDebtgetting out of debtGettingOutOfDebthigh interestHighInterestNetflix Incpaying off credit cardsPayingOffCreditCardspersonal financePersonalFinancesnowballThe Motley FoolVanguard Total Stock Mkt IdxHope Nelson-Pope, The Motley FoolFri, 11 Nov 2011 10:00:00 ESTAs Italian Drama Persists, Fears of Credit Crunch Spread to Small Businesseshttp://www.dailyfinance.com/2011/11/10/as-italian-drama-persists-fears-of-credit-crunch-spread-to-smal/http://www.dailyfinance.com/2011/11/10/as-italian-drama-persists-fears-of-credit-crunch-spread-to-smal/http://www.dailyfinance.com/2011/11/10/as-italian-drama-persists-fears-of-credit-crunch-spread-to-smal/#commentsFiled under: ,

As Italian Drama Persists, Fears of Credit Crunch Spread to Small BusinessesThe Atlantic Ocean is wide, but maybe not wide enough. On Thursday, markets had a mixed reaction to the deepening economic crisis in Europe. With Silvio Berlusconi's exit as Italy's prime minister, the nation is expected to name a new government within days. Some sources reported that the European Central Bank would step in and buy Italian bonds, easing fears that yields of more than 7% would cause the European economy to fracture.

In the U.S., small business owners grew nervous, while the equities markets took a slight hit. The crisis impacted oil prices, which fell on Europe's political news but were buoyed by reports of weak U.S. supplies. Gold prices fell nearly 2% to just above $1,750 an ounce, as the sell-off included precious metals. The wider commodities markets took a hit as well, with holiday treats like chocolate and sugar both trading down.

"The European economic crisis is definitely concerning as we're in a global market," said Danielle Snyder, the co-founder of DANNIJO, a New York-based designer jewelry and accessories company, and a member of the HuffPost Small Business Board of Directors. "The crisis has weakened confidence in spending abroad. Fashion in particular is an international business and Italy is one of the most influential countries in the game," said Snyder, who adds that her company has grown its European presence in the past 18 months.
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"The crisis is a big threat -- don't mistake the damage this can do," says Clint Greenleaf, the founder and CEO of Greenleaf Book Group, an Austin-based independent publishing company, and another member of the HuffPost Small Business Board of Directors. "A hiccup in Europe can create havoc here, so it causes great concern. As with any crisis, there is both threat an opportunity - right now, we should all protect ourselves in case the storm is strong.

Even though they won't push the U.S. into another recession, Europe's problems will tighten U.S. lending and spending for the near term, said Alan Levenson, chief economist for T. Rowe Price. That could lead to a decline in asset values and wealth for American consumers and rise in savings rates. Translation: Slow growth through the end of the year and into early 2012. That won't help the growing U.S. deficit, already troubled by one credit downgrade this year.

Wednesday's global market sell-off was prompted after Italian 10-year bond yields broke the 7% level that had already sent Greece, Portugal and Ireland to the hand-out line. But Italy could be cushioned by its diverse labor pool and strong export sector, which give it a stronger ability to recover than its fellow European debtors. For all of Europe, however, Italy's problems accelerate a recession that is already under way, said Levenson.

The question now many are asking is: Is Italy too big too fail, making all this just another round of economic brinksmanship with Italy basically giving the economic equivalent of a crude hand gesture to the global market, said Joseph S. Fichera CEO of New York-based investment firm Saber Partners, LLC. "Italy has the ability to pay, but not the willingness," he said.

--Rod Kurtz contributed reporting to this article.

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]]>Atlantic Oceanausteritycredit crunchCreditCrunchdouble dip recessionDoubleDipRecessionEuropeEuropean Central BankEuropean debt crisisEuropeanDebtCrisisFinanceGold PricesGreeceGreek debt crisisGreekDebtCrisisitalian debt crisisItalianDebtCrisisitalyPortugalSilvio Berlusconismall businessSmallBusinessSmart growthT Rowe Price Group IncCatherine NewThu, 10 Nov 2011 15:00:00 ESTAverage Student Debt Hits Record High in 2010: $25,250http://www.dailyfinance.com/2011/11/03/average-student-debt-hits-record-high-in-2010-25-250/http://www.dailyfinance.com/2011/11/03/average-student-debt-hits-record-high-in-2010-25-250/http://www.dailyfinance.com/2011/11/03/average-student-debt-hits-record-high-in-2010-25-250/#commentsFiled under: ,

Average Student Debt Hits Record High in 2010: $25,250 A report released on Thursday by the Institute for College Access & Success's Project on Student Debt shows that members of the class of 2010 who took out loans to finance their educations owed an average of $25,250 in student debt at graduation -- a 5% increase from the year before.

The data were compiled from more than 1,000 colleges -- half the country's public and private nonprofit four-year schools. According to the report, only five out of 471 for-profit colleges reported student debt data for their 2010 graduates. Had profit-making schools been included, The New York Times reports, the "average amount of debt would be even higher," since at these colleges, "almost all students take out loans and, according to federal data, borrow about 45 percent more than students at nonprofits."

The report blamed difficult economic conditions and increasing costs of tuition for the record level of student indebtedness: "Most students in the Class of 2010 started college before the recent economic downturn, but the economy soured while they were still in school, widening the gap between rising college costs and what students and their parents could afford." The report did not include loans taken out by parents in its calculations.

In all, about two-thirds of seniors graduating in 2010 carried student debt. The class of 2010 "also faced the highest unemployment rate for young college graduates in recent history at 9.1%," the Institute noted in its press release.

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]]>class of 2010ClassOf2010college loansCollegeLoansfeeFinanceLocalrecessionstudent debtStudent LoansStudentDebtStudentLoanstuitionU.S.Eamon MurphyThu, 03 Nov 2011 10:25:00 ESTWho Says the Worst Is Over? Financial Security Index Dips Againhttp://www.dailyfinance.com/2011/11/01/who-says-the-worst-is-over-financial-security-index-dips-again/http://www.dailyfinance.com/2011/11/01/who-says-the-worst-is-over-financial-security-index-dips-again/http://www.dailyfinance.com/2011/11/01/who-says-the-worst-is-over-financial-security-index-dips-again/#commentsFiled under: , ,

Financial Security Index Dips AgainA new poll from Bankrate.com shows that only 17% of Americans feel better off financially than they were a year ago.

Bankrate.com's monthly Financial Security Index fell from 93.9 to 92.8 in October, its second lowest level this year. According to Bankrate.com, anything below 100 is a clue that in general, people are feeling less financially secure compared to 12 months ago.

"The weak economy, ailing housing sector and volatile stock market continue to undercut consumers' feelings of financial security," said Greg McBride, CFA, senior financial analyst for Bankrate.com, in a prepared statement. "Americans' feelings about their savings, debt and net worth continue to erode."

View Poll


Just how low folks are feeling? Only 11% of Americans said they were more comfortable with their savings now that a year ago, which was a new low. And when it comes to debt, only 20% said they were more comfortable than they were 12 months ago. That percentage has dropped monthly since June.

Meanwhile, 19% said their net worth was higher than this time last year, compared to some 30% who said their net worth had dipped.

Seniors are the group that's most earnestly crying the blues: 34% of those ages 50-64 surveyed, said they feel less secure in their jobs; 56% said they feel less comfortable with their savings, and only 5% are more comfortable. Nearly 40% of retirees say their overall financial situation is worse than a year ago, and a mere 7% are feeling things are better.






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]]>BankratedebtEconomic IndicatorsEconomicIndicatorseconomyFinanceFinancial Security IndexFinancialSecurityIndexjob securityJobSecuritypollsavingsSheryl Nance-NashTue, 01 Nov 2011 14:15:00 ESTAbusive Debt Collection Agency Ordered to Cease Operationshttp://www.dailyfinance.com/2011/10/26/abusive-debt-collection-agency-ordered-to-cease-operations/http://www.dailyfinance.com/2011/10/26/abusive-debt-collection-agency-ordered-to-cease-operations/http://www.dailyfinance.com/2011/10/26/abusive-debt-collection-agency-ordered-to-cease-operations/#commentsFiled under:

Abusive Debt Collection Agency Ordered to Cease Operations As part of its effort to crack down on scams that target Americans in financial distress, the Federal Trade Commission has sued more than 30 debt collection companies. On Wednesday, another collection agency made the list.

At the request of the FTC, a U.S. District Court ordered Rincon Debt Management, a California-based company, to halt its debt collection operations. According to the FTC, Rincon made "bogus threats" telling consumers they had been sued or could be arrested over debts that they often didn't even owe. Employees of the collector also posed as attorneys, demanding consumers pay various nonexistent legal fees.

The FTC receives more consumer complaints about debt collectors than any other industry, including identity theft and fraud. Aside from the FTC's obvious interest in ensuring that debt collectors abide by the law, the agency is focused on the industry because of the important role it plays in consumers' everyday lives. Unfair or illegal debt collection practices can mean that "consumers often pay more than they owe, inadvertently waive their rights, have their privacy invaded, and get deeper into debt," the FTC says.

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However, many of us are unaware of the difference between legal and illegal debt collection practices. Under the Fair Debt Collection Practices Act, a statute created in 1978 to protect consumers, Americans have a variety of rights that debt collectors must respect.

For example, debt collectors cannot contact you too early in the morning, or too late at night. Nor can they call you at work if you specifically tell them that your employer prohibits personal calls. You can require a debt collector to stop calling you and instead communicate strictly in writing. A debt collector must inform you, in writing, of exactly the size of the debt, to whom it is owed, and what you should do if you believe that you do not owe the debt. Additionally, debt collectors can't threaten you with violence, nor the possibility of arrest, nor any other legal action.

These are only some of the rights afforded consumers under the Act. To see a more extensive list, click here. To report an abusive debt collector, click here.

As for Rincon Debt Management, which allegedly earned almost $10 million through these illegal practices, the court order not only halts operations but also freezes the company's assets and appoints a temporary receiver to oversee the business while the FTC pursues its case.

Loren Berlin is a reporter with the AOL Huffington Post Media Group. She can be reached at loren.berlin@teamaol.com, on Twitter at @LorenBerlin, and on Facebook.

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]]>abusive debt collectorAbusiveDebtCollectorcollection agenciesCollectionAgenciesdebt collectorsDebtCollectorsdeceptive debt collectorDeceptiveDebtCollectorFair Debt Collection Practices Actfederal trade commissionFederalTradeCommissionFinanceFTCillegalillegal debt collectorsIllegalDebtCollectorsRincon Debt ManagementRinconDebtManagementUnited States district courtLoren BerlinWed, 26 Oct 2011 15:20:00 ESTTips for Pricing a College Before You Applyhttp://www.dailyfinance.com/2011/10/24/tips-for-pricing-a-college-before-you-apply/http://www.dailyfinance.com/2011/10/24/tips-for-pricing-a-college-before-you-apply/http://www.dailyfinance.com/2011/10/24/tips-for-pricing-a-college-before-you-apply/#commentsFiled under:

How do you avoid sending your kid off into the world without a pile of student loan debt? One key is to figure out the real, bottom-line price of a specific college -- before you apply. DailyFinance's Laura Rowley explains.


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]]>cost of collegeCostOfCollegefeatured videoFeaturedVideostudent debtstudent debt advicestudent debt loadstudent loanStudent LoansStudentDebtStudentDebtAdviceStudentDebtLoadStudentLoanStudentLoansLaura RowleyMon, 24 Oct 2011 06:00:00 ESTShould You Cash in an Annuity to Pay Off Your Debts?http://www.dailyfinance.com/2011/10/19/should-you-cash-in-an-annuity-to-pay-off-your-debts/http://www.dailyfinance.com/2011/10/19/should-you-cash-in-an-annuity-to-pay-off-your-debts/http://www.dailyfinance.com/2011/10/19/should-you-cash-in-an-annuity-to-pay-off-your-debts/#commentsFiled under: , ,

Stacy is on a fixed income. She could free up more cash if she paid off her credit cards and mortgage. Should she cash in an annuity to make that happen? DailyFinance's Laura Rowley explains the key factor Stacy should consider in making the decision.




















Struggling with your own personal finance situation? I welcome your questions but it's also about your wisdom, ideas, and experiences that may help other readers. Email me at laura.rowley@teamaol.com. You can also follow me on Twitter @MoneyHappiness.

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]]>annuitiescredit cardsCreditCardsfeatured videofeaturedvideoFinancemoney and happinessMoneyAndHappinesspaying down debtpaying off your mortgage earlyPayingDownDebtPayingOffYourMortgageEarlytax free savingsTaxFreeSavingsLaura RowleyWed, 19 Oct 2011 06:00:00 ESTHow to Stretch Out a Home Foreclosure for Yearshttp://www.dailyfinance.com/2011/10/18/how-to-stretch-out-a-home-foreclosure-for-years/http://www.dailyfinance.com/2011/10/18/how-to-stretch-out-a-home-foreclosure-for-years/http://www.dailyfinance.com/2011/10/18/how-to-stretch-out-a-home-foreclosure-for-years/#commentsFiled under: , , ,

How to Stretch Out a Home Foreclosure for Years Losing your home to foreclosure is traumatic, no doubt. And for a variety of reasons--from internal bank bureaucracy and missteps to slow-moving government programs--the pain can stretch out for months.

It takes an average of 336 days for a home to move through the foreclosure process, from the first day a default notice was filed to the final disposition of the property, according to the latest report from RealtyTrac. That's the longest average since the 2007.

For Janet, a 48-year-old attorney and mother of five who asked that her full name not be used, the process has stretched out for nearly 900 days, and counting. That's more than two years without paying a single mortgage payment.

Her story is a lesson on how to keep a roof over your head.

"It requires fortitude -- never take no for an answer -- and an ability to not become intimidated by paper," says Janet, who now lives on Social Security disability payments. "Paper is just paper. If it's a 40-page form, fill it out and send it in. Never let the process get in the way of the goal -- to stay in your home."

From Success Story to Distressed Homeowner

Janet has the classic American bootstrap success story. She left a dysfunctional family at 16, got a job and an apartment, finished high school and started college. By the mid-1980s, she was married with two toddlers, going to school and bartending at night. Her husband left, but she earned her bachelor's degree and put herself through law school.

Decades of prosperity followed. Janet established herself as a real estate attorney and opened her own firm. Her children flourished. Janet remarried and had another child. She also adopted the 5-year-old child of a client who had died of cancer and whose spouse was killed in an accident a few months later.

And she bought property: "I reinvested every dollar I was making into real estate," she recalls. "Some were vacation rental homes, or flipped homes, but I was always reinvesting."

In 2006, Janet was diagnosed with breast cancer. She took out home equity lines of credit on the three properties she owned to pay the bills while she underwent treatment. "I thought the worst that could happen is I would sell the properties to pay off the debt, be healthy and go on my way," she says.

Janet fought through surgery, radiation and chemotherapy. Too sick to work, she went on Social Security disability. In 2007, she put her homes up for sale. The first two went into foreclosure.

A Short Sale Fail

In spring 2009, Janet and the kids moved into the smallest of the homes. She owed about $298,000 on the mortgage and roughly $44,000 on a second lien. In December 2009, she found a buyer willing to give her $100,000 in cash for it in a short sale. Her lender, Bank of America (BAC), didn't respond, and the court scheduled a foreclosure auction for February 2010.

Janet requested a postponement and contacted Bank of America again about the short sale. It appraised the property at $179,800 and rejected the offer. "The bank does not accept offers at 60% of fair market value," says Bank of America spokeswoman Jumana Bauwens.

A month later, a bank representative named Delila called Janet to tell her the offer would be accepted if she and her broker filed additional documents. Elated, she called the buyer, who was still interested.

"When I called back, I was told [Delila] had been separated from the company and there was no way they could reconstruct that file," says Janet. "The person who took over said 'No thank you.'" Janet asked that we not share her identifying information with Bank of America. As a result, Bauwens can't comment on that aspect of the situation. "It is very difficult for us to respond to [a situation] we haven't been able to research," she says.

In mid-2010, Janet's cancer recurred and she began another round of treatment. She got a fiscal reprieve in October when the bank froze all of its foreclosures while it conducted an investigation of its processes. (Bank of America is still trying to cope with the aftermath of the mortgage meltdown.)

Embracing the Delays

In the meantime, Janet tried the mortgage modification route. From September to mid-December, she called the bank more than two dozen times to request its Home Affordable Modification Program application package.

"Every time I called they would say, 'Oh, your loan doesn't qualify' or 'The investor who bought your loan doesn't participate,' or 'Because you have no income, you don't qualify,'" she says. She persisted, received the application, and spent the next several months sending it to various addresses at the bank's request.

In March 2011, Bank of America wrote to say Janet wasn't eligible for HAMP because the home wasn't her primary residence. She sent copies of her voter ID card, electric, sewer, water, and other bills showing she lived in the house.

In April, Janet received notice that her case had been delayed due to "additional processing time needed." May brought another letter informing her that the lender would call to discuss her loan's eligibility.

Rather than becoming discouraged, Janet learned to embrace the delays. "Once you know [the correspondence] has been received and you can prove it by signature, don't call to check your status," she says. "If the goal is to stay in your home, there's no benefit in moving your file from the bottom to the top of pile."

In June, Janet learned she'd been approved for a trial period in HAMP -- but the modified payment would be $19.96 higher than her original one. "I thought, 'What kind of crack do you people smoke?' If I couldn't pay the first one, I can't pay $19.96 more," she says. "I sent a letter in to begin the process again."

Bauwens speculated that the bank may have combined the mortgage, property taxes and insurance in one payment -- a standard procedure after a loan modification. If that's the case, it wasn't made clear in the documents examined by DailyFinance.

Mistakes and Misinformation

In September, Janet met with a Bank of America home loan counselor, who told her she was no longer eligible for HAMP, but was eligible for her state's attorney general's mortgage modification program. The woman also told Janet that she would be her only contact going forward. The next day, Janet received a letter instructing her to correspond with a different customer relationship manager. Bauwens says the letter may have been sent before the appointment.

Without explanation, in September Janet received a mortgage bill $264.25 higher than her original payment. Bauwens says it's possible that after the trial HAMP offer, taxes and insurance were added to the mortgage bill.

In October, the bank notified Janet that her HAMP offer had been officially canceled, attaching a "values chart" that explained the decision. It was riddled with errors: The income it listed for her was double her actual income; the property was valued at $264,252, despite BofA's earlier appraisal of $179,800; and it listed homeowner's association fees of $24.75. Janet's property isn't part of a homeowner's association.

"All she had to do was call back up and say the information used to calculate the debt-to-income ratio was wrong," says Bauwens. But under a HAMP modification, housing payments are set at 31% of income, and Janet's disability income might not be adequate to sustain even a modified mortgage payment. Depending on which state she lives in, Janet may be eligible for the Hardest Hit Fund, which helps homeowners who have suffered job loss, she adds.

In the letter cancelling the HAMP offer, Bank of America suggested Janet try to do a short sale.

Lesser of Two Evils

Janet says for now, she'll continue to return the ball every time it lands in her court, and will sue if necessary. "My original loan was with Washington Mutual, which was sold to Countrywide, which was sold to B of A, and I truly believe they don't have the requisite documentation to foreclose," she says. "But I still have avenues I can pursue on their own crazy agenda before I pursue mine."

Janet's ultimate goal: Hang on for another 18 months until her youngest kids graduate high school. She concedes the dubious ethics of her quest, but argues it's the lesser of two evils -- gaming the foreclosure system versus becoming homeless.

"I get it -- it's a moral hazard, but it's not by choice. If I could have traded cancer and the loss of my profession, I would have," Janet says. "People should walk in each other's shoes before they make those moral high-ground judgments."


Struggling with your own personal finance situation? I welcome your questions but it's also about your wisdom, ideas, and experiences that may help other readers. Email me at laura.rowley@teamaol.com. You can also follow me on Twitter @MoneyHappiness.





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]]>Bank of AmericaBank of America Home LoansFinanceforeclosure preventionForeclosurePreventionForeclosuresHAMPHome Affordable Modification Programhome foreclosure processHomeAffordableModificationProgramHomeForeclosureProcessmoney and happinessMoneyAndHappinessmortgage modificationMortgageModificationPersonal FinancePersonalFinanceshort salesShortSalesSocial Security Disability InsuranceLaura RowleyTue, 18 Oct 2011 10:00:00 ESTWhat to Do When Mom and Dad Need Money Helphttp://www.dailyfinance.com/2011/10/12/what-to-do-when-mom-and-dad-need-money-help/http://www.dailyfinance.com/2011/10/12/what-to-do-when-mom-and-dad-need-money-help/http://www.dailyfinance.com/2011/10/12/what-to-do-when-mom-and-dad-need-money-help/#commentsFiled under:

what to do when you parents have money troubleOne of the toughest days in many people's lives is the day they realize that their parents need financial help. Especially if your mom and dad were always there for you when you needed them, it's only natural to want to return the favor when they need you.

A lot of families are finding themselves dealing with not just their own financial issues, but those of their parents and grandparents, too. According to the Federal Reserve's 2009 Survey of Consumer Finances, 35% of households headed by those 75 and older carry debt, as do 62.1% of households headed by those between 65 and 74.

That's a rough place to be, especially for people who have already retired or are anticipating retiring soon -- and for those who care about them.

How Can You Help Your Folks?

If your parents are among those in debt on a fixed income, it's important to remember that not only do they need to get through the current crisis, but also the rest of their lives. Be sure to consider both their immediate needs and what the implications may be for the future.

Here are a few key do's and don'ts for you to consider when helping them through their jam.

Do talk with them about their end-to-end financial picture. Consider all their assets, all their debts, all their sources of income, and all the places they're spending their money. There might be a few fairly easy tweaks available, like cutting back cable or downsizing a car, which can help them get back on more solid ground. If larger changes are needed, the sooner you have this conversation, the less painful it will be for both you and them.

Don't offer to co-sign loans or credit cards or otherwise take over any of their debts. The moment you agree to take on their debts, their financial problems become your problems, and their creditors on those debts can come after you and your assets if they fail to make the payments. If you feel personally obligated to financially cover their debt, consider gifting them money to pay it off, instead of co-signing.

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Do look for signs of declining mental and physical health. Especially if your parents had previously been solid stewards of their finances, a sudden onslaught of debt might be a sign of underlying issues. If they're becoming susceptible to scams, forgetting to pay bills, or need to pay for help for daily household tasks, you and they may need to consider more significant changes to their living situation.

Don't raid their protected assets for a "quick fix." Depending on what caused their debt situation and how deep they're in it, bankruptcy may actually be a preferable option. Their IRAs, qualified employer retirement plans (like 401(k) plans and pensions), and homes may be largely protected from most creditors, even in a bankruptcy (depending on both state and federal law). But the moment they take cash out of their IRA to pay a debt, they lose both that protection and the future use of that money.

Do make connections with local elder-care charities, senior centers, and other reputable agencies. You may only have one set of parents going through these types of money troubles, but chances are there are others in your community who are dealing with similar issues as well. Not only will you find the opportunity to commiserate with others going through shared experiences, but they may be able to point you in the direction of programs specifically designed to help.

It's Not Easy, but It Can Be Worth It

Having your parents reach out to you for financial help may be one of the toughest things to happen in your life -- and theirs. Helping them in a way that keeps both today and the future in mind just might be the best gift you can give them to help assure that the remainder of their golden years remain golden.

Motley Fool contributor Chuck Saletta welcomes your comments.


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]]>elder careElderCaregetting out of debtGettingOutOfDebtpersonal financePersonalFinanceretirementretirement accountretirement accountsRetirementAccountRetirementAccountsChuck Saletta, The Motley FoolWed, 12 Oct 2011 11:15:00 ESTSlovakia's Recession Linkhttp://www.dailyfinance.com/2011/10/11/why-slovakia-is-making-world-markets-hold-their-breath/http://www.dailyfinance.com/2011/10/11/why-slovakia-is-making-world-markets-hold-their-breath/http://www.dailyfinance.com/2011/10/11/why-slovakia-is-making-world-markets-hold-their-breath/#commentsFiled under: , , ,

Slovak vote on European bailout fundSlovakia, the Central European country that didn't exist before 1993, looked set on Tuesday to reject the expanded eurozone bailout upon which global investors were pinning their hopes for world financial stability.

Slovakia is the final country in the 17-member euro area to vote on the retooled bailout, known as the European Financial Stability Facility. Every member must ratify the bailout in order for it to be approved, which means that this nation of 5.5 million people has veto power over the Continent's plan for economic salvation. The bailout is intended to prevent Europe's sovereign debt crisis -- largely confined right now to the Mediterranean nations of Greece and Spain -- from spreading and causing a general downtown, the effects of which could ripple across the Atlantic and lead to a U.S. recession.

Europe's economic fate became entangled with the domestic politics of Slovakia when Prime Minister Iveta Radicova tied a vote on the bailout to a confidence vote in her own shaky government, trying to encourage members of her four-party coalition to support the €440 billion ($600 billion) bailout fund. One member, the Freedom of Solidarity Party, remains opposed.

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The country's largest opposition party has said it would support the bailout in a second vote if Tuesday's session resulted in the collapse of the government. If that comes to pass, the enhanced bailout fund would have majority support in the Slovak parliament, meaning the measure would in fact be approved.

Stocks were mixed Tuesday on anxiety over the Slovak vote after the largest four-day rally in worldwide equities. Two Greek banks fell to record lows.

Germany and France, the economic powerhouses of the eurozone, have been leading the effort to shore up Greece, which is teetering on the edge of default, and to recapitalize European banks that have significant exposure to Greek debt. Slovakia, however -- "with average salaries still below those in Greece," according to Bloomberg -- has been less enthusiastic about extending further financial support to previously profligate eurozone members.

The news that the EFSF is likely to be approved in Bratislava one way or another should calm investors' nerves somewhat, though uncertainty will linger, given the lack of a set date for a second vote, should it be needed. Some political wrangling over cabinet positions will have to occur first.

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]]>bailoutCentral EuropeEFSFEuropean Financial Stability FacilityEuropeanFinancialStabilityFacilityEurozone debt crisisEurozoneDebtCrisisFinanceGreecegreek debt crisisGreekDebtCrisisIveta RadičováSlovakiaSolidarity PartyvoteEamon MurphyTue, 11 Oct 2011 12:30:00 ESTThe Financial Landscape: Post-Recession Blues; Netflix Kills Qwiksterhttp://www.dailyfinance.com/2011/10/10/the-financial-landscape-post-recession-blues-netflix-kills-qwi/http://www.dailyfinance.com/2011/10/10/the-financial-landscape-post-recession-blues-netflix-kills-qwi/http://www.dailyfinance.com/2011/10/10/the-financial-landscape-post-recession-blues-netflix-kills-qwi/#commentsFiled under: , , ,

A round-up of news from across the financial world:

o. "In a grim sign of the enduring nature of the economic slump" -- and a mark of just how useless official macroeconomic determinations can sometimes seem to those on the ground -- The New York Times reports that "household income declined more in the two years after the recession ended than it did during the recession itself." According to one of the researchers behind the report, the 9.8% fall in income from the recession's start through this June represents "a significant decline in the American standard of living."

o. Harvard economist Martin Feldstein sounds a related note, calling the recovery "about as bad an expansion as I've ever seen" and insisting that there's a "nontrivial" chance of another recession. Bloomberg, on the other hand, argues that "the U.S. has likely dodged a recession for now, even though it's too early to sound the all-clear for the economy."

o. Reuters reports that European leaders claim to have devised a new plan to stabilize the eurozone by the end of the month, sending global stocks and the euro higher, though German Chancellor Angela Merkel and French President Nicholas Sarkozy were vague on the details of how they would solve Greece's sovereign debt crisis and recapitalize the continent's banks.

o. Netflix kills its much-derided Qwikster plan before the DVD service has even launched:

o. Free texting apps threaten to undermine the profits of wireless carriers, "an industry that makes most of its money from services that are high priced and low bandwidth, like texting."

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]]>Angela MerkeleurozoneFinanceGreat RecessionGreatRecessionGreecegreek debt crisisGreekDebtCrisisHousehold IncomeHouseholdIncomeMartin FeldsteinNetflix IncNicolas SarkozyQwikstersovereign debt crisisSovereignDebtCrisisEamon MurphyMon, 10 Oct 2011 12:00:00 ESTPersonal Bankruptcy Filings Fall, But That's Nothing to Cheer Abouthttp://www.dailyfinance.com/2011/10/05/personal-bankruptcy-filings-fall-but-thats-nothing-to-cheer-ab/http://www.dailyfinance.com/2011/10/05/personal-bankruptcy-filings-fall-but-thats-nothing-to-cheer-ab/http://www.dailyfinance.com/2011/10/05/personal-bankruptcy-filings-fall-but-thats-nothing-to-cheer-ab/#commentsFiled under: , ,

Personal Bankruptcy Filings Fall, But That's Nothing to Cheer About In the current cloudy economy, finance experts and everyday folks are constantly hunting through the news and statistics for silver linings. So it would surely seem a good thing that in the first nine months of this year, personal bankruptcy filings decreased 10% compared to a year earlier, according to the American Bankruptcy Institute -- but experts say hold the applause.

While we might want to take some comfort in the fact that bankruptcies declined from last year -- which had the highest number of filings since 2005 -- truth is, it's not necessarily good news.

"People file bankruptcy because of financial distress," explains David Leibowitz, co-chair of the Consumer Bankruptcy Committee of the ABI. "They are afraid of losing their houses, getting their wages garnished or losing their personal property. If the personal property is exempt, as is often the case for people who have little in the way of assets, if they no longer own their own home as is more and more frequently the case, if the home has no equity, which is very often the case, or if they are unemployed, then people who owe money for credit cards, medical bills and the like are said to be judgment-proof. There's no need for them to file bankruptcy."

Then too, once you file a bankruptcy case, you can't file again under Chapter 7 for eight years. With well over 10 million bankruptcy cases in the past eight years, that's a lot of people who are ineligible to file again, says Leibowitz.

"The fact is, bankruptcy cases continue to be filed at high levels. This is reflective of the very poor economy and does not necessarily reflect a leading economic indicator of better times to come," says Leibowitz.

A Range of Economically Unhealthy Explanations

Something else could be going on too. Creditors are working with consumers more than they ever have in an effort to just collect something. "I see a lot of people at all income levels that are a paying a fixed monthly payment on credit cards which they negotiated better rates with the credit card companies," says Julie Murphy Casserly, president of JMC Wealth Management.

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Also, she says, consumers are able to easily walk away from bad home purchases though short sales or foreclosures, either of which can shore up their financial position a lot. And thanks to the sheer volume of home loans in default, homeowners are able to skip paying their mortgages for 18 to 24 months before a bank gets around to kicking them out.

David McClough, assistant professor of economics at Ohio Northern University, certainly sees nothing in the numbers to cheer about either. "Consider, for example, how the financial crisis, recession, housing crisis, and jobless recovery undoubtedly moved forward many bankruptcies that would have been delayed," he says. "In this case, the decline implies that more people declared bankruptcy sooner and thus have struggled with the consequences longer. This is not a good thing."

The 2005 Bankruptcy Act, made it more difficult for individuals to file personal bankruptcy and see a full discharge of their debts. Consequently, many who file will have to pay some of their debts over time. That means filing bankruptcy is no longer the golden parachute it once was.

"This could discourage the greater number of filers," points out Jeffrey Verdon, a tax and estate planning attorney with the Jeffrey M. Verdon Law Group. He has another suspicion: "The extension of unemployment benefits may have had an affect on the number of those who file for personal bankruptcy."

Others suggest the dip may be temporary. "As foreclosure filings again reach lofty levels, the bankruptcy filings will again spike as people file to slow down the foreclosure sale," predicts Ted Connolly, a bankruptcy lawyer with Duane Morris and author of Road Out of Debt.

Simply put, there are better tea leaves for reading the economy than the bankruptcy numbers. "Mortgage foreclosures and depressed real estate values continue to be a drag on the economy," says the ABI's Leibowitz. "The best indicator of better times to come is the level of unemployment, which remains persistently high. Interestingly, temporary employment is increasing. This might be a leading indicator of better times to come."

Connolly, keeping it real, says: "The decrease in filings is too insignificant to portend an improving economy. Instead, the filing numbers continue to show a weak economy, teetering on the brink of a downward fall."


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]]>American Bankruptcy InstituteAmericanBankruptcyInstitutebankruptcyChapter 7Chapter7creditdebtEconomic IndicatorsEconomicIndicatorseconomyFinanceForeclosurespersonal financePersonalFinanceshort salesShortSalesSheryl Nance-NashWed, 05 Oct 2011 16:15:00 ESTFamily Needs a Post-Unemployment Debt Reduction Planhttp://www.dailyfinance.com/2011/09/23/family-needs-a-post-unemployment-debt-reduction-plan/http://www.dailyfinance.com/2011/09/23/family-needs-a-post-unemployment-debt-reduction-plan/http://www.dailyfinance.com/2011/09/23/family-needs-a-post-unemployment-debt-reduction-plan/#commentsFiled under: ,

After a long spell in which one or both spouses were unemployed, a couple with three kids finds themselves $50,000 in debt. Now, with wife and husband back at work, they're aiming to get all their financial pins in a row and bowl a strike. DailyFinance's Laura Rowley offers a strategy for success.


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]]>advicedebt reductionDebtReductionfamily budgetFamilyBudgetfeatured videoFeaturedVideofinancial planFinancialPlanhiringjobsLaura RowleyLauraRowleymoeny and happinessMoenyAndHappinessnew jobNewJobpaying off credit cardspaying off debtPayingOffCreditCardsPayingOffDebtrecoveryunemploymentLaura RowleyFri, 23 Sep 2011 15:30:00 ESTCredit Card Debt Soars as Americans Borrow Like It's 2006http://www.dailyfinance.com/2011/09/12/credit-card-debt-soars-as-americans-borrow-like-its-2006/http://www.dailyfinance.com/2011/09/12/credit-card-debt-soars-as-americans-borrow-like-its-2006/http://www.dailyfinance.com/2011/09/12/credit-card-debt-soars-as-americans-borrow-like-its-2006/#commentsFiled under: , , ,

credit debt risingHabits are hard to break: Just when you think you're firmly in control, you backslide again. Such may be the case with Americans debt addiction.

According to CardHub.com's, Q2 2011 Credit Card Debt Study, U.S. consumers accumulated a staggering $18.4 billion in credit card debt in the second quarter -- 66% more than they accumulated in the same quarter a year ago, and 368% more than in the second quarter of 2009. Based on the study, Americans will end 2011 with around $54 billion more in credit card debt than they began the year with.

"A debt increase of $18.4 billion during a single quarter is mind boggling, especially when you consider that this increase is 368% higher than what we witnessed in the same quarter two years ago," says Odysseas Papadimitriou, CEO of CardHub.com.com. The study focused on consumer debt data from the Federal Reserve's G19 report in conjunction with quarterly charge-off data to determine how much consumer debt actually increased when you consider the amount of bad debt written off the books.

The upside is that consumers ended the first quarter of this year with a significant net decrease in credit card debt -- as they had in the first quarter of 2010. However, in subsequent quarters last year, they proceeded to wipe out that reduction.

"There is no doubt in my mind that a lot of consumers are reverting back to pre-recession habits and that this is why we are witnessing such a dramatic increase in credit card debt (net of charge-offs). Anyone whose income was tied to the housing boom -- either directly or indirectly -- should realize that those years aren't coming back unless we find ourselves in another bubble," says Papadimitriou. Also troubling, say the folks at CardHub.com, is that in 2011, people seem to be spending up their debt at a faster rate than ever. Last year ended with a net increase in debt of $9.1 billion, which practically erased the net decrease of $10 billion in 2009. In contrast, 2011's projected $54 billion increase in debt is hair raising.

Overleveraging Again

To be fair, he says, part of the increase is also driven by consumers who lived within their means before the Great Recession, did not see income reductions when the housing bubble burst, and are now increasing spending because of growing optimism about the economy. That's a healthy sign. "Without being able to quantify this, my assessment is that the majority of the increase is attributed to the failure of many to realize that their disposable incomes will not be going back to "bubble levels" anytime soon," says Papadimitriou.

What does all this mean for our seesawing economy? "Our economy is in this state because a significant number of consumers wanted to overleverage themselves and regulators allowed this to take place, primarily through the housing bubble. While a trend that points to consumers reverting back to pre-recession debt levels could be construed as a sign that things are returning to 'normal', I believe it is worrisome indicator of a return to overleverage," says Papadimitriiou.

He says there are three clear takeaways from the study.

1. Without a doubt, people are much more confident about the nation's financial outlook and that more people are finding jobs (even if it is part-time).

2. Consumers are recognizing that credit cards are now safer vehicles for revolving debt, thanks to the new credit card law, which prevents issuers from arbitrarily changing a consumer's interest rate on an existing balance.

3. Some consumers simply have not come to terms with the fact that they shouldn't return to their pre-recession spending habits, no matter how much the economy recovers. Consumers need to think strategically: Maintain an excellent credit standing, ensure that you have the income to comfortably pay off any new debt, and buy items on credit only when you will be better off financially by getting them now as opposed to buying them later with cash -- for example, buying a home instead of spending the same amount of money in rent,or buying equipment for your small business that will increase revenue.

Instead of increasing your overall debt load, focus on lowering the cost of your existing debt, he says. For example, there are some amazing 0% balance-transfer credit card offers available now that, in combination with the new credit card law, can help consumers lower the cost of their existing debt without having to worry about "gotcha" practices, says Papadimitriou.

Mostly, he says, we should learn from our mistakes.

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]]>cardhubcharge offsChargeOffscreditcredit card debtcredit cardsCreditCardDebtCreditCardsdebtdefaultseconomyFederal Reserve SystemFinanceGreat Recessionpersonal debtpersonal financePersonalDebtPersonalFinanceSheryl Nance-NashMon, 12 Sep 2011 16:30:00 ESTWhat's More Important: Saving or Paying Down Debts?http://www.dailyfinance.com/2011/09/03/whats-more-important-saving-or-paying-down-debts/http://www.dailyfinance.com/2011/09/03/whats-more-important-saving-or-paying-down-debts/http://www.dailyfinance.com/2011/09/03/whats-more-important-saving-or-paying-down-debts/#commentsFiled under: ,

For many households, it's a personal finance dilemma: Should they try to pay down debt first, or build up savings? In the aftermath of the Great Recession, opinions have clearly tipped toward the ditch-your-debt side.

According to the August poll by the National Foundation for Credit Counseling, Americans are choosing to deal with what they owe: 89% of those surveyed said they value paying down debt over saving money; just 11% chose saving first.

America has a new aversion to debt, and with a national revolving debt tab of $798 billion as of June, and household debt averaging around $11,000, who can blame us? According to the NFCC, new purchases are more likely to be paid for with debit cards than credit.

A Question of Opportunity Cost

At face value, paying down debt sounds like it's always a good thing, but if it comes at the expense of saving, it's a bit more complicated.

"It is a good idea to pay down debt over savings if you have already started a savings account," says Harrine Freeman, author of How to Get Out of Debt: Get an "A" Credit Rating for Free.

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Making your debt demon the top priority also makes sense if you are someone who loses sleep over debt, if you're trying to reshape your debt ratios and credit scores, or if you will benefit more from better cash flow later than today, says Rich Arzaga, founder of Cornerstone Wealth Management.

Then too, the value of paying down debt is directly proportional to the interest charged, says certified financial planner Michael Kresh.

Credit card debt, which can often exceed 20% interest, should always be a priority to pay down, he says. But all questions regarding how you allocate your money should be looked at through the lens of opportunity cost.

For example, is the interest you're paying on money you owe greater or less than the return on an alternative investment you could make with the funds?

If you have credit card debt at 14%, paying it off is like earning 14% on those funds -- a better profit than you are likely to make leaving the money elsewhere. And if the money you'd use is sitting in a low-interest bank account, you net much more by paying off that plastic. On the other hand, if you can refinance your mortgage to 3.5% - 4% (the lowest rates in our lifetimes), keeping a low-interest loan active while putting money into other investments can garner you a net profit, says Kresh.

Paying down debt also might not be the best move if you're likely squander the cash surplus once the debt is paid; if you're getting the benefit of an interest write-off to help offset your income taxes; or if you have the ability to manage debt in the short term or long term, says Arzaga.

Advocating for Saving

Not everyone agrees on the question of putting debt first.

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To pay off debt before you have an emergency fund in place makes no sense, says Kevin Lynch, an assistant professor at The American College. Getting a cash cushion in place should be the first order of business, he feels.

Generally, people should be saving 10% of their income, says Thomas Fox, community outreach director at Cambridge Credit Counseling. "Although with the recession people began to save again, and it's now around 5% of income, in countries like Japan, the savings rate is 25%, and it's 50% in China."

In this uncertain economy, you should be looking to have money to cover at least 10 months of expenses where you can readily put your hands on it, says Fox.

If you do choose to focus on debt, don't get too relaxed once it's paid off. Instead, reallocate the amount you had been spending each month on freeing yourself from debt toward another major financial goal, such as retirement, education, buying a new car, or whatever tops your list.

In the best of worlds, we would split the difference: "Pay down debt and contribute to a savings account at the same time," says Freeman. "That way you will have an emergency fund and pay down debt which increases your credit score, reduces credit card usage and improves your financial life."



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]]>2011+pay+debt+or+emergency+fund2011paydebtoremergencyfundcreditCredit card debtcredit cardsCreditCardsdebtemergency fundEmergencyFundFinanceGreat Recessioninterest ratesInterestRatesJapanKevin LynchmortgageNational Foundation for Credit Counselingopportunity costOpportunityCostpersonal financePersonalFinanceretirementsavingTax CreditTaxCreditThe American CollegeSheryl Nance-NashSat, 03 Sep 2011 07:00:00 ESTOnline Pawn Shop Tries to Polish Up an Old Lending Ideahttp://www.dailyfinance.com/2011/09/02/online-pawn-shop-tries-to-polish-up-an-old-lending-idea/http://www.dailyfinance.com/2011/09/02/online-pawn-shop-tries-to-polish-up-an-old-lending-idea/http://www.dailyfinance.com/2011/09/02/online-pawn-shop-tries-to-polish-up-an-old-lending-idea/#commentsFiled under: , , , ,

PawngoJanet Barbour wanted to take her 11-year-old grandson Brian to Disney World, but money had been tight since her husband's death. So the 63-year-old Barbour arranged a loan through an Internet pawn broker called Pawngo. She put up seven diamond and emerald rings as collateral for $700 at 6% a month interest, and off the two went from their Charlotte, N.C., home to the Magic Kingdom in Orlando, Fla. "It didn't cover it all, but it did cover tickets and part of the gas," she told DailyFinance.

Two-year-old Pawngo bills itself as a more upscale pawnshop for the digital age, and Barbour as the new breed of pawn customer -- not desperate, just temporarily cash-strapped. The average loan from a storefront pawn shop is $150, while the Pawngo average is $2,000, according to the company.

"Our services are meant for people that have assets that don't necessarily want to sell their assets," explained Pawngo CEO and co-founder Todd Hills. "It's a difficult time."

Barbour checked out the local brick-and-mortar pawn shops and said she was turned off by the 20%-plus interest. Pawngo's rate runs between 3% and 6% a month. If you borrow $1,000 at 6%, $60 a month is automatically debited from your bank account until you repay the loan. Otherwise, the electronic pawn outlet operates pretty much the same as a brick-and-mortar store, with stay-at-home convenience. (Those low numbers may seem fairly painless, but it's worth noting: Even without the compounding interest trap, that's actually an annual rate of 72% -- much higher than the most expensive credit card.)

You click on Pawngo.com and answer questions about your collateral. You then agree to temporary terms and Fedex the item or items to Pawngo (on their dime through a digital shipping label). Pawngo offers 50% of the appraised value as a loan and deposits the money in your account as soon as you give the final OK. You have three months to pay the loan back.

Less Sleaze, More Ease

The company is trying to dispel the pawn shop stereotype of a sketchy storefront dealing in fenced goods. Heck, let's throw in a cigar-chomping sleaze in a moth-eaten sweater behind the counter to complete the picture. Pawngo is supposed to be the pawn shop your grandma would visit -- virtually anyway.

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Hills pointed out that unlike a default on a mortgage or car loan, his company -- or any other pawn shop -- will not kick you out of your house, take your car, bash your credit rating or take you to court. Pawngo merely keeps your modest assets and sells them to pay back the loan. It will gladly do business with you again, should an emergency come up like a plumbing catastrophe or car breakdown, Hills said.

"It's really the oldest form of borrowing," he said. "You're borrowing money against your past and you're not leveraging against your future. We've developed a much friendlier user experience to get things done."

A Google search for "online pawn shop" produced no other obvious competitors on a national scale. Pawngo recently underwent a so-called "rebranding" and relaunch in June to reflect its motto: "The Pawn Shop Reimagined!" Since its inception, the company has known nothing but recession and recession hangover followed by the threat of a relapse. Pawn shops generally thrive in that kind of economic climate. The stock price for pawn shop operator Ezcorp (EZPW) doubled to $38 a share in the last year, AP reported. The number of Florida's pawn shops doubled in the past year -- the state now houses 1,280 of the nation's 10,000 pawn shops, the National Pawnbrokers Association told the Miami Herald. And reality shows like the History Channel's Pawn Stars have raised awareness of pawning as well.

Pawngo, backed in part by Groupon founders Eric Lefkofsky and Brad Keywell, already has loaned out more than $2.5 million, Hills estimates. Its loan cap per person is $1 million. One of the biggest borrowers so far was a trucking company owner whose fleet sputtered into the shop, Hills said. He forked over a Rolex, a Cartier and some diamonds for a $50,000 loan.

Barbour, the North Carolina grandmother, might not have a business to save, but she's ready to pawn again for a vacation after she gets her rings back. "If I want to take a cruise," she said, "I have no reservations whatsoever."




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]]>borrowingCollateralcredit cardsCreditCardsEZcorp IncFedex CorpFinanceFloridaHistoryinterest rateInterestRateloanMagic KingdomNorth Carolinapawn shopsPawn StarspawngoPawnShopsThe Miami HeraldWalt Disney World ResortRon DickerFri, 02 Sep 2011 11:00:00 ESTReverse Mortgages: Do the Benefits Outweigh the Risks?http://www.dailyfinance.com/2011/08/31/reverse-mortgages-benefits-risks-money-and-happiness/http://www.dailyfinance.com/2011/08/31/reverse-mortgages-benefits-risks-money-and-happiness/http://www.dailyfinance.com/2011/08/31/reverse-mortgages-benefits-risks-money-and-happiness/#commentsFiled under: , ,

The reverse mortgage was invented decades ago to help seniors facing economic hardship access the equity in their homes. Between 1990 and 2010, more than 660,000 reverse mortgages were issued, according to the AARP. Today, the products are aggressively marketed through ads featuring Boomer-friendly spokespeople such as Henry Winkler (the Fonz from Happy Days). But these products are complicated, expensive and ripe for abuse, which lead a reader named Fred to ask:

"What is your opinion about reverse mortgages? So many financial planners are pushing this sort of thing, but I heard that fees are steep."

Home Equity Conversion Mortgage (HECMs) are the most popular reverse mortgage available. They are federally insured and offer certain borrower protections. Seniors who either own their homes outright or have low mortgage balances can take out reverse mortgages and convert their equity into cash -- either as a lump sum, monthly payment or line of credit, or some combination of the three.

There are no income or credit requirements, and the loan has no monthly payment. Instead, the lender pays the homeowner, and the reverse mortgage balance rises as a result, accruing interest and fees. Lenders get repaid when the owner either moves or dies, and the home is sold. HECMs are insured by the Federal Housing Administration, so if for the sale price of the home falls short of the loan amount, FHA pays the lender the difference.

"Reverse mortgages are full of pitfalls and they are very expensive -- but they are very valuable to the people for whom they work," says Margot Saunders, at counsel with the NCLC. "If you are sitting on a mortgage and you can afford to make payments on it, and have home equity and other assets, this is probably not a good idea. But if you are 85 years old and have $250 a month in income and a $500,000 house, it's a great idea no matter how much it costs, because the lender will give you money you don't otherwise have."

In short, these pricey loans can be a lifeline for low-income seniors. What they aren't is a cost-effective source of cash to buy sports cars or dream vacations, although the industry has aggressively marketed them that way. Lenders have also falsely pitched reverse mortgages as some kind of government benefit program, or part of the economic stimulus plan -- and been sued by states for doing so.

The amount someone can borrow depends on their age and the amount of equity in the home, but the maximum is $625,500. (The loan limit was raised in 2009 as part of the federal stimulus law and is set to expire Dec. 31, after which it reverts to $417,000.)

The Risky and Expensive Sides of the Lifeline

Reverse mortgages also come with hefty fees, which can run as high as 5% of your home's value by some estimates. The FHA charges everyone who gets one a mortgage insurance premium fee of either 0.01% or 2% up front, as well as ongoing annual fees. The HECM Saver loan, created in October 2010, has lower fees, but typically higher interest rates and more restrictions on borrowing. Consumers also have to pay a fee up front for third-party counseling to make sure they have a clear understanding of their options.

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Another pitfall: The NCLC and other groups have documented multiple instances in which seniors were steered unnecessarily into products with higher interest rates and fees by brokers seeking bigger commissions. While HUD capped origination fees, it has done nothing about "yield spread premiums" given to brokers.

In addition, Fannie Mae used to buy reverse mortgages from lenders and hold them in its portfolio. But in 2006, reverse mortgages were securitized for the first time, and the resulting securities sold to investors. Since investors like predictable, fixed rates of return, fixed-rate loans have begun dominating the market. That's actually problematic for seniors, because fixed-rate reverse mortgages must be distributed to their borrowers as lump sums.

Think about it: You cash out the equity from your home at, say, a 5% interest rate and then invest it -- where? In a savings account earning 1%? You're losing 4% a year. This is where the bad apples in the business bob up: Some brokers try to convince seniors to use the cash to buy insurance policies, annuities and the like. Steer clear of anyone who links the reverse mortgage transaction to a subsequent financial product purchase. Although the Housing and Economic Recovery Act of 2008 banned cross-selling of this kind, it still occurs. If you have access to a simple home equity line of credit or home equity loan, you're better off.

The final problem with reverse mortgages arises when seniors quickly spend the lump sum. Normally, one only pays off the loan when the owner of the house moves or dies, and the home is sold, but a reverse mortgage also comes due if the owner fails to pay property taxes and homeowners insurance, or make necessary repairs. Those situations are occurring more frequently lately, according to the NCLC.

So, find a variable-rate reverse mortgage that allows you to draw on the line of credit as needed instead of taking a lump sum, advises Saunders: "Homeowners who take the cash all at once may not have the ability to pay property taxes and insurance later, and HUD is directing lenders to foreclose. The rules should be changed so there is an evaluation of the ongoing ability to pay taxes and insurance, or money should be kept in reserve."

Borrowers should also delay getting a reverse mortgage as long as possible in the event they need the money for long-term care, according to the AARP, which offers a host of other recommendations.

Good luck with your decision.

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]]>AARPFannie MaeFederal Housing AdministrationFHAFinanceHECMhecm saverHecmSaverHenry WinklerHome Equity Conversion Mortgagehome equity line of credithome equity loansHomeEquityConversionMortgageHomeEquityLineOfCreditHomeEquityLoansHousing and Economic Recovery Act of 2008insurancemoney and happinessMoneyAndHappinesspersonal financePersonalFinancereverse mortgagesReverseMortgagesseniorsLaura RowleyWed, 31 Aug 2011 10:20:00 ESTHomeowners Move Away From 30-Year Mortgageshttp://www.dailyfinance.com/2011/08/16/homeowners-move-away-from-30-year-mortgages/http://www.dailyfinance.com/2011/08/16/homeowners-move-away-from-30-year-mortgages/http://www.dailyfinance.com/2011/08/16/homeowners-move-away-from-30-year-mortgages/#commentsFiled under: , , , ,

MortgagesMany homeowners who are refinancing their mortgages have been abandoning 30-year fixed-rate loans for 15-year and 20-year loans.

According to the Freddie Mac Quarterly Product Transition Report, 37% of those who refinanced a mortgage in the second quarter picked a 15-year or 20-year plan to replace their 30-year fixed-rate obligation. This was the highest number since the third quarter of 2003, when the U.S. housing boom was getting underway.

"Compared to a 30-year fixed-rate mortgage, the interest rate on 15-year fixed was about 0.8 percentage points lower during the second quarter," Frank Nothaft, Freddie Mac vice president and chief economist, said in a press release. "For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term."

Fixed-rate loans accounted for 95% of refinanced loans during the quarter, according to the report.

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Why 30-Year Loans are Less Fashionable Now

The lowest interest rates on record may have encouraged people to reduce their terms. People may not want the weight of a mortgage over their heads for three decades. Some also might now believe it will take less than 30 years for them to be able to sell their homes if they want to, which -- until recently, with the collapsed housing market -- seemed like less than a sure bet. Why sell a house with a mortgage when eventually it can be sold "free and clear"?

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The choice to shorten a mortgage term may have offsetting impacts. A homeowner with a new mortgage of 15-years may save tens of thousands of dollars in interest over the course of the loan. The mortgage holder may also get much less of a tax deduction over the period they hold their loans. On the other hand, people may also feel that if they have little or no home equity, a 30-year obligation to pay for a home is a poor use of funds.

While economists speculate about why people choose among 15-year, 20-year, or 30-year mortgages, one thing is certain. The decisions are mainly being made by those who are refinancing, not buying. Far fewer mortgages are being used to buy new homes. Virtually every piece of housing data points to that.

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]]>15-year mortgage rates15-yearMortgageRates20-year mortgage rates20-yearMortgageRatesFreddie MacFreddieMachome buyingHomeBuyinghousinghousing marketHousingMarketinterest ratesInterestRateslow interest ratesLowInterestRatesmortgagemortgage ratesMortgageRatesmortgagesDouglas McIntyreTue, 16 Aug 2011 10:00:00 ESTIs Now the Time to Refinance Your Mortgage?http://www.dailyfinance.com/2011/08/15/is-now-the-time-to-refinance-your-mortgage/http://www.dailyfinance.com/2011/08/15/is-now-the-time-to-refinance-your-mortgage/http://www.dailyfinance.com/2011/08/15/is-now-the-time-to-refinance-your-mortgage/#commentsFiled under: , , , , ,

RefinancingSome homeowners in their 50s are taking advantage of historic low rates to refinance their homes and score themselves a mortgage-free retirement.

Mark and Jan Sass, 55-year-olds who live in Cincinnati, Ohio, refinanced their home last week to lock in lower rates, Reuters reported. They switched from a 20-year fixed-rate loan of 4.875%, with 12 years remaining, to 10-year mortgage with a 3.5% rate.

"The opportunity to look 10 years out and know that - unless things change - we won't have a mortgage when we retire looked like a smart decision," Sass told the news agency.

A Refi surge

They aren't alone. U.S. banks have seen a recent surge in loan applications that's almost entirely due to refinancing, Greg McBride, senior financial analyst at Bankrate.com, told DailyFinance.

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Mortgage applications for the week of Aug. 5 rose more than 21% over the previous week and three quarters of those applications were for were for refinancing, according to the Mortgage Bankers Association, also known as MBA.

"Over the past month, refinance application volume has increased by 63%," Mike Fratantoni, MBA's vice president of research and economics, said in a statement. "Refinance applications for jumbo loans increased by almost 75% relative to last week. Despite these low mortgage rates, applications for home purchase have remained little changed through the summer."

According to a Bankrate.com survey released Thursday, the average 15-year fixed rate for a mortgage reset is 3.61%, while 30-year fixed-rate mortgages average out at slightly less than 4.5%. The jumbo 30-year fixed rate set a new record of 5.02%, the Bankrate.com survey found.

Should You Refi?

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So with all the chatter about low interest rates, is refinancing right for you? To answer that question -- or to pick the right mortgage for a refinancing deal -- homeowners should consider their home equity, credit history, time horizon, age and cash flow.

For example, homeowners in their early 50s who have lived in their homes for a number of years and have positive cash flow have little reason to stretch out a longer-term loan, says McBride. Refinancing into a shorter-term now could put them on track to pay off their house by retirement time.

Alternatively, homeowners who are in their 30s and starting a family might be looking at refinancing into another 30-year loan as a way to create more breathing room in the monthly family budget and to enable them to sock more money away into retirement or college savings. Mortgage calculators can help homeowners determine where refinancing is a good option.

For a back-of-the-envelope calculation: Divide how much will it cost you by how much you will save. That will tell you break-even point. If it will save you the amount of your mortgage payments for the two- to three-year range, says McBride, then it's generally worthwhile to consider refinancing.

See more stories on refinancing at AOL Real Estate.

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]]>home buyinghome loanshome pricesHomeBuyingHomeLoansHomePricesinterest ratesInterestRatesmortgagemortgagesPersonal FinancePersonalFinancerefinancerefinance mortgageRefinanceMortgagerefinancingCatherine NewMon, 15 Aug 2011 06:30:00 ESTWhere Americans Go for Cash in a Pinchhttp://www.dailyfinance.com/2011/08/10/where-americans-go-for-cash-in-a-pinch/http://www.dailyfinance.com/2011/08/10/where-americans-go-for-cash-in-a-pinch/http://www.dailyfinance.com/2011/08/10/where-americans-go-for-cash-in-a-pinch/#commentsFiled under: , , ,

America's coin purseWhere do you turn when you're hit with a nasty surprise expense? If you're like most Americans, it's not your savings account.

A recent online poll by the National Foundation for Credit Counseling showed that 64% of Americans would tap sources other than their savings account if they were slapped with an unexpected $1,000 bill.

Here's the breakdown of the percentage of respondents that chose each of the different answers:

36% savings account
17% borrow from friends or family
17% disregard other monthly expenses
12% sell or pawn assets
9% take out a loan
9% cash advance on your credit card.

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Wrong Answer

In other words, only 36% of people had the best answer. Because everything else is a no-no. When you don't have an emergency fund, you're bound to make less-than-ideal choices that can just make matters worse, sooner or later. Do you really want to ask mom or dad for money, again; skip a payment on one bill to pay another; or sell an item, whether you can get a good price or not?

"Selecting any option other than taking the money from savings should be a red flag," said Gail Cunningham, a NFCC spokeswoman, in a prepared statement. "If saving money has always seemed out of reach, there is no better time than now to get to the root of the problem and protect yourself, your family and your financial future."


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]]>bankingbanksbillsdebtemergency fundsEmergencyFundshousehold billshousehold budgethousehold financesHouseholdBillsHouseholdBudgetHouseholdFinancessacha baron cohenSachaBaronCohenSavingsaving moneySavingMoneysavingsSavings AccountSavingsAccountSheryl Nance-NashWed, 10 Aug 2011 13:30:00 EST