Avoiding Debt Management Plan Scams!

A Debt Management Plan allows you to achieve financial balance within your means with the cooperation of your creditors. It provides you the structure of making only one monthly payment rather than keeping up with several bills due at different times during the month. Through predetermined policies established with creditors, Debt Management Plan participants are often offered concessions that allow them to repay the accumulated debt over a shorter period of time, resulting in less total interest paid. Along with the convenience of one monthly payment and the opportunity for creditor concessions, other advantages of this type of program include: repayment of all unsecured debt within a maximum of 60 months; the stopping of harassing correspondence from creditors; one point of contact, and educational opportunities. Disadvantages may include a potential for the program to negatively impact your credit rating.

 

It’s important that you do your homework and research the debt management agency prior to doing business with them. Most if not all reputable credit counseling organizations are nonprofit or not-for-profit organizations, are members of their local Better Business Bureau, and are accredited affiliates of the industry trade organizations such as the National Foundation for Credit Counseling. Additionally, most have informative web sites that explain their philosophy, provide thorough and clear explanations of their programs, and provide educational opportunities to their clients. Credit counseling organizations teach you how to manage your money and offer you options on how to better manage your debt. Counselors are certified and are trained in areas of consumer credit, money management, debt management, budgeting, and often housing. Counselors will discuss your entire financial situation with you and help you develop a personalized plan to solve your financial problems.

If you choose the right program for your needs and have the income to complete it, a Debt Management Plan is an excellent method for resolving money management and debt issues.

Debt Reduction Options

When you work with a Debt Management Agency, the counselors may suggest several programs designed to help reduce your debt. Here are some examples:

• Debt Consolidation: This simple program is also the most popular. After an initial consultation, a counselor will contact your creditors and attempt to get your fees reduced and your interest rates lowered. The new balance is then combined into a single monthly payment. This payment is sent to the debt management agency, which disburses the funds to your creditors, minus any fees charged by the agency.
• Debt Consolidation Loans: You obtain a loan from a lender to pay off your unsecured debts, and make one monthly payment to that lender. Many of these loans are actually from credit card companies offering “consolidation loans.”
• Debt Settlement: You agree to have a reduced debt paid off in less than one year, or in a lump sum. The counselor may then be able to get your debts reduced by up to 50%. If you pursue this option, be sure to get the agreement in writing so as to reduce the likelihood of being charged later for the remaining balance not paid in the settlement. This will show as a “settled” account on your credit report, rather than “paid as agreed.”
• Mortgage Equity Debt Payoff: Under this program, you borrow from the equity in your house to pay off your unsecured debts. As we discussed earlier, this is most commonly done either by refinancing your home, or taking out a second mortgage.

Keep in mind that many financial advisers stress that in many cases, using a loan to pay off a debt is not a good idea, because you’re simply trading one debt for another. In the case of an equity loan, you could end up paying interest on that debt for the next twenty to thirty years, which will cost you significantly more than if you were to choose another method. You’re also taking an unsecured debt and turning it into a secured debt, so be sure you’re fully aware of the consequences and can repay the new loan.

The following link will guide you in your research in determining whether a debt management plan is right for you. This website will show you the important questions to ask when choosing a Credit Counselor.

The Federal Trade Commission (FTC): For People on Debt Management Plans: A Must-Do List

Lawyers, Real Estate Agents, Loan Modification Companies … Leave me the hell alone!

So  here you are, behind on your mortgage, credit cards, utilities and god knows what else. Your bank recorded a Notice of Default on your home and all of a sudden … BAM … mountains of unsolicited mail and phone calls from everyone and their brother who would be more than happy to help you with your problems. Sound familiar?

It has been my experience that most homeowners were not irresponsible in their spending habits, ok maybe just a little. But that wasn’t the source of the problem that made everything spiral out of control. Sure, the savings may have been non-existent but you would be surprised how many homeowners I have worked with actually had savings accounts. The source of the problem is generally a one-time event that was life altering, aka; death in the family, illness accompanied with massive medical bills and no health insurance, loss of job, etc. Believe it or not, I have worked with people where all these issues culminated into one bad year for the family. Now, add to the stress; one never ending pile of “help” from strangers that you never asked for and it makes you want to snap. I get it.

How is it that you get this unsolicited mail and barrage of phone calls, simply put, public information. When you purchase the property, the information is recorded with the county. Since the county information is public information anyone (actually everyone) can get this info and businesses will use it for marketing purposes. This in itself is not necesarily a bad thing, you may find that one of these nice companies can actually help you in your current situation.

Rules of the road: There are some rules of the road you need to follow to protect yourself and your family. Our focus here is upfront fees in return to process your loan modification.

If you are considering a loan modification remember this one vital rule. Advance fees are illegal in the state of California. If they ask you for money up front, collect money up front or collect fees up front, they are in violation of California law. This link will take you to a Consumer Alert Bulletin issued by the California Department of Real Estate regarding paying fees up front for loan modifications.

I always tell my clients, if you would like to pursue a loan modification, I recommend giving it a shot yourself. No one can convey your hardship better than you. The reason most homeowners don’t do this is simply because they don’t have the time, patience or feel intimidated by the process. Don’t let these things stop you from giving it try. If you are denied, you can apply again. There are different programs available depending upon your situation. Whatever  you do, don’t procrastinate. If you feel that you aren’t making progress, give me a call. I’ll give it a shot, but the truth of the matter is, depending upon your situation to include debt-to-income ratio, etc., a loan modification may not be in the cards. It really depends on what you and your lender need to make it make sense for you both.

The truth is a small number of loan modifications have actually been processed and approved. Be aware that the first 90 days after you and the bank agree on a modification might very possibly be a trial period which means that the lender could decide to rescind the loan modification after the trial period. If they rescind the modification they can put your property back into a default and place your property into foreclosure. I have seen it happen.

If you have questions, the following links will guide you along the right path. Just remember, once you have received your Notice of Default do not procrastinate.

• HUD Approved Housing Counseling Agencies
• HAMP: Making Homes Affordable Program
• U.S. Department of Housing & Urban Development

If you have any additional questions feel free to send an e-mail, leave a comment or give me a call. I will be happy to setup a consultation to help you figure out your options. Most importantly, do not bury your head in the sand. That is the worst thing you can do.

Bank of America: Our favorite whipping boy!

Did you know that a whipping boy was a young boy who was assigned to a young prince and was punished when the prince misbehaved or fell behind in his schooling. How do we as real estate agents love to put Bank of America in his shoes.

As real estate agents we know all-too-well the horrors of processing a short sale. Many agents that I have spoken with over the past two years have put Bank of America (B of A) at the top of the “Bad Bank” list.

Our goal as an agent is to assist the homeowners and manage their expectations of the process, which is not easy when you the agent don’t fully understand the process. The changes in the industry, regulation and internal processes do not make it easy for us. Truthfully, B of A has done a much better job of communicating with the agent pool in this regard.

My personal experience with B of A short sale processing has been nothing short of awesome! How is this you ask? The tools available for you today are easy to use, comprehensive and offers an unparalleled level of communication compared to most other lenders. Recent changes in their short sale processing platform makes the system more flexible and covers more scenarios that more closely emulate what’s really happening in the real world. It’s not perfect, but much better today than yesterday.

How is that ol’ J.R. can sit here and shout from the mountain top that Bank of America is not a demon especially when we have had so much trouble with them in the past? Well, they simply cannot afford to get this wrong, it’s all in the numbers! We all hear that foreclosures are on the rise which should make more REO inventory available for listing agents. I believe that the processing of REO’s will increase, but not in the quantities being discussed. We will see more REO inventory, but we will see many more Short Sales processed and accepted next year.

A quick look at the numbers:

Bank of America processed 94,000 short sales last year. So far in 2011 they have processed over 100,000 short sales and they expect higher numbers next year. A significant number of the short sales that are being processed are actually approved. There are 4 or 5 things that can derail the short sale through most any lender or servicer, but knowledge is power, so learn what those 4 or 5 things are and you will be much more effective in your short sale processing.

If you can’t stand to process short sales, 2012 may not be a good for you as a real estate agent.

So what is the purpose of this blog? Simply put, your BUSINESS PLAN! The final quarter of the year is when you should be assembling your business plan for the upcoming year. A well thought out business plan includes a product mix that keeps your business healthy through the tumultuous times. Your plan should include a mix of REO inventory, Short Sales, Traditional Listings and yes if you are a new agent – buyers. If you focus your business on a good product mix, as the market shifts your business will be less likely to suffer. In other words folks, don’t put all your eggs in one basket. My experience with Bank of America has been great, don’t discount what you’ve heard about their ability to process a short sale, you will need short sales in your product mix to be successful. Too many times, agents lock-in with a ferocious singular focus, driving one product type into their pipeline only to absolutely freak out when a sneeze from up top disrupts their business. Don’t be that agent!

If you need direction with your business plan, leave a comment, shoot me an e-mail or give me a call. I will be happy to assist you. It’s not hard, doesn’t take long and is the only way that you can achieve your goals as a real estate agent.

It’s Your Business … Exit Strategy

It’s your business …

Most agents spend more time planning their family vacation than they do planning for the success of their business. It’s true, less than 5% of ALL agents currently have a formalized business plan. This series of articles will examine the components of creating a successful real estate business plan.

Last month we covered the foundation of business planning. Now that you have your foundation in place you are ready to move to the next step; developing your exit strategy. I have never met a real estate agent that wants to work forever.

Exit Strategy

How long do you see yourself selling Real Estate? What do you want to do when you are tired of the real estate business or want to retire? Do you have an exit strategy? If not, now is the time for you to develop one!

Real Estate is an interesting business. Historically, the industry was built mostly on part-time agents who were just trying it out or using real estate to supplement their family income. The issue here is that it shouldn’t be “part time” as it’s now one of the most complicated and time-consuming professions that anyone could undertake.

Here are two critical pieces in developing your exit strategy:

1. Decide when you will get out of the real estate business.
2. Decide how much income or money you will need each year to live.

There are quite a few options and solutions for developing a strategy to stop day-to-day selling. Here are 3 key points you should focus on in developing your exit strategy.

1. Build A Business
2. Invest In Real Estate
3. Begin An Investment Portfolio

Build A Business

Now isn’t this what we’ve been talking about; How to “build” your business for success in real estate? However, the truthful answer from most agents is “NO”! Well, the first and most critical step to building a successful real estate business is by completing your business plan! The next step is to TAKE ACTION on your business plan. Just having the plan is not enough … it’s the ACTION that produces the RESULTS.

Take action and build a highly successful real estate business and you will have a retirement vehicle that will let you drive your dreams.

Invest In Real Estate

Take a chance; have the ability to act on those deals, I am always amazed at the lack of actual real estate investing completed by real estate agents. Here’s a suggestion: Get to know your market and the current trend of that market area. Find the area that is undervalued. This may change year-to-year or even month-to-month in some areas. Look for the lowest to mid-level homes in that area. Start making some offers. You make money when you BUY property, NOT when you SELL that property!

Imagine this, if you were to buy one investment property per year for ten years, in that time period you could be a millionaire with positive cash flow and terrific equity! As there are various components to investing in real estate, you are in the BEST position … take advantage of it. The market today is full of opportunities for you. As a matter of fact, I can’t remember a better time to buy real estate in Southern California.

Begin An Investment Portfolio

Real estate, as an industry, is made up of nearly all “Independent Contractors” and as such, not always with the benefits of other careers or “jobs”, we are … self-employed. We are responsible for out taxes, expenses, marketing, advertising, salaries, insurance and our own retirement.

As an Independent Contractor we do have options and opportunities over a wide range of investment types. Start the process as quickly as you can and reserve a portion of each fee you earn to this process. Perhaps set a goal of ten percent of each commission check and place it in some type of investment or retirement plan; in 10 years you will have a very nice” nest egg!”

Do not overlook the benefit of consulting with a tax advisor to determine your best option for your portfolio.

Developing your personal retirement or “exit” strategy is an important part of your business planning and building process. Unfortunately, it is at the top of the list of things overlooked by many who come into the real estate business. Plan for it now and reduce your stress later.

I get it, so what’s next?

Now that you have a “Business Plan” and an “Exit Strategy” established for your business, the fun part begins. It’s time for us to start fine-tuning the business model and drive business into your pipeline. In next months article we will discuss “Lead Generation”. It’s a great topic and the next step in the development of your business.

I would like to thank everyone for the e-mails last month! We had some great discussions and I am excited to say that there are several agents of various experience levels implementing a business plan for the first time! Congratulations and I have only one question: Are you ready?

Remember, it’s your business …