As the Market Turns

A recent AP story referred to the current real estate market as “bi-polar. ” That assessment would be difficult to dispute. With nearly all-time record-breaking low interest rates and extremely affordable homes and condos, it is difficult to understand how anything could even be left on the market at this point. The problem of course is the uncertainty and instability that equates to poor consumer confidence numbers. The fact that the fed took aim and sued 17 of the nation’s top mortgage lenders is particularly damaging to the economy.  The fed’s position is that Fannie Mae and Freddie Mac were sold a bill of goods. As if they did not know what they were buying? With $198 billion in toxic asset sales at issue, this comes at a time when banks are already quite vulnerable.

However, the 500 pound gorilla in the room is the distressed shadow inventory that exists throughout the nation. The term “shadow inventory” refers to the millions of distressed properties out there that  have not yet hit the open market. We now have 2.2 million  of them in the foreclosure pipeline. 37% of those have not made a payment in more than 24 months; 34% have not made a payment in more than 12 months. All told, that means that nearly three quarters of the mortgagors in various stages of foreclosure have not, on average, made a single payment in nearly a year and a half! At some point, the banks will have to accelerate the process again and turn these billions of dollars in non-performing assets into cash.  

For Destin, Seaside, Ft. Walton Beach and Sandestin real estate information, contact Ed and Terri Smith at RE/MAX Coastal Properties, 850-837-5500 x1, or by email smith@realtor.com



How bad will a bankruptcy hurt my credit report?

First and foremost, bankruptcy should be your absolute last option. Oftentimes, an individual’s credit score has been so decimated leading up to a bankruptcy filing that it makes little difference.

While most derogatory information can stay on your credit report for seven years, a bankruptcy may remain for ten years. There are many alternatives that should be considered prior to filing.

If you are employed or otherwise have some income and assets, you may be much better off negotiating with your creditors. On the other hand, if you have very little income and no assets, there is not much that a creditor can do to you, aside from obtaining an unenforceable judgment against you.

There are many free services out there such as Legal Aid that may be able to provide you with professional legal advice to help you make the best decision given your particular circumstances. But beware of the many predator operations lurking out there on the internet that promise to make your financial problems simply go away. Most of these companies are scam operations that can leave your credit and your pocket book in far worse shape than before.


5 Ways to Kill Your Credit Scores

 The curtain has parted, albeit slightly, on the mystery of how your credit rating is calculated. Find out what these common credit problems can do to your standing.

MSN Money
One of the questions I’m asked most often about credit scores is exactly how much certain actions affect people’s scores.
Until now, the best I could do was say, “It depends.” That’s because the company that created the leading credit score, the FICO, has been wary about releasing specifics.
Fortunately, that just changed. At my request and for the first time, the company (also known as FICO) has released details about how specific actions, from maxing out a credit card to filing for bankruptcy, can affect people with different credit scores.
I asked the company to compute the results of those actions for two examples: a person with a 780 score, which is an excellent score on the 300-to-850 FICO scale, and someone with a 680 score. The results:

Effect on a 680 score
Effect on a 780 score
Maxed-out card
-10 to -30
-25 to -45
30-day late payment
-60 to -80
-90 to -110
Debt settlement
-45 to -65
-105 to -125
-85 to -105
-140 to -160
-130 to -150
-220 to -240
Source: FICO
The results are given in a range because FICO is still a little nervous about revealing too much about its proprietary scoring. But the range is fairly tight, and we can clearly see the disparate impacts of the different actions.
A guide, not a guarantee Before we go further, I have to make this clear: Your mileage may vary.
People with the same credit score can have very different credit profiles: more or fewer accounts, a different mix of accounts, a longer or shorter credit history, use of more or less of their available credit, etc.
Because of those differences, the same action — maxing out a card, say — can have different effects on people with the same score, depending on the details of their individual credit profiles.
For the sake of this exercise, FICO assumed both people had several active major credit cards as well as a mortgage, a car loan and student loans.
The person with the 780 score:
Has at least 10 credit accounts in total and a 15-year credit history.
Uses 15% to 25% of her credit card limits.
Has no late payments on her credit reports.
Has no collection accounts or other major negatives.
The person with the 680 score:
Has six credit accounts and an eight-year credit history.
Uses 40% to 50% of her credit card limits.
Was 90 days late on an account two years ago.
Was 30 days late on another account one year ago.
Here’s what you need to know about each action and the effect it had:
Maxing out a credit card
Using 100% of your limit on any credit card puts you at risk of over-limit fees. It also takes a bite out of your credit score.
Our person with the 680 score might lose 10 to 30 points from this one action, while the 780 scorer could shed 25 to 45 points.
The difference points up an important fact: The higher your score, the more points you tend to lose from “bad” actions. That’s because the scoring formula is sensitive to any sign you’re getting in over your head. Maxing out a credit card is considered one of those signs.
You also should know that it typically doesn’t matter to the formula if you carry a balance or pay off that maxed-out card as soon as you get your statement. What’s usually reported to the credit bureaus is the balance on your last statement. Even if you pay the debt in full before the due date, the maxed-out card will hurt your score.
Skipping a payment
Mailing a payment a few days late normally won’t hurt your score, although you may incur late fees and trigger higher interest rates. The big hurt comes when you miss a payment cycle entirely.
A 30-day-late report would shave 60 to 80 points from our lower-scoring person and 90 to 110 points from our higher scorer. In other words, one lapse of attention could plunge the 680-scorer into subprime credit territory, and our 780-scorer could find credit much harder to get and more expensive.
This is why it’s so important to set up automatic payments to ensure your bills get paid on time, all the time. With credit cards, you can set up automatic payments that take the minimum payment out of your checking account to ward against a late payment. You can always make a second payment that reduces your debt or pays it off entirely. You can sign up for automatic payments on the Web site of your card issuer.
Settling a credit card debt
All the advertisements about “settling your debt for pennies on the dollar” make debt settlement sound like a great solution. But failing to pay what you owe a creditor will take a serious toll on your score.
The 680 scorer would lose 45 to 65 points with this maneuver, while the 780 scorer would shed 105 to 125 points.
Our scenario assumed that our borrowers would miss one payment before settling the debt with their credit card companies. In reality, debt settlement negotiations can drag on much longer, with each missed payment taking another chunk out of your score.
Settling a debt with a collection agency would hurt less, probably much less, because the FICO formula is set up to weigh more heavily what the original creditor says about you than what a collection agency reports. But if our borrowers were settling with a collection agency instead, their scores would be lower to begin with, because they would have collection accounts on their records.
Also, you should know that the amount of debt your creditor “forgives” in a debt settlement solution is typically added to your taxable income. So you may save some money by settling a debt, but you’ll give some of it back to Uncle Sam in higher taxes.
Losing a property to foreclosure
Foreclosure deals a severe blow to your credit score: 85 to 105 points for our person with the 680 score and 140 to 160 points for the one with the 780 score.
Foreclosures have implications for your future ability to get a mortgage as well. Although your score may start to improve as soon as the house is gone, mortgage lenders may not be willing to extend you another home loan until two to four years have elapsed.
In an attempt to protect their credit, many people attempt short sales, selling their houses for less than what’s owed, with the lenders’ permission. Unfortunately, these transactions, even if successful, are often reported as settlements. And a settlement, as you’ve seen, is pretty bad for credit scores. To lenders, a short sale isn’t quite as bad as a foreclosure, though, and it may be easier to get another mortgage once you’ve rebuilt your credit.
Filing for bankruptcy
FICO spokesman Craig Watts once called bankruptcy the nuclear bomb of credit actions. Filing for bankruptcy would shave 130 to 150 points from the 680 score and 220 to 240 points from the 780 score.
This is different from the other black marks, where the higher scorer was still left with better numbers than the lower scorer. In this case, both would wind up near the bottom of the credit barrel. Getting new credit, particularly in the current credit-crunch environment, would be extremely tough.
Sometimes, of course, bankruptcy is the best of bad options. (See “Quiz: Should you file for bankruptcy?“) But if you can’t pay your bills, you should at least explore the other possibilities: forbearance, credit counseling or even debt settlement.
Finally, if you have any of these five black marks on your record, remember two things: The impact on your score may differ from what’s shown above, and regardless of how many points you lost, you can rebuild your FICO score over time.
You can start by using a free FICO score estimator, such as this one at Bankrate.com, or MSN Money’s credit score estimator, which similarly models a score on Experian’s 330-to-830 range, to see where you stand.
Or you can sign up for free credit scores from sites such as Quizzle, Credit.com and Credit Karma, which use the actual information on file about you with the credit bureaus. But the scores you get still may not be the ones lenders actually see.
Or you can buy your Equifax or TransUnion FICO score from MyFICO.com. (Experian no longer sells FICO scores to consumers, although it continues to sell the scores to lenders.) With paid scores, you’ll get specific advice about how to improve your numbers. In general, when you’re trying to build a credit score, you should:
Pay your bills on time, all the time.
Reduce your credit utilization; below 30% is good, below 10% is better.
Have a mix of credit on your reports, including installment loans (mortgages, auto loans and personal loans) and revolving accounts (credit cards and lines of credit).
Refrain from closing accounts.
Apply for new credit sparingly.
For more details, read “Raise your credit score to 740.”
Liz Pulliam Weston is the Web’s most-read personal-finance writer. She is the author of several books, most recently “Your Credit Score: Your Money & What’s at Stake.” Weston’s award-winning columns appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board and helps middle-class families cope at Building a Brighter Future.
Published Nov. 11, 2009

I am being evicted from a rental house because the house is being foreclosed. What can we do?

Typically, the bank will offer you what is called “Cash-for-Keys”. If you agree to leave within a few weeks or so, they will actually pay you for leaving the property in good condition. The amount of the offer may vary from one lender to another, and we have seen everything from $500 to $2,000.

Different states and municipalities may have certain regulations pertaining to evictions which may (or may not) provide you with additional rights, so it may be advisable to check with a local attorney or Legal Aid office for details. But bear in mind that if the lender has to forcibly evict you, they will be much less likely to offer you any money to leave.