Okay, January 9th is a bit late to be making resolutions, but we can’t help ourselves. Besides, it’s never to late to make financial resolutions.
The new year (and tax time) is a great time to sit down and look over your budget. It’s easy. Take a piece of paper (or use Excel, if you like your computer), and write down all your income in one column. In another column, write down all the expenses you require to live. For most people, this will include things like utilities, groceries, etc. It the internet a utility? You decide. In a third column, write down all the money you like to spend on non-essential things like cable TV, eating out for lunch, your car payment, etc.
Total up each column. Subtract your expenses from your income, and you should have the balance of your savings account (minus things you spent your savings on, like retirement or fabulous trips to Europe). If you don’t, or if you end up with a negative number, start cutting up your credit cards.
We see a lot of this. Someone comes in for a consultation who is in trouble financially. They can’t afford mortgage payments, and so they come to see me with a story about how their mortgage broker predatorily convinced them to get the mortgage loan. As evidence, they point to their vastly overstated income on the loan application. When they do this, we point to their signature at the end of the loan application.
Was the broker breaking laws and preying on the consumer? Probably. The problem is that the consumer—on paper, at least—was complicit in the fraud, which was perpetrated primarily on the lender (i.e., the bank who actually writes the check), not on the consumer.
The moral? Don’t sign loan applications that overstate your income. If you can’t afford the loan, don’t get it. Mortgage brokers are paid at closing. They don’t care if you ever make a payment on the loan. They are not looking out for your best interests, but for their own. They are paid on commission not (usually) by you, but by the lender.
This is another reason to get an attorney of your own, but the bottom line is don’t overstate your income—or anything else—on a loan application. Instead, buy a cheaper house. Or keep renting until you can actually afford to own.
Mary Pawlenty, wife of Minnesota Governor Tim Pawlenty, has taken a job as general counsel of the National Arbitration Forum. She is presently a Dakota County District Court judge, but will resign effective next month.
Apparently she doesn’t agree with Richard Neely, a retired West Virginia judge who described his experience with the National Arbitration Forum this way:
Thus I learned how Godless bloodsucking banks have converted apparently neutral arbitration forums into collection agencies to exact the last drop of blood from desperate consumers.
We say this so often, but it bears repeating once again. It may show a somewhat pessimistic world view, but the time were a nod and a handshake were all that was needed to seal the deal are over. Get a written copy of every agreement you make.
This is especially true for agreements you make with a large company. You have no guarantee that the customer service drone in India who told you she would reduce your next cell phone payment by $10, reduce your credit card interest rate, or whatever, will actually make a note on the file. Or that anyone will ever read the file notes. Or that the “file” even exists. Avoid headaches, and ask for a confirmation number and a written copy.
It also makes sense to record phone calls. It may be legal in your state to record without notifying the other party to the phone call. Or it might not. Check first. Since the company “may record this call for quality purposes,” they shouldn’t mind if you do the same. Tell the customer service drone at the beginning of your call that you intend to record. We have a how to, and Consumerist has some more information on recording with Skype and other techie methods.
A person claiming to be a debt collector for a “legitimate collection agency” calling himself “Doug Danger” recently made a fascinating post on the DCC forums. Mr. Danger says he is “following after my old man who was the chief debt collector for a Jewish Loan Shark in suburban Chicago back in the good ole days.” And it just gets better from there.
Mr. Danger also says “I do not believe in the Fair Debt Collection Practices Act.” As I posted in reply, I can’t wait to meet Mr. Danger one day after he has, by his account, made “threats of arrest, property seizure, wage garnishment, and . . . bodily harm . . . .”
The full post after the jump.
Last October an interagency conference of federal and Minnesota banking executives and the Minnesota Department of Commerce arrived at a new set of guidelines for nontraditional mortgages in Minnesota. According to the Department of Commerce, “[t]he guidelines are intended to protect consumers from taking on high-risk mortgage loans without having a full understanding of the terms of those loans.” One hopes the Dept. of Commerce will soon go beyond postcards and sponsor legal enforcement of the new, more strict guidelines.
Follow the jump for more on nontraditional mortgages and the new guidelines.
I see a lot of people with predatory lending cases concerning real estate. I take an incredibly small percentage of those cases. This is not because I have no pity for the consumers who are my potential clients, it is because given the facts of their situations, there is little help I can give. And the tragedy of it all is that the reasons I cannot help are similar in many cases.
Mortgage brokers are not in business to help consumers. They are in business to make money. Most consumers are hardly sophisticated enough to look after their own best interests, and there is little an attorney can do after the deal falls apart and foreclosure looms.
If you are looking to purchase a home, refinance, or engage in some other real estate transaction this year, hire an attorney. A mortgage broker will take a fee of thousands of dollars. An attorney in most simple real estate transactions will probably cost $500-$1,000, and their job is to represent your best interests, nothing more. They have no stake in the transaction, and can save you thousands more than their fee.
Created by Prentiss Cox based on data provided by John Villerius.