Sunday, July 27, 2008

Fair Housing

Fair Housing Acts prohibit discrimination based on race, color, sex, national origin, religion, disability, or familial status in real estate transactions involving residential property. It is sad that it has to be written up as a law, rather than us realizing for ourselves that it is wrong to discriminate in the first place. Some of the noted forms of violations as it applies to real estate transactions are described below.

Red Lining is the practice of lenders conspiring to refuse loans to applicants in certain neighborhoods in order to keep the minorities out.

Steering is the practice of showing or targeting only specific neighborhoods based on discriminatory criteria. So, if you ask your agent to show you properties that meet only a specific criteria based on one of the protected classes described above, your agent has to politely deny your request. Likewise, a seller insisting that the buyer be restricted to a certain class is a violation of the law. This does not mean that it is illegal to reject some one with a bad credit score as it is not discrimination based on the protected classes described above.

Block Busting or Panic Peddling is the practice of a broker hoping to profit by persuading home owners to sell claiming minority groups are moving into the neighborhood.

An important fact to keep in mind is that Fair Housing Acts does not apply to commercial properties or for owner occupied properties with less than 4 rental units. A wealth of information is available at the Housing and Urban Development web site.

If you feel you have been discriminated against, you can file a complaint with the Housing and Urban Development (HUD) within 1 year of the violation.

Monday, July 7, 2008

Foreclosure Prevention

Foreclosure is a process through which a lender can recover the loan by taking ownership of the property used to secure the loan if the borrower defaults in making payments.

A property goes into pre-foreclosure when the lender files a public notice of default after a borrower defaults on the loan payment. During pre-foreclosure, the borrower has the right of redemption within a grace period specified by state law. The borrower may sell his property during the pre-foreclosure period to pay off the loan. The lender may also agree to sell the house at a price lower than the current loan amount and release the borrower of the obligation to pay the remainder through a process called a Short Sale. At the end of the pre-foreclosure stage, if the owner has not been able to reinstate the loan or sell the house, it is sold at a public auction. The auction usually takes place at the county court house, and the property will be sold to the highest bidder.

Take steps to take control your finances as I discussed in Independence Day and try to cut down unnecessary expenses as much as you can to become a frugal spender.
Beware of scams. You should NOT have to pay for counseling when HUD approved free services are available. Look for the links below.
If you are behind in payments and have received a letter from the lender
  • Contact the lender immediately to try and work out a payment plan to catch up with the payments you have been unable to make. It is very important that you DO NOT ignore these notices. The problem will not go away if you ignore the notices, and it will only make matters worse. If you communicate with the lender, at least you have a chance of negotiating better terms with your loan, or try to work out a payment plan while you look for a job or put your house up for sale. Lenders, faced with many foreclosures, are willing to work out loan payment arrangements, but you have to take the first step by contacting your lender.
  • If you can come up with the costs required to cure foreclosure, you have the right of redemption within a specified time period.
  • If you cannot sell at a break even price, you may still be better off selling the house at a loss than continue to loose more money. You maybe able to negotiate a Short Sale, a process by which the lender agrees to sell your property at a loss, and release you of the additional loan obligations.
If you are still making payments and is facing a rate reset.
  • Contact your lender and try to work out a payment plan or see if you can you refinance under better terms. Lenders are not in the business of buying and selling property and they don't want you to loose your house, because its costly for them as well. It takes time, money and effort for the lender to foreclose, renovate and put a house back on the market. So, you do have some bargaining power.
  • Shop around for loans at better terms with other lenders.
  • If you are unable to secure a new loan at better terms, consider selling your property.
In any case, do your best to educate yourself about the options that are available to you. I have done the research and listed my sources below.

Homeownership Preservation Foundation offers free counseling and claims to have provided advice and education to more than 300,000 homeowners since 2002. Click here for other HUD Approved Housing Counseling Agencies

Department of Housing and Urban Development is a good source of information about foreclosure prevention.
From Federal Reserve
From FreddieMac
From IRS
If you want the legalities, find the foreclosure law for your state
Foreclosure Information for Veterans

Thursday, July 3, 2008

Independence Day

On the 4th of July 2008, we celebrate the 232nd occasion of The Declaration of Independence from the British which occurred on July 4, 1776. This certainly is a great cause for celebration, as we all are grateful for the fruitful lives we enjoy today due to the sacrifices made by those before us. This is also a time for us to think of our own independence; independence from debt, which leads to true liberation. Each of us should try to declare independence from debt by taking action to minimize and eliminate unhealthy debt. The day we achieve that, is a day of true independence that we can celebrate for ourselves. Here are 12 suggestions that you can try.

  1. Take inventory of your income vs. expenses. First step is to figure out what your income is and what your expenses are. If you don’t know what, how and where you are spending your money, you might as well walk blindfold in a mine field.
  2. Make a budget. Now that you know your income and expenses, you have to make sure you are spending less than you make.
  3. Recognize that there is healthy debt and unhealthy debt. What I call healthy debt is debt that can work for you, such as your home mortgage, since the interest paid on your mortgage is tax deductible. Unhealthy debt is debt from Credit Cards or Auto loans where the interest paid is money gone from your wallet for ever. Automobiles and consumer goods are depreciating assets as the value will continue to depreciate over time.
  4. Automate your bills. If you are making your purchases on credit cards, make sure you pay it off before the due date every month. If you sign up for online banking, you can automate the payments, so you will never be late. Also make sure you join rewards programs that will give you something back. If you are going to have to spend the money anyway, why refuse to get something back?
  5. Debt consolidation. If you have credit card debt, take steps to consolidate your debt and make a plan to pay it off ASAP. Credit card debt is usually the worst kind of debt as they allow you to make minimum payments while sucking you dry.
  6. Figure out all the other unnecessary expenses and take steps to minimize them. We all know that we have little choice when it comes to energy costs, but you can save by packing your lunch instead of eating out, etc.
  7. Organize yourself. If you want to track every little expense as it happens, try Xpenser to help you track them. If not, at least try to write down your major expenses.
  8. Make sure you put aside some savings every month. If it is not possible to save, at least try not to spend more than you make.
  9. Become a lender. If you have additional money, you could become a lender yourself thru Prosper. Remember that lending is a risky business, so do your research and make sure you are investing "only what you can afford to loose".
  10. Contribute to your 401K. If your employer has a matching 401K program, make sure you contribute at least the minimum required to get the maximum matching from the employer.
  11. Learn to become a frugal spender and try to make the dollar go as far as possible. You work hard to earn your money, why should you let it leave your pocket too easily?
  12. Seek the assistance of a financial planner if you must. Suze Orman always gives good advice.