Retirement is tricky enough without having to carry bad decisions into the future. It is my greatest hope, particularly for those close to retirement, that your house is secure, with any luck close if not already paid for and there is no chance of foreclosure in your future. But things happen and fates change.
Last Friday, on MomsMakingaMillion radio with Gina and Kat, the topic of deficiency judgments was discussed in the MoneyTips section of the show. I know something about foreclosures and wondered if what was being discussed could be prevented and how.
In a previous article here, we looked at the possibility of walking away from your home. The obligation, we argued is one that involves two parties: lender and the borrower. Every financial contract, we all know comes with obligations. But exactly how those obligations are applied can vary from state to state.
Gina, who resides in Nevada, gave fair warning to the homeowners in her state about the pitfalls of owing money long after you have been foreclosed. Called a deficiency judgment (the only states that have no right for the lender on the books are Massachusetts, Mississippi, West Virginia and Delaware), this action theoretically allows the lender to pursue you for the balance of the loan due after the house has been foreclosed, . While on the surface, this seems like an additional blow to your already decimated financial world, but there are steps that must be taken and certain rules that protect you.
Do you know about deficiency judgments?
Paul Petillo is the Managing Editor of Target2025.com
Showing posts with label foreclosures. Show all posts
Showing posts with label foreclosures. Show all posts
Tuesday, February 9, 2010
Monday, July 7, 2008
Where You Live; What you are Worth - Retirement Planning and Credit
Do you live in a state where housing has taken a big hit? Do you live in, near or around a place where credit has all but dried up and foreclosures have appeared like so much acne before prom night? 
Have you felt immune to the downside fallout of those events because you pay your bills (and more importantly, your mortgage) on time, have little or no debt and money in the bank?
The credit crisis is about to make itself known to millions of Americans who otherwise would have felt as though all of that bad financial news was not their concern. Even folks who have pristine credit, the very ones who use at it is supposed to be used and were proud of the lending power (credit limit) these credit issuers gave them. You were a good risk.
Lately though, credit card companies are estimating, or should I say, re-estimating that risk and its worth to their bottom line. Bad loan decisions and the overall tightening credit market has forced many lenders to rethink their generosity and with that, how much money you can borrow. What was previously a five figure credit limit on home equity lines and credit cards has been reduced often by as much as 90%.
What can you do?
In most instances, nothing. If the financial institution you do business with decides that there is overwhelming risk in your ability to pay off balances, even if you have done so faithfully in the past, the credit limit can and in many cases, without warning, be reduced. Primarily, this seems to be targeted towards small business owners who rely on those credit limits for business and travel decisions. But it is finding its way into the average person’s financial lives as well.
If there is so much as a hint of financial stress in your credit score, even if you don’t live in a state with a high degree of foreclosures, you will eventually come under scrutiny. Best thing to do is maintain your credit score. Do this by paying your bills on time and by communicating with your lender. In many instances, they would like to assess their risk and remedy the situation to not only their best interest, but yours as well.
They may lower or waive any fees on the account or renegotiate the terms of the current loan. Do this by threatening to shop around. There are some better risk-situated financial institutions willing to lure business away from competitors.
The last thing you can do is reconsider the project you might be starting around the house. Determining the value of a remodel has gotten more difficult with the best changes coming from structural improvements rather than upgrades to living spaces. Exterior maintenance and things like electrical, insulation, and plumbing will be more worthwhile fix-it projects than a new kitchen or bathroom.
Small businesses might reconsider the need for certain business trips in terms of return on that investment of time. In some cases, the credit companies may be unwittingly making a business decision for you.
Have you felt immune to the downside fallout of those events because you pay your bills (and more importantly, your mortgage) on time, have little or no debt and money in the bank?
The credit crisis is about to make itself known to millions of Americans who otherwise would have felt as though all of that bad financial news was not their concern. Even folks who have pristine credit, the very ones who use at it is supposed to be used and were proud of the lending power (credit limit) these credit issuers gave them. You were a good risk.
Lately though, credit card companies are estimating, or should I say, re-estimating that risk and its worth to their bottom line. Bad loan decisions and the overall tightening credit market has forced many lenders to rethink their generosity and with that, how much money you can borrow. What was previously a five figure credit limit on home equity lines and credit cards has been reduced often by as much as 90%.
What can you do?
In most instances, nothing. If the financial institution you do business with decides that there is overwhelming risk in your ability to pay off balances, even if you have done so faithfully in the past, the credit limit can and in many cases, without warning, be reduced. Primarily, this seems to be targeted towards small business owners who rely on those credit limits for business and travel decisions. But it is finding its way into the average person’s financial lives as well.
If there is so much as a hint of financial stress in your credit score, even if you don’t live in a state with a high degree of foreclosures, you will eventually come under scrutiny. Best thing to do is maintain your credit score. Do this by paying your bills on time and by communicating with your lender. In many instances, they would like to assess their risk and remedy the situation to not only their best interest, but yours as well.
They may lower or waive any fees on the account or renegotiate the terms of the current loan. Do this by threatening to shop around. There are some better risk-situated financial institutions willing to lure business away from competitors.
The last thing you can do is reconsider the project you might be starting around the house. Determining the value of a remodel has gotten more difficult with the best changes coming from structural improvements rather than upgrades to living spaces. Exterior maintenance and things like electrical, insulation, and plumbing will be more worthwhile fix-it projects than a new kitchen or bathroom.
Small businesses might reconsider the need for certain business trips in terms of return on that investment of time. In some cases, the credit companies may be unwittingly making a business decision for you.
Subscribe to:
Posts (Atom)