Credit/Debt Recovery

Carryback mortgage?

I'm sorry for the slow posting these days; we're in the middle of a move here, and my house is on the market.

I just had a potential buyer who was looking for a 20% seller carryback option.

As I understand it, if you need a seller carryback, this is your situation:
•You have no money to put down on the purchase of the home.
•Your credit score is too low (<550) to get a zero-down mortgage loan.
•The conventional lender will only loan you the money for the home if you have a down payment (in this case, 20%)

So in a carryback mortgage, the seller would carry a second mortgage for the buyer. The bank looks at that as a down payment, and loans the buyer the rest of the money.

I can't figure out the advantage for the seller. Why would I want to carry such a high-risk loan for tens of thousands of dollars? At 20%, I'd be risking all of the equity in my home on a borrower who couldn't qualify for a better mortgage. What am I missing?

MBNA changes terms

I have an MBNA card I rarely use--in fact, I destroyed the card itself a few months ago. There's no balance on the account right now, so it just sits there.

The other day, I got a 12,000 word document from MBNA detailing the amendments to my credit card agreement. Since Bank of America acquired MBNA last year, I'm sure they're just getting around to breaking all of the promises MBNA made before the merger.

Some of the new provisions of my MBNA account:
"Default pricing" has been added. Slightly less evil than "universal default," but the same general idea.
The grace period has been changed.
"Cash equivalent transactions" will now incur a fee.
Foreign transactions will now incur a fee.
The late fee is being increased.
Every payment made with a paper check will be processed as an electronic debit (they're using the signed check as authorization to transfer funds electronically); this will help BofA/MBNA get their money faster.
The default rate has been raised.
It goes on and on... lots of new fees established, mandatory arbitration, etc.

I believe MBNA can conduct their business any way they want, but the agreement I signed with them is very different from the one we now have. I'm a big believer in free-market capitalism, but that's not what this is; the transaction is not voluntary on my end. At the very least, these changes should require my signature on an amended agreement.

Sure, I can always take my business elsewhere (and I will) but not everyone can do that. Someone with big balaces who can't get approved for another card could well be stuck with MBNA and it's onerous new changes to its terms. It's wrong.

List of Bankruptcy Blogs

Over at the "Be PaperFree" Bankruptcy blog, run by Milton and Mary Jones, there was a post on Sunday listing around a dozen bankruptcy blogs. I disagree with many of the things written on some of them, but I'm also a big believer in giving my readers all sides of the story; plus there's a lot of good info on some of the more fair-minded bankruptcy blogs.

I could certainly be wrong, but my personal feeling is that the recent changes to bankruptcy law are here to stay. There's still a lot of great information on most of these bankruptcy blogs, so you'll only have to skip a few "BAPCPA whine" posts here and there to get all the really good, useful info these BK blogs have to offer.

Do-it-yourself-bankruptcy on the rise?

A few days ago, Tom Blumer at BizzyBlog linked to this article about the rise of pro se bankruptcy filings in New Mexico. Tom sees this as a reaction to higher legal fees for bankruptcy, which is undoubtedly correct. He's also right when he suggests that this is "no indicator of the average filer’s ability to get through the process on their own."

Bankruptcy is complicated, now more than ever. If you're really savvy and determined, you might want to try doing it yourself and save some money. But odds are you'll need an attorney. I'd definitely recommend getting legal advice from a qualified professional before you attempt a pro se filing.

In fact, I feel this way about a lot of things, like correcting your own credit, settling debts, or negotiating debt repayment plans with your creditors. A lot of people like to scream that "you can do it for yourself" when it comes to things like credit repair (the FTC certainly seems to think this is the ONLY way to repair your credit), but nobody seriously thinks everybody should prepare his/her own bankruptcy filing. Just because you can repair your own credit, file bankruptcy by yourself, or cut your own hair doesn't mean you should.

The True Cost of Smoking

I was doing some research and saw a statistic that claimed "across all ages, non-smokers have twice the net worth of those who smoke." That's pretty stunning, and a good argument for quitting if you're a smoker.

But it's false. Yes, non-smokers have healthier finances than smokers. But they're not twice as wealthy. This webmd article tells the real story: heavy smokers had $8400 less net worth than nonsmokers. Nothing to sneeze at, but nowhere close to half as the statistic claimed.

Thom Fox, my co-author on "Repair Your Credit and Knock Out Your Debt," wrote this section on "The True Cost of Smoking":

For all Thom knows, the stress he's relieved through smoking would have killed him faster than the cigarettes. But we do know this: Even though Thom smokes less than a pack a day and always bargain-shops, in the past 7 years he's spent approximately $6300 on cigarettes. If he'd put that money against one of his credit cards, he'd have saved an additional 900 bucks. And if he could invest that $7200 in an IRA right now, he would have over $25,000 in extra cas by th etime he retires.
Think of it: 25 grand. Enough for a new truck, but not enough for a lung transplant. That's the true cost of smoking.

Buying a car with a "Fax Blast"

Credit counselors, contrary to popular opinion, don't just push debt consolidation plans. In my career I offered free seminars on credit use, money management, using coupons, identity theft, predatory lending, surviving the holidays, and a lot more. The free seminar I offered that was my favorite was auto buying.

I relied on Remar Sutton's "Don't Get Taken Every Time", and I've long recommended that anyone who is in the market for a new car buy his book and read it. For around $12, it will save you thousands on your next car purchase; definitely worth every penny.

A few years ago, I helped a friend buy a car with a "Fax Blast". That involves faxing multiple auto dealers seeking quotes, essentially stating "this is the car I'm looking for, and I'll be buying from the lowest bidder." It takes the pressure off of the buyer and puts it on the dealer.

Edmunds.com offers this article about the process (they call it "Blas Fax" car buying), and I found this website that offers a comprehensive package including a "Fax Attack" service for around $35. Remember, you're going to save thousands on the car, so that seems to me to be a fair price.

One of my college professors had an axiom that has served me well over the years: if there's one person you can't abuse enough, it's a car salesman. Do your homework before you buy a car, and consider a "fax blast" next time you're in the market. And good luck!

Outrageous Headline

This story caught my eye, and after reading it, I was kind of steamed. The story is entitled "Woman gets prison for stealing $7, credit cards," and starts like this:

A Williams Township woman who stole $7 and two credit cards from a woman she supervised at a Hanover Township, Northampton County, business will spend up to two years in prison.

Marlene A. Miller, 52, of 314 Brougher Hill Road, who was caught committing retail theft three times in the past but never went to prison, said she has a lot of stress.

See, I'm supposed to be upset that a woman is going to prison (for 30 days to 2 years) for only stealing $7.

Thing is, she didn't just steal $7. She stole two credit cards. And nowhere in the story are we told what those credit limits were. Which is too bad, because that's the actual amount she stole.

We do know from the story that she charged around $550 illegally on the cards. So maybe the article could have been called "Woman gets prison for stealing $557." Except, of course, that there wouldn't be anything eye-catching about that. No, $7 is the lie that makes this non-story into something that sells newspapers.

I cry WORM on this.