Senior Democrat and Republican leaders in the Senate went on record yesterday saying that they support the extension of the $8,000 first time home buyer tax credit. The tax credit is set to expire on November 30th, 2009. Senators are proposing extending the credit through April of 2010 since the mortgage sector has not yet recovered. Voting is currently forecasted for sometime next week.
Democrat leader Harry Reid’s office has said the new bill would keep the $8,000 tax credit for first time buyers, and would add on a lower $6,500 tax credit for existing home owners who have been in their residence at least 5 years if they’re buying a new primary residence. In addition to the new coverage for existing homeowners, the tax credit income limits will be increased dramatically, to $125,000 from $75,000 for individuals and to $250,000 from $125,000 for couples.
In a deeply divided congress this has been one of the few issues That Majority Leader Reid and Minority Leader Mitch McConnell have agreed on, giving this issue significant traction in a session known for few, if any, accomplishments due to the bipartisanship. In spite of their agreement though, the bill has the chance of being delayed further because Reid wants to add on a rider for extended insurance for the unemployed, which McConnell does not support.
The current push for an extension of the tax credit is largely due to a report last week indicating that home sales reached a two-year high in September thanks to the tax credit, and another report this week from the Mortgage Bankers Association showing a sharp decline in mortgage applications in October due to the impending deadline for the tax credit. The home purchase must close by November 30th to take advantage of the credit, meaning it would be extremely difficult, if not impossible, to close if you are starting the process now.

Reprinted from The Pew Charitable Trusts
Written by Kip Patrick

Washington, DC – 10/28/2009 – One hundred percent of credit cards offered online by the leading bank card issuers continue to include practices that will be outlawed once legislation passed in May takes effect next year, according to a new report by the Pew Health Group’s Safe Credit Cards Project. The report also found that advertised credit card interest rates rose an average of 20 percent in the first two quarters of 2009, even as banks’ cost of lending declined. With the Federal Reserve currently developing rules to ensure penalty charges are “reasonable and proportional” as required under the Credit CARD Act, the report also includes policy recommendations for regulators.

“Since passage of the Credit CARD Act, we found that credit card issuers have done little to remove practices deemed unfair or deceptive by the Federal Reserve,” said Shelley A. Hearne, managing director of the Pew Health Group, which oversees the project. “In fact, some of the most harmful practices have actually grown more widespread–not one of the bank cards reviewed would meet the legal requirements outlined in the Credit CARD Act, which is bad news for consumers.”

The new report, “Still Waiting: ‘Unfair or Deceptive’ Credit Card Practices Continue as Americans Wait for New Reforms to Take Effect”, examines all consumer credit cards offered online by the largest 12 bank issuers in America. These banks control more than 90 percent of outstanding credit card debt nationwide. The report also reviewed cards offered by the largest credit unions. The Pew Safe Credit Cards Project gathered data from July of this year on nearly 400 cards, building on its previous research from December 2008.

Key findings of the report show that:
• 99.7 percent of bank cards allowed issuers to increase interest rates on outstanding balances – a jump from 93 percent in December;
• 95 percent of bank cards permitted issuers to apply payments in a way the Federal Reserve found likely to cause substantial financial injury to consumers; and
• 90 percent of bank cards had penalty rate hikes with the vast majority imposed by “hair triggers” of one or two late payments in a year.
“The Federal Reserve must ensure that the rules it is developing will prevent unreasonable or disproportionate penalties, including penalty rate increases, which our data show remain far too common,” said Nick Bourke, manager of Pew’s Safe Credit Cards Project.

In July, median advertised annual percentage rates (APRs) for purchases on bank issued cards were between 12.24 and 17.99 percent, compared to a range of 9.99 to 15.99 percent in December 2008 (issuers advertise a range of rates depending on applicant credit profiles). Compared to December of last year, lowest advertised bank rates grew by more than 20 percent, while highest advertised rates grew by 13 percent. Pew’s previous report identified that issuers raised rates on nearly one-quarter of existing accounts, costing consumers a minimum of $10 billion in a one-year period between 2007 and 2008.

“Still Waiting” also provides the first comprehensive comparison of bank cards to those issued by credit unions, based on advertised terms and conditions. The analysis showed that credit unions offered much lower APRs, less punitive penalty rates and engaged in far fewer unfair or deceptive practices than their commercial peers.

To ensure that the Credit CARD Act is implemented to meet its goal of safeguarding the consumer, the report outlines policy recommendations for the Federal Reserve and other regulators to ensure that the new rules under development will:
• Regulate penalty interest rate increases in its rules governing “reasonable and proportional” penalty fees and charges in accordance with the law;
• Scrutinize partially variable rates, which can increase when the index rises but cannot drop below a minimum set by the issuer; and
• Eliminate credit card penalties that are not aligned with achieving the Act’s primary goals of protecting consumers against risky practices.
“When the Credit CARD Act takes effect next year Americans can expect to see safer, more transparent cards,” said Bourke. “How well the new law works, however, will depend significantly on how the Federal Reserve creates new rules under the law to protect consumers. In the meantime, issuers have the opportunity to move as quickly as possible to ensure their products are clear of the unfair and deceptive practices that unfortunately remain part of every card we reviewed for our report.”

The Pew Safe Credit Cards Project (www.pewtrusts.org/creditcards), part of the Pew Health Group, develops and promotes standards for consumer-friendly credit cards to help ensure the financial security of all Americans. The Pew Health Group is the health and consumer product safety arm of The Pew Charitable Trusts, a nonprofit organization that applies a rigorous, analytical approach to improving public policy, informing the public and stimulating civic life.

NCS is proud to announce that they have joined forces with HomeownerToolbox.com, the premier loan modification assistance provider in America.

Company Overview
Homeowner Toolbox, Inc. is a lifeline for homeowners looking for mortgage relief. The company, founded by experienced financial executives, offers a proven, FREE solution, as an alternative to hiring costly loan modification consultants. Instead of spending thousands with someone over the phone to help “fix” a mortgage, Homeowner Toolbox has created a self-guided tool, complete with a Probability Meter™, which offers a step-by-step solution through the loan modification process and puts a submission-ready package into the homeowner’s hands – all at no cost to the homeowner. By automating the service with interactive Web technology, the creators of Homeowner Toolbox have been able to fund this service through private capital and donations. At no cost to the homeowner, Homeowner Toolbox offers a detailed financial evaluation, with tailored guidance on how best to present a modification package to a lender for maximum results.

The company was created to offer homeowners an alternative when seeking mortgage help. Homeowner Toolbox recognizes that many homeowners are mislead or misinformed about loan modification programs. The creators of the company have found that many think they need to be behind in their mortgage to be eligible for a loan modification – this is a myth! Many homeowners also feel they need to show their lender that they don’t have any money remaining after expenses to cover the mortgage – another myth! This new automated tool works with the homeowner to improve the presentation of their financial situation and increase their odds for a favorable loan modification. Even those at risk of losing their home can benefit from the Homeowner Toolbox, which provides options for maintaining ownership and improving the terms of a mortgage.

With the company’s proprietary Web-based, guided solution, homeowners now have their financial future in their own hands – for FREE.

When the current mortgage crisis started a lot of financial experts encouraged homeowners who were falling behind on their payments to contact their mortgage lenders. The conventional wisdom at the time was that the banks wanted to avoid foreclosure as much as the home owners.

Those financial experts aren’t so sure anymore, but the homeowners who have been through the confusing and frustrating processes created by the lenders are sure the convention wisdom is wrong.

One consumer in San Diego has been quoted saying “I have gone through the modification process but have been denied, although no clear explanation was provided. I have been seeking assistance and guidance from quite a few bank representatives and have only received rude, misguided information.”

Since this crisis started there have been a myriad of complaints from people who say they follow the instructions given, send in the documents requested several times, and are then told their paperwork has mysteriously disappeared.
Another consumer from New Jersey said “I faxed papers repeated times and was told that I need to fax more or that they never received them so they can start a modification, I made payments and they never credited my account. Now they call in October 2009 and they tell me that they stopped the modification because I never faxed out the papers. Is this a joke?”

These complaints span the entire industry, regardless of the lender. These troubled homeowners begin this process thinking they will receive a loan modification since the lenders don’t want foreclosure anymore than they do, and all they get is frustration due to indifference and incompetence.

A Wisconsin resident stated “We sent all information requested by certified mail, as the others have described, we have had to make contact. They do not respond. The usual answer is ‘Whoever told you that is wrong.’ I actually have a tape of one of their agents stating, ‘I can’t be responsible for what someone else told you.’ Should they not be required to respond in writing? Is this not a government-funded program?”

She’s right. The Treasury Department began the homeowner assistance program in March to encourage mortgage lenders to modify distressed loans to stem the growing tide of foreclosures. The entire process has proved unwieldy and slow, with no impact on the number of foreclosures.

The National Consumer Law Center, based in Boston, says there’s no great mystery here. The loan servicers are slow walking the process of assisting the homeowners because they reap a greater profit if the home goes into foreclosure. They explain that the loan servicers, unlike the homeowners, don’t risk financial loss on a foreclosure. Dianne Thompson, of the National Consumer Law Center explains that “One common-sense solution to the foreclosure crisis is to modify the loan terms in more instances [because] foreclosures are a costly ordeal for the homeowner, the lender, and the community. Yet they continue to outstrip loan modifications because servicers have no incentive to help borrowers stay in their homes.”

Why is that? It’s because the loan servicers that homeowners speak with don’t actually own the mortgage loan the vast majority of the time. They’re essentially a collection agencies passing the funds on to the investment groups that actually own the loans behind the scenes. So if the property goes into foreclosure the loan servicers that handle the modification process don’t lose anything, just the investors and the homeowners. So there’s no risk to the loan servicers—it’s actually more profitable for them to allow the loans to foreclose by denying principal and interest rate reductions because they make more money on forbearance agreements or outright foreclosures.

Loan modifications always cost the servicer something, so a loan servicer deciding between a loan modification and a foreclosure has to decide between a financial loss if the loan is modified, or the potential profit, with no penalty due to the lack of third-party oversight, if the home is foreclosed.

Congress and the Securities and Exchange Commission have failed to provide legislation on this matter. They have done nothing to remove the financial upside to foreclosure for financial institutions, nor have they dictated that loan modifications need to be put in place before foreclosure can be initiated. Until they step in homeowners will continue to lose their houses while the loan servicers profit.