Texas Bankruptcy Lawyer » Robert A. Kraft

Consumer Lawsuits Against Bill Collectors Skyrocket

Robert A. Kraft — Tue, 06 Jul 2010 17:49:52 +0000

McClatchy reports, “Since the recession hit in 2007, federal lawsuits filed under the Fair Debt Collection Practices Act have more than doubled, while complaints about problem collectors have skyrocketed.” Attorney Sergei Lemberg, whose “firm has filed about 1,500 such lawsuits in the past three years,” said, “I think debt collectors have become more aggressive by necessity because folks just have less money.” He added, “And consumers are more likely to think legal when they’re being cornered.” Jack Gordon, the president of WebRecon, “a website that tracks…filings for the collections industry,” said that “the spike in lawsuits” is linked to internet ads from plaintiffs’ lawyers. Gordon said that “costs are an even bigger driver in the lawsuit surge,” as it’s often “cheaper for collection agencies to settle rather than fight a case.”

From the American Association for Justice press release.

Fed Adopts Rules to Protect Credit Card Customers

Robert A. Kraft — Tue, 29 Jun 2010 13:21:42 +0000

The Federal Reserve adopted new rules this month aimed at protecting credit card customers from getting hit by high late payment charges and other penalty fees. The Dallas Morning News ran a good article on the new rules, and here are excerpts:

The rules respond to public and congressional outrage over practices by credit card companies.

They bar credit card companies from charging a penalty fee of more than $25 for paying a bill late. They prohibit credit card companies from charging penalty fees that are higher than the dollar amount associated with the customer’s violation. They also ban so-called “inactivity” fees when customers don’t use the account to make new purchases and they prevent multiple penalty fees on a single late payment.

The rules take effect on Aug. 22.

In addition, the rules require companies to reconsider interest rates imposed on customers since the start of last year. Some lenders pushed through rate increases ahead of the first phase of sweeping new credit-card protections, which took effect earlier this year. Those first set of rules were designed to protect customers from sudden hikes in interest rates.

“The new rules require that late payment and other penalty fees be assessed in a way that is fairer and generally less costly for consumers,” said Fed Governor Elizabeth Duke, the central bank’s point person on the rules. “Card issuers must also reevaluate recent interest rate increases, and, if appropriate, reduce the rate,” she added.

Underwater Foreclosures Growing in D-FW Area

Robert A. Kraft — Fri, 04 Jun 2010 10:12:22 +0000

This recent headline in the Dallas Morning News wasn’t referring to foreclosures on underwater houses. The topic was foreclosures on houses where the owner was upside-down or “underwater” on the mortgage. In other words, the owner owed more on the mortgage than the house was worth on the open market. This is similar to having a serious car wreck in a new vehicle — you will frequently owe more on the car note than the vehicle is worth at fair market value. Whether it involves a house or a car, it’s a bad situation to be in.

More than 20 percent of foreclosure listings thus far in 2010 in the Dallas area were for houses with more debt than the appraised tax value. That’s a very large increase from the same period in 2009. This is not only a problem for the homeowner, but also for the lender, who usually cannot resell the house for the amount they have invested in the mortgage and other costs.

According to the newspaper, “Recent studies estimate about 15 percent of all Dallas-area homeowners with mortgages owe more than their house is worth. They either paid too much for the property or, more likely, values have fallen in their neighborhoods due to distressed property sales and high inventories of unsold homes.”

Car Dealers Dodge Financing Oversight

Robert A. Kraft — Wed, 26 May 2010 10:19:42 +0000

Auto dealers got a big break from Congress this week when the Senate voted to exclude them from the proposed new law creating a consumer finance agency. The vote was non-binding, but was by a large majority of 60-30, and is similar to an exemption in the House version of the finance bill. The exemption applies to consumer loans for vehicle purchases. Otherwise, the bill will impose strict new regulations on businesses making consumer loans.

This exemption will allow unscrupulous dealers to continue to take advantage of car buyers through the use of high-interest and high-fee loans, but on the other hand it will allow honest dealers to offer more financing options to customers.

Dallas-Fort Worth Residents Have Among the Highest Debt and Lowest Credit Scores

Robert A. Kraft — Mon, 17 May 2010 10:33:15 +0000

Dallas residents apparently enjoy spending beyond their means more than most of the country does. At least that’s the appearance given by a recent survey of the 20 largest metropolitan areas done by the Experian credit bureau. As reported in the Dallas Morning News, people in the Dallas and Fort Worth area rank just below Seattle residents in average debt per consumer — not exactly a great honor for us. And we also tied for lowest average credit score. Here are excerpts from the article:

According to Experian, Dallas had an average debt per consumer of $26,599 in March, just behind Seattle’s $26,646. The average for all consumers nationally was $24,775.

“It’s not a good thing that it’s No. 2,” said Maxine Sweet, vice president of public education at Experian.

Experian analyzed a sample of all its credit reports nationwide to calculate national averages and then isolated data from consumers living in the top metro areas to discern local trends. The figures include consumer debt, such as credit cards and car loans, but exclude mortgage debt.

The Dallas-Fort Worth area has an average credit score of 719, tied with the Miami-Fort Lauderdale area for the lowest score among the top 20 metropolitan areas, according to Experian.

The score used is the VantageScore, which was developed by Experian and the other two credit bureaus, Equifax and TransUnion, and ranges from 501 to 990. The national average is 749.

The average debt of Dallas-Fort Worth consumers has been falling in the last two years, but their credit scores are slightly lower, Sweet said.

“That likely means more missed payments and higher utilization,” she said.

The average number of missed loan payments among Dallas-Fort Worth consumers is 0.67.

However, the national average is 0.5, Sweet said, adding that the difference is significant.

Late payments are the biggest factor in knocking down credit scores.

Also critical is the “credit utilization” ratio, meaning what percentage of a consumer’s available credit is being used. The higher the number, the riskier the consumer looks to creditors.

Dallas-Fort Worth consumers are using an average of 29.54 percent of their available credit, compared with an average of 28.47 percent nationally, Sweet said.

“It’s important to look at the whole picture when evaluating how consumers are actually managing their credit,” she said.

“Seattle ranks the highest in terms of average debt per consumer. However, additional data shows that Seattle’s consumers have very few late payments and are not maxing out their credit cards, so they are using their credit wisely and maintaining higher credit scores.”

Do You Take Thee, With Good Credit Score or Bad?

Robert A. Kraft — Mon, 10 May 2010 16:32:04 +0000

Not to take all the romance out of young love, but the Dallas Morning News had an excellent column today about checking someone’s credit before you get too personally involved with them. Excerpts follow, and they’re good tips. But this is something should to do before you’re too deeply in love for it to make a difference.

Marriage is as much a financial partnership as it is an emotional one, and you need to go into it with your eyes wide open.

“Before you get serious with someone – certainly before you step to the altar – you want to know how your financial lives are going to commingle,” said Craig Watts, spokesman for FICO, the company that developed the widely used credit score.

Decide who will handle the bill-paying responsibilities and how the bills will be divvied up.

One reader told me that he and his fiancee exchanged their credit reports and scores before they married. That’s not a bad idea if you’re both comfortable with that.

“Your FICO scores offer a neat snapshot of how you’ve each handled your money – student loans, car payments, credit cards,” said Deborah Owens, author of A Purse of Your Own, an investments and financial book for women. “FICO scores will reveal who has more financial acumen and if there are areas that the two of you need to address.

“You fell in love with the man and not his money,” she adds, “but how he handles his finances can tell you a lot about his values, character and future money behavior.”

At some point during your marriage, you will undoubtedly think about purchasing a home or car, so you’ll want to know your future spouse’s potential for qualifying for new credit.

“You’re not just mingling your personal life with this person,” Watts said. “You’re also mingling your aspirations and your ability to achieve those goals. Not having your eyes open on any liabilities when it comes to the financial side means you really are walking blind into your future.”

There’s one misconception I want to clear up. Some people think married couples have one credit score and one credit report. Not true.

“Some people think that once you get married, then your credit histories must get mingled at the credit bureau so now you have a joint credit score,” Watts said. “You always have an individual credit score based on your personal history.”

However, if you get a joint credit card account or co-sign for a loan with your spouse, “now your credit reports start looking more similar,” he said.

And if your spouse forgets to make the loan payment on that joint account or co-signed loan, your credit will be hurt along with your partner’s.

If both of you need a loan and you’re the one with good credit, you should apply for credit based on your credit history.

So be honest and discuss finances with your partner because his or her financial burdens will affect your credit.

“You’re talking about a lifetime commitment here, and you want to make sure that you understand the risks that you’re taking by mingling your future with your partner,” Watts said.

Auto Repo Business Is Hurting In This Down Economy

Robert A. Kraft — Thu, 08 Apr 2010 16:46:45 +0000

An article today about auto repossession caught my attention. It was in the Dallas Morning News, and made the point that this is a bad time for the vehicle recovery business. I had assumed that with so many people out of work and unable to make their car payments, the repo business would be booming. But apparently the number of car sales is down so much that there aren’t as many cars to repossess as in recent years. Here are a few snippets from the article:

Nationwide, about 1.5 million vehicles are repossessed annually. But the economy has taken a toll.

“We’re picking up less cars, and a lot of that is because the dealerships are not selling the cars,” said Mark Summs, president of Summs Skip and Collection service in Virginia and president of National Finance Adjusters, a trade association. “The repossession business is based on selling cars and a having a good portion of those loans going bad. So if they’re selling a whole lot less, then there’s less possibility of it being repossessed.”

•Repossessions can occur any time on any day.

•In most cases, no physical force or threats can be used. This includes breaking into a garage.

•A vehicle can usually be repossessed from private property.

•Lenders are not obligated to grant borrowers a grace period

•Like most states – California, Florida and South Carolina are exceptions – Texas does not license recovery agents or regulate the repo industry. Although there are rules regarding the overall towing business, anyone with a working tow truck could hold act as a repo agent.

Five Credit Score Killers

Robert A. Kraft — Thu, 25 Mar 2010 10:21:01 +0000

As Dallas bankruptcy lawyers we are often asked by our clients about what helps and what hurts their credit scores. Bankruptcy hurts, of course, but you can recover from that over time. There are other actions you can take, usually in a futile attempt to avoid or delay bankruptcy, that also can hurt your credit score. Sometimes it’s best to just bite the bullet and file for bankruptcy. That way you can preserve your money for your family, rather than lose it all by trying to pay bills you can’t afford. You also may be able to avoid foreclosure, and foreclosure can have a terrible effect on your credit score.

CNNMoney.com recently ran a good article about five bad habits that can kill your credit score. Here are excerpts:

As banks shy away from making risky consumer loans, a mediocre credit history just won’t cut it anymore. To get the best rates on mortgages, credit cards and auto loans, you need a killer score.

Your FICO score is a numerical measure of your creditworthiness that ranges from 300 to 850. While there are a few different credit scoring systems available, it’s the FICO score, created by the Fair Isaac Corporation, that most lenders look at when they check your credit.

Lenders have already raised their standards by about 20 to 40 points this year, according to Barry Paperno, consumer operations manager at FICO. So while a score in the 720 to 740 range would have gotten you the best rates on a mortgage in the past, you now need a score of at least 760 to snag the best loans.

“Requirements are higher than in the past so you’re going to have to be more diligent this year,” said Paperno.

FICO focuses on five categories when calculating your score: How much debt you have, your payment history, your debt utilization ratio (how much you owe in relation to your credit limits), how far back your credit history goes and your mix of various types of credit.

Here are a few things that can wreak havoc on your score and wreck your chances of getting an affordable loan:

1. Making late payments

A single late payment on a credit card or other loan could ding your score by as much as 110 points if you already had a great score and 80 points for someone with an average score. So the best thing you can do to improve your score is make payments on time.

“This continues to be the number one reason scores are lower,” said Paperno. “In addition to being a heavily weighted part of your score, if you’re late on a payment, it’s going to continue to appear on your credit report for about seven years.”

If you’ve made mistakes in the past, you can’t change them, but you can outlive them. The longer it’s been since you were late on a payment, the less of an impact it will have on your score, but “your history does follow you,” said Paperno.

Since payment history accounts for about 35% of your total score, it’s really important to start paying on time.

2. Carrying a big balance

Your debt utilization ratio accounts for almost 30% of your score. So carrying too much debt will not only cost you a fortune in interest, it can also destroy your credit rating.

“The best thing to do is pay your bills on time and pay as much of the balance as possible to try to keep your debt utilization ratio down and raise your credit score,” said Bill Hardekopf of Lowcards.com.

As part of the CARD Act that went into effect last month, credit card issuers must now include a chart with your bills that shows how long it will take to pay off your balance if you only make the minimum payments. The chart will also display how much you need to pay each billing cycle in order to completely pay off your balance in three years.

Hardekopf thinks the new information will be a huge wake-up call for most consumers, and even he was alarmed by the calculations on his own statement.

“It was shocking,” he said. “This is going to have a dramatic effect on how much people are paying when they see it in black and white, and will be a positive move for their credit score.”

3. Closing a credit line

As credit card companies jack up interest rates and add inactivity fees to compensate for lost revenues, it’s tempting to just close your accounts.

But closing a line of credit could impact your debt to utilization ratio, said Hardekopf.

For example, if you have two credit cards with a limit of $1,000 each and a $400 balance on one card, closing the other account will immediately double your debt to utilization ratio from 20% to 40%.

But the negative effect varies greatly. Closing one card could have a very small impact if you have lots of other high-limit cards.

You can also counteract some of the impact by opening up a new line of credit. But beware: that can also impact your score.

4. Opening a credit line

“When you open a new account, you’ll knock some points off your score,” said Paperno. “The reason why is that the people who open new accounts tend to be of a higher risk level immediately after opening a new account.”

In order to open a new account, a credit card company will need to check your credit, and a typical “hard” inquiry like this will lower your score by about five points, plus the cost of opening a new line of credit typically ranges from five to 15 points.

But the temporary ding only lasts about six months, so if you’re in a stable financial situation, the score reduction could be worth it, said Paperno.

“You can look at it as a long-term strategy and go in with the idea that you might lose a few points now but in the long run you might be better off because you’ll have more credit available,” he said.

5. Defaulting

A home foreclosure, for example, might dock about 200 points off your score and a short sale could cost you around 80 to 90 points, said Johnson. Declaring bankruptcy could lower a good score of 750 by up to about 250 points, Johnson said.

While most negative information stays on your report for seven years (bankruptcies can stay on for 10 years), it’s never too late to start rebuilding your credit.

“People have been hit hard by the economy and those who had really good scores now have scores in the 500s and want to just give up,” Johnson said.

But certain good behaviors like making on-time payments, taking out a small loan and paying it off and keeping a low balance, can get your score back up in the mid-600s or low 700s in a little over 2 years, said Johnson.

1. Making late payments

Since payment history accounts for about 35% of your total score, it’s really important to start paying on time.

2. Carrying a big balance

Your debt utilization ratio accounts for almost 30% of your score. So carrying too much debt will not only cost you a fortune in interest, it can also destroy your credit rating.

3. Closing a credit line

As credit card companies jack up interest rates and add inactivity fees to compensate for lost revenues, it’s tempting to just close your accounts. But closing a line of credit could impact your debt to utilization ratio. For example, if you have two credit cards with a limit of $1,000 each and a $400 balance on one card, closing the other account will immediately double your debt to utilization ratio from 20% to 40%.

But the negative effect varies greatly. Closing one card could have a very small impact if you have lots of other high-limit cards. You can also counteract some of the impact by opening up a new line of credit. But beware: that can also impact your score.

4. Opening a credit line

But the temporary ding only lasts about six months, so if you’re in a stable financial situation, the score reduction could be worth it, said Paperno. ”You can look at it as a long-term strategy and go in with the idea that you might lose a few points now but in the long run you might be better off because you’ll have more credit available,” he said.

5. Defaulting

Defaulting on a loan is the single worst thing you can do for your credit, said Rex Johnson, founder of credit union consulting firm Lending Solutions Consulting. And given the down economy, more people are damaging their credit scores through foreclosures, credit card charge offs and bankruptcies. A home foreclosure, for example, might dock about 200 points off your score and a short sale could cost you around 80 to 90 points, said Johnson.

Federal Reserve Cracks Down on Gift Card Abuses

Robert A. Kraft — Wed, 24 Mar 2010 15:18:05 +0000

In a bit of good news for consumers, the Federal Reserve issued new rules yesterday prohibiting certain restrictions on gift cards. Under the new rules taking effect August 22, 2010, consumers must have at least five years to use the gift cards before they expire. The Fed also says service or inactivity fees can be imposed only under certain conditions. Such fees can be charged if the consumer hasn’t used the card for at least a year, if the consumer is given clear disclosures about them, and no more than one fee is charged a month.

New Rule Will Clarify Free Credit Reports

Robert A. Kraft — Mon, 22 Mar 2010 10:14:32 +0000

One of my pet peeves is the abundance of TV commercials advertising free credit reports from companies that actually charge you for your credit report. This is totally deceptive, and finally the government is going to start putting an end to this practice on April 1. Here are excerpts from a column by Susan Tompor in the Detroit Free Press, explaining the impact of the new federal rule:

When you’re shopping for a free credit report — totally free — you can skip that singing pirate in the commercials. Free isn’t free with this guy unless you buy something else — but what would you expect from a pirate? If you’re confused by which “Free Credit Report” is really free — and believe me, plenty of consumers are — things should soon clear up.

Beginning April 1, some ads for free credit reports will have to include disclosures that you might have to spend money for credit monitoring or other services to get a “free” credit report from that outfit. By Sept. 1, such disclosures will be mandated in all TV and radio ads.

You also should know that you have a legal right to get a free report on your credit through www.AnnualCreditReport.com or by calling 877-322-8228. But federal law only provides for free credit reports — not credit scores. So you still might find yourself a bit flustered.

This is the first major change in credit report rules since 2003, when Congress enacted the law giving everyone free access to one report each year.

Tim Burns, public affairs director for the Better Business Bureau serving Eastern Michigan, said more than 10,000 consumer complaints were filed nationwide in the past three years against Experian’s Consumerinfo.comv and FreeCreditReport.com. Generally, people thought their reports were free but did not know they were signing up for other costly services.

And now, if you go to www.freecreditreport.com, you’ll see a disclaimer at the top that says: “Free credit reports are available under Federal law at: AnnualCreditReport.com.”

An Experian spokesperson said via e-mail this week that “Experian just received the final rules issued by the FTC regarding the marketing of free credit reports, and we are currently reviewing them to determine the appropriate actions to support our business. We remain committed to clearly and conspicuously disclosing to consumers that the free report we offer is not the free annual credit file disclosure provided by federal law.”

If you order a free credit report at the Experian site, you do get one — when you also begin a free trial membership in Triple Advantage Credit Monitoring. If you don’t cancel that membership within the 7-day trial period, you’ll be billed $14.95 a month. Most consumers would likely agree with Levin, who said, “free credit reports aren’t supposed to produce $15-per-month charges on a person’s credit card.”

The pitchman in the commercial says, “a man should always dress for the job he wants. So why am I dressed up like a pirate in this restaurant?” Maybe he needed a second job to pay for that “free report” on his credit.

More Than 10% of Texas Homeowners Behind on Mortgage Payments

Robert A. Kraft — Mon, 15 Mar 2010 10:57:18 +0000

More than one in ten Texas homeowners with mortgages are behind in their payments, according to the Dallas Morning News. Texas’ mortgage delinquency rate is now just slightly behind the national average of 10.44 percent. Texas ranks 18th nationally among the states with the highest percentage of late home loans. The article states that “The number of homes going through foreclosure slowed in 2009 because of the large number of home mortgage modification programs designed to help troubled borrowers. But foreclosure filings remain high – reaching a record of almost 61,000 in North Texas last year.”

If you have questions about foreclosure, please contact our law firm. We’ll be glad to visit with you.

Dallas-Fort Worth Foreclosure Rate May Be Artificially Low

Robert A. Kraft — Thu, 11 Mar 2010 16:19:29 +0000

The Dallas Morning News recently ran an interesting and somewhat disturbing article about the decrease in local foreclosures in 2009. The good news is that the number of foreclosures dropped in 2009 from previous years. But the bad news is that this drop may have been artificially induced by strategies employed by financial institutions. Here are excerpts from the article:

Dallas-Fort Worth area home foreclosures for 2009 fell to their lowest level in three years.

But the almost 12 percent drop doesn’t mean that fewer North Texans are threatened with losing their homes.

Indeed, the number of D-FW homeowners with a loan in default is at a record high, and foreclosure filings continue to grow.

Actual foreclosure sales have fallen, though, because many lenders are negotiating longer with borrowers and delaying foreclosures for months, a close look at the data shows.

“There are an awful lot of problem loans out there that should be foreclosed on and are not,” said George Roddy, who heads Foreclosure Listing Service of Addison, which tracks foreclosures in 19 Texas counties. “Perhaps they think if they delay long enough, the situation will work itself out.

“Yes, foreclosures are down, but it’s artificial.”

Last year, lenders sold 18,637 homes at foreclosure auctions in Dallas, Tarrant, Collin, Denton and Rockwall counties.

That’s down from 21,174 forced sales in 2008 and 19,102 in 2007, according to a Dallas Morning News analysis of Foreclosure Listing Service’s numbers.

More than 65 percent of the loans on foreclosed homes were made between 2005 and 2009. The average loan balance was about $130,000.

Neighborhoods in Grand Prairie, Southeast Dallas, McKinney, DeSoto and Frisco led the area in total foreclosures in 2009.

Lenders foreclosed on the most local homes in the first quarter of last year – about 5,000. But after a slowdown in the summer months, the fourth quarter saw an increase in forced sales.

The number could have been even higher.

More than 40 percent of the homes posted for possible foreclosure last year in Dallas-Fort Worth were repeats – cases where the lender delayed taking the property while negotiating with the borrower.

Roddy says repeat foreclosure filings slowed in early 2010 but are still high.

Along with avoiding the bad publicity from throwing thousands more homeowners out of their houses, lenders postpone taking ownership of the property because it can cost them. By some estimates, it costs a lender $50,000 to foreclose on a home.

While analysts worry that there could be a deluge of foreclosures at some point, Scott Norman, president-elect of the Texas Mortgage Bankers Association, doesn’t expect it.

“It’s possible that the numbers of foreclosures will rise, but I don’t think they will spike,” he said. “Lenders are trying to exhaust every option they have before foreclosing on a house.”

10% fall behind

Recent reports showed that the ratio of Texans behind on their mortgage payments has risen to more than 10 percent for the first time.

In the Dallas-Fort Worth area, about 6 percent of homeowners with loans at the end of 2009 had missed three consecutive mortgage payments.

Even in cases where borrowers are that far behind, many mortgage companies – spurred by government programs – are attempting to modify the debt and avoid foreclosure.

Such forbearance wasn’t the norm during the last big housing sector shakeout in Texas in the late 1980s and early 1990s.

Real estate analysts are hoping that the more moderate approach in this cycle will dampen the impact of reselling foreclosed homes.

Dr. James Gaines, an economist with the Real Estate Center at Texas A&M University, said it’s “a good thing if the lenders manage to stagger the foreclosures rather than dumping thousands of properties on the market at once – that doesn’t do anybody any good,” he said.

“So far the market has been able to absorb most of the foreclosures.”

The potential for increased lender foreclosures is one of the clouds hanging over the local housing market, said D’Ann Petersen, business economist with the Federal Reserve Bank of Dallas.

“Hopefully the lender programs will work, and a majority of homeowners will be able to stay in their homes,” she said. “A sudden and steep increase in forced sales could swell the housing inventory and put downward pressure on home values.”

Lower impact

So far, the impact of foreclosures on home values in North Texas has been less than expected.

In all of 2009, the median price of homes sold through the Realtors’ Multiple Listing Service was flat compared with 2008.

In the last two months, the benchmark S&P/Case-Shiller Home Price Index has recorded modest increases in D-FW residential values.

The discounts on foreclosed homes sold in the D-FW area have been substantially lower than in the late 1980s, when “we regularly saw 40 to 50 percent write-downs in values,” Roddy said.

But statewide, the inventory of foreclosed homes available for resale has increased more than 25 percent in recent months, he said.

Almost 40 percent of the residential real estate sold in North Texas the last quarter was foreclosed or distressed properties, according to a recent study by Clear Capital.

“In some neighborhoods, up to 60 percent of the home sales are foreclosures,” Roddy said.

So far, there’s no indication that foreclosure filings and home mortgage payment delinquencies will decline in 2010.

So far this year, home foreclosure filings in the D-FW area are up 22 percent from the first quarter of 2009.

About 15 percent of Dallas-area homeowners with mortgages owed more than their house was worth at the end of 2009, according to a new report from First American CoreLogic.

That makes them much more likely to walk away from their homes if they’re caught in a cash squeeze.

Pain of unemployment

Keeping more homeowners in their properties will require job creation, analysts agree.

“Better economic times would certainly help,” Petersen said.

The majority of home foreclosures are now attributed to borrowers losing their jobs or part of their income – not the result of the onerous mortgage provisions that caused most foreclosures a couple of years ago.

“One in three of the unemployed right now are at least six months behind in income,” said Todd Mark of Consumer Credit Counseling Service, which works with thousands of troubled mortgage holders each month.

“And they are letting their house payments fall behind.”

Mark’s organization has seen an increase in housing counseling requests since December.

“We’ve definitely seen a surge in calls over the last 2 ½ months,” he said.

Many mortgage companies are still giving borrowers more time, Mark said.

“Some lenders are letting them stay in their homes six months,” he said. “What a stark contrast to what we saw before.

“Maybe property values will have a chance to come back a little bit in the interim,” Mark said.

“Maybe their employment situation will improve. It’s buying time for both sides.”

Dallas-Fort Worth area home foreclosures for 2009 fell to their lowest level in three years. But the almost 12 percent drop doesn’t mean that fewer North Texans are threatened with losing their homes. Indeed, the number of D-FW homeowners with a loan in default is at a record high, and foreclosure filings continue to grow. Actual foreclosure sales have fallen, though, because many lenders are negotiating longer with borrowers and delaying foreclosures for months, a close look at the data shows.

Last year, lenders sold 18,637 homes at foreclosure auctions in Dallas, Tarrant, Collin, Denton and Rockwall counties. That’s down from 21,174 forced sales in 2008 and 19,102 in 2007, according to a Dallas Morning News analysis of Foreclosure Listing Service’s numbers. More than 65 percent of the loans on foreclosed homes were made between 2005 and 2009. The average loan balance was about $130,000.

Recent reports showed that the ratio of Texans behind on their mortgage payments has risen to more than 10 percent for the first time. In the Dallas-Fort Worth area, about 6 percent of homeowners with loans at the end of 2009 had missed three consecutive mortgage payments. Even in cases where borrowers are that far behind, many mortgage companies – spurred by government programs – are attempting to modify the debt and avoid foreclosure.

So far, there’s no indication that foreclosure filings and home mortgage payment delinquencies will decline in 2010. So far this year, home foreclosure filings in the D-FW area are up 22 percent from the first quarter of 2009. About 15 percent of Dallas-area homeowners with mortgages owed more than their house was worth at the end of 2009, according to a new report from First American CoreLogic. That makes them much more likely to walk away from their homes if they’re caught in a cash squeeze.

Tips for the Suddenly Unemployed

Robert A. Kraft — Wed, 10 Mar 2010 18:27:04 +0000

As the national economy slowly recovers, jobs are lagging badly. People who have lost their jobs over the past year are still having a difficult time finding new employment. The McClatchy-Tribune News Service recently ran an article with tips for the unemployed. In the article was a list of Web sites that seem helpful.

The threat of job loss continues to remain foremost in the minds of many workers. What steps should a person take once the dreaded pink slip arrives? Several Web sites have several good insights and answers. Here are a few sites with information about how to survive a layoff:

BEST-JOB-INTERVIEW.COM

www.best-job-interview.com/lay-off-tips.html

Discusses coping with the emotional toll of a layoff, taking stock of career goals and networking for a new job.

LAYOFF SURVIVAL TIPS

lay-off-survival-tips.com/2009/10/27/how-to-survive-a-lay-off/

Offers five key steps for adjusting to a job-loss situation.

NATIONAL FOUNDATION FOR CREDIT COUNSELING

www.nfcc.org/FinancialEducation/consumertips/consumertips_21.cfm

Features a useful list of steps to take after a layoff.

QUINTESSENTIAL CAREERS

www.quintcareers.com/layoff_action_steps.html

Provide good insights on taking action to prepare for a layoff, and after it occurs.

THE UNEMPLOYMENT HANDBOOK

unemploymenthandbook.com/

unemployment-articles/just-laid-off-start-here /48-6-immediate-strategies-for-managing-a-sudden-job-lay-off

Covers actions to take after a layoff, including filing for unemployment and cutting monthly expenses.

Obama May Compromise on Consumer Agency to Pass Financial Regulation

Robert A. Kraft — Mon, 01 Mar 2010 10:22:55 +0000

The Obama administration is no longer insisting on the creation of a stand-alone consumer protection agency as a central element of the plan to remake regulation of the financial system, according to an article in the Washington Post. The article is lengthy, but interesting and important. Here are the opening paragraphs:

In hopes of quick congressional approval of a reform bill, White House officials are opening the door to compromise with lawmakers concerned about creating a new bureaucracy, according to congressional and some administration sources.

President Obama’s economic team is now open to housing the consumer regulator inside another agency, such as the Treasury Department, though they still prefer a stand-alone agency. In either case, they are insisting on a regulator with political autonomy and real teeth so it can effectively enforce rules designed to protect consumers of mortgages, credit cards and other financial products.

The administration may also have to compromise on Obama’s recent proposal for a rule to limit risky activities at banks by prohibiting them from engaging in many kinds of speculative investments.

Treasury officials are preparing to send Capitol Hill a toughly worded measure that would bar banks from making certain investments that benefit only the firms’ bottom line rather than their customers. But there is little support among either Democratic or Republican lawmakers for this proposal, known as the “Volcker rule,” and Senate leaders are now closing ranks around legislation that would leave it to banking regulators, rather than the law, to decide which activities to ban.

From the start of the Obama presidency, administration officials have made far-reaching financial reform one of their highest priorities, along with overhauling the nation’s health-care system. Officials have vowed to put in place new rules and regulators to prevent a repeat of the abuses that precipitated the financial crisis.

New Credit Card Rules Take Effect Today

Robert A. Kraft — Mon, 22 Feb 2010 10:48:36 +0000

As many people know, today is the effective date of the largest section of the new federal law regarding credit cards, and especially the parts governing what the credit card companies can do and say. This excellent page of official information is from the government Web site of the Federal Reserve:

The Federal Reserve’s new rules for credit card companies mean new credit card protections for you. Here are some key changes you should expect from your credit card company beginning on February 22, 2010.

What your credit card company has to tell you

When they plan to increase your rate or other fees. Your credit card company must send you a notice 45 days before they can
- increase your interest rate;
- change certain fees (such as annual fees, cash advance fees, and late fees) that apply to your account; or
- make other significant changes to the terms of your card.
If your credit card company is going to make changes to the terms of your card, it must give you the option to cancel the card before certain fee increases take effect. If you take that option, however, your credit card company may close your account and increase your monthly payment, subject to certain limitations.

For example, they can require you to pay the balance off in five years, or they can double the percentage of your balance used to calculate your minimum payment (which will result in faster repayment than under the terms of your account).

The company does not have to send you a 45-day advance notice if
- you have a variable interest rate tied to an index; if the index goes up, the company does not have to provide notice before your rate goes up;
- your introductory rate expires and reverts to the previously disclosed “go-to” rate;
- your rate increases because you are in a workout agreement and you haven’t made your payments as agreed.
How long it will take to pay off your balance. Your monthly credit card bill will include information on how long it will take you to pay off your balance if you only make minimum payments. It will also tell you how much you would need to pay each month in order to pay off your balance in three years. For example, suppose you owe $3,000 and your interest rate is 14.4%–your bill might look like this:

New balance	$3,000.00
Minimum payment due	$90.00
Payment due date	4/20/12

Late Payment Warning: If we do not receive your minimum payment by the date listed above, you may have to pay a $35 late fee and your APRs may be increased up to the Penalty APR of 28.99%.

Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example:

If you make no additional charges using this card and each month you pay. . .	You will pay off the balance shown on this statement in about. . .	And you will end up paying an estimated total of. . .
Only the minimum payment	11 years	$4,745
$103	3 years	$3,712 (Savings = $1,033)

New rules regarding rates, fees, and limits

No interest rate increases for the first year. Your credit card company cannot increase your rate for the first 12 months after you open an account. There are some exceptions:
- If your card has a variable interest rate tied to an index; your rate can go up whenever the index goes up.
- If there is an introductory rate, it must be in place for at least 6 months; after that your rate can revert to the “go-to” rate the company disclosed when you got the card.
- If you are more than 60 days late in paying your bill, your rate can go up.
- If you are in a workout agreement and you don’t make your payments as agreed, your rate can go up.
Increased rates apply only to new charges. If your credit card company does raise your interest rate after the first year, the new rate will apply only to new charges you make. If you have a balance, your old interest rate will apply to that balance.
Restrictions on over-the-limit transactions. You must tell your credit card company that you want it to allow transactions that will take you over your credit limit. Otherwise, if a transaction would take you over your limit, it may be turned down. If you do not opt-in to over-the-limit transactions and your credit card company allows one to go through, it cannot charge you an over-the-limit fee.
- If you opt-in to allowing transactions that take you over your credit limit, your credit card company can impose only one fee per billing cycle. You can revoke your opt-in at any time.
Caps on high-fee cards. If your credit card company requires you to pay fees (such as an annual fee or application fee), those fees cannot total more than 25% of the initial credit limit. For example, if your initial credit limit is $500, the fees for the first year cannot be more than $125. This limit does not apply to penalty fees, such as penalties for late payments.
Protections for underage consumers. If you are under 21, you will need to show that you are able to make payments, or you will need a cosigner, in order to open a credit card account.
- If you are under age 21 and have a card with a cosigner and want an increase in the credit limit, your cosigner must agree in writing to the increase.

Changes to billing and payments

Standard payment dates and times. Your credit card company must mail or deliver your credit card bill at least 21 days before your payment is due. In addition
- Your due date should be the same date each month (for example, your payment is always due on the 15th or always due on the last day of the month).
- The payment cut-off time cannot be earlier than 5 p.m. on the due date.
- If your payment due date is on a weekend or holiday (when the company does not process payments), you will have until the following business day to pay. (For example, if the due date is Sunday the 15th, your payment will be on time if it is received by Monday the 16th before 5 p.m.).
Payments directed to highest interest balances first. If you make more than the minimum payment on your credit card bill, your credit card company must apply the excess amount to the balance with the highest interest rate. There is an exception:
- If you made a purchase under a deferred interest plan (for example, “no interest if paid in full by March, 2012″), the credit card company may let you choose to apply extra amounts to the deferred interest balance before other balances. Otherwise, for two billing cycles prior to the end of the deferred interest period, the credit card company must apply your entire payment to the deferred interest-rate balance first.
No two-cycle (double-cycle) billing. Credit card companies can only impose interest charges on balances in the current billing cycle.

Will New Credit Card Rules Increase Bankruptcies?

Robert A. Kraft — Sun, 07 Feb 2010 10:55:41 +0000

Jonathan Ginsberg, Atlanta Bankruptcy Attorney, has an interesting post at the Bankruptcy Law Network blog. His theory is that the new credit cards rules taking effect later this month may cause personal bankruptcy filings to rise. This in spite of the fact that the purpose of the new rules is to benefit consumers. Please read the entire post, but here is the primary point:

I think that before we begin celebrating these common sense changes, we should recognize that from the credit card companies’ perspective, these new regulations will negatively impact profits. And credit card companies have many smart lawyers on staff advising them how to recapture those profits by taking actions that are not prohibited by the new laws.

I predict that when these new laws go into effect we are going to see more instances where credit lines are closed and demand for payments made. We will see more aggressive collection efforts sooner. We will see faster triggers on interest rate hikes because of the delays in hikes set out in the law. And we will see less inclination by credit card lenders to “work with” debtors who have always paid their bills but now need a little breathing room.

In my experience, any squeeze on credit card profits will equal a squeeze on consumers struggling to pay debt, and that will mean more consumers will end up looking at bankruptcy as a way out.

Dealing With Bill Collectors

Robert A. Kraft — Mon, 11 Jan 2010 02:39:15 +0000

Dallas Morning News business columnist Pamela Yip published an excellent article about dealing with debt collectors. We recommend you read the entire article if you are having debt collection problems, but here are a few highlights. We will be glad to answer any questions you have in this area.

No one likes to be dogged by a bill collector, and there are steps you should take to ensure that you resolve your situation quickly and aren’t bullied by unscrupulous collecting firms:

1. Don’t ignore calls or written communications from collectors.

2. Make the collector prove you owe the debt.

3. If a collector calls about a bill you already paid, show proof that you met that obligation.

4. Don’t tolerate abuse from debt collectors.

5. Take action if collection calls go over the top.

Limited-Time Offer — Free Consultation With Consumer Law Attorney

Robert A. Kraft — Sun, 10 Jan 2010 18:28:14 +0000

The lawyers and staff at Kraft & Associates have been helping Texas consumers for more than 30 years with their personal injury and Social Security disability claims. But we have only recently added an experienced bankruptcy and consumer law attorney to our team. So for the early part of 2010 we are going to offer you a special “Get To Know Us” deal.

If you are having financial problems — facing possible foreclosure, receiving harassing phone calls from debt collectors, confronting bills you just can’t pay, considering filing for bankruptcy — we will give you a FREE telephone consultation with our bankruptcy and consumer lawyer, Ms. Kathleen Munden. Ms. Munden has represented hundreds of clients with financial problems over the past 14 years, and she wants to help you too.

Just Contact us now and ask for the special “Get To Know Us” free consultation.

Call Us — We’re Easy To Talk To.

Bankruptcies Jumped 32 Percent in 2009

Robert A. Kraft — Tue, 05 Jan 2010 17:17:09 +0000

As Dallas bankruptcy lawyers, we were not surprised by any of the facts reported today by the Associated Press, but the story is interesting. Consumers and businesses filed so many bankruptcy petitions in 2009 that it became the seventh-worst year on record, with more than 1.4 million petitions filed. This is an increase of 32% from 2008. Texas ranked No. 32 among the states, with a 25 percent increase in filings. Here are excerpts from the article:

While experts believe some of the increase is due to a natural recovery as consumers and attorneys become accustomed to a recent overhaul of bankruptcy laws, the numbers indicate clear correlations to recession-weary regions. Arizona saw the fastest increase, a jump of 77 percent from the year before, followed by Wyoming (60 percent), Nevada (59 percent) and California (58 percent).

For three years, filings have been steadily rising back toward levels reached early in the decade before Congress overhauled the nation’s bankruptcy laws. The 2005 alterations made bankruptcy filings more cumbersome, a move that followed fears from lenders that some consumers were abusing the system to wipe away debts.

John Pottow, a bankruptcy professor at the University of Michigan, said the return to the highs of earlier this decade illustrates the failures of the 2005 overhaul bill. He said the measure largely made filings more costly and time-consuming by forcing consumers to undergo a paperwork-heavy test to determine eligibility for Chapter 7 bankruptcy and adding liability for attorneys who provide help.

“It never made sense in the first place that you could change the laws and make all these bankruptcies go away,” said Pottow, who would like to see the 2005 law changes repealed. “If people are encountering financial distress, you can only scare them away for so long before they come back again.”

Beware Credit Card Changes As You Charge Into Holiday Shopping

Robert A. Kraft — Thu, 10 Dec 2009 10:51:59 +0000

As Dallas bankruptcy lawyers we see far too many clients who have gotten into financial trouble by misusing their credit cards. Pamela Yip, the personal finance columnist for the Dallas Morning News had an excellent article recently on the hazards of using credit cards for holiday shopping. The gist of the article is that there are many new charges that credit card companies have slipped into their contracts in advance of stiffer federal laws that take effect in February. Consumers need to be aware of these additional charges or may find themselves in over their heads with debt. Here are excerpts from the article:

Running up your credit card bills could be extra costly this year as card issuers scramble to change many terms before federal rules restricting their practices take effect in February.

They’re raising annual percentage rates, instituting fees, slashing credit limits and even closing some accounts, all of which could put consumers who carry large balances in a bind.

Consumers “need to really think twice about how they’re paying for the holidays this year,” said Todd Mark, vice president of education at Consumer Credit Counseling Service of Greater Dallas. “If you’re planning on carrying a balance and you’re going to charge up a bunch of things during the holidays, today’s [credit card] terms may not be tomorrow’s terms.”

Translation: The purchases you make now and in December could have a higher annual percentage rate in January.

If you do use a credit card, don’t charge anything that you can’t pay off in three months.

“Credit card rates are now too high to just charge something and assume you will be able to pay for it,” said Bill Hardekopf, chief executive of LowCards.com, a credit card information Web site.

Don’t even think about just making the minimum payment.

“If you charge $1,000 on a credit card with an interest rate of 15 percent and just pay $25 of your balance each month, it will take you until May of 2014 to pay off this Christmas, and you will pay an additional $370 in interest,” Hardekopf said.

Avoiding credit cards

To protect yourself from having to use credit cards, develop a spending plan before you venture out to the mall. This isn’t as restrictive as you might think. In fact, it can be quite liberating because it will keep you from making impulse purchases.

Mark suggests making a list of the people you’re buying for, how much you’re spending on them and what you want to purchase.

“Every aisle is going to be filled with impulse purchases, so you don’t want to fall prey to that,” he said. “It’s usually the minor expenses that ruin our budgets, so creating a list for each and every item will help keep your budget in line.”

Pay in cash or through a debit card. But if you use a debit card, keep track of your spending and your bank balance so you don’t overdraw your account.

“It’s really hard to outspend the cash you have,” Mark said. “You can’t have $600 and end up spending $1,000.”

Studies have shown that consumers typically spend 12 percent to 18 percent less when they pay with cash, Hardekopf said.

“Counting out and handing over cash is a sobering reminder of how much items really cost,” he said. “It makes you pause and consider if the purchase is really worth your labor.”

Don’t procrastinate

Retailers are going into this holiday season with leaner inventories than last year because they don’t want to be forced to give huge discounts to move the goods.

That means door-buster deals may be more limited this year.

Take advantage of coupons and promotion codes from retailers.

Finally, remember that you don’t have to spend money to give to others.

“If you’re thinking, ‘I don’t have enough cash or credit,’ remember that money does not equal love at the holidays, and you can supplement that with gifts of time and love,” Mark said.

SHOP WITH SELF-RESTRAINT

To keep your finances under control this holiday season, follow these tips:

•Create a detailed budget.

•Don’t wait until the last minute to shop; many retailers already are offering great deals.

•Collect coupons.

•Use credit cards prudently. Don’t charge anything that you can’t pay off in three months.

•Make your gift instead of buying it. It will hold special significance for the recipient.

•Give of yourself. Consider doing a chore for a friend or offer to baby-sit. Do things that don’t require money but still convey the spirit of giving.

SOURCE: Consumer Credit Counseling Service of Greater Dallas