Starting Thursday, consumers denied credit will be better able to learn why.

That’s when a new rule goes into effect requiring lenders to give you a free copy of your credit score if your application for credit is turned down or you don’t receive the best available interest rate.

Consumers “will actually be able to see their credit score, which has been very difficult for consumers to do,” said John Ulzheimer, president of consumer education at SmartCredit.com. “If the lender pulled a 720, you’re going to get a 720.”

For this, you can thank the Fair Access to Credit Scores Act of 2010.

Previously, consumers only had limited access to the score that lenders used to evaluate your credit, Ulzheimer said.

“If you applied for a mortgage and got turned down, or didn’t get the best interest rate, you would get your credit score for free,” he said. “As long as you applied for a mortgage, you got your score.”

Now things will be different. Here are the circumstances under which you will get a free credit score in addition to when you apply for a mortgage, Ulzheimer said:

You apply for credit and a credit score is used to set the terms of the account.

You’re denied credit based on a credit score.

You’re approved for credit but under less favorable terms.

Your credit card company raises your annual percentage rate because of your credit score.

The lender also must tell you the factors that pulled down your score — such as late payments or maxed out credit cards — and where your score ranks nationally. It also will tell you how to get a copy of your credit report for free.

“The ruling only applies to lenders,” said Bill Hardekopf, chief executive of LowCards.com, a credit-card information website. “If a utility, telephone company or insurance agency has a special scoring system, it does not have to provide a free credit score.”

However, there is one exception to that, Ulzheimer said. “The exception is if the proprietary score uses only information from a credit bureau, then it must be disclosed.”

“For the first time, consumers will get a clear understanding of how they are judged by lenders,” Hardekopf said.

This should force consumers to really think about how they can improve their credit.

“Are they going to be realistically close to being able to qualify for something or are they really so far away that they should hang up [hope] for a loan and really focus on improving their credit?” Ulzheimer said.

The first and most important step you can take to improve your credit score is to pay your bills on time.

“Even if you only pay the minimum, pay your bills on time because late and missed payments are the easiest ways to lower your credit score,” Hardekopf said.

Secondly, pay off your debt.

“High balances and high debt ratios drag down credit scores,” Hardekopf said. “Your debt balance should be less than one-third of your available credit.”

Hardekopf suggests consumers with a good payment history contact their creditors and ask for lower interest rates.

“Then use what you saved in interest to pay down your balances,” he said.

So use this new law to punch up your finances — and your credit score.

The Dallas Morning News reported today that theTexas Legislature is beginning to take action regarding payday lenders. Here are the opening paragraphs of the article:

Senators took the plunge into payday lending rules Monday, approving two bills that bring some oversight to the largely unregulated industry in Texas.

Sen. John Carona, R-Dallas, said the legislation represents a “very, very delicate compromise” between consumer groups and the payday and auto title lending industry.

The legislation by Rep. Vicki Truitt, R-Keller, would require more disclosures by lenders about their fees and force the companies to obtain licenses and report data to a state agency. The first measure passed, 27-3, and the second vote was 28-2.

Sen. Wendy Davis, D-Fort Worth, and Sen. Royce West, D-Dallas, pushed for stronger regulation and a cap on fees. The Truitt proposals don’t cap fees, which can often reach 500 percent.

Those who take out payday loans and cannot pay them off roll them over, incurring even more fees and sometimes falling into a cycle of debt.

“Historically, Texas has taken a hands-off approach to the regulation of this industry,” Davis said in an impassioned speech, urging senators to think of those who get trapped in rolled-over loans. “They’re poor, they’re voiceless and they’re not here in the halls of the Capitol.”

Bills that would prohibit companies from charging fees to arrange short-term consumer loans are scheduled to be heard by the Senate’s Business and Commerce Committee. Similar legislation has been drafted in the House.

Critics contend payday lenders get around state usury laws by charging exorbitant fees to arrange the loans with third-party lenders, rather than making the loans directly. Those charges can amount on an annual percentage rate basis to more than 500 percent.

The bills threaten the livelihood of such companies, known as credit service organizations, or CSOs, charged Rob Norcross, spokesman for the Consumer Service Alliance of Texas, which represents the industry.

“The bill(s) as written would prohibit credit service organizations from charging a fee for arranging a small, short-term loan,” Norcross said. “If you want to make it illegal to provide (that) service … they are going to be forced to close their doors.”

State Sen. Wendy Davis, a Fort Worth Democrat who authored one of the bills, denied she’s trying to run the lenders out of business.

“It’s an issue of making sure that vulnerable people are not preyed upon in a predatory way,” Davis said. “I’m hearing from people who are finding themselves literally in a debtors’ prison as a consequence of these loans.”

Borrowers can roll the loans over if they can’t repay them on the due date, but Davis said that often lands them in deeper financial trouble because of the additional fees tacked on.

By operating under the state’s CSO laws, payday lenders are not subject to rate and fee caps that govern consumer loans under Texas Finance Code.

The CSOs charge a fee, which can range from $20 to $30 for each $100 borrowed, to arrange the loans. The lender generally charges 10 percent annual interest on each loan.

“It’s an access to credit issue for our customers,” Norcross said. Many of them don’t have access to credit through banks or credit unions. “This is their least expensive option for financial emergencies.”

Similar legislation never made it out of committee two years ago. This time around, Davis said, the various bills have support from both parties.

The number of houses on the market is 15 percent higher than a year ago, the latest statistics from the Realtors’ Multiple Listing Service show.

“When you look at year-over-year inventory counts, we’re much higher, and most sellers don’t want to first list their properties for sale in August or September,” said Altos Research vice president Scott Sambucci. “This would indicate that the new sellers hitting the market are going to be distressed or bank foreclosures to an extent.

“But banks are smart – they aren’t going to just throw a bunch of inventory on the market during a seasonally slow time of year,” Sambucci said. “So while some of the inventory is REO [real-estate owned], not all of it is.”

Record-low interest rates and bargain home prices are no doubt prompting some owners to try to unload their current houses so they can move.

Dallas sales agent Barry Hoffer says it’s a case of “sellers wanting to move up and take advantage of favorable home values and the lowest interest rates that we have seen in decades.”

Hoffer, who works at Ebby Halliday Realtors, said some listings are left over from the peak summer sales market.

Whatever the reason, single-family home sales listings in North Texas have topped 42,000 – the highest level since August 2008 and up from a low of 31,589 last December.

Looking nationwide, the number of homes listed for sale with real estate agents has grown in the last three months by almost 9 percent in Houston, 8.5 percent in Los Angeles and 7 percent in San Francisco.

The increase in home listings is coming at a time of year when seasonal buying begins to slow.

And this year – because of the April expiration of the federal housing tax credits – home sales in North Texas and elsewhere are down sharply from a year ago.

Maybe that’s why home listing prices are falling. Altos Research says they have dropped about 1.7 percent in the last three months in the cities they survey.

In the Dallas area, list prices in the MLS have fallen an average of more than 3 percent during the last 90 days, the California-based research firm found.

From the American Association for Justice press release.

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.

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.”

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.

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.”

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.

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

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.

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.

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.

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.

]]> http://www.texasbankruptcylawyer.com/consumer_law_news/tips-for-the-suddenly-unemployed/feed/ 0 http://www.texasbankruptcylawyer.com/consumer_law_news/obama-may-compromise-on-consumer-agency-to-pass-financial-regulation/ http://www.texasbankruptcylawyer.com/consumer_law_news/obama-may-compromise-on-consumer-agency-to-pass-financial-regulation/#comments Mon, 01 Mar 2010 10:22:55 +0000 Robert A. Kraft http://www.texasbankruptcylawyer.com/?p=434 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.

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:

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:

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.

You would think that as a bankruptcy lawyer, I would never fall victim to a scam. Unfortunately, I saw one of the commercials while I was waiting impatiently for a webpage to load on my laptop, which has become increasingly slow over the past few months. In a weak moment, I went to the website and downloaded the program, after paying $30.00 for the privilege.

At first, I was pleasantly surprised. My computer did indeed speed up noticeably, and I was very happy with the result. However, when I turned on my computer the next morning, I was greeted by a succession of Viagra ads, porno websites, and warnings that I needed to go back to the website and download the company’s anti-virus program. For another $30.00, of course.

Fortunately, I wasn’t that gullible, and I tried to go to the websites for Microsoft, Norton, and McAfee to download a reputable anti-virus program. The FinallyFast program blocked all my efforts to go to those websites, and I had to give up and go buy a program to load manually.

When I told the salesman at the computer store what was going on, he told me that the program might not allow me to load the Norton software I had purchased. He was right. My first attempts to load the program failed. Fortunately, Norton had a fix for that on the CD, and I was finally able to load the program.

Instantly, the virus was detected and eliminated. I was so relieved, and immediately did what I should have done to begin with — researched the website from which I had downloaded the program. I found hundreds of consumer complaints, and added my experience to every website I could find that addressed the problem.

And, of course, I should already have had a good anti-virus program installed on my computer. The program I had expired a few months ago, and I had planned to buy a new computer, so I didn’t resubscribe. Then I forgot about it, until I needed it. Never again. I hope my experience will keep a few people from the same expense and frustration.

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.

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.”

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.

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

In a bid to avoid an overload of foreclosed houses in its inventory, Fannie Mae has introduced a new program that would give homeowners facing foreclosure the option of leasing their houses for one year. The program could keep thousands of families in their homes, but critics worry that the Government-backed lender, which has received billions of dollars in bail-out funds, could end up losing even more money.

The “Deed For Lease” program would allow homeowners to transfer title to their homes back to Fannie Mae, in exchange for a one-year lease, with possible extensions after that lease term ends. The goal is to allow homeowners to remain in their homes, and for Fannie Mae to avoid the expensive and lengthy process of foreclosing on the homes.

The program helps “eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities,” Jay Ryan, a Fannie Mae vice president, said in a statement.

It also does less harm to the borrower’s credit record. “It shows that you put your best effort to work out a solution,” said Gabe Del Rio, director of homeownership at Community HousingWorks of San Diego.

However, Mike Himes, director of homeownership services at NeighborWorks Sacramento, said the industry should push harder to modify loans at lower monthly payments. “The preferred option is allowing people to retain ownership,” he said.

Fannie Mae executives said the rental program is designed to help delinquent homeowners who don’t qualify for a loan modification, but still want to stay in their homes.

To qualify, homeowners have to live in the home as the primary residence and prove that they can afford the market rent, which will be established by the management company running the program. Rents are based on current market rates.

This program will be particularly attractive to homeowners who owe more on their house than it is worth. By paying the market rate of rent in their area, they may actually be paying less per month in rent than they were paying on their inflated mortgage.

During the first nine months of 2009, Fannie Mae foreclosed on over 90,000 homes, and accepted 2,000 “deeds in lieu of foreclosure,” where the homeowners deeded the homes back to Fannie Mae and then walked away.

While Fannie Mae executives say the company’s motives are community-minded, critics say the company is simply gambling that the properties will eventually sell for a higher price. “That’s folly,” says Peter Schiff, president of Euro Pacific Capital in Darien, Conn., and a longtime bearish investor.

“Taxpayers are now going to own all these houses that (Fannie Mae) should have unloaded,” he said. “It’s going to cost a fortune.”

The announcement came as Fannie Mae asked for an additional $15 billion in government aid after posting another big loss in the third quarter as the taxpayers’ bill from the housing market bust keeps getting bigger. The mortgage finance company, seized by federal regulators in September 2008, posted a quarterly loss of $19.8 billion, including $883 million in dividends paid to the Treasury Department.

Pessimists like Schiff say the recent stability in the housing market is just temporary, and argue that there is a huge backlog of foreclosed homes that haven’t gone on the market. Refusing to sell those homes, they say, only prolongs the problem.

But other experts say that Fannie Mae’s new policy could make sense, even if prices don’t rebound quickly. The company will get rental income while avoiding costly foreclosure expenses. It will also help to safeguard the homes, which are less likely to be vandalized when occupied.

“There are a whole lot of costs you avoid,” said Thomas Lawler, a former Fannie Mae economist. “You don’t necessarily have to believe that home prices a year from now will be higher than today.”

Fannie Mae’s sibling company, Freddie Mac, launched a similar effort in March. That policy, however, requires the foreclosure to be completed and only allows month-to-month leases. Freddie Mac declined to detail how many borrowers have participated.

The two companies purchase loans from banks and sell them to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion, about half of all U.S. mortgages. They have been badly hurt by the housing bust and have required $96 billion in federal aid since being seized by government regulators 14 months ago.

To find out whether your home loan is owned by Fannie Mae or Freddie Mac, try these Web sites:

Fannie Mae http://loanlookup.fanniemae.com/loanlookup/

Freddie Mac: http://www.freddiemac.com/mymortgage

If you have questions about foreclosure or any related legal matters, please contact our bankruptcy and consumer law firm. There is no charge for that first phone call.

Complaints concerning predatory lending and mortgage practices were sixth, with complaints about telemarketers, automobile repair, automobile warranties, and telecom slamming rounding out the top 10.

“With the recession and increased foreclosure rates, consumers need to be on high alert. Too many people are being swindled out of their hard-earned money by scam artists,” said Hawaii Attorney General Mark Bennett, who co-chairs the NAAG Consumer Protection Committee with Montana Attorney General Steve Bullock.

Utility companies that use pre-paid meters effectively avoid state utility commission regulations. Such consumer protections as notice before disconnection and discretion to allow utility service to continue for elderly or sick residents disappear. Lower-income households are typically the users of pre-paid meters, and severe pressure may be put onto families to find cash to feed the meter. The situation can cause such families to become victims of predatory small lenders and even loan sharks.