You already know a Plan B is important, but what should it include? The first steps to take in creating your plan are to:
Save money.
Put away some money each month to have an emergency fund in case something unexpected happens, such as losing your job. You should have several months of housing costs saved to protect you from unexpected financial problems.
Reduce expenses.
Think about where you can save money; for instance, temporarily canceling cable or your gym membership. By paring down to the bare necessities, you may be able to save a significant amount of money. And even if it doesn’t seem like enough of a savings to make a big difference, remember – every little bit helps.
Senator John McCain was the second candidate to outline his solutions to the housing and credit situation. He restated the history leading up to the current situation and placed the blame for the crisis on:
Speculators who moved into the housing market during the bubble and overwhelmed normal market forces with rampant speculation.
Lenders who became complacent because of the sustained period of rising home prices and consequently failed to maintain their lending standards.
The explosion of complex financial instruments that were not well understood even by sophisticated investors and were largely off-balance sheet and hidden from scrutiny.
A crisis of confidence arising out of initial losses in the market which has caused banks to no longer trust each other and credit to dry up.
Step One: Passage of the proposed legislation by Rep. Barney Frank and Senator Christopher Dodd which would expand the government's capacity to stand behind mortgages that have been reworked on affordable terms.
Sen. Clinton called the current administration's efforts to help families a process that is both too slow and will help relatively few families; "it simply isn't enough to revive our housing market."
The Frank/Dodd legislation, she said, would move beyond this incremental approach by setting up an auction system for mortgage companies that would allow them to sell mortgages in bulk to banks and other buyers who would then restructure them to make them affordable for families. The auction system would be based on the fact that mortgages would be eligible to be guaranteed by the government once they are refinanced.
Senator Obama said that the government has let the special interests set the regulatory agenda and it is time to reconsider how we oversee the financial markets. He laid out six principles necessary to this reform.
Provide the Federal Reserve with basic supervisory authority over any financial institution to which it makes credit available as a lender of last resort. Saying that the Fed exists to ensure stability not to bail out financial institutions, he emphasized that any institution that has access to the discount window or similar facilities must be subject to prudent oversight to make sure it is not taking excessive risks with taxpayer money.
Capital, liquidity and disclosure requirements should be developed and strengthened for all financial institutions and there must be examination and reform of credit rating companies.
End our balkanized framework of overlapping and competing regulatory agencies. Large and complex financial institutions no longer fit under a single regulatory authority. The system must be streamlined and capable of identifying where risks actual reside in the system.
Predatory Lending is the equity killer. Consumers can lose equity in their homes by being placed in higher rates than they qualify for, by paying junk fees that are financed in the loan, by being placed in bad loan programs, etc. Predatory Lending, simply stated, is the practice of unfair lending. Predatory Lending victimizes hundreds of thousands of families every year. For the past 3 years Fair Community Lending Services has worked to protect consumers against predatory lending through education, access and accountability.
So what is Equity?
Equity is your ownership in the property you own also known as your asset position. A mortgage is your liability. So as shown in Example 1, if your home is worth $300,000 and you owe $200,000 to the bank, the equity remaining in your home is $100,000. Your equity is available for you to turn to cash by either selling your home or refinancing your home.
Credit is the key to wealth building. Before you embark on any financial transaction you must understand your credit. Do you have good credit, ok credit, at risk credit?
A credit report is a snapshot of one's payment history. It is used by lenders, insurance companies, landlords, and employers to determine a consumer's willingness to pay and demonstrate their credit worthiness. One's credit report and their FICO score (ranging from 300-850) will help financial institutions decide if one is eligible for a loan and if so what type of interest rate they can obtain. As consumers, we must use our credit reports to prove to others that we are a good risk when they consider us as a potential borrower, employees, tenants, etc.
The guidance below is applicable to homeowners with FHA Insured loans. While a good deal of this information may apply to all homeowners in danger of losing their homes, not all of the foreclosure avoidance tools mentioned may be available to you if you have a VA or conventional loan. Additionally, HUD/FHA does not have any Loss Mitigation oversight over VA or conventional loans. Please contact your lender or a housing counseling agency.
Q: What Happens When I Miss My Mortgage Payments?
Foreclosure may occur. This is the legal means that your lender can use to repossess (take over) your home. When this happens, you must move out of your house. If your property is worth less than the total amount you owe on your mortgage loan, a deficiency judgment could be pursued. If that happens, you not only lose your home, you also would owe HUD an additional amount.
Whether Wall Street likes it or not, Bank of America's Ken Lewis is getting a good deal, according to Shawn Tully's number-crunching.
By Shawn Tully, editor at large
(Fortune) -- Bank of America's $4 billion deal to rescue Countrywide Financial is getting decidedly mixed reviews from Wall Street. Investors fret that CEO Ken Lewis is overpaying for a ruined franchise to save face, following his ill-timed $2 billion investment in Countrywide late last year.
The markets are hardly cheering: B of A's stock has dropped as much as 2% today to $38.40, its price in early 2002. But the best guide to gauging the probable success or failure of this deal is studying the numbers: they show that, barring absolutely disastrous writedowns, this deal will prove a winner.
