Protecting Your Credit During Divorce

Divorce raises a whole host of complex issues that can be emotionally and financially devastating. During this time of great upheaval, the last thing anyone wants to deal with is a change in the credit status he or she has worked so hard to achieve.

The good news is it doesn't have to be this way. By taking a proactive approach and creating a specific plan to maintain one's credit status, anyone can ensure that "starting over" doesn't have to mean rebuilding credit from scratch.

The first step for anyone going through a divorce is to obtain copies of your credit report from the 3 major agencies: Equifax, Experian®, and TransUnion®. After you've gathered the facts, create a spreadsheet, and list all of the accounts that are currently open, including the creditor's name, contact number, the account number, type of account, status, balance, minimum monthly payment, and who is vested (joint, individual, authorized signer.)

There are two types of credit accounts, and each is handled differently during a divorce. The first type is a secured account, meaning it's attached to an asset. The most common secured accounts are car loans and home mortgages. For these types of accounts, your best option is to sell the asset. This way the loan is paid off and your name is no longer attached.

The next best option is to refinance the loan. In other words, one spouse buys out the other. This only works, however, if the purchasing spouse can qualify for a loan by themselves and can assume payments on their own. If they cannot qualify on their own, suggest that they try to qualify using a co-signer. One 30-day mortgage late can cause a drop in your credit score of up to 80 points or more, regardless of who the judge says is responsible for paying the monthly obligation.

Your last option is to keep your name on the loan. This is the most risky option because if you're not the one making the payment, your credit is truly vulnerable. If you decide to keep your name on the loan, make sure your name is also kept on the title. Imagine being stuck paying for something you do not legally own.

The second type of credit account is an unsecured account, meaning no asset is attached. It's important to know which spouse, if not both, is vested, and it's best to act quickly. If you are merely an authorized signer on the account, have your name removed immediately and request that the three major credit bureaus remove that account from your credit reports. If you are the vested party and your spouse is a signer, have their name removed right away. Any joint accounts (both parties vested) with balances should be frozen from any future charges and accounts that do not carry a balance should be closed immediately.

Remember, a divorce decree does not override any agreement you have with a creditor. Regardless of which spouse is ordered to pay by the judge, not doing so will affect the credit score of both parties.

Divorce can be difficult for everyone involved. However, by taking these steps, you can ensure that your credit remains intact.

If you or someone you know is struggling with these issues, do not hesitate to call. We are experienced mortgage professionals who can help you meet your financial goals and credit needs.
Stay tuned for more great credit tips!

What is the Velocity of Money and How Does it Impact Home Loan Rates?

If you’ve been watching the economic news, you’ve probably noticed that market experts and traders have been keeping a close eye on the Commerce Department’s Personal Spending and Personal Income reports. Obviously, those reports provide insight into the health of our economy, but did you know they also influence home loan rates? That’s right, personal spending can actually influence the interest rates that are available when you purchase or refinance a home.

Here's why. It has to do with something called the velocity of money. Even though the government keeps pumping money into the system, nothing happens until that money is spent or lent – and passes from one hand to another or one business to another. The speed at which this money passes between parties is called the velocity of money.

With the job market still very sluggish, consumers aren't spending much money these days, and businesses are still reluctant to spend money to make investments in their business. With the present velocity at low levels, inflation remains subdued and that's good for home loan rates. That's because rates are tied to Mortgage Bonds and inflation is the archenemy of Bonds, so low inflation is good for Bonds and rates. However, once velocity increases, the excess money in the system will cause inflation – which is bad for rates, since even the slightest scent of inflation can cause home loan rates to worsen.

While we certainly want to see better economic recovery news in the near future, we have to remember that there's an inverse relationship between good economic news and Bonds and home loan rates. Weak economic news normally causes money to flow out of Stocks and into Bonds, which helps Bonds and home loan rates improve. Strong economic news, on the other hand, normally has the opposite result.

Currently, home loan rates are near historically low level, but that situation won’t last forever. That means now is an ideal time to purchase a home or refinance before the velocity of money – and rates – change. If you or anyone you know would like to learn more about the current economic situation and how to take advantage of historically low home loan rates, then please contact me.

Tax Deadline Extended!

There's great news for last minute tax filers! You'll have a few extra days to file your taxes this year...thanks to a little known Washington D.C. holiday called Emancipation Day, which celebrates the freeing of slaves in the district.

Though Emancipation Day actually falls on Saturday, April 16, it will be officially observed on Friday, April 15 this year. And since the tax code says that filing deadlines can't fall on Saturdays, Sundays, or holidays, that means your tax filing isn't due until Monday, April 18, 2011.

As always, the most important thing is to file your tax return on time, even if you can't pay your bill. The IRS charges some pretty hefty penalties for filing late: generally 5% per month or up to 25% of the total tax amount due. And that doesn't even factor in interest charges, which the IRS changes quarterly and range between 4% and 9%.

Albert Einstein once noted that, "The hardest thing in the world to understand is income tax." And with all the changes that happen in the tax code each year, it's easy to see why he said so! If you have any questions about your taxes, your best bet is to talk to a CPA or tax professional. Let me know if I can refer someone to you, or if I can answer any questions at all that you may have about your mortgage. I'm always happy to help you however I can in achieving your short- and long-term financial goals.

Sincerely,

Hope Hall
Hall Lending Group
Phone: 319-899-3820
hope@HallLendingGroup.com


NMLS # 3938

Who says December is a “quiet” month in the real estate industry?

Here are just a couple significant happenings that will have an enormous impact on the Real Estate industry throughout 2010.

1. HUD recently postponed the implementation date of Mortgagee Letter 09-28 from January 1, 2010 to February 15, 2010. According to the letter FHA-approved lenders will be prohibited from accepting appraisals prepared by FHA Roster appraisers who are selected, retained or compensated in any manner by a mortgage broker or any member of a lender’s staff who is compensated on a commission basis tied to the successful completion of a loan. Although use of an Appraisal Management Company is not mandated when obtaining an FHA appraisal, one has to expect that most lenders will use the same channels already in place for ordering conventional appraisals under the HVCC.
2. NEW Good Faith Estimate 2010. This is the new hurdle lenders and brokers must tackle. The complexities of this new form of disclosing loan terms and fees will no doubt affect the flow of transactions but we want to make it clear that we are fortunate to work with some of the best lending partners in our industry and are implementing systems to ensure a smooth transition to this new format.

Our staff possesses a thorough knowledge of rates, loan products, and lenders programs. We use this information to structure a loan that will give you the mortgage that you deserve.
We look forward to working with all of you in 2010 –