Gunning Daily News

Q: What Is Seller Financing?

January 22, 2014 10:24 pm

A: Also known as a purchase money mortgage, it is when the seller agrees to “lend” money to the buyer to purchase and close on the seller’s home. Usually sellers do this when money is tight, interest rates are high or when a buyer has difficulty qualifying for a conventional loan or meeting the purchase price.

Seller financing differs from a traditional loan because the seller does not actually give the buyer cash to complete the purchase, as does the lender. Instead, it involves issuing a credit against the purchase price of the home. The buyer executes a promissory note or trust deed in the seller's favor.  


7 Tips for Protecting Your Identity & Money

January 21, 2014 6:33 pm

At least 110 million consumers were affected by a recent hack involving Target and Neiman Marcus retailers. Whether or not millions more will have their identities manipulated and finances ruined within the coming months due to more breaches of security at other stores is anyone’s guess, says identity theft recovery expert Scott A. Merritt.

“By necessity, I became an expert on identity theft. My information was stolen in 2006, and in repairing the damage, I learned some not-so-obvious ways we can all protect against identity theft in the first place,” says Merritt, CEO of Merritt & Associates (scottamerritt.com) and author of  "Identity Theft Do's and Don'ts."

Merritt’s problems began quickly. While disputing financial charges and dealing with resulting business problems, in 2007 he was stopped for a traffic violation and arrested on a false outstanding felony warrant. He immediately knew why.

“I had to enlist my U.S. congressman and convince the state police, NCIC, FBI and Secret Service that I didn’t commit the felonies. For a few years, I had to prove that the prints did not match the false record in question. After legal action, however, I was able to have this corrected.”

Unfortunately, the millions affected by the recent hacks may be dealing with similar repercussions in the years ahead, he says.

Before you become a victim of identity theft, Merritt offers seven ways to guard against it.

• Understand how and where it happens. Identity theft is like being robbed when you are away from home; most thefts occur in places where you do business every day. Either a place of business is robbed, a bad employee acts improperly or a hacker breaches the office through the computer.

• Secure your wallet’s information. Photocopy everything in your wallet: photos, credit cards (front and back), membership cards—everything. Put the copies in the order the cards are arranged in your wallet, staple the pictures and place them in a strong box or safe.

• Make sure your information is consistent. For all of your identity and financial documents, make absolutely sure, to the smallest detail, that all of your personal information is accurate and consistent! Discrepancies such as using your middle initial on some documents, and not others, or having different addresses, can wreak havoc in proving your identity, and can compromise your credit score.

• Secure your digital habits and data. Change your passwords at least twice a year on a non-scheduled basis—don’t be predictable. Have a strong firewall if you shop online, and only access sites that are protected by a strong firewall and high industry standards. Access accounts of a financial nature only from your personal computer.

• Protect your banking information. While in the bank, keep account numbers and other data out of sight, and avoid stating account numbers, Social Security numbers and similar information out loud. When planning a bank visit, have items such as deposits and withdrawal slips prepared in advance.

• Account for your interactions with vendors. Every time you speak to someone with whom you do business, write down the time, date, name and the purpose or outcome of the call. If an identity theft occurs on the vendor’s end, you will be able to reference these prior conversations effectively. Be sure to note any animosity or reluctance from the vendor.

• Don’t carry around your birth certificate or Social Security card. Unless it’s necessary, keep those vital items in a safe, or at least a firebox. If you know someone is going to need a copy of your tax returns or your driver’s license, for example, make the copies ahead of time. This avoids the need for a firm’s employee to leave the room with such information.

“Of course, you can greatly reduce being a victim of such recent hacks that occurred at the major retailers by using cash more often,” he says. “But if you’re going to use credit, use a card from a national bank or a national credit union and never a debit card, no exceptions.”


Protect Yourself from Mortgage Abuse

January 21, 2014 6:33 pm

In this report, I will pick up where I left off: reviewing details from the Connecticut Public Interest Research Group - ConnPIRG - about new Consumer Financial Protection Bureau (CFPB) rules that just went into effect to help protect homeowners and homebuyers from mortgage abuses.

ConnPIRG is a non-profit, non-partisan advocacy organization that takes on powerful interests on behalf of its members. As a founding member of the coalition Americans for Financial Reform, ConnPIRG helped lead the fight to establish the Consumer Financial Protection Bureau.

Abe Scarr, ConnPIRG Director said in addition to the CFPB's new rules protecting homebuyers and homeowners, the agency has released a variety of self-help tools so consumers can protect themselves.

Scarr says with these new rules and tools, consumers will have a better chance to protect themselves against unfair practices in the mortgage marketplace, whether they are buying a new home or already living in it.   

The new mortgage guidelines are part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted after the mortgage market collapsed and millions of consumers lost their homes, according to the ConnPIRG release. It is the first federal financial regulator with just one job: protecting consumers.

It has jurisdiction over both banks and non-banks, so it protects consumers no matter where they shop. Among numerous other achievements, it has already ordered big credit card companies to refund nearly $800 million to consumers for unfair practices.

The CFPB’s new tools will help consumers:

  • File a mortgage complaint
  • Find a housing counselor in their area
  • Get answers to mortgage-related questions
  • Read tips for homebuyers and homeowners
  • Download a guide for housing counselors

We'll be taking a closer look at specific services and issues covered under the newly enacted CFPB mortgage rules in future reports. In the meantime, get more information and access the consumer toolkit of links, including a way to ask questions directly to the CFPB by clicking here. 


Word of the Day

January 21, 2014 6:33 pm

Comparables. Properties similar to a specific piece of property that are used to help estimate the value of that property.


Q: What Is Amortization and Negative Amortization?

January 21, 2014 6:33 pm

A: When you amortize a loan you basically pay off the principal by making regular installment payments. This typically takes place gradually over several years.

Negative amortization is when the mortgage payment is smaller than the interest that is due, which causes the loan balance to increase rather than decrease. Negative amortization only happens with adjustable rate mortgages (ARMs) with certain features, including an initial payment that does not cover the interest due, a feature that is supposed to increase the affordability of the loan.

With negative amortization, a persistent rise in interest rates reduces the equity in the house unless the negative amortization is offset by house appreciation.

Negative amortization has to be repaid, which means your payment will rise in the future. The larger the negative amortization, the more you will be required to amortize the loan in full.


Get to Know New Consumer Protections on Mortgages

January 20, 2014 9:42 pm

I received some very important information issued through the Connecticut Public Interest Research Group - ConnPIRG - which is one of a network of these nonprofit consumer agencies operating across the country.

ConnPIRG issued a notice that new Consumer Financial Protection Bureau (CFPB) rules are now in effect that will help protect homeowners and homebuyers from the mortgage abuses they say led to the housing crisis.

In particular, ConnPIRG says consumers will get protections from lenders that make risky loans without checking a borrower’s income, assets, or ability to repay a loan. In the next two segments, we will review the highlights of these new policies, and how they can help mortgage seekers.

The new mortgage guidelines are part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted after the mortgage market collapsed and millions of consumers lost their homes, according to the ConnPIRG release.

Abe Scarr, ConnPIRG Director said the CFPB is getting results for consumers - the new rules are designed to help people safely buy affordable homes, and then to keep them.

Among the highlights of the CFPB’s new rules are the following:

  • Consumers will get more information and more protection when shopping for a loan and during home ownership.
  • Lenders will be required to make a “good faith, reasonable effort” to make sure you can repay your loan.
  • Loan officers and brokers will now have to follow rules that protect consumers from conflicts of interest.
  • Consumers will receive periodic mortgage statement that put important information about monthly payments in one place.
  • Servicers must, under certain circumstances, reach out to borrowers having trouble making mortgage payments and help them apply for the options available to them to avoid foreclosure.

Check out our next segment, where we'll examine the CFPB's new toolkit for consumers, to help them take advantage of new mortgage protections. Also, get more information about the new law here. 


5 Ways to Boost Your Credit Score

January 20, 2014 9:42 pm

Low credit scores result in higher interest charges. Borrowers with a FICO credit score of 700 save an average of $648 in interest on their credit card, $1,392 on their car loan, and $2,340 on their mortgage each year, compared with borrowers who have scores below 620, according to a study by CardHub.com, a credit-card comparison website.

For consumers willing to scale back on credit card usage, says the Wall St. Journal, there are five sure strategies for boosting your credit score:

Pay down credit card debt – Borrowers with the best credit scores use an average of seven percent of their total credit-card limit. Borrowers who surpass 10 percent of their credit limit will see their FICO score drop, even if they make monthly payments on time. Ideally, you should pay off your balance each month. If you carry a balance, put the card away and pay off the balance as soon as possible. A stop-gap option is to ask your creditor to increase your spending limit, which could increase your overall credit score.

Convert credit card debt to a personal loan – Credit-card debt is more damaging to credit scores than a personal loan, which is considered installment debt. That’s because the credit-utilization ratio does not take installment debt into account. Also, a personal loan will likely have a lower interest rate. So converting the debt to a personal loan, and paying it off efficiently, makes sense – but only if you stop using the credit card until the loan is paid.

Be selective about accelerating payments – For the same reason, consumers looking to improve their credit score should pay off credit card debt first, rather than student loans or other kinds of debt.

Check credit scores regularly – One in three consumers has errors in at least one of their credit reports (Equifax, Experian, and TransUnion.) Errors can send your score plunging. Get a copy of your credit report for free every year from annualcreditreport.com. If you spot errors, contact the credit bureaus, which are legally required to respond within 30 to 45 days.

Pay on time – the quickest way to harm your credit score is to miss a payment. Late payments can stay on your credit report for seven years, so the first rule in improving scores is to pay on time each month.


What 'Reason Codes' Tell You about Your Credit Score

January 20, 2014 9:42 pm

BPT)—Consumer knowledge about credit scoring remains a challenge. In fact, nearly half of Americans still don't know that mortgage companies use credit scores when making decisions about credit availability and pricing, according to a 2013 survey by the Consumer Federation of America and VantageScore Solutions, a credit score model developer. Even if you do understand the importance of a credit score, you may still wonder why yours isn't higher.

That's where "reason codes" come in handy.

Reason codes—also called score factors or adverse action codes—address factors that may be impacting your credit score, such as high balances on revolving credit accounts, late payments or a short credit history.

"Many people only review their credit score when they're applying for or have been refused new credit," says Barrett Burns, president and CEO of VantageScore Solutions. "Credit score notices, often sent after consumers apply for credit, include 'reason codes'—numbers and phrases that appear along with the score to explain why the score isn't higher. If you're unfamiliar with what those reason codes mean, the information intended to help you better understand your score may actually have the opposite effect."

You'll see reason codes on your credit score notice, regardless of whether your score is really good, average or poor, because the reason codes are meant to explain why your score isn't even higher. While they don't directly account for a lender's credit decisions, understanding reason codes can help you better manage your credit accounts and improve your credit score.

To help with that, VantageScore Solutions created a new consumer education website, ReasonCode.org, which provides a wealth of information about reason codes. The website includes a search engine that allows you to enter the reason codes that appear on your credit score notice and obtain more detailed information about each code in plain English and tips for improving your credit score.

To help you understand reason codes, here are some important consumer questions and answers:

Q. What is a "reason code" and why does it appear on my credit score notice?

A. Reason codes are alpha numeric codes (e.g. 01, AA) combined with short descriptions intended to explain why your credit score is not higher. Reason codes clarify why you did not receive a "perfect" credit score on a particular scoring model. Since perfect scores are rare, your score could always be higher, even when it's very good, so you'll always have reason codes associated with your score.

Q. Why should I care about reason codes?

A. If your score could be better, you can use reason codes as a guide to understand what you need to do to improve it. For example, if you receive a reason code that points to a high balance on your credit cards as a reason your score is lower then paying down those balances may lead to an improved score.

Q. Which code has the most influence on my score?

A. Reason codes are always listed in the order of greatest impact. Keep in mind just about all consumers will receive reason codes—even if a score is nearly perfect. If your score is already very high you may not need to take any action.

Reason codes can be a map for you to follow on the road to a higher credit score. Read and research them carefully and become a better manager of credit. The result can quite literally be more money in your pocket.

Source: ReasonCode.org


Word of the Day

January 20, 2014 9:42 pm

Close. Act of finalizing a transaction in which all the concerned parties meet to transfer title to a property. Also, when real estate formally changes ownership.


Q: Can I Deduct a Loss on the Sale of My Home?

January 20, 2014 9:42 pm

A: No. A loss from the sale of personal-use property, such as a home or car, is not deductible. They are considered nondeductible personal losses, and you cannot reduce your tax bill by deducting them the way you would deduct stock and investment losses on your tax returns.