Every day we see more drama in the foreclosure debacle, with increasing number of lenders being pressured to put them on hold.
But what's the strategy for those of us who are still paying our mortgages and not in danger of losing our homes? This should be a perfect opportunity to take Arianna Huffington's wildly successful "Move Your Money" campaign one step further by "shopping for a lower-cost mortgage" and refinancing with a more responsible lender. This won't just punish those who loaned recklessly and reward those who didn't, i.e., community bankers, it will likely save you big bucks if interest rates have dropped at least two percentage points below the rate you are paying on your mortgage.
In the first seven days alone of the "Move Your Money" campaign which began in December 2009, about 340,000 people searched zip codes to find community banks that are highly rated. More importantly, they also moved big bucks out of big bad banks: according to Dennis Santiago of Institutional Risk Analytics, who created a search engine on the site, more than $1 billion was moved in the first three months of 2010. Finding a bank couldn't be easier. When you go to Move Your Money you simply need to enter your zip code to find a list of sound local banks and credit unions to choose from.
There's a big difference between the Too Big To Fail banks that got bailed out and the Small Banks Who Failed. For one thing, the community banks tried to stop these reckless lending practices while the big banks threw bucks at Congress to try to stop reform, James MacPhee, chairman of the Independent Community Bankers of America (ICBA).
"Along with several ICBA member bankers and staff, I have testified numerous times in the past three years in front of Barney Frank, Chairman of the House Financial Services Committee, and Chris Dodd, Chairman of the Senate Banking committee," MacPhee said. "Conversely, the American Bankers Association and the largest Wall Street firms ran a full court press trying to stop (reform) from ever being passed."
Have community banks failed? Yes, MacPhee maintains, but it wasn't because they were reckless but because their prudent loans were "bundled" with bad loans.
"As these debt instruments became worthless, hose buying our debt stopped purchasing, and foreclosures ran in the tens of thousands. When that occurred, the market value of the solid loans became worth less, as foreclosed homes were being sold well under their market value. As the job market dried up, even good loans had to be written down by the community banks. The resulting loss of capital dropped below regulatory standards, and the banks were closed and then typically merged into other banks by the Federal Deposit Insurance Corporation. "
The good news -- or let's hope so -- is that the exposure of reckless practices will humiliate the bad banks into changing their practices. If it doesn't? All the more reason to "boycott" them and only do business with those who put their customers first.
Ready to consider refinancing? Consider taking these steps.
Before you do any "mortgage shopping," get a copy of your credit history at AnnualCreditReport.com. If you have a low score, you might want to consider postponing refinancing until you've built a better bill-payment history; it could literally cut your mortgage cost in half.
Consider only fixed-rate mortgages. Some "experts" may claim that adjustable rate mortgages are okay if you're only going to stay in your home for three years or less, but your home is not a disposable item like a cell phone. If you're only planning to live in one place for three years or less, you should rent, not buy. MacPhee agrees with me that one of the biggest ripoffs in the banking industry -- that the media STILL isn't covering -- is the adjustable rate mortgage. "If (a bank is) going to write an ARM mortgage because someone cannot afford a home under standard bank rates, who are you kidding? The custom is happy for three years, or the period of the ARM balloon, the bank makes big fees, and then sells off both the credit risk and the interest rate risk and walks away."
As I pointed out in my book, America, Welcome to the Poorhouse, another big bargain is the little-talked about 15-year mortgage. Savings are significant both because the loan features a shorter payback period and because these mortgages generally feature lower rates. For example, assuming a 6% interest rate, your total interest costs on a $100,000 30-year mortgage are nearly $116,000. If that same mortgage were converted to a 15-year term, it would require somewhat higher monthly payments -- $844 instead of $600 -- but you'd save nearly $64,000 in interest payments.
Never take out an interest-only mortgage. While you pay no principal during the interest-only period, your payments will rise when that period comes to an end. Furthermore, the mortgage has to be paid off during a shorter term -- 25, 23, or 20 years -- so your monthly payments will be higher.
Avoid one of the riskiest mortgages, a balloon loan. Talk about bait and switch: typically, after the end of a three- or seven-year period, you owe the bank all the remaining principal, in one lump sum. If the value of your home drops you won't be able to find another mortgage to repay that loan and you risk foreclosure. And let's hope that this option won't even be broached by your responsible community banker.
we have a cultural probles here: it should be a shame to have $10th of millions ... or billions, because NO ONE is capable to make that much by their labor without FRAUD i.e. our system is fundamentally unhumane (Evil, if you like). One of the problems that Church is one of beneficiary of this system and; therefore, guards it via their pedofiles ...... all the way to the Pope. Do you see Christ dress in gold and other costumes? the problem is cultural in its nature, but, certainly, we must address tools of fraud and robbery until society matures via technology, citizens' war or total depression.
2) I am interested to know the collective credit card debt of this 10,000 people.
And further more how much of that debt is on Luxury Items = Cars, Flat screens.i-phones,Texting, Cable or Satellite, Bicycles, Eating out, Gifts and toys for children, Gourmet foods, Fancy clothes and Jewelry, Tickets to the game or a show, Vacations at the Beach, Lap tops, Fancy perfumes and Body Care, Golf Cubs, Fancy Booze, Beer and Wine, Fancy pets, Motorcycles and Boats and general junk in the attic or garage.
The American Dream, you got to be asleep to believe it. Pathological Consumerism.
Toma chocolate,paga lo que debes. So now the frugal must pay for the frivolous.
Swiping of credit cards here and there without care.
The demon is the credit system and user is a pathological consumer.
My old man and his old man knew this to be true.
It is serious business my friend.
Mort=Death
Gage=Pledge. dont sign the line, if you do, be SURE to pay on time.
Take your money out of BoA and put it in a savings account with a reputable credit union.
a) with out atm
b) without checking
c) without debit
Then you can see your assets.
*Use cashiers checks and money orders (which are often free at your corner store) We'll see how long the banks allow that to continue.
*Rent a conservative apartment.
*Pay off your credit card and then cut them up
*Buy silver coin (American Silver Eagles have no tax and the sale is not reported).
The New Fiscal Conservative Citizen.
The New Social Progressive : Shop at the Farmer's Market I implore you.
Show them who the real boss is. We have No Demand for your services and we are taking back Our Supply.
Much of America is "upside down" in their mortgages ... making a refinance transaction nearly impossible ... therefore, switching mortgage companies isn't so easy ... and quite expensive.
Other than the fee the local banks get to write the mortgage, what difference does this make? You are not "moving your mortgage" to that bank, your payments won't go there. Your mortgage payments go to whoever bought the mortgage security, that hasn't changed.
Banks used to hold mortgages. I remember my surprise the first time my mortgage was sold, now they all are, though I believe the new financial bill requires them to hold 5% of each loan they write, big deal.
Now that's classic. Testifying in front of the one man most responsible for creating the subprime market...Barney Frank. All while placing the blame on someone else...the banks.