Wednesday, April 14, 2009

Volume 3, Issue #28

Don't become a pawn in one of their schemes, learn what you need to watch for and how to protect yourself with this special report by Karim Rahemtulla, investment director of Smart Profits Report. (Full Story Below)

Also in Today's Issue...

Dear Smart Profits Report Reader,

At the recent Investment U conference in St. Petersburg, Florida, I spent some time with Frank Trotter, Executive Vice-President of Everbank, where our conversation turned towards the latest murky situation in the mortgage industry.

By way of disclosure, I'm an Everbank customer and whenever we meet at conferences like this, Frank gives me insights into what his bank is doing and the banking industry in general. Insights that are invaluable in terms of knowing how to play the trends.

But this time, we chatted about a disturbing trend in the mortgage industry: The dangerous amount of mortgage misinformation and how it's opened the door for mortgage scams, which take people's money and houses.

Some of the very people who got consumers into the wrong mortgage are now trying to "help" them get out of the mess by using a variety of unscrupulous techniques.

Today, I'm going to share Frank's insights with you - and show you what you need to watch for and how to protect yourself...

Are You Paying For Mortgage Industry Information That Should Be Free?

Scam #1: Want to free yourself from a burdensome mortgage obligation by using a government program?

Simply send $395 to a company advertising such services and they'll start the process by sending you some information.

Solution: There are thousands of legitimate mortgage brokers who will send you the same information free of charge. Companies that ask for money upfront with the promise of this information to follow aren't interested in helping you. They just want your money.

Click the following links to read about the programs currently in place, with full contact information, guidelines, and qualification requirements.

Making Home Affordable - Program Description
Making Home Affordable - Summary of Guidelines
Home Affordable Modification Program Guidelines
Housing Counselor Q&As
Home Affordable Refinance
Home Affordable Modifications

If you're looking to refinance with those sweet 4.5%, 30-year mortgages, it's not a mirage - those rates do exist.

But you'll need to put some work into it (after all, there's no free lunch) and qualify for them. This means you'll need substantial equity in your home, at least two years of tax returns, and a credit score of at least 740, otherwise you'll likely pay a higher rate. Still, that's not bad when you consider that a higher rate is now in the 5% to 5.5% range.

With money so cheap at the moment, Frank tells me that Everbank's mortgage business is going gangbusters. But they're also spending time explaining to customers that...

* The government is not bailing them out of upside-down mortgages.
* Mortgage relief doesn't mean you can reduce your mortgage principal by 50% with a simple phone call.

Still, Everbank does offer some of the best rates I've seen on both mortgages and savings accounts.

Home Foreclosures: Be Honest, Play Tough, And Work With Your Lender

Scam #2: The second scam out there is foreclosure relief, with expensive brochures peddling their services for an upfront fee.

Solution: The best place to get foreclosure relief is from your lender. I personally know several people who are not being harassed by their mortgage companies, but are actually getting relief.

The key is to be honest and upfront with them, while playing hardball at the same time. When the economy was booming and real estate values were more stable, banks had more leverage and were more ruthless about removing people from their homes.

But in the current economic climate, and with the issues over oversupply and foreclosure having led to tanking home prices, banks are more willing to work with customers and retain business these days.

That's not to say that some couldn't care less. They're out there. But there are many more who will try to keep you in your home.

Do: Approach them with a plan and try work out a payment plan, principal reduction, interest rate reduction, or even an orderly foreclosure or short sale.

Don't: Try to pull a fast one because you've heard everyone else is doing it and think it's okay, too. Banks have all your financial information at their fingertips - your monthly income, credit score, and how much you're paying out every month.

So for example, if you have a good job, are paying your bills, have cash in the bank and low debt, you'll have a hard time pulling that fast one.

That said, it's obviously unfair that responsible, creditworthy people have to bear the burden of those who got themselves into a mess, but there isn't too much you can do about it.

Sell Short... But Only With The Proper Guidance

Ever heard of the "short sale?" It's a popular tool these days to get out of a mortgage. In a short sale, you basically agree to sell your property at a lower price than the mortgage - at a loss. That loss is then your responsibility to either pay off or negotiate with the bank. Some banks will let you off the hook completely, others will make you pay it back.

Scam #3: The scam here is for companies to offer to do it for you - providing you with the information, negotiating with the banks, and getting you out without any credit wounds.

These scams usually have some aspect of legal representation - i.e. "We have attorneys who will do the work for you." But it's just another way of getting an upfront fee from you (notice the trend of "up-front fees" here?)

Solution: You can negotiate a short sale directly with your lender. It's cheaper for a bank to lose $50,000 than to sit on a $500,000 house that is losing value and needs to be kept up. That's your leverage. If that doesn't work, you can hire an attorney to do it for you, but it should be based on contingency, not some hefty upfront fee.

Check out this excellent article on short sales.

The Mortgage Scammers Want Your Money... The Banks Don't Want Your House

Getting mortgage relief while preserving your credit and dignity is a worthwhile goal that can be achieved - despite unscrupulous scammers. You can do everything required without needing a fly-by-night "advisor," who will charge you for something that is readily available free.

But it will take some work on your part. Take the first step today by reading the articles linked in this issue and by familiarizing yourself with the programs available today.

Being upside-down on a mortgage, or facing foreclosure is a stressful, unpleasant situation, for sure. But it's now easier to get back on your feet and either move forward or get some relief. Remember, the banks do not want your property.


--Karim Rahemtulla
Investment Director
Xcelerated Profits Report

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