What Does the Mortgage Aid Settlement Mean?

People who were foreclosed upon by one of five mortgage banks -- Bank of America (which includes any Countrywide mortgages), Wells Fargo, Chase, Citigroup and Ally Financial --  between 2008 and 2011 could be entitled to a share of the recent $25 billion settlement.

Sounds great, right? But there are issues. The settlement will not apply to any mortgages guaranteed by Fannie Mae or Freddie Mac. It also appears that it is going to take time to sort out exactly who is entitled to relief and how much will be paid to each homeowner. Initial analysts project that it will take six months to a year before any funds are distributed and it is likely that individual payments will not exceed $2,000.

Another component to the settlement allows some current homeowners who are underwater (i.e., owe more on their mortgages than their homes are worth) to refinance their mortgages and obtain a lower interest rate.

If you think you might be entitled to relief you should stay on top of this. The StarTribune has provided a list of resources to get more information.

About the author: Dan Cooke

 

Be Wary of Celebrity Debit Cards

Well-known public figures, such as financial advisor Suze Orman and the Kardashian sisters,  have begun marketing their own prepaid debit cards, which promise people with bad credit access to instant cash.

According to the Wall Street Journal, celebrity-sponsored prepaid debit cards may pose unique dangers for consumers, due to the unreasonable fees that are being charged for using the cards. Prepaid debit cards launched by, among others, the Kardashian sisters and hip-hop king Russell Simmons ended up costing more than they were worth. The Kardashians withdrew their cards from the market after consumers discovered ridiculous fees, including an $8 monthly maintenance charge. Even Orman's recently-launched prepaid debit card has fees that can add up quickly (Orman says there will be a $3 activation fee, a $3 monthly maintenance fee, and a $3 charge for every call to a customer service representative).

Industry observers claim that these fees will still squeeze money from people who use the cards, ultimately resulting in a financial loss for low-income consumers. While it is true that having a prepaid card can help folks improve their credit rating or help to establish credit, no one should sign up for a new debit card simply because it is offered or endorsed by a celebrity.

A far better practice would be to find a local bank or credit union that offers a low or no fee account with a debit card attached to the account. For those who cannot open a regular bank account due to bad bank credit, some of the big national stores are offering pre-paid debit card accounts that have much lower service fees than the celebrity cards. Be sure to compare prices before signing up for any of these cards, even if it takes a minute or two to go over the fine print on the back of the packaging containing the card in the store.

When it comes to managing your money and your credit score, be a smart consumer and don't let the celebrity images sway you into making a bad financial decision.

About the author: Dan Cooke

Mortgage Stripping in Minnesota

Most U.S. bankruptcy courts already recognize mortgage lien stripping as an option for distressed homeowners. Minnesota has only recently allowed this as a remedy. If you have a second or third mortgage on your home that is "underwater" - meaning that your home is currently worth less than what you owe on your first mortgage - bankruptcy relief may allow you to strip any underwater mortgages away entirely, helping many struggling homeowners stay in their homes and avoid foreclosure.

A recent article in "Minnesota Lawyer" explains the current legal developments. The key Minnesota case on the issue is on appeal. We can expect a decision by the appellate court early this year and if the court follows the national trend, more Minnesota homeowners will be able to consider mortgage stripping as an option.

About the author: Dan Cooke