Info for Your Potential

On Friday, June 6, 2008, oil’s price went up $10.75 to close at $138.54 per barrel. At this point, I am going to state a correction. I almost always use FutureSource charts to see what’s up with the price of oil. I trade options on stocks, EFTs and Indices and my account is not set up to trade futures. I don’t care to trade futures, find there’s a little too much “good old boy” issues in futures and commodities and prefer to stay away from that arena.

I discovered that I can view a chart of Light Crude Oil contracts without having to set up my account to trade futures and here is what I found: FutureSource’s charts (which are from Quote.com) show the previous day’s Volume and Open Interest under the daily candlestick at which I am looking. This is confusing, but it does, in one sense, make sense. It seems that some charting services wait to close of market to calculate Volume and Open Interest in a sort of time delay and chart it under the next day’s candlestick. Why they do this is a mystery to me, since my trading account charts are in real-time and show volume and open interest in real-time.

On June 9, 2008, I found it hard to believe that volume and open interest went down with the price of oil climbing to a new record high, so I decided to see if I could use the charts in my trading account to view Oil’s July contract and compare it to FutureSource charts. The chart I looked at in my options trading account shows Light Crude Oil July 2008 contract had a direct relationship in volume and price, but open interest (according to the FutureSource chart) did go down. Not much, but it did go down. Usually, with such a climb in price, open interest goes up in direct relationship to volume and price. Looks like a sell off. Nothing to write home about, but worth noting.

I was also told that the price of Oil went up due to the fact that a minor Minister in Israel announced that they were going to attack Iran due to growing concerns over Iran’s rhetoric on it’s Nuclear power. It’s always a fact that any news of war or eminent attack causes concern with supply and demand in oil, so it is safe to assume that the price of oil climbed on June 6 due to concerns over possible Israeli retribution on Iran and supply and demand in oil, but the fact still remains that oil is over-bought and over-priced due to speculation.

Oil prices, traditionally, rise and fall based on supply and demand. According to William Engdahl, 60% of oil’s price today is purely speculation and has nothing to do with supply and demand. The reason for this: unregulated oil exchanges. Read Mr. Engdahl’s article. It’s a real eye opener!

Here’s another little eye opener that will make you see why some folks swear the price of oil is going up due to a true supply and demand issue. When a trader or speculator buys a Futures contract, they are literally buying oil, corn, coffee, etc. In other words, they are buying oil and will take delivery of that oil, unless they sell all contracts before the contract expires. Most traders will sell all open contracts before they expire. When a trader/speculator has no intention of actually buying oil, but is instead buying to invest in oil futures contracts for the sole purpose of making money, then they are creating what I call speculation demand and are creating a pseudo-supply and demand.

So…who do we thank for all this pseudo-supply and demand? The latest controversy is ICE (InterContinental Exchange), an energies trading exchange. From everything I have read and heard about ICE, it is unrestricted and traders are virtually anonymous. Only the “big boy” oil trading banks know who is trading oil contracts. It’s only one of several energies or oil trading exchanges, but it seems to have the most influence on oil speculation.

In May of this year (2008), Congress questioned the Executives of the five top oil companies and basically asked (and I paraphrase), “Why do you keep setting oil prices higher and higher?” Their response was, “It’s not us…honest!” To be perfectly honest with you, I knew it wasn’t oil company Execs who were causing oil prices to climb. It was nothing more than trader speculation brought about by all the hype created by analyst, brokers and unregulated oil exchanges. If I knew it was trader speculation, surely Congress knew this. If they didn’t they didn’t know it, that’s not saying much for common sense intelligence of Congress!

Personally, I think Congress questioned the Oil Execs due to pressure from the public. A majority of the public knows very little to absolutely nothing about oil, how it’s priced, what speculation or a speculator is and how the stock and commodities markets work. Since they know very little about oil and it’s price, it’s much easier to blame the obvious offender - oil company executives. Who is the real offender?

In September of 2000, a 15 year old high school junior was accused by the SEC of running a “pump and dump” campaign on stocks that he had bought, knew were virtually worthless, hyped them on Internet message board and sold them to unsuspecting investors. This 15 year old was doing nothing more than what most brokers and stock and futures analysts do: convince (con) you, me and professional traders into buying a certain stock or futures contract.

Why am I telling you about this? To show you the real offenders. Two years ago, every time I went to the mailbox, I would receive brochures hyping an energy crisis and how I needed to buy energy futures before it’s too late. I called it the “pump and hype” campaign and it was very obvious to me what was going on. Shortly after that, the price of Light Crude Oil started climbing creating a speculation bubble.

Why didn’t I buy oil futures? First, common sense. I knew of no supply and demand (S&D) issues with oil or natural gas and couldn’t imagine why all of a sudden, out of nowhere, there is this shortage of oil and natural gas. I knew it had to be a fictionalized issue with supply and demand, so I did some research. I didn’t find anything that told me that there was a S&D issue with oil, so why would I trade oil futures? I wouldn’t and I didn’t! Am I sorry that I didn’t buy oil futures? No! Not one single bit!

Second, I have a conscience. (1) I realized that I was being conned into believing there was an energy shortage and prices were going to go up due to “hyped” S&D problem with oil. This creates panic buying. It also creates economic turmoil. (2) I wanted nothing to do with prices going up beyond S&D pricing. Something as sensitive as oil pricing has an effect on the economy. Whether it is by truck, train, plane or ship it has a direct effect on Goods and Services. Don’t think so? I used to pay $80 a week for groceries for a family of 3. I now pay $160 to $200 a week!

Third, a price and speculation bubble were eminent! Don’t you just love the word bubble? Mortgage bubble, oil speculation bubble, stock bubble… Makes one wonder what “bubble” is next, but like all bubbles, they eventually pop! In the 90s, Microsoft was the hot ticket. Traders couldn’t buy shares fast enough, but even I knew the bubble would burst at some point. While Microsoft was not a “pump and hype” campaign by analyst or brokers, it’s the same problem with any stock or commodity that climbs higher and higher in price with no correction or retreat in price. At some point it will go down and it usually goes down hard and fast.

BTW, if you are thinking about buying future contracts in Light Crude Oil, you may want to think again! It’s been on a steady climb almost straight up and it’s due for that hard and fast drop in price. It’s creating the very same trend as a the mortgage bubble and stock bubbles of Microsoft and Enron. The price starts with little or no trading action, suddenly takes off like a rocket, peaks to a new high, to very suddenly and very quickly drop like a rock creating a major sell off and correction before settling at normal price (Microsoft) or dying completely (Enron and AmeriQuest). The bubble is due to burst!

It is a sad fact that the dishonest behavior of “pump and hype” by brokers and analyst is what drives the stock and futures market. It’s now driving oil futures and it is just as bad, if not worse, as the mortgage crisis. Lately, it seems we go from one financial crisis to another and one thing that creates it is greed; another is lack of regulation. Isn’t that interesting! The mortgage industry crisis was created by greed and lack of regulation and now it’s the oil exchanges! When will Congress and the powers that be ever learn.

Not one speculating trader, not one unregulated oil exchange has stopped to think about the consequences of driving oil prices to 60% speculation. This careless, unethical behavior by speculators and exchanges is reeking havoc on the world’s economy and they don’t care and what is worse is that Congress and law makers allow it to go on and on.

I saw the very same behavior by Congress concerning the mortgage crisis. Actually, from everything I am reading about the mortgage crisis, Congress created it and allowed it to happen. Mortgage company CEOs lobbied and donated campaign funds in return for Congress creating lax Federal laws that literally let mortgage companies do business totally unrestricted creating a financial crisis. These same laws took presidence over state laws which were much more strict and protective of homeowners rights and property. I hope that’s not the case with oil, but we do have a president in office that has a lot of cronies in the oil (energy) industry.

I was told that the SEC told ICE to clean up their mess with the price of oil or they would find themselves under strict regulation with all anonymous traders revealed. Personally, and this is just my opinion, but I think we may be seeing the start of the clean up. From May 22 to June 5, price and volume were falling and open interest is falling. Are speculators selling off their open positions and starting to develop a conscience OR is it fear of coming under scrutiny and regulation by the SEC and US Congress? I think the clean up has started.

It would be great to see speculators become responsible traders and develop a conscience. Do I honestly believe this will happen? NO! It would be great to see Congress and the SEC close all of these wide open loopholes by creating trade regulations for oil in order to protect the World economy. It’s going to take an act of Congress with new oil trading regulations to bring things under control and it needs to be done soon.

This is unregulated speculation at it’s worst and I hope that speculators and oil exchanges do something about it soon before Congress has to step in to create laws to make them bear the responsibility of ethical trading!

Have you ever wondered why in the world banks have so many fees?

Actually, it’s very very obvious! Banks earn 1/3 of their revenue from fees. They fee their customers into debt…literally. Most of us are the “working class.” I know I wasn’t born with a silver spoon in my mouth and I work for my money. Some folks live paycheck to paycheck, yet the banking industry targets these very people with their unethical, unscrupulous and irresponsible robbery because they know these folks are easy picken’s. Banks know that the working class keeps very little to no extra cash in their checking account and are quite obviously easy targets for unethical banking policy. I don’t care what a bank’s policy is. I know one thing it is not, it is not law and while major banks get away with it because they are not breaking the law, their policy is unethical and deviously unscrupulous. Banks make the Grinch look like the tooth fairy.

For those of you who keep extra money in your checking account, why? Are you like most Americans and fear the inevitable? The day will come when you will make a mistake in your check book register or someone you paid with a debit card has decided that you are their next target for debit card fraud? It is my opinion that having extra funds in a checking account does not make good financial sense and if banks practiced ethical banking policy, it should be totally unnecessary. That money is better served in a money market account, mutual fund account, saving account, Certificate of Deposit (the original CD, LOL!) or some other investment, not for padding your checking account in the event that your bank drains your account by unethical banking practices because you made a simple mistake or were the victim of debit card fraud.

Yeah, yeah, I hear you saying, “But, all I have to do is prove debit card fraud and my bank will refund all NSF fees.” Go ahead, and by the time you finally prove it, your bank will have fee-d you to death. Do you honestly, think the bank will refund all their NSF fees?

Think again. My neighbor told me about her experience with debit card fraud. It took over two weeks to get the bank to realize that she was a victim fraud even after she filed a police report. The bank did NOT refund all the fees. Why? They told her that she should have researched the company she did business with more closely. The bank manager told her that she allowed herself to become a victim of fraud. She closed her account that day and sued the bank. They settle the day after the attorney’s letter arrived announcing she intended to sue.

Let’s look at four of the most popular unethical schemes by banks to rob you of your money.

1. Posting transactions in descending order. Every major bank posts in descending order, largest transaction to the smallest. Why? They can get more NSF fees! Most people find that they on occasion will make mistakes in their checkbook register: a miscalculation, a missed debit card transaction, a missed automatic payment, etc. This happens all the time and banks count on it especially from the hard working middle class who have very little money in their accounts. I had a retired bank manager who told me that since Debit Cards have become so popular, banks count on consumers forgetting to deduct Debit Card transactions from their checkbook registers, because they know they can make a killing in NSF fees. Banks literally have no scruples.

Example: This is what happened to me. I transposed two numbers on a debit card transaction in my checkbook register. I posted $17.10, it should have been $71.10. Here’s what happened: I had four transactions post one day in February, $54.20, 24.31, 5.60 and 4.32 and they posted in that order, largest to smallest. My balance was $47.56 on this particular day. Since my bank’s policy is to post in descending order, which is a very unethical scheme to make more money in NSF fees, I was charged $120 in NSF fees for all four transactions . If the transactions had been posted in ascending order, I would have only been charged one NSF of $30. I was more than willing to accept $30 as punishment for not being more careful, but $120 is ridiculous!

2. Banks approve debit card transactions even when there is no money in the account to cover it. It is the worst of the four schemes listed and shows how determined banks are to generate income in the form of fees from their customers.

I know everyone should know the balance in their checking account and I am particularly anal about knowing how much money I have in my account and not going over that amount, but s**t happens. I recently received a notice from my bank that I had a NSF. I checked my register and should have had $60.98 in my account. I went online and checked my account only to find a transaction for $59 that I did not authorize, but what bothered me more was the fact that my bank had approved a debit card transaction when I had no money in my account to cover it!

How obvious can it be that this bank was using every scheme in the book to make money on unethical banking practices? Even when my balance was only $1.98, my bank approved a $5.10 transaction and then proceeded to charge me $30 for a NSF. This is not only unethical, it should be illegal! If it had been declined, I would have known that something was wrong and could have corrected immediately.

3. Banks post transactions before deposits. This has to be the most obvious as to why it is done and it too should be illegal.

4. Low balance fees on savings accounts. This is the ultimate in ridiculous! It’s a savings account for goodness sake. Some folks work hard to save a few dollars a month and the banks are going to take it away because their customers are not stockpiling money away like a Rockefeller. My bank currently takes $10 a month for a balance below $100. Give me a break! Better yet, Mr. Banker, give your customers a break!

I worked for credit union and we posted transactions in ascending order (smallest to largest), deposits and credits before transactions and debits and if a customer was $5 or less short, we paid the transaction with NO NSF fee and we never charged a savings account fee.

Every bank should do this, but these days it’s a game of brainstorming to see who can come up with the next latest and greatest of unethical schemes to rob consumer’s of their hard earned money. To make matters worse; banks, credit card companies and mortgage companies lobby congress to get unscrupulous laws in their favor with the only intention being that of making millions of dollars in revenue. Greed has happily made it’s home in banking.

It’s disgusting and I decided that I had had enough. Writing my congressman was out of the question since banks literally have congress in their pocket. Credit unions are great, but I am seeing a trend with credit unions becoming mutual savings banks (MSB). How do I know? My bank was a credit union and became a MSB. When it was a credit union, I never had one problem. After the change, I didn’t dare take my eyes off my account for one second.

So, what do you do? Well, private banks and credit unions are great! Credit union customers are actually shareholders in the credit union; therefore, credit unions wouldn’t use unethical schemes to bilk their own shareholders. Private banks are far and few between, but are less likely to resort to unethical means to create revenue.

Then there is what I call a “stand-alone” Visa debit card. It is attached to an account with a routing number, but it is not a full service checking account. There are many of these stand-alone cards, but I like Wired Plastic and All Access (Netspend) Visa Debit cards. No, I am not getting any money for promoting them. I am sure there are others that are just as good, but these are the two with which I have had experience.

Here’s why I like them:

• Direct deposits are free
• There is usually an affordable monthly fee, which gives you unlimited free transactions
• Transactions post as they come in (not in descending order)
• Most, if not all, do not charge NSF fees
• All will decline debit card transactions if you do not have the money in your account
• Some charge a decline fee of about $1.00
• Some offer text messaging daily of your account balance, declines, etc.
• Most offer online services to track your account
• Most offer free online bill pay

Here’s what I do not like:

• If you want to buy gas at the pump, you will need to have at least $50 available on your card
• Most hold transactions in authorization for 30 days or until the vendor posts the transaction. This sometimes results in a double debt. The authorization is deducted and later the vendor post the actual transaction in a different amount. This is usually seen when dining out. The restaurant does an authorization for your total tab, BEFORE the tip. Later the actual transaction comes through as a separate transaction. This will require calling the Visa debit card company and/or the restaurant to get the authorization credited.
• Maximum daily or weekly deposit restriction. Most allow unlimited deposit amount by direct deposit.

A little aggravation out-weights the benefits of not being taken to the cleaners by being fee-d into debt by the bank.

Before those of you who think you are so wise make any comments about how people need to be more responsible with their money, let me point out that many banks set up these schemes to bilk millions of dollars from unsuspecting working class every day. Yes, banks are in the business to make money, but not by taking advantage of the very people who work hard for every penny they make. Yes, some folks have to live paycheck to paycheck. For some, that is their reality, but banks should not take advantage of these folks by getting more fees from posting transactions in descending order, approving debit card transactions when there is not enough money to cover the transaction or by posting transactions before deposits and credits. All are extremely unethical and it is very obvious the intention of these so-called policies.

Take control of your money and tell all the major banks to take a hike!

Lately, I have never seen so many companies absolutely determined to rip consumers off with deceptive business practices and down right fraud. The worst of it is the fine print, hidden fees and failure to disclose.

I am currently dealing with Dish Network. It has been the ultimate lesson in “do your research before you buy.” I have never seen a company so determined to make it to the top of the list for ripoffs.

My story starts with an online search for reasonable cable TV rates in my area. My research reveals “forget cable” and gives me “go with satellite.” I looked at Direct TV and Dish Network and decided on Dish for the simple fact they had more packages to choose from, were much more reasonable than Direct TV and were a high profile, well known company. I fill out on online application for the Family Plan at $19.99. The process produces a statement that shows I do not have to pay anything up front, so I schedule an appointment to install.

The next day I get a call. Seems there is an up front charge of $49.95 installation fee which will be refunded on my first statement. I assumed that the online statement was one of those deceptive offers of nothing up front by means of a rebate. You know what I’m talking about, right? One of those cases of promoting a FREE product, then find out you pay $100 up front and then send in a rebate form to get the $100 back in the form of a rebate check. I gave the rep my debit card info and assumed all was fine. That was only the start of my problems. The rest of this story I will list for you.

• The first statement did show a refund to me for $49.95, but I was charged for two months of service at $39.99 per month. I chose the Family Plan at $19.99.
• A call to customer service was useless, since the customer service was in India. Not a good sign. I couldn’t understand half of what the rep was saying and most of the conversation was a confusing explanation of why I was charged $39.99.
• I decide to pay one month of service.
• Two weeks later, Dish turns my service off. I assume because I only paid for one month.
• Two days later, Dish makes an unauthorized charge to my debit card $56 and does not turn my service back on. I call customer service, in India, and have to pay another $56 to get it turned back on. Again, I assumed they must require two months service paid on the first statement and that the $56 fee is for fees relating to turning my service back on.
• Two weeks later, I receive a statement. Once again, I am charged for two months of service, but this time it is $52 a month. I never changed my service.
• I call customer service, in India, and get no where trying to explain that the Family plan is still only $19.99 and I would like to know why I’m being charged $52. After an exhausting 20 minute, very confusing conversation, I decide it is time to cancel my account. The rep cancels my account and says nothing about a cancellation fee.
• On 9/24/2007, Dish makes another unauthorized charge of $200 to my debit card. Yep, you guessed it. Another call to India. Another confusing call, one inwhich I am told that there was an 18 month service agreement, which I was never told about or shown and a $295 cancellation fee, which I never knew anything about either.
• I research www.ripoffreport.com about Dish Network. Holly Cow! If you look in the dictionary for deceptive, you will find Dish Network listed. List of complaints is unbelievable. Unathorized transactions being number one on the list.
• I’m talking to my neighbor and the subject comes up about the high price of cable and satellite TV. I tell her about my problems with Dish and she tells me hers. She canceled her service with them and they made unauthorized transactions to her credit card for 3 months before she finally had to closed the card. The next month, Dish made an unauthorized transaction to her checking account. She never gave them her checking account number, which means Dish found her checking account info and made an unauthorized transaction on her checking account.

I have been told, and I do not know if this is true, but India law does not stop them from making unauthorized transactions in the US. If this is the case, how in the world do you stop this activity which is illegal in the US? Seems to me, it would not matter if the company is in India or Australia, if they are going to do business with US citizens, then they need to abide by US laws.

When it comes to your money, do your due diligence before doing business with a company. I personally do not like the Better Business Bureau as a guide of with whom I should do business. The BBB simply notifies a company of a complaint against them and if the company responds to the customer, it is considered “good enough” to give the company a satisfactory rating, even though the issue has not been resolved.

The best and most effect means of research a company before doing business is doing a search via Google or Yahoo.  Do a search on the company in question. If there are any problems, they will be listed and you will be able to make an informed decision.

Check with the FTC and check the BBB.  The only problem I have with the BBB is the fact that if the business contacts the consumer about the complaint, the BBB considers that “good enough” for a satisfactory rating.  Honestly, it does not say much for the BBB.  Personally, I would like to know if the complaint was resolved to the consumers satisfaction.

I recently found a new website that allows consumers to submit complaints against businesses with whom they are having trouble.  It’s www.complaintsboard.com.  It would be a good idea to check them out as well.

In the last five years I have dealt with so many deceptive companies, it’s mind boggling. Some of it is on the verge of fraud while others are down right fraud. Why companies feel they need to deceive consumers is beyond me. It only ruins their reputation and cause them to lose business. With so many people using the Internet, you would think that companies would do everything in their power to abide by consumer laws and create an atmosphere of excellent customer service.

Do the Due! Research any company in which you intend to do business.

Everyday, someone tells me their experience with a debt collector and it’s never good. The story always starts with, “They call me at least 8 times a day.”

I talked to a lady recently who told me about her experience with a debt collector. This collector, like most, was extremely determined. When she got home from vacation, she checked her Caller ID to find that this collector had called her 32 times in a 3 day period. Each message made it sound like it was a life or death matter that she contact them immediately, so she did. When she found out they were trying to collect on a debt that was $22.24 and over two years old, she laughed so hard, they hung up on her. They never contacted her again.

It would be wonderful if it was that easy to deal with debt collectors. If all you had to do was laugh and all your troubles would vanish, but debt collectors are not a laughing matter. As a matter of fact, debt collection has become so high profile that Attorneys are getting in on the game. It seems that getting an official looking letter from an Attorney makes debtors very eager to pay and pay quickly.

Fair Debt Collection Practices Act

Let’s look at some laws that protect you from debt collectors. Debt collectors:

• May call you between the hours of 8:00am and 9:00pm seven days a week. FDCPA Section 805(1).

• May not use obscene or profane language. FDCPA Section 806(2).

• Cannot call you repeatedly. It has become the practice of debt collectors to call more than 8 times a day if you do not pick up and answer your phone and leave a message each time they call. This is harassment. FDCPA Section 806(5).

• They cannot threaten to take your personal property (except in the event of foreclosure or repossession), damage your reputation or inflict bodily harm. FDCPA Section 806(1).

• They may call your home, cell, work, boss, friends and family. When they call your work, boss, family and friends, it is to gather contact information ONLY. They must state their name, and if asked, who they work for. They may not say that the call is in reference to a debt or debt collection. FDCPA Section 804.

• You may send the debt collector a letter telling them to cease and desist in calling you at your home, cell, work, boss, friends and family and they must stop all contact. If you have an attorney, put the attorney’s contact info on the letter and they must contact the attorney. Warning: I advise telling the debt collector that they may call you at home or by correspondence. If you attempt to stop all communication with the debt collector, they may file a lawsuit in retaliation. FDCPA Section 805(c).

Did you know:

• There is no law that says you have to answer calls from debt collectors.

• There is no law that says you have to return their calls. If you can’t pay the debt, then there is no need to contact the debt collector until you can pay.

• There is no law that says you cannot hang up on a debt collector. You should hang up the phone if the debt collector yells at you or will not let you explain why you cannot pay. This is abuse and it should not be tolerated. It’s common practice for debt collection agencies to train their debt collectors to rudely over-talk you when you try to explain why you can’t pay just to make you mad so you will agree to anything to get them off the phone. Personally, I don’t understand the mentality behind that, but hey, I’m not a debt collector. If you want to get a debt collector off the phone really fast, HANG UP THE PHONE! It works every time.

• There is no law that says you must agree to their terms especially when you know you cannot possibly pay the debt under their terms.

• You can record all conversation with your debt collectors. You must tell them that you are recording your conversation, if you intend to use the recording as evidence of abuse in court.

• If you cannot pay a debt, it is best to not open any First Class US Mail that you suspect has been sent to you by a collection agency.

• You should open and read any mail that has been sent to you by Certified Mail, Return Receipt Requested.

Statute of Limitations on Debt Collection

Did you know all debt, once it is considered delinquent, has a Statute of Limitations(SOL) pertaining to how long a creditor, debt collector or attorney can try to collect on delinquent debt? Well, it does and it is one of those laws that debt collectors hope you do not know. Once the SOL has expired, the debt collector cannot sue to force a debtor to pay a debt. You always owe a debt, but with an expired SOL, you cannot be forced to pay.

Each state’s SOL limitations are different. When dealing with debt collectors and before you pay a debt, it is wise to check and make sure the SOL for the debt in question has expired.

1. Get a recent copy of your credit report.

2. Look for the debt in question.

3. There will me a column or a field that says “Last Date Report” or something similar. Look for that date.

4. Compare the Last Date Reported with today’s date and if it is longer than the SOL for your state, then the SOL has expired.

Example: A debt collector is calling you trying to collect on a delinquent debt. According to your recent credit report, the Late Reported Date for the debt is 7/3/2001. You live in Texas and the SOL for all types of debt in Texas is four years. It’s 2007 and six years has passed. The SOL for this debt expired on 7/3/2005.

If it has expired, you MUST send a letter to the debt collector and tell them you are aware of the laws and know that the debt has an expired SOL. If you do not send a letter informing them that the SOL has expired, they have the right to sue and they will win a judgment against you.

You’ve got to be savvy when dealing with debt collectors. They truly hope you do not know the laws concerning your debt. Know the laws that protect you and know that you are doing the best you can. If you can pay the delinquent debt, by all means do so, but only if it benefits you. Watch out for debt collectors and attorneys who will try to get you to pay SOL expired (barred) debt. This is the latest in the game of debt collection.

Debt collectors and attorneys buy lists with SOL expired, also known as barred debt. They’re hoping you don’t know about the little known law of SOL for collecting on delinquent debt. If they can get you to pay, they get 100% profit!

Payment Arrangements, Agreements and Automatic Drafts

You can make payment arrangements or agree to pay over the phone 24 hours a day, seven days a week, 365 days a year, but BE SURE TO GET IT IN WRITING! If they say they can’t put it in writing, you say, “I won’t pay you until you do.” You’ll probably get an agreement in writing in the mail in a few days.

I can’t say this enough, do NOT make one payment to a debt collector until you get it in writing. Do NOT pay a debt collector by Automatic Draft, ACH, check by phone (there all the same) from your checking account. Debt collectors are notorious for drafting more than was agree, even if you have it in writing.

The biggest concern is the fact that if you send them a check from your checking account, they now have your account information. I can’t tell you how many collection agencies and creditors think this is an open invitation to help themselves to the money in your account at any time they deem it necessary. There is this false belief among collection agencies that a receiving a check from a customer gives them permission to take as much money as they want and at any time they want from your account. Of course, this is illegal and you as a consumer can sue, but many consumers do not and creditors know it.

Make all payments with a money order. Many collection agencies will insist that they can only take payments by draft. They’re not telling the truth. They can and will take a payment by mail. Let them know you know this. Once you get the address, send a money order.

Debt collectors are smart, but you can beat them at their game. Be smart about your debt. Know the laws, protect yourself and build your self-confidence when dealing with debt collectors.

How to Stop Creditor Harassment

If a collection agency, attorney or creditor (Hereafter, I will refer to all three as creditor) has broken the laws of the FDCPA, then you as a consumer have the right to file a complaint with the Federal Trade Commission and your state as well as the creditor’s states Attorney General’s office.

The number one complaint is harassment. No one should have to deal with any creditor who calls repeatedly. It is harassment. If you have talked to the creditor and they are still calling, I recommend doing all of the following.

1. Write a Cease and Desist Letter to the creditor telling them they may no longer call you at home due to the fact that their repeated calls are harassment. Send the letter to the creditor via Certified Mail, Return Receipt Requested and save the receipt the Post Office gives you and the Return Receipt that will come to you in the mail in a few days. They must abide by your request, because it is law (FDCPA Section 805(c)).

It is a very good idea to inform them that you will only accept communication from them in writing via correspondence. Make it very clear to them that since they call repeatedly, you consider it harassment under the FDCPA Section 806(5) and you will be filing a complaint with both the FTC and your and their state’s Attorney General’s office.

2. Make sure you keep a diary of all their calls and keep all phone records from your home or cell phone.

3. File complaints against the creditor with the FTC and your state and the creditor’s state Attorney General’s office.

4. There is no law that says you have to answer the calls of a creditor or return their calls. If you are being harassed, end the harassment by refusing to answer or return their calls. It’s that simple. It amazes me to this day to see how many people perpetuate the harassment by taking the call of a creditor. Today, many people have Caller ID on their home phones. Cell phones come with Caller ID. If you do not have Caller ID, it’s a good idea to buy a phone that has it. With Caller ID, you will know who is calling and will know which calls you should answer, such as those from family and friends.

5. If you have paid the debt or know that it is being paid on time, send a letter to the creditor with proof (canceled checks, statements, provide a Excel spreadsheet, etc.) that you have paid your debt or that it is being paid. Send it by Certified Mail, Return Receipt Requested. Staple all receipts to your copy of the letter and file it where you can find it.

Arbitration

From everything I have read and been told about arbitration, I would say that it is a useless means of legal recourse and I would never recommend it. Some, but not all, creditors require mandatory arbitration to settle disputes. Why? Well, it automatically puts the favor in their court. Awards are literally guaranteed to creditors. I have seen more people go into arbitration to prove they have paid a bill only to come out owing more or find that their efforts to prove the debt was or is being paid go unheeded.

By law, no one can deny you your right to legal counsel or legal recourse. If it comes down to needing legal counseling, I recommend seeking the advice of an attorney that specializes in debt dispute resolution. I know of one attorney who is an advocate for consumers who have problems with creditors and debt collectors. His name is Bud Hibbs. Visit his website, read and read some more. Then, if you feel you need help, you can contact him. His phone number is on his website.

Do not let creditors or debt collectors harass you. You have rights and laws to protect you. Use them to deal with debt collectors and keep your sanity. Deal with debt collectors and creditors with savvy. Use the law to beat them at their own game.

There’s a new spin on an old business. It seems that collection agencies as well as attorneys are buying SOL expired debt. Are you laughing? I know, I know. It’s not that kind of SOL..but, in the attorney’s case, it could apply!  Legally, attorneys and law firms cannot buy charged-off or SOL expired debt, but there is a way around this.  They use an alias company and use their attorney presence to scare consumers into paying SOL expired debt.

SOL in this instance stands for Statute of Limitations and refers to the length of time (in years) a creditor, collection agency or attorney has to collect on delinquent debts.

This “new” business has consumers up in arms. It is serious and requires all of your attention. While I like Bud Hibbs, a very well known consumer advocate, he says to ignore them. In my opinion, this is NOT good advice! Do not ignore them! It could cost you a lot of money!

Even though the delinquent debt’s SOL has expired, whoever bought your SOL expired debt can (and most will) sue you legally and win a judgment. So, what do you need to do? You need to send them a letter stating very clearly that you know that the delinquent debt they are trying to collect has an expired SOL and you do not have to pay it.

Below is a letter that I created. You are more than welcome to use it.

_______________________________________________________

Your Name
Your Address

Date

Collector’s Name
Collector’s Address

RE: [insert account number, name of account and/or name of debt]:

Dear Sir or Madame:

This letter is in response to your [letter dated xx-xx-200x] (copy enclosed) or [phone call on xx-xx-200x], concerning the collection of the above referenced [account number or account name].

I do not owe this debt; therefore, I dispute this debt. I am well aware of my rights under the Fair Debt Collection Practices Act (FDCPA) and my state laws. I have also checked with my State Attorney General and verified that the Statute of Limitations for enforcing this type of debt through the courts in the state of [insert your state’s name here] has expired; therefore, should you decide to pursue this matter in court I intend to inform the court of my dispute of this debt and that the “statute of limitations” has expired.

This letter is your formal notification that I consider this matter closed and demand that you, or anyone affiliated with your company, cease and desist contacting me at my home phone, cell phone and work phone regarding this or any other matter except to advise me in writing that your debt collection efforts are being terminated or that you or the creditor are taking specific actions allowed by the FDCPA or my state’s laws.

Be advised that I consider any contact not in accordance with the Fair Debt Collection Practices Act a serious violation of the law and will immediately report any violations to my State Attorney General, to the Federal Trade Commission and, if necessary, take whatever legal action is necessary to protect myself. Be advised that I tape record all phone calls and violations of the FDCPA can result in you or your company being personally fined up to $1,000 per incident.

(Sign above name)
Your Name Typed Here

___________________________________________________________

Send this letter to the creditor, collection agency or attorney by Certified Mail with a Requested Return Receipt. Staple the receipt you get from the post office to your letter and file it where you can find it. Should they try to sue after they have received your letter, you will need proof that you sent them a cease and desist letter and the receipt is your proof.

I’ve only had to use it once and I never heard from the attorney who bought my SOL expired debt again.

Don’t let unscrupulous collection agencies and attorneys intimidate you into paying for debt that has legally expired. Call them to the mat and make them realize that you know the laws and you know that they cannot take you to court to force you to pay.

Use the laws to your benefit! That’s why they were created.

While this post is mostly my opinion, there are some relevant facts presented here which I have witnessed personally. I’m going to reveal these facts while trying to remain objective. This will difficult considering that most of the subprime industry has dabbled in deceptive and fraudulent predatory practices for years.

The title of this post is Subprime Mortgage Woes. It sounds like Subprime lenders are the victim, but it really means they finally got their comeuppance. The idea that the blame for the subprime mortgage disaster is to be placed squarely on the shoulders of the consumers is laughable. Most of the well known subprime mortgage companies are (or were) involved in a game of unfair and deceptive mortgage practices. By shear determination alone, subprime’s focus was placing homeowners in ARM loans with low introductory “teaser rates.”

My own personal experience, as well as that of others to whom I have spoke, was a bait and switch tactic. Bait unsuspecting homeowners in with low Fixed teaser rates and then at the closing, switch to an ARM.

This was the number one deceit tactic by most subprime lenders. Many homeowners didn’t realize they had signed papers for an ARM mortgage, because the only thing they had ever discussed with the loan officer was a Fixed rate mortgage, but just as many did notice the change.

Some of the mortgage companys’ loan officers illegally doctored loan papers (contracts) with Photoshop and changed documents from Fixed to ARM. By the time homeowners received the “doctored” documents by mail, the 3 right of rescission had expired and the homeowner was “stuck” in an illegally gained mortgage.

Why did mortgage companies push ARM loans? Loan officers made more in commissions if they closed an ARM loan from the perpetual money machine it created. The big name, well known mortgage companies literally demanded that their loan officers close nothing but ARM loans to keep homeowners coming in every two years to refi.

The loan officers, many of them trained to go through the loan documents as quickly as possible at closing, failed to disclose the terms to the homeowners and would simply state, “as discussed.” “As discussed” meant that the homeowner had discussed a Fixed Rate loan - nothing was ever discussed about an ARM. While I personally read the documents carefully at my closing, many homeowners trusted the mortgage company with whom they dealt. Gone are the days of trust between a consumer and a business. It is a “buyer beware” world we live in!

Let’s face it, many people trust a company that has brand name recognition with high profile advertising and have no reason to suspect that the company would stoop to unscrupulous and fraudulent business practices. Why would anyone suspect that a company that has won numerous awards for customer service or has their name on stadiums, arenas or ballparks, be committing fraud or using deceptive business practices? This type of brand recognition and advertising serves it’s purpose. It creates a false feeling of comfort and trust among consumers.

The main focus for the subprime market was “Get the ARM loan no matter what it takes!” An attitude that included lying to the homeowner and breaking several state and federal laws in the process while illegally”doctoring” documents to force the homeowner into an ARM loan. Subprime lenders had to know that at some point they were going to get caught. They also had to know that at some point they were going to end up with a negative cash flow which would create an economic disaster. They had to make up that cash flow somewhere and their so-called ingenuity came in the form of “keep’em coming back every two years” with ARM loans! Raising interest rates every six months would ease the cash flow problem, but they didn’t think this ingenious idea through to a logical conclusion.

Anyone who can only afford a $1,000 a month mortgage payment, can not afford to have their mortgage payment go up every six months. That is common sense logic and I can not understand why mortgage companies thought ARM loans were the answer to increasing their cash flow. It wasn’t. It backfired on the mortgage industry with a well deserved and well justified fury.

Homeowner Greed?

It infuriates me to read from any author of an article on the subprime debacle that he thinks homeowners were being greedy and that led to the current subprime failure. Let me see if I understand this right…

A homeowner is looking to refinance his high interest rate mortgage:

• in a market that has seen the lowest interest rates in a decade
• makes a financial sound and responsible decision to refi to a lower interest rate
• is specifically targeted (predator practices) by a subprime lender who knows he has less than perfect credit
• in some cases the homeowner’s credit was actually good, but the mortgage company checked the homeowner’s credit repeatedly to lower the credit rating; therefore, putting the homeowner in the subprime market
• gets an offer at 5.6% Fixed
• decides to refinance
• is deceived by the mortgage company’s loan officer by being convinced that he signed papers for a Fixed rate
• some of the fees he paid were illegal charge
• two years later he finds out that he signed an ARM loan and his interest rate is going to increase
• his home was over appraised
• he can refinance with the same mortgage company to no benefit and any equity he accumulated in the first two years will be charged back in fees with the refinance increasing the homeowner’s mortgage balance and subsequently, his debt.

How is that greed on the homeowners part? I don’t know about you, but I call that trying to do something considered very intelligent by the financial experts, refinancing a high rate mortgage to a lower rate. Where it went very wrong was putting faith in a supposedly reputable business by brand name recognition that in the end use deceit and broke state and federal laws just to get the loan which made billions for subprime lenders.

I know very few people who know everything there is to know about mortgage laws in order to keep from being deceived by unscrupulous mortgage companies and their employees. Could you imagine how much reading and information you would need to know about mortgage laws to consider yourself knowledgeable?

Most homeowners depend on mortgage companies, banks and loan officers to be honest and knowledgeable. Since the subprime debacle, I’ve talked to many people concerning their mortgages. These folks are not only intelligent, they are like most consumers, they depend on the mortgage company to know the laws and will be honest and fair where their mortgages are concerned. Since the subprime failure, none of these people trust banks, mortgage companies or loan officers. The trust between consumer and businessman stands on very shaky ground due to the subprime mortgage crisis making it justifiably necessary for consumers to be wary.

Financially, it is good sense to refinance to a lower rate. It is not greed! It is just good financial management - period! Calling it greed shows how little some people really understand the issues concerning subprime lending or maybe, they do not understand the mortgage process themselves. I find that when someone makes a comment about how refinancing is greed on the homeowners part, they themselves are usually not a homeowner.

Now, if homeowners were the ones who made $322 billion in 2003, I could see that this might be homeowner greed, but that is not the case, is it? Homeowners have not made one single, solitary penny from doing business with subprime lenders and that right there ends the argument for “Homeowner Greed.”

The key word, folks, is DECEPTION and that deception was created by subprime lenders, not homeowners. Many thousands of homeowners were deceived and I don’t know anyone who has not been deceived by a business at some point in their lives. It’s only after the fact that many consumers discover the deceit.

The Agony of ARM Mortgages

After the initial Fixed rate period (usually two years), ARM loans go up at an absurd rate of 1 to 3% every six months to a cap at 13/14%! Subprime lenders knew what they were doing. They set themselves up to make billions of dollars on finance fees and interest from the subsequent rise in ARM rates which are illegal for Home Equity loans in some states, but if you have millions…no, billions of dollars, you can donate to a congressman’s campaign fund and get the congress to change federal mortgage laws. This is exactly what one high profile mortgage company CEO and his wife did and other mortgage companies followed suit.

Subprime lenders were always one step ahead of the state laws. They knew that Federal law takes precedence over state laws, thus giving them the green light to do basically whatever they wanted. Subprime lenders were literally unfettered and unregulated.

In the beginning, they did whatever they wanted and got away with it until homeowners and financial analyst were seeing some disturbing trends in the subprime markets - a disturbing mortgage stock bubble and mainly, an alarming rise in foreclosures and not just in the subprime markets! That’s right! Foreclosures are up in the prime markets and it all revolves around ARM loans. While it is not as high as subprime, it is up well above average and the media hasn’t paid one bit of attention to it. Why? It goes back to placing blame on homeowners with poor credit, which is just an excuse to justify subprime lenders actions. It’s all a very sad state of affairs.

Subprime Lender’s Greed

The scheme behind ARM loans is MONEY! Lenders stand to make more money with ARM loans in the long run, but ARM loans are very stressful and extremely deadly to any homeowner. Good credit or bad, anyone who needs a mortgage is on a budget and needs a mortgage payment that is stable and affordable.

ARM loans payments are not easily calculated by homeowners and many homeowners want a fixed monthly mortgage payment. The consequences of subprime’s aggressive practice of intentionally putting homeowners in ARM loans are yet to be fully seen. The current consequences are that foreclosures are up over 5 times normal in some states and subprime lenders are losing money. They literally created their own nightmare.

Notice About Ripoffreport.com

At one time, I had recommended Ripoffreport.com, but since it has changed its format and I discovered that the owner has been taking payments from businesses to remove negative complaints, I will no longer recommend it. The owner has stooped to doing the very thing he accused the BBB of doing, taking money to report a “satisfactory” rating. He is being accused of and has been sued for conspiracy and racketeering as well as paying victims to falsify negative claims against businesses in an attempt to defame innocent businesses.

I am all for consumer advocacy, but I am against extortion at any price. I believe the burden of proof lies with the person making the complaint and believe that every business has the right to refute a complaint by providing proof of their innocence.
I became concerned when I noticed that Ripoffreport.com no longer allowed businesses who had negative, seriously damaging claims posted against them to state their rebuttals. Not only did this seem unfair, it seemed unconstitutional. It was as though Ripoffreport.com was taking a one-side slant to consumer advocacy without allowing a business to provide proof.

Ripoffreport.com was supposed to be something better than the BBB. A place where consumers could voice their complaints against businesses and the businesses were given the opportunity to rebuttal with proof or an offer to help the consumer. Lately, this has not been the case. I’m am sorry to see this happen. Consumers needed Ripoffreport.com as well as businesses. It should have been run much more fairly and with the best interest of everyone involved.

I did find a lot of information on several sites confirming that many businesses are fighting back by suing the owner, Ed Magedson, but rest assured, many of the complaints posted at Ripoffreport.com concerning deceptive business practices of mortgage companies were legitimate complaints and and the powers that be knew they were legit. It’s a shame that the owner had to resort to illegal tactics when there really was no need to go that far.

I posted a report at Ripoffreport.com concerning my mortgage company and was contacted by an attorney. What I didn’t realize was that my problems with my mortgage company had already been aired in court by means of several lawsuits from other homeowners, so my post was validated by well documented proof.

There is an excellent interview with Ed Magedson in a blog by Sarah Fenske with Phoenix New Times. It reveals the character of Ed Magedson and why he, like most consumers, felt compelled to something more aggressive, since most consumers find the law protects the businesses who usually have more money and power.

Burden of Proof

I will not name names and I certainly could, but just about every well known mortgage company has dabbled in deceptive and predatory business practices. Several have been sued and one in particular lost a very large class action to the tune of $325 million. It’s easy to find out who’s been bad. Do a Google or Yahoo search on “subprime deceptive business practices.”You’ll find ‘em on the Net and when you do, you’ll wonder why the Federal Government is putting up with their whine about, “We tried to help poor people with less than perfect credit by giving them loans and they stiffed us.” If they were truly honest about their behavior, they should have said, “We lured trusting homeowners in with teaser rates and stiffed them by fraudulently placing them in ARM loans, knowing full well that even someone with perfect credit could not stand the strain of interest rates increasing 1 to 3% every six months to cap at 13/14%.”

The Federal government should be more concerned with helping States discover what needs to be done to help homeowners who are victims of Subprime Lender’s deceptive practices. Homeowners are losing their homes due to the illegal nature of these practices; they are the victims, not subprime lenders. Subprime lenders are a victim of their own greed.

My Personal Experience with Subprime Lenders

It seems from the very beginning, I have been a victim of subprime lenders and didn’t even know what a subprime lender was or that each of these lender’s primary target was homeowners with less than perfect credit. My husband and I decided to take out a Home Equity loan on our home. It needed repair and needed it soon. Our credit was excellent.

The first mortgage company was good, but they changed the due date and literally screwed up our payment process. Our payment was due on the 20th of every month and when our due date was moved to the 1st, the mortgage company insisted we were 30 days past due. It took me six months to get this mess straightened out; meanwhile, they were acquired my another company and only then did the problem get better. It would take forever to explain all the problems with this fiasco. It’s safe to say it was a mess.

Second mortgage company was strange. We had excellent credit, yet the interest rate was 14%. We made our payments on-time, they repeated posted them late and reported us to the credit bureau as late. Seems this was a tactic to hold on to customers, since so many were refinancing with other mortgage companies to lower rates. Report your customer as paying late, ruin their credit and that way, they can’t leave. They also tried to talk us into refinancing to charge us 12% in fees, which, by this time, I knew was illegal. Needless to say, we didn’t refi. Decided it was time to leave these folks.

The third mortgage company was a real piece of work. If you lookup predator in the dictionary, you will find their logo. This refi started with a local bank. The bank offered me a fixed rate loan at 8.5%, but I received a constant over-flow of advertisements in the mail from another well known, highly advertised mortgage company, which I will call Noname Mortgage. I had seen their ads on TV and at the time, I had no idea that they were a subprime lender. I didn’t even know there was such a thing as a “subprime lender.” We decided to go with Noname Mortgage company since they offered us a lower interest rate than that of the bank.

I witnessed some of the strangest behavior for a professional mortgage company I had ever seen. After being approved, I was told my interest rate would be 5.9% Fixed, but this changed several times during the loan process. Each time it changed, I was convinced by the loan officer that it was for a legitimate reason. The deed was in my name only and must be in both my and my husband’s name - upped to 6.9%; other unforeseen paperwork - upped to 7.9%; previous lender delays (over 60 days) in disclosing the payoff - upped to 8.9% and since this loan process took so long, they had to pull another credit report and this pushed it up to 9.9%. When we finally made it to closing, the interest rate was 9.9%, but instead of being a fixed rate, it was an adjustable rate (ARM).

When I refused to sign the loan papers because the loan was supposed to be a fixed rate, the loan officer told me that since there had been so many unforeseen problems, the fixed rate would be 11.9%….BUT, the ARM was fixed at 9.9% for two years and at the end of the two year fixed period, I could refinance to a lower fixed rate. Since it had taken so long and we were well into the loan process, the interest rate was much lower than our current loan, so we decided to sign the papers. At this point, we honestly thought we were doing the right thing and were dealing with an ethical company.

Two years later we decide to refi before the interest rate started to go up on our ARM. We started the refied process with Noname Mortgage company. After checking our credit, they told us the interest rate would be 7.9% FIXED! The loan process went smoothly this time, except for the closing…yeah, you guessed it!

We get to the closing and it’s an ARM, not Fixed! I never even discussed an ARM with the loan officer. The only thing we had discussed was a Fixed Rate Mortgage! I told the closer I refused to sign. She called the loan officer and he was mad. In a very angry voice, he ask, “What’s the problem?” I told him I do not want an ARM, we had never discussed an ARM and I refuse to sign. He tells me that their interest rates have increased and he knew I wanted the 7.9%, so now, the only way we can have that interest rate is with an ARM. Again, he tells me that we can refi in two years and get a lower rate.

Something was very rotten in Denmark…uh, sorry, the subprime market. This seems to be the customary “scheme” by Noname Mortgage company. Instead of backing out of the loan and starting all over with another lender, my husband and I decide to go ahead and sign the loan papers and we agree that when two years is up, before the rate starts to increase, we will refi with another mortgage company.

When the two year Fixed rate period goes by, we decide it’s time to refi and get as far away from Noname Mortgage as we can. We go to another mortgage company, I’ll call them Newlender Mortgage. During the loan process, I get a call from the loan officer that literally makes me feel like I am going to pass out.

The appraiser cannot appraise our home at the loan amount needed to payoff Noname Mortgage and cover the Newlender Mortgage’s fees. I call the appraiser. After talking with him for over an hour, I get an eye-opening education on the fraudulent behavior of certain subprime lenders, mainly in over appraising homes just so the lender can get the loan. My home was over appraised by $20,000 by Noname Mortgage.

I called an attorney in my state and to my horror, he tells me, “Well, they did give you a loan.” What was that supposed to mean? Yes, they gave me a loan, but did so in a very deceptive and fraudulent manner. Noname Mortgage has had its fair share of problems, mostly legal. They are no longer allowed to do business in most states.

Let’s look at subprime’s so-called woes:

First, subprime lenders put together an ad campaign to intentionally draw the attention of consumers with less than perfect credit. That was their target audience, that is what they wanted and that is what they got…along with billions of dollars in profits. This type of targeting is known as predatory practices. Many subprime lenders targeted the elderly as well.

Second, subprime lenders played some very deceptive games with consumers.

• Bait and switch interest rates. Started with a low teaser rate and increased the rate during the loan process for whatever reason.
• Repeatedly checking the homeowner’s credit in order to lower his/her credit rating to qualify for the subprime market.
• Over appraising homes just to do anything to get the loan in order to make money from fees and future rate increases.
• Charging prepayment penalties for early payoff, even though the contract says there will be no penalty for early payoff.
• Refinancing with no benefit to the homeowner. The homeowner ends up with more debt against their home due to high fees.
• Bait and switch rate terms. Promising Fixed Rate Mortgage (FRM), then changing the terms to an ARM at the closing. Many unsuspecting consumers signed their loan papers thinking they were getting a FRM, only to find out two years later that they had actually agreed to an ARM.
• Loan officers convinced homeowners to sign papers for ARM loans with the plan in mind of getting homeowners back to refi every two years with no benefit to the homeowner. Subprime lenders were creating a perpetual “money machine” that increased debt against the homeowner’s property with an eventual ARM rate increase ever six months.
• Charging outrageous and unnecessary closing fees, most of which were illegal.
• Purposely failing to post payments and reporting late payments to the credit bureaus in order to keep current customers from going to other lenders with lower interest rates.
• Breaking State and Federal mortgage laws.

The list goes on and on. All of it unfair, deceptive and in some cases illegal to consumers and all of it benefiting the mortgage companies involved in using these practices.

Third, subprime lenders made 332 billion dollars from unsuspecting consumers in 2003. Unsuspecting consumers made nothing, zip, zero, zilch, but they did have the heartbreak experience of foreclosure.

Fourth, the collapse came when consumers could no longer afford their mortgage payments due to rising ARM rates, which is now overflowing into prime lenders. Homeowners could not continue to refi every two years to avoid the nightmare of an ARM. Refinancing every two years forever is impossible. Homeowner’s would have more debt stacked on their homes with each refi and never pay off a mortgage with this perpetual cycle of refinancing to avoid the outrageous terms of an ARM which only benefited the mortgage companies.

At some point, the homeowner will be unable to take anymore money out of the equity in their home. Home prices would have to appreciate at least 20% a year to keep up with the refi fees and to comply with Home Equity laws in most states. On an average, most homes appreciate 5 to 7% a year. Subprime lenders knew this and took advantage of homeowners faith in a business they thought they could trust.

What they failed to realize is that everyone, including folks with excellent credit, are on a budget and know how much they can afford. The promise by subprime lenders to homeowners of refinancing before the Fixed period of an ARM expires was just another ploy to make billions in fees.

Fifth, I have talked to two neighbors who have perfect credit and mortgages with prime lenders. When they refied, the prime lender tried to talk them into an ARM. Has greed spilled over into prime lenders? Are they setting themselves up for prime lender woes? Have they learned nothing from the subprime fiasco?

Sixth, foreclosures in some states are five to six times the norm and going up! I find it hard to believe that that many people would sacrifice their homes to foreclosure simply because they have poor morals concerning paying their debt. This many foreclosures tells me one thing, subprime lenders intentionally and unethically put consumers in ARMs to make billions in fees and from interest when rates started to increase.

These companies are only now feeling the backlash of their behavior. They are also not taking responsibility for their behavior by blaming homeowners lack of credit morals for the problem. They targeted people with less than perfect credit and then talked them in to ARMs with absurd rate increases knowing perfectly well that very few people could afford the terms and conditions under an ARM! This degree of deception is not only unbelievable, it is scary. How does a homeowner know who to trust?

Seventh, ARM loans in today’s market are deadly! In the past, there were variable rate loans (VRM). The most a homeowner could expect their payment to increase $25 to $50 once a year. ARMs are ludicrous! ARMs increase every six months at a rate of 1 to 3% of the balance of the mortgage to cap out at 14%.

Based on the balance of the mortgage, the payment could increase $150 to $800 every six months! Many state constitutions and laws do not allow for VRM or ARMs for Home Equities to protect homeowners from foreclosure due to these types of loans, but Federal laws overrides state laws and it seems the Federal government does not see a problem with ARMs. With the recent state of events with subprime lenders and investigations into why there are so many foreclosures, this may soon change.

Eighth, the subprime lending problems will effect the home building industry which subsequently will affect the economy.

Educate Yourself!

When it comes to a mortgage, know everything you can about mortgages and the laws that govern lenders before you start the loan process. Investigate the company you intend to do business with thoroughly. Do a Google search on the company’s name. If you find any complaints, ask the loan officer about the complaints. Listen to your “gut feelings” and if you feel something is not right, look for another mortgage company.

The best book I have found is a quick read called What Mortgage Brokers Don’t Want You to know! by Mortgage Advocate Dan. Fixed rate Mortgage are the best, so do not allow your loan officers to convince you otherwise. ARMs are not in your best interest, especially where Home Equity loans are concerned. ARMs only benefit the mortgage company. They will make money from you in one of two ways: (1) raising your interest rate 1 to 3% every six months or (2) they keep you coming back at the end of the fixed rate period to refinance to make money from fees.

Everyday, I find another company that has found a way to charge hidden fees, have double means (say one thing, but mean another) contracts with open-end disclaimers (We reserve the right to change our fees without notice.), open-end contracts (this is known as perpetual debt or death by fee) and deceive consumers with deceptive business practices. It is truly a “Buyer beware!” world we live in. Gone are the days of blind trust. Every consumer needs to have their eyes wide open and be well informed.

Be well prepared when dealing with Mortgage companies and Mortgage Brokers. It could save you from facing foreclosure!