On Tuesday, interest rates dropped to their lowest point since the early 1960s. In an effort to shock the sluggish economy out of its slumber, the Federal Reserve cut the federal funds rate from 1 percent to a target range of zero to 0.25 percent. Many homeowners, especially those facing imminent foreclosure are rushing to refinance with at these basement bargain interest rates. With the new rates, homeowners can now find a 30-year, fixed mortgage rate at about 5.06 percent.

This is great news for homeowners who are in toxic loans and who want to find a more affordable rate for their mortgage. But unfortunately it may not help homeowners already experience foreclosure because many creditors are still only lending to debtors with stellar credit records. If a homeowner is already facing foreclosure, their credit score has probably taken a serious beating. Missing mortgage payments and other debt obligations will bring down your credit score and scare many lenders away in today’s cautious lending environment. But for those homeowners who are not facing foreclosure and have remained current with debt payments, taking advantage of these new, low rates may be the best long-term financial decision they could make.

Representative Linda Sánchez introduced House Bill 3707 that would eliminate a ban on modifying residential home mortgages in Chapter 13 bankruptcy. Currently, the law for Chapter 13 bankruptcy allows modification of nearly any type of loan with the exception of a residential home mortgage. Under the proposed bill, homeowners may be allowed, with the supervision of the bankruptcy court and bankruptcy trustee, to modify their home mortgage in Chapter 13 bankruptcy. The debtor would be required to repay through Chapter 13 bankruptcy, the actual value of the home and interest rates deemed “predatory” could be modified to reflect true market value. Under the proposed changes to the bankruptcy law, the lenders would have the right to add extra interest as a cushion to protect them from possible future default.

This is the type of bankruptcy reform that is needed by struggling Americans. With the subprime fiasco, foreclosure crisis and the credit crunch, debtors need as many viable options as possible so that they can eliminate debt quickly and get back on their feet. Hopefully, our legislators will have enough foresight to give this bankruptcy reform law serious consideration.

Looking for a mortgage? But finding the credit market so tight that even if your score is nearly perfect the terms and conditions are almost impossible to meet? Well Uncle Sam, who has now increased its share of the mortgage market to around 90 percent, up from 55 percent last year, may be the only game in town. And the Treasury Department is now considering a new plan that would push mortgage rates down to as little as 4.5 percent in an effort to stimulate the housing market. But if the plan is approved, it will only be available to new 30-year fixed rate mortgages or refinanced loans.

The Treasury Department did not offer any details on this new plan designed to relieve pressure on the stagnating housing industry. But as we all know, the devil is in the details. Whatever plan the Treasury Department chooses to push next, I just hope it helps stop the foreclosure crisis, prevent the explosion of future foreclosures and help those who are currently facing toxic loans avoid foreclosure.

Did you sign mortgage papers on what you suspect to be a toxic loan? In other words, bad for your bottom-line! Well the law states that you have three days to cancel a mortgage after signing the papers. If you signed a mortgage and the papers had certain problems you may be able to cancel the mortgage even after three years.

Problems that might justify the cancellation of a mortgage include:

• An incorrectly calculated APR on the mortgage papers
• The absence of a Truth in Lending Disclosure
• The absence of the word "monthly" in the payment schedule of the mortgage
• The absence of the notice informing the borrower of his/her right to cancel the mortgage within 3 days
• If the company convinced you to sign the mortgage papers using unfair or deceptive tactics

Speak with a bankruptcy attorney to find out if your mortgage might be eligible for cancellation.

According to an article in the Star-Telegram officials from the Treasury and FDIC are currently negotiating a plan that would get the U.S. government to guarantee the mortgages of nearly 3 million distressed homeowners facing imminent foreclosure. The plan, if approved would be the first of its kind to offer relief directly to homeowners and could cost as much as $50 billion. Under the proposed program, homeowners’ monthly mortgage payments would be reduced to an affordable level. The reduced mortgage payments would be achieved by lowering interest rates, cutting the amount of principal owed or offering an extended payment period that could stretch beyond 30 years. For mortgage lenders the program would be voluntary. To entice mortgage lenders, the government would guarantee that lenders would be compensated for any losses they suffer if borrowers default after the loans are reconfigured.

This plan sounds like a good first step; but we need to be careful that when mortgage lenders reconfigure the loans the homeowner is given credit counseling so that he/she does not fall behind again. Theoretically, if the government guarantees compensation for losses on reconfigured loans this could encourage lenders to implement reconfigured loans in way that is still not affordable. The government should offer some type of incentive that will encourage lenders to help borrowers over the long-term; such as offering tax breaks on each borrower who stays in his/her home five years after the loan is reconfigured.

According to Money.com in December 2008, Bank of America will begin implementing the most aggressive foreclosure prevention effort ever created by any U.S. bank. To help save as many as 400,000 troubled borrowers from foreclosure, Bank of America will cut monthly housing payments to no more than 34% of gross income. There are no prepayment penalties or modification fees for borrowers in the program.

Who May Be Eligible For The Program

• Only distressed borrowers who signed up with Countrywide Financial between January 1, 2004 and December 31, 2007 are be eligible for the program.
• Countrywide borrowers in subprime ARMs, subprime fixed rate loans, option ARMs and borrowers who did not document their income.
• Countrywide borrowers in all 50 states are eligible to participate in the program.

The Countrywide program will screen all of its borrowers to see if they meet the eligibility requirements. Those that are eligible will be contacted directly and given loan workout offers designed to prevent foreclosure.

The Texas tax code allows residents who own real estate property to take out a loan from third party lenders to pay their past due property taxes. Many may think this is an easy way to avoid the penalties associated with delinquent taxes such as liens against the property; but property tax loans come at a high price. When taking out a property tax loan the property owner will mostly likely incur exorbitant fees. For example, while the Texas taxing authority can only charge you 12% interest, the lender can charge up to 18% interest on the loan. Also, the lender has the power to place a lien on the property and foreclose if the borrower defaults under the terms of the loan. If the mortgage lender fails pay the tax transfer lien prior to the foreclosure sale, the mortgage lender may recover the property after the foreclosure - but for 25% more, according to Texas law.

Although the Texas Tax Code was amended in 2007 to provide additional protections for consumers, including a two part foreclosure process, additional notice provisions, and licensing requirements for the tax loan lenders, tax loans are still risky business.

According to the Dallas Morning News Wall Street’s bad luck seems to have infected the car sales and loan industry in Dallas-Fort Worth area. Sales continue to slide, dropping as much as 35% in several car dealerships in the Dallas-Fort-Worth community. With the availability of car loans becoming more limited, many dealerships are finding buyers scarce and reluctant. Most people can’t afford to pay cash for a car, even a used one and depend heavily on car loans to help them make the purchase. But according to several car dealers it is becoming tougher to find car loans for subprime borrowers. Those with good credit are still able to get car loans; but those with less than stellar credit are finding that the car loans come with stricter requirements.

Car Loan’s Tougher Requirements:

Down payments required sometimes as much as 10% on the car loan.

Higher interest rates for those with average or below average credit scores.

Limits on rolling over negative equity into a new car loan for customers who owe more on their trade-in than it’s worth.

Fees of up to $5,000 to grant subprime car loans at some banks

Drew Campbell, president of the New Car Dealers Association predicts that new-vehicle sales in Dallas-Fort Worth, which rose 3 to 4 percent annually for most of this decade, will fall by double digits in 2008.

If you want to get a car loan but your credit is less than perfect you may need to consider the following:

1. Buy a used vehicle, the car loan with be smaller.
2. Provide a larger down payment which may increase your chances of getting approved for a car loan.
3. Buy the car with all cash and avoid a car loan completely.

As North Texas builders aggressively sell as many of the homes on the ground as they can existing-home sales rose 2 percent in September from a year ago. At the same time, builders have battled slower sales by reducing the number of new homes they put on the market, bringing the supply closer in line with demand. Builders started 5,551 homes in the third quarter, down 34.5 percent from the third quarter of 2007. The inventory of new, unsold homes on the market is now at 17,602, down 27 percent from a year ago.

In September, the median home price in North Texas was $147,000 — 2 percent less than a year ago. As the availability of houses comes down to meet the actual demand we will begin to see prices rise again, along with sales.

Today Countrywide Financial agreed to modify home loans in Texas and 10 other states as part of the largest predatory lending lawsuit settlement in history.

Countrywide will:

• provide $8.4 billion in direct loan relief
• waive late fees totaling $79 million
• waive prepayment penalties of $56 million
• suspend foreclosures on delinquent borrowers with the riskiest loans
• create a $150 million foreclosure relief fund for borrowers who are at least four month delinquent
• provide $70 million to help troubled borrowers relocate to rental housing
• reduce principal balances in some cases and cut interest rates in others

Who May Qualify

Borrowers whose first loan payment was due between Jan. 1, 2004, and Dec. 31, 2007, can participate in the loan modification program. The borrower’s loan balance must be at least 75% of the current value of the home, and the borrower must be able to afford the adjusted monthly payments.

As the housing bubble continues to deflate, we will probably see more predatory lending lawsuits and settlements popping up on the landscape. But be forewarned, although Countrywide has promised these measures, homeowners to should seek any and all remedies to avoid foreclosure and consult with a professional attorney before agreeing to any modifications to their loan.

Most banking customers are unwittingly enrolled in their bank’s overdraft loan program which costs on average about $34 per overdraft occurrence. What this means is that if you mistakenly overdraft your checking account while purchasing coffee for $3 you will be charged $3 plus a $34 fee by the bank to cover the transaction. But there are cheaper alternatives.

Linked Savings Account - This program allows the bank to access your savings account when you overdraft your checking account, often for a nominal fee.

Linked Line of Credit/Credit Card - This program allows the bank to cover overdrafts of your checking account with your line of credit, such as a credit card. You will need to secure this line of credit through your bank. This option usually has an annual fee; but is much cheaper than the bank’s overdraft loan program.

Reject Purchase - You can also request that your bank decline any purchase that causes you to overdraft your account. Beware the merchant may charge you a bounced check fee.

(sources: http://www.federalreserve.gov/pubs/bounce/ and http://www.responsiblelending.org/issues/overdraft/)

Fannie Mae and Freddie Mac buy billions of dollars worth of mortgages and have their own rules and regulations; but they both refuse to buy any loans containing binding mandatory arbitration clauses. Freddie Mac stopped purchasing loans with mandatory arbitration clauses August 2004 and Fannie Mae followed their example on October 31, 2004.

“Freddie Mac believes that all homeowners should be able to voluntarily choose the mortgage dispute resolution option they believe to be in their best interests,” said Paul Peterson, Freddie Mac’s chief operating officer when the decision was made.

The rejection of binding mandatory arbitration clauses on home loans by mortgage giants Freddie Mac and Fannie Mae will discourage the practice amongst smaller players throughout the industry.

Many homeowners don’t realize it, but often their loan agreements include binding mandatory arbitration clauses. These clauses require that any dispute a homeowner may have with a lender be settled through arbitration and prevents the homeowner from taking any claims to court.

What This Means For You

If you’re a homeowner who has been the victim of predatory lending practices often found in the subprime lending industry, binding mandatory arbitration clauses prevent you from having your case heard by a jury of your peers, in a public forum. Arbitration is held in secret with little or no documentation of the proceedings.

Often, binding mandatory arbitration clauses include language that limits a homeowner’s ability to claim penalties, attorney fees and may limit the actual dollar amount awarded homeowners.

Some binding mandatory arbitration clauses also prevent homeowners from joining a class action suit against lenders.

If you are considering taking out a loan on a home make sure that your attorney checks the documents for binding mandatory arbitration clauses and their stipulations.

(source: http://www.responsiblelending.org/issues/arbitration/briefs/page.jsp?itemID=28012328)

Peer-to-peer lending, allows individuals looking for credit to bypass traditional lending institutions and create listings online detailing how much money they need to borrow, the purpose of the loan and how much interest they are willing to pay. Also known as person-to-person lending, this source of credit is becoming increasingly common as more people find it difficult to meet the new stringent requirements for loans, according to an article in the Dallas Morning News.

"What we’ve seen since the credit crunch hit is that lenders are moving to more creditworthy borrowers," said Chris Larsen, chief executive of Prosper, the largest people-to-people lending marketplace. "They actually have more and more customers to pick from and more customers who have been cut off by traditional lenders across the board."

According to research, peer-to-peer loans are projected to reach $5.8 billion in the U.S. by 2010. If you want to consider peer-to-peer lending make sure that the loans you’re requesting are for practical things such as, business equipment, repairs to the home or school supplies etc. It may be very difficult to convince individuals to loan money for luxuries such as a new car, clothes or vacations.

How many of us have been through wanting to take out a loan; but just were unable to translate the legalese to simple layman’s English? What eventually happens? We sign away on the dotted line without truly understanding what we are agreeing to. Well help is here for Texans. The Office of Consumer Credit Commissioner offers plain language loan contract modules to the public at http://www.occc.state.tx.us/pages/Legal/plain_lang/index.html

What plain language means…

“Plain language” contracts describe reader-focused text in contract that the average person can easily understand. Plain language contract replaces legalese with consumer-friendly words and phrases.

The Office of Consumer Credit Commissioner regulates non-depository lenders in Texas, such as motor vehicle sales financing companies, consumer loan companies, home equity and junior lien mortgage lenders, payday lenders, and signature loan companies. To reach the OCCC, call 800.538.1579 or send an e-mail to info@occc.state.tx.us.

Consumers who sign plain language contracts are empowered to make informed decisions.

According to the U.S. Department of Housing and Urban Development, the number of reverse mortgage loans is projected to exceed a record 110,000 this year. Nationally lenders originated 76,351 government-insured reverse loans in 2007, according to the National Reverse Mortgage Lenders Association. But that’s just a small portion of the market. The National Council on Aging estimates that 13.2 million senior households are qualified for the loans, with each household eligible to borrow an average of $72,128.

With millions more Americans expected to retire in the coming years, banks and other lending companies are positioning themselves to capitalize on the market for reverse mortgages. In 2007 Wells Fargo stepped up their efforts to grab a market share by generating 23,271 reverse mortgage loans last year.

One of the great advantages reverse mortgages have for consumers is that they are "no-recourse loans." In other words the lender cannot force borrowers or heirs to repay the loan. They can only take possession of the home once the borrower moves, dies or they can seize the proceeds from the sell of the home.