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mortgages

During my years as a first party collector for a mortgage company we learned a lot about people who don’t pay their bills. One of the most common things we noticed is the people didn’t really understand why they couldn’t pay. They just knew that at the end of every month they had less money than was required to pay whatever bill it was that happened to be due. Most mortgage payments are due around the first part of the month so guess who didn’t get paid? There are so many reasons someone falls behind on their bills from gross neglect to dire medical emergencies. Our jobs as collectors was to take the emotion out and sympathize without allowing ourselves to empathize with them. In theory this allowed us to take an objective look at their situation to determine the proper course of action to resolve not only the delinquency but the situation that caused the delinquency to occur.

There is a big distinction in 1st party collections and 3rd party collections when it comes to the initial mindset of collections. As a 1st party collector you are a direct representative of the mortgage lender and your main goal is to ensure the borrower pays on time every month for the full duration of the loan. You don’t just want to collect, you want to make sure they are able to stay current. Your ultimate  goal is to improve the bottom line for the business and that means collecting regular interest payments from the borrower, not pissing them off and having to repossess* their home.

1st Stage of Collections

Collections on an overdue mortgage in my office would begin anywhere between 2-15 days past due. The initial contact attempts are mainly just to check with the borrow to ensure they didn’t “forget” to pay their payment or to see what the problem is and make arrangements to pay the current months payment. A good collector will realize someone who is already 15 days past due this month may not be on time next month and try to make arrangements for future payments as well. Collectors shouldn’t force the issue to much during this stage of “lateness” because the loan is most likely not considered delinquent until they are at least 30 days past due.

True Collections

When a loan reaches 30 days past due the loan is officially delinquent. Depending on the reporting dates for the mortgage company it could be reported on your credit report as late/delinquent immediately or not until the following month.  Collectors are in for a tougher go of it because they have to not only collect or make arrangements for the current months payment but they also have to make arrangements for the missed payment as well. The ultimate goal, regardless of the stage of delinquency, is always to bring the account current and ensure the borrower can keep it that way.  The goal of a good collector at this stage should be to take full assessment of the situation and determine what caused the delinquency and what the borrower might be able to do to ensure the account is brought current and stays that way.

Collectors can find themselves taking on the role of a very much uncertified debt councilor to people who don’t know they have anywhere else to turn. It is a hard situation to be thrown into but you learn to adapt and hopefully provide help to people who are in disparate need of it.

The Exception

When it hits the last week or the last couple of days of a month take all the good stuff I said about collectors trying to help and throw it out the window. In fact throw it in the garbage, crap on it, and set it on fire. At this point in the month the only goal of the collector, their boss, and probably their bosses boss is to meet the target delinquency goals so they can all get their bonus. What this means for the borrow is instant demands for payment, a total disregard for the customers overall well being and lots of phone calls. It isn’t unheard of for a collector to suggest a borrower take a payday loan or title loan to pay off their delinquent debt to the mortgage company. This is the point where you start to see people lose their cool, the bonuses for meeting goal can be quite substantial giving the collectors a big incentive to disregard what is best for the borrower and look at what is best for them. This is the unfortunate truth and greed of the collections world.

*When I talk about my collections experiences you may see me use the terms repossession and foreclosure interchangeably. To me they were mostly the same term since I worked as a collector for a company that did loans on mobile homes. If a mobile home had no property financed with it it is treated like a vehicle and registered with the Department of Motor Vehicles (DMV). You don’t foreclose on a car you repossess it, the same holds true for non-land deal mobile homes.

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The First Time Home Buyer Tax credit was authorized as part of the American Recovery and Reinvestment Act of 2009. The credit is not a deduction, meaning you get the money straight off the your tax bill. If you owe $8,000 and you get an $8,000 tax credit you owe nothing.

The bill authorizes up to an $8,000 tax credit for qualified people who happen to pick up a home between January 1, 2009 and December 1, 2009.  If you have been thinking about buying a home you should jump on the bandwagon soon or you could miss out on this credit.

Who Qualifies

  • Anyone who has not owned a primary residence in the last three years.
  • Married couples where both spouses have not owned a primary residence in the last three years
  • The qualifying individual on a joint purchase when not married. If one of the two of you qualifies you get the credit.
  • Someone who owns/has owned a vacation property but not a primary residence in the last three years.
  • Someone who owns/has owned a rental property but not a primary residence in the last three years.

Limits on The Credit

  • The credit is 10% of the purchase price up to $8,000
  • If you are applying individually the income limit is $75,000
  • Married applicants must make less than $150,000
  • You could still qualify above the income limits for a reduced credit

Additional Facts

  • Home must close escrow no later than November 30, 2009
  • Credit can be claimed against 2008 tax filing
  • If you aren’t a U.S. Citizen you may qualify if you are not a nonresident alien.
  • If you are building a house the date of first occupancy counts as the close date.

Why you Should Hurry

The tax credit is only good for purchases which close escrow by November 30, 2009. There is a lot that goes into buying a house and it can take a good bit of time, for instance you are going to need to:

  1. Get approved for a mortgage
  2. Find house to buy
  3. Make an offer on the house
  4. Haggle over the price
  5. Get a home inspection
  6. Have the issues corrected
  7. Work through any additional contingencies
  8. Get through underwriting
  9. Hope your broker is ready
  10. Close on the loan

You need to get the whole set done by the end of next month if you want to capitalize on the $8,000 credit. If you are waffling on your home but want the credit now is the time to pull the trigger. The only reason I could see to wait is the potential for housing demand to fall like a rock after the credit expires. If that happens home prices are going to start to falter again and you may be able to get a better deal. Don’t count on this assumption though, if you want a house go ahead an get it houses are on sale and you get an extra $8,000 to help get it on the straight and narrow.

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