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A lot of people are trying to save money for their Retirement years and have questions concerning how to go about saving and paying off their debts to prepare for retirement.
The following information was given by Steven Zeller, a Gold River, CA, based investment adviser regarding credit card debt and publised by RISMEDIA:
If you are heavily in debit, he would not encourage anyone to go into bankruptcy proceedings if he or she can help it. It creates a lot of stress and is not the best for your self-esteem.
If you have multiple credit cards to payoff, I would begin paying off the credit cards, starting with the smallest one first, until they are all gone for good.
It may be painful at first, buy you will increase your cash flow over time by eliminating the monthly payments.
He also stated, ”At the end of the day, if you pay into an IRA and Roth IRA instead of paying down your credit card debt, you will still have debt. ”
Related articles
5 Reasons To Stop Saving for Retirement(money.usnews.com)
Fair Isaac released a report that says credit scores are affected about the same, whether a seller does a short sale or foreclosure. Fair Isaac says the average points lost on a FICO score are as follows:
- 30 days late: 40 to 110 points
- 90 days late: 70 to 135 points
- Foreclosure, short sale or deed-in-lieu: 85 to 160
- Bankruptcy: 130 to 240
Foreclosure or Deed-in-Lieu of Foreclosure
Both of these solutions affect credit the same, says David Steep of Vitek Mortgage. Sellers will take a hit of 200 to 300 points, depending on overall condition of credit. This means if a seller’s FICO score before foreclosure was 680, it could dip as low as 380.
Short Sale
Steep maintains that the effect of a short sale (providing the sellers are more than 59 days late) on a seller’s credit report is identical to that of a foreclosure. The ding on credit will show up as a pre-foreclosure in redemption status, Steep says, which will result in a loss of 200 to 300 points. This means a short sale seller with a previous FICO of 720 could see it fall from 520 to 420. If your loan stays current during a short sale, your credit will not be effected as much as not making your payments and your chances of purchasing another home sooner than two years is possible.
ResiLandscape report, issued by analysts at Moody’s Investors Service warn that there’s a change the country will slide back into a recession, and they forecast a “longer and deeper housing correction.”
The chief economist for Moody’s Analytics said “We have lowered the near-term economic outlook and raised the risk of a double-dip recession from one in four to one in three.”
He also says the US recovery has lost significant momentum since the spring. Retailing, housing, business investment, and industrial activity have all weakened, and the job market is no longer improving. After ticking higher to 9.6% in August, he is expecting the nation’s unemployment rate to drift back into double digits in the coming months.
Celia Chen, senior director for Moody’s Analytics expects house prices to fall until the 3rd quarter of 2011, significantly longer than Moody’s previous projections of a 1st quarter 2011 bottom in homes. She says the flood of 4 million homes either in late-stage delinquency or foreclosure is clogging the foreclosure pipeline from the servicers to the courtrooms, creating delays.
Distortions due to the first time homebuyer tax credits previously offered are partially to blame for the expected double-dip.
Nearly 31,000 borrowers with Fannie Mae (FNMA) and Freddie Mac (FMCC) loans forfeited their homes through a short sale or deed-in-lieu of foreclosure during the 2nd quarter of 2010. This is a 27% increase over the 24,000 transactions completed during the 1st quarter of 2010.
During the same period last year there were 11,700 transactions up from 3,000 the year before.
Federal Housing Finance Agency (FHFA) also reported that loan modification and refinancing by FNMA and FMCC were up in the second quarter. The Home Affordable Modification Program (HAMP) increased 65% while refinancing under the Home Affordable Refinance Program (HARP) increased by 30%. Loan servicers completed 171,200 permanent loan modifications on these types of loans thru HAMP and nearly 88,600 borrowers in HAMP trials transitioned to permanent modifications bringing the two companies HAMP numbers to nearly 225,000. FHFA’s report also stated that approximately 202,000 of the borrowers were in a HAMP trial period at the end of the 2nd quarter, compared to nearly 448,100 at the end of the first quarter. That means minus the 88,600 permanent modifications 157,500 homeowners’ HAMP trials were cancelled as a result of missed payments or inadequate documentation.
FHFA also noted that more than ½ of the modifications completed in the 2nd quarter lowered borrowers’ monthly payments by more then 30%. During this same period the two companies initiated 275,100 new foreclosures, an increase of 12%. Completed foreclosure sales and 3rd party sales totaled 112,400, up 15% from the previous quarter.
If you have found yourself falling behind in your mortgage and debt obligations, you aren’t alone. With the loss of jobs and declining home values and the current economy, homeowners like you are forced to consider options that were unthinkable a few years ago.
The US Department of Housing and Urban Development (HUD) has established a hotline to assist homeowners who are facing a hardship. You can contact HUD at their toll free number 1-877-483-1515 to find out what options are available to you:
1) Loan Modification
2) Short Sale
3) Foreclosure
To learn more about the tax consequences of a short sale versus a foreclosure, you can visit the IRS web site at www.irs.gov. Before executing any of these options, consult with a certified public accountant or tax attorney.
Governor Schwarzenegger has instituted a statewide, 90-day halt on foreclosure proceedings for each owner-occupied home subject to a first mortgage on which a Notice of Default has already been file.
The U.S. Treasury released statistics the end of July, 2010 for the Home Affordable Modification Program (HAMP) program. The statistics showed that loans that have been permanently modified had a re-default rate to be around 2% – 5.9% 60 or more days past due after modification and 1.7% 90 or more days delinquent. When those statistics came out, they received a huge outcry from analysts questioning the validity of these statistics.
The Treasury pulled the numbers and re-evaluated the statistics after retaining a third-party consultant to provide independent validation. A few weeks later, they corrected the re-default assessments as follows: 10% of six month old permanent modifications are 60+ days delinquent and 6% are 90+ days delinquent.
Analysts say that’s still too low and the rates will surely go higher the longer the program is in place. Up until six months ago, permanent modifications had been offered to only about 434,716 borrowers. The Treasury has cancelled the temporary modifications of 616,839 borrowers.
The analysts at Barclays are predicting a 60% re-default rate and Fitch Ratings projects 55-75%.
http://www.dsnews.com/articles/print-view/treasury-corrects-its-math-for-hamp-redefaults-2010-08-12
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