This post is from the Blown Mortgage Hall of Fame.  It originally appeared back in July 2007 on my series on credit.  Now more than ever your credit score is vital to securing financing.  I’m on vacation from Saturday until Tuesday the 15th so enjoy some of the classics while I’m gone. 

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In part 1 of this series on credit we talked about how important credit has become in surviving the current home depreciation environment and avoiding the ARM Reset Foreclosure Trap. In part 2 of the credit series we looked at the elements that comprise your credit score. Part 3 covered improving your score on your own and outlined the importance of credit management and protecting your credit report. In this part of the series we’ll look at options for improving your credit using third party services.  Here is a recap of the series so far and where we are at to date:

Credit Series Overview

1. Why credit is so important
2. Understanding elements of credit
3. Improving your score organically
4. Improving your score using 3rd party help
5. Managing your score

A note before we begin. Before you agree to work with any third party to improve your credit score you need to do the following things:

• Know and understand your current score, and understand the items on your credit report. You can do this by signing up for MyFICO, an inexpensive, accurate way to keep tabs on the accuracy of your credit report.
• Know and understand what is legal and what is illegal when it comes to credit repair.
• Check with the Better Business Bureau for any third party you choose to work with.
• Carefully examine the fees charged and the results guaranteed by the party you choose.

How to Avoid Scams

Just like in mortgage, if it’s too good to be true, it probably is. Ignore any company that makes any of the following claims:

• We can erase your bad credit - guaranteed!
• We can remove bankruptcies and judgments permanently!
• Get new credit instantly!
• Form a personal corporation and get all the credit you need, now!

These all represent untrue statements about credit repair. You are setting yourself up for disappointment if you do business with these types of firms.

Your Rights When Engaging a Credit Repair Service

From the Federal Trade Commission Web site on Credit Repair:

By law, credit repair organizations must give you a copy of the “Consumer Credit File Rights Under State and Federal Law” before you sign a contract. They also must give you a written contract that spells out your rights and obligations. Read these documents before you sign anything. The law contains specific protections for you. For example, a credit repair company cannot:

• make false claims about their services
• charge you until they have completed the promised services
• perform any services until they have your signature on a written contract and have completed a three-day waiting period. During this time, you can cancel the contract without paying any fees

Your contract must specify:

• the payment terms for services, including their total cost
• a detailed description of the services to be performed
• how long it will take to achieve the results
• any guarantees they offer
• the company’s name and business address

I have heard horror stories of people sending thousands of dollars to “credit repair” companies only to find their situation unimproved and their precious cash squandered on false hope. Do not let this happen to you. As with all financial situations do not rush in to a decision; and always get a referral if possible.

Types of Third Party Credit Repair Companies

Consumer Credit Counseling - These companies take all of your outstanding debt, analyze the creditors, balances and interest rates compared to your monthly income. They then negotiate with all of your creditors to reduce your overall debt and monthly payments. While this sounds good; it really looks bad on a credit report. This is a red flag to an underwriter reviewing your credit history. Some banks will consider this almost as negatively as a bankruptcy. While it may be beneficial to consult with a credit counselor to help game plan a way out of your debt; it can be very costly to your future credit options should you engage them to restructure your outstanding debt.

If you choose to work with a credit counselor simply use them to help remove disputed items that appear on your report. They can provide you templates and contacts to help you remove incorrect information on your report.

Consumer Law Offices - Lawyers like to tout that they are more effective than credit counseling companies because, well, they are lawyers. The truth is that they take the same steps as everyone else to remove disputed items. There is nothing inherently bad about using a law firm to remove credit items that are erroneous; its just that they don’t have different avenues than other organizations that may be less expensive.

Individual Credit Counselors - There are many independent “credit experts” who offer services to repair or improve your credit score.  They may be former employees of the above types of firms or not.  As long as you use the same precautions in researching and selecting them as the above companies they can be a reasonable alternative to the above.

The Best Alternative?

Most people turn to third party companies when they are desperate and in need of help.  This is the wrong time to begin to work on your credit profile.  The best bet may be to do it yourself.  Using a copy of your credit report and some template correspondence you can effectively clean up your credit report with out having to pay the fees associated with the above services.  The bottom line is that, all things considered, being your own credit counselor may be your best bet.

If you’d like samples of the template letters you can use to dispute items on your credit report please email me at morganb@blownmortgage.com and I’ll be happy to send them to you.  if you’d like a detailed white paper on how your credit score impacts your home financing options please email me as well.  Much of this information is based on the FTC’s Consumer web site on Credit Repair - you can learn more byvisiting the FTC site.

Source [blownmortgage]

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Filed under: Good news, Technical Analysis, Stocks to Buy

PG&E Corporation (NYSE: PCG) is an energy-based holding company, serving some 15 million northern and central California residents through subsidiary Pacific Gas and Electric Company. The firm owns and operates electricity generation facilities, over 150,000 miles of electric lines, nearly 50,000 miles of natural gas pipelines, and underground natural gas storage fields. Competitors include American Electric Power (NYSE: AEP) and Edison International (NYSE: EIX).

Investors were pleased last week, when PG&E said it expected FY08 EPS of $2.90-$3.00 and FY09 EPS of $3.15-$3.25. Analysts had been expecting $2.96 this year and $3.19 next year.

Continue reading PG&E Corporation (PCG): Share price defines a bullish ‘pennant’

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Filed under: Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO)

On its face, it looks like the tech M&A market is holding up nicely — despite the credit crunch and slowing economy. For example, in Q1, tech M&A came to $92 billion, which was down from last year’s $100 billion (this is according to the 451 Group).

Good, huh? Well, as usual, statistics can be deceiving. Keep in mind that Microsoft’s (NASDAQ: MSFT) $45 billion bid for Yahoo! (NASDAQ: YHOO) was a huge factor (interestingly enough, there are signs that the deal may not go through).

In fact, there was a 50% reduction in deals in excess of $1 billion (only 11). For the most part, larger transactions need debt financing — which is in short supply nowadays. After all, last year we saw a rush by private equity firms into the tech sector.

According to the 451 Group, it also looks like strategic buyers are getting skittish. Simply put, they are concerned about the macroeconomy. And something else: with lower stock prices — with companies like Microsoft, Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG) and VMware (NYSE: VMW) — it is more dilutive to do deals.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: International markets, Analyst reports, Consumer experience, China, Economic data, Oil

The good news keeps on coming. The government now expects oil prices to stay above $101 a barrel for the balance of the year. That means that many Americans will be deciding between driving and the costs of basic daily necessities.

U.S. Energy Information Administration “had predicted $87-a-barrel oil in January”, according to The Wall Street Journal. So, the agency has revised it target up 16% in a little over three months.

The biggest question from the report is whether Americans will drive less and keep oil from rising further? The answer may be that it does not matter.

So much of the demand for the world’s oil comes from emerging markets such as China that a slight drop in US consumption is almost certain to be taken up somewhere else. Refinery capacity is not growing, so the supply of gas and diesel is not likely to improve. And, new, large oil fields are not coming on line at the rate that they were twenty years ago.

The new estimate on the price of oil may actually be conservative. Watch for it to be revised up again in June. The global demand for crude is that great.

Douglas A. McIntyre is an editor at 247wallst.com.

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We lost 80,000 jobs in the latest payroll reports as unemployment spiked to 5.1% the highest in two and a half years.  The 80,000 jobs lost was the biggest single contraction of the job market in five years.

From Market Watch on the dismal job numbers:

In employment data that would seem worthy of the name recession, the government reported Friday the steepest monthly job losses in five years as well as a spike in the unemployment rate for March.

The report confirms widespread pessimism about the near-term economic outlook.

Nonfarm payrolls fell by an estimated 80,000 in March, the Labor Department said. It marked the largest decline seen since March 2003, underscoring how reluctant employers remain to committing to making new hires.

Private-sector payrolls have now declined for four consecutive months, the data showed. Read full survey.

The nation’s unemployment rate surged to 5.1% last month, the highest since September 2005.

Source [blownmortgage]

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We are once again firmly in Wonderland and falling deeper into the rabbit hole as the market is responding to negative news as if it just won a Powerball contest. On Monday, UBS AG announced another $19 billion in writedowns putting it firmly in the lead of all those in the writedown 500. […]
Related Posts:
■The Genesis of the Credit Bubble: Advertising, Deception, and $163 Billion in Subprime California Loans Resetting in 1 Year.
■This Housing Mess is Getting Ugly and Your Face Shows it. Unintended Consequences of Lost Home Equity.
■Real Homes of Genius: Today we Salute you Pico Rivera. $300,000 for an 856 Square Foot Home with 5 Bedrooms?
■Real Homes of Genius: Today we Salute you Buena Park. $511,000 for 864 Square Feet. Even Knott’s Berry Farm is Cheaper!
■Real Homes of Genius: Today we Salute you Stanton.

We are once again firmly in Wonderland and falling deeper into the rabbit hole as the market is responding to negative news as if it just won a Powerball contest. On Monday, UBS AG announced another $19 billion in writedowns putting it firmly in the lead of all those in the writedown 500. The race of course is dominated by investment banks and each writedown simply is a reflection of poorer performing mortgage assets;, aka Real Homes of Genius with sub-prime loans. Yet this is fantastic news somehow and the amazing plan that will turn the market around? Dilution of shares! You really have to enjoy the headline for this article:

And what does this plan further entail?

“To rebuild its cushion against further losses, UBS is seeking shareholder approval to raise $15 billion by selling new shares to existing shareholders in a so-called rights issue. “Our firm turned a page today at the end of a bitter chapter,” said Marcel Rohner, chief executive of UBS. “We will return our company to profitability.”

The write-downs at UBS and Deutsche Bank put financial firms’ total losses on subprime-mortgage investments well above $150 billion — more than halfway to the eventual total of $285 billion forecast by ratings firm Standard & Poor’s. That is based on a total of $1.4 trillion of subprime securities issued from 2005 through the third quarter of last year.”

It seems like a pattern is emerging here. First, if you are a large investment bank facing sub-prime problems you must:

A. Oust your leader with of course a nice severance package

B. Decide to sell more shares and call it “turning around” or some other cheerleading tagline

C. Announce the news in conjunction with horrible news (i.e., $19 billion in writedowns)

D. Add a touch of oregano and the market rallies

E. Rinse and repeat

If all goes bad, you always know that the Federal Reserve will step in and provide a back stop to a total collapse. There isn’t much to lose for those on Wall Street. Yet we now realize fully that the Fed cutting rates is doing nothing except kicking the dollar in the gonads and doing nothing to save the American homeowner. This has been the implication of course, that the rate cuts would somehow inject stability into the market which of course it has not. Now that we realize this hasn’t done much aside from diluting our US Dollar and we are still heading toward a recession, we get the amazing and fantastic $300 billion bailout via the FHA. Let us look at this puppy with closer eyes:

“Program would permit FHA to provide [up to $300 billion] in new guarantees that would help to refinance at-risk borrowers into viable mortgages. In exchange for the acceptance of a substantial write-down of principal, the existing lender or mortgage holder would receive a short payment from the proceeds of a new FHA loan if the restructured loan would result in terms that the borrower can reasonably be expected to pay. The existing lender or mortgage holder will have a cash payment and no further credit exposure to the borrower. This could potentially refinance between 1 and 2 million loans (and help these families stay in their homes), protect neighborhoods and help stabilize the housing market.”

Language is absolutely critical here. Whether you agree with this plan or not, this is a government sponsored bailout. I realize that this problem does require some solutions but if we are to seriously talk about these issues, let us call them for what they are. Heck, even Chairman of the House Financial Services Committee Barney Frank has this on the proposals:

“FRANK ANNOUNCES NEW ECONOMIC, MORTGAGE AND HOUSING RESCUE PROPOSAL”

So let us go back to the first paragraph. First, the wording on “viable mortgages” is very ambiguous. Does this mean 30 year fixed mortgages? Does this mean new mortgage products? Also, we read that lenders will need to accept “substantial” write-downs of principal to unload mortgages but what is substantial? Does that mean that the government will use independent appraisers to go to properties to accurately assess a value? If they are planning on allowing current appraisers to do the work this leaves the door wide open for more fraud and gaming of the system. Look what they’ve done with the current housing market! This here is extremely important since homes should be valued for their current market value and discounted at current rates.

It is clear even from the first paragraph that this will bailout mortgage holders. What if the property is worthless? There are some areas that simply have no market so how are these going to be valued? There does appear to be some back stops for these contingencies:

“Eligibility Requirements for Existing Loans (Requires All of the Following):

• Owner-occupied principal residences only (no investors, speculators or second homes);
• [Existing senior loan being refinanced must have been originated between January 1, 2005 and July 1, 2007];
• To remove any incentive for borrowers to “purposely default,” the borrower must have had a mortgage debt-to-income ratio of no less that 40 percent as of March 1, 2008, and must certify that he/she has not intentionally defaulted on existing mortgage(s). Regulators can make exceptions for involuntary changes after that date;
• Participating mortgage holders/investors must waive any penalties or fees on the existing mortgage and must accept proceeds of the new loan as payment in full;
• Existing mortgage holders/investors must accept their losses - taking substantial write-down sufficient to establish a 5 percent loan loss reserve for the FHA, bring the loan-to-value ratio on the new FHA-loan down to no greater than 90 percent of property’s current appraised value, result in a meaningful reduction in mortgage debt service by the borrower, and to pay all up-front fees for the new loan. Accordingly, to qualify, mortgage holders would need to accept a substantial write-down, receiving no more than 85 percent of the property’s current appraised value as payment in full for the existing loans.”

I actually tend to agree with most points however, the main concern I hold is that if we are to use the current infrastructure of oversight, there is huge potential for fraud once again. Unless we have new entities coming in and ensuring appraisals are correct and accurate and verifying owner occupancy and also income, we will once again be going into liar loan territory. There is a lot to gain and lose here and the pressure to commit fraud by institutions is high. Those hungry for commissions will do anything they can to squeeze people into homes once again. If this plan does go through as is, it is incredibly important that stiff penalties and oversight are put over the lenders like a hawk.

Some of the language here is too flexible. What do they mean by purposely default? Do they mean walking away? They have to be more specific here. Also, I’m certain that many investors will fight to keep the penalty fees in since that is a reason many brokers made out like bandits on these mortgages. The more toxic the higher the yield. Now who will be one of the few responsible for this oversight?

“Increased Fraud Prevention/Oversight

• The HUD Secretary shall establish independent quality reviews to determine underwriter compliance, and rates of delinquency, claims and losses;
• Submit semi-annual reports to Congress; and
• HUD Inspector General shall conduct annual audit of the program.”

Bwahaha! You mean Alphonso Jackson who just resigned a few days ago under massive cronyism charges? Interesting how right on the back of this new FHA proposal the HUD Secretary resigns. Oh man we are so screwed.

Real Homes of Genius - Today We Salute you Covina

Let us not forget that there is a ton of junk floating out there. We are nowhere close to seeing the end of sub-prime resets and we haven’t even taken a look at Alt-A or Pay Option ARMs. These are the next ticking time bomb that should hit in 2009 through 2011. The above home just hit the market a few days ago. It is a 3 bedroom 2 bath home in the city of Covina. The home is currently bank owned so fortunately, this would not qualify for the new FHA plan. But let us take a look at the sales history here:

Sale History

01/17/2008: $411,507 *

11/17/2003: $268,000

06/25/2002: $210,000

We can presume that the sale price in January was simply the bank taking the place back. You may be wondering, how can it be that a place that sold for $268,000 in 2003 now has a balance of $411,507 without any sales? Welcome to the next big issue, the home equity line and second mortgage problems. Given that recent data shows that $1.1 trillion in home equity mortgages is out there, and these certainly won’t qualify for the FHA bailout, we have another issue just waiting to fall. This place has a pool listed and one of the pictures shows that it has modern accents to it. Given that the home was built in 1954 I think you can put 2 and 2 together and have an idea where the 2^nd mortgage went. The current price is $370,000 and I’m sure given the 424 other homes for sale in Covina, this place will have stiff competition.

There is a great new tool out by the New York Fed that uses data from Loan Performance to show mortgage market data across the U.S. This is a very useful tool and may run a bit slow given that I’m sure many are using it:

I went ahead and ran the program on Covina and the results do not look promising:

Share in foreclosure: 10.8%

Share ARMs resetting in 12 mos: 43.2%

Share low or no documentation: 47.5%

Share ARMs: 73.8%

And how we are close to a bottom with the above statistics is beyond me. Today we salute you Covina with our Real Homes of Genius Award.

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Related Posts:
■The Genesis of the Credit Bubble: Advertising, Deception, and $163 Billion in Subprime California Loans Resetting in 1 Year.
■This Housing Mess is Getting Ugly and Your Face Shows it. Unintended Consequences of Lost Home Equity.
■Real Homes of Genius: Today we Salute you Pico Rivera. $300,000 for an 856 Square Foot Home with 5 Bedrooms?
■Real Homes of Genius: Today we Salute you Buena Park. $511,000 for 864 Square Feet. Even Knott’s Berry Farm is Cheaper!
■Real Homes of Genius: Today we Salute you Stanton.

Via [DrHousingBubble]

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Filed under: Major movement, Good news, Google (GOOG), Options, Technical Analysis, Technology

Google Inc. (NASDAQ: GOOG) shares are trading higher after the company said in a blog post last night that it bid in the recent government spectrum auction in an effort to open up the airwaves to outside Internet devices. The company also said it planned on bidding in the next wireless spectrum auction in an effort to improve its own wireless business. GOOG is currently developing a mobile phone software platform, and hopes to “make the wireless world look much more like the open platform of the Internet,” according to a company statement. If you think that the stock won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on GOOG.

After hitting a one-year high of $747.24 in November, the stock hit a one-year low of $412.11 in March. GOOG opened this morning at $457.01. So far today the stock has hit a low of $456.20 and a high of $471.99. As of 12:45, GOOG is trading at $470.01, up $14.89 (3.2%). The chart for GOOG looks bearish but improving slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.