At Issue & In Focus

Avoiding Foreclosure Through Education

Six months ago, the Attorney General’s Office (AGO) awarded over $1.1 million in financial literacy grants to the areas hit hardest by the mortgage crisis and economic downturn.  Funds for this program come from the settlement of the AGO’s  enforcement action against Fremont Investment & Loan and its parent company, Fremont General Corporation. As part of the settlement, Fremont has also agreed not to foreclose upon unfair loans without certain protections for borrowers or originate unfair loans in the Commonwealth.

These grants have allowed 18 organizations from across the commonwealth to educate homeowners on avoiding high-risk mortgages and help those facing foreclosure.  A total of 983 participants have attended 86 workshops, and 650 have attended Foreclosure Prevention Counseling.  These programs have yielded 123 legal cases, including five Class Action cases, and have saved 63 houses from foreclosure so far this year.

Outside of the grant program, the AGO continues to support and inform new and re-financing homeowners.  The AGO provides a direct link to updates on policies and procedures regarding mortgage loans, as well as more information on loan modification scams.  The Office is also a direct link to attorneys that are currently handling subprime and predatory lending cases.  For more information on the Financial Literacy Grant Program, along with other home and housing information, visit the AGO website.

YOUR MONEY MATTERS: Avoid Credit Card Trouble

This is the fourth in a series of blog posts about money matters. Today's edition discusses tips for avoiding credit card trouble.

Nearly every adult in the U.S. possesses at least one credit card.  A credit card can be a valuable and convenient tool, to assist us in purchasing goods and services, but it is important to manage credit cards and credit card debt wisely. Small purchases can add up very fast and may place you at risk of not being able to pay off your credit card debt in a timely manner. 

Your credit history:
Credit history is a report of how you have paid your bills or repaid your loans over time. Basically, if you pay your bills in full and on time every month, then your credit history will be positive.  If you have late or missed payments, then you will most likely trigger late payment penalties and default rates, which will also harm your credit history and lower your credit score.

Credit card fees:
It is important to understand all of the fees and finance charges associated with any credit card. Annual fees are set by the card issuer and interest rates may vary in accordance with the prime lending rate. To obtain lower fees and interest rates, shop around for lenders who don’t require an annual fee or offer lower annual fees and interest rates. Rates and fees may be particularly competitive when transferring balances, but it is important to manage this option wisely and not continue to run up the debt on the remaining cards.

Make timely payments:
One of the most important things you can do to avoid these penalties is to keep careful track of all payment due dates and be sure to send in (at least) the minimum required payment on time each month. Consider setting up automatic monthly minimum payments from your checking account. However, making only the minimum payments means it will take you longer to pay off your balance and you will continue to accrue interest charges. To avoid higher finance charges, and to benefit yourself, you should aim to pay off as much as possible of your balance each month.

Late payment penalties and default rates:
In addition to the interest charges incurred when you carry a balance on your credit card, the costs of credit include late fees and default rates. If you do not carefully manage your account and pay it on time, many credit cards charge large late fees (from $20 to $39) if they do not receive your payment by the due date. Also, if you make late payments, you may be subject to an increase on the interest rate applicable to that account.

Set a goal to pay off your credit card debt:
Take a careful look at your budget so that you can allocate sufficient funds to pay down and pay off your credit card debt in a timely manner.

If you cannot make your payments:
If you find that you cannot meet your minimum monthly payments, you should immediately contact your creditors. Determine a monthly payment that you can and will make. Many creditors will try to work out a suitable payment schedule if they believe you are acting in good faith.

If you are still having serious problems after attempting these steps, another option to consider is to work with a credit counseling service to create a debt repayment plan.  Be advised that fees vary widely and it is very important to shop around and avoid credit counselors who charge large up-front fees or large monthly fees.  For more tips, please refer to the “Before You Contact a Debt Elimination and Consolidation Service” page on our website.

Two other methods of dealing with debt problems are consolidating debt through a single loan, and filing for bankruptcy. There are serious implications associated with both of these options, so consult with a trusted banker or counselor about debt consolidation, or a competent bankruptcy attorney about bankruptcy, before taking any action.

Learn more:
For more information on managing credit cards, including a review of changes implemented recently under the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, please refer to the AGO’s Guide to Consumer Credit.

Your Money Matters: Creating a Budget

This is the third in a series of blog posts about money matters. Today's edition discusses tips on creating a budget.

Establishing a budget is not only important to keep track of your current finances, it also helps you plan for the future. Creating a budget is relatively simple. The hard part for most people is sticking to it. However, anyone can start the journey to having a better handle on their finances by taking these five steps:

1. Track your income. Collect paystubs, interest statements and any other income sources for at least a month to determine exactly how much money you have at your disposal.
2. Figure out your average monthly expenses. This includes a mortgage or rent payment, car payments, auto, health and house insurance, groceries, utilities, entertainment, dry cleaning, retirement or college savings and essentially everything you spend money on. Many people do this by keeping bills in one place (a folder, a basket, a drawer) and collecting all receipts from all spending. Don’t forget to create a way to track any cash transactions (a cup of coffee, a newspaper, for example) in a small notebook or on an index card.
3. Total your monthly income and monthly expenses. If the result shows more income than expenses you have a surplus! This means you can allocate this money to savings or you can reduce credit card or other debt faster. If you are showing a higher expense column than income it means some changes will have to be made.
4. Make necessary adjustments. Consider if you can find some creative strategies to reduce some of your current expenses. Refer to our recent blog post: “Easy Ways to Save Money” for some ideas to get you started. Also, decide if it makes sense to pick up a short-term, part-time job to help pay down any credit card debt that has gotten out of control or see if it’s time to clean out the closets or garage and sell your extra “stuff” via a yard sale.
5. Review regularly. Even the best budgets will fail if you do not review them regularly. Once you can comfortably stay on your planned budget, see if you can increase your savings for short-term and/or long-term needs. In that way, your budget will reap rewards for you and your family for years to come.

 

Your Money Matters

Easy Ways to Save Money:
Daily, Weekly, Monthly, Yearly

This is the second in a series of blog posts about money matters. Today's edition discusses some tips for saving money.

It is amazing how fast money dwindles away without you even realizing it.  Have you ever been shocked to find out how low your checking account balance was, and then when you looked at your monthly statement, all you saw were $3 and $4 food and drink purchases that added up to $70, $80, $100?  How about at the convenience store when you only needed three things and you ended up spending $25? 

Fortunately, there are some suggestions you can take advantage of on a daily, weekly, monthly, and even yearly basis without having to change your routine a whole lot, but that won’t break the bank either.

Daily/Weekly.  The easiest way to save money on a daily or weekly basis is to figure out what you buy every day or week and see if you can create a lower cost alternative. Here’s one example: Take a look at your daily spending on breakfast. Do you typically buy your daily cup o’joe and bagel on the way to work?  This habit can easily cost $5 a day.  Consider the savings if you were to brew your own coffee and make your own bagel. The average pound of coffee beans costs around $8 and that will yield at least 30 cups of coffee and a dozen bagels costs an average of $5.  In one month, you could realize a savings of more than $100.

Once you’ve mastered the art of breakfast, see if you can reduce the amount you spend for other meals. If you frequently eat lunch or dinner out, see if you can find some easy, make at home options. Even cooking one additional meal a week at home can reap significant savings.

Monthly: One trip to the movie theatre each month can run you at least $10 - $15 per person – for the ticket and even more if you add a snack or two. Consider getting videos and DVDs from one of the $1 rental kiosks available in grocery and convenience stores or better yet – borrow them from your local library. Pop your own bag of microwave popcorn at home and watch the savings add up.

Take a look at your monthly bills (utilities, cable, phone, etc.) and see if you can reduce your average consumption, choose a lower cost plan or switch to a competitor.

Yearly:  Take a look at big picture items like your annual cost of car ownership. Can you stretch out the time you hold onto your car? Many people will take out a loan and buy a new car every four to five years. If you hang onto your car after the loan has been paid, the annual cost of ownership may be reduced substantially. 

Can you find a creative way to reduce the cost of a vacation? Research the best deals for airfares and hotels, or consider creating your own mini-vacation within easy driving distance of home.

Decide If It Is a Want or a Need: Only you can truly decide if there are areas in your current lifestyle which are your true needs versus those things that are convenient wants. Once you make the decision to make saving money a priority, you will discover more and more creative ways to spend less and put more of your money to work for you to get what you truly need.

Money Matters: Student Loans

This is the first in a series of blog posts about money matters. Today's edition discusses student loans.

For many parents and students, affording a college education is becoming increasingly difficult.  Whether it is looking towards graduation and thinking about how to pay off loans, or it is an interest in obtaining a loan now, it is important to understand the options in the loan market. While every loan is different, they are all similar in that loans are borrowed money that must be paid back, with interest, upon leaving school or completing an education.  The most significant variation between loans is the source of the money: loans are either public and come from the federal government, or are private and are funded by private companies or corporations.

When beginning the loan process, the first step is to check eligibility for a public loan.  Public loans are often preferable because they have low interest rates which are set and capped by the federal government.  To check public loan eligibility, fill out a Free Application for Federal Student Aid, which can be done on the FAFSA website.  If qualification for public loans does not exist, then begin the application process for private loans, which are available through most banks and lending agencies. 

Repayment of loans usually begins six or nine months at the end of an education, whether upon graduation or simply leaving school early.  It is important to stick to the repayment schedule and to make the payments in full and on time.  If loan repayments are not made in full and on time, this may result in a default on loans, which will have serious and long-term consequences.  Bad credit early on in life could have negative implications on future decisions, such as purchasing a car or a home.  For public loans received during school, there is the option to consolidate different types of federal loans in order to simplify the repayment process.  Loan consolidation offers benefits such as a fixed interest rate and the opportunity to make only one payment per month.  For more information on loan consolidation and to apply for a Direct Loan Consolidation, visit www.loanconsolidation.ed.gov.

Repayment Plan	Description
Standard	Pay a fixed amount each month for ten years
Graduated	Payments start out low in the beginning of ten year payment period and gradually increase
Extended	Payments are extended beyond standard pay period, usually 12-30 years
Income-sensitive	Monthly payments are adjusted depending on annual income

Going Green May Net Some Green

When you invest in energy-efficient products or make energy efficient improvements to your home, you not only will be saving money on your energy bills, you may also see some green when you file your taxes.

The Internal Revenue Service (IRS) website lists six energy-related tax credits created or expanded by the American Recovery and Reinvestment Act of 2009.

Some Examples:

• Homeowners who make energy efficient improvements to their existing homes can receive a credit of 30 percent of the cost, up to $1,500.
• Recent car buyers who purchased a hybrid, fuel cell, alternative fuel or advanced lean-burn technology vehicle, you may qualify for a tax credit of up to $7,500.

To learn more, check out the IRS website.

Top 5 Consumer Scams of 2009

In honor of National Consumer Protection Week, Scott Schafer, Chief of Attorney General Coakley’s Consumer Protection Division along with consumer advocates from the Executive Office of Consumer Affairs and Business Regulation, the Better Business Bureau and the United States Postal Service warned the public about the Top Consumer Scams of 2009.

The top five scams that the Attorney General’s Office received complaints about last year were:

1. Time Share Resellers
2. Loan Modification Fee Schemes
3. Deceptive Advertising and Solicitations
4. Deceptive Lending Schemes
5. Fake Check Scams

For additional information on these issues, or if consumers are concerned about these scams or other scams, they should file a complaint with the Attorney General’s Office.

AGO Awards Over $1 Million in Financial Literacy Grants

The Office of the Attorney General is pleased to announce its Financial Literacy Grant Program has awarded nearly $1.1 million in grants designed to assist some of the areas in the Commonwealth hardest hit by the fallout from the housing bubble, the financial crisis and predatory lending practices. Eighteen community-based organizations who are on the frontline of the foreclosure and mortgage crisis will receive grants of up to $100,000 for a period of one year. Funding for the programs stems from a settlement obtained by the Attorney General’s Office against Fremont Investment & Loan and its parent company, Fremont General Corporation. For more information on the Financial Literacy Grantees or other AGO grant programs, visit the AGO website.

AGO Announces Community and Youth Development Grants

Yesterday, the AGO launched three new grant opportunities totaling $4 million that will support jobs for youth at risk, provide support to reclaim abandoned property and will work with families at risk for losing their homes to foreclosure. The funding for the grants stems from several settlements that were obtained by the Attorney General’s Office as a result of recent enforcement actions against pharmaceutical giants Merck Vioxx, Eli Lilly and Pfizer and against Fremont Investment & Loan. All grant programs have an expected start date of January 4, 2010.

$1.5 million will go to support Project YES, a youth employment program derived from the AG’s work as co-chair of the Governor's Task Force Anti-Crime Council's Subcommittee on Urban Violence. The Project YES: Employment, Health and Wellness program will provide low-income youth with jobs that have specific physical activity components.

An additional $1.5 million for Abandoned Property Rehabilitation grants stems from the Attorney General’s settlement against Fremont Investment & Loan Corporation. This funding will assist Massachusetts community development organizations and non-profit housing groups to rehabilitate abandoned properties and create more safe and affordable housing.   

Finally, $1million will towards the Financial Literacy Education Grant Program. This funding also stems for the AG’s settlement with Fremont Investment & Loan Corporation and will support consumer and community programs in providing direct consumer outreach, education and related services to help homeowners recognize and avoid predatory lending practices and avoid mortgage foreclosure. Funding will also support borrower protection services, including legal representation by qualified legal services organizations, of individuals who are at risk to losing their homes due to fraud, misrepresentation or other unfair, deceptive or predatory lending practices.

For more information on these programs check out the Attorney General’s website.

New Credit Card Rules You Should Know About

In May, Attorney General Martha Coakley attended a ceremony at the Rose Garden where President Obama signed a bill that updated the laws regarding credit card rules for consumers.  Today, the first phase of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act goes into effect, changing the rules for millions of Americans who hold credit cards.  The changes are designed to give consumers additional notices and protections, and help them protect themselves from the burden of certain fees.  As of today, consumers now have the right to be given:

• At least 45 days' warning of changes to their credit card accounts.  Prior to this change, consumers could receive as little as15 days' notice of changes to their account terms.
• At least 21 days to pay their monthly credit card statements without threat of “late fees.” 
• The right to opt out of interest-rate and fee increases and the right to cancel their accounts while paying off the balances under the old, lower interest rates. Until today, issuers offered opt-out options only at their discretion, and did not necessarily permit consumers to pay off their balance at the old rate.

Another important change in the law requires credit card issuers to inform card users of the right to cancel their account when the issuers mail a 45-day notice of a change in terms. The notice must explain the steps cardholders can take to exercise their right to cancel, including a toll-free number to call and a deadline for opting out. “Opting out” means that a consumer can no longer make purchases with the card. Instead, the old, lower interest rate or fee will be applied while the consumer repays the balance.

These are just some of the many rights credit card holders have under this new law.  Additional protections will go into effect in February 2010.

As the consumer advocate for the Commonwealth, the Attorney General is responsible for making sure that the rights of its citizens are protected and enforced.  For more information on the Attorney General’s efforts to help the public understand their financial rights, please visit the Consumer Credit section of the Attorney General’s website.