Bankruptcy & Foreclosures

One of the questions that I seem to encounter time and time again pertains to borrowing money; specifically what’s the best method to get a lender to shell out the cash you seek while not raking you across the coals (interest rate wise) in the process? I’ve been quick to dispense a bit of wisdom from my standard bag of tricks throughout the years but now it appears as though the tides are turning against the borrower as the economy goes through its shake-up. Don’t get me wrong, it is still possible to borrow money, but lenders are tightening up and potential borrowers are going to have to apply with a bit more savvy than before.

Credit Score

The first area to increase your chances is by no means unique to the present economy troubles: credit report! Most consumers have some idea of the importance of maintaining good credit but now more than ever will this affect individuals looking to borrow. To give an example, just a few months ago my company had no trouble securing mortgages (subprime) for individuals with FICO scores as low as 500 and now we’re struggling to get scores in the mid 600s financed.

Organization

Lenders are going to respond to organized borrowers now more than ever before. If you need to apply for a loan, sit down with your lending officer with a plan in hand. This plan should include your budget, repayment schedule, and plans for the money in question. If it’s a toss-up between two candidates, odds are your lender will lean toward the more organized applicant.

Capital & Collateral

Sadly the days of 100% financing are blamed for contributing to the whole subprime mess in the first place, so borrowers expecting to walk in with nothing more than a smile are going to have to rethink their strategy. Lenders are currently in the process of decreasing risk so don’t be surprised if they wish to establish personal property or income from another source as a prerequisite to be considered for a loan. Business loans in particular are going to force borrowers into putting up physical property as collateral for loans: Inventory, supplies, buildings, etc.

These are tough times as far as lenders are concerned. If all goes wrong, they are going to be clawing to recover as much of their investment as possible. Keep that in mind when applying for a loan.

It seems like in each post, I come on and preach of economic doom and gloom. I try to be positive amidst the turbulence and finally have a hint of good news to report. According to the Energy Information Administration ‘s weekly Inventory report, crude stocks (supply) are on the rise. Oil stock rose by 7 million barrels last week, which put us in the middle curve of the average range for this time of year. This is the lowest level at which oil has traded since January 24, when oil temporarily dipped down to $87.01 per barrel.

What’s being credited to this increase in supply? Why a decrease in demand of course (for those who forget their Intro to Economics lessons). People are literally driving less due to the economic crunch proving that some good can come out of the turmoil. After all, the United States remains the world’s largest economy and fear of recession has global repercussion.

Unfortunately, we’re not going to get through this Money management post without a little bad news. The National Association of Realtors has released word today that home prices are likely to continue to decline in 2008 (for the second year in a row). Just a month ago the Association was predicting an ugly start to 2008 but a rebound in the second half of the year. Now their forecasts are looking a bit more bleak; with hopes of 2009 (and beyond) representing the earliest periods of recovery.

Since oil trading and domestic housing represent only two of dozens of markets credited with influencing the economic situation, these opposite reports do not cancel each other out. The positive spin is to hope gas prices continue to drop at the pump while we wait-out the proverbial turbulence.

Just when you thought the economic stimulus package couldn’t possibly be sweetened any further, the Senate has proposed an additional perk to individuals living off Social Security. While ineligible under the House’s earlier proposed plan, the Senate’s package would reduce the size of the rebate to $500 for individuals and $1,000 for couples (rather than $600-$1,200 as the original plan had aimed) so as to include social security recipients.

Even if the rebate amount is lowered for working individuals, couples, and businesses, the plan comes in at a whopping $156 billion spread across the original 117 million families included in the House’s plan plus an additional 20 million senior citizens.

The Senate is truly on a mission with their plans, going on to propose extensions of unemployment benefits (13 weeks/ 26-weeks in states with high unemployment rates), additions and extensions to unemployment benefits, putting emphasis on home heating subsidies and grants, increasing food stamp benefits and approving funds for additional public works projects.