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“Four out of five metropolitan areas recorded lower home prices in the third quarter from a year earlier, while existing-home sales fell in 32 states from the second quarter, according to the latest quarterly survey by the National Association of Realtors^®.”

Underwriting guidelines continue to tighten. Lenders are requiring that homeowners have more equity than before.

Gone are the days of leveraging the full value of your home.

This all spells trouble for those consumers who were planning on utilizing available home equity as a debt consolidation loan.

If you’ve grown accustomed to borrowing against your home to pay off other debts, you may be forced to explore other debt reduction or elimination strategies. Read the rest of this entry »

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Anytime you carry over balances on your credit card you’re going to pay a lot of interest. Even if you currently have a special low-interest promotional deal, that interest rate is eventually going to increase. Use the following three tips to pay off your credit cards and slash the total amount of interest you’ll pay.

1.      Pay more than the minimum balance due and you’ll methodically reduce the amount of the principal you owe. When you only pay the minimum amount due, you’re probably only paying about 2% to 3% of the total balance owed, according to the Motley Fool. Even if you can only spare a few extra dollars a month it’s worth it to put this toward your debts.

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More Americans are having trouble paying their utility bills, according to the Wall Street Journal. And some consumer advocates and regulators are growing concerned about the growing number of homes that have had their utilities shut off because of unpaid bills—especially because more people may be impacted as the economy worsens.

Throughout the country utilities have shut off more delinquent customers than last year. The article states:

In Pennsylvania, PPL Corp. increased shutoffs by 78% in the first three quarters of the year compared with the same period a year earlier. Shutoffs at electric utilities throughout the state increased by 20% in that period… In Memphis, Tenn., the city-owned utility that supplies electricity, natural gas and water to residents cut off 38% more people in the first eight months of the year, or 69,743 electric accounts, versus the same period in 2007.

If you find yourself in this boat and are facing a utility shutoff, you may be able to get help through the Low Income Home Energy Assistance Program (LIHEAP). This federally funded program helps low-income households with their energy bills. LIHEAP may also be able to help you with weatherization and energy-related home repairs.

The program is targeted at low-income folks but eligibility rules have been expanded to allow people with higher incomes to qualify. That’s because state regulators say more people with higher incomes are having their power shut off. “We’re seeing an uptick in middle-class people who have never been in this situation before,” Eric Hartsfield, director of the customer-service division of the New Jersey Board of Public Utilities, told the Wall Street Journal.

It’s especially important that people with health issues, the elderly, and small children don’t go without heat for too long. Also, using stoves, portable heaters, and grills is dangerous and should be avoided, especially because carbon monoxide poisoning can result.

About the Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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By Jim Perez,
DebtHelp, Inc. Staff Writer

Super-Freak-O-Nomics hears this question quite a bit in the bars he frequents:

If the economy is doing so wonderfully, as President George Bush says, and his Fed cronies echo, why do I feel so poor?
Well, I decided to do some digging around on this topic, and guess what?

You’re right.

You are poor.

Sort of.

The housing boom we’ve been riding the past few years has created a newfound wealth for many people, primarily those who bought homes within the past 10, 15 or 20. But now that the crest is subsiding, the “artificial” wave of wealth many of us rode is crashing into the sand.

For some, this crash means losing their homes.

For others, it means working a second job to help pad the retirement nest egg that is now turning from hard- to softboiled.

According to Robert Hardaway, a professor of law at the University of Denver Sturm College of Law, this crest began quite a long time ago. It’s the result of an accounting sleight-of-hand that makes the boys from Enron look like church basement bingo bunnies.

Hardaway said that in 1983, the U.S. Bureau of Labor Statistics had to make a choice: Strip the cost of housing from the Consumer Price Index, causing an immediate drop to the inflation index, bringing it down to 2 percent, or leave it in and keep inflation at about 15 percent, making our economy look like that of a “banana republic.”

Adding insult to injury, since bond traders and investors demand a 2 percent return after inflation, this would mean that bond and money-market yields could climb as high as 17 percent.

Imagine getting a double-digit return on a bond or money-market fund.

That’s unheard of today.

And unthinkable.

Think what having to pay out that high of a return to common folk investors such as us would do to the bonus of a bank or fund manager.

Why, their salaries might actually drop below the $10 million mark.

To keep the average person in the dark, and the red, the BLS chose the smoke and mirrors route, and chose to strip out the cost of housing in the CPI.

Instead, they magically came up with a substitute they chose to call the owner equivalent rent component, which they based on what homeowners might rent their houses for.

“The reported inflation index quickly dropped to 2 percent” from the “real, and horrifying, 15 percent” inflation rate, Hardaway said.
Speculators wanted to offset the costs of holding properties “by renting out their homes while their prices skyrocketed, thereby flooding the market with rentals that pushed down the cost of renting a house or apartment,” Hardaway said.

The BLS was correct in assuming this statistical ruse would fool the average citizen into believing that inflation was only 2 percent, and therefore be willing to accept a meager 4 percent return on bank savings, Hardaway said.

“What is remarkable is that the ruse also fooled the bond traders, and apparently continues to do so, leading analyst Peter Schiff to describe these supposed savvy bond traders as the ‘hormonal teenagers of the capital markets,’” Hardaway said.

“The present subprime credit crisis can be directly traced back to the BLS decision to exclude the price of housing from the CPI. It is now clear that the ‘benign’ inflation figures reported over the last 10 years” were lies from the Fed and the U.S. government, Hardaway concluded.

Imagine that: Our government lying to us.

Not only lying, put propping the global economy on a house of cards that can be blown away by a sneeze in, say, the subprime markets.

This sneeze can be attributed as the cause for the correction in the housing market we are now seeing.

Slowing home sales. Lagging new home construction.

And this correction is causing ripple effects, such as layoffs in the financial services, construction and building supply sectors.

Even though the jobless numbers just released were better than expected, how long will this good news last? How soon before other sectors start feeling the squeeze?

Meanwhile, Washington will keep on just putting on a happy face for the hedge fund managers and bond traders.

Stay tuned to this same Bat station for more on this same Bat topic.

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By Jim Perez,
DebtHelp, Inc. Staff Writer

SuperFreakOnomics.

This is the first in an occasional posting on what extremes seemingly normal human beings will take to make ends meet in the land Dubya created.

Although I like the name SuperFreakOnomics, I believe Stephen Dubner and Steven Levitt, the boys who wrote Freakonomics, are writing a sequel, which they plan on calling, appropriately enough, SuperFreakOnomics.

Those guys have more money than I do, and can afford better lawyers than I.

Considering their writing also appears in the New York Times, they have access to great media lawyers, which the Times has used on a number of occasions. Anyone remember Jayson Blair? Rick Bragg? Judith Miller?

So in the hopes of not getting sued, I will call this blog something else.

I think Super-Freakin’-Ah-Mics sets a nice tone.

Anyway, the economy is getting kind of crazy. People are talking about a recession that will be the hardest to hit the country since the Great Depression of 1929.

I didn’t have the pleasure of living through the Great Depression, but from what I’ve read, it doesn’t sound as if it were so great to me.

Today, confidence in the dollar is shrinking. The housing market is tilting. And consumer confidence is eroding quicker than Bush’s popularity.

As such, “extremis malis extrema remedia,” which translated means “extreme maladies for extreme ills,” or as it’s more commonly put: Desperate times call for desperate measures.

In New Rochelle, N. Y. …

Yes, you Trivial Pursuit fans, you read right: New Rochelle, the home of Laura and Rob Petrie. After reading this, you’ll know why they never slept in the same bed:

Anyone remember Pulp Fiction?

Undercover officers raided a three-bedroom home after seeing a Craig’s List posting offering dominatrix services. The posting even offered a grand opening special. The officers arrested four alleged prostitutes and the homeowners.

New Rochelle ain’t Kansas, Toto.

Police say the house had been turned into a brothel. A red ribbon near the sidewalk welcomed customers to the grand opening.
The owners, 34-year-old Robert Werner and his 32-year-old wife Heather Mazzenga, both of whom are mortgage brokers, were charged with promoting prostitution, a felony, police said. The four alleged prostitutes, who range in age from 21 to 30, were charged with unlawfully practicing massage, a misdemeanor.

According to news reports, neighbors said the house had originally been listed for $750,000, but didn’t sell even after the price had been dropped to $600,000. The owners had rented the property to a string of tenants, and the house grew more and more rundown until new occupants arrived a few weeks ago.

The new tenants, who kept out of sight, mowed the lawn and put up heavy shades on all the windows, neighbors said.
A neighbor of the New Rochelle brothel was quoted as saying: “I know they’re (owners) mortgage brokers. And I know it’s been a tough business, so I assume they might have had financial difficulty.”

Police said they believe that troubles in the housing market led to the couple’s financial woes.
Werner and Mazzenga had filed for bankruptcy a few days prior to the bust, and barely kept their home in nearby Pleasantville from foreclosure.

Now don’t get me wrong. Super-Freakin’-Ah-Mics is of the mind that someone, or even a number of someones, should do time for the housing and credit markets collapse crime.

But my thought is that the imprisoned should be the lobbyists who sent members of Congress on cruises or other junkets, and plied them with liquor, hookers and millions in campaign contributions, to pave the way to easing regulations and tax laws so that the subprime debacle could live.

Or perhaps it should have been members of Congress making bail arrangements.

Or even better yet, both the lobbyists and members of the best Congress money can buy should share cells.

I imagine we’ll be seeing more and more flashing red light specials in the coming 18 months as millions of borrowers, who were seduced by lenders offering cheap and easy money, find themselves stuck as their ARMs readjust and they can’t afford their ballooning mortgage payments, and are unable to unload their properties in a down housing market.

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By Jim Perez,
DebtHelp, Inc. Staff Writer

I have a feeling that’s the tune retailers are singing after consumer sentiment figures released Friday registered the lowest since August 2006.

The Reuters/University of Michigan Surveys of Consumers said its early October figure on consumer sentiment was 82, below the median forecast of 84 and the final September reading of 83.4.

Consumers’ skittery feelings were attributed to uncertainty about how deep the housing slump will slide.

According to the survey, one in three households reported in early October that their personal financial situation had worsened. This worsening has been constant for the past six months.

Consumer sentiment is often used as a barometer of future spending, which accounts for two-thirds of the U.S. economy.

The data indicate an average growth rate of 2 percent in personal spending over the next four quarters. The weakest quarters are expected around the turn of the year, just in time for the holidays.

The data also points to continued declines in housing starts and new and existing home sales through at least mid-2008, the survey said.

Consumer expectations also fell in October, to 71.6 from 74.1 in September. This is a 13-point drop from October 2006.
Adding insult to injury, this news came on the heels of disappointing numbers released Thursday by several large retailers.

The biggest losers included Limited Brands Inc., Mothers Work Inc., Target Corp., J.C. Penney Co. and Nordstrom Inc.
Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass., said that if sales don’t pick up, stores will be forced to slash prices to get rid of inventory and make room for holiday merchandise that will start to hit stores this month.

This news doesn’t bode well for retailers as Santa and his helpers scramble to replace lead-tainted toys made in China in time for the gift-giving season.

Retailers have seen slow sales most of the year as shoppers struggle with higher food and gasoline prices and the weak housing market.

And last month, Mother Nature, (or global warming?), added insult to injury as unseasonably warm, muggy weather wilted demand for fall clothing.

Christian Weller, senior fellow at the Center for American Progress, in his Economic Snapshot for October 2007, articulates well the

Top 12 reasons why this Christmas won’t be so merry for retailers.

1) Wage growth is low.
2) Worker benefits are disappearing.
3) Family debt is rising.
4) Families are feeling the pressure of foreclosures.
5) The housing market is continuing to tumble.
6) Equity in homes is declining.
7) Weak job growth continues.
8) The poverty rate remains high.
9) Improvements in government’s finances are temporary.
10) Tax cuts do not pay for themselves.
11) Our economic independence is endangered.
12) The trade deficit remains high despite strong export growth.

The bright side is that as bad as everyone says it’s going to get, if things keep getting worse at this pace, at least we’ll get it over with.

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By Jim Perez,
DebtHelp, Inc. Staff Writer

As the once soaring U.S. housing market crashes and burns, banks and consumers around the world are also being scorched.

The number of U.S. foreclosure filings reported in August 2007 is more than double those reported in August 2006. This is also a 36 percent spike from July of this year.

This trend is a flashing red light that an increasing number of homeowners are unable to make timely payments on their mortgages or sell their homes in this burgeoning national housing slump.

According to RealtyTrac Inc., 243,947 foreclosure filings were reported in August, up 115 percent from 113,300 in August 2006. There were 179,599 foreclosure filings reported in July of this year. The filings include default notices, auction sale notices and bank repossessions. Some of these may be duplicate notices if the owners have multiple mortgages. The August total is the highest reported in a single month since RealtyTrac began tracking monthly filings two years ago.

The national foreclosure rate in August 2007 was one filing for every 510 households, the company said.

High-risk subprime mortgages, loans extended to borrowers with weak credit histories, are behind the spike in defaults. The growing number of bad loans has forced a number of lenders into bankruptcy, while hedge fund and other big investors in securities backed by subprime mortgages took deep financial hits.

The roiling waters are fueling a tsunami in the financial markets.

Across the Atlantic, in Great Britain, hundreds of customers lined up to withdraw their savings from Northern Rock Bank, ignoring government assurances that their money was safe. Police were called in some cities to steer panicked crowds away as branches were closed for the day.

The Sept. 15 run on the bank was caused by fears over its earlier request for an emergency Bank of England loan amid the global credit crisis. Northern Rock, Britain’s fifth-largest mortgage lender, is the first British bank in 15 years to be bailed out by regulators.

News reports cited “an unidentified person described as close to the situation,” who said customers on Sept. 15 withdrew $2 billion, about 4 percent of its deposit base, from the bank. The bank declined to confirm the figure.

Even as Alistair Darling, British Treasury chief, and the country’s Financial Service Authority tried to assure customers Northern Rock is solvent, news reports said Northern Rock was preparing for a sell-off. Unidentified sources were quoted as saying one plan would divide the bank’s mortgage portfolio between other major banks in what would be a private-sector rescue of the lender.

The bank reportedly made the loan request earlier in the week because it relies heavily on wholesale money markets for cash. Its cash crisis has been attributed, in part, to the subprime mortgage woes U.S. banks are experiencing. Although Northern Rock requested substantial emergency funds at a penalty rate, the bank has said it had billions of pounds in cash at its disposal. It has yet to draw on any emergency funding.

Backing up Northern Rock’s assurances to its customers, Darling said all deposits at the bank will be guaranteed. He said the cost of safeguarding the deposits, if required, would come from the company’s assets. He assured customers that Northern Rock was solvent.

Back in the United States, the financial woes for American Home Mortgage Investment Corp. continue to pile up. The lender filed for Chapter 11 bankruptcy protection Aug. 6.

In mid-September, American Home issued checks to pay the property taxes of more than 70 homeowners in the Baltimore metropolitan area: Those checks bounced, Baltimore County officials said.

“This is just another chapter in what is a very difficult time for the mortgage industry,” Donald I. Mohler III, a spokesman for Baltimore County, said in news reports. The county no longer accepts checks from American Home.

The City of Baltimore received bad checks for 53 properties – a total of about $63,500. Baltimore County said American Home Mortgage checks bounced for 21 properties, totaling $41,000. Taxes are due at the end of September.

A Baltimore spokesman said the city doesn’t plan to notify property owners. If the problem isn’t resolved before, they will find out in November, along with other delinquent taxpayers. Baltimore County has alerted the property owners.

Greg McBride, a senior financial analyst at Bankrate.com, hinted the problem might not be limited to bounced checks. “What I’d heard is the checks weren’t being sent.”

Homeowners often make monthly payments for property taxes, insurance and other fees to their mortgage companies to be set aside in escrow funds until the money is due.

American Home Mortgage has not explained the bounced checks, nor has it said whether it has money to cover the checks or what it intends to do. Escrow accounts are protected by state law from creditors during bankruptcy proceedings.

Compounding American Home’s woes, some of its former employees are fighting to block the company’s creditors from accessing a retirement plan that contains $11.6 million of their savings.

In a filing on Sept. 18 in bankruptcy court in Delaware, Sean Malloy, attorney for the 43 former employees wrote that “Participants were induced to enter into compensation-deferral agreements and participate in the plan with promises of the value of tax-deferred investment growth and little if any discussion of the risks associated with insolvency.”

The court filing claims that employees who contributed to the plan may have been misled. “It is hard to imagine the employees would have chosen to make compensation deferrals if they knew that their claims would fall behind the rights of lenders,” Malloy wrote.

American Home Mortgage had no comment, according to reports. A hearing is scheduled for Oct. 1.

Don Lindner, a compensation expert with World at Work, a nonprofit group that focuses on employee benefits and compensation, said the likelihood of the employees succeeding is very slim, because such “non-qualified deferred compensation plans” are not subject to the same government protections that a worker would receive under a traditional 401(k) account.

“They will have to stand in line behind those creditors with priority,” Lindner said. “They will be treated just like any other creditor; they have no special rights.”

The deferred-compensation plan enabled American Home Mortgage employees making more than $200,000 annually to save money tax-free until they retired. But it’s not the same as a 401(k) account.

“This system is only for highly paid employees, who are limited in what they can put into a 401(k),” Lindner said. “They look and feel like a 401(k), but the difference is the money can’t be put into a trust like a 401(k).”

American Home has more than 1,000 creditors, some of which already have priority claims on the firm’s assets; many are not expected to recoup any money at all.

American Home has laid off 6,000 workers this year. The struggling mortgage and housing sectors have cut more than 80,000 jobs this year. Nationwide, about 516,000 people have been laid off.

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The DebtHelp.com blog is an exciting new meeting ground for top financial writers and economic professors in the US. This blog has been the work of 4 months of collecting interviews, reviewing journals, and preparing. We have managed to contact and “pick the minds” of some of the top finance, economics, and financial law professors in the US including colleges such as Harvard, Stanford, University of Chicago, Northwestern, and many more.

The purpose of this blog is to act as a consumer advocate. We will attempt to take matters that may be confusing to the public at large and condense them into well written and insightful information everyone can appreciate. We will not be swayed by any bias toward the financial industries, nor will we avoid any critical topic for fear of “aggravating” our business partners. DebtHelp.com was founded on the belief that people get into debt every day, and it’s our responsibility to help them get out.

Over the next several months we will be posting daily updates about the credit, loan, debt, and financial market industries. Please add us to your RSS readers, bookmark the blog address, or remember to check back often. We promise to never have a dull moment.

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