Foreclosure Scam Prevention

In the United States people are willing to do almost anything for the "American Dream". For some, it may take many years of hard work to fill their homes with beautiful memories and treasures. However, it only takes a few missed payments to lose it. Foreclosure is the worst nightmare for every homeowner with a mortgage.

Foreclosure could happen to the best of us. Sometimes unanticipated financial troubles can affect our ability to meet our obligations. Sometimes foreclosure is being caused by the devaluation and/or lack of demand for real estate, thus even though you are trying to sell your property to meet your obligation you can't because the property is worth less than the total amount owed to the lender. This may complicate things, as it allows your lender to pursue a deficiency judgment against you, which represents the difference between the sold price of the property and the amount owed to the lender. If this happens to you then not only do you lose your home, you are also liable to the bank for the difference (deficiency).

Many families are still battling to protect their homes and families from foreclosure. It is during these difficult times that some people lurk around the darkness to take advantage and pray on the weak. There are predators out there who look at homeowners in poor financial situations as easy prey, devising a number of scams and fraud attempts to take advantage of people who are already on a heck of a financial roller-coaster. It is important that you protect yourself by staying current on the foreclosure fraud and scams that are circulating, so that you do not get taken by one of these fraudsters. Here are some of the more prevalent scams that people are trying to pull over on homeowners and families buying homes or facing foreclosure.

- Sales Leaseback - People often tout this as an easy deal, requiring that the homeowner hand his or her deed over to an "investor" for little or no money, on the basis that the homeowner can continue to live in the home, leasing it back with the option of repurchasing within a year. This may sound like an excellent concept, but there is a serious catch involved. Even if you sign the deed over to someone else, you are still legally responsible for the mortgage, meaning that you would be paying both the original mortgage and the lease amount to the investor. Paying twice what you were already having difficulty paying will be close to impossible and one missed or late payment will have you evicted from the home, and the home sold out from under you. 

Read More.

- Predatory Lending - Unfortunately, there are a large number of lenders out there who offer loans with the specific intention of taking advantage of borrowers who cannot afford to make the payments. If there is any equity in the home at all, these lenders will attempt to take it all in the form of incredible fees, exorbitant interest rates, and nightmare prepayment penalties. While new laws are being passed that prohibit many of these predatory practices from occurring, it is still quite easy for lenders to take advantage of homeowners in bad financial situations. 

Here are some of the predatory lending practices that you need to steer clear of:

- Frequent Refinancing - The frequent refinancing of loans without offering any real benefits to the homeowner or borrower, or frequent refinancing of loans simply so that the lender may generate additional fees for him or herself.

- Equity Switching - Equity stripping, by persuading an owner in dire financial straights to take out a loan far beyond his or her ability to repay it.

- Bait and Switch - Attempts at bait and switch, where lenders advertise a specific set of 'teaser' fees and interest rates, then the rates and fees skyrocket suddenly at the point of closing, reaching points that are beyond the homeowner's means.

- Appraisal Inflation - Inflating appraisals up front, forcing the homeowner to take on much larger loans with much higher interest rates. Homeowners lose the opportunity to refinance the amount of the loan at a later time, because the value of the home is no longer enough to cover the full amount of the loan.

- Loss Mitigation - This practice is regularly referred to as "I can prevent your foreclosure, but only if you pay a fee". People who try to force this type of a process on unsuspecting people tout it as the ability to stop or prevent foreclosure, but only for a fee paid up front. The problem with this type of service is that the "rescuer" cannot guarantee that they will actually prevent your foreclosure from occurring, yet they still collect your fee up front. If you want to protect yourself as a homeowner in a bad financial situation, there are much easier ways to do it without paying exorbitant fees to "rescuers" who more than likely will not be able to help you.

- List and Sell - This is a scheme that is becoming quite popular among real estate agents and brokers looking for additional income streams. The concept is simple: The real estate agent convinces a homeowner in default to allow the agent to list the home in an attempt to sell it. The real estate agent promises that if the home is not sold within the period before the foreclosure auction, which is typically around sixty days away, he or she will purchase it.

But here is the catch: In too many cases, the real estate agent will drastically overprice the property when listing it in the MLS or Multiple Listing Service, so that nobody expresses any interest in purchasing it. Then when it does not sell, the agent is able to purchase it for substantially less than what it was listed for.

- Hiding things in the contract - Some scammers and predatory lenders like to hide a variety of different bombshells right in the contract where they cannot be found. They wait until the absolute last minute, and then make these hidden terms known. By now, it is too late for the homeowner to renegotiate the contract, and he or she is trapped dealing with the true intentions of the contract.

Homeowners who are caught in situations like these are very rarely capable of seeking legal advice. They suddenly find out that there are costs behind their resources, but if they fight the contract at closing they could potentially lose their home in the foreclosure process.

Profile of a Scammer: What to Look For

The people and companies that prey upon homeowners in foreclosure use many tactics to gain the homeowner's trust. Here are some examples:

•     The scammer contacts you by telephone, mail, or even knocks on your door (legitimate foreclosure consultants don't seek you out, you must go to them). 
•     The scammer is smooth-talking and preys upon your desperation. 
•     He provides little or no information about the foreclosure process.
•     Many scammers claim government affiliation. 
•     They often use "affinity marketing" -- Spanish-speakers marketing to Spanish-speakers, Christians to Christians, senior citizens to senior citizens, and so on. 
•     They claim the process will be quick and easy (dealing with foreclosure is never quick and easy) and use messages such as: "Stop foreclosure with just one phone call" or "I'd like to $ buy $ your house" or "Do you need instant debt relief and CASH?" 
•     They tell the homeowner to cease all contact with the mortgage lender.

Source: Nolo's Law for All; Don't Lose Your Home to Foreclosure "Rescue" Scammers

Reccomended Reading:The Foreclosure Survival Guide: Keep Your House or Walk Away With Money in Your Pocket

If you think that money market funds are just another checking account...

Many investors when they close their equity positions and need a place to park their cash, they do not use their checking account. Most of them will sell their stocks and let their stock broker place the proceeds into a money market fund. Nothing wrong with that if you are aware the risks associated with this type of account. Many investors when they receive their monthly investment statement and look at the allocation of their investment portfolio and see "cash" they assume their money is parked in a low risk account similar to a checking account but better since it holds high-quality short-term commercial paper that almost never defaults and gives them a higher yield than checking.

However, that assumption can lead you to some frustrations later when you see your "cash" dwindling. If you review the account information of your money market fund you will notice that the fund is investing in some disturbing things such as European bank debt. However, you may think that you can get your money out with a mouse click, right? After all it is like a checking account and it is your money.

You may be for a surprise. The US Fed recognizes the potential weakness of the money fund system and is considering withdrawal limits on money market funds.On July 19, the Federal Reserve Bank of New York said it supports limiting some types of money-market fund withdrawals in a bid to protect those funds from suffering the equivalent of a bank run. Interesting!

Many things that have been sold to us as "risk-free", may after all not be so "risk-free". Money market funds must be reviewed and you cannot assume that it is "like a savings account" with no or little risk. Many things that we were told that were sound investments need to be re-evaluated. Banks can no longer be trusted to be "too big to fail", Corporate America cannot be trusted to properly compesate us for our labor, governments do run out of money, and even the all mighty dollar stops functioning as a store of value.

What will happen next? Will our government impose control over our retirement accounts?

Do you need life insurance?

The main purpose of life insurance is to protect someone whose finances depend on you being alive. For example, if only one of you is working, you need a policy to protect the spouse who is not earning money against the loss of income. The same applies in the case when you have a spouse that earns the majority of the household income.

Another factor to consider is large financial obligations, such as a mortgage. In the eventually of death the proceeds of the life insurance can be used to reduce or eliminate the financial obligation and leave the surviving spouse in a better position.

Five Tips For Financial Freedom

1. Establish and Control Cash Flow
The building blocks of any financial plan are liquidity (or like my wife calls it “fluidity”) and expense management. People who spend more than their income will never achieve financial independence. Your best friend is your family budget, without it you will be spending blindly which will lead you into constant shortfalls and borrowing from your savings or credit cards to cover the “unexpected shortfall”.
2. Manage and Eliminate Debt
As part of the post-recession era, families should have as their primary goal to eliminate debt. As long as our families continue enslaved by debt, we are selling our children's future to the money changers.
3. Establish an Emergency Fund
Families should have at least a three month reserve of cash for emergencies. Once you have established your 3 months of reserve, you should work towards 6 to 9 months of reserves. Emergencies come in different ways from layoffs to natural disasters to illness or death of a family member. Having this emergency fund is critical to sustain those rocky moments. For this type of funds you should avoid Mutual funds, Money market accounts and CDs. Instead go for a savings account or even cash in a safe at home, remember the key is liquidity for this fund.
4. Protect Your Assets
Another aspect we fall short in the United States is inadequate protection for our assets should a wage earner die or become disabled. Tax  planning and using retirement and savings products that offer tax protection are key. Life insurance, retirement and saving vehicles should be carefully evaluated to financial hardship should a disability or death occur.  A family trust can save thousands of dollars in probate in the event of a death as well.
5. Grow Your Wealth
Even in a down market sound investments will still produce returns that grow and protect principle. Take advantage of investment plans from reputable companies with a history of success and expertise. Avoid uncertain and extremely speculative offers. As money grows, the potential for earnings increases exponentially.

Financial freedom does not come free, it requires strong management, planning and foresight. However, with proper planning and using these basic guidelines, your journey will be more enjoyable and will yield a brighter financial future tomorrow.

Tips on Buying Insurance

Before you talk to an insurance agent it behooves you to do a little research about the insurance buying process. The purchase of insurance should be taken seriously and you should never rush in the decision process. Regardless of the insurance you are purchasing, whether it’s life or car insurance, it’s a huge decision that demands a little research and your undivided attention. Also, if you spent some time upfront and determine what you need or want, locating the insurance policy that best fits your needs will not be the unpleasant task that many people think it is.

That is why it is important that you meet with your insurance advisor to assist you in locating the best insurance policy for your needs. It is critical that the insurance you purchase meets YOUR needs and not the needs/wants of the insurance agent. You don’t want to make any hasty decisions, an incorrect could mean thousands of dollars wasted over the long term.

Insurance is important in the building and protection of your assets. Therefore, in the same way we spend time in developing an investment portfolio or business planning, we ought to dedicate time to determine our insurance needs. As we get older, our needs change and so our insurance needs. Furthermore, not all insurance companies are built equal.

I’ve compiled a list of six tips to take into consideration when purchasing a new insurance policy.  Hopefully these tips will help you make a wise decision and save yourself countless headaches:


1. Determine your needs. This should be your first step in the purchase of insurance. Why are you buying insurance? What are you protecting? Determine how much it would cost to replace something that is valuable to you — your life, if you are disable and unable to work for three to six months, your home, your business equipment with which you generate revenues or anything else you determine is important. Compare the cost and inconvenience of replacing the asset you want to protect and you will find out that many times that insurance (when properly purchased) is comparatively inexpensive.

2. Research the company’s ratings. Many times overlooked. The best example was our recent recession. Many banks and insurance companies failed. Poor management decisions can lead an insurance company to lack the proper funding when the time comes to pay claims. Insurance companies are no different that other businesses. You need an insurance company that will be around when you need their service. Therefore, do your due diligence; you might even be surprised at the companies that don’t fare too well.

3. Check your insurance agent credentials. The presentation and sale of insurance products are regulated by your state. Insurance agents must be properly licensed and trained for the products they are presenting to you. As mentioned above, you need to have an insurance agent that is qualified to help you in the decision process and not just trying to sell you a product that they have no idea if it truly fits your needs but they know that they are making a huge commission on it. There are many insurance sales people, some are out there just for the commission they can make on the sale. However, there are a lot of great insurance professionals well trained and prepared to assist you in making the right decision.

4. Check your local BBB. Research consumer complaints filed against the insurance company under consideration. Knowing what the complaints are against a company will tell you how solid of an insurance company they are. Do not overreact on complaints filed, find out what type of complaints where filed and how the company handled them. Once again, insurance companies are no different than other businesses, they make mistakes too. Also, look at the frequency of complaints filed, are the same complaints being filed? Repetitive complaints could be a sign of weak internal controls.

5. Get the right coverage for YOU. Remember that the insurance must meet YOUR needs. Therefore, you should buy the right type of insurance and the right amount of coverage. Never let an agent tell you how much insurance or coverage you need. As a financial advisor, I could make a recommendation and it is my responsibility to justify my calculations based on the facts I have about my clients. However, it is YOUR responsibility to figure out how much insurance you want. Letting an insurance company blindly tell you what you need is like asking a casino how much you should gamble.  Whether you need an umbrella policy or extended coverage, this is for you to decide, not an agent. 

6. Ask some tough questions. Insurance is a significant financial decision. Take the time to really ask the tough and important questions. Also, remember that the investment in insurance coverage can have long-term implications. If your insurance agent seems uncomfortable, unable or unwilling to answer your questions, unprepared or unable to explain to you the insurance product that he/she is presenting to you, you are better off going to another insurance professional.

I hope these tips will be of help to you in the your decision making. As you may have noticed, I did not mentioned price on my tips. Even though, price is important, insurance is more than just price. Many times you will hear of horror stories of people that thought they had insurance or certain coverage and they find out the hard way and when it is too late. The cheapest insurance is not always the best option. Take these principles and print them out, keep them nearby when you are meeting or talking to your insurance agent. Remember, it is your money and it is your decision, if you ever feel that your agent is not listening to you or does not address your needs, that is a sign that it may be time to end the conversation and consider a different company.  Take your time and make a decision you and your wallet can be proud of. Never buy insurance under pressure.

Is Canada Good as an Asset Protection Haven?

Last week Kitco Metals, Inc a reputable precious metal dealer from Canada was raided by authorities in Quebec. More than 175 Revenue Quebec Agents (equivalent to the US IRS) conducted raids related to Kitco on homes, offices, accountancy firms and bankruptcy trustees in the Montreal area, and a court-appointed receiver is now controlling the company. Canada has a respectable image internationally with a stable banking system and a currency that is doing well primarily due to Canada’s huge wealth of gold and other natural resources. You may think that Canada could be a great safe haven for our declining dollar. However, thinking of Canada as an investment alternative to the instability in the United States received a big surprise last week. Here are some reasons the Canadian dollar should not be considered as a hedge currency for the US dollar:

1. The Canadian economy is very tied to the US economy,
2. The Canadian Government is intent on devaluing the Canadian dollar alongside the US,
3. The Bank of Canada has virtually no gold for backing the Canadian dollar,
4. All that does back the Canadian dollar is the US dollar and other fiat currencies, and
5. The Canadian dollar is not used globally

The raid against Kitco seems to be focused on the sales tax evasion. When you trade in gold bullion the transaction is exempt from sales taxes, but not gold scraps. It appears that Kitco was buying scrap gold, paying the sales tax to the sellers (local jewelery firms or small gold dealers) then legitimately reclaiming the sales tax paid. Since Kitco was selling bullion, they were not obliged to charge sales tax. Therefore they would have been receiving large tax rebates on a regular basis – something governments obviously hate! In Europe this is called “missing trader fraud” or “carousel fraud”. Keep in mind that Kitco has not been formally charged with anything.

This raid to an internationally recognized firm is a wake up call, since gold traders are not popular people with the governments. The Canadian taxman has learned from the US about high profile, publicity seeking cases where you accuse first, destroy somebody’s business, then later look at the facts. The lesson from this event is to proper planning for your asset protection. Many people think that the best places to store gold is the United States, UK and Canada, but that is not necessarily true. If you have gold to be stored or thinking on trading in gold considered Switzerland. Switzerland is the center of the world gold trade, a bastion of stability, and it is just unthinkable that the Swiss government would do something like the Kitco raid. Another place that is overlooked is Singapore. It isn’t yet able to compete with Switzerland on pricing and volume, but several storage facilities are now offering precious metals storage in the duty free zone at Changi Airport. Hong Kong is another option for your consideration. The bottom-line is proper financial planning.