When I came across this download mp3information by the FDIC, it brought to mind something I thought of while reading the review of Steve Martin’s new book “Born Standing Up” I saw in Time Out New York Magazine yesterday.
I remember one of my favorite Martin routines went something like:
>Q: How to have a million dollars and never pay taxes…
>A: First, get a millions dollars…then…
In other words, their advice is probably too late for many, although the FDIC probably means well with their publication.
- Try to raise your credit score in the months before you apply for a mortgage, such as by paying off much or all of what you owe on credit cards.
- Contact several lenders, let them know you are comparison shopping, and then try to negotiate the best deal.
- Compare fixed-rate and adjustable-rate mortgages (ARMs), even if the latter carries a lower initial interest rate, because a fixed-rate loan may be cheaper in the long run.
- Be wary of a loan with payments that can increase substantially, such as mortgages with low monthly payments in the early years in exchange for the deferred repayment of principal and/or interest.
- And, watch out for unfair and deceptive sales practices that lure people into costly or inappropriate loans.
Definitely wild and crazy advice.
Sheila Bair, chair of the FDIC has a constructive solution for borrowers in trouble:
>She’s proposing that the banks automatically modify every subprime loan if the borrower lives in the house and has been paying on time. Payments would continue at the starter rate, without a step-up. That could prevent foreclosure on about 1 million loans, Bair says, freeing overtaxed bank staffs to focus on the borrower’s default.
Loan modifications could be a good halfway point for many to avoid foreclosures. Lenders learned that it was often cheaper to renegotiate than to bear the expenses associated with foreclosure.