This Way To Debt

Short Sale Strategies and Overview

Tips on selling your home short of foreclosure

This information is a general overview and guideline and is not necessarily state specific.

This information is distributed with the understanding that the writer is not rendering any legal or professional services.  Mortgage professionals developed this manual, however it should not be used as a substitute for legal advice.  If legal or other professional advice is required, these services should be retained.

Any federal tax discussion contained in this written communication is not intended to be used and cannot be used for the purpose of avoiding federal tax penalties imposed by the federal government or promoting, marketing or recommending to another party any tax related matters.

Table of Contents

1. Current Economic Times

1. What is a short sale?

1. Parties involved in the short sale process

1. Short sale basics

1. Getting Started

1. Manage expectations and timelines

1. The paper intensive process

1. Lender Guidelines

1. Prepare HUD-1/Settlement sheet and send to lender

1. What is a BPO?

1. Patience and follow up

1. Approval letters and parameters

1. Short sale deficiency balances

1. Professionalism and ethics

1.  Current Economic Times

Due to years of aggressive lending in the prime and sub-prime markets, the mortgage industry and banks have suffered serious losses.   Americans generally spend aggressively; it has become the American way.  This aggressive borrowing mentality combined with aggressive lending and a decline in the housing market has led to the “perfect storm”.  Many financial institutions are faced with hundreds of thousands of over-valued homes and millions of loans facing foreclosure and serious credit losses.

Many borrowers made decisions to continue to refinance their homes in order to finance their current lifestyles.  Now borrowers must face the fact that if they are experiencing financial hardship, they must work to rid themselves of their over-mortgaged property.  That is where a short sale comes into play.  Selling a home through a short sale is not an easy or quick venture.  It can be frustrating and overwhelming for all parties involved.

This guide is an easy overview that can help assist and guide individuals in the process of a short sale.  By investing a small amount of time in reading the material enclosed, it will lead to better negotiations and a more easy path towards completing a successful short sale.  Ridding oneself of over-mortgaged property can be a relief and can help turn the page on a new tomorrow.

Lenders open their eyes to the current crisis

• Home values are on the decline
• Adjustable rate mortgages reset causing increased delinquency
• Real Estate inventory increases across the country
• Home values are decreasing at alarming rates
• Homeowners are stuck

Banks are willing to negotiate.  Contrary to popular belief banks are not in the market of owning homes.  In reality when banks take properties through foreclosure and into inventory they lose up to 60% of their loan balance.  This amounts to large losses and is incentive for banks to entertain short sales.

2.  What is a Short Sale?

A short sale is an approved sale of a property for less than the full payoff on the loan.  Generally, a short sale is used when a borrower cannot afford to maintain payments on the property due to financial hardship.  The funds accepted by the lender are “short” of what is owed.

Many borrowers make the mistake in not realizing that there are numerous arrangements or verbiage placed in acceptance letters regarding the deficiency amount.  The deficiency is the amount that is left over after the short sale is accepted.  This booklet will give you valuable information to negotiate properly during the short sale process.

Most lenders have departments that handle their short sale negotiations.  These departments go by a variety of different names depending on the institution.  The most common names are Loss Mitigation, Workout Team or Homeowner Assistance Group.

It was customary within the last few years that many Loss Mitigation or Workout Teams would not entertain a short sale if the loan were current.  Often times it was a pre-requisite for the loan to be 90 days delinquent.  However, tough economic times have forced many lenders to become much more pro-active in mitigating potential losses.  Most lenders will review short sales even when the customer is not delinquent.  Some lenders still resign to the fact that the customer must be delinquent in order to sell their home to a short sale, “borrowers beware” of these lenders.  A short sale can be a tough road and may even require the loan to fall delinquent prior to moving into short sale negotiations.

3.  Parties involved in the short sale process

• Lenders accepting a short sale- this includes any lender which holds interest in the property
• Third Parties- includes Homeowners Associates, judgment lien holders and the local property tax office.  All of these entities must be involved in the short sale process in order to “clear title” and negotiate properly
• Seller/Borrower
• Purchaser
• Funding Lender – this includes a loan officer or broker
• Loss Mitigators – the representative at the lending institution that will negotiating the deal and providing approval and acceptance letters
• Real Estate Agent – this is two part, due to the fact that most real estate sales have both a buyer and seller agent
• Closing Attorney/ Title or Settlement Agent- the closing agent will be facilitating the short sale transaction until funding

For the coordination of a successful and timely short sale transaction, it is important to remember the entire cast of characters involved.  Communication is essential in the proper coordination of a short sale.

There are even some companies or third party negotiators that take on the task of coordination of a short sale.  However, these companies complete the job at a cost to the consumer.  By following this easy guide, borrowers can negotiate their own successful short sale, potentially saving thousands in costs paid to third party companies.

1. 4. Short Sale Basics

There are several key factors that are important to remember when working on a Short Sale.

-The lender does not have to agree to a short sale, it is a voluntary agreement.

-The borrower has no rights to a Short Sale.

-A Short Sale is an optimal alternative to foreclosure action

-A Short Sale presumes an arm length’s purchase transaction of the property by a third party purchaser

-Seller/borrower will not receive cash at closing

-Realtor commission or any fees involved will be negotiated or reduced

-Sellers will not be retaining the property

Banks accept Short Sales for a variety of reasons.  Banks generally get more money from a short sale that by completing foreclosure and selling the property through the lender’s REO (Real Estate Owned) Department.

Foreclosure actions can be costly averaging $3,000+ to complete.  Not to mention the cost in property preservation and resale expense of marketing the home as a “bank owned property”.  Banks generally market their homes in “as is” condition with no representations or warranties, which drastically affects the overall sale price of the home.

All parties included below complete work during the short sale process:

• The Seller or Borrower
• The Real Estate Agents
• The new home buyer
• The Lender
• The Closing Attorney/Settlement Agent

Short sale negotiations requires a variety of skills including title clearance, brokerage, technical, paralegal and legal work.  However, the lender and closing title agent will facilitate most of the work for you, with no out of pocket to you.  Do not pay attorneys or short sale companies thousands of dollars; with a little knowledge consumers can maneuver through the process free of charge.

1. 5. Getting Started

It is important to know the value of your home prior to listing it with a realtor.  Obtaining a market analysis is a good way to start and is generally done for free by a realtor.  This will provide a good starting point in determining what the property is worth.

Secondly, order payoff quotes from your first and second mortgages.  At this point you will have an estimate of how much the property will sell for versus how much is owed on the property.  If your information indicates you will not have enough to pay off the property immediately call your lenders.

Most lending institutions have departments that specifically handle short sales and they can guide you through the process free of charge.  These department names vary depending on the lending institution.  However, many are referred to as Loss Mitigation, Homeowner’s Assistance Department or Workout Group, these groups can help you.

When making contact with the lender advise them that you need to open a file for a possible short sale and request a list of information required.

Most lenders require that you complete a financial hardship application.  This may sound difficult, however it is simply a list of your monthly expenses versus your monthly income.  It is important to show little to no means to pay in order to complete a successful short sale.  Beware, that most lenders pull a credit report to validate the information.  Please be as thorough as possible.  In most financial applications you must also include monthly expenses such as groceries, utilities, insurance, childcare and medical expenses.  This contributes to your full financial picture.  Please make sure you provide a thorough picture of your financial situation.

6.  Manage Expectations and Guidelines

Short sales may take a long time, often times you do not know how long it will take.  Depending on the lender it can take 1-2 weeks, which would be quick turnaround time.  Some lenders are so overwhelmed with the current economy that it can take 8-12 weeks for someone to review your file or your current offer.

There are no guarantees that a short sale offer will work out.  The house may still go into foreclosure.  It really depends on how willing the lender is to work out an agreement.

Also, it is important to work with your listing realtor.  Any offers from potential buyers, should be advised of the time constraints in receiving acceptance.  It is IMPORTANT to make sure when all offers are received it is clearly stated that they are “subject to bank approval”.  Any offers requiring 24-48 hour response need to be advised that the response time is dependent on the bank.  Generally formal short sale offers need to leave open time limits for acceptances and counter offers.  Buyers need to be aware of this guideline to avoid disappointment and in order not to anger potential buyers.

7.  The paper intensive process

After the offer on the property is received now the work begins in getting the paperwork together.  Attached is a list of items that may be required- all lenders have slightly different requirements, so check with your lender first.  This list will provide a good overview.

Paperwork Needed

• Authorization to release information – this is required so the lender can work directly with the realtor and title company.  This will help in keeping you out of the day to day and allowing these individuals to do the work for you.
• Listing Agreement- initial property listing agreement
• Purchase and Sale Agreement
• Hardship Letter- letter explaining her financial situation, which led to making the short sale necessary.  Usually describes things that are beyond the customer’s control, including illness, death in the family, adjustable rate loan or job loss.  This letter can be handwritten and is no more than one page in length and should be a polite request for assistance.  The most important message should be conveyed that the customer does not have the ability to maintain payments going forward.  A well-written hardship letter can help alleviate many unrealistic requests later in the process.
• Financial Statement or Packet – A form generally supplied by the lender which details your income and expenses
• Recent 401K, Investment or IRA Statements – required for all borrowers on the loan
• Copies of the last one or two pay stubs – required for all borrowers on the loan
• Last two years of tax returns – this requirement may only be required for customers who are self employed and unable to provide pay stubs
• Copies of the last one or two bank statements
• Any special forms required by the lender

8.  Lender Guidelines

Once you get the requirements on what is needed from the lender it is easier to proceed with the short sale.   Make sure that all of the required documents are sent, incomplete or missing information can further delay the approval process.  Many times buyers will walk away if the short sale takes too long.  Therefore, it is important be timely in supplying these items that are within your control.

Many banks require that all realtors reduce their commission to 5%.  This is often not negotiable.  Realtors are familiar with this, but should be reminded.  You do not want a stubborn realtor to prevent your short sale from taking place.

9.  Prepare HUD-1/Settlement sheet and send to lender

Many times the realtor or title agencies can prepare this for you.  It must include the purchase price, estimate closing costs, delinquent taxes.  All proceeds go to the lender.  You as the seller in all short sales must receive $0.00 from the sale of the home.  In some HUD workout programs seller cooperation is rewarded by allowing the seller $1,000 at closing.  But generally this is not the case, go into the short sale expecting zero and focus on the relief when you can rid yourself of the over-mortgaged property.

Once the lender guidelines are met and the proposed settlement sheet is completed, showing where the money is going.  Send the full package to the lender.  Make sure to include names and contact information in case additional information is needed.  Include any contract deadlines or foreclosure dates if applicable.  Also include a name and contact information for the BPO.

It is important to confirm that the lender received the packet.  Many times files can be lost in the chaos at the bank, especially in the current environment.  One follow up call to ensure the packet is received can relieve further delays.

10.  What is a BPO?

A BPO is a Broker Price Opinion.  Most lenders require an interior BPO on the property to ensure it is being sold at fair market value.  It is a real estate brokers opinion on what the property is currently worth.  It is important that your realtor be present during the interior inspection to answer any questions or point out factors in the house that contribute to the value such as roof repairs needed or any other negative factors.  The lower the BPO comes in, the better it is for you as a consumer.

11.  Patience and Follow Up

Now comes the hard part………………….the waiting game.

There are four essential keys:

• Wait- as previously discussed, this can take weeks or even months
• Have Patience- banks do not take huge losses lightly; it may require several levels of management to review the offer.
• Follow-Up- to ensure your information has been received and is being reviewed follow up regularly.
• Be Persistent- call your assigned representative and request answers and updates.  Remember the squeaky wheel gets oiled.  You want to be so persistent that they are anxious to get you an answer in order to prevent the excessive phone calls.  Your realtor can usually help you in making phone calls; it is basically their job to get the property sold.

12. Approval letters and parameters

Once the bank approvals the offer, you will usually get a phone call with a verbal acceptance.  However, a formal written Short Sale Approval Letter will follow.

This may be the most important part of the short sale.  Make sure to carefully read the wording regarding the deficiency, 1099 tax consequences and repayment terms.  These terms are essential and can be damaging if agreed upon hastily.  Terms after the acceptance letter may still be negotiable.

1. 13. Short Sale Deficiency Balances

Even though the short sale is negotiated, it is still important to review the terms of the deficiency balance.  The deficiency is the amount left unpaid after the sale of the property.  There are many ways to negotiate, including no repayment, some repayment or settlement in full.

1. 14. Professionalism and ethics

The closing title company and the realtor are professionals and should act accordingly.  Realtors are bound by ethics.  It is important to be able to trust your realtor, because they are on the front lines fighting and negotiating the best deal possible for you.

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Tags: federal government, foreclosure, HUD, legal, mortgage, real estate, short sale

Loan Modification Strategies To Help You With Debt

Current Economic Times

Due to years of aggressive lending in the prime and sub-prime markets, the mortgage industry and banks have suffered serious losses.  Although many people believe banks want to take your home that could not be farther from the truth.  Banks take huge losses when they foreclose on properties.  With the suffering economy, many banks are going to drastic measures to keep customers paying and in their homes.

As little as two years ago, banks would not even talk to you unless you were three payments behind on your mortgage.  That is not the case now.  Many lending institutions and banks will even solicit you when you are current, in an attempt to curb losses.  Take advantage of the tough economic times and try to get lower mortgage payment now.

One of the most commonly used tools used by banks to prevent foreclosure is a loan modification.  In essence, a loan modification is like a refinance but with no closing costs and much less hassle.  Banks are doing hundreds and thousands of loan modifications every month.  You should be one of the lucky customers that receive a lower interest rate and payment.  But you must know how to negotiate and what to ask for.

This guide is an easy overview that can help assist and guide individuals in the process of a loan modification.  This guide is written by individuals who have worked in the banking and mortgage industry for many years.  This guide will give you an “insider’s” view on the easiest way to get approved for a loan modification.  By investing a small amount of time in reading the material enclosed and following the simple steps, it will lead to better negotiations and a lower mortgage payment.  If you want to keep your home but cannot pay your current high payment, this is the guide for you.  Also, if you are in a variable rate mortgage and are worrying about when your next rate increase will happen, we can help.  Negotiating with banks can be tough, but once you know what they are looking for, you can become a professional at getting the lowest mortgage payment possible, with little to no cost. Even if you can afford your current payment, it never hurts to keep more money in your pocket, try for a lower payment, in many cases your may get approved.

What is a loan modification?

A modification allows for a restructuring of your loan.  It can include past due payments, principal, interest, costs and fees to be waived or added into your principle balance for a fresh start.  Capitalization means anything outstanding such as interest, fees or late charges can be added to your principle balance.  You will hear this term often during the loan modification process.  Also be aware that your principle balance may increase after the loan modification process.  However, now banks are waiving a lot of the interest and fees.  An important tip is to refer to the lack of equity in your home, ask if they will waive the fees and costs versus capitalizing.  Banks often do not want to add these to the principle balance because they will be in worse equity position if you stop paying.  It never hurts to ask, but make sure to stress the current value of your home, if you make it appear that there is no equity in the home, there is a better chance you can get some or all of the interest and fees waived.

A loan modification also allows for the original payment, term, balance and/or interest rate to be changed if needed.   The interest rate is usually lowered to allow for a lower monthly payment.  At the same time many banks are drastically extending your loan term with a rate reduction to allow for an even lower payment.  Some banks are extending terms to 40 years, just to keep the payment affordable for customers.

Loan modification terms can be permanent or temporary.  It is always better to try to negotiate for a permanent modification so you are locked into your new lower payment for the entire loan.  Many banks do not like to give lower rates for the entire loan, but it never hurts to ask.

Getting started in the loan modification process

To get started and on your way to a lower payment you must first determine which department handles the loan modifications.  Usually it is the Loss Mitigation, Loan Workout or Homeowner’s Assistance Department that handles the loan modifications.  Banks call these departments’ different names; however the typical name is Loss Mitigation.  If you contact any bank or lending institution and ask for the Loss Mitigation Department they will know what you are asking for.

To get started you will need to contact the Loss Mitigation department and advise them that you cannot afford your current payment and need assistance.  You can also ask them if there is any way that you qualify for a lower payment.

Most lenders will ask you to complete a financial packet, which includes a detailed list of all of your monthly expenses and net income. This may sound difficult; however it is simple and takes only 30 minutes to fill out.  It is important to show enough extra money left over each month to pay reduced payment but make sure you show you cannot pay the current payment.  Many banks use a formula to determine what you can afford, which varies from bank to bank.

Example:

If your net or “bring home” income is $2,300 and you’re your current mortgage payment is $700 a good financial application will look like this:

Car payment                        $250

Food                                    $300

Gas/Electric                 $250

Car insurance/Gasoline        $300

Telephone/Cell                    $50

Trash                                   $25

Water/Sewage                      $25

Credit Cards                        $100

Student Loans                      $100

Child Care                           $350

Prescription Medicine $50

Total Expense                     $1,800

Net Income                                 $2,300

Subtract Expenses                      -$1,800

Surplus                                        $500

Factor for Misc. Expense           -$50 *

Affordable payment                   $450

*Banks use 10-20% calculations as an allowable surplus for unexpected expenses

The example above shows that you can only afford a monthly payment of $450 versus the current $700 payment.  Therefore, to put you into a payment you can afford the bank would need to lower the rate and extend the term enough to lower your payment to $450.  This is a general example, but allows you to see how it works.  The bank often keeps their current payment out of the equation and backs into the payment amount that you can afford.

It is important to remember and list all expenses paid out each month.  Many banks will make you provide a bank statement to prove your expenses and a pay stub to show proof of income.  So be careful not to list items too high as that will bring questions and may cause you to show additional proof.

Beware, that most lenders also pull a credit report to validate the information that you provide.  Please be as thorough as possible.  The other living expenses such as food, utilities, insurance, prescription medicine cannot technically be proven, so this is the area where you can be a little creative.  All of your expense contribute to your full financial picture and show your ability to pay.

Loss Mitigation Departments can send you the Financial packet and list of required documents (pay stubs, bank statements etc).  However, many banks now have the version online, so ask, it can really speed up the approval process.

Modification basics

It is important with a loan modification that you show some ability to make a payment.  Many people want to exaggerate their expenses in order to show no excess income.  However, if that is the case the bank many times will not approve a loan modification because your financial picture shows you cannot afford a realistic payment.  If you show no ability to pay, then the bank will often times suggest that you sell the property.  Therefore, it is important to show the ability to pay, but only the ability to pay a lower payment than you currently have.

Loan Modification types

There are several different types of loan modifications.

• Permanent Loan Modification- this reduces the rate for the remaining life of the loan.   This is the best type of modification because you will get to reap the rewards of a lower payment throughout your loan even if your financial situation improves.

• Step Loan Modification- this type of loan modification temporarily reduces the rate for a specified period.  Then “steps” back up to your normal rate.  There are several types of Step modifications.  There are one step modifications where the payment goes for a set period then goes back up to the current rate in one transaction, when the step period expires.  There are also multiple step adjustments on some step modifications.  For example the rate will be lowered for a specified period then gradually return to the current interest rate over a period of a few years.

• Balloon Loan Modification- this is the most dangerous type of loan modification.  It allows for temporary payment relief, then similar to a balloon loan, after a set period of time the entire loan balance balloons and becomes due and payable.  This should only be used in extreme cases and when you are confident you will be able to refinance the balloon amount when it comes due.  If you are not careful, if you cannot pay or refinance the balloon amount, foreclosure can begin and you can lose your home.  Beware of this type of loan modification and try to avoid it.

How to speed up the approval process

Many banks and mortgage companies have the financial assistance applications online.  Some banks have the full application online such as National City Mortgage.  Their application process is so advanced that you can even look at the status of your application online.  Other banks such as Washington Mutual have the full financial application online, where you can print it and fax it.  Other mortgage companies have more limited forms to fill out online.  If the form is simple and requires very little financial information, they are simply preliminary forms that are forwarded to the Loss Mitigation department, who will contact you later to obtain more detailed information.

The online forms are the quickest way to get your application reviewed.  If you run into technical difficulty many online application websites for major banks have ways to request technical assistance. CitiFinancial Mortgage has a website where you can fill out a form requesting technical assistance if you are having difficulty with their online form.

The paper intensive process

Many of these financial applications are accompanied with a checklist of the additional information needed with your financial application.  Many banks require one or two pay stubs from each borrower, accompanied by W2 forms and bank statements.  The trend in the industry is now geared to requiring less paper documentation.  However, if the documents are listed on the form as required it is important to send them.  In many cases your file will be denied and closed simply because you do not have all of the required supporting documents.  To ensure your files is reviewed in a timely manner make sure it is accurate and complete.  Also include alternate numbers to reach you.  In many cases they may not have valid phone numbers for your account.  Also, if you prefer to correspond via email only, include your email address.  Many banks prefer to send documents and correspondence via email.

Lender Guidelines

The guidelines to qualify for a loan modification vary across the industry.  Some banks even charge a modification fee of $500-$750.  However, with the economy in shambles, many banks now waive the modification fee.  Most banks will require the first lower “modified” payment to be made at the time of the modification.  This first payment shows that you have the ability to make the new payment amount.  Some banks require a total of three new modified payments be made before they will modify the loan.  These banks want you to show a renewed “willingness and ability” to make the payment. In other words, they want you to prove you can make the payment. They assume that three months of making the new lower payment amount shows you can stay on track.  Whichever down payment or fee is required, it is necessary.  It is still much cheaper than a refinance and will pay for itself in only a few months.

Some banks require subordination’s or approvals from second mortgages, which can delay or even derail the process.  Mortgages companies are now skipping the subordination process and modifying the loan without re-recording the new modification agreement.  If a bank is going to record the new modification agreement on your property you may also be required to pay a recording fee, which can be a few hundred dollars.

Helpful hints and tips

When you contact the Loss Mitigation department get a full name and number of the representative you are talking to.  Also get a direct email address to this person.  This person will be your main contact during the process.  You do not want to always be routed through the frustrating maze of toll free numbers and departments every time you call in.  Taking the time to get a direct contact is essential to keep in close contact on the status of your loan modification.

Meet the deadlines set forth in your agreement.  Often banks will offer a modification to your loan with a deadline attached.  If the deadline is missed, there may not be a second chance.  So hit your deadlines and dates.  Also include any down payment required by the deadline.  You do not want to give them any reason to revoke their offer. Make sure you are prompt in responding and sending in all required documents.

Bank employees often have “quotas” to hit at month end. Some are even paid bonuses based on how many customers they help.  So your deadline will most likely be prior to the end of the current calendar month.

Closing

A modification can be a great tool to lower your payments and keep your house.  However, the federal government regulates banks and sets guidelines and parameters for workouts.  Currently most banks cannot complete more than two modifications within a five year period.  Also, there are limits on how old the loan must be. Some lenders require 9 to 12 months from the original loan date before they will consider a loan modification.

Government loans such as FHA, Freddie Mac or Fannie Mae loans have special guidelines and requirements for their loan modifications.  They currently will lower the interest rate very little if any and require that the loan be three payments delinquent.  They are behind on the times and their guidelines are sure to loosen up as well.

Please refer to our other guides and books for helpful hints on other workout option or specifics on government loans.

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Tags: banks, financial, foreclosure, homes, Loan Modification, loans, mortgage

“There’s Nothing Fun About Debt” Book 1

Brian Gosur, Thomas Chandler, Amy Boyack,  Jeff Polhill, Linda Adleen Carpenter, Sherry Balcom, and Bill Beavers

Nothing Fun About Debt Series

Book One–There’s Nothing Fun About Debt

• If Debt Is a 4-Letter Word, Why Do We Have So Much…And What Can You Do To Get Rid Of Some?
• Have You Ever Thought Life Would Be Easier Without Money?
• What Can We Learn From Grandma and Grandpa To Help Us Today?

Book Two- Emotional Factors

• Why Does It Take So Long For Me To Pay Off My Debt…And How Can I Speed It Up?
• Does Everyone Want To Be Debt Free…Why Aren’t They Doing It?
• Why People Hold On To Their Debt… And How To Let Go.

Book Three–Getting Rid Of Debt…What is involved?

• What Are The Components, And Types Of Debt… And Some Ways To Get Rid of Each Type Of Debt.
• How Do You Get Into Debt…And How Do You Get Out?
• Your Credit Score And It’s Effect On Your Debt.
• How Do Your Taxes Fit Into Your Present And Future Debt Picture?
• How Do You Pay Off Debt…FAST?

Book Four–Using Banking Tools To Get Out Of Debt Part 1

• Things You May Or May Not Know About Checking Accounts, And How They Can Help You Get Out Of Debt.
• Amortization…Understanding A Key To Getting Out Of Debt Quickly.
• Debt And Your Home’s Equity…What Options Do You Have?
• 
  Secrets About Interest That Can Save You Money.
• FDIC Insurance…Are You Protected?

Book Five–Using Banking Tools To Get Out Of Debt Part 2

• Loan Modification Strategies To Help You With Debt
• Mortgage Financing Made Easy
• Short Sale Strategies And Overview
• Putting It All Together…The Ultimate Way To Get Out Of Debt In The Fastest Way Possible!

This book is a collaborative effort of like minded folks that work in the financial services industry. We know the burden debt places on everyone. We wanted to offer you information that would bring alternatives and hope. We want you to know there are things you can do to change your debt picture for the better. Most of these things are well within your grasp. We hope you will enjoy this book.

Disclaimer: All opinions expressed in this book are the opinions of the authors and should not be taken as anything more than that. This book provides information about debt and finances designed to help readers better understand the financial issues surrounding debt. But financial information is not the same as financial advice — the application of information to an individual’s specific circumstances. Although we have conducted research to better ensure that our information is accurate and useful, we insist that you consult a financial expert if you want professional assurance that our information, and your interpretation of it, is accurate. To clarify further, you may not rely upon this information as financial advice, nor as a recommendation or endorsement of any particular financial understanding, and you should instead regard this book as intended for entertainment purposes only.

Section 1: There’s Nothing Fun About Debt

Chapter 1: If Debt Is A 4-Letter Word, Why Do We Have So Much…

And What Can You Do To Get Rid Of Some?

There’s nothing fun about debt. When we’re looking for people to date or finding a mate, we definitely don’t look for someone who’s strapped with bills and having a tough time making payments each month. Imagine a reality show where beautiful contestants compete to be chosen to marry the guy burdened by debt in the end. It wouldn’t be a sizzling success like “Who Wants to Marry a Millionaire?” In fact, I’m sure they’d be hard pressed to find anyone willing to participate as contestants.

Debt is not a word that conjures up happy images or pleasant feelings. We don’t like talking about how much debt we have. We certainly don’t want our friends to know our debt situation, and the bigger and deeper the problem gets, the more we try to avoid talking about it.

We’ll spend our last dollar on a gift to give at a wedding or a dinner to treat our friends just to look like we don’t have any financial problems at all. Then, charge our groceries on our credit card because we ran out of money and had lots of month left. I know it sounds familiar. We’ve been there, too. Remember, money is always there, but the pockets change.

There are reports about the increasing debt in our country and we all see that the problem is huge.

“I went to an ATM today, and it asked to borrow a twenty till next week.”

But seriously, the economy is in worse condition than it has been in for a long time. The market is terrible.

This market stinks so bad …that on my drive home yesterday there was a guy at an intersection with a sign that read, “Will manage your money for food”.

And, even with the many people trying to educate and warn us about the dangers of debt, 

we still continue to spend. Why don’t we just go on a budget and fix the problem? Shouldn’t we be able to spend less and get out of debt without too much effort?

Well, unfortunately, that is one of the dangerous lies that we tell ourselves to make it seem like debt really isn’t such a big problem. We think we can handle it on our own and we tell ourselves that we can stop and pay it off anytime we want. Kind of the way an alcoholic or smoker rationalizes they can quit anytime. In fact, it’s not much different because shopping addictions are much the same as any other addictions. We spend money we don’t have on things we don’t need and sometimes don’t even want.

Although men and women spend for different reasons, they both spend because it feels good initially. We get addicted to that good feeling we get when we spend money.

Why women spend:

· feels good

· addiction

· low self esteem

· need to look good

· family needs (food, clothing)

· paying bills

· impress other women

· save money

I heard about a woman who was seen sitting in front of a mall, holding a cardboard sign that read, “Help! I am addicted to shopping.” While this seems funny at first, it is actually quite sad when we realize how many of us are falling prey to the addiction of emotional spending.

What’s considered enough money? Just a little bit more. ~Will Rogers

Women tend to spend money on things their family needs, like food, clothing, piano lessons, etc. They can rationalize spending hundreds of dollars if it will benefit those they love. After all, clothing, shelter and food are needs, right?

They also spend money on looking good. They pay to get their hair and nails done. They pay for weight loss products. They buy lots of makeup, hair spray, hair care products, and other things to keep up their image. There is such a competition among women to be the best looking, best dressed, skinniest, most put together woman on the block.

Women also buy things when they’re on sale. How often have you heard a woman come home from a shopping spree bragging about how much money she saved?

Women are also in charge of getting the bills paid and keeping up to date on financial obligations many times. This is not always the case, but many times, women feel a responsibility to get the bills paid. While it is better for couples to work together on finances, it has been our finding that usually one or the other has their hand in the finances more than the other.

A woman proudly told her friend, “I’m responsible for making my husband a millionaire.”

“Well what was he before he married you?” the friend asked… “A billionaire.”

Since women are so emotional and spend for emotional reasons, it is important to address those emotions and deal with them head on. We will give you some practical information in this book that may help you to accomplish that.

While women get addicted to buying clothes, makeup and food, men tend to buy vehicles, gadgets, and more toys. You may have heard the saying, “The only difference between men and boys is the price of their toys.” While it is a funny saying, it rings true for a lot of us. Let’s look at why men spend.

Why men spend:

· feels good

· addiction

· gadget lovers

· hobby oriented

· latest and greatest

· power and prestige

· paying bills

· recreation

· help others (usually their children)

· midlife crisis

Men tend to buy more gadgets and toys because they are more hobby oriented. They want the latest and greatest stuff to show their friends they can keep up with all the new stuff. It’s fun to be the one to show everyone else the newest gadgets and have them instantly respect you.

Men are more concerned with recreation. They will pay for camping trips, vacations, and nights out with the family. They will also help their children or others who are in trouble by giving them money.

There’s also the issue of a midlife crisis, leaving men to feel like they need to do something with their lives. They wake up one morning, needing to buy a new sports car or do something important. While we laugh at this, it is a real emotion that needs to be addressed. To the man going through a midlife crisis, it is no laughing matter.

Whether you’re a man or a woman, there’s a common thread of why we spend. It feels good.

No matter what emotions we are feeling, we can always make it better with more toys, the right fishing rod, or a night out…or so it seems. If we’re sad, we’ll spend all kinds of money because we need a lift. If we’re angry, we’ll spend money to calm down.

If we’re happy, we go out to celebrate. If we’re bored, we head to the store. If we feel guilty, we buy something to distract us from the guilty feelings or to buy gifts for those we have hurt.

“Therapy Shopping” is becoming a major addiction in America as well as other countries around the world. That is the practice of buying something to feel better. It’s giving yourself therapy through shopping.

Debt is another addiction, especially in bad economic times. People will go out just to go out. They fill a void because they bought something they’ve been wanting. Consumer debt is something that businesses enjoy getting people into because it makes them money. Cigarettes and alcohol sell really well in any economy. Movies and pizza are always doing well. While it seems like nobody is out shopping in a bad economy, it seems that everyone is eating out.

Many times, it seems innocent because we rationalize it away. We tell ourselves things like, “this will help me feel better”, or “I deserve this”, or “I can afford to buy this because…”

Although the problem of overspending is a major problem, it is often a symptom of a much deeper problem, emotionally. Usually, there is some kind of a need to feel that we’re good enough. We feel that we’re not good enough because of some hurt that we experienced and we try to fill that hole with stuff. We feel that if we have more stuff, we’ll be a better person. Often, there are marital problems, such as a lack of communication, or a lack of emotional connection and this can spill over into a spending problem.

This spending problem is only a symptom of the deeper emotional wounds that exist from the poor marriage or the hurt from the childhood, or whatever else is hurting us emotionally. If we do not take care of the deeper problems, then we will not be strong in the emotional moments when we feel the urge to spend. The debt will not be taken care of unless we can deal with the underlying cause.

Once we deal with the underlying emotions that are driving the overspending, we can deal with changing those poor habits that we have developed and fix the financial picture.

We will probably need tools that will help us to look at the finances realistically and see the impact that our financial decisions are having on our future.

For instance, it would be good to have a tool that would allow you to compare the years that it will take to get out of debt with the purchase and without the purchase we are considering. If we have decided ahead of time to always sleep on a financial decision that would impact our budget more than $200 or some set limit, we can have a better chance at success. By trying to look at things rationally and with a support group, and financial tools to help us evaluate the soundness of our decisions, we will be more likely to be able to see the true picture of what we’re doing, however hard that may be to face.

Spending money for emotional reasons can make us feel better initially, but in the long run, it brings other feelings that are depressing. It can ruin us financially and cause problems that do not easily go away. People who have overspent may be faced with bankruptcy, eviction, repossession, and foreclosure. There is also the embarrassment and shame that comes with being unable to qualify for credit and pay your bills.

People who are burdened by debt often feel hopeless, depressed, worthless, and angry. They may feel that the situation is not fair and that they don’t deserve to have so many problems and bills. There may have been extreme circumstances out of their control that got them into trouble such as a medical condition or a disaster of some kind such as the loss of a job or a major accident. Or it may be due to poor spending habits. This loss of hope and depression can lead to feelings of despair and an inability to face the problem. Many people get so frustrated that they stop trying to find a solution, figuring that debt is just a part of life and they go on spending money that doesn’t exist.

Others feel that the problem isn’t so bad because they can afford their payments. However, they are in denial. If they truly look at the problem, they will realize that their entire paycheck is going toward interest and only a very small portion of it is actually paying off their debt.

In dealing with denial, it is important to get an accurate picture of all the debt, all the income, the spending habits and the cash flow. Then, analyze this to find out how long it will take to get out of debt in the current situation. Many times, a financial analysis is free and can help to show small changes that can be made to dramatically change the situation over time.

Whether you’re single or married, too much debt can have a major impact on your life. Let’s look at the differences in how singles and families are affected by debt.

How Too Much Debt Hurts Families:

· Less Money for food for the entire family

· Harder to pay bills

· Everybody feels the impact when there’s no money

· Stress on kids and spouse

· Possibly have to move the family if you lose home

If you’re in a family situation, the financial problems you’re experiencing affect your whole family. There may not be enough money for food, so the whole family goes hungry. The bills become harder to pay and the family may not be able to do the things they want to do. Everyone feels the impact of the hardship. This stresses out the whole family, including the children. There may be a loss of a home and everyone would have to move or find another living arrangement (sometimes moving back in with grandparents). When a family is involved, the whole family feels the stress from the financial burden.

How too much debt hurts singles:

· Nobody to fall back on for second income

· Responsibility can be overwhelming

· May affect other family members

Just because someone is single, doesn’t make their situation any easier. Sure, they are the only ones suffering unless there are other family members in the household, but that also means they don’t have anyone to fall back on for an extra income. The responsibility can be overwhelming and lonely. There are no safety nets and the person may feel vulnerable and upset.

No matter what family arrangement you are living with, debt can be very stressful and upsetting. Make sure to take time to strengthen relationships with family members and friends at this emotionally trying time.

By looking at the facts and stepping back and acknowledging the emotions and habits that have gotten us into trouble, we can face our fears and overcome the addictions that have caused the problems. Will it be easy? Well, probably not. I’ve never known an addict who quit their bad habits without any problems or work. I’ve known addicts who have quit, but it has always required work and an honest look at their problem.

I guess the question is, do you want to get better and have a financially secure future without the worry of bills and creditors, and be able to keep more of your income for yourself, or do you want to continue on the path that you’re already on, which could spiral downwards out of control and lead to bankruptcy, eviction, repossession, and foreclosure?

I hope you want to choose the path that leads to the higher plane. Living a life free of guilt and worry about money matters is a great goal and can be achieved with careful planning. If you have read this and still have an open mind, it means that you are ready to make some changes and admit there is a problem, which is the first step to recovery.

So, congratulate yourself on this first step, but not by buying something. Celebrate by not buying anything. Celebrate by doing something free. Go for a walk or listen to your favorite music and dance a little. You’ve done the first step. You’ve analyzed your life with an open mind and come to some realizations that will help you on your journey. Write them down.

Throughout this book and in our other books, we will give you tips and unlock secrets to help you get out of debt. We refer to programs and tools throughout these books that can be used for the ultimate in debt reduction strategies. In the end, we will reveal what our favorite plan is, but it is important to understand the underlying concepts so you can plan your own strategy, since no two families or their debt situations match exactly.

Let me leave you with a short video that I hope puts a smile on your face and little laughter in your heart.  Please clink on the link.                                       uffstevemartinvideo

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Tags: addiction, bankruptcy, book, Debt, family, foreclosure, money