A Look at Why Consumers Are Using Prepaid Debit Cards

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It’s clear that prepaid debit cards — cards that you load with cash, spend down and then reload — are hot.

In 2009, consumers loaded roughly $29 billion on such cards, which are especially popular with young adults and those considered underbanked — meaning they have little access to mainstream financial institutions like banks. But by next year, that amount is expected to reach $202 billion, according to an estimate cited in a report from an arm of the Pew Charitable Trusts. Even the budgeting guru Suze Orman is marketing a prepaid card.

So to gain insight into why consumers are using the cards, researchers from Pew’s Safe Checking in the Electronic Age project convened focus groups last fall in Houston and Chicago.

The project recently released some of its findings, along with excerpts from the comments made by participants in the focus groups. The gist of the findings is that users do not like some of the fees associated with prepaid cards, but seem to prefer them over higher and, from their perspective, less predictable fees that come along with traditional checking accounts.

Some of the comments are not only enlightening but also fun to read, so I decided to share some here. (You can read more in the full report).

Here’s one of my favorites, in which a Chicago woman re-enacts a telephone call she made to the customer service number for her prepaid card to question a charge — only to learn that she was being charged for the inquiry. (The card brand isn’t identified.)

Participant: “It was like, ‘Ma’am, you get charged for calling customer service.’ ‘I’m getting charged now for calling you all about the money that I got charged?’ She was like, ‘Yes, I’m sorry.’ I was like, ‘The next time I load my card, I have to pay for the fees that you charge me for talking to you right now?’ ‘Yes.’ ‘O.K. ’Bye.’”

Yet participants seemed to prefer the fees associated with prepaid cards, which Houston participants described as more transparent, to charges like overdraft fees that can come into play with checking accounts at banks.

Male Participant: “Compared to my situation, I went through a lot of late fees with the credit cards, extra fees with the checking accounts. I was paying monthly between $35 to $50 in fees compared to $3.99 that I pay for a maintenance fee to get a card.”

Female Participant, on the prepaid card fees: “I think they are fair because they’re upfront. I’m thinking in contrast to a checking account. I think the ambiance and the idea of the marketing behind a checking account is they’re your friend; they’re your hometown bank. You can depend on them. You can count on them and, really, they’re just lulling you into the sense of comfort because they’re going to whammy you with fees on the backside. Whereas prepaid debit cards, they’re very upfront. This is the cost of the card; this is the cost for the services. It’s up to you at that point.”

Several participants seemed uneasy about the notion of adding credit options to prepaid cards, since they see a major benefit of the cards as helping them stick to a budget and avoid overspending.

Female Participant (Chicago): “It defeats the purpose of a prepaid debit card because it is, like, it’s a credit card. You can use money that you really don’t have to pay back, and I wouldn’t want to do that because I know I’m just going to get myself in some trouble.”

Have you used prepaid debit cards? Are the fees charged for them worth it for the service the cards offer?

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Mortgages - Shopping for Loans Online

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Peter Carroll, the acting assistant director for mortgage markets at the newly formed Consumer Financial Protection Bureau, suggests that borrowers begin the process by reading the fine print of each site they choose to work with. “Understand the terms of use and privacy policies,” Mr. Carroll said.

If you are shopping for loan rates on sites like Bankrate.com or LendingTree, also be sure to read their “frequently asked questions” section, industry experts say — and recognize, too, that these sites are businesses that make money by working with lenders, via a pay-per-click formula or by generating leads.

If you provide personal information, including your credit score, find out how widely that material will be circulated. As Mr. Carroll put it, “Understand that many lenders may be contacting you.”

At Zillow Mortgage Marketplace, the average number of rate quotes customers receive is 20, while at LendingTree it is 3 to 5, according to both companies.

Most sites provide rates and other information only from lenders that are signed on as their customers. One exception is Bankrate.com, which offers one table that includes its lending clients as well as the five largest banks and other lenders in some 600 local or metropolitan areas.

The online mortgage marketplace has become increasingly popular for borrowers researching loan rates and options. Some 1,200 mortgage-related Web sites are tracked by Experian Hitwise, and the top seven sites drew more than 22 million total domestic visits in April, up 24 percent from a year earlier and 74 percent from April 2010. The numbers are expected to grow with the wider use of smartphones and other devices.

Doug Lebda, the chief executive and founder of LendingTree.com, noted that for the last three years, the difference between the highest and lowest rates available was “wider than it has been in recent history,” making comparison-shopping even more important. But he also pointed out that the advertised rates are “indicative rates but they’re certainly not offers.”

Mr. Lebda suggested that borrowers also consider the mortgage initiation fee and closing costs.

As they navigate through online mortgage sites, borrowers will need to find out the sites’ criteria for matching them up with lenders, and whether lenders can pay for higher placement. That’s where reading the fine print may come in.

“Make sure you feel you’re in control,” said Erin Lantz, the director of Zillow Mortgage Marketplace. That way you can give your personal information out to lenders of your choice.

And if a credit report is pulled by lenders, Mr. Carroll added, find out “what rights do they have to that information besides evaluating that loan request?”

Borrowers will also want to learn about quality control at the sites they visit. Bankrate.com, for example, has a 40-person quality-control department that investigates consumer complaints and does what is known as “mystery shop” on various sites. LendingTree says it relies partly on consumer ratings and reviews, as does Zillow Mortgage Marketplace. It has more than 10,000 reviews to date, Ms. Lantz said, adding that the reviews are also vetted to ensure they are not from any lenders.

Mortgage shopping sites will often advertise that they are making comparisons easier and faster for borrowers, but that could be counterproductive, said Sue Berkowitz, the director of the South Carolina Appleseed Legal Justice Center, which advocates for greater disclosures by these companies. “It should be time-consuming, and done with analysis.”

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Medical Debts Can Leave Stains on Credit Scores

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But by then, it was already too late. Unbeknown to Mr. White, the debt had been reported to the credit bureaus. It was only when he and his wife went to refinance the $240,000 mortgage on their home in Lewisville, Tex., last month — nearly six years after the accident — that he learned the bill had shaved about 100 points from his credit score. Even with no other debts, a healthy income and otherwise pristine credit, the couple had to pay an extra $4,000 to secure a lower interest rate.

“It wasn’t like I ignored it,” said Mr. White, 47, an executive in Internet advertising. “It’s not like I’m a credit risk in any way, shape or form.”

Even people with good insurance coverage know how hard it can be to figure out how much they owe after a visit to the doctor or, even worse, the emergency room, which can generate multiple bills. But as patients become responsible for a growing share of costs — not just co-payments, but also deductibles and coinsurance — bill paying is becoming ever more complex.

On top of that, more medical providers are using collection services and turning to them more quickly than they have in the past, some experts say.

“It used to be that the mantra was ‘gentlemen and physicians rarely discuss matters of money,’ ” said Dr. Jeffrey Hausfeld, an otolaryngologist and plastic surgeon who now co-owns FMS Financial Solutions, a collection agency that specializes in medical debts. “But that has changed now.”

The reason is that the portion of the bill that patients owe has become a larger percentage of medical practices’ and hospitals’ revenue, said Mark Rieger, chief executive of National Healthcare Exchange Services, which offers software to help providers manage billing. “They are getting increases in their fee schedule amounts, but their revenue is declining because more of the responsibility is being shifted to patients,” he said.

Medical providers collected no more than 8 percent of their revenue from patients about 10 years ago, he said. Now, it is closer to 20 percent, or even 30 percent, in some markets.

Like Mr. White, people who fail to pay or respond to a medical collection agency in time — whether intentionally or not — may be surprised to learn, often much later, that it left a black mark on their credit record.

FICO, which produces one of the most popular credit scores used by lenders, said it viewed different types of collection agency accounts — medical-related or otherwise — as equally damaging. For someone with a spotless credit history, “it wouldn’t surprise me if their score dropped by 100 points or more,” said Frederic Huynh, a principal analytic scientist at FICO. And the blemish does not entirely disappear for seven years.

Consumer advocates argue that this is unfair. After all, medical debt is usually something people do not volunteer for, and billing errors and figuring out who owes what can often take months. According to the American Medical Association’s 2011 National Health Insurer Report Card, commercial health insurers processed 19.3 percent of claims erroneously in 2011, up from 17.3 percent in 2010.

In 2010, an estimated 9.2 million people aged 19 to 64 were contacted by a collection agency because of a billing mistake, according to research by the Commonwealth Fund, a nonprofit research group, while 30 million were contacted by a collection agency because of an unpaid medical bill.

“There is enormous room for errors, whether they are intentional or unintentional,” said Pat Palmer, founder of Medical Billing Advocates of America.

Rodney Anderson, a mortgage banker in Plano, Tex., said he started to notice in 2008 that more of his customers were being hurt by these medical delinquencies. So he kept notes on 5,100 loan applicants over 10 months. He found that 2,200 had at least one medical debt that lowered their credit score, and many of them were unaware of the damage.

“It’s the same thing over and over,” said Mr. Anderson, executive director of Supreme Lending. “You just don’t let $100 go to collections to ruin your credit.”

That prompted him to take the issue to Congress. He said he had spent $1.5 million of his own money on consultants and on lobbying to change the rules. And his efforts, along with those of consumer groups and others, have gotten lawmakers’ attention.

A version of the Medical Debt Responsibility Act, which would erase medical debts from credit reports within 45 days of being settled or paid, was approved by the House with bipartisan support in 2010. The bill was reintroduced in the Senate by Jeff Merkley, Democrat of Oregon, in March.

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Report Finds Improvement in Credit Scores

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5/4/12 | Updated to correct a figure.

The number of consumers with top-tier credit ticked up to its highest level since 2008, according to a report from the creator of the FICO credit score.

An analysis by FICO, formerly known as Fair Isaac Corporation, found that 18.3 percent of consumers with FICO scores had scores of 800 to 850, the highest range of scores available. (In 2008, 18.7 percent of consumers fell in that range.)

FICO scores range from 300 to 850 and are used by most lenders to gauge a potential borrower’s creditworthiness. The higher your score, the more favorable the interest rate you’re likely to get on a loan.

FICO’s report is based on an analysis of a national sample of credit reports as of October 2011 provided by Equifax, one of the three major credit reporting agencies.

The report found, though, that just 15.5 percent of consumers had scores in the 700 to 749 range — the lowest that FICO has recorded since it began tracking such data in 2005.

Rachel Bell of FICO Labs, FICO’s research arm, said many consumers had stepped up their efforts to maintain an excellent credit profile, by paying bills on time and using credit wisely. That’s why they have moved into the top tier.  But the lingering financial stress of the recession and a tight job market have pulled others into lower tiers.

The report said the proportion of consumers with scores in the lowest tier — 300 to 549 — was 15 percent, the lowest since 2006.

One likely explanation, Ms. Bell said, is that lenders have written off bad debt and closed their riskiest credit accounts. Negative items carry less weight in a credit score as time passes, she said, so credit scores will move up for consumers who had multiple bad debts and delinquencies, but who are now staying current.

John Ulzheimer, who blogs about credit at SmartCredit.com, said what struck him was that more than half of consumers — 53.2 percent — still had credit scores over 700.  That’s down from 54 percent in 2006 and 2007, before the full impact of the credit crisis. But it suggests that the “gloom and doom perception about credit scores falling off the table” because of the economy “simply isn’t true,” he said in an e-mail.

In general, you must pay to obtain your FICO score (although you can get it without charge if you sign up for a free trial of other products on www.myfico.com).

But you can check your credit report — on which your FICO score is based — free on www.annualcreditreport.com.  Each of the three major credit bureaus (in addition to Equifax, they are TransUnion and Experian) must provide consumers one free copy of its report each year. So you can check a different report, free, every four months.

Have you checked your credit score lately? Has it gone up or down?

This post has been revised to reflect the following correction:

Correction: May 4, 2012

An earlier version of this post misstated the range of scores in which 15.5 percent of consumers fell. It was 700 to 749, not 700 to 799.

View the original article here

The Post-Cash, Post-Credit-Card Economy

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At Home Depot on a purposeful Sunday, you load your cart with lumber and light bulbs and instead of pulling out your wallet, you type in your cellphone number and a PIN. Payment made.

In London, travelers can buy train tickets with their phones — and hold up the phones for the conductor to see. And in Starbucks coffee shops here in the United States, customers can wave their phones in front of the cash register and without even an abracadabra, pay for their soy chai lattes.

Money is not what it used to be, thanks to the Internet. And the pocketbook may soon be destined for the dustbin of history — or at least if some technology companies get their way.

The cellphone increasingly contains the essentials of what we need to make transactions. “Identification, payment and personal items,” as Hal Varian, the chief economist at Google, pointed out in a new survey conducted by the Pew Research Center. “All this will easily fit in your mobile device and will inevitably do so.”

The phone holds and records plenty more vital information: It keeps track of where you are, what you like and who your peers are. That data can all be leveraged to sell you things you never knew you needed.

The survey, released earlier this month by the Pew Research Center’s Internet and American Life Project along with Elon University’s Imagining the Internet Center, asked just over 1,000 technologists and social scientists to opine on the future of the wallet in 2020. Nearly two-thirds agreed that “cash and credit cards will have mostly disappeared” and been replaced with “smart” devices able to carry out a transaction. But a third of the survey respondents countered that consumers would fear for the security of financial transactions over a mobile device and worry about surrendering so much data about their purchasing habits.

Sometimes, those with fewer options are the ones to embrace change the fastest. In Kenya, a service called M-Pesa (pesa is money in Swahili) acts like a banking system for those who may not have a bank account. With a rudimentary cellphone, M-Pesa users can send and receive money through a network of money agents, including cellphone shops. And in India, several phone carriers allow their customers to pay utility bills and transfer small amounts of money to friends and family over their cellphones.

In the United States, several technology companies, big and small, are busy trying to make it easier for us to buy and sell all kinds of things without our wallets. A start-up, WePay, describes itself as a service that allows the smallest merchant — say, a dog walker — to get paid; the company verifies the reputations of payers and sellers by analyzing, among other things, their Facebook accounts. Bill Clerico, its founder, reckoned that in the future, with ever swelling piles of digital data, he could gauge an individual’s credit worthiness or eligibility for a mortgage.

A BRITISH start-up, called Blockchain, offers a free iPhone application allowing customers to use a crypto-currency called bitcoins, which users can mint on their computers.

A company called Square began by offering a small accessory to enable food cart vendors and other small merchants to accept credit cards on phones and iPads. Square’s latest invention allows customers to register an account with Square merchants and pay simply by saying their names. How does the merchant know the customer is who she says she is? With no more than a gaze. The customer’s picture pops up on the merchant’s iPad.

It is still early days for each of these companies, and as the Pew survey suggests, it is difficult to say whether they will gain widespread acceptance or freak people out — or whether, indeed, they will improve our well-being. With so much vital data in our cellphones, what happens when we lose them? Could we one day load up the cellphones of our teenage children with money for cab rides but not beer? Would cash be reserved for purchases of sex, drugs and, in repressive countries, banned books? Or just for people with bad digital reputations?

Perhaps one of the most revealing moments on the road to future money came with the arrival of a mobile payment system Google announced with great fanfare last fall. Google Wallet, as it is called, has been designed to sit in your mobile phone, be linked to your credit card, and let you pay by tapping your phone on a special reader, using what is known as near field technology. But the future, alas, hasn’t come as quickly as Google would like. To date, Google Wallet works on only four kinds of phones, and not many merchants are equipped to accept near field technology.

Meanwhile, PayPal, which allows people to make payments over the Internet, has quietly begun to persuade its users to turn to their cellphones. PayPal posted $118 billion in total transactions last year and became the fastest-growing segment of eBay, its parent company.

“The physical wallet, which had no innovation in the last 50 years, will become an artifact,” John J. Donahoe, the chief executive of eBay, told me recently. The wallet would move into the cloud, and ideally, from his perspective, into PayPal. No more would the consumer worry about losing a wallet, nor about organizing coupons and loyalty cards. Everything, he declared, would be contained within PayPal. It would also enable the company to collect vast amounts of data about customer habits, purchases and budgets.  

PayPal recently rolled out a payment system at 2,000 Home Depot stores nationwide, allowing customers to pay simply by typing in their cellphone numbers, along with a PIN. It plans to install similar kiosks later this year at other chains, including a fast food establishment.

Mr. Donahoe said he wanted his company to become “a mall in your pocket.”

I recently described PayPal’s plans to Alessandro Acquisti, an economist who studies digital privacy at Carnegie Mellon University. Mr. Acquisti smiled. If today all you need to do is enter your phone number and PIN when you visit a store, perhaps tomorrow, he said, that store will be able to detect your phone by its unique identifier as soon as you enter. Perhaps in the not-too-distant future, he went on, you won’t have to shop at all. Your vast piles of shopping data would be instead collected, analyzed and used to tell you exactly what you need: a new motorcycle from Ducati, perhaps, or purple rain boots in the next size for your growing child. Money will be seamlessly taken from your account. A delivery will arrive at your doorstep. “In the future, maybe you won’t have to pay,” Mr. Acquisti offered, only half in jest. “The transaction will be made for you.”

A technology reporter for The New York Times.

This article has been revised to reflect the following correction:

Correction: May 2, 2012

An article on April 19 about the quarterly earnings of eBay misstated the estimated annual transactions of its PayPal online payments unit. PayPal posted about $118 billion in transactions in 2011, not $31 billion. The error was repeated on Sunday in a Sunday Review article about payments by cellphone.

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Secret Service Employee’s Plea in Colombia Proved True

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Phrases can help give a sentence depth, detail and movement, but they can also create clutter.

A landmark court decision ordered authorities to prosecute members of Zimbabwe’s government who tortured opponents. It should not be appealed.

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Consumer Agency Seems to Soften Limit on Credit Cards Fees

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The agency, the Consumer Financial Protection Bureau, introduced a proposal that would make it easier for credit card issuers to charge fees before borrowers’ accounts were officially open.

The bureau, which began overseeing many consumer financial products last year, said it was issuing the proposed rule in response to a federal court decision that challenged how the Credit Card Act was being applied. The act, which took effect in February 2010, put several rules in place aimed at curbing abusive lending practices.

Part of the new law said that credit card issuers could not charge fees equal to more than 25 percent of the borrower’s credit limit in the first year after the account was opened. But after certain credit card issuers started charging application or processing fees before consumers’ accounts were opened, the Federal Reserve expanded the rule so that the fee limit would also apply to those upfront charges. That’s the piece of the rule that the consumer protection agency, which has since assumed regulatory authority, is proposing to eliminate.

The bureau declined to say why it took this course. But some consumer advocates said they believed that the consumer agency, led by Richard Cordray, may be backing down because it has decided to “pick its battles,” while trying to show that it is not unfriendly to business.

But other advocates said they could not understand why the agency was not taking a more aggressive stand. “Even if it is a small rule, it affects the most vulnerable of consumers — consumers with impaired credit records, often of limited means, who end up with these expensive fee-harvester cards,” said Chi Chi Wu, a lawyer at the National Consumer Law Center, referring to cards marketed to people with tarnished credit histories. “Exactly the sort of consumers that we think C.F.P.B. should stand strongest for.”

The bureau’s proposal stems from a ruling in September by the Federal District Court for South Dakota that granted a preliminary injunction blocking the rule on the upfront fees from taking effect. To resolve the matter, the consumer agency said it was seeking comment on whether it should revise the rule so that it no longer applies to fees charged before an account is opened.

The initial lawsuit that led to the federal ruling was brought in July 2011 by First Premier Bank of South Dakota, which issues cards to borrowers with troubled credit records. The bank told the court that it would “suffer irreparable harm” if it were not allowed to collect the upfront fees. “The regulation will threaten First Premier’s very existence by causing the loss of millions of dollars in profits,” the bank said.

It also argued that it is “one of the few businesses in the country that offers such high-risk borrowers the chance to rebuild their credit history.”

A First Premier spokeswoman, Brenda Bethke, said Thursday that the bureau’s proposal is under review by its legal counsel and declined to comment.

Odysseas Papadimitriou, chief executive at CardHub.com, a credit card comparison Web site, said that to his knowledge, First Premier was the only bank that has been trying to make up for revenue that had been crimped by the new credit card regulations by charging more upfront fees. “However, you can count on other banks to start doing the same thing if consumers embrace these high-fee credit cards,” he added. “A smarter strategy for the C.F.P.B. might be to drop the amendment and the associated legal battle but require any issuers that charge fees before the account is opened to send a notice that clearly shows consumers how much their credit card will cost them.”

But some consumer advocates said they still believe that the fees are egregious enough to warrant more of a fight. They said First Premier began charging a $95 processing fee before the card account was opened, as well as a $75 annual fee. Yet the credit limit on the card was $300.

“The C.F.P.B. should not back down in protecting consumers from this sort of chicanery,” Ms. Wu said.

The consumer agency said all comments on its proposal must be received by June 11.

“We welcome and want public feedback on this proposal,” the agency said.

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Activist’s Undercover Videos on Rules for Voter IDs Lead to an Investigation

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Phrases can help give a sentence depth, detail and movement, but they can also create clutter.

A landmark court decision ordered authorities to prosecute members of Zimbabwe’s government who tortured opponents. It should not be appealed.

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On Keeping Medical Bills From Hurting Your Credit Score

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Paying your medical bills is becoming more complicated, particularly as more patients become responsible for a greater share of their medical costs. And often, hospitals and other providers are turning over bills more quickly to collection agencies.

The problem, as my article on Saturday outlines, is that medical bills can be riddled with errors. Or, it may just take you many months and phone calls to figure out how much you’re really obligated to pay, or why your insurer is dragging its feet. But if you take too long to untangle the mess, it could end up hurting your credit score. If a medical provider hires a collection agency to collect the money on its behalf, credit experts said there’s nothing stopping them from reporting the delinquency to the big credit reporting bureaus. Debt collection experts said that it was ultimately up to the medical provider to determine when the debt got reported.

A consumer has 30 days to dispute the debt (from the time the debt collector initially reaches out to them) with the collector. And if the consumer disputes the cost, the collector is supposed to “cease collection of the debt” until the collector can verify the debt with, say, a copy of a judgment. “That would seem to include notice to the credit bureaus,” said Robert J. Hobbs, deputy director at the National Consumer Law Center and author of “Fair Debt Collection” (National Consumer Law Center, 1987). But “it’s a gray area of whether that is actually a collection effort.”

The Consumer Data Industry Association, a trade group for the big credit bureaus, said that consumers could also request to have the debt deleted from their credit report if the debt was invalid. But as we’ve reported before, disputing errors is not always an easy process.

“You’ve got this mishmash of consumer protection laws that might provide some protection, but aren’t specifically designed to protect consumers against medical billing problems,” said Gerri Detweiler, a credit expert with Credit.com. “We’ve given collection agencies a lot of power to harm consumers’ credit reports due to medical problems, without proper checks and balances.”

The article also discusses legislation that would erase medical debt from credit reports within 45 days of being settled or paid. Supporters of the bill said it would help people whose credit scores were unfairly damaged, while critics argued that it would undermine the value of credit reports because it does not distinguish between people who were truly delinquent and those who were the victims of billing errors or other mistakes.

Has your credit score been damaged by medical bills? What do you think of the legislation? Please share your experience in the comment section below.

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ID Theft Firms Criticized on 'Free Trial' Policies

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A new report on identity-theft protection services says the most frequent complaint from customers concerns misleading trial offers.

Customers sometimes didn’t understand that they would have to pay once the trials ended, the report found, or had trouble reaching the companies to cancel the service.

The Consumer Federation of America, working with commercial providers of identity theft services, last year proposed voluntary “best practices” for the firms to follow in marketing their products. These companies offer a range of services, from credit report monitoring to correcting actual damage caused by an incident of identity theft.

The best practices state, in part, that companies shouldn’t misrepresent their ability to protect consumers from identity theft; that they should have clear, easily accessible privacy policies; and that they clearly explain how the service’s features may help consumers.

The federation recently completed a review of about 20 providers’ Web sites to see how firms were doing in meeting the guidelines a year later.  It found that most of the services’ Web sites did a “fair job” of complying with the guidelines, but there is still “need for improvement,” said Susan Grant, director of the federation’s consumer protection division and leader of the project, in a news release.

The full report looks at the sites and ranks their compliance with each of the voluntary guidelines. The researchers didn’t actually test the services; rather, they tried to gauge how well the companies were doing in providing straightforward information to prospective customers.

If the federation decided the company met the standard, it awarded a “thumbs up” symbol; if it needed some work, it got a hammer; and if it didn’t meet the standard, it got a “thumbs down.”

The report found that some of the sites’ marketing hype remains over the top, and may promise more than the company can deliver. “While these services may alert consumers about possible identity theft quicker than they would discover it themselves,” the report said, “they can’t prevent consumers’ personal information from being stolen or detect identity theft in all circumstances.”

But the most common complaint found during an online search had to with “free trial” offers, an area that wasn’t directly addressed in the original guidelines.

When the federation’s researchers searched online for complaints, looking at sites like ripoffreport.com, it didn’t find much concern about the quality of the identity theft services. (That isn’t surprising, the report said, since “the real test of these services is how well their alert systems and fraud assistance work when consumers become identity theft victims, and many will never experience that situation.”)

Rather, they found complaints about trial offers, in which companies offer their services free for a week or a month, after which customers are charged a fee. Customers often didn’t understand that they had to cancel the service to avoid being charged a fee. And some said they did try to cancel but couldn’t reach a company representative to do so. Still others said they never agreed to try the service in the first place.

The federation recommends that identity theft service providers give customers 48 hours’ notice that a free trial is ending, along with information about how to cancel if they wish and what the terms of the contract will be going forward, if they want to continue using it. And, the federation added, services should provide a quick, easy means of cancellation — “no endless busy signals, no multiple hoops to jump through.”

Have you encountered problems when trying to cancel an identity-theft protection service?

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Web Site Stole Job Seekers’ Data in Tax-Fraud Scheme, Manhattan Prosecutor Says

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The site, www.jobcentral2.net, listed nonexistent jobs and used applicants’ identities to file the bogus federal tax returns and collect tax refunds, said Cyrus R. Vance Jr., the Manhattan district attorney.

Petr Murmylyuk, 31, a Russian citizen living Brooklyn, preyed upon unemployed people because they were unlikely to have income and unlikely to file a tax return, reducing the chances that the fraudulent returns would draw attention, Mr. Vance said.

“His scheme hurt jobless individuals and society as a whole,” Mr. Vance said.

The ease with which a bogus company can look legitimate on the Internet has created a perfect scenario for fraudulently “phishing” for Social Security numbers and other personal information under various pretenses.

Filing fake tax returns, in particular, is a growing problem. In January, the Internal Revenue Service and the Justice Department announced that a law enforcement sweep through 23 states had revealed the potential theft of thousands of identities and taxpayer refunds.

The I.R.S. has devoted a Web page to listing enforcement actions involving identity thefts used to fraudulently claim tax refunds. In the most recent case, a woman from Monroeville, Ala., who had conspired with a tax return provider to file bogus returns was sentenced to 75 months in prison and ordered to pay more than $1.3 million to the federal government.

The most common form of identity theft complaint received by the Federal Trade Commission’s Consumer Sentinel Network relates to the filing of fraudulent government documents or benefits.

Mr. Murmylyuk’s site claimed that its job placement services were “sponsored by the government and intended for people with low income,” prosecutors said. He sent e-mails with links to his fake Web site through legitimate job search forums and college electronic mailing lists, they said.

He collected refunds in the names of 108 job seekers, an indictment against him said. The amount collected on each was about $3,500 to $6,500, which totaled more than $450,000. Mr. Vance’s office said that money was stolen from the federal government.

Mr. Murmylyuk recruited 11 students from Kazakhstan, who let him use their bank accounts to cash the tax refunds, according to court documents. Some of the students returned to Kazakhstan shortly after opening the accounts for Mr. Murmylyuk, and were indicted in absentia.

Mr. Murmylyuk, also known as Dmitry Tokar, was charged with money laundering, identity theft and other charges. He faces up to 15 years in prison if convicted on the top charge of grand larceny.

Federal prosecutors in New Jersey, meanwhile, charged Mr. Murmylyuk on Tuesday with working with a ring that stole $1 million by hacking into retail brokerage accounts at Scottrade, E*Trade, Fidelity, Schwab and other brokerage firms and executing sham trades.

He was charged with conspiracy to commit wire fraud, unauthorized access to computers and securities fraud. He faces a maximum of five years in prison and a $250,000 fine on the federal charges if convicted.

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Lenders Returning to the Lucrative Subprime Market

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“Even I wouldn’t make a loan to me at this point,” Ms. Alejandro said.

In the depths of the financial crisis, borrowers with tarnished credit like Ms. Alejandro were almost entirely shut out by traditional lenders. It was hard enough for people with stellar credit to get loans.

But as financial institutions recover from the losses on loans made to troubled borrowers, some of the largest lenders to the less than creditworthy, including Capital One and GM Financial, are trying to woo them back, while HSBC and JPMorgan Chase are among those tiptoeing again into subprime lending.

Credit card lenders gave out 1.1 million new cards to borrowers with damaged credit in December, up 12.3 percent from the same month a year earlier, according to Equifax’s credit trends report released in March. These borrowers accounted for 23 percent of new auto loans in the fourth quarter of 2011, up from 17 percent in the same period of 2009, Experian, a credit scoring firm, said.

Consumer advocates and lawyers worry that the financial institutions are again preying on the most vulnerable and least financially sophisticated borrowers, who are often willing to take out credit at any cost.

“These people are addicted to credit, and banks are pushing it,” said Charles Juntikka, a bankruptcy lawyer in Manhattan.

The banks, for their part, are looking to make up the billions in fee income wiped out by regulations enacted after the financial crisis by focusing on two parts of their business — the high and the low ends — industry consultants say. Subprime borrowers typically pay high interest rates, up to 29 percent, and often rack up fees for late payments.

Some former banking regulators said they worried that this kind of lending, even in its early stages, signaled a potentially dangerous return to the same risky lending that helped fuel the credit crisis.

“It’s clear that we are returning to business as usual,” said Mark T. Williams, a former Federal Reserve bank examiner.

The lenders argue that they have learned their lesson and are distinguishing between chronic deadbeats and what some in the industry call “fallen angels,” those who had good payment histories before falling behind as the economy foundered.

A spokesman for Chase, Steve O’Halloran, said the bank “seeks to be a careful, responsible lender,” adding that it “is constantly evaluating the risks and costs of funding loans.”

Regulators with the Office of the Comptroller of the Currency, which oversees the nation’s largest banks, said that as long as lenders adhered to strict underwriting standards and monitored risk, there was nothing inherently dangerous about extending credit to a wider swath of people.

In fact, an increase in lending is a sign that the economy is improving, economists say. While unemployment remains high, consumers have been reducing their debts. Delinquencies on credit card accounts and auto loans are down sharply from their heights in the crisis. “This is a natural loosening of credit standards because the banks feel they can expand again,” said Michael Binz, a managing director at Standard & Poor’s.

And lenders miss many potential customers if they focus just on people with perfect credit.

 “You can’t simply ignore this segment anymore,” said Deron Weston, a principal in Deloitte’s banking practice.

The definition of subprime borrowers varies, but is generally considered those with credit scores of 660 and below.

The push for subprime borrowers has not extended to the mortgage market, which remains closed to all but the most creditworthy.

Capital One is one lender that has been courting borrowers with damaged credit, even those who have just emerged from bankruptcy, with pitches like, “We want to win you back as a customer.”

Pam Girardo, a spokeswoman for Capital One, said, “Our strategy is to provide reasonable access to credit with appropriate guardrails in place to ensure consumers stay on track as they rebuild their credit.”

Ms. Alejandro, 46, was one of the borrowers fresh out of bankruptcy courted by Capital One. So far, she has turned it down.

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For 2 Decades, Airport Worker Used Murder Victim's ID, Officials Say

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On a July morning in 1992, a man named Jerry Thomas was shot to death in front of the Y.M.C.A. on Parsons Boulevard in Jamaica, Queens. According to the Queen’s district attorney’s office, no one was arrested for his murder.

Almost 20 years later, a security supervisor at Newark Liberty International Airport was arrested on Monday at his home in Elizabeth, N.J., and charged with stealing Mr. Thomas’s identity.

Bimbo Olumuyiwa Oyewole, a 54-year-old illegal immigrant from Nigeria, had been using a birth certificate, Social Security card and other documents indicating that he was Mr. Thomas, said the Port Authority of New York and New Jersey.

In a real-life case reminiscent of Dick-Whitman-as-Don-Draper of “Mad Men,” Mr. Oyewole worked at the airport for various private security companies for almost 20 years under the name Jerry Thomas, the Port Authority said. He had passed multiple background checks, the agency said.

It was not clear how Mr. Oyewole obtained Mr. Thomas’s documents, the authorities said.

An investigation into Mr. Oyewole’s true identity was initiated after the Port Authority’s inspector general received an anonymous tip, a Port Authority spokesman, Steve Coleman, said.

Mr. Oyewole was being held in Essex County Jail on Monday afternoon, awaiting his arraignment, Mr. Coleman said.

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ID Theft Firms Criticized on 'Free Trial' Policies

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A new report on identity-theft protection services says the most frequent complaint from customers concerns misleading trial offers.

Customers sometimes didn’t understand that they would have to pay once the trials ended, the report found, or had trouble reaching the companies to cancel the service.

The Consumer Federation of America, working with commercial providers of identity theft services, last year proposed voluntary “best practices” for the firms to follow in marketing their products. These companies offer a range of services, from credit report monitoring to correcting actual damage caused by an incident of identity theft.

The best practices state, in part, that companies shouldn’t misrepresent their ability to protect consumers from identity theft; that they should have clear, easily accessible privacy policies; and that they clearly explain how the service’s features may help consumers.

The federation recently completed a review of about 20 providers’ Web sites to see how firms were doing in meeting the guidelines a year later.  It found that most of the services’ Web sites did a “fair job” of complying with the guidelines, but there is still “need for improvement,” said Susan Grant, director of the federation’s consumer protection division and leader of the project, in a news release.

The full report looks at the sites and ranks their compliance with each of the voluntary guidelines. The researchers didn’t actually test the services; rather, they tried to gauge how well the companies were doing in providing straightforward information to prospective customers.

If the federation decided the company met the standard, it awarded a “thumbs up” symbol; if it needed some work, it got a hammer; and if it didn’t meet the standard, it got a “thumbs down.”

The report found that some of the sites’ marketing hype remains over the top, and may promise more than the company can deliver. “While these services may alert consumers about possible identity theft quicker than they would discover it themselves,” the report said, “they can’t prevent consumers’ personal information from being stolen or detect identity theft in all circumstances.”

But the most common complaint found during an online search had to with “free trial” offers, an area that wasn’t directly addressed in the original guidelines.

When the federation’s researchers searched online for complaints, looking at sites like ripoffreport.com, it didn’t find much concern about the quality of the identity theft services. (That isn’t surprising, the report said, since “the real test of these services is how well their alert systems and fraud assistance work when consumers become identity theft victims, and many will never experience that situation.”)

Rather, they found complaints about trial offers, in which companies offer their services free for a week or a month, after which customers are charged a fee. Customers often didn’t understand that they had to cancel the service to avoid being charged a fee. And some said they did try to cancel but couldn’t reach a company representative to do so. Still others said they never agreed to try the service in the first place.

The federation recommends that identity theft service providers give customers 48 hours’ notice that a free trial is ending, along with information about how to cancel if they wish and what the terms of the contract will be going forward, if they want to continue using it. And, the federation added, services should provide a quick, easy means of cancellation — “no endless busy signals, no multiple hoops to jump through.”

Have you encountered problems when trying to cancel an identity-theft protection service?

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Is That Credit Score a FICO, or a FICO 8?

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It’s difficult enough already to grasp the nuances of consumer credit scoring. So it doesn’t help when industry players are fuzzy about just which score they’re talking about.

Last week, I wrote about a report from FICO, creator of the most widely used credit score. The report, which analyzed data from the credit reporting bureau Equifax, showed an increase in the proportion of people in the top tier of credit scores, and a decrease in the lowest tier. (FICO scores run from 300 to 850; the higher the score, the better your credit. Your actual number may vary, depending on which of the credit reporting bureaus — like Equifax or TransUnion — provides the credit information for calculation by FICO’s formula.)

What FICO failed to note was that the analysis was not based on the version of the FICO score that most lenders still use to rank a potential borrower’s creditworthiness. Rather, the FICO analysis used the newest version of the score, called FICO 8. (Thanks to an alert reader for bringing that to my attention.)

When I followed up with FICO, Rachel Bell of FICO Labs, the company’s research arm, said it did not matter that the report used FICO 8. Individual credit scores might differ under the latest formula, she said, but the trend would be the same, even if an older scoring model were used. Fair enough.

But I would argue that for the sake of clarity, the company should have specified the version of the score on which it based the report, because there is so much confusion among consumers about credit scores, and also because consumers generally do not have access yet to their FICO 8 scores.

Some background: According to FICO’s consumer Web site, FICO 8 was introduced in 2009, and is based on a formula that has been revised to better predict borrower risk. For instance, FICO 8 scores are “more forgiving” of rare late payments, and give more weight to highly used credit cards — those with balances near their limits. “The goal and the methodology for FICO 8 is doing a better job of identifying risk,” Ms. Bell said.

Nearly half of consumers, the Web site says, have FICO 8 scores within 20 points of their scores under the previous version. Ms. Bell said that because the updated formula is more sensitive to predicting credit risk, people with good credit habits would probably see their scores go up a bit with FICO 8, while people who are riskier might see theirs go down.

FICO says more than 7,600 creditors are now using FICO 8. Lenders that have adopted it include Citi Cards, the credit card unit of Citibank, according to FICO. “Our approach is to get lenders using the most current version available as soon as possible,” Ms. Bell said. But that typically takes time.

The company would not disclose the number or proportion of lenders using older FICO scoring models. In an e-mailed statement, a company spokesman, Craig Watts, said FICO 8 “is the fifth generation of our classic FICO scoring model, first introduced in 1989.” He said that lenders’ adoption of FICO 8 has been faster than their adoption of scores from any of the preceding scoring models.  “We’ve found over the years that some lenders convert quickly, some lenders never choose to leave their current scoring version for a newer updated one and most lenders fall somewhere in between,” the e-mail said.

Still, FICO 8 isn’t yet the most widely used version. That is why, currently, consumers cannot buy access to their FICO 8 scores on the company’s consumer site, myfico.com.  Ms. Bell said myfico.com was intended to offer consumers access to the scores that are most used — so until FICO 8 is more broadly adopted, the scores available for purchase by the public are based on the older formula.

“We’re getting close to that switch,” Ms. Bell said. “There will be a point where we use FICO 8.”

Have you checked your FICO score lately? How do you think your FICO 8 score would compare, and would you like to have access to your FICO 8 score now?

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The Cybercrime Wave That Wasn’t

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Yet in terms of economics, there’s something very wrong with this picture. Generally the demand for easy money outstrips supply. Is cybercrime an exception? If getting rich were as simple as downloading and running software, wouldn’t more people do it, and thus drive down returns?

We have examined cybercrime from an economics standpoint and found a story at odds with the conventional wisdom. A few criminals do well, but cybercrime is a relentless, low-profit struggle for the majority. Spamming, stealing passwords or pillaging bank accounts might appear a perfect business. Cybercriminals can be thousands of miles from the scene of the crime, they can download everything they need online, and there’s little training or capital outlay required. Almost anyone can do it.

Well, not really. Structurally, the economics of cybercrimes like spam and password-stealing are the same as those of fishing. Economics long ago established that common-access resources make for bad business opportunities. No matter how large the original opportunity, new entrants continue to arrive, driving the average return ever downward. Just as unregulated fish stocks are driven to exhaustion, there is never enough “easy money” to go around.

How do we reconcile this view with stories that cybercrime rivals the global drug trade in size? One recent estimate placed annual direct consumer losses at $114 billion worldwide. It turns out, however, that such widely circulated cybercrime estimates are generated using absurdly bad statistical methods, making them wholly unreliable.

Most cybercrime estimates are based on surveys of consumers and companies. They borrow credibility from election polls, which we have learned to trust. However, when extrapolating from a surveyed group to the overall population, there is an enormous difference between preference questions (which are used in election polls) and numerical questions (as in cybercrime surveys).

For one thing, in numeric surveys, errors are almost always upward: since the amounts of estimated losses must be positive, there’s no limit on the upside, but zero is a hard limit on the downside. As a consequence, respondent errors — or outright lies — cannot be canceled out. Even worse, errors get amplified when researchers scale between the survey group and the overall population.

Suppose we asked 5,000 people to report their cybercrime losses, which we will then extrapolate over a population of 200 million. Every dollar claimed gets multiplied by 40,000. A single individual who falsely claims $25,000 in losses adds a spurious $1 billion to the estimate. And since no one can claim negative losses, the error can’t be canceled.

THE cybercrime surveys we have examined exhibit exactly this pattern of enormous, unverified outliers dominating the data. In some, 90 percent of the estimate appears to come from the answers of one or two individuals. In a 2006 survey of identity theft by the Federal Trade Commission, two respondents gave answers that would have added $37 billion to the estimate, dwarfing that of all other respondents combined.

This is not simply a failure to achieve perfection or a matter of a few percentage points; it is the rule, rather than the exception. Among dozens of surveys, from security vendors, industry analysts and government agencies, we have not found one that appears free of this upward bias. As a result, we have very little idea of the size of cybercrime losses.

A cybercrime where profits are slim and competition is ruthless also offers simple explanations of facts that are otherwise puzzling. Credentials and stolen credit-card numbers are offered for sale at pennies on the dollar for the simple reason that they are hard to monetize. Cybercrime billionaires are hard to locate because there aren’t any. Few people know anyone who has lost substantial money because victims are far rarer than the exaggerated estimates would imply.

Of course, this is not a zero-sum game: the difficulty of getting rich for bad guys doesn’t imply that the consequences are small for good guys. Profit estimates may be enormously exaggerated, but it would be a mistake not to consider cybercrime a serious problem.

Those who’ve had their computers infected with malware or had their e-mail passwords stolen know that cleaning up the mess dwarfs any benefit received by hackers. Many measures that tax the overall population, from baroque password policies to pop-up warnings to “prove you are human” tests, wouldn’t be necessary if cybercriminals weren’t constantly abusing the system.

Still, that doesn’t mean exaggerated loss estimates should be acceptable. Rather, there needs to be a new focus on how consumers and policy makers assess the problem.

The harm experienced by users rather than the (much smaller) gain achieved by hackers is the true measure of the cybercrime problem. Surveys that perpetuate the myth that cybercrime makes for easy money are harmful because they encourage hopeful, if misinformed, new entrants, who generate more harm for users than profit for themselves.

Dinei Florêncio is a researcher and Cormac Herley is a principal researcher at Microsoft Research.

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Mortgages - A Hidden Fee Is Set to Rise

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An increase in the fee has been mandated by Congress to occur this spring, and other increases are likely later this year and next. When they happen, interest rates on single-family mortgages resold to Fannie Mae or Freddie Mac are likely to inch up as well.

“It’s going to be silently passed through” by lenders when it does increase, said Richard W. Grohmann, a real estate lawyer in Paramus, N.J.

The G-fee — as it is known — does not show up in borrowers’ mortgage documents or good-faith estimates, and it is little known outside the industry.

“It gets incorporated into the underlying rate that the borrower pays,” said Andrew Wilson, a spokesman for Fannie Mae.

An interest rate is usually made up of three parts: the largest goes to the bank or the investors who buy the loan; a smaller portion is for the mortgage servicer that collects monthly payments; and then there’s the guarantee fee. Fannie and Freddie charge guarantee fees as a form of insurance against default for the loans they acquire and resell to investors.

The G-fee will rise 10 basis points on April 1; the increase was included in the two-month extension of the payroll tax reduction last December. (A basis point is equal to one one-hundredth of 1 percent, or 0.01 percent.)

Keith T. Gumbinger, a vice president of HSH Associates, a financial publisher in Pompton Plains, N.J., says the increase in the guarantee fee will very likely push up mortgage rates on new loans by one-eighth of a percentage point. “While it is most common to build the G-fee into the loan’s rate, it doesn’t have to be done that way,” he said in an e-mail, noting that some lenders might charge a flat fee instead.

Already, though, loans with interest-rate locks from the last 45 or 60 days have the higher guarantee fee written into them, according to Tom Kelly, the president of Investors Home Mortgage, a division of Investors Bank in Short Hills, N.J. Lenders say they need the extra lead time because it may take time to close the loan, package it and send it on to Fannie or Freddie.

One way to avoid the guarantee fee is to use a lender that does not sell off its loans — for instance, a community bank or a credit union.

Besides offsetting risks, the fees provide a primary source of revenue for Fannie Mae and Freddie Mac. Fannie, for instance, made $5.6 billion in single-family guarantee-fee income in the first nine months of 2011, a 4.7 percent increase from the 2010 period, according to its quarterly financial statements.

Fannie and Freddie have collected G-fees since the introduction of mortgage-backed securities in the early 1980s. “It was variable from the start, based on the volume level of loans” made by the lender, Mr. Kelly said.

Both organizations started raising fee rates in 2008 during the housing crisis, as foreclosure costs rose. G-fees gained modestly in 2010, and also last year.

New single-family loans acquired by Fannie Mae were charged a guarantee fee of 31.1 basis points, on average, in the third quarter of 2011, the most recent period for which data are available. That is six points higher than in the third quarter of 2010. Rates on multifamily loans are 15 to 20 basis points higher than on single-families.

“We expect that single-family guarantee fees will increase in the coming years,” Fannie Mae said in its third-quarter report to investors, “although we do not know the timing, form or extent of these increases.”

In a letter to Congress last month, Edward J. DeMarco, the acting director of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, suggested “continued gradual increases.”

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Extended mortgages - online features

Jack M. Guttentag, who has a PhD. in economics, since the mortgage industry for decades as a professor and researcher in international banking at the Wharton School of the University of Pennsylvania since 1969 and as a consultant for Freddie Mac and the World Bank, to name a few. He has a weekly column under the name "mortgage Professor" written for 12 years, and a group named the prior Mortgage Brokers Association, which promotes the transparency of fees not even started.

In February mortgage started a service that helps to match buyers and lenders on its website Professor Dr. Guttentag and two partners. "You can talk to all the people you like, and it has often minimal effect," he said "but if you have them a better way to do it better show, wears it makes much better."

Mortgage market and Bankrate.com are Dr. Guttentag compete with the likes of better-established organizations such as LendingTree, Zillow. Marketplaces are these so-called mortgage always become more popular as a way for borrowers loan prices and options research. For example, LendingTree, says that it has facilitated over 30 million loan requests and $214 billion in closed loan transactions since its inception 15 years ago. And all the available 1,200 mortgage-related sites tracked by Experian Hitwise moved 126 million visitors in February to 26 percent over the previous year.

The larger sites offer a mix of consumer mortgage calculators and other tools, along with fare quotes or match-ups with one or more of the hundreds of participants lenders. Add many other features and functionality, to stay more competitive.

Zillow mortgage marketplace focused on mobile applications, and have seen the early "enormous deployment," said Erin Lantz, the Director of the marketplace. To their mobile mortgage app for the iPhone that offers check borrowers loans and rates, has been downloaded more than two million times since June. In February, it started a version for Android phones.

LendingTree, now plans to redesign their website in the next three months, and has several functions, including one called "The best loan for life." It evaluates homeowners signed with LendingTree to see whether it would worth to refinance short-term loans against new offers from lenders. In June, are users of the site can add their own information - i.e., prices and conditions from other lenders, associated with not only the LendingTree. This will do a side-by-side analysis "and to see which is better", said Doug Lebda, founder. on Bankrate.com who would like a mortgage banker can now access "a call-center interface" and finally connect with someone, said Bruce Zanca, a spokesman. Not all mortgage banks have signed, he said.

The mortgage Professor service is tiny in comparison: only six mortgage lenders have so far signed. But Dr. Guttentag said that he hoped some of the larger shopping sites teachings. It consists of its mortgage-shopping site "certified network lenders" calls, of which each must comply with certain standards and post prices in real time. Borrowers can shop anonymously, until she bombed a lender, which you choose with information.

At various points in the mortgage shopping process are borrowers covered by "Decision Support," access to short informative articles and question-answer capabilities.

Dr. Guttentag is already considering updates. "We have a special section on niche products," he said.

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MORTGAGE; Dealing with student debt

CORRECTION APPENDED

For many of the recent college graduates the dream possession of a House may have moved a while they will fight da first with repayment mound education loans.

Loan debt is outstanding student now over $1 trillion, according to a report by consumer financial protection Bureau last month. That exceeds the amount on all credit cards in the United States owned.

Student has debt an issue in the presidential election, President Obama and Mitt Romney, the alleged Republicans support efforts to loan subsidies expire will expand in July.

In the last year alone, students took loan from 117 billion dollars only in the Federal Republic. And it's no wonder: according to the College Board, the calculation of the average annual cost of out-of-state tuition, accommodation and meals at a public institution is $29.657; It is a private not-for profit $38.589.

"Some student loan payments are as high as a mortgage," said Cari sweet-Kostoplis, a manager of the Jersey Mortgage Corporation in Parsippany. It found that a client had loan monthly payments in the amount of $2,800 decided to work as a prison psychologist for a federal student program qualify loan forgiveness for those offered, commit the community service work after graduation.

Wife sweet Kostoplis and other industry professionals say that buyers for mortgage turned down many first-time because loan debt significantly their total debt raising their students. Most lenders follow underwriting guidelines, the total debt payments-for the mortgage and property taxes, plus credit cards, student loans, car loans, and other debt-to limit to 45 to 50% of adjusted gross income of the borrower.

Assuming the mortgage and taxes up to 33 to 35 percent, food, this means that students can make loan payments and credit card bills, no more than 10 percent or so of gross income, said Ms sweet Kostoplis. This corresponds to $833 per month for someone making $100,000 per year.

In order to reduce the monthly loan payments, borrowers can restructure or consolidate student loans. Mark Kantrowitz, the founder of FinAid.org, provides tips for student loans and grants, says that some students choose to extend the length of the loan.

Loan consolidation can carried be about the student loan provider Sallie Mae and net could an interest rate as low as 3% and a term of up to 25 years, first Vice-President of the Provident said David Boone Bank in Jersey City, n.j.

Before you look at a home, Mr. Boone aggressive recommends paid student loan debt and lack of any more large debts, to buy a car. Borrowers should also ensure that their student loan payments will be made in a timely manner. Overdue payments 30 days or more would be a loan late, be declared would, said Heather Jarvis, a lawyer in Wilmington, NC, student debt training, as well as advice for the highly indebted persons offers.

Mrs Jarvis, graduated from law school with $125,000 students in debt, also notes that there no statute of limitations on collection of overdue student loan payments and says that she knows of people even garnish your social security checks to pay back they had.

Conversely, she added, also help a borrower repayment of student loans on time and fully to improve credit score.

Another can reduce student debt the borrower family involved, although this comes with risks.

For example Mr. Kantrowitz said, could parents or grandparents take out voices a home equity loan and loan balances to disburse the proceeds of the students. The borrower would be home equity loans, the parent or to pay back directly to the lender. Home equity loans have usually lower interest rates as a student loans, because the debt is secured, he said, adding that if the at least two percentage points lower than the student loan was, it is worth, so that the change could be.

Charts: INDEX for adjustable rates mortgages: 1-year Treasury prices (source: HSH.com)

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Mortgages - refinance again when

Thursday Freddie Mac was pro survey 3.84 percent according to the average interest rate on a 30-year loan, down from 3.88 percent of the previous week, and 4.71% at about the same time a year ago. The interest rate for the 15-year loan average 3.07% from 3.12 percent of last week and 3.89 percent last year. Freddie Mac spokesman says that the prices are the lowest in the 41-year history of the per survey.

Many homeowners to refinance to decided last fall and winter when first under 4 percent popped up mortgage rates, Guy Cecala said the Chief Executive of inside mortgage finance, a trade magazine. He said "People who jumped 5 percent jumped to 4 percent,".

Mr Cecala says many borrowers refinancing these days are at least second timer - it, for, this did to last fall that his mortgage interest to lower percentage point three quarters - but he said he knew of no specific data follow this trend.

If you are considering refinancing, financial planner first hit diving you into your financial goals - in particular, how long you expect to live in your home.

Some home owners decide that it makes more sense to stay, especially if they plan, within one or two years to move or the savings are small with their current mortgage. "It's an effort to refinance - all these papers," said Sheila Walker Hartwell, a financial planner in Manhattan. One of their clients, they noticed recently against refinancing, because to use them equity in their home, which they hoped building was already on their next home purchase.

"When you refinance equity, not want to build," said Mrs Walker Hartwell. "You are at the beginning of the depreciation start tables".

Amortization schedule work as follows: in the first years almost all payment goes towards interest, so the longer you have the loan, which will be more in the direction of the principal.

"This is very important," Edward said ADEs, a partner in universal mortgage in Brooklyn. He mentions, for example, that in the first year of a $300,000 30 year mortgage at 4 percent, a borrower from 1.76% of the balance would have paid; in the fifth year, rising to 2.06 per cent.

Those who allow account not depreciation tables in the last year or two, but they must know their capital position - and if refinancing would begin to pay off.

To calculate, you begin, with an overview of all the closing costs, then share the closing costs by the amount you expect that to save on each monthly payment. So if closing costs $5,000, and your monthly savings are $400, take it 12.5 months to break even on refinancing.

When you, say it takes three years to recoup the cost, and you hope a financial planner Staten Iceland period of two years, then refinancing not useful, John j. Vento, said.

Depending on your lender, you must probably have 20 percent equity, and perhaps a little more, if your then want to include costs in the new mortgage. Who are underwater - an abbreviation for home value due to more than the is - possibly the home affordable refinancing program or HARFE, which is now widely available, Mr Cecala noted.

Greg McBride, senior financial analyst for Bankrate.com, hits home owners start with their current lender, and wondering whether they can streamline the process. You can may a second appraisal and title insurance reports and fees, he said, and added, "This not only time, but also money would save."

He also suggests that borrowers look you new lenders and a shorter loan term "shave years from the payments" and build equity faster.

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Mortgages - locks in peace of mind

This guarantee can a refinancing particularly important for those who are refinancing, where even a quarter of a percentage point could a borrower tend calculations and make financially less desirable, said Keith t. Gumbinger, Vice President of HSH.com a financial Publisher in Pompton of plains, n.j.

Prices for the 30-year fixed-rate mortgage averaged 3.95 percent nationwide in March, up from 3.89 percent in February after Freddie Mac, but this is still significantly less than the 4,84 average rate in March 2011. The average rate was 3.98 percent on Thursday compared to 3.99 percent of the week before.

"We expect that fixed-rate mortgages move 4.5 percent gradually higher in the next six months to around 4.25 how improved the economic situation of the country," said Frank Freddie Mac Vice President and Chief Economist Nothaft. "This would be a step of the all-time record low rates that we experienced in the last few months but still at a historically low level."

Rate lock - in the provide buyers with some peace of mind, not to mention less to think one thing, in an otherwise burdensome application process.

Lenders usually loan agreements give warranty a few, get if a borrower has a firm contract, but for those that are for a mortgage, preapproved, Rick said Allen, Chief Operating Officer of the mortgage Marvel, an online Web site.

When shopping for a mortgage bank, Mr beats Allen loans to inquire locks. He said, "A copy of the agreement get lock price", pointing out that this borrowers better understanding would help, how the process works.

The cost for the reservation of an interest rate depends on both the duration of the lock and the amount of the loan. "The longer is the lock, the expensive," an owner of allies said financial mortgage in river edge, n.j., mark Lazar. Most locks are for 30, 45 or 60 days, but some lenders go as long as six months.

Most lenders offer some version of a free lock, Mr Gumbinger said that even though it may be only for 30 days. Calculate other points - or parts thereof - based could be the several hundred dollars on the size of the loan. (A point equals 1 percent of the loan amount.) Sometimes these fees at closing will be refunded, said Mr Gumbinger.

Borrowers should skip a rate lock-in, or delay, and if they are not sure if their is close to buying a House.

"You must have a pretty good idea your last day of the period," Mr Lazar said.

To know how long in a rate lock requires the mortgage of your creditors on how long it takes a clear picture process and a good estimate, approve the loan and the paperwork and other requirements. This may treat for some lenders refinance 15 or 20 days; others take longer.

Mr Gumbinger said some lenders may extend an interest guarantee for a day or two, but you need an additional 10 to 15 working days to close, it could cost, a few hundred dollars or a fee a quarter point. On a balance of $300,000 loan that would work up to $750.

Mr. Lazar stated that some lenders for free, will prolong a set of lock-in, above all, if interest rates are unchanged.

What happens if your loan from the insurance carriers to get approved? Borrowers must inquire whether the lock fee will be refunded, and under what circumstances could they get back their money.

Lord said "Most lenders it will reimburse, if credit is denied," Allen. If the deal falls apart under circumstances beyond your control, such as a failed home inspection, such as many lenders will refund the fee, he added. If you decide to back out, you expect your money to keep locked up lenders.

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Mehr Hausbesitzer suchen Reverse Hypotheken in früheren Jahren

Reverse mortgages have always considered last resort was - something that could transform older pensioners if she urgently needed to supplement their dwindling incomes. But during the real estate market collapse and high unemployment, a new study has found that people are using reverse mortgages to more urgent financial pressure to alleviate such as the payment of debts. And House and apartment owners for these loans apply at a much younger age than in the past.

Reverse mortgages allow people age 62 and older, tap, which, can be your greatest asset, equity in their homes without having to make payments. Instead, the bank pays the borrower, although they remain responsible for the payment of property taxes and homeowners insurance of. If borrowers to sell (or if they die) are ready, the Bank takes its share of the proceeds from the sale and borrower (or their heirs), what is left.

From the MetLife mature market Institute and the National Council on Aging, study analyzed data from reverse mortgage candidates by mandatory counseling sessions with Government-approved guides went put together. The study includes 21.240 sessions from September until November 2010.

"Attitude of consumers about reverse mortgages vary because the recession has eroded confidence in retirement security and Americans are more and more on these measures", said Sandra Timmermann, Director of the Institute of MetLife mature market. "Because reverse mortgages have no income requirements, and other forms of credit have become less accessible, these loans are more attractive."

The research, that around 21% of homeowners who went through advice 62 were found to 64 years old - although you can drag less money from the younger, you are. This is an increase from the 6 percent of the borrower of this age group 1999 applied for reverse mortgages.  These observations are consistent with a recent industry analysis, a dramatic shift toward younger borrowers in recent years found.

MetLife mature market Institute

And the average age of the borrower at the age of 73, as the chart shows above, was the average age of the homeowner, who went through the advice 71.5 years old. This is study, consistent, said, with the Housing Department results. "If we look more closely at the age distribution of the last advice customers, it seems that this broad trend at the beginning of generations can hide a major shift in the use of reverse mortgages,", said the study.

House and apartment owners that a reverse mortgage are superior to, are almost 46 percent under the age of 70, according to the study.

The vast majority of advising clients in the year 2010, or 67 percent, searched for the reverse mortgage to reduce their debt of households. Only 27 percent were taking into account, that it to improve their quality of life. The last advice clients (67 percent) said that they had a conventional mortgage, that when they decided to record the mortgage, while 27 percent identified with housing and nonhousing debt had to be paid back. Of course means with their own capital to repay the debt, that they less links they will it in the future need to access.

For almost one-third of the consulting of the clients existing mortgage may half the value of their home, and the study said. In other words, they are not enough to qualify for equity for the mortgage, or they wait several years until they for a loan, which can greatly qualify enough to satisfy their financial needs.

Most reverse mortgages arise through the Department of housing-home equity conversion mortgages program - known as HECM (pronounced: HECK-um) - the more become popular in the last 10 years. There have been many changes to the program, including a new loan option known as the "HECM saver", according to which lower fees in advance. This version was released in October 2010, so the study noted that its results may reflect the fact that more homeowners considered these loans, although it is unlikely that it had a huge impact.

The authors of the study also suggest that more homeowners expected home equity to their pension instead of it type only for emergencies to integrate. "It is likely the option reverse mortgage applies in addition to some of the more traditional methods of saving and investment", said Barbara Stucki, Vice President for the home-equity initiatives at the National Council on aging.

The study included also a consumer advice: Guide to mortgages to reverse.

At what point would you consider a reverse mortgage?

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Avoid mortgage mortgage relief scams

But these so-called mass connection actions advertised in programmes are fraudulent - allegedly out by company law firms, according to a consumer warning on the Federal Trade Commission website are published.

The F.T.C filed a lawsuit against an operation based in Santa Ana, California last month, claiming that it nationwide more each join as to pay $6,000 to $10,000 to 1,000 homeowners "mass connection" suit, which similarly had convinced as are class action lawsuits. House - and apartment owners with little or nothing in return landed, said the F.T.C...

"It is a new trend," Reilly said Dolan, the Agency Deputy Director of financial practice, these fraudulent operations describe changes as part of a wide range of fraud in connection with loans.

Consumers can lose valuable time, these dishonest players - not to mention money. The non-profit Lawyers Committee for civil rights under law, the seven complaints nationwide with fraudulent loans has brought changes, estimates that nationwide homeowners, the fraud in its database registered have lost over $ 60 million in the last two years alone, and $4 million of these losses were suffered by New York.

Of course, there are many credible law firms to help homeowners. But Mr Dolan pointed out that some companies could promote itself as a provider of services in the area of law, when they, just an advocate for retention say, as a way to F.T.C had rules to collect only lawyers in advance fees on mortgage help. And these companies may not meet all requirements of the rule, which also requires that the lawyer licensed his lawyer in the State of the homeowner lives.

"We get people who think that they have lawyers who have received the lawyers that they are not sufficient support, definitely," said Erica Jo Gilles, Associate Director of advocacy and public relations at the South Brooklyn legal services.

Such companies and people as lawyers are 60 per cent jump in complaints about mortgage in this year according to a report this month from home ownership Preservation Foundation, was fueling the distressed homeowner helps. The nonprofit group says that the boost with the announcement of the new Covenant falls utilities for homeowners.

How can to protect consumers from unscrupulous operations? Here are some suggestions from industry experts.

Validating credentials State bar associations have lists of approved lawyers. (And the national organization of bar counsel Web site contains links to national associations bar.) When you speak with an attorney, consumer questions on the track record of the lawyer, including the documentation of achievements through media reports or court documents granting signed borrower money or relief. The names of the lawyers that specialize in foreclosure and loan modification, local bar associations provide housing can guide of nonprofit groups in some cases.

Beware of promises "Legitimate lawyers not guarantees, such as doctors," said Colleen Hernandez, the Chief Executive of the Homeownership Preservation Foundation. In particular Mr Dolan of F.T.C. proposed, restore to avoid companies that promise to credit.

Pay in advance "When they say n-O, questions you want for any kind of money,'" said Martha Cedeno-Ross, a consultant with neighborhood of housing services in Waterbury, Connecticut provides that that there are non-profit groups many free services, certified by the Department of housing and urban development.

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Mortgages - loans reverse in recent years

Consumer advocates warn that these borrowers are in danger, at an early stage to exhaust their resources.

House - and apartment owners between 62 and 64 years are far more likely Institute and the National Council on aging after last month published report by MetLife mature market, take a reverse mortgage today than they were in 1999, even if means you less of their home equity, can borrow their age.

The average age of those who have gone through the State-required reverse mortgage advice 71,5, the report found, was down from 76 in 2000 and nearly 77 in 1990. Twenty percent were 62, 64, who says report, compared to 6 percent in 1999, when the last detailed research has been completed.

A reverse mortgage can homeowners 62 and older to borrow against the equity from their homes, and in them the House live, without paying, as long as remains their primary residence. The interest is added to the loan balance, and the loan and the mortgage insurance premium can be added. After the borrower moves or dies, the loan must be repaid.

Almost all reverse mortgages come through the Department of housing and urban development today and are by the Federal Housing Administration through a program called home equity conversion mortgages or HECM guarantee.

Although many industry experts feel the minimum age for the inclusion of a reverse mortgage is set to 62, it is too young.

"It is a bad idea," said Judith Grimaldi, lawyer in Brooklyn, has specialized in the representation of the elderly. "You have that too much life to taking your most important asset."

Ms. Grimaldi reminds a New Jersey couple who took a reverse mortgage in the 1960s. Now in the 70's, they have no equity links in their home, which means that they undress and buy another can afford. See HECM insured reverse mortgage borrowers with property taxes and insurance must keep up to date.

The loan amount depends on a borrower age, the assessed value of a home, the interest rate and whether the rate is fixed or adjustable. "The older the person is, the more they can be justified," said Mario Martirano, senior Vice President of residential home funding Corporation in White Plains, n.y.

Homeowners who wait until at least the age of 72, take a reverse mortgage get significantly more Mr Martirano said, although he noted that some borrowers can't wait. You can use a reverse mortgage to dig, or even to prevent foreclosure, as long as they have enough equity in the property itself out of a financial hole. "We do a lot of for foreclosures," he said.

The MetLife research found that two-thirds of the homeowners wanted to search reverse mortgages, that them as a way to reduce their debt and help, "their often precarious financial situation." (The MetLife report an analysis of the 21.240 advice guides approved meetings of HUD is based on.)

Kelly Sabino, the Director of the Division's reverse mortgage mortgage in Melville, n.y., told us, "The majority of the people that we see are demand-oriented clientele," with significant debt.

Ms. Grimaldi said that the borrowers can sometimes let marketing of reverse mortgages and less expensive alternatives, such as a line of credit secured not taken into account by a House of industry.

Homeowners at or near retirement with a financial planner or a lawyer specialized in real estate, to ensure that they should work a clear plan for the next 20 years which have cost of living, said Mr Sabino. He asks customers to develop a list of relatives, which may be affected by a reverse mortgage. "Get it all together so that we can talk about" and answer their questions, he said.

This article has been revised to reflect the following correction:

Correction: 13 April 2012

Mature market distorted part of the name of the MetLife Institute an earlier version of this article. It is not "markets."

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Mortgages - loans online shopping

Mortgage markets in the newly created consumer financial protection wizard suggests Office, Peter Carroll, Executive Director, that borrowers start read the fine print of any Web site who choose to work with. "Understand the terms of service and privacy policy", said Mr Carroll.

If you shopping are interest rates on sites like Bankrate.com or LendingTree loans, also make sure the section "frequently asked questions" read industry experts say - and also, recognize that these sites which are money by working with lenders, on a pay-per-click formula, or by generating leads.

If you will to provide personal information including your credit score to find out you made, how far, that material in circulation will be brought. As Mr Carroll put it, "understanding that many lenders will contact."

On Zillow mortgage marketplace is the average number of prizes offers customers get 20, while at LendingTree it is 3 to 5, according to both companies.

Most websites give prices and further information only from lenders who their clients are logged on. An exception is Bankrate.com, provides a table that the customers loans as also the five largest banks and other lenders in some 600 local or metropolitan areas contains.

Online mortgage market has become more and more popular loan prices and options for borrowers. Some of the 1,200 mortgage-related websites are tracked by Experian Hitwise and top seven sites drew more than 22 million domestic total visits in April to 24 percent compared to the previous year earlier and 74 percent from April 2010. The figures are expected to be with the wider use of smartphones and other devices.

Doug Lebda, CEO and founder of LendingTree.com, pointed out, that for the last three years, the difference between the highest and lowest rates comparison shopping make even more important "was wider than it was in recent history,". But he also pointed out that the advertised prices are as "indicative prices, but they are certainly not offers."

Mr. Lebda proposed that borrowers mortgage introduction also fee and closing costs into account.

As they navigate Web sites by online mortgage, must find out borrowers, the sites can pay them criteria for matching up with lenders, and whether the creditor for higher placement. This is where the fine print can come to read.

"Make sure that you feel that you are in the control", said Erin Lantz, the Director of Zillow mortgage marketplace. In this way can you give your personal information to lender of choice, out.

And when a credit report is pulled out from the lenders, Mr Carroll added to find out "What rights they have on this information in addition to assessing these applications from loan?"

Borrowers will experience also quality control at the sites that they want to visit. Bankrate.com, has, for example, a 40-person quality control Department, which investigated complaints and doing, what is known as "Mystery shop" on various websites. LendingTree says that it is based partly on consumer ratings and reviews, such as Zillow mortgage marketplace. It has over 10,000 reviews so far, Mrs Lantz said, adding that the reviews are also checked to ensure that they are not by any creditor.

Mortgage shopping sites is often to advertise, make easier and faster could be counterproductive comparisons for borrowers, but Sue Berkowitz, the Director of the South Carolina Appleseed legal said Justice Center, the advocates for more information of these companies. "It should be done time consuming and analysis."

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Mortgages - dealing with student debt

Loan debt is outstanding student now over $1 trillion, according to a report by consumer financial protection Bureau last month. That exceeds the amount on all credit cards in the United States owned.

Student has debt an issue in the presidential election, President Obama and Mitt Romney, the alleged Republicans support efforts to loan subsidies expire will expand in July.

In the last year alone, students took loan from 117 billion dollars only in the Federal Republic. And it's no wonder: according to the College Board, the calculation of the average annual cost of out-of-state tuition, accommodation and meals at a public institution is $29.657; It is a private not-for profit $38.589.

"Some student loan payments are as high as a mortgage," said Cari sweet-Kostoplis, a manager of the Jersey Mortgage Corporation in Parsippany. It found that a client had loan monthly payments in the amount of $2,800 decided to work as a prison psychologist for a federal student program qualify loan forgiveness for those offered, commit the community service work after graduation.

Wife sweet Kostoplis and other industry professionals say that buyers for mortgage turned down many first-time because loan debt significantly their total debt raising their students. Most lenders follow underwriting guidelines, the total debt payments limit - for the mortgage and property taxes, plus credit cards, student loans, car loans, and other debt - 45 to 50% of adjusted gross income of the borrower.

Assuming the mortgage and taxes up to 33 to 35 percent, food, this means that students can make loan payments and credit card bills, no more than 10 percent or so of gross income, said Ms sweet Kostoplis. This corresponds to $833 per month for someone making $100,000 per year.

In order to reduce the monthly loan payments, borrowers can restructure or consolidate student loans. Mark Kantrowitz, the founder of FinAid.org, provides tips for student loans and grants, says that some students choose to extend the length of the loan.

Loan consolidation can carried be about the student loan provider Sallie Mae and net could an interest rate as low as 3% and a term of up to 25 years, first Vice-President of the Provident said David Boone Bank in Jersey City, n.j.

Before you look at a home, Mr. Boone aggressive recommends paid student loan debt and lack of any more large debts, to buy a car. Borrowers should also ensure that their student loan payments will be made in a timely manner. Overdue payments 30 days or more would be a loan late, be declared would, said Heather Jarvis, a lawyer in Wilmington, NC, student debt training, as well as advice for the highly indebted persons offers.

Mrs Jarvis, graduated from law school with $125,000 students in debt, also notes that there no statute of limitations on collection of overdue student loan payments and says that she knows of people even garnish your social security checks to pay back they had.

Conversely, she added, also help a borrower repayment of student loans on time and fully to improve credit score.

Another can reduce student debt the borrower family involved, although this comes with risks.

For example Mr. Kantrowitz said, could parents or grandparents take out voices a home equity loan and loan balances to disburse the proceeds of the students. The borrower would be home equity loans, the parent or to pay back directly to the lender. Home equity loans have usually lower interest rates as a student loans, because the debt is secured, he said, adding that if the at least two percentage points lower than the student loan was, it is worth, so that the change could be.

This article has been revised to reflect the following correction:

Correction: 6 may 2012

The mortgage column distorted last Sunday on the qualifications of a mortgage while repeatedly paying student debts, the politics of Sallie Mae, a student loan provider, consolidation loans. It offers personal loans to current college students, that financial assistance must complement Federal Republic of, but it offers no consolidation loans.

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