I have discussed strategic defaulters in previous blogs.  To refresh your memory, strategic defaulters stay current with their debts but default on their mortgage because they have negative equity or are “upside down.”  They can afford to pay their mortgage, but choose not to do so.

FICO study

FICO conducted research on strategic defaulters compared to those that go delinquent (90 days or more late).  They identified the following characteristics:

Strategic defaulters have a higher FICO score and have had good payment history.

They haven’t used much of their credit limit on their credit cards, so their utilization is low. read more »

The Obama Administration’s phase 2 of the Home Affordable Refinance Program (HARP), or HARP Phase 2, is to assist homeowners whose mortgages are underwater and pay their mortgages on time.  This program lets them refinance their mortgage to take advantage of low rates, even though they have negative equity in their home. Approximately 20 million homeowners are eligible for this program, but their mortgages have to be backed by Fannie Mae or Freddie Mac. To find out if your loan is owned or guaranteed by Fannie Mae or Freddie Mac, go online to either http://www.fanniemae.com/loanlookup/ or https://ww3.freddiemac.com/corporate/.

Terms of HARP 2

Here are some of the highlights of HARP 2 and more information is still coming out: read more »

TransUnion, one of the three credit reporting agencies, analyzes their consumer database quarterly to determine how credit active consumers manage mortgages, credit cards and auto loans.  This analysis is called the “TransUnion Trend Data”; the latest study was from third quarter 2011 (Q3 2011).  Credit card delinquencies and the average credit card balance increased from the prior quarter, while delinquencies and debt decreased from a year ago.

Delinquency rate

The national credit card delinquency rate (more than 90 days past due) was .71 percent in Q3 2011, compared to .6 percent in Q2 2011 or an 18.3 percent increase. This was the first increase since fourth quarter 2009.  The Q3 2011 delinquency rate was a decrease of 14.46 percent from the .83 percent rate a year ago. read more »

On October 26, 2011, the White House announced a student loan relief plan, which made changes to the federal student loan program passed by Congress in July 1, 2010.  The 2010 law lowered the repayment cap and eliminated banks as the middle man for government student loans.  This 2011 relief plan changes repayment plan effective dates and provides for federal loan consolidation.

Student loan debt continues to mount with $1 trillion in outstanding, which has surpassed credit card debt.  In 2010, student loans taken out totaled $100 billion. Approximately 36 million are currently paying college debt. In-state tuition and fees at four year public colleges increased 8.3 percent over one year ago; the average tuition is over $8,000 annually.  Private college tuition increased by 4.5%, with $14,000 being the average tuition. read more »

This is a continuation of The Institute for Financial Literacy’s Annual Consumer Bankruptcy Demographics Report for 2010. Part 1 of this blog covered income, education and cause of financial distress.  Part 2 covers the remaining areas: gender, age, employment and marital status.

Additional Key Findings

The largest increases from responders in the last five years were those in older age groups, self employed, and married. read more »

The Institute for Financial Literacy released its Annual Consumer Bankruptcy Demographics Report. This report included not only 2010 demographic information, but also comparisons to data collected since 2006. They surveyed their clients, who were fulfilling requirements according to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).  The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 required individuals to complete mandatory credit counseling in order to be eligible to file a consumer bankruptcy case under the bankruptcy code. The law also required certain debtors to complete a mandatory financial management instructional course to receive a discharge of their debts.  For purposes of this study, they didn’t know if the client filed bankruptcy after the credit counseling.

The survey covered January to December 2010, and included 52,851 of their clients from the 50 states, Northern Mariana Islands, Virgin Islands and Guam. The information surveyed included gender, age, education, income, employment, marital status and causes of financial distress. read more »

Professional Risk Manager’s International Association (PRMIA) conducts a quarterly on-line survey for FICO. The most current one surveyed 188 bank professionals in August 2011. The bankers expected delinquencies to increase for consumer loans, underwriting would become stricter and the housing market would continue to struggle.  More than 48 percent feared the U.S. was heading into another recession. They expected delinquencies to rise for auto loans, student loans, mortgages and credit cards in the next six months.  Almost half thought it will take five years for credit card balances to reach pre-recession levels and nine years for housing to reach pre-recession levels. read more »

In September 2011, a bill to update the Telephone Consumer Protection Act (TCPA) was introduced in the House of Representatives. This bill, the Mobile Informational Call Act of 2011, will allow informational calls to cell phones using auto-dialers or robo-callers; clarify the “prior express consent” requirement; and continue the prohibition against the use of “assistive” technologies to call wireless numbers for telemarketing purposes.  “Prior express consent” is oral or written approval by a person, because of a business relationship or purchase, or by providing their phone number. read more »

This is one of the most common questions when it comes to credit report information.  It’s of most concern when you have negative data on your credit report, which can seriously impact your credit scores.  The information on your credit reports is compiled by the credit reporting agencies from many different sources.  The account information such as credit cards, mortgages, and car loans is reported by the credit grantors.  Public records such as judgments, civil suits, bankruptcies and tax liens are delivered electronically from public record venders of PACER. Collection agencies report accounts that have been turned over to them to collect upon. read more »

In March 2011, the Federal Trade Commission (FTC) issued their annual report, which included consumer complaints about 3rd party debt collectors, called “The FTC Annual Report 2011: Fair Debt Collection Practices Act”.  The FTC enforces the Fair Debt Collection Practices Act (FDCPA) and receives hundreds of thousands of consumer complaints about debt collections.  Behind identity theft, debt collections received the second most complaints. read more »