Last week, I was privileged to hear a lecture given by the highly influential and esteemed attorney Mr. Robby H. Birnbaum. Mr. Birnbaum practices before the CFPB, the Federal Trade Commission (FTC), offices of state attorneys’ general, state banking and financial services departments and federal and state insurance regulators.
A primary take-away for me is that the credit bureaus now, in 2022, will not consider a dispute on the basis of “unfair.”
This strikes me as very odd, since a big portion of credit law is based on The FAIR and Accurate Credit Transactions Act that was passed by Congress and signed into law in 2003.
If you were reported as late unfairly due to illness, loss of income, pregnancy, a liar, a scammer, or anything else — the credit bureaus will not hear your cry of “Unfair!” Therefore, don’t put that word into your dispute letter.
What they WILL consider is a dispute based on one of the following:
I’ve had some questions come in about getting a settlement agreement on a collection or charged off account and how that plays out in having the account deleted from your credit report.
A settlement is an agreement to pay less than the balance showing. Saving money is always a good thing — especially when the balance might include late fees and a high interest rate. If the past due account has been sold to a collection company, then they probably purchased your debt (along with a bundle of other people’s debts) for pennies on the dollar.
A collection agency can afford to settle less than the balance and still make a profit.
If the balance is $6,000 and they settle for $3,000 and they report to the IRS that you profited by $3,000, that is okay. You will come out ahead by saving $3,000 and reporting an “income” of $3K to the IRS. Always take the settlement when you can — which is most of the time.
The purpose of the settlement is so they make some money rather than zero. Your purpose is also to save money and to stop the stress and harassment at the same time. You also want to get it deleted from your credit report, which is another step in the negotiation process.
Settling for less than the balance does not remove it from your credit report. The best settlement agreement includes both saving money and deletion from your credit report.
The #1 rule of getting a settlement is to get it in writing. If it’s not in writing, you run the risk of another individual at the collection company contacting you later for more money, claiming you did not pay all that you owe. That very thing happened to one of my book readers recently; and fortunately, he had followed Chapter 15 and gotten the agreement in writing, which shut them up in a big hurry.
When their Settlement Agreement Letter states that they will accept $3,000 for account # 1234 if paid by the end of the month, then that ensures they won’t ask for more money later. IT DOES NOT REMOVE IT FROM YOUR CREDIT REPORT.
If the letter states that they will report the account as “settled and paid,” then that wording goes on your credit report and confirms that the account is yours, because you agreed to the amount and paid it.
You are doing yourself a disservice to have “settled and paid” added to the account. You don’t want that! You want them to agree to delete it from your credit file upon receipt of funds.
Working as a mortgage loan officer doing debt payoffs in a refinance, I also negotiated many settlements for my homeowner clients. I share how I did this and exactly what I said in Chapter 15.
Sometimes, the creditor absolutely refuses to provide an agreement to remove the account from your credit file, and no matter how long you hold out, they won’t budge. In that case, use the strategy in Chapter 16, even if your account is small and not large.
An agreement that is not in writing (letter or email), is a tease, not an agreement. You must get the agreed upon amount — with any added terms (all in your favor) — in writing so that you can save it for future use.
If you receive a threatening phone call or letter, especially if it is a large balance or from an attorney’s office, do not ignore it. Check to see if it is past the Statute of Limitations in your state; and if not, negotiate a good Settlement Agreement that is put into writing.
Good luck! Others are doing this, and you can, too.
It’s a good idea to edit your dispute letter to make it personal to your situation. This is why I included samples of actual dispute letters with the Letter Packet you get free with the book. (Request it here.)
One small edit you can make to help prevent your letter from looking like it is from a template is to replace “sincerely” with a different closing. Something that is not a standard business letter closing that everyone uses is good. Depending on who you are and what region you live in, here are some ideas to consider and get your creative mind working
Thank you in advance for fixing this issue
I appreciate your help
Have a good day
Y’all have a good day
This morning, the cover design for my new upcoming book was finalized. I am so excited and I love what the designer did, because it truly reflects the message of the book.
Here’s a sneak peek. Book expected to be released later this month, and I will provide more information about what’s inside soon.
Lender’s Title Insurance is required when you buy a new home and close on that mortgage loan. The title company does a search to make sure the title is clear of all encumbrances and possible issues. They insure your title for the life of the loan with lender’s title insurance.
No lender will give final approval on the loan without having their money protected. They are not going to lend hundreds of thousands of dollars and put that at risk. They require the title insurance to be in place for closing.
Let’s say that 10 years later, there is another individual who has the same name as you in the U.S. That person fails to pay their IRS taxes. They move around a lot. The IRS wants to find them and make them pay back taxes. They do a search using your name and find five people who own property. They place a tax lien on all the properties. They are erroneous liens on all the innocent homeowners, including you. You never even know about the lien, until one day…
You decide to refinance into a lower rate. The title company does a search and the false tax lien is on your property. It is not you! The title insurance company uses your information (such as date of birth, social security number) to prove to the IRS that it is not you and removes the tax lien so that your new refinance can proceed and close.
As a mortgage broker for 23 years, I have seen that scenario a lot. Sometimes the lien is not the IRS but another type of bill that was never paid. A contractor who did remodel work and failed to get paid might place a lien on the wrong person’s property. Not unusual. I’ve seen that a lot and the title company gets it removed.
Especially when a person has a common name, several false liens can pop up. As a loan officer, I have even called the attorney and gotten liens removed for a client named Smith myself when the title company was busy and too slow for my liking. The title insurance protected the owner from that lien that belonged to a different Smith.
Another scenario is a false heir popping up and claiming to have inherited the property. I have also seen that. The title insurance company protected the rightful owner from this person who claimed to have ownership in the property. The owner had purchased title insurance from First American Title more than 20 years prior when he bought the house. First Am got the bogus heir’s false filing off of the property.
Owner’s Title Insurance protects you as the owner for as long as you own the property, even after the mortgage is paid off.
Lender’s Title Insurance and Owner’s Title Insurance go hand-in-hand and it is important to purchase both. It is worth the one-time cost.
What do you do when you can’t afford to buy the house you want?
This chart shows interest rates for a conventional loan, 30-year fixed rate and 15-year fixed rate.
You can see that today, a 30-year fixed rate is 5.25%, the highest it’s been in the last 10 years.
This is causing some home buyers to lose their preapprovals. The loan they could afford at 4% they cannot afford at 5.25%.
When you cannot qualify for the home you want, here are some concessions you might consider making:
Give up some space. What can you live without for now? Maybe a second bathroom or additional bedroom is a “want” but not a “must.”
Give up some amenities. Everyone wants hardwoods throughout and granite countertops. Those are luxuries a first-time homebuyer can live without.
Look in a less pricy neighborhood. Less desirable neighborhoods become more desirable when they are the only affordable locations. More professionals move in and clean up their properties, raising the value of real estate. A low-price neighborhood can be a place to start (assuming it is not too dangerous for your family).
Buy farther from the city. With more employers allowing work-from-home, more people are able to buy outside city limits where decent starter homes are not priced ridiculously high. Maybe a change of scenery would be welcome anyway.
Look at a condo or townhome. You might consider a condo as a way to get started in owning real estate. The tricky thing about condo buying is that there is also a Home Owners’ Association with monthly HOA dues, so you want to make sure the dues are reasonable. Find out what the HOA budget looks like (to check for pending litigation and that there are reserves to cover things like future painting or roofing) and what the rules are (such as if pets are allowed).
Even though rates have topped 5%, they are still a lot better than the days of 10% – 16% rates. So don’t let 5% discourage you from becoming a home owner. Be aware and tailor your desires to your budget.
ALWAYS get preapproved in writing before you go house shopping. You need a solid Preapproval Letter in hand from a mortgage broker (preferred) or bank.
Is it a good idea to take a Home Equity Line of Credit (HELOC) as a safety net in case you need emergency cash?
Now that refinance business has dropped off a cliff due to the higher interest rates, lenders are soliciting homeowners to open a HELOC.
A home equity loan is a second mortgage that is secured in second position behind your main mortgage. If you were to default on your mortgage causing the home to be foreclosed and sold at auction, the main lender would be paid first. Then if there was enough money from the sale, the second mortgage holder (the lender who did the HELOC) would get paid.
Because it is riskier to take second position, any second mortgage has a higher interest rate. Because most people don’t like high rates, the HELOC is set on an adjustable rate mortgage. You set the loan for the maximum amount of cash you might want, then you are given checks for withdrawing money as desired.
An adjustable rate mortgage (ARM) begins at a lower rate than a fixed rate mortgage, but later it can go quickly and significantly higher.
How much higher? That depends on the terms, which you need to be aware of before signing. Here are questions to ask:
What is the start rate?
When will the interest rate be first adjusted and how often after?
What is the index? (This is what the rate is based off of.)
What is the margin? (The index + the margin = your new rate when it adjusts.)
What is the lifetime cap? (The max rate it can go up to.)
Is there a prepayment penalty? If so, what are the terms?
Those are six essential components you should understand before signing.
Here’s an inside tip: The lender makes a bigger profit by giving you a bigger margin. Most borrowers don’t pay attention to the margin and many loan officers don’t bring it up if you don’t ask. The margin is negotiable on some second mortgages, and it is a crucial part of the loan. Some banks have the margin set in stone so there is no negotiation, but you need to understand what it is and how it works.
Lifetime cap: It’s not unusual to see a very high rate such as 19%. If you have cash out and the rate goes that high, how will you handle the payment? If you do not pay your HELOC, they can foreclose on your house even if your main mortgage is paid 100% on time.
Prepayment Penalty: This is a big “gotcha” in California. In Washington state, a prepayment penalty on a second mortgage is illegal. If your HELOC will have a prepay penalty, then ask, “What is the worst case scenario?” Loan officers are famous for minimizing the affect of a ppp, saying “it will never happen to you,” “it’s not a stopper,” and other nonsense.
WHO SHOULD GET A HELOC?
In my opinion, only people who have had top tier credit scores for at least three to five years should get a HELOC. Why?
Because in my 22 years of working in the mortgage industry and in doing loans in 25 states for all types of credit profiles, it is my experience that only people who are fiscally conservative will handle a HELOC in a manner that does not work against them.
For many people, having a HELOC is like an alcoholic having a bottle of vodka in the house. They can’t resist using it for something they would like to have but cannot afford. They don’t have the patience to save cash, so they go into debt for a non-essential big ticket item.
If you maintain excellent credit and have a low debt-to-income ratio and want to take a HELOC, then ask the six questions above, then you will have the information to make an excellent choice. Best sources for a HELOC are midsize local banks and some credit unions. Personally, I like Banner Bank for HELOCs.
If you missed the information last week about medical debt being removed from credit reports, scroll down and read that article. Today, let’s talk about RIP Medical Debt, a charity organization.
So far, 3,619,950 individuals and families have had their medical bills paid for, adding up to $6,748,483,828 in debt PAID OFF by RIP Medical Debt.
RIP Medical Debt buys portfolios of debt from hospitals and other secondary sources, then they select the ones who are in the most dire need, and pay off the debt for them. In addition, they remove the debt from their credit reports. This is in compliance with all federal and state laws. This does not create “taxable income” for the person, so there is no Form 1099-C with the IRS.
Their criteria for selection looks like this:
The recipient must earn less than 2x the federal poverty level. (The income amount varies by state and family size. You can Google search your state.)
The medical debt is at least 5 percent of the family’s annual income.
You do not apply for this relief yourself, but it might be possible for you to ask your hospital if they are familiar with RIP Medical Debt, or if they might get it touch. https://ripmedicaldebt.org/hospitals/
If you don’t qualify for RIP Medical Debt help, here are some tips about handling medical bills:
Never pay with a credit card UNLESS you can afford to pay off the credit card bill when the statement arrives. Use your credit card as a convenience, not as a tool to go into debt hell that might lead to eventual bankruptcy.
Ask the hospital for financial assistance. You can do this even if your stay was a year ago.
When you apply for assistance, let them know about other large bills you have. That is an important factor in receiving help. You might qualify even if you have a good income due to debt-to-income ratio.
If you cannot get financial assistance, ask for a payment plan.
Don’t stop taking the medications you need or getting the medical care you need if you cannot afford payment. Your health, your staying alive is more important than money. “People over money” always!
For more information about RIP Medical Debt and/or to make a donation to this charity, see here.
Equifax, Experian, and TransUnion said in a joint statement that they will be removing 70 percent of all medical debt off of credit reports.
Beginning July 1, 2022, medical debt that has been paid off will be deleted. Those negative medical accounts that show late payments, as a collection, or a charge-off will automatically disappear. No letter from you required!
More Good News
Beginning early 2023, medical debts with a balance less than $500 will not be included on a credit report.
This is great news, because a $2 debt that shows late hurts your score as much as a $2,000 debt. It is the late factor that docks you, not the balance. No more credit score punishment for small medical collections!
The Reason for the Change
In light of the recent pandemic, the credit bureaus do not want to penalize people who incurred medical expenses, were unable to pay for awhile, but then got caught up and paid.
It was determined — and rightly s0 — that those people do not impose a risk for lending credit. Therefore, they should not have their credit scores decreased for paid medical debt or small debt.
Beware: This Does Not Cancel Your Medical Bill
Notice that the negative accounts that will be deleted are those with a $0 balance. This does not mean you don’t have to pay a medical bill.
If you have a balance owing, now would be the perfect time to negotiate a settlement per Chapters 15 in Repair Your Credit Like the Pros (here). You don’t even have to get the agreement for the collector to remove the account upon receipt of payment now, because the credit bureaus will delete it July 1st. Easy-peasy!
Thank you and please “Like” and pass on to others who could be encouraged by this information!
I would never expect my dentist to charge me illegally, but that is exactly what happened.
This goes to show why it is imperative to read every type of bill, in detail. I will explain what happened in hope that my experience might help save someone else money.
CONTRACT BETWEEN INSURANCE COMPANY AND DENTIST
The dentist has a contract with “approved” insurance companies, in my case, Delta Dental Insurance.
The dentist sends the bill to the insurance company. The insurance company has a limit for the max they will pay for each given procedure.
In my case, Delta Dental Insurance pays 100% for preventive care, such as teeth cleaning.
After receiving payment from Delta, my dentist sent me a bill for $60. Why? Because that was above what Delta was willing to cover. But wait!
I called Delta Insurance and learned that their contract DOES NOT ALLOW the dentist to charge the patient more! So their bill for $60 was illegal, according to their contract.
Delta Insurance offered to call the dentist for me and inform them they could not bill me for $60. The dentist’s employee told Delta the $60 was a “balance forward.” But that was FALSE.
At the top of my bill it said: Balance Forward $0. Plus, if I had owed money, they would have been asking me for payment.
So then I called the dentist to get that false and illegal $60 bill removed. She said, “I will remove the $60 but you still owe $10.”
“What is the $10 for?” I asked.
“A PPE fee. That is for extra Covid precautions.”
“You mean I have to pay for your Covid masks?” I asked, incredulously. “That was not on my previous bill.”
“Yes,” she said. Now I was even more annoyed! Why were they adding a new fee? Like a junk fee?!!
I called Delta Insurance again. The insurance agent laughed and said, “They are not allowed to charge you any PPE fees for Covid-related expenses. At the beginning of Covid, I sent out a memo telling them how to handle PPE fees.”
Now I called the dentist again. This time I said, “Who is the top person in charge of billing?” She gave me the name April. “I want an appointment with April,” I said. “I am coming in to straighten out my bill, because it is a mess.”
Two days later, I went to my appointment with April. Guess what happened?
April started off my saying, “Let me first apologize to you.” She said she reviewed my bills going back to 2019 when they went on a “new billing system.” Then she handed me this check for $209.70.
They had been illegally sending me a bill for the difference between what the insurance company allowed (and paid) and what they wanted to charge (over-charge). Not knowing it was illegal, I had always paid it.
But because of that stupid $10 PPE fee and my insistence on speaking with the person in charge, I received a nice refund check.
I wonder how many other dental patients are owed a refund but who will never receive it, because they don’t question their bill or call the insurance company and ask.