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Tuesday, November 21, 2017

Debt Consolidation Referral Fees

Posted by PattiM

A number of firms looking to make easy money supposedly fixing your debt problem are vigorously soliciting Mortgage Brokers and Mortgage Agents looking for you as a referral client.

They offer the broker/agent as much as half of the fee they are going to charge you. That’s right they will charge you a hefty fee — see further for how it is calculated.

Their fee is based on 50% of the amount they intend to save you.

Here is an excerpt from their pitch to the brokers and agents:

“Debt arbitration is our primary product, though which we are able to significantly reduce our clients debt loads by leveraging their financial hardship with a lump sum payment.”

They go on to say:

“As financial hardship is often the reason our clients come to us, few have the resources available to make a lump sum payment on their own, thus mortgage financing – either refinancing a current mortgage or obtaining a second mortgage – is a crucial element to the service we provide.”

These so called “lump sum settlements” are supposed to improve your situation beyond that of a Consumer Proposal (see our information on Consumer Proposals good or bad). The fact is you may be much better off in bankruptcy considering, on average people, filing bankruptcy or a consumer proposal still keep their home. (you need to know how to keep your home in bankruptcy)

They also claim — “Our average reduction saves the client 60% of the original balance.”

So let’s run some numbers:

Suppose you owe $80,000 on lines of credit and credit card debt.

If they save you $60% — you will have to pay out $32,000 in lump sum settlements.

Theoretically you will save $48,000, but wait, remember their fee is 50% of the saved amount or in this example — $24,000.

HST is due on that amount $24,000 @ 13% — add another $3,120.

That means ($32,000 settlement amount + $24,000 fees + $3,120 tax) = $59,120.

Now you are paying at 74% of your $80,000 debt

Realistically you need a mortgage for this amount plus the cost of borrowing.

Since you have bad credit you will only qualify for a 2nd mortgage with a private lender —  current rates average 15% plus 2% lender fee plus broker fee average another $1,500 plus legal costs to register the mortgage et cetera — average $1,500

Round off the mortgage to $60,000 plus lender fee $1,200 and we get (60,000 + 1,200 + 1500 +1500) or $64,200 @15% for 1 year or $9,600

Total needed $73,800 or 92% of what you owe.

You need to do the math before signing on these porous lines.

What will the broker get for this? Well, they get $12,000 plus the mortgage arrangement fee of $1500 = $13,500

The debt solution company is paying for your referral at 50% of the fee they charge you to the referring agent or $12,000 each.

This is a quote from their document “we offer up to 50% of our fee (25% of the savings negotiated for the client) to the referring partner.”

The fee fluctuates as some creditors don’t settle for the 40% offer.

Also these companies seldom care if all of your debt is not settled. Quite often creditors refuse to settle and continue their own collection action.

Read this quote on limited liability:
LIMITED LIABILITY

Signator understands that in certain cases negotiations will fail, in which case Signator hereby releases and indemnifies “the company” from any and all claims by the Signator for a failure to achieve such an understanding with creditors. In addition, Signator understands that although “the company” will act as Attorney-in-fact on behalf of Signator, no liability is assumed by “the company” for any claims or damages against Signator by creditors, past present or future. “the company” assumes no liability for any creditor action initiated as either direct or indirect result of ‘the companies’ efforts.

To establish themselves as a ‘Licenced’ entity and pretend they are not ‘Collection Agents’ they make statements like this:

“anyone charging a fee for such a service must be licensed by the Ministry of Consumer Services — Protection Branch. The license is offered as a Collection Agency license and governed as such, meaning all stipulations of the Collection Agencies Act and Regulations apply”

Contact the registrar for Collection Agents and Collection Companies and they will tell you there is no such ‘Licence’ in existence.

For a free consultation by an Accredited Insolvency Counsellor and fully LICENCED Mortgage Agent please contact us at here or call 613-475-6480

Yes, You Can Live Debt Free

Posted by PattiM

Sometimes fear can just paralyze us from taking action we need to take. I’ve met with many people who desperately need to deal with the debt situation but are just terrified of taking action. What is the major fear? They are terrified that taking action to restructure their debts will mean they wont have access to credit. It doesn’t seem to matter they don’t currently have access to credit, they are terrified of having to rebuild a credit rating.

Believe it or not, living without credit can be a liberating experience. I’ve had clients over the years who come into my office for their counseling appointments on cloud nine. They have embraced the credit free lifestyle and are very proud of themselves for having done so.

Benefits of Living Without Credit

  • You never have to worry about answering the phone. Your cash wont be calling you to find out when you are going to make your payment.
  • You don’t pay extra when making a purchase. When you buy on credit, you have the cost of the article, service charges (if applicable) and most importantly the interest to pay. Sometimes that would mean the article actually cost you double or triple its original cost.
  • You can ask for discounts when paying cash. When you pay cash, stores aren’t paying the surcharge on handling your debit or credit card. Sometimes they will give you a discount if you pay cash.
  • You never have to worry about repossession or foreclosure.
  • You don’t have to wait on credit approval.
  • When you sell an asset the money is yours, not dispersed to a creditor first.
  • You never have to worry about where the money for payments will come from WAIT! There is more to read… read on »

The Home Ownership Dream

Posted by PattiM

Many of you will have seen in the news this week that Finance Minister Flaherty is changing some of the home financing rules effective April 19th. It has been widely reported this action was taken to slow the possibility of a housing bubble forming in Canada which could have the effect of deepening the recession which the government believes we are starting to rise out of.

Almost all the clients I meet with, who don’t yet have a home, have a dream of owning a home. So, the question most on their minds right now would be do the new rules impact their dream? My considered answer would be … maybe. Helpful, eh?

Actually there is a reason for my middle of the road response. There is more than one way to pursue the dream of owning a home. There is the prudent, planning and saving towards realization of the dream and then there is the almost scatter gun effort. For those who are prudent, planning and saving — it is unlikely the changes will have an impact on them. For those with the scatter gun effect — yes the changes likely will have an impact and they should.

I’ve been amazed at times by the number of clients who meet with me for counseling who are focused on wanting an answer to when they can buy their home to the exclusion of any discussion of planning or saving. These clients are people who have recently done a filing under the Bankruptcy and Insolvency Act. This is an opportunity for them to make a fresh start and with some fiscal discipline finally realize their dream of home ownership. WAIT! There is more to read… read on »

Are You Financially Sabotaging Yourself?

Posted by PattiM

You have a decent job, decent income, you work hard but never seem to be able to feel financial security. What are you missing? You are likely suffering from one or more common undiagnosed financial problems of your own making. The good news is, since you made the problem, you can correct the problem.

Let’s have a brief look at the problems you may be suffering from:

Not Planning – Planning finances isn’t as much fun as planning vacations but your finances will be around a lot longer. We have a tendency to procrastinate and we’re no different when it comes to our finances. We let credit card balances accumulate instead of getting serious about getting them paid off, we put money into investments and then never get around to examining if we’re getting a decent return on our investment. Failing to plan is planning to fail.

Overspending — The average Canadian only saves about 5% of their income. Many Canadians have no idea where their money goes and don’t make an effort to track it. Being deliberate about determining the difference between needs and wants is vital to learning to reign in spending and start putting those hard earned dollars into savings. WAIT! There is more to read… read on »

Where to Turn When Your World Turns Upside Down

Posted by PattiM

Almost any material you read about how to deal with debt will tell you to talk to your creditors, your banker and/or your mortgage company. Your creditors may be willing to be patient for a month or two but when you are in a situation which doesn’t have a defined endpoint, don’t hold your breath on your creditors being kind and understanding. Let’s have a look at your other sources of information.

Your Banker
Usually the first thought you have when your finances start to go off track is to appeal to your banker for help. The most common form of that ‘help’ is to consolidate your debts into one loan so you can pay it off with one payment a month.

That sounds like it would really be the ticket out of the problem. Keep in mind, your banker has a job to do, to sell you banking services and helping their employer make a profit. You need to explore very carefully how much the difference in interest costs would be to determine if you would actually benefit from a consolidation loan.

If the total interest is not substantially lower, you are in fact incurring more debt while you are trying to wrestle the total load into the ground, that is not a benefit.

My suggestion: inquire if you would qualify for a consolidation loan but don’t commit until you have explored all your possibilities and carefully examined the total costs. A diversified list of debts is actually to your advantage. Once you consolidate and then start having difficulty meeting your payments, your available options become fewer.
WAIT! There is more to read… read on »

Are Your Debts Giving You Nightmares?

Posted by PattiM

We’re being hammered by a recession, jobs disappear in a flash but the debts we owe continue to climb. What is a person to do?

You’re used to being able to find credit and the first impulse is usually to go find more credit — consolidation loans or home equity loans. With interest rates being low, that seems to be a logical way to deal with those debts, as long as you are working and the rates stay low. In this volatile economy, you have no guarantee either a job or low interest rates will be stable.

There are options to dealing with your debts based on your ability to pay. The most important step you can take right now is — DON’T Panic! Take a deep breath and take a good look at the situation. WAIT! There is more to read… read on »

Reboot Underway

Posted by PattiM

We’ve been sadly neglecting this blog. We know that. Somehow it just seems other work takes priority. Well, we’ve set a goal of at least one post per week in 2010. I’ve been doing some tinkering behind the scenes updating the site and will soon be posting an article.

You Can Set The Agenda

As visitors to this blog, we need to know what help you are seeking. Feel free to use our Contact Form to send your questions to us. When I see a trend in the questions I receive, I will know that a post is in order on that subject.

Twitter Me

You can follow us on Twitter here and receive an update when we post.

A Facebook page will be coming soon.

Documents and Proof Required to Close a Home Purchase

Posted by Bill

Proof that you are who you say you are:
♦ Two pieces of picture I.D.: Birth Certificate, Citizenship, Passport, et cetera
♦ Lawyer name address and contact info including Fax & E-mail.

Proof of income:
♦ Proof of income can be Pay Stubs, Tax Assessments, Tax Returns, Letter from employer with employer’s contact information.

Self-employed proof of Income:
♦ 3 past years Tax & Assessments.
♦ Self-declared income by way of a letter stating your gross income.

Closing costs:
♦ Ensure you have added all closing costs.
♦ Appraisal will need to be paid before funding is advanced and it is the responsibility of the buyer, average cost $300.00. Appraisal will not be released until the fee is paid. Appraisal may be waived if mortgage is CMHC insured.
♦ Home Inspection – average $300.00 to $500.00. Usually paid up front by the buyer.
♦ Lawyer fees for Independent Legal Advice (ILA) average cost $150.00. This lawyer represents you. This may  be taken from the mortgage if it was pre-calculated. Don’t leave yourself short if you have not requested it in the mortgage.
♦ Lawyer fees for closing. Can be $1000.00 to $1500.00 if there are no complications. Remember the lender chooses the lawyer and although you pay for it the lawyer represents the LENDER.
♦ Lender fee. There is often a lender fee especially with Trust Companies.
♦ Broker fee. The Broker will disclose in writing both the lender’s and the broker’s fee. Often these two fees are added to the mortgage, not a good idea especially if you can afford to pay them separately.
♦ Land transfer Tax. WAIT! There is more to read… read on »

Restoring Your Credit Rating

Posted by Bill

As an Insolvency Counsellor I have counselled literally thousands of individuals and business operators over the years on the principals of good money management. The problem is that I usually don’t see these people until after they have become insolvent or have reached a point where they need to file a Consumer Proposal (Orderly Repayment of Debt) or perhaps they are being forced into bankruptcy.

So, I thought it might help our site visitors if I wrote about restoring credit; what works, and what never works.

Unpaid Credit Cards:

Perhaps you have defaulted on credit card payments. A Collection Agent has been assigned to your account and is demanding payments. Let’s say you have not paid for 6 months or more and they are threatening to garnish your wages, or sue you. At this stage you have an “R9” rating at the Credit Bureaus which is the equivalent of being bankrupt. That’s right, it is the same as if you had filed bankruptcy, but it gets worse. WAIT! There is more to read… read on »

The “Claim Jumpers” want your home – here’s what to watch out for!!!

Posted by Bill

There are companies and individual lenders who specialize in second mortgages that are doomed to fail so that the lender can take your home for much less than the market value. I am going to show you how it works so you will know what to watch out for.

This is the true story, unfortunately, I hear it from lots of people who come to see me after getting into a mortgage they cannot manage.

Each time my client explains, something unusual has happened; a sickness, death, lay off et cetera, and the credit cards get maxed out. They struggle for a while and fall behind on payments to creditors. Sometimes collection agents convince them not to pay their mortgage so that a payment can be sent to the collection agent. Collectors tell them that it’s better to pay the credit cards to keep their good credit and let the mortgage fall behind. (Take note … that is a false statement).

The desperate homeowner diverts mortgage money to pay the collection agents.

Soon the collection agent demands they get a 2nd mortgage to pay off the balances on the credit card debt and often demand that the struggling homeowner goes directly to the lender that the collector recommends. They paint a very nice picture that this particular lender will give them money even though the banks have turned them down. (That is correct – that is why these lenders are in bed with some collection agents).

Soon the homeowner gets the 2nd mortgage which is high interest and repayable monthly at “Interest Only”. The mortgage always has a one (1) year term, but they are told not to worry – it can be renewed again at the end of the year for an additional 1 year term. (Of course that little statement is not written into the mortgage document). They are also told this mortgage will give them an opportunity to rebuild their credit over the coming year. (Only problem is – that will definitely not happen – see further down for reasons). WAIT! There is more to read… read on »