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Equity Loan, Home Prices, Money Pain for People That Help Us, and a Controversial Tough Topic That Will Make You Ponder

In this podcast, I want to share the following stories that may surprise you.

We will start with a loan advertisement that might appear in your mailbox and why you need to watch out.

Then we will chat about what will happen with home prices in this uncertain economy. Will they crash? Let’s take a look.

Next, I want to discuss how you might be inadvertently hurting people that help you.

Finally, I want to wind up with a controversial topic with significant economic unintended consequences for both men and women. I bet this is going to give you information most have not considered.

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Transcript

Well, hello again, friend. Thank you for a small slice of your valuable time, so I can share some information on money, credit, and debt with you.

In this podcast, I want to share the following stories that may surprise you.

We will start with a loan advertisement that might appear in your mailbox and why you need to watch out.

Then we will chat about what will happen with home prices in this uncertain economy. Will they crash? Let’s take a look.

Next, I want to discuss how you might be inadvertently hurting people that help you.

Finally, I want to wind up with a controversial topic with significant economic unintended consequences for both men and women. I bet this is going to give you information most have not considered.

Watch Your Mailbox for an Offer to Give You Money. But, Keep Your Eyes Wide Open. There is a Big Catch.

Matt is a great guy and a good friend. He sent me a scanned image of a recently received advertisement that landed in his mailbox. The message in the envelope seems almost too good to ignore, but after a few minutes of reading the offer, Matt got pretty pissed off. You’ll understand why soon.

The advertisement says the company offering the deal with a catch is named Point. However, according to the Better Business Bureau, the company’s full name at the return address on the envelope is Point Digital Finance.

If you get one of these letters in your mailbox, there is something I want you to look for very closely before you get excited and think you’ve won the lottery.

Matt’s advertising letter says he can use the money Point wants to give him however he wants. That sounds too good to be true. There must be more to this offer, and you bet there is.

The mailer also says while a credit score may be considered, you can qualify with a credit score above 500, and they don’t look at income. It sounds like you just have to fog a mirror by breathing on it. That’s another red flag for me.

The offer says fees for this offer are between $950 to $1,350 with a processing fee of 3% to 5% of the money they give you.

If you’ve been paying attention, I bet you are wondering what the catch is. Well, it’s a doozie if you pay attention to the fine print.

This is not a traditional loan offer. Instead, this mailer is an invitation for Point to give you money in exchange for a part of your home equity.

And while there are no payments for 30 years, at the end of that time, you must buy back your equity via a refinance, new home loan, or sell the home.

Point is offering you cash now to hand over a portion of your home equity. So what does that wind up costing?

But here is the kicker. Point says when you pay off what they call a Home Equity Investment, you will need to repay the original amount you received plus a share of your home appreciation from the start of the term to the time of payback.

They also say the capped amount you have to repay is “typically equal to the total amount that would be paid on a loan of equivalent size with an annual rate of 15% to 20%.” That’s nuts!

So before you leap for the Point Home Equity Investment offer, please read and understand all the fine print, or you are getting into one of the most expensive home equity loans you can imagine.

One testimonial in the letter said, “By the end of last year I had run up my credit cards and was running out of financial options. I do own my own home outright and could not get a loan because I am unemployed. I am too young for a reverse mortgage and my credit is shot.”

So this person appears to have proudly traded equity in her property at a very high-interest rate to deal with an underlying financial crisis. That’s kind of crazy when it is unclear if she considered selling her house, settling her debt for a fraction of what she owed, and then regrouping her life inside what she could afford. Apparently, she is using the money received to pay the credit cards. What happens when that’s gone. Or what happens when unexpected home repairs or maintenance are required. Nothing good, I assure you.

Matt, thanks for sending this mailer to me.

Keep your eyes open like my friend Matt did. If you get similar crazy stuff in your mailbox, drop by my site at GetOutOfDebt.org and look for my I Buy Junk Mail in the menu at the top of the site.

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Let’s see if we can top this nutty offer.

[You can see the mailer at the bottom of this post.]

Are You Patiently Waiting for the Housing Market to Collapse and Prices to Drop to Buy a Home?

While the economy is adjusting its financial wedgey and trying to find some comfort level, some people think housing prices will collapse again.

What do you think?

The 2007 housing collapse drove down the prices of homes in many parts of the country. The underlying cause was the deluge of subprime and risky loans that all crashed simultaneously.

In 2007, about 36% of the nasty and putrid home loans were adjustable-rate mortgages. Those loans were just trash, as almost anyone could get a loan with little regard to being able to afford it.

I should know. At the time, I had a mortgage loan broker tell me to fill out an application but leave all the spots blank, and he’d fill those in.

He said he’d fill in the correct numbers to get the loan approved, and the actual numbers didn’t matter since nobody looked at them anyway. He was right. I didn’t fall for that loan, but many did.

So I bet you wonder what will happen this time as the economy stutters.

Keep listening, and I’ll share some surprising insights.

As a result of the mortgage loan collapse, new laws and regulations and underwriting standards were enacted to prevent a similar event from happening again.

Today, only about 8% of mortgages are adjustable-rate loans, and even new loans will hold the same initial interest rate for the first seven years. None of this annual increase garbage we saw before.

But that’s not all that has changed. For example, late mortgage payments are low now, with just under 3% of mortgage payments past due.

With defaults being low and loan underwriting improved, this time, will the outcome be fundamentally different?

Total mortgage debt in the United States is less than 43% of current home values, the lowest on record. In addition, negative equity is virtually nonexistent. That’s when a borrower owes more on the loan than the home is worth.

Compare that to the more than 1 in 4 borrowers underwater previously. In addition, today, only 2.5% of borrowers have less than 10% home equity. Times have changed.

The conventional wisdom is there will not be another pricing collapse like in 2007.

I don’t believe home prices will collapse, but they might slow or even stagnate as interest rates climb. So don’t expect another big price collapse.

Are You Willing to Hurt These People That Help You With a Smile?

Inflation sucks. Nobody likes paying more for things like food or gas.

Although…a couple of years ago, I bought an electric car. I have to admit a bit of glee driving by gas stations and only having a monthly car charging bill of $15. That’s a selfish celebration.

But that’s not the real issue I wanted to talk about.

What was it again? Oh yes, inflation sucks, and as a result, you are more likely to hurt people who help you.

Because of inflation, nearly every spending category is climbing towards a 40-year high water mark.

That is putting the pinch on more people, families, and pockets.

As a result, discretionary spending is being reduced for all of us.

As the amount of money you have is compressed and the increase in costs is rolling towards the front of your thoughts, I bet what I’m about to share is something you have not consciously considered.

As more people return to a more active lifestyle than before the pandemic, the amount of people eating at restaurants or visiting bars is climbing.

However, inflation is causing people to tip significantly less. As a result, servers and bartenders that work to provide you with a good experience are getting financially punished.

One server said the reduction in tips was causing a real impact. He said, “I’m really pinching my pockets, and I’m going, ‘crap, crap, crap – I haven’t paid my water bill in two months.’

Another server said she has been getting stiffed more frequently than ever in the past seven years she worked at the diner. She said that if they tip, it’s often less than 10%.

Even food delivery drivers are saying they only get tips 57% of the time now, down 6% since 2019.

It’s something to think about. Should we eat out less and tip more or eat out more and tip less? What do you think?

I Bet You Haven’t Considered This Supreme Court Hidden Financial Surprise.

Recently the Supreme Court decided on a controversial topic, a woman’s right to abortion. But that’s not exactly what I’m talking about. So instead, here is something related that might give you something to ponder.

What does all of this have to do with debt? Keep listening, and I’ll reveal the surprise. It’s a big one.

I’m putting aside all the complex consequences of this emotional issue. But here is a knock-on effect many might not have considered.

Dr. Bethany Everett, a professor of sociology at the University of Utah, raised this point. She said, “It’s really naïve to think that the repeal of Roe is only going to impact women and pregnant people.”

That got me thinking about my friend Charles.

In all the discussions I’ve heard, there has not been much talk about the impact the recent Supreme Court decision will have on men. It will have a significant impact; I don’t think people have thought much about this.

Dr. Everett said, “Parents should really think hard about not just what the repeal of Roe is going to mean for their daughters, but what it’s going to mean for their sons. Their sons may become dads much earlier than they’re prepared for.”

“So Steve,” you might be saying, “What does any of this have to do with men and your friend Charles?”

Studies show us that when it comes to young men, those involved in situations that result in abortions are more likely to pursue college and earn more. For example, young men engaged in pregnancy and whose partners had an abortion were nearly four times more likely to graduate from college than those whose partners gave birth.

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That might be the result of research and studies, but even that is not the critical issue I wanted to share with you.

Are you ready for the two words you probably don’t think of when you hear the word abortion? Here they are – Child support.

Those are two words my friend Charles has heard for the past eighteen years.

Those are words men have listened to for a long time, even if they have no access to see their children.

Charles’s child support experience was an eye-opener. I’ve listened to his struggles over this for years.

There were times when he would be called into court for a child support review, and if his income had increased, he would be ordered to pay retroactive child support on his increased pay, back to the time of the last review.

Charles said, “Those retroactive increases were the beginning of my hell.” Sometimes those increases were due over multiple past years.

The financial impact of child support can dramatically alter the lives of men.

Don’t get me wrong; I’m not arguing men should not pay support for a child they helped create. I think they should.

Consider your young son in love in high school. He makes a wrong hormonal decision one night. The condom breaks, and his girlfriend accidentally becomes pregnant. How will your son meet his legal requirement to provide child support for nearly the next two decades and move forward to pursue his educational goals?

The obligation for a male to pay child support is not linked to his income alone. For example, suppose the court believes your son is unemployed or underemployed. In that case, it has the authority to base his support obligation on what he should be earning rather than his actual income.

In some states, you as his parent can be forced to pay the child support for your minor son when he can’t.

And suppose the baby is born with health issues. In that case, your son can also be responsible for more financial support to pay for medical care.

Again, I’m not making an argument for or against abortion or trying to be casual about someone obtaining an abortion. I’m just presenting information to help educate regarding the financial consequences of changing the way things were.

The financial impact of child support from more men will leave them less able to make ends meet and face jail time. Yes, you heard me right, jail.

There were times my friend Charles would be served court papers to appear over child support after the mother had requested an increase. This was incredibly embarrassing for my friend because he was an officer at the county jail and saw all of this unfold daily at work.

Charles said during his time at the jail, he had many inmates locked up for being unwilling or unable to pay child support.

He described the system by saying deadbeat dads either pay or stay in jail.

Besides state laws regarding the non-payment of child support, there are also consequential federal laws for deadbeat dads.

Being found to be the father of a child and unable to make court-ordered child support payments can lead to having a:

  • Warrant issued for your arrest, which may be criminal or civil
  • Finding of contempt of court
  • Fines, jail, or both
  • Garnishment of wages, including unemployment and worker’s compensation
  • Denial of tax refunds
  • Exclusion from receipt of certain government benefits
  • Revocation of your passport
  • Suspension, revocation, or denial of various licenses, including your driver’s license. You can lose your occupational and professional licenses as well.
  • You might have a lien placed on a property to cover child support payments.
  • And military members can even be dismissed from the service.

All of this makes me wonder what the financial fallout of the Supreme Court decision will be once more men face criminal charges and even jail over child support issues.

But my experience with men who owe child support is they have few good choices when it comes to finances and debt when child support is owed.

The punishments for not making court-ordered child support payments are so severe that payments to creditors must be abandoned.

So for people that believe they have a moral obligation to repay creditors no matter what, how about when income must be directed to child support instead?

We will just have to watch and see what happens with child support debt.

Once more men start winding up going to jail or losing their licenses, will laws change? I don’t know. What do you think?

If you have a question you’d like to ask, go to getoutofdebt.org/question, or if you want to leave a question for an upcoming podcast, go to getoutofdebt.org/message.

Until next time, this is Steve Rhode, your Get Out of Debt Guy from GetOutOfDebt.org.

Point Home Equity Mailer

Equity Loan, Home Prices, Money Pain for People That Help Us, and a Controversial Tough Topic That Will Make You Ponder

Equity Loan, Home Prices, Money Pain for People That Help Us, and a Controversial Tough Topic That Will Make You Ponder

Equity Loan, Home Prices, Money Pain for People That Help Us, and a Controversial Tough Topic That Will Make You Ponder

Equity Loan, Home Prices, Money Pain for People That Help Us, and a Controversial Tough Topic That Will Make You Ponder

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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