by Andrea Murad | Published March 21, 2013 | FOXBusiness
The spring season tends to flood the housing market with buyers, and in markets with low inventory levels, the competition is stiff.
As home prices continue to recover and interest rates remain at near-record lows, some houses are receiving multiple offers and to win the bid, buyers need to stand out from the crowd. According to the National Association of Realtors, houses sold in 71 days in January, down from 99 days a year ago.
Since markets are moving fast, experts recommend sellers have their loan pre-approved and down payment ready before starting their search. “The market is changing,” says Cara Ameer, broker associate and Realtor at Coldwell Banker Vanguard Realty based in Ponte Vedra Beach, Fla. “Inventory is low and demand is high—a buyer needs to know exactly what their parameters are.”
Multiple bids are becoming the norm, so be ready to compete and do your homework to seal the deal. The longer the negotiations, the more chance you could lose out to someone else who made a better offer, says Ameer. Be reasonable without being difficult because until an offer is signed, sealed and delivered, other buyers can bid on the property.
While you have to compete in the current market, maintain your budget. “You don’t want to end up paying more for the house than it’s worth,” says Daren Blomquist, vice president at RealtyTrac.
Experts warn against cutting corners like skipping the inspection or engaging in a bidding war. You don’t want to unduly stretch yourself just to get into a property,” says Blomquist.
To help you become a homeowner in this competitive market, experts recommend the following tips for being the most attractive:
“You have to plan four months before you’re going to buy,” says Michael Corbett, Trulia’s real estate expert. Check your credit for accuracy and avoiding making any big purchases or taking on any big debt during this time.
“[Debt] brings down your credit score and increases your debt-to-income [ratio] which are two critical things banks look at when qualifying and preapproving you for a loan,” says Corbett.
If your debt-to-income ratio is too high, experts recommend paying down as much debt as you can to lower this ratio.
Set Your Home Price
“Don’t look at a $300,000 home if all you can afford is $250,000,” says Ameer. Less supply on the market increases the likelihood for multiple offers, and you won’t be able to compete. “If properties are selling at 95% of asking price, don’t think you’ll get a deal at 85% of asking price,” she says.
If you do spot a great deal on a house, don’t wait days to make an offer, warns Corbett. Since time isn’t on your side, learn how to spot a great deal by researching an area’s home prices.
“Do a little due diligence and go to open houses—do your homework,” says Corbett. Being educated will help you negotiate and could prevent you from paying more for a house than it’s actually worth because you’re emotionally involved.
Know that Cash is King
The more cash you have, the more appealing you are as a buyer. Putting 20% or more down makes you look more financially stable and gives sellers comfort that you’ll qualify for a mortgage, says Corbett.
Cash can cover a multitude of problems when you make an offer, whether it’s difficulty with the mortgage process or a lower-than-expected appraisal. “A buyer can contribute more cash to cover the different between the appraisal and offer price,” says Blomquist.
If your appraisal is low, don’t expect the appraiser to come up in value, says Ameer. “Appraisers are under scrutiny with the banks and they have to justify everything they do.” They’re required to follow Uniform Standards of Professional Appraisal Practice (USPAP) guidelines, as well as lender guidelines.
Appraisers use surrounding properties for comps, says Ameer, and if there are only foreclosures, that’s a bad hand to be dealt. You can always review the appraisal for discrepancies and suggest different comps but don’t expect the value to change.
Get Preapproved before Your Search
Getting prequalified for a mortgage gives a ballpark for what you can afford to buy and will streamline your search process.
If you’re financing your house with a mortgage, have a pre-approval letter with you and if you’re paying cash, have proof of funds that shows you’re good for it.
Getting preapproved will also help you to compete with an all cash buyer, says Walter Molony, spokesperson for the National Association of Realtors.
When you know what you can afford and are preapproved, you won’t be shopping outside of your price range, says Corbett. “It makes you a much stronger buyer when you can turn in that preapproval letter with your offer.”
Limit Your Contingencies
Experts suggest having as few contingencies as possible to be an alluring buyer. “Don’t overcomplicate your offer to the seller,” says Ameer. Certain contingencies based on your ability to get a mortgage, the appraisal and home inspection are standard, but piling on more could make the seller less inclined to work with your offer.
Experts advise making an offer based on a satisfactory home inspection. “It gives you the opportunity to walk away if you find in an inspection that there are too many problems with the house,” says Corbett.
Making your offer contingent on you selling your house first will make you a less appealing buyer. If you need to sell your house before buying a new one, then sell your home first and rent or move in with family or friends while you look for your new home, says Blomquist. “As a seller, you’ll sell that home quickly. Then as a buyer, you’re much more appealing than a buyer contingent on a sale.”
Add a Personal Touch
Corbett suggests sending a letter to explain why you want to buy that house. “You become a person who really loves and appreciates the home instead of just a number,” says Corbett. Sending a letter is just one extra little thing that will help level the playing field.
Be Flexible with Closing Dates
“Let the seller know that you would be flexible on the closing timeline,” says Corbett. Find out when the seller would ideally like to close on the house and see if you can match it.
by Andrea Murad | Published January 31, 2013 | FOXBusiness
With the real estate market gaining solid footing across the country and interest rates holding near record lows, many consumers are taking the leap into home ownership.
In recent years, homes have been selling for less than the true value or replacement construction costs, according to Walter Molony, spokesperson for the National Association of Realtors. “Even though prices are up, they’re still below their peak.”
But real estate is very local—some markets are experiencing price drops while bidding wars break out in other areas of the country.
“In certain markets, there’s almost a frenzied feeling again because of the shortage of inventory,” says Daren Blomquist, vice president at RealtyTrac. There are fewer homes for sale mostly because foreclosure inventory is down about 30% from the peak and new construction is still slow. On top of that, many underwater homeowners are waiting to sell their homes until the market recovers more. Low inventories make buyers feel like they have to bid up the price of a home to be able to buy, says Blomquist.
Low interest rates and cheap money make it tempting pay more for a new home as well. Before making an offer, Michael Corbett, Trulia’s real estate expert, suggests knowing the true worth of properties and the inventory status in a desired location.
“Take your emotions out—it’s a business decision,” says Corbett. “Don’t throw money at a purchase price out of the excitement of a bidding war.”
Even with a bidding war, knowing whether you’re getting a good deal on a home can be difficult, says Jonathan Clements, director of Financial Education for Citibank. Once you’ve chosen the house you want to buy, experts recommend questions to research before making an offer.
Question 1: What are the comparable sales?
“The primary way to make sure you’re not overpaying is to look at the comps,” says Corbett. Sales rather than listing prices can help you monitor what something’s worth. Corbett suggests researching sales in the same neighborhood that occurred within the last 60 days to get a good idea about home prices.
Regardless of what you can afford, experts advise against paying more than what someone else paid for a similar home last month. Even with multiple bids, homes are not selling for more than their asking prices, says Blomquist. “What ends up happening is the seller has to choose what offer they like best based on other factors that the buyer brings to the table.” These days, sellers tend to choose the most qualified buyer rather than the highest bidder.
Question 2: Can you afford the house?
“When you’re home shopping, you shouldn’t be looking for a return on your investment,” says Corbett. “Buy for lifestyle and all the advantages home ownership brings you.”
“If you put 20% down, is your mortgage payment going to be less than what you’re renting in that area?” asks Blomquist. Since homeowners get a tax break for mortgage payments, even if the home’s monthly payments are higher than rent, it still may make financial sense to own a home. “If you’re a homeowner, you should be taking advantage of that deduction that’s available to you.”
Blomquist suggests keeping monthly payments, including insurance, property taxes, and maintenance costs, for a new home at one-third or less of your monthly income. If you lose your job or have to relocate unexpectedly, you’ll have the fallback position of being able to cover your expenses if you rent your home.
Buying an investment property may require a higher down payment to be competitive with area rents. “You have to look at your own financial situation,” says Corbett. “In some cities, it’s cheaper to rent than buy.”
Question 3: What’s the appraisal value?
“If you need a mortgage, you’re going to be precluded from overpaying,” says Molony. Underwriting standards have made qualifying for a mortgage difficult and many lenders require an appraisal. “Appraisals are coming in below the agreed upon price.” On average, about 33% of real estate contracts were canceled, delayed or renegotiated because of issues that include low appraisals, according to the National Association of Realtors.
“If you have a price that’s bid up above the appraisal value, you won’t get a mortgage unless you come to the table with cash,” says Molony. With a low appraisal value, the bank may deny you a mortgage or require a higher down payment so experts suggest requesting another appraisal. Contract offers are usually contingent on getting a mortgage and a satisfactory home inspection—buying a house “as is” can cause you to lose out.
“Look at the comparables that the appraisers are using,” says Molony. Banks have been demanding that appraisers use eight to 10 comparables that sold in the past three months. In areas without many sales, appraisals sometimes use foreclosures without making any price adjustments.
Experts recommend becoming educated about home prices so you have a good appreciation of valuations before making an offer. All cash buyers who aren’t seasoned investors may risk overpaying if they don’t understand an area’s home valuations, says Molony. “If you’re purchasing as an owner occupant, you really have to do your homework.”
Question 4: How long do you plan to stay in that home?
“If you don’t see staying put for five to seven years, you probably shouldn’t be buying a home,” says Clements. The longer you stay, the more likely you’ll be able to ride out any market declines and to recoup the enormous amount of money it costs to buy and sell real estate because of broker fees, application fees, lawyer fees, commissions, title searches and home inspections.
If you’re going to be in the home short-term, consider renting as an alternative to buying, says Corbett. For a time horizon less than five years, if renting and buying cost the same, buying could still be a viable option.
Read more: http://www.foxbusiness.com/personal-finance/2013/01/31/how-to-tell-if-your-dream-home-is-really-good-deal/#ixzz2KGKuoulj
by Steve McLinden | Published January 02, 2013 | Bankrate.com
Real estate has distinct momentum heading into 2013, with demand finally starting to catch up with supply and significantly fewer distressed properties weighing down the system. As 2012 wound down, the national vacancy rate for owned homes had dropped to 1.9% from a downturn high of 2.9%. That’s still above the 1.5% norm but nevertheless encouraging. The ever-optimistic National Association of Realtors predicts a 5% rise in median existing home prices through 2013, though most forecasters see a more modest 3% upswing in real estate prices.
Either way, the real estate market is thawing, unless you’re living in such hard-hit areas as California’s Inland Empire or dodgier parts of the Rust Belt. With the new year upon us, here are 10 real estate tips to see you through a more promising 2013.
Tip 1: Get off the sidelines
For good-credit buyers waiting for the bottom of the market, it has passed, but the good news is that home prices and interest rates are still quite low. For sellers waiting for market improvements, they’re here. Stretch, take a deep breath and jump back in the game if your budget allows. The rules have changed a bit, however, and lenders want buyers to put a little more skin in the game. So expect to make higher down payments than in those pre-bust years. Another caution: Sellers will likely find that buyers have a harder time qualifying for mortgages.
Tip 2: Screen your buyers
Save your time, and weed out the tire-kickers. Make sure potential buyers are preapproved, which means they’ve already had their credit and employment checked thoroughly to determine how much they can borrow. Have your agent call their loan officers. Serious borrowers will find this acceptable because it shows they are ready to act.
Tip 3: Create a good impression
Most folks start their home searches online these days, so the number of murky, drab photos posted on website listings is baffling. Consider hiring professional photographers or videographers to create an optimal presentation, particularly for high-dollar spreads. Winter exteriors might show sun shining off the snow, spring shots could sport blossoms, summer shots ought to spotlight that shimmering pool or well-coifed lawn, and fall photos might show vibrant leaves. Think vividly, but not deceptively. Shots should accurately reflect the depth of rooms. Interiors should show bright, uncluttered spaces and highlight the best outdoor views. Remove a few furnishings for your photo session and brighten up (or even repaint) dark rooms.
Tip 4: Renovate wisely
A thorough remodeling can help seal a deal, but it rarely pays for itself. In fact, the average remodeling payback in the past 10 years has dropped from 82% in 2003 to about 57%, according to Remodeling magazine. Bringing up the rear are added back-up power generators (47.5% return) and sunroom additions (45.9%). Topping the list are steel entry-door replacements (73% return) followed by garage door replacements (71.9%). Unless the place is a wreck, focus on the small stuff: Sellers routinely underestimate the positive impact of simple home improvements such as repainting and minor fix-ups, say 3 out of 4 Realtors.
Tip 5: Build your team wisely
Vet the help. This goes for such crucial players as your agent (interview at least three), your inspector, appraiser, title company and if applicable, your attorney, surveyor or even energy auditor (a good idea if you’re buying a large home). Look them up at the Better Business Bureau, Angie’s List and any of a number of websites where service reviews can be found.
Tip 6: Don’t let the heart lead the head
No clinging to false hopes, please. Win the game of “the price is right” by pricing your house correctly from day one. Find a proven, seasoned agent and follow his or her lead on listing-price suggestions. Pricing should be based on comparable sales, specific neighborhood time-on-the-market trends, an up-to-date appraisal and the home’s inherent pros and cons. No amount of marketing hocus-pocus or staging can overcome a bloated price tag. Cut your price if no serious offers emerge in the first 30 to 45 days. It’s not 2006 again.
Tip 7: Open your marketing options
Give your agent (or yourself) the green light to creatively market your home in varied venues, be they virtual or terra firma. Sellers are tapping into Twitter, Facebook, Pinterest, LinkedIn and any number of sites to tickle buying bones. Agents and owners are customizing websites and blogs as well. But be tactful and imaginative. For example, a blog called “What you’d like about living in my town,” might cover culture, education and other quality-of-life niceties — followed by a playful pitch for your home, of course. Social media, unlike listings on the Multiple Listing Service or newspaper ads, allow for quick feedback and Q-and-A. You might also suggest your agent market your home to foreigners via overseas property sites or local partners abroad and to corporate relocatees.
Tip 8: Run the numbers
Are you really poised to buy? The housing market is improving, but that doesn’t mean exuberant buyers should write a check and empty their savings accounts. Back up a bit and first get a free copy of your credit report, then fix any blips to save on higher mortgage interest rates. Break down your essential monthly bills and reconcile them against your family income, then use an online mortgage calculator to see how much wiggle room you’ll have once you buy. Remember to factor in closing costs, inspection fees, loan fees, legal fees and emergencies.
Tip 9: Work your ground game
You’re not just buying brick and mortar, you’re buying a neighborhood. Consider this short checklist before making your buying decision.
- Do a criminal search, including the ZIP code’s crime statistics and the National Sex Offender Public Website at NSOPW.gov.
- Chat up residents about pros and cons of the neighborhoods.
- Visit at different hours; be wary of poorly kept homes and yards, unsavory visitors, traffic and pet noise, industrial or landfill odors, blaring train horns, too-bright lighting, and vacant-but-developable commercial lots.
- Practice your work commute and find mass transit options.
- Research school performance and student-teacher ratios.
Tip 10: Leave nothing to chance
Switch on that stove, run the faucets (including the baths), check the water pressure, activate the sprinklers, turn on all the lights, flush the toilets, turn on the air conditioning and heat, test the remotes and venture into the closets and look for signs of brown splotches or fresh paint for evidence of roof leaks. Granted, you might not feel comfortable doing all these at the open house, but you certainly can at the final walk-through. Sometimes agents and inspectors miss things.
Copyright 2013, Bankrate Inc.
By Rodney Anderson
This is the time of year when we celebrate and thank our veterans for their sacrifice to America., it’s also a perfect time to note that the U.S. Government’s offering of VA loans is a part of that. It’s a terrific program and a popular one. Here are 4 Get-Educated Points on the availability of VA loans …
1 First off, know that with some banks tightening their lending standards, the Veterans Affairs mortgages, known as VA loans, can be a savior for people. These VA loans are among of the few mortgage options for borrowers who don’t have down payments. They are available to more than 22 million veterans and active military members. And VA loans are somewhat easier to qualify for than conventional mortgages. We’ve seen nearly 500,000 loans guaranteed by the VA this year … and my office is ready to pitch in and help!
2 Now to the matter of eligibility. Most members of the military, veterans, reservists and National Guard members are eligible to apply for a VA loan. You can get a certificate of eligibility before applying for a loan. You can even submit the form online, and again, my office can guide you there.
3 No down payment is needed here. There are many ways to solve the challenges, and even with conventional loans, hey, if you’ve got good credit, this is a time for you to buy and re-fi. But for veterans, it’s even more attractive. Loans guaranteed by the VA can be obtained without any down payment. Another plus: A VA loan doesn’t require mortgage insurance. No mortgage insurance saves hundreds a month. No down payment, of course, saves thousands and thousands right up front!
4 Finally, what about credit scores? We talk so much about the importance of credit scores for conventional loans … and for all of us as consumers … what about for VA loans? Well, in my office we’ll ask for a credit score of 620 or higher. Potential borrowers still need to be in good financial health, however the credit score requirements are just less stringent than a conventional loan.
By the way, it’s worth noting as you prepare to call us that VA loans are available only to finance a primary home. A VA loan cannot be used to purchase or refinance vacation or investment properties.
The VA works hard to help veterans achieve the American dream, and we’re glad to be a part of it … Celebrating the contributions of our veterans shouldn’t be a once-a-year occasion. We appreciate them year round!
The column you will read below expresses clearly the problems with medical debt in America … and I think explains my fight in Washington D.C. for The Medical Debt Responsibility Act. Read on …
By Mark Rukavina
It’s no secret that medical bills in collection can ruin your credit. In fact, it may lower a score by “100 points or more” for someone with a spotless credit history, according to FICO. As tens of millions of Americans are paying off medical bills over time, the potential for damaged credit is great. Many government agencies are beginning to take notice of this problem. Unfortunately, the consumer credit reporting industry is fighting these efforts for consumer protection every step of the way.
Just last month, the Center for Public Integrity released a report — Cracking the Codes– scrutinizing the use of electronic health records by doctors and hospitals. They documented improper billing of Medicare for more complex and costly services than delivered. Following this report, HHS Secretary Kathleen Sebelius noted “troubling indications” that some providers were billing for services never provided and vowed to prosecute. How many bills related to these procedures hit consumer credit reports?
Earlier this summer four United States senators asked the Consumer Financial Protection Bureau (CFPB) to investigate the issue of medical collections. By late August the CFPB responded, saying they had begun a review of “the treatment of medical debt in both the debt collection and credit reporting industries.” Their investigation is welcome news for the estimated one in four Americans living in families where at least one family member is paying off medical bills over time.
The CFPB is not the only federal body looking into the problem of medical debt. In September, the Subcommittee on Financial Institutions and Consumer Credit of the U.S. House of Representatives Committee on Financial Services held a hearing entitled “Examining the Uses of Consumer Credit Data.” The topic of medical debt was prominently featured in the hearing.
While witnesses acknowledged the prevalence of errors in medical billing, only one felt that it would be inappropriate to correct these errors by suppressing them from credit reports once fully paid or settled.
Rather than acknowledge these errors, a representative of the consumer data industry (which includes the credit reporting industry) chose to gloss over the problems by raising the equivalent of the “Twinkie Defense.” In defense of the industry, the representative cited the 2.4 million consumers who had undergone Botox injections in 2010 and consumers who are making choices for elective procedures and surgeries (noting procedures such as liposuction, cosmetic eyelid surgery, facelifts, forehead lifts, lip augmentation, nose surgery, tummy tucks, laser hair removal), arguing that they shouldn’t get special treatment. Taking a hard line, he said that “these choices are no different than making a purchase in a retail store and the debts should not be deleted.”
Get real, this isn’t about Botox, it’s about cancer treatment, care of chronic disease, and emergencies like a burst appendix. And to make matters worse, these illnesses are often followed by a pile of confusing bills. It is stunning that the consumer data industry simply cannot face the fact that much of the medical payment data included on consumer credit reports is erroneous.
During this election season, it’s reassuring that elected officials from both parties can work together to call attention to a problem plaguing millions of Americans. It is also comforting to know that the CFPB is taking notice of underlying factors that destabilize hardworking families; factors like medical collections. In the words of CFPB Director Richard Cordray, “Consumers who have medical collection reported on their credit file face real-world consequences, they can face a harder time getting a loan approved or even getting a job.”
Hopefully, this federal attention will result in action that requires the removal of medical accounts from credit reports. One legislative proposal currently enjoying rare bipartisan support is the Medical Debt Responsibility Act. It would require the removal of medical collections within 45 days of being fully paid or settled.
Given that the CFPB just initiated its investigation, it is not yet clear what they might propose. But one thing is clear, the need for the consumer data industry to stop stonewalling efforts to address the unfair practice of penalizing people who’ve had medical bills sent to collection. Hiding behind the “Botox Defense” is an insult to the millions of Americans who are now paying the price because of medical collections.
This article originally appeared on Credit.com and appears on The Huffington Post. Mark Rukavina holds an MBA from Babson College and is a principal at Community Health Advisors, LLC, which assists hospitals in developing effective health improvement efforts while complying with new regulatory requirements on financial assistance, billing and collection issues. He previously served as director of The Access Project, a national research and advocacy organization, and is a recognized expert on healthcare affordability and medical debt. Mark has testified before U.S. Congressional committees, published research and policy briefs and regularly speaks on issues related to healthcare affordability presenting a unique perspective on these issues based on his direct work with consumers and policy expertise.
By Rodney Anderson
All-time low interest rates coupled with the overall upturn in the housing market has created a BOOM of refinance opportunities. More and more consumers are educated as to the benefits of a refinance, and are calling 1-800-Express to take advantage of this opportunity. One of the most frequent questions asked is: What paperwork do I need to have together for my refinance?
Once you’ve made the phone call and we learn more about your specific needs and desires, we can tailor this list to you. But for now, here’s what to gather on your “financial day off”:
Social Security number of all applicants.
*Two-year residence and employment histories.
*Two most recent paystubs covering the past 30 days.
*Copies of previous two years W-2 forms, 1099s, and complete tax returns.
*Two most recent bank statements (all pages): checking accounts, savings accounts, stocks, bonds, etc.
*If you own other properties, prepare a file with the address of properties and current market value. Also, any debt owed on properties, the lender’s name, address, account number, monthly payment, and current balance. Additionally, a copy of previous two years Federal Income Tax Returns with all schedules, and if it’s rented, a copy of lease.
*If you are applying for a VA loan, prepare your DD-214 and Certificate of Eligibility or a statement from your Commanding Officer if you are on active duty.
*If you have filed bankruptcy in the last seven years, be prepared to supply us with a copy of the petition and discharge, a handwritten explanation of reason for bankruptcy.
*If you are self-employed, prepare your previous two years Federal Income Tax Returns with all schedules and a year-to-date profit and loss statement.
In almost every case, this sort of paperwork at the ready is a wise move for your financial health in general. And then, when it’s time to take advantage of great rates and a great lender … you’re ready to save!
Fortunately for me, I’m fascinated by what I do for a living. The ability to help families combined with my hunger for knowledge about the mortgage business provides me with full days and days of fulfillment.
Recently on my radio show, I broke the news about a major change in the way an FHA loan works that can save so many of us thousands of dollars.
This new FHA Refinancing Program is all about a simple change in the way we pay for mortgage insurance. And a quick calculation is going to show you how it works:
Anyone who took out an FHA loan before May 31, 2009, may qualify for this program. What it does is reduce your monthly mortgage insurance. … from 1.25 percent on a 30-year fixed rate mortgage … down to .55 percent.
That’s a .70-percent savings …
Now, at first glance, your response might be, “OK, every little bit helps. But it doesn’t sound all that impactful …’’
Stick with me and understand why my office is putting so much effort into helping families in this way … because it’s about to add up.
On a $200,000 mortgage, that seemingly subtle change in the rules saves you $116 a month. That’s $116 right back in your pocket. Now, let’s keep adding: That’s $116 times 12 in the first year. Well worth a phone call, obviously.
Now look at it over the course of, say, 60 months. We’re talking about saving $7000 with this program. $7000 saved in the first 5 years!
If you refinance and have upfront mortgage insurance, that’s at 1.75 percent. You need to have good credit for this program (a 640 credit score or better), but on that same $200,000 loan, that mortgage insurance can be rolled back to .1 percent … and that saves you $3,300 more!
So in this example, we’re talking about $3,300 saved right off the bat, and five years in it adds up to a savings of $10,000 … in just the first five years!
A great aspect of this new FHA Refinance Program is there is no appraisal, so being underwater is not an issue. Again, good credit, no rolling in of closing costs here, and you’ll likely need to have some cash to get started … but thousands of dollars worth of savings once you do start! And $10,000 worth of savings in the initial five years.
It is my business and my pleasure to gather this information, to understand it, and to help you understand it and benefit from it. For more information on the new FHA Refinance Program that can save you thousands of dollars … give me a call at 1-800 EXPRESS!
Reps. Manzullo, Hall and Shuler
Champion ‘Medical Debt Responsibility Act’ in U.S. House of Representatives
Proposed legislation could help millions of credit-worthy Americans receive the credit score they deserve
WASHINGTON, DC, June 6, 2011 – Representatives Don Manzullo (R-IL16), Ralph Hall (R-TX4) and Heath Shuler (D-NC11) are championing the bipartisan Medical Debt Responsibility Act of 2011 in the U.S. House of Representatives. On June 2, these three Members of Congress introduced H.R. 2086, legislation that will allow consumers to pay or settle medical debt in collection and have their credit reports reflect that action within 45 days. As a result, many credit-worthy Americans will have access to credit that they can use to purchase homes and major consumer goods—items that were previously unavailable to them because current law allows paid-off medical debts to remain on consumers’ reports for up to seven years.
A recent Commonwealth Fund study showed that 14 million Americans have medical debt items on their credit reports as a result of mistakes in billing. In 2010, 30 million Americans were contacted by collection agencies for unpaid medical bills and billing that is error-prone and confusing to consumers.
“Small amounts of medical debt cause huge credit problems for millions of responsible, hard-working Americans who have suffered an illness or accident,” said Rep. Shuler. “This legislation is a win for consumers and the economy. By keeping cleared medical debt off of credit reports, this bill will allow more Americans to have the credit score they deserve and need to buy homes and stimulate economic growth in their communities.”
H.R. 2086 was applauded by Rodney Anderson, who is executive director of Supreme Lending, a financial expert and author of the book Credit 911. Rodney Anderson recognized that this failure in current law was not only unfair to consumers but also stifled the economy. Based on his own research, Mr. Anderson single-handedly created a grassroots movement, got the attention of champions in Congress, and urged the introduction of this legislation. The Medical Debt Responsibility Act requires that medical bills of $2,500 or less, which now have a zero balance from having been paid or settled, be removed from credit reports. Presently, medical debt that has been completely paid off or settled can still remain reflected on consumers’ credit scores for up to seven years. As a result, millions of hard working and credit worthy Americans are being denied credit and are paying higher interest rates on mortgages.
“Medical debt is not a reliable indicator of credit risk, yet nearly a quarter of Americans have seen their credit scores plummet because of small, routine medical bills,” said Rep. Nydia Velazquez (D-NY12), Ranking Member of the House Small Business Committee an and original cosponsor of H.R. 2086. “This bill provides a common-sense, simple solution to address this problem now and protect consumers in the future.”
Said Mr. Anderson: “The bill being introduced into the 112th Congress will create jobs, allow qualified Americans access to credit and mortgages, put the housing market back on the road to recovery and provide a substantial boost to the economy — all at no expense to taxpayers or to the government.”
“I am pleased to be a sponsor of the Medical Debt Responsibility Act,” said Rep. Hall. “This bill, which costs the taxpayer nothing to implement, is a bipartisan effort that recognizes the difficulties and inconsistencies relating to medical debt. At a time when our economy is unstable, this is a small but important step to bolstering financial certainty for Americans.”