We took a quick sampling of credit card issuers’ recent activities to see how they have responded to the Federal Reserve rule changes that were announced in December 2008 but won’t take effect until July 2010. We found the top eight issuers, who account for 80 percent of credit card balances, are raising interest rates on a larger portion of customers than usual and increasing the number of fees they impose. The new Fed rule will ban some but not all of these activities.

Perhaps most notable is what these issuers — Citigroup, Bank of America, JP Morgan Chase, Capital One, HSBC, Discover, American Express, and Wells Fargo — have not done. All continue to apply a customer’s monthly payments to the least costly balance first, leaving the most expensive to continue to grow. None have changed their policy of imposing interest rate hikes for any reason, any time. Additionally, there is no evidence that any of these companies has expanded the period of time between when monthly bills are sent and when late fees apply.

Many folks look into balance transfer cards for the above-bolded reason. To avoid a high interest rate on one card, a more competitive one is used to get the cardholder in a better position for repayment. But if that card is also subject to unannounced increases in rates, a consumer is left wondering what they can possibly do to get ahead of the curve. Especially when seven of the top eight issuers increased their penalty APRs. Many families are finding themselves stuck between a financial rock and a hard place.

No bright light on the other side of the tunnel either, as new trends in unemployment rates show increases and no lack of momentum:

The number of idled workers filing new unemployment benefit claims climbed more than expected last week, driven higher by filings in car-industry states.

Separately, U.S. producer prices climbed in April more than expected because of a jump in food costs, but core wholesale inflation rose only mildly as the recession robs companies of pricing power.

…

Wall Street economists had expected a 10,000-claim increase to a level of 611,000, according to a Dow Jones Newswires survey. The prior week’s level was revised to 605,000 from a previously estimated 601,000.

The four-week average, which aims to smooth volatility, rose by 6,000 to 630,500.

The larger-than-expected increase in new jobless claims was a disappointment, given a report last week that indicated a mild moderation in layoffs. The Labor Department had said 539,000 non-farm payroll jobs were lost in April. Payrols fell by 699,000 in March. Since the recession began in December 2007, the U.S. has shed 5.7 million jobs.

…

The tally of continuing jobless claims — those drawn by workers collecting benefits for more than one week — rose 202,000 in the week ended May 2 to 6,560,000, the highest level since the government started keeping track in 1967. Continuing claims lag new claims by one week.

The unemployment rate for workers with unemployment insurance rose 0.1 percentage point to 4.9%.

Not adjusted to reflect seasonal fluctuations, Illinois reported the largest increase in new claims during the May 2 week, 2,052, due to layoffs in the construction, trade, and manufacturing industries.

Those numbers only reflect actual claims too. They don’t account for underemployment and people working multiple part-time jobs to make it by. We don’t have a crystal ball over here, but I wouldn’t be calling an end or bottom to anything, anytime soon.

Well, quite a lot actually. After the bailout passed, the Dow continued to crash, and we’re seeing how things are affected on a world scale… what else is going on?

Looks like property taxes will be going UP, not down for Arizona residents:

Maricopa County homeowners saw an average 3.9 percent tax increase at a time when real-estate values are dropping and foreclosures rising, said county Treasurer Charles Hoskins. That’s because this year’s bills are based on peak valuations set by the Maricopa County assessor two years ago. How much the taxes went up - or if they went up - depends on the spending practices of local cities, schools and special districts.

Myth Busted: “It’s been sort of folklore in the industry that people always pay their home mortgage or auto loan first”:

In the study, researchers looked at thousands of borrowers who had taken out mortgages in 2002 and 2005 and tracked their payment behavior over a 24-month period. Of those in the 2002 sample who missed two payments on their mortgages during the two years, 26 percent maintained a spotless credit-card payment history and 59 percent kept pace with car payments.

Mortgage payments continued to slide down the list of priorities a few years later. Of those in the 2005 sample who fell behind on their mortgages, 38 percent kept up with credit-card payments, and 62 percent made all their car payments.

…

These borrowers did not lack financial sophistication, Ms. Hart added. “The people who were delinquent on their mortgages but who paid their credit cards on time tended to have higher credit scores,” she said.

…

Meanwhile, borrowers who neglect their mortgages could be doing so because they think banks or the government will help keep them in their homes.

Global Rate Cut? Looks like Central Banks are saying this economic fire requires a global response:

The Federal Reserve, European Central Bank and four other central banks lowered interest rates in an emergency coordinated bid to ease the economic effects of the financial crisis.

The Fed, ECB, Bank of England, Bank of Canada and Sweden’s Riksbank each cut their benchmark rates by half a percentage point. The Bank of Japan, which didn’t participate in the move, said it supported the action. Switzerland also took part. Separately, China’s central bank lowered its key one-year lending rate by 0.27 percentage point.

…

“The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability,” according to a joint statement by the central banks. “Some easing of global monetary conditions is therefore warranted.”

Interest rate skeptics: We have lived beyond our means for too long. Are interest rate cuts appropriate? Also - Inflation and Japan:

Japan’s experience suggests that, sometimes, interest rate cuts simply don’t work. It is not difficult to see why. When a bubble bursts, asset prices, by definition, collapse. Even if interest rates do fall to 0 per cent, there is not much point borrowing if you and everybody else think asset prices are more likely to fall than rise. Why buy a house, for example, if you think house prices are persistently falling (one reason why last week’s stamp duty announcements from the UK Government were met with such derision)?

…

Where, I suspect, the interest rate sceptics are right is in the idea that we have lived beyond our means for far too long. But does this mean that interest rate cuts now are inappropriate? In one sense, yes, because interest rate cuts create the illusion that, despite our collective profligacy, we can all be bailed out by the central bank. But, in a more worrying sense, no, because much depends on the likely impact of lower interest rates. Monetary policy works a bit like the lights in your kitchen. Flick the switch and, in normal circumstances, everything is illuminated. What happens, though, if a number of light bulbs have gone? Then, flicking a switch doesn’t have quite the same effect.

The issue, then, is not so much whether interest rates should come down but, rather, whether reductions will be both effective (by boosting demand) and safe (by avoiding inflationary risks). Japan’s experience in the early 1990s suggests that, in the aftermath of a bubble, only the second of the conditions is likely to be met. From an inflationary point of view, rate cuts may be safe – because banks are simply unable to lend – but, from a demand perspective, rate cuts may be ineffective – again, because banks are unable to lend.

To wit, Arizona just broke a record for the number of foreclosure notices in September. Expect many more foreclosure stories to come.

One dreary week in September set a new record for foreclosure notices in Maricopa County, with 2,210 notices outpacing sales in a three-county region, according to a Mesa data company.

“It was a record buster,” said analyst Zach Bowers of Ion Data in Mesa, which tracks the notices.

“We’ve been averaging 1,700 to 1,800, and that (week) just kind of caught us off guard,” he said.

The record, which includes residential and commercial foreclosure notices, came Sept. 15-19, for an average 442 notices a day.

Unless the people receiving the notices are able to work out their finances, the notices likely will become foreclosed properties by January.

That indicates the number of foreclosed properties in January could be double the 3,295 tracked by Arizona State University across the county in August.

A comparable week in mid-September last year saw just 758 notices total, about one-third the number during the record week.

The previous weekly record came June 9-13, Bowers said, when 1,915 notices were filed.

Making the foreclosure figure even uglier, it outpaced total affidavits of sale in the county for the same week (1,551) and even the total combined sales in Pima, Pinal and Maricopa counties (2,063), according to Ion.

Last month, the U.S. Department of Housing and Urban Development announced Arizona would get $121 million to help areas blighted by foreclosures, but officials are doubtful even that large sum will mitigate the growing problem.

The problem here though, isn’t that states need money to keep afloat. The problem is that the problem is not known. If you hang up a dartboard on a wall, turn off the light, turn around a couple times, and start throwing darts… How many bulls-eyes do you think you are going to hit?

We can’t turn off the lights, go in sight unseen (ironic that those two words are responsible for many of the investor purchases that helped explode this bubble), and start throwing invisible US Dollars at the problem. Especially if we are suggesting amounts which equal bandaids on severed limbs.

But I only seem to be preaching to the choir on that one:

“Is it enough? No, it’s not nearly enough compared to the magnitude of the problem,” Arizona Department of Housing Director Fred Karnas said.

“We need to look at this (funding) as one more tool to address foreclosures, along with the things we are doing with housing counseling, and getting people to talk to their lenders.”

The department will use the funds to buy foreclosed homes and preserve the value of neighboring properties that might otherwise be dragged down as the foreclosed properties languish.

But we’re already seeing the effects of these properties blighting the neighborhoods around us. Copper thieves are coming into suburban areas and increasing crime, also loading up on other metals and items that can be sold for scrap for cash.

What can you do if you’re going through or about to go through a foreclosure? A call to the Arizona Foreclosure Prevention Hotline may be able to help you. In other words, I wouldn’t sit and wait for a senator to save you.

“We’ll see if we can improve the quality of life for people that have been able to hold onto their mortgages and are still living in their home, but are now seeing more crime and such in their neighborhoods because of foreclosures,” Karnas said.

Struggling homeowners hoping to avoid foreclosure can call the state’s foreclosure-prevention hotline at 877-448-1211.

To give some additional perspective, one commenter broke it down a bit further:

To flesh out the numbers, there were approximately 4500 foreclosures in September, and 7500 Notice of trustee sales.

Both of these were records.

According to the MLS, we had about 6200 sales in September. However, DPA (downpayment assistance) disappeared October 1, so it seems many buyers were rushing to beat the deadline. I would expect sales to drop strongly for October to January, and foreclosures to keep rolling in.

Prices dropped almost 1% month over month, and the number of bank owned homes on the MLS went up by about 1000. So, even with a 1% monthly price drop, it was not sufficient to keep the bank owned home level even. Expect price drop to accelerate over the next few months.

This is going to get worse, before it gets better. When will it get better, though? We’ll have to turn on the lights for that one.

Secretary Henry Paulson has been pushing not only for a quick vote on the Bush Administration’s $700 billion bailout package, but also for complete control and discretion over how and where the money is spent. There is an argument that more government red tape, political posturing, grandstanding, and bickering will only bloat the process of fixing the US economy. For the most part, it could be believed that one person could do things better than a committee. Meetings are often a waste of time.

However, the problem with this is that Henry Paulson, as early as last month, was stating how strong our economy was and how we had little reason to worry. Now that he’s so sure we’re in trouble that he needs close to one trillion dollars to fix it, it definitely puts the amount of confidence his opinion deserves into question.

The other day Ron Paul was speaking with Wolf Blitzer on CNN and had some amazingly strong points about why the bailout won’t work and why it could affect those without a 401k.

Ron Paul vs John McCain and Barack Obama’s Plans

Here is a quick recap of Ron Paul’s thoughts and some reasons he disagrees with John McCain and Barack Obama on what needs to be done.

I think that last paragraph is the most telling. People don’t like to hear bad news and they don’t want to be told that it will be painful. They would much rather have something be done and then face the fact that it wasn’t enough, later on. The American people seem to be supporting a mantra that they’d rather have the pain be a result of the consequences of failure, rather than the cost of the solution.

Even if this plan works, we’re going to see the basics go up in price, house prices will still be falling, and in the end, we’ll still be taxed for making money as well as taxed for spending it. Only now, we’ll also be taxed for doing nothing with it at all.

Ron Paul’s comparison to the Iraq War and the Battle On Terror was most appropriate: It Will Not Be Enough. After all the money is spent, we’ll likely find that they only sold us on the number that we could swallow, rather than the number it would take. In cases like this you overestimate and come back later with great news - it didn’t cost as much as we thought. Instead, we’ll face this in the near future as we’re told that the problem was bigger than expected and our initial investment wasn’t enough.

But while buying a home can be dangerous and has its own set of things to watch for, renting can be just as bad, if not worse. When you own a home and face foreclosure, you have ample time to figure out your next steps. The process can takes months or years depending on your location and the financial details.

However, eviction has a much shorter notice. But if you pay your rent on time, you don’t have to worry about eviction… right?

Well, that’s the first, and perhaps the most important mistake many people make.

Rental Mistake #1: Not Checking County Records On The Property You’re Renting

In the post-bubble years, we’ll see this grow more and more. Many people are paying rent on time, following their contract to a T, only to face the Sheriff or a process server at the door letting them know they need to vacate in days or weeks. It turns out, many landlords rent a property, collect the monthly rental payments, and never pay their mortgage. They know they’re going through foreclosure, but you probably have no idea at all. For those that miss the official notices, you may even find yourself homeless just days before the auction.

In Arizona, you can visit the Maricopa County Recorder’s site and do some official searching for your property address and things to check on (is this house going through foreclosure, are property taxes paid, etc.). For those in other states, a simple google search for your county’s Recorder Office should yield quick results.

In one of the next mistakes, you’ll see that while I suggest working with individuals, you should also pay attention to see if there are any of the big trouble signs:

Bugging you for rent earlier than normal or appearing anxious or nervous about payment

Allowing agreed-upon services like landscaping or pest control stop without notice

Having someone stop by the house asking for the owner, who isn’t just selling magazines or Omaha Steaks

One thing you can also do very easily from the comfort of your own chair, is to surf the web and see if the house you’re renting is for sale. A quick google search for “(insert state) mls search” like this great public MLS tool for Arizonans, will help give details that you might find shocking. Many houses you see on the craigslist rental page or elsewhere, are more than likely for sale. Renting is usually a secondary option for when a property isn’t selling. This is why this is the primary mistake most poeple make that can lead to yourself finding you and your belongings evicted and out on the street with little, if any, notice.

Rental Mistake #2: Using A Rental Agency Or Realtor

Take Mistake #1 in deeply. Really let it settle in your mind. Now think, what if I had no contact with the owner. What if, I didn’t even know where to go if I needed to discuss something that important with him or her?

This is why you should NEVER use a Realtor. At least when you’re renting.

Having been a licensed Realtor in the past, I know first hand that rentals not only bring in extremely little money for Realtors - they also provide more problems than they’re worth. This is not always the case, but it is safe to say it is the rule and not the exception.

The same goes for a group or company that manages rentals. While it is nice to pay anonymously to a property management company and have an office number to call, in this post-bubble market, I personally believe it’s one more level of separation you simply can’t afford to have between yourself and the owner.

The primary reason this is so dangerous in this new market we’re in as a result of the housing bubble popping, is that many Realtors who were unsuccessful, joined late, or need money, will revert to acting as ad-hoc property managers in order to bring in a little regular income without going completely broke.

Property Management companies offer a bit more confidence, but you have to realize that this work isn’t free. Having one more person between you and the owner of the home you’re renting means that a portion of your rent, deposit, or upfront fees are going to the middle-man. In this new age of the internet, you can completely cut this segment out of the process with little work at all on your end. Having a good phone number and email for your landlord is often better than waiting for the next day when the rental agent comes into their office. Many landlords want to know if something is wrong and if they check their email that night, may even get someone out to fix something sooner rather than have the problem get worse.

This also leads into my next two mistakes regarding getting the best price in this market. A rental agency has little to no say in the price of the rent. Nor would they, as a cheaper price can cut into their profit margin on the rental.

Rental Mistake #3: Not Starting Early Enough

This leads into the next mistake, but is important enough to deserve its own place on the list. Just as many homeowners try to sell their home first before renting it, they will also likely face several months when the house is vacant or on the real estate or rental market.

If you get looking early enough, even if you can’t end your lease any sooner or make an offer any sooner (as most folks want someone to move in within 30 days or so), information is priceless. Not only would you know from a few early rental searches on craigslist, the local paper, or other medium which houses are available at that time, you’ll also learn which neighborhoods seem to be having the most rentals, what the prices tend to be for a certain floorplan in that neighborhood, and most importantly, which houses seem to be un-rentable.

Many people will re-list their craigslist ads over and over again until they rent. Eventually when you get your search down (4 bedroom, 2 bath, with picture, in your city of choice, between these prices), you’ll notice the same listings, descriptions, or pictures popping up quite often.

When you find a few homes you like with prices that seem decent, do an MLS search and see if they’re for sale. Check craigslist as well as some folks double list a property in both the “for sale” and “for rent” sections. Notes, descriptions, and pictures, will help tell if you’re dealing with a property that’s vacant and in desperate need of a renter, or properties that just need a ton of work, or perhaps homes being rented by completely unrealistic folks. All are signs that can help you gain more leverage at the negotiation phase.

Rental Mistake #4: Not Negotiating - Everything Is Negotiable

Some folks may not be “hagglers” or may try and avoid uncomfortable or unreasonable requests. That’s completely fine. As a matter of fact, you don’t want your landlord feeling like he was pressured to offer you more than they expected. This is a long term relationship and an amicable one will benefit you both greatly.

However, you must realize that the monthly rent isn’t like that of an apartment. It likely isn’t based on some profit formula, but rather based on the current competition or a certain number they need to bring in so that they can keep the mortgage current.

Beat this into your head: “People SELL first, RENT second”. Renting can be a nightmare, or at least a source of one, for many owners. What if their renters knock holes in the walls, run a meth lab, or do something otherwise as scary? Even a decent security deposit may not cover those types of damages. People would much rather sell the home, but may rent if they simply can’t sell it, or realize that the loss on a sale in this market would be more than losing a hundred or two a month and renting it out. Many people lose money on a rental, especially if they bought recently, but may end up even come tax time.

If you start early, you may find a great home, that the owner simply can’t rent. Maybe he’s charging $50-$100 more than other homes like that one are going for. Maybe they’re just unlucky. It’s never a bad idea to approach them early and offer a more competitive price and see what their response is. Do they respond back saying that they’re going to keep looking? Do they completely ignore you? Do they get hostile with you for insulting their intelligence? If it’s the latter, that’s a big “KEEP OUT” sign for you.

If you establish that benchmark, you may find that when it’s 3-4 weeks before your lease ends, that the house you liked is still for rent and hasn’t been picked up. Mention you’re closer to your move-out date and still interested for the price you mentioned. They may find themselves more willing to deal with you now knowing that they may not get another offer for several months. Losing 100 bucks to you every month may actually be CHEAPER than getting full price but paying another mortgage payment.

It’s also great to see if you can get landscaping, or at least pest control, taken care of by the seller. Ultimately, the seller is the one that will get dinged by the HOA. They’ll make you pay for those charges if you were responsible for them, but they may also not want the hassle if you turn out to be one of “those tenants”. They may figure the monthly trimming/mowing to be cheaper than the constant headaches of reminding you to do it. Also, having them establish a routine pest control schedule can help assure them that nasty rodents or insects won’t nest in the house and cause long-term damage to the structure or occupants.

It never hurts to ask or at least figure the costs of those services into the price of the home. If one home is slightly more than another, but has free landscaping and spraying, the end cost may be lower for you. But still ask the homeowner if they would handle that just in case.

Appliances are another HUGE money saver. Some homes don’t come with a fridge, washer, and dryer. Even on a budget those appliances can easily run $1,500 to $2,000. Instead, ask the landlord if they would like to buy acceptable budget appliances in exchange for a slight increase in rent. In one home I rented, the landlord went to Sears, bought a lower end fridge, washer, and dryer, got points and rewards for himself, and I paid an extra $50 to him every month. When I moved out the next year, he didn’t break even, but would actually end up with a PROFIT the next year with the next tenant. Mention this selling point to them and they may appreciate your business sense.

Rental Mistake #5: Not Knowing Who’s Responsible For What

As mentioned above, understand who is responsible for landscaping, for lawn maintenance, for handling the automatic drip and sprinkler system, and for pest control. Who pays the Home Owner Association fees? Those costs can run you hundreds of dollars every month and turn a GREAT deal into a TERRIBLE deal.

Be aware of this in case the owner plans to do it themselves to save money. If they say they’ll come by and spray, are they going to do it with a can of RAID, or with acceptable chemicals that will truly help the problem? It’s no use to you if you have to pay extra to cover for a bad job done by them.

Also, get EVERYTHING in writing. This shouldn’t need to be said, but it does. If the owner is offering something like a “Rent-To-Own” plan where a percentage of your rent goes towards the down payment, or if they offer any future incentive terms to convert the rental into a purchase, get it on the rental contract.

As a renter, if you don’t have a legally binding rental contract, you may find yourself completely powerless later on when you need to bring in legal help to deal with a nasty situation.

It’s also a great idea to make sure a “current condition” form is filled out where you take a walkthrough and detail the condition of the carpet, tile, showers, bathrooms, windows, doors, cabinets, etc. You may notice that in a couple weeks a cabinet door’s hinge starts breaking. If you documented this and reported it early, they may have it under warranty or be able to help you. If not, you can detail it and if it gets worse at move-out time, can help make sure that you don’t lose your deposit on something simple like a cabinet door replacement.

If you have another family member with you, have them run a video camera of everything. Sounds of doors and such opening and closing so that if the owner tries to say there’s a funny sound or problem closing the back door, you can point to video where you already documented that as a pre-existing condition.

Don’t let anything slide here, if it looks remotely questionable, mark it down just in case. Just like the rental contract, make sure the owner and you both have your own copies. Rental payments should also be documented. Keep carbon copies of checks if possible, or receipts from bank deposits handy.

Renting A House Can Be A Great Thing

Renting can be great if you find yourself in a good relationship with the owner. For first-time renters, it offers a preview at home ownership so you become aware of things you’re going to face later on. Did they provide fans and window coverings that you found yourself desperately desiring and having to pay for later on? Was the house too big or did it cost too much to heat or cool?

Later on, as prices settle, and the banks are less afraid of collapse, you may find that the owner trusts you and that trust can save tens of thousands of dollars at the table if you choose to buy it. They may not want to leave it vacant on the market again and accept a lower price for a quick and easy sale. Just make sure to cover yourself. Even a $50 break will turn into $600 at the end of the year. Ever dollar counts.