Thursday, August 27, 2009

Anaxarchus (c.380—c.320 BCE)

As a follower of Democritus, Anaxarchus developed the skeptical
tendencies within Democritus' thought. Although our information on him
is extremely sketchy, he is a pivotal figure connecting the atomism of
Democritus to the skepticism of Pyrrho, if ancient philosophical
genealogies can be trusted. He allegedly abolished the criterion of
truth by likening our experiences to those of dreamers and madmen.
Renowned for his contentment, he earned the title "the happiness man"
(ho eudaimonikos). Like Pyrrho, this contentment was based on an
indifference to the value of things around him. But unlike Pyrrho,
this indifference did not manifest itself in a detachment from worldly
affairs. Instead, he was an advisor to Alexander the Great and
actively pursued the objects of his desires, often spurning
conventional values.

1. Life and Sources

Anaxarchus was a close companion of Alexander the Great, and he
reportedly accompanied Pyrrho on Alexander's expedition to India.
Apparently, Indian philosophers rebuked Anaxarchus for "fawning on
kings," and it was this rebuke that led Pyrrho to withdraw from
worldly affairs. Also, unlike Pyrrho, Anaxarchus was fond of luxury.
Nevertheless, he was famed for his impassivity and ability to be happy
under any circumstances. This impassivity is the subject of many of
the anecdotes about him, most dramatically in the widely-circulated
story of his death: he was able to pay no attention to his torment as
he was being pounded to death in a mortar at the orders of a tyrant he
had insulted. (Zeno of Elea, however, is also said to have died in
this manner, so the story is somewhat suspect.)

No philosophical works of Anaxarchus survived. We have only two
"fragments" (that is, direct quotations) from his oeuvre, and few
reports concerning his philosophical positions or the arguments for
them. Most of our information on Anaxarchus comes in the form of
colorful anecdotes, contained in much later sources, concerning his
interactions with Alexander and Pyrrho. These stories are often false,
being composed to make some (supposedly) humorous or edifying point.

Relying on dubious anecdotes in order to reconstruct someone's
philosophy is obviously less than ideal, but it is not hopeless,
because these bogus tales were often composed in order to provide
fitting and amusing illustrations of a philosophical point or position
of the figure in question, and so they can be used as evidence for a
person's philosophy. For example, Plutarch reports that Anaxarchus
told Alexander that there are an infinite number of worlds, causing
Alexander to despair that he had not yet conquered even one (Plutarch,
Tranq. 466D). This conversation almost certainly never took place.
Instead, it was invented to make a neat little point about the
insatiability of ambition. That is to say, even Alexander, the most
powerful man in the world, could not attain all that he desired, and
if this is so, wouldn't you be better off in adapting your desires to
the world, rather than engaging in vain striving in order to bend the
world to your boundless desires? Nonetheless, that there is an
infinite number of worlds is a thesis characteristic only of the
atomists in antiquity, and so this anecdote gives us evidence that
Anaxarchus was regarded as an atomist, since putting this remark in
the mouth of e.g., an Aristotelian, who believes that only one world
exists, would make no sense. Still, because of our sources, any
conclusions concerning Anaxarchus' philosophy will of necessity be
sketchy and tentative.
2. Epistemology

Anaxarchus was accused of abolishing the criterion of truth because he
likened things to painted scenery and said they resemble the
experiences of dreamers and madmen (Sextus Empiricus, Against the
Professors 7 87-8). This suggests that the things that we take
ourselves to be acquainted with in ordinary experience, such as trees
and rocks, are merely representations, like painted scenery, not the
objects themselves at all. Furthermore, these experiences cannot be
relied upon to get us at the truth: we are in no better position than
are dreamers and madmen, people whose experiences are paradigmatically
false (or at least untrustworthy).

The above points are only Anaxarchus' epistemological conclusions, not
the grounds for them. At least two different reconstructions of
Anaxarchus' reasoning can be given. In the first (in Hankinson (1995)
54-5), Anaxarchus is offering an argument from skeptical hypothesis.
Such arguments from skeptical hypotheses proceed in the following way:
you start by proposing some skeptical hypothesis—for instance, that
you are a brain in a vat or that the world was created exactly five
minutes ago. You then argue that you do not know whether or not this
skeptical hypothesis holds—typically, because your situation under the
skeptical hypothesis would be indistinguishable, as far as you can
tell, from the situation you ordinarily think obtains. Then various
skeptical inferences are drawn from this—since you do not know that
the skeptical hypothesis does not hold, you are unjustified, for
instance, in trusting the evidence of the senses or of your memory. On
this reconstruction, Anaxarchus' analogies operate as skeptical
hypotheses. The two-dimensional surfaces of painted scenery delusively
convey just the same sort of impression of a three-dimensional world
as do our regular sense-impressions. But because we cannot distinguish
between the delusive impressions produced by stage-paintings and the
(supposedly) veridical impressions our senses normally convey, we
cannot know whether the skeptical hypothesis holds, and so we should
not trust the evidence of the senses. Likewise, the impressions we
receive in sleep, or that madmen receive, are indistinguishable from
ordinary sense-impressions—but if so, we cannot trust the senses. If
this is right, Anaxarchus' argument is an exciting anticipation of the
most famous argument from skeptical hypothesis, Descartes' dreaming
argument in the Meditations against the trustworthiness of the senses.
In the second reconstruction, the analogies are vivid illustrations of
our epistemic predicament, but are not themselves the basis for
Anaxarchus' skeptical conclusions. Instead, he draws from his
Democritean heritage. Democritus says that we know nothing genuine
about objects in the external world, only about the effects that they
have on our bodies (Against the Professors 7 136, DK 68 B 7). For
instance, we are not really acquainted with some portion of honey in
itself, we are familiar only with the way this honey makes us have
certain visual sensations as atoms streaming off of it impinge upon
our eyes, gustatory sensations as the soothing round atoms of the
honey pleasingly and sweetly roll around on our tongues, etc.
Furthermore, the information conveyed by our senses about these
objects is systematically misleading. The same object may appear
yellow to one person, and grey to a person with color blindness: but
both sensory reports are false, since qualities like yellowness,
grayness, and sweetness are not really present in the objects
themselves at all. As Democritus famously puts it: "by convention
sweet, by convention bitter, by convention hot, by convention cold, by
convention color: in reality atoms and the void" (Against the
Professors 7 135, DK 68 B 9, trans. Hankinson).

As a result, the senses give only "bastard" knowledge (Against the
Professors 7 138, DK 68 B 11). And this makes Democritus conclude that
attaining knowledge of the world is very difficult, perhaps
impossible. Although its exact extent is controversial, there is
doubtless a heavy skeptical strain in Democritus. This strain is
developed further by some of his followers, such as Metrodorus, who
was allegedly Anaxarchus' teacher. Apparently he thinks that Socrates
was being too optimistic when he said that the one thing he knows is
that he knows nothing; Metrodorus asserts that we know nothing, not
even that we know nothing (Against the Professors 7 88). Anaxarchus is
another member of this group: because of the unreliability of the
senses, we are no better off than dreamers and madmen when it comes to
our access to truths about the world, and so, there is no criterion
whereby we can distinguish what is the case from what is not.
3. Ethics

According to Anaxarchus, the key to contentment and happiness is being
indifferent concerning the value of things. This claim is also central
to the ethics of Anaxarchus' traveling companion Pyrrho, and the much
later skeptics who named their movement after Pyrrho. This immediately
raises the question: If one is indifferent concerning the value of
things, on what basis does one act? Anaxarchus gives his own
distinctive answer to this question, one reminiscent of the sophists.

We cannot be sure in exactly what sense Anaxarchus is "indifferent"
concerning things' value, and why, but his Democriteanism allows us a
plausible reconstruction. It is easy to extend Democritus' reasoning
concerning sensible qualities to ethical qualities, although
Democritus himself did not do so. For Democritus, honey is no more
sweet than bitter, because in truth it is neither sweet nor bitter—in
truth, it is just a conglomeration of atoms buzzing about in the void.
And a sign of this is the relativity of perception, that the same
honey can taste sweet to one person, but bitter to somebody with a
disease. Properties like sweetness and bitterness are not really part
of the nature of the objects themselves.

Others give similar arguments concerning value, moving from the
relativity of value to its elimination from nature. Wealth may be
esteemed by one person and disdained by another, or the same sort of
action regarded as honorable in one city and base in another. But when
we think about the objects or actions themselves, none of them are
really good or bad, base or honorable, by nature, but are simply
regarded as such by convention. And so, any statement, such as "this
action is by nature base," which assigns a value to something in
itself, would simply be false. Anaxarchus' ethical eliminativism has
been compared to J. L. Mackie's error theory of morality (in Warren
2002).

The Pyrrhonian skeptic Sextus Empiricus would call this position a
form of dogmatism, since it is a substantial metaphysical thesis about
values not being part of the furniture of the world. The true skeptic,
according to Sextus Empiricus, is indifferent concerning the value of
things insofar as he refrains from making judgments one way or the
other about whether things are good, or bad, or neither, and this
indifference is based upon the equal weight of conflicting appearance
and arguments that leave him in a state of suspending judgment.

Sextus Empiricus claims that suspending judgment about value helps one
attain contentment in the following way: the skeptic will unavoidably
sometimes suffer from cold or thirst, since he is human after all, but
he does not have accompanying this discomfort the further disturbing
thought "I am suffering something that is bad by nature" (Outlines of
Pyrrhonism I 12), and so he is unperturbed. This same basic sort of
reasoning would also be available to both Anaxarchus and Pyrrho.
Pyrrho is unopinionated, and ipso facto he would have no opinions that
he is suffering something bad by nature. Not caring much about things
like pain and danger that most people regard as naturally bad helps
him remain tranquil. (See Bett (2000) chapter 2 for more on this
issue.) Anaxarchus, by contrast, does not suspend judgment about
questions of value, but his eliminativism means he would never believe
that he is suffering something bad by nature. Furthermore, his
indifference allows him to remain content and moderate in his
passions, since he never believes he is lacking in anything good by
nature. If things like luxury, power, and social status, which are
conventionally regarded as good, are really indifferent, and one has
no beliefs about other things being by nature good or bad, on what
basis does one act? Pyrrho's life indicates one possible answer: he
shows his disregard for such conventional values by withdrawing from
the world and living in solitude. He pays no attention to things that
are indifferent, and he is willing to do actions regarded by
convention as demeaning, such as washing a pig (DL 9 66). Anaxarchus
behaves quite differently. As noted above, Anaxarchus was rebuked by
Indian philosophers for "fawning on kings," and many of the anecdotes
about Anaxarchus concern his pursuit of luxury: for instance, his
wrapping himself up in three rugs when a cloak would have done, and
his asking for a huge sum of money from Alexander when Alexander tells
him to ask for as much as he wants.

Pyrrho's disciple Timon condemned Anaxarchus for this behavior, and
apparently thought of it as inconsistent with the indifference
advocated by both Pyrrho and Anaxarchus. But actively engaging with
the world, and pursuing what presently attracts you, is consistent
with believing that the objects of one's pursuit are by nature neither
good nor bad, as long as one pursues them realizing that these objects
have no value in themselves, and are pursued merely because of the
value that one gives them. Realizing that they have no value in
themselves, you will not be terribly distraught if you fail to attain
them, and you will be able to adapt yourself to circumstances
effectively. This adaptability to circumstances might be why
Anaxarchus says that the ability to seize the "opportune moment"
(kairos) is the boundary marker of wisdom. Anaxarchus displays this
virtue in his request of great wealth from Alexander. Pyrrho would
have spurned such an offer. But Anaxarchus, even though he says that
it is hard to collect money, and even harder to keep it safely, seizes
the opportunity and correctly guesses that Alexander would be amused
and flattered by the chutzpah of his request.

And in any case, Anaxarchus does display his own sort of contempt for
convention. He thinks that standards of what is right and wrong are
merely conventional, and as such, one should feel free to disregard
them when they get in the way of pursuing what one wants. This
attitude is strikingly displayed in an anecdote concerning Anaxarchus
and Alexander (Plutarch, Life of Alexander 50-52). Alexander and his
friend Cleitus get into a drunken quarrel. They exchange insults, and
in a rage, Alexander picks up a spear and kills Cleitus. His anger
then immediately departs, and he would have killed himself if his
guards had not prevented him. Over the next several days, Alexander is
in a bad way, staying in his room and loudly lamenting what he has
done. Anaxarchus successfully relieves Alexander's suffering with the
following remark:

Here is Alexander, to whom the whole world is now looking, but he
lies on the floor weeping like a slave, in fear of the law and censure
of men. He should be their law and measure of justice, if indeed he
has conquered the right to rule and mastery, instead of enslaving
himself to the mastery of empty opinion. Don't you know that Zeus has
Justice and Law seated beside him, so that everything that is done by
the master of the world may be lawful and just?

Asserting that moral norms are merely conventional, and that one
should as a result feel free to flout them if need be, is reminiscent
of Callicles in Plato's dialogue the Gorgias, and the sophist
Antiphon. And indeed, Anaxarchus was sometimes called a sophist.
However, unlike Callicles and Antiphon, Anaxarchus has no notion of
there being things that are "by nature" just, right, or good, in
contrast to those merely conventional standards.
4. References and Further Reading

* Bett, Richard. Pyrrho, His Antecedents, and his Legacy. Oxford:
Oxford University Press, 2000.
o The best consideration of Pyrrho's "indifference"
regarding things (chapter 1), its practical implications, and its
supposed benefits (chapter 2). Bett also briefly talks about the
relationship between Anaxarchus and Pyrrho (160-163); he is
pessimistic about our ability to reconstruct Anaxarchus' philosophy.
* Brunschwig, J. 1993. "The Anaxarchus Case: An Essay on
Survival," in Proceedings of the British Academy 82: 59-88.
o An interesting discussion of Anaxarchus' supposedly
fawning attitude towards kings. Brunschwig argues that the anecdotes
paint a much more ambivalent and complicated picture than that of a
simple flatterer. Also worth looking at for its extended consideration
of what Anaxarchus says concerning Alexander's deification, which
Anaxarchus supported.
* Hankinson, R. J. The Sceptics. London: Routledge, 1995.
o Contains a brief discussion of Anaxarchus' epistemology
(54-55); also worth looking at for introductions to Democritus'
skepticism and Sextus Empiricus' claims concerning the psychological
benefits of indifference.
* Warren, James. Epicurus and Democritean Ethics: An Archaeology
of Ataraxia. Cambridge: Cambridge University Press, 2002.
o Chapter 3 is the longest treatment of Anaxarchus' ethics
in English, examining our fragmentary evidence in great detail. Warren
also gives a revisionary reading of the "dreamers and madmen" report
in Sextus Empiricus, arguing that it has only ethical, and not
epistemological, significance.

Saturday, August 22, 2009

Down Mortgage Paying

The reader notes that just about every personal finance guy he has read says not to pay off your mortgage with the idea being that market returns typically, I say typically, exceed mortgage interest rates paid..

Down Mortgage Paying

The reader asks why not pay off all debt and invest whatever little bit is left over. I think the question was prompted by my noting that while people with a lot of money may not worry about having enough in the bank, people with no mortgage and no car payments probably don't have a lot of worries either or Down Mortgage Paying.

This issue comes up in talking to clients. I should note I am the portfolio manager not a CFP, my colleagues at the firm are and for planning issues I consult with them but in terms of just talking the issue comes up. My answer is always the same which is that from a long term numbers standpoint there is no question that paying off the mortgage is the wrong thing. It is like investing at a very low rate. Additionally a $2500 mortgage taken out today will be far less of a
burden in ten years from a cash flow basis than it is now. Think about people paying a mortgage they took out 20 years ago that might only be $800 a month.

That being said I paid off my mortgage five years ago when I was 38 making me a tad hypocritical although I always tell clients this in the conversation. We live in a small cabin we bought in 1998 for $87,000 and the financing situation was such that we had to put $30,000 down. Based on troubles my parent had I was motivated to live modestly, this is clearly rooted in psychology versus reason, have a very low overhead and thus avoid financial stress points that many people grapple with.

We are all motivated by different things and the numbers notwithstanding I think most people need to heed these drivers and act accordingly.

In addition to the numbers favoring investing and maintaining a mortgage there is another less objective drawback to paying off the mortgage. If a person has $100,000 in the bank and $100,000 in debt then they have a decent pile of cash and a small payment to make. Each month they make the payment the debt goes down a little and they still have that pile of cash which allows for flexibility to do many things. If they pay off that debt all at once then the cash is gone, the flexibility is gone and they have nothing.

One last consideration is how many people can pay off their mortgage? Is the average mortgage debt $200,000? I can't imagine raiding an IRA account to pay off a mortgage makes any sense so that would mean taking it out of a taxable account. Obviously far more people have mortgages with close to nothing in the bank than with the ability to pay it all off.

Having no mortgage creates an emotional comfort but in my opinion has no numerical support. Down Mortgage Paying

Avoiding Scams When Looking For Mortgage Modification

Before signing any papers for a loan modification, speak to an attorney or a state regulatory agency. You will want to speak with someone who is familiar with the governing process of these companies. Also, make sure the loan modification company has filed a contract with your state and that they hold a valid state license. In addition, make sure they are willing to go through the United States Postal service for pickup and delivery of funds and documents. If not, it could be that they are just trying to skirt issues of mail fraud.

Avoiding Scams When Looking For Mortgage ModificationGet educated on loan modifications. Know what your loan options are. Have several different real estate agents give you a comparative market analysis (CMA) to see what your home would sell for. Seek the advice of an attorney if you want to pursue keeping your home.

Here are some of the common things many "scam" companies will say when you call and ask them if they can help you save your home.

1. "By signing the title of your home over to us, we can salvage your credit. That way when the foreclosure is issued, it's our name that will be recorded."

Busted - In truth, a home foreclosure is always recorded against the borrower. It doesn't matter whose name is on title. The person who borrowed the funds is responsible. If you fall for this, you now owe money on something you no longer own.

2. "We will help you out of this situation by giving you some money AND paying your delinquent payments. Just sign the title to your house over."

Busted - If you don't mind being at the mercy of a lot of uncertainty, this might not be a problem. However, carefully consider this: Are you losing home equity you may have built in your home? Can the buyer really cure the default? Will the buyer really make the mortgage payments? Do you want to be responsible for a home loan on property you no longer own? There are a lot of maybe's and what if's in this scenario, so it's hard to make a call; be careful, and have an attorney on hand to review contracts before you sign them.

3. "Let us buy your home and you can lease it back from us. We'll make sure you can buy it from us later."

Busted — So you sell your house for less than it is worth, rent it for more than you should and then buy it again later at a higher price. Doesn't sound like much of a bargain. Now you've not only lost money, but you will most likely have a higher loan amount than you did before and probably at a higher interest rate. It will probably be harder to qualify for a loan and the payments will be more. A better choice? Sell it on the open market or consider a hard equity loan if you have the equity in the property to do so.

4. "We can help you refinance your property and pay off some of your bills."

Busted — Refinancing costs money - which is usually rolled into the new loan amount. This not only costs you money, but eats into the equity you have in your home.

When looking at mortgage lenders, consider the total amount of the loan, instead of getting stuck on how much the monthly payment is. Traditionally, these loans have higher interest rates and more fees.

5. "Home Foreclosures are my specialty. I know I can get you top dollar and help you out from the strain you've been under."

Busted — There are agents who search the public records looking for people who are in pre-foreclosure. They give these names to investors who make ridiculously low offers, all in the name of "helping." Many times, if the seller had interviewed three agents from the area and gotten comparative market analysis' done on their homes, they would have gotten a better deal. Always do your homework and work with an attorney if possible.

6. "Declare Bankruptcy - Stop the Foreclosure."

Busted - Foreclosures are NOT stopped by declaring bankruptcy. It just stalls the foreclosure process, and gives you a little extra time to organize your finances better. Contact a local attorney who specializes in bankruptcy and see if this is truly your best option. Wrong choices can make the situation even worse so make sure you choose someone who knows what they are doing. Are you looking for a bargain or do you want the job done properly?

7. "In exchange for paying us to modify your loan, we can arrange to have your mortgage payments frozen for 3 to 5 months.

Busted - Many mortgage modification companies get paid in advance for their assistance in stopping foreclosure by making false representations to homeowners. Some companies are not operating legally even though they offer money back guarantees. A number of these loan modification companies simply take the money and run, while others arrange only for you to receive the same unaffordable forbearance agreement you were already offered by your lender. Make sure you are working with a reputable company. Beware if they start offering rebates or making offers that sound too good to be true.

In closing, remember to do your homework. Just because you find yourself in a difficult situation, don't lose your head. Speak to several experts and get several opinions. A knight in shining armor may end up being a nightmare.

Enjoy The Mortgage Rate Slide Through 2008

It ALMOST cant get any better than this. Mortgage rates are smoking going into 2008. The current interest rate environment is Storm Chaser Roller Coastergreat for adjustable rate mortgage holders. My ARM loan rate is down nearly a 1/2 % just in the last few months and looks as though it will continue to go down throughout this year. This morning I found myself calculating how low my mortgage payment would go if………..Kind of funny. Like when you buy a stock and you start calculating all this money your going to make if this winner you picked goes to the moon.

With the Jobs Report for December showing only 18,000 new jobs when estimates were looking for 70,000 thats quite a surprise. Unemployment is creeping up as well to 5% this is a pretty large increase from Novembers level of 4.7%. Bad news for stocks but great news for mortgage bonds!

The bad news with the slide in interest rates as is with all the so called help from the government for those facing foreclosure or arm resets is that the majority of those wanting to take advantage of the lower rates and refinance can not. Its nearly impossible for even the best of credit scores to refinance their loan right now at anything over 80%. I have had four loans in December alone, all rate and term refinances (no cash out), all mid 700 credit scores not get approved. Its ridiculous right now, mortgage bonds are at the best they have been since summer of 2005 but its increasingly harder for approvals on refinances to take advantage of them.

Fannie Mae and Freddie Mac have all but closed up funding higher loan to values. I do not see this getting better anytime soon and even see it getting worse before it gets better. Most lenders have already added Risk Based Pricing to loans that Fannie and Freddie are officially starting in March 2008. Some lenders are starting to take away Investor loan programs for cash out. That is correct No Cash Out for Real Estate Investors, not even $10. Also some lenders are pulling Expanded Approvals as well. Then you have the automatic 5% value reduction for declining markets.

The storm is not over yet. There are going to be many more limiting changes that are coming down the pipe I am sure and It will not matter how low rates go if mortgage holders can not take advantage of them.

Avoiding Scams When Looking For Mortgage Modification

Before signing any papers for a loan modification, speak to an attorney or a state regulatory agency. You will want to speak with someone who is familiar with the governing process of these companies. Also, make sure the loan modification company has filed a contract with your state and that they hold a valid state license. In addition, make sure they are willing to go through the United States Postal service for pickup and delivery of funds and documents. If not, it could be that they are just trying to skirt issues of mail fraud.

Avoiding Scams When Looking For Mortgage ModificationGet educated on loan modifications. Know what your loan options are. Have several different real estate agents give you a comparative market analysis (CMA) to see what your home would sell for. Seek the advice of an attorney if you want to pursue keeping your home.

Here are some of the common things many "scam" companies will say when you call and ask them if they can help you save your home.

1. "By signing the title of your home over to us, we can salvage your credit. That way when the foreclosure is issued, it's our name that will be recorded."

Busted - In truth, a home foreclosure is always recorded against the borrower. It doesn't matter whose name is on title. The person who borrowed the funds is responsible. If you fall for this, you now owe money on something you no longer own.

2. "We will help you out of this situation by giving you some money AND paying your delinquent payments. Just sign the title to your house over."

Busted - If you don't mind being at the mercy of a lot of uncertainty, this might not be a problem. However, carefully consider this: Are you losing home equity you may have built in your home? Can the buyer really cure the default? Will the buyer really make the mortgage payments? Do you want to be responsible for a home loan on property you no longer own? There are a lot of maybe's and what if's in this scenario, so it's hard to make a call; be careful, and have an attorney on hand to review contracts before you sign them.

3. "Let us buy your home and you can lease it back from us. We'll make sure you can buy it from us later."

Busted — So you sell your house for less than it is worth, rent it for more than you should and then buy it again later at a higher price. Doesn't sound like much of a bargain. Now you've not only lost money, but you will most likely have a higher loan amount than you did before and probably at a higher interest rate. It will probably be harder to qualify for a loan and the payments will be more. A better choice? Sell it on the open market or consider a hard equity loan if you have the equity in the property to do so.

4. "We can help you refinance your property and pay off some of your bills."

Busted — Refinancing costs money - which is usually rolled into the new loan amount. This not only costs you money, but eats into the equity you have in your home.

When looking at mortgage lenders, consider the total amount of the loan, instead of getting stuck on how much the monthly payment is. Traditionally, these loans have higher interest rates and more fees.

5. "Home Foreclosures are my specialty. I know I can get you top dollar and help you out from the strain you've been under."

Busted — There are agents who search the public records looking for people who are in pre-foreclosure. They give these names to investors who make ridiculously low offers, all in the name of "helping." Many times, if the seller had interviewed three agents from the area and gotten comparative market analysis' done on their homes, they would have gotten a better deal. Always do your homework and work with an attorney if possible.

6. "Declare Bankruptcy - Stop the Foreclosure."

Busted - Foreclosures are NOT stopped by declaring bankruptcy. It just stalls the foreclosure process, and gives you a little extra time to organize your finances better. Contact a local attorney who specializes in bankruptcy and see if this is truly your best option. Wrong choices can make the situation even worse so make sure you choose someone who knows what they are doing. Are you looking for a bargain or do you want the job done properly?

7. "In exchange for paying us to modify your loan, we can arrange to have your mortgage payments frozen for 3 to 5 months.

Busted - Many mortgage modification companies get paid in advance for their assistance in stopping foreclosure by making false representations to homeowners. Some companies are not operating legally even though they offer money back guarantees. A number of these loan modification companies simply take the money and run, while others arrange only for you to receive the same unaffordable forbearance agreement you were already offered by your lender. Make sure you are working with a reputable company. Beware if they start offering rebates or making offers that sound too good to be true.

In closing, remember to do your homework. Just because you find yourself in a difficult situation, don't lose your head. Speak to several experts and get several opinions. A knight in shining armor may end up being a nightmare.

Mortgage Contingency Conditions In the Real Estate Contract

It is really important to make sure that your real estate attorney explains to you the mortgage contingency provision in the real estate contract. Many contracts tend to have generic provisions but there is no reason why your attorney cannot amend the provision and tailor it to suit your particular situation. When negotiating the mortgage contingency provision of the contract, a mortgage contingency amount of eighty percent (80%) of the purchase price may be requested, even if the client may subsequently apply for or accept a smaller loan. A forty five (45) to sixty (60) day contingency period in which to get a firm mortgage commitment should be sought, remembering that loan application processing in some banks can be very slow. However, a shorter thirty (30) to forty five (45) day mortgage contingency period would be acceptable in the contract if the sellers' attorney agrees to insert the provision assuring the granting of a reasonable extension of time if the loan commitment has not been secured by the agreed contingency date. You don't want to be left in a situation where the seller finds another buyer or decides to take the house off the market and leave you high and dry. Even though he may not give you an argument in returning your deposit you have already expended money and time in securing a mortgage and in making plans to move forward with the purchase of the particular residential property, commercial property, co-op or condominium that you have set your dreams on.

There are a lot of different standard real estate contracts floating around out there and different attorneys use different versions of a contract. I have seen many contracts where there are no mortgage contingencies in the printed form but there is a specific tailored rider annexed to the original contract. It is important that that tailored rider is studied in detail and that your attorney explains it to you in detail. In many contracts the mortgage contingency clause is actually in the standard contract and if you read the paragraph in detail you see that you are committing to purchase the house as soon as you have received a "written commitment" without the word "firm," "unconditional" or "fundable". Now we all know that many lenders issue written commitments BUT the written commitment isn't worth the paper its written on if it is followed by a long detailed page of conditions that you have to meet before you close on the loan. I personally am very careful to make sure that my client is not placed in a position where he has to go forward and purchase the property as an all cash transaction because the mortgage contingency clause isn't worth anything.

Of course the purchaser can always file an action in court claiming that he is entitled to his deposit back if the mortgage is not funded by the financial institution however, I would much prefer that my client is not put into this expensive nerve-racking situation.

Options to Keep or Sell Your Home

The following are several options to help you keep your home: If you current financial situation is only temporary and you know you will be able to make your mortgage payments in the near future, you can get approved for a forbearance, which would delay or reduce your payment. If you make your regular monthly payments plus an additional amount, you can have a repayment plan available. If your loan has mortgage insurance, you may be eligible for a claim advance to bring the account current. You may also be eligible for a modification by modifying the terms of your mortgage.

There are also several options to help you sell your home: If you're unable to afford your home anymore, you may be able to receive a short sale, where the lender accepts less than the full payoff amount. You can also get a loan assumption if you have a buyer willing to assume your mortgage loan. If your property is fairly listed for 90 days without any activity, you can receive a deed-in-lieu from your lender who will accept the property by warranty deed as a settlement.