Finance news. My opinion.

WASHINGTON—American Home Mortgage Investment Corp. wants bankruptcy court permission to sell pools of mortgages in which borrowers are behind in their payments and owe $164 million in principal on the loans.

The failed mortgage lender has asked the U.S. Bankruptcy Court in Wilmington, Del., to approve a Feb. 13 auction for the mortgage loans, according to court documents filed last week.

American Home has proposed to sell three pools of 618 non-performing loans in which payments are more than 60 days past due. That total could change if borrowers catch up on their payments or more fall behind.

American Home is one of many mortgage lenders that have been forced into bankruptcy due to the credit crunch. It has been selling its assets and winding down its business. In October, the bankruptcy court approved the sale of American Home’s loan-servicing business to Wilbur Ross’ private-equity firm.

According to court papers, a pool of 83 loans are subject to liens by American Home’s bankruptcy lenders, including the entity set up by Ross to buy the loan-servicing business. Another 208 loans are subject to liens by Bank of America Corp. JPMorgan Chase & Co. has an interest in the remaining 327 loans.

American Home has proposed a Jan. 25. deadline for interested buyers to submit indicative bids and a Feb. 11 deadline for formal, binding bids.

The bankruptcy court will consider American Home’s request at a Jan. 14 hearing.

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Sherry Ridge assists the person wanting to eliminate debt, as well as the couple having a tough time paying their mortgage.

Ridge, owner of Sherry Debt Free, teaches people how to get out of debt and create and follow a budget.

“It’s all about choices,” says Ridge, a Round Lake Beach resident for 20 years. For example, Ridge never buys a brand new car. She gives clients easy tips on how to save money. For example, she says that if women don’t wear makeup one day a week, they’ll save $60 a year.

For the past decade, Ridge has led Debt-Free & Prosperous Living workshops. She was certified by and works as an independent contractor for the Wisconsin-based company that sells the workshops.

Ridge is proof that the program works. Before she started teaching the method, she tried it herself. She paid off her 30-year mortgage in less than seven years.
She’s now attempting to help others follow a simple budget.
“Money can’t buy happiness. But your debt can stop a lot of things,” she said.
Ridge said she works with clients living paycheck to paycheck and who don’t have a plan.

Mainly working with couples, Ridge said she meets with clients twice, once to create a budget looking at all expenses, from manicures to golf outings. She creates a budget tailored to the client’s needs and then creates a debt-elimination plan.

Ridge, 44, said the cost for the two-session consultation is $399.

She also holds a variety of workshops at area schools and park districts, including the College of Lake County, Harper College, Libertyville and Mundelein high schools and the Gurnee Park District.

Beginning in January, Ridge is attempting to reach more people. She will host a new weekly radio show addressing household budgeting, debt elimination, personal cost-cutting efforts and more.

The show airs at 1 p.m. Wednesdays on WRLR 98.3-FM or via the Web at www.wrlr.fm.

The first four shows will address the housing market. She will talk to mortgage brokers who will discuss foreclosures and what a new homeowner needs to look for when getting a mortgage. February will address tax returns.

Ridge also wrote a book titled “Practical Household Budgeting.” She sells it for $25 on her Web site at www.sherrydebtfree.com.

Ridge, who grew up in Las Vegas, also volunteers in the community. For the past seven years she has taught English as Second Language classes at Mono A Mono Family Resource Center in Round Lake Park.

She hopes to soon launch less costly Internet sessions addressing how to get out of debt.

For more information, call (847) 740-9178.
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U.S. loans for big-ticket items like cars fell in October for a second consecutive month, according to a Federal Reserve report Friday that suggested tighter lending conditions in the wake of a global credit crunch.

It was the first back-to-back decline for this type of loan since 1992.

Nonrevolving credit, which includes closed-end loans for big-ticket items such as cars, boats, college educations and holidays, declined by $1.64 billion, or 1.26%, to $1.561 trillion, the Fed said.

In addition, September’s report of nonrevolving credit was revised to show a decline of $1.37 billion from a previously estimated $363-million increase.

The data can be seen in different ways. One explanation might be that tougher lending standards mean fewer customers qualify for this type of borrowing, which is dominated by auto loans.

Financial firms have suffered heavy losses as a result of a credit crunch spurred by problems in the U.S. sub-prime mortgage market. As a result, many are being more careful in their lending. Or the declines might be driven by weaker demand for credit as consumers tighten their belts.

Overall U.S. consumer borrowing rose by $4.71 billion in October, compared with forecasts of a $5-billion rise. The increase was at an annual rate of 2.27% and took the total to $2.490 trillion, the Fed said.

This followed a downward revision to September’s credit numbers, which were trimmed to a gain of $3.21 billion from an originally reported $3.75-billion rise. August’s increase was revised upward to $20.75 billion.

Revolving credit, made up of credit and charge cards, rose $6.34 billion, or an 8.3% rate, to $928.49 billion in October. This compares to an upwardly revised September increase of $4.59 billion.

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Realtor Lori Naese calls it the worst kind of loan.

It’s the kind structured so that, if the mortgage-holder doesn’t refinance by a certain date, he or she will be locked in at some extraordinary interest rate, to the extent that a $1,000 monthly payment soars to $1,800 overnight.

That’s because few of the borrowers using those kinds of predatory loan instruments are able to qualify for refinancing, especially as credit has tightened and the number of foreclosures mounts.

“I know several families that this has happened to,” says Naese. “They have really struggled.”

Holders of the aforementioned loans — in addition to the near-doubling of their mortgage payment — also lose big in the fee structure of the default financing.

“When that day hits for these families, you’d have to be a millionaire just to afford the fees,” she said. “I’ve seen a case where the fees ate up all of the $11,000 the owners had in equity in their house.”

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