Black Personal Finance Expert Ryan Mack: Top Money Advice, Part 2

Black finance expert Ryan Mack is back with part two of his informative interview full of great practical financial guidance. In our first installment, we learned the background of the mortgage crisis and what people can do to avoid losing their homes. This week, Ryan brings us more details about rebuilding credit and ways to battle the recession. Read on for his expert money management tips.

Miss Part 1? Read:
'Ryan Mack Has Help For Housing Crisis Victims'

So Ryan, if someone loses a house at this time, what would be your best piece of advice for them as a next step?

At the risk of sounding elementary, the first thing the person should do is make sure they have a place to live. Afterward, they need to start re-establishing credit. My company offers a plan called 'Seven Steps to Improving Credit.' The basic outline is as follows:

Step One – Basic Housekeeping

You should know that 75% of all credit reports have errors and small balances that have been neglected. These should be cleared up immediately.

Step Two – Pay Bills on Time (35% of FICO score)

Missing just one payment can deduct 50 – 100 points from your score. Skipping payments for one month can take a 700 FICO score down to 562. To repair your credit, please get into the habit of paying your bills on time.

Step Three – Pay Down Debts

Carrying a balance serves no purpose. (For those planning on buying a house within a year, begin paying down all your balances NOW!)

Step Four – Don't Cancel Old Accounts

Your Balance/Lending Limit Ratio makes up another 30% of your FICO score. If you must cancel accounts, cancel the newest accounts first. Try to spread out the time between cancellations by 6 months.

Step Five – Don't Be Afraid of Credit Counselors

FICO ignores credit counseling and credit consolidation remarks. After payment is paid remarks are removed. That's all you need to worry about.

Step Six – Don't File for Bankruptcy

This shaves 200 points off your FICO score immediately. If your score is lower than 620 points, fewer points are removed as you take greater steps to clear up your credit.

Step Seven – BE PATIENT!!

It takes time to repair credit. You can do it, if you take it step by step.

Is there an upside to the housing crisis?

There is an upside to this, because people are now re-learning the importance of delayed gratification, and the importance of saving and avoiding excessive consumption. People also now realize that Wall Street and Main Street are closely intertwined. America always has a way of self-correcting. After this recession is over, our habits will be dedicated towards more long term-thinking. Renewed and improved habits combined with some RESPONSIBLE government investment should bring us closer to building a solid infrastructure within this economy.

What do you think of President Obama's fiscal policies thus far?

The previous administration's policies accomplished nothing but doubling the size of our debt with nothing to show for it. Obama wants to focus on investing in people. Re-establishing our education system, moving us closer towards universal health care, tearing us away from dependency on foreign oil, implementing more regulation on Wall Street and providing a more transparent and responsible government are just some of the ways he is going to accomplish this. Obama understands that we cannot fix this financial crisis with tax cuts and tort reform. We need to help people on all levels.

What are your top money tips for 2009, given the current global recession?

We must make sure that we are all:

• Budgeting within our households effectively and using each dollar wisely (avoiding excessive consumption).
• Aiming to improve our FICO scores to at least above 750.
• Covering our families with the right amount of insurance.
• Implementing and updating the appropriate estate plans for our households.
• Eliminating ALL of our credit card debt.
• Maximizing the efficiency of our company retirement plans and making sure that our asset allocation matches our age and risk profile.
• Saving at least 6 months of living expenses in a high yield, FDIC insured savings account for a rainy day.
• Investing in the market only when you have eliminated all of your credit card debt, saved enough for your emergency fund and are certain that you can sustain a long term investment strategy.
• Learning enough about insurance, mortgages and other financial service products to lessen the chances of being taken advantage of by financial predators.
• Pre-paid debit cards (like the Rush Card), check cashing facilities, refund anticipation loans, payday loans and cash advances should all go out of business, because we have improved our habits enough to never have to use any of them again.

Six Horror Stories of Mortgage Modification

Sue Wright, Las Vegas, Nev.
Real estate agent Sue Wright was one of the earliest homeowners to apply for the FDIC's mortgage modification plan to help insolvent IndyMac's at-risk borrowers keep their homes. But because she was current on her mortgage payments, the bank said it couldn't help her and advised her to stop making payments for two months. She did that and called back right after her second payment was overdue. She was given a plan with a reduced interest rate and told to make the new payments for three months and the modification would become permanent. But after doing that, she received a letter from the bank telling her the modification was off; the investors wouldn't approve it.
Full Story: The Crazy Part Is ...

Courtesy CNNMoney.com

A. G. Chancey, Longwood, Fla.
Chancey has been trying to arrange a mortgage workout since August 2008, when she was only two months behind on payments. Today, after dozens of phone calls to her lender, she's made progress. But she's now five months behind. She has been in the home for 23 years, but family health problems, divorce and economic factors have conspired against her and she's never been able to substantially pay down the loan. She tried to apply for a mortgage workout, but no one ever seemed to know her status.
Full Story: She May Get Good News Yet

Courtesy CNNMoney.com

Raul Medina, Moorestown, N.J.
No good deed goes unpunished, they say, and Amber and Joe Tardiff might be forced to agree. When Joe's good friend and partner in a landscaping business, Raul Medina, was left a parapalgegic by an auto accident, the Tardiffs took on the Good Samaritan task of dealing with Medina's mortgage issues. Medina, who's also a minister, owns two properties, his residence and one he bought for a Moorestown, N.J., church to provide shelter for the homeless. But after seven months of roadblocks, wrong numbers, voice mails to people who no longer work for the company, they were told that the lender does not offer any loan modifications.
Full Story: His Only Options Now

Courtesy CNNMoney.com

Richard and Pati Kays, Stuart, Fla.
"He's 83 and I'm 73, with separate assets, stuck in the mortgage mess. We're not quite in foreclosure but in distress over the inability to sell or refinance," says Pati Kays. Pati married husband Richard seven years ago. He's a retired high-steel construction man. She's a retired attorney who owns five cottages she rents out. Richard was supplementing his pension and social security with the rent from a mortgaged duplex he owns. Not any more. His adjustable rate mortgage reset, and his payment on the $430K mortgage went from $1,750 a month to $2,750. The rent he now receives is only $1,800 a month. Trying to head off problems, Richard called his lender to ask for a workout.
Full Story: Why He's in a Bind

Courtesy CNNMoney.com

Ron Nash, Carlsbad, Calif.
Ron Nash is not someone who's shy about pushing to get what he wants; he's a motivational speaker, headhunter and author of "How to Find Your Dream Job; Even in a Recession." But when it came to obtaining a mortgage workout, he wasn't getting anywhere -- even after months of trying. He finally wrote a letter to the president of his lender to try to resolve the issue. The results were very gratifying -- at first. After that, however, and after he was asked to send in all his paperwork for the fifth time, he didn't hear from them again for six months. Then, recently, he finally got a call back with a loan workout offer.
Full Story: Why He Chose to Walk Away

Courtesy CNNMoney.com

Ken Mobley, Tampa, Fla.
Ken Mobley had some of his best earnings years ever in the mid-2000s, as an advertising sales representative for a media company. But with newspaper ad revenues in decline, he was "reorganized" by his company and now sells ads to mom-and-pop businesses. He called his lender last fall hoping for a hardship consideration and asking for a two-month postponement of his mortgage payments. He wanted to have them added to the end of his mortgage. Mobley says his credit rating was excellent, and he was merely trying to free up some cash for the holidays. The effort failed.
Full Story: His Catch-22

Courtesy CNNMoney.com

As a renowned black finance expert, please share some positive words of encouragement, inspiration or your favorite piece of wisdom with the BlackVoices.com audience.

Times have been hard for everyone. However, as hard as they have been, the spirit of the American people can and will sustain us with hope and faith. More than stocks, bonds, or gold... "faith" is the most precious commodity that we must all have. Faith has two components. The first component is "believing that tomorrow will bring brighter/better days." The second component is "being able to act on that belief." If you have one without the other, you will not produce the results you desire.

To use an example, let us imagine that one has faith that he will own his own home. He believes that he will purchase the home, but after one year of thinking he becomes discouraged because his dream has not come to fruition. This is because he forgot the second component – faith must be balanced with action.

Now let us add this second component to the scenario. Not only does he believe, but our friend begins to act on this belief. He hires a financial adviser to help him put together a budget that outlines how much he can really afford. He knows that just because you are pre-approved by a lender (who only looks at your income and debt levels), that does not mean you will be able to afford that piece of property.

With his adviser, he calculates that he can afford a mortgage that is $300 more than his current rent. He begins to save that $300 per month in a high-yield savings account and "pretends" he is paying that mortgage. He saves an additional $300 on top of that, for a total of $600 per month, because he realizes that when he owns his home he needs to have additional funds available for household expenses. Whenever he calls the landlord to fix anything around his apartment, he deposits the cost into his savings account as well. This way he is getting real-time training about the expense of owning a home.

While he is "acting" like he already owns his home, he is going through the seven steps listed above to improve his credit to a score of 750 so that he can receive a prime rate on his mortgage. He also interviews at least 6 lenders a full year in advance of getting pre-approved, and asks them what FICO score he needs to get a prime rate. Then he writes his goal purchase date down on a piece of paper, and checks his FICO score on annualcreditreport.com that same day, then again 6 months from that day, and 3 months before his planned purchase date.

With faith and action, within a year (or when he saves 20% on his home, whichever happens LAST) he will purchase his home.

With faith, nothing is impossible. Faith is effort, faith is diligence and faith is real. Have faith enough to work hard and acquire resources. People connections and knowledge are the most important resources that you could ever have. Financial literacy is just one of many areas of knowledge that will make your journey towards success that much smoother. Have the faith to assemble a plan of action. Starting today, write down five tangible steps of action that you can take right away that will take you towards your goal. Knowledge is only as powerful as how you use it, so combine that knowledge with action to create real power.

If it takes a village to raise a child, then the strength of the children depends upon the strength of the village. The strength of the village depends upon the strength of each individual member of the village. The stronger we are as individuals, the more effectively we can contribute to the village as a whole. We need all of you to recognize your true potential spiritually, mentally, physically and financially. If you are successful, we all will be.

Together we will take this strength, battle this recession and show the world the will and the spirit of the American people! I want you all to be successful. No matter what your income level, have faith enough to work hard and find your purpose on this earth. If you have a pulse you have a purpose, and that is where you will find your prosperity.

President of Optimum Capital Management, Ryan Mack has a life mission to build and develop a durable financial empire geared towards educating his community and beyond. Ryan Mack graduated from the University of Michigan Business School (ranked number one in the country) with a concentration in finance. His career in equity markets began in Detroit as a stock trader and later as a trader for the largest NASDAQ trading firm in the nation, Knight Securities. Having a passion for teaching, he established his own financial awareness group in 2003, for which he began to publish regular newsletters about various financial issues for people of all income levels. Ryan Mack also blogs for The Huffington Post.

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