Following a similar move made by mortgage giant Freddie Mac, unemployed borrowers who have their mortgages owned or guaranteed by Fannie Mae may be eligible for up to 12 months of forbearance starting March 1, 2012. The new Fannie Mae policy mirrors Freddie Mac’s move to double the existing forbearance policy’s eligibility period and allows mortgage service companies to approve unemployed borrowers for six months of mortgage forbearance without prior approval from Fannie Mae. They can also approve extending the forbearance period for an additional six months with prior Fannie Mae approval, giving eligible unemployed borrowers a possible one full year of forbearance.

This is good news for holders of mortgages owned or guaranteed by both Fannie Mae and Freddie Mac, as prior to the policy changes mortgage service companies were only allowed to grant up to three months of mortgage forbearance with no payment and without prior approval, or six months at a reduced payment with prior approval.

Those mortgage borrowers who are already enrolled in a Fannie Mae Home Affordable Modification Program (HAMP) or non-HAMP trial period plan may also be eligible for Unemployment Forbearance if they become unemployed during the trial period. They may also be eligible for a loan modification upon successful completion of the terms of the Unemployment Forbearance period because the HAMP was designed to help homeowners who are in default and those at risk of default by providing more affordable monthly payments.

Generally speaking, a mortgage borrower is eligible for Fannie Mae’s Unemployment Forbearance program subject to the following conditions:

• The property must be a principal residence and cannot be vacant, condemned, or abandoned.
• Second homes and investment properties are not eligible under the program.
• The borrower must exhibit a financial hardship due to unemployment.
• The borrower can be delinquent or in default.
• FHA, VA, or Rural Housing mortgage loans are not eligible.

A Fannie Mae borrower must also meet the following conditions in order to qualify for an extension of his Unemployment Forbearance program:

• The borrower must meet all terms and conditions as required on the current forbearance plan.
• The borrower’s cash reserves cannot exceed 12 months of the borrower’s average monthly housing expenses.
• The borrower’s current monthly housing expense to income ratio must be greater than 31% (unemployment benefits are excluded).

For more information on the specific terms and requirements of the Fannie Mae Unemployment Forbearance program, visit Fannie Mae’s website at fanniemae.com.

Just because mortgage rates have been a record lows recently it doesn’t necessarily mean you should refinance your mortgage right now according to some economists. Many consumers are feeling that mortgage interest rates are basically at the lowest point they could possibly reach right now, as lenders have seen more interest among borrowers looking to take advantage of the historically low mortgage rates. Currently, the average rate for 30-year-fixed-rate mortgages has fallen to just under 4% and rates on 15-year loans have fallen to nearly 3.25%. The great rates only apply to borrowers with excellent credit though, and they do vary by region as well.

The rates may seem low now, but lawmakers and bankers may succeed in pushing them down even further in the near future as administration officials try to move the rates even lower. The Federal Reserve is buying more mortgage-backed securities and the White House is looking for ways to prop up the Home Affordable Refinance Program in order to help borrowers refinance even if they have little or no equity left in their homes. The thinking is that if the rates fall low enough that more people begin refinancing, it could help stimulate the overall economy. The economists warn that although the rates could fall in the short term, the will eventually start to rise again as the economy begins to get stronger.

This means that with rates still hovering around 4%, and after you add in the typical cost of about 2% for the typical refinanced loan, refinancing today might not be in your best interests. People who try to refinance every time the rates fall a bit will also find they might be losing money in the long run due to the stacking of closing costs every time they get a new loan. Making decisions based entirely on lower rates without taking into account the closing costs, tax rates and the number of years left on a mortgage, could be a mistake.

Waiting for a lower rate that may never materialize can be risky, but if borrowers can get their lenders to waive some of the other loan fees, it might only take a half-point of savings to make a deal truly worthwhile. If homeowners can get their lenders to cover their closing costs, the loans would be more affordable with less upfront costs. Some borrowers have approached the problem by refinancing with a shorter 20 or 15 year term that allows them to keeps their monthly payments about the same as they were paying on a 30-year loan.

According to the Federal Reserve’s annual analysis of mortgage data gleaned from the Home Mortgage Disclosure Act, recent declines in lending have been greater in neighborhoods that have been hardest-hit by foreclosures and price declines. Many of those same neighborhoods saw high concentrations of subprime and other exotic mortgages during the housing boom. The Federal Reserve found that lenders originated just 7.9 million mortgages in 2010, down 12% from 2009. The only year with a lower total in the past decade was 2008, with 7.2 million new mortgages that year.

The Federal Reserve analyzed mortgage data provided by more than 7,900 mortgage lenders that was reported to regulators under the Home Mortgage Disclosure Act. The trend seems due to in part from declines in loans to borrowers and investors who don’t use the homes as their primary residences. The report also found a growing concentration of lower-income borrowers in those communities. Higher-income borrowers accounted for 29% of all loans in those distressed neighborhoods in 2010, compared with 52% of all loans in those same neighborhoods in 2005. In less-distressed neighborhoods, higher-income borrowers accounted for more than half of all loans in 2005 and 43% of loans last year. The result is that changing income patterns in the distressed neighborhoods could slow the economic recovery of communities that have seen big housing price declines as well as a high number of foreclosures.

The findings also point to the difficulties many Americans are currently having refinancing their existing mortgages. Far too many homeowners have not been able to qualify for low interest rate loans because they did not have enough equity in their homes. The fact that lending standards are now much stricter than they were when most people initially took out their loans did not help. The Fed’s report pointed out that if loan

underwriting standards had been a bit looser and home equity was not a factor, an estimated additional 2.3 million homeowners might have been able to refinance last year alone. That translates to a near 50% increase over the 4.5 million borrowers who were lucky enough to be able to refinance last year.

Arizona, California, Florida, Michigan and Nevada are states that have seen the huge home-price declines along with a corresponding drop in refinance loans. In those five states, just 6.4% of borrowers with credit scores between 680 and 719 refinanced last year, compared to the 9.7% of borrowers who successfully refinanced in the remaining 45 states. The Federal Reserve’s report shows the mortgage market’s overly heavy reliance on government-backed mortgages in a market the Federal Housing Administration accounted for more than half of all loans for home purchases in 2010. The Fannie Mae and Freddie Mac agencies accounted for nearly one-quarter of all purchase loans and more than half of all refinances in the same period.

The report also warned that unless Congress intervenes, borrowing costs could continue to rise and lending could decline in certain high-cost housing markets where the size limits for government-backed loans will decline at the end of the month. Proposed new loan limits will drop from the current $729,750 down to $625,500 in some of the more expensive markets in the nation. The Federal Reserve report also estimated that the decline in loan limits would boost the volume of loans by more than 20% in the nation’s 250 counties where loan limits are set to decline.

The California Association of Realtors recently issued a news release painting a bleak picture for the future of the state’s housing market with the revelation that “Short sales will be a part of the California real estate landscape for years to come.” The association appeared to be turning away from its generally positive outlook when it sent letters to JP Morgan Chase, Bank of America, Wells Fargo, and Citigroup, urging the large banks to implement better procedures for the handling of short sales.

Because the Realtors only get paid when a sale closes, they have the ultimate motivation to see the short sales approval process streamlined. The association’s requests of the banks included a host of elements designed to improve the overall short sales system. One request was that the banks provide and meet realistic time frames for offer evaluations; another was to provide borrowers with a complete list of the documentation needed in order to process each short sale. Of particular concern to the Realtors was that the banks stop canceling short sale requests already in process and not require the borrowers to start the whole procedure over again when only one or two documents in a package are missing or incomplete. Realistic time frames for offer evaluations would increase short sale processing speeds since many buyers get tired of waiting for bank responses that may take weeks or even months. The Realtors group also sought to increase the amount of money available to pay off secondary mortgages in a short sale because the secondary lenders can block a sale if the primary lenders don’t offer a realistic payoff up front.

California Association of Realtors President Beth L. Peerce said “We believe banks, investors, homeowners, and real estate professionals all have a common interest in conducting these transactions expeditiously and efficiently. The housing market recovery is in everyone’s best interests, and your urgent focus on these issues will help achieve that end. We are convinced that by correcting these items, your system will run more smoothly and, in the end, save everyone money and resources, as well as assist in the housing market recovery.”

According to the association, short sales benefit the many distressed sellers who have lost jobs or been forced to take employment at lower pay than when they purchased their homes. A short sale allows them to walk away from their debt without facing bankruptcy or foreclosure, and causes less damage to their credit ratings. The sellers also get to decide when and how they will move after a foreclosure, instead of facing eviction. The Realtors say short sales allow the banks to get the benefit of selling homes that are still occupied and cared for by their owners. Such houses will usually bring a higher price than homes that have been abandoned and neglected. Any extra money left over after the short sale goes to the bank, another factor that decreases their losses. The banks also save a few thousand dollars by not paying a trustee to complete a foreclosure. Short sales are also better for the rest of the neighborhood when one considers that the higher prices short sales bring do far less damage to surrounding home values than poorly maintained abandoned homes that are neglected by foreclosing banks might.

Data from national mortgage trackers and other financial analysts indicate that foreclosures take longer for more-expensive homes than for less-expensive ones. The data from the first half of this year shows that nearly 400,000 homes in the U.S. were repossessed by lenders or sold to others at foreclosure auctions. The time disparity shows up when you see that the more-expensive homes were delinquent an average of about 650 days at the time they were repossessed or sold, while the less expensive homes were delinquent an average of just 330 days, or about four months less total time in default.

After dividing homes into categories of inexpensive homes valued under $417,000 and the more costly homes valued from $417,000 to $999,999, the research showed that homeowners in the more expensive houses had more time in their homes without having to make mortgage payments in 45 out of 50 states and the differences in time ranged from days in some instances to several months in others.

Various bank spokesmen have maintained that loan size does not affect the foreclosure process and that lenders are not showing favoritism to wealthier people. Instead, they point out that people who can afford to buy expensive homes might have more resources to delay foreclosures and that other factors are probably affecting the time lines. One of those factors might be the type of loan itself as loans below $417,000 are most often owned by the twin mortgage giants Freddie Mac and Fannie Mae who both have simpler foreclosure processes that lead to faster resolutions than loans held by other lenders. The larger loans found on more expensive homes tend to be held by other lenders or investors who might be putting off having to take the larger losses that can occur when expensive homes go into foreclosure.

A deal struck between the Federal Trade Commission and Countrywide Home Loans in June of last year will finally go into effect later this summer when some 450,000 borrowers who were charged excessive fees by Countrywide when they fell behind on their mortgages will finally begin receiving their fair share of $108 million the company agreed to pay back. The deal involves the largest settlement in the FTC’s history and involves more than double the number of mortages that were originally estimated.

Those who will receive cash payments under the settlement are the borrowers whose home loans were serviced by Countrywide between January of 2005 and July of 2008. At the time, Countrywide was the nation’s largest mortgage lender and the biggest loan servicer too, administering some $1.4 trillion in mortgages during the same period. Countrywide eventually crashed due to its’ subprime lending practices and was later acquired by the Bank of America in 2008. The Bank of America made a deal with the FTC to provide the commission with a comprehensive list of borrowers overcharged by Countrywide, but because the company’s records were totally disorganized, the bank had to hire an independent accounting firm that took over a year to identify the borrowers who were actually owed money. As a result, borrowers receiving money from the settlement can expect to get amounts ranging from $500 to $5,000 later this year.

The charges that excessive fees and improper charges were levied on borrowers whose loans were serviced by Countrywide means that the company could be responsible for overcharging more than 1 percent of all the mortgages in the United States. Jon Leibowitz, chairman of the Federal Trade Commission, said Countrywide’s practice “Was a business model based on deceit and corruption and the harm they caused to American consumers is absolutely massive and extraordinary.” Countrywide set up subsidiaries to perform services like property inspections, title searches and maintenance on homes going through foreclosure, and in many cases, marked up the cost of those services by more than 100 percent.

Almost 350,000 borrowers whose loans were serviced by Countrywide were routinely charged excessive amounts by Countrywide for default-related services and another 100,000 people will share in the settlement because Countrywide furnished them with incorrect accountings on how much they owed on their mortgages or had added fees and escrow charges without proper notice. The Bank of America did not dispute the FTC’s charges because the bank said it wanted to “Avoid the expense and distraction associated with litigating the case.” If you think you are owed money in the Countrywide Home Loans mortgage settlement, contact a Bank of America branch in your area.

Everyone knows that the higher your credit rating scores are, the more access you will have to credit overall and you will also enjoy much better interest rates than you might with lower credit scores. The three major credit reporting agencies, Equifax, Experian and TransUnion will all provide one free copy per year of your three major credit reports. Repairing or improving your credit rating begins with accessing your credit reports at the government-authorized site annualcreditreport.com where consumers can request their own reports. The three major credit reporting agencies will not give your credit scores for free, but they will each furnish you with a copy of your latest credit report. If you do not want to go through the government sponsored site, consumers can contact the agencies directly at:

Equifax: 800-685-1111, P.O. Box 740241, Atlanta, GA 30374; www.equifax.com.

Experian: 888-397-3742, PO Box 2002, Allen, TX 75013; ww.experian.com.

TransUnion: 800-888-4213, P.O. Box 2000, Chester, PA 19022; www.transunion.com.

When you receive your credit reports, the first thing you should do is to examine them for accuracy. Keep an eye out for credit cards or other credit accounts on your reports that do not belong to you. It is also important to try to remove any negative reports that are over seven years old because they are no longer considered part of your credit history for rating purposes. You should also look for any incidence of duplicate past-due items and other inaccuracies like incorrect an incorrect Social Security number or birth date.

If you do find errors on your reports, you can ask the agency in question to investigate and remove the inaccuracies. The reporting agencies are required by law to check out any errors you bring to their attention. The agency will usually contact the creditor that reported the information to check its records and if the creditor can not verify that the info is correct or they don’t respond to the query, you can ask that the item be deleted.

When it comes to repairing your credit, don’t be tempted to close all the accounts you are not currently using. Closing old accounts will not help your credit scores and will reduce the amount of your available credit and the result could be even lower scores. You do want to pay down your overall debt load though as your payment history is worth about one-third of your overall credit score and paying your bills on time is critical in order to maintain good credit scores. Try not to run all your credit accounts to the limit even if you do pay them on time as some lenders might assume you are at the upper limit of your available credit and decide to turn down any requests for more credit.

As interest rates continue to drop and home prices around the nation plummet, one might be tempted to think now is the time to buy a home, but the reality is that most Americans are locked out of the best interest rates because qualifying for credit has become a lot tighter after the collapse of the housing market and now it takes nearly perfect credit and a big down payment in order to get the best mortgage rates.

Newly released federal credit rules that came about as a result of last year’s Dodd-Frank financial-services legislation, now require banks and other lenders to disclose to consumers the scores used to determine interest rates charged borrowers, or to deny credit. This means it will be easier for consumers to see exactly how their credit scores affect the interest rates they pay, but it doesn’t necessarily mean they will qualify for the best rates.

Because Fannie Mae and Freddie Mac finance 75% of all mortgages by purchasing the loans from the banks, they can basically dictate how much it costs to borrow mortgage money today. This makes the FICO credit scores on the loans that banks are giving out more critical than ever before. Before the housing crisis went into full collapse, , a credit score of 700 to 725 was good enough that a borrower could expect to get a conventional mortgage loan at the lowest possible rates. Between 2003 and 2006, a credit score between 700 and 750 was required for over three-quarters of all Fannie Mae mortgages.

Fast forward to 2011 and only 13% of Fannie Mae mortgages have a 750 score or better. Only 1.7% have a score of 700 to 725 and the median score is 711, according to FICO. The result is a large percentage of the population being unable to qualify for the best mortgage rates. Whereas a score of 730 was considered excellent just three years ago, now you need the 730 score as well as a 20% down payment and just one single problem on a credit score could cost an extra 0.125 percentage point per year.

For lower credit scores, the costs get even higher with an extra quarter percentage point required for scores between 700 and 725. People with scores hovering around 630 will find the additional costs equaling 1.5 percentage points if they can even find a loan at all. The upshot is that anyone with a credit score of 680 or less may not be able to qualify at all. The numbers apply to refinancing as well, with just 12% of agency-backed mortgages currently eligible for refinancing. The lesson for borrowers in the current housing loan market is that it is obviously important to pay extra close attention to your credit scores in this time of tight credit guidelines.

The current administration claims it is once again trying to make life a bit easier for homeowners who lose their jobs to keep their homes from foreclosure. The administration announced that two programs providing unemployed homeowners temporary relief on their mortgages will be extended to 12 months. Although thousands of homeowners might benefit from the additional time to pay, the real problem is that not all jobless homeowners will be eligible for the program.

Many see this latest action is being taken as part of the administration’s effort to bolster the sitting president’s chances of reelection in 2012 at a time when unemployment still remains above 9% and the economy struggles to rebound. For the month of May 2011, 6.2 million people remain without work for at least 27 weeks and new figures from the next Jobs Report due for June will probably not be any better.

Despite his previous attempts to put an optimistic spin on the nation’s non-materializing “recovery,” President Obama did admit that housing has been the most difficult problem to solve as the nation struggles to recover from its worst recession in decades. At a recent and apparently staged Twitter town hall forum where the president dodged the hard questions on the economy at the White House, he did admit, “The continuing decline in the housing market is something that hasn’t bottomed out as quickly as we expected, and so that’s continued to be a big drag on the economy. We’ve had to revamp our housing program several times to try to help people stay in their homes and try to start lifting home values up.” With the usual optimism Obama said, “We’re going back to the drawing board, talking to banks, try to put some pressure on them to work with people who have mortgages to see if we can make further adjustments, modify loans more quickly.”

Although the Federal Housing Administration began offering four months of mortgage relief to unemployed homeowners nearly ten years ago, the latest version of assistance is called The Home Affordable Modification Program (HAMP) and has only been offering three months of relief to the unemployed since last year. Banks and the mortgage brokers who service mortgages under the program are expected to follow its voluntary guidelines and must comply with the new standard. Those wishing to qualify for mortgage forbearance under the HAMP rules must be unemployed people who are currently looking for jobs.

Unfortunately the program does little to address the needs of those homeowners who can afford to pay a portion of their loans, as they must continue to pay without assistance or help for their efforts to stay afloat in the ongoing recession. Although the HAMP program is intended to help reduce the growing number of foreclosures around the nation, whether or not it will be successful remains to be seen. It almost a sure bet that most unemployed homeowners facing imminent foreclosure would prefer to have jobs and make their own mortgage payments instead of simply getting a temporary government handout.

Mortgage industry analysts say that the Bank of America is in a class by itself when it comes to put-back claims. The so-called “put-backs” or repurchases, relate to mortgage loans that were pooled together and stuffed into bundles of bonds known as mortgage-backed securities (MBS) before the current financial crisis struck.

Last year the Bank of America and other big and medium-sized mortgage lenders were exposed to the threat of untold billions in potential losses from exposure to an unhealthy number of foreclosed homes in the United States. A report at the time put the total risk to the banks at a whopping $134 billion. Since then, most of the banks have spent a great deal of time working with investors on put-backs, and while claims against most of the other banks appear to be stabilizing or dropping back, the Bank of America saw an increase of $3 billion in the first quarter alone.

Most of the buyers of the mortgage-backed securities bundles were large institutional money managers like insurance companies and pension funds, and many of those entities lost a lot of money on their MBS investments. Many buyers claimed that the mortgages that were bundled into the MBS were fraudulent to begin with or did not meet the criteria originally promised. Although many banks did get a handle on their put-back exposure, when the current numbers are compared, it does show that B of A is still carrying far more risk than any other institution. The Bank of America currently shoulders $13.6 billion in put-back claims alone while the combined total of six other major lending banks is far less. JPMorgan Chase, Wells Fargo, Citigroup, Capital One Financial, First Horizon National Corp. and SunTrust Banks all have a combined put-back exposure risk of just $9 billion.