In a recent development, the Mortgage Bankers Association (MBA), and members including Bank of America Corp (BAC.N) and Wells Fargo & Co (WFC.N), has proposed a new forbearance plan for the jobless homeowners. Some of the other companies which helped MBA in developing this proposal are Citigroup Inc’s (C.N) CitiMortgage, American Home Mortgage, SunTrust, etc. The proposal has been placed in front of the top U.S. officials. The Treasury has also been contacted for credit to support the plan.

Why forbearance for unemployed?
It has been found that due to job loss, a large number of borrowers are unable to qualify for the relief programs like HAMP and HARP offered by the government. Thus, the Mortgage Bankers Association has come up with the proposal of forbearance for unemployed.

What could the unemployed expect under this plan?
Any unemployed borrower will get forbearance for 90 days. The plan could be re-evaluated for two more periods depending upon the borrower’s financial situation. The borrowers would be re-evaluated for HAMP after the 9 months are over or when the borrower gets a job.

Why would loan servicers participate in this plan?
Participation in this program is voluntary. The MBA have requested the U.S. Treasury to initiate special loans to the companies that advance payments to investors during the forbearance period.

The MBA met with Treasury, White House and Department of Housing and Urban Development representatives in regards to this program. All the departments have accepts the proposal in a positive way and open mind.

Of late, there has been a discussion in the MortgageFit forums, where a poster has asked queries regarding qualifying for a home loan. The poster is willing to buy a home for $667,000 with a down payment of 50%. She has a credit score of 620 and an income of $92k per year. Her husband is out of work, but he is about to have a job of $100k next month. His credit score is 700. The poster paid off all her credit cards as well as a delinquent account (medical collections). She’s concerned that she might not qualify as her credit report still shows the credit card debts and the delinquent account. She asks:

How long will it take for her credit scores to improve?
What are her options for a home loan?
Will it be wise to keep her husband on the loan, even with no income?

It’s good to know that the poster has been able to pay off her credit cards and the medical collections. This will help her improve credit scores, but it’ll take about 30 days for her credit report to reflect the changes in her scores.

How can she improve her credit core fast?

She can take help of rapid rescore to improve her credit scores in quick time. Rapid rescore is a service through which your credit is evaluated to ascertain what is primarily causing your credit scores to drop. If you have any collections or any derogatory items on your credit report, and you’ve paid them off, companies providing rapid rescoring services work with the all 3 credit bureaus – TransUnion, Equifax and Experian - to have the items removed from your credit as soon as possible. However, this service can be availed only by lenders, not by borrowers. Thus, our poster can request her lender to do a credit rescoring as a quick solution to her issue with the credit. (more…)

Credit score is an important number while you apply for any kind of loan – secured or unsecured. Your creditor/lenders will decide whether or not you’re creditworthy depending upon this score. If you hurt your credit score, then it would take years to repair it. Thus, it’s a better option to protect you score rather than repairing it.

Take a look at 7 things which may affect your credit:

• Defaulting mortgage payment: If your mortgage payments are past due, it’ll badly affect your credit report. The lender will start report your late payments to the credit bureau. Late payments are considered as a negative item and it will remain on your credit report for the next 7 years. Moreover, it will also lower your credit score by some points.

• Charge off: If you haven’t paid your credit card dues or mortgage payments (especially second mortgage) for quite sometime, the lender may think that you would be unable to pay off the dues. Thus, your creditor/lender will charge off the account to a collection agency. This will have a huge impact on your credit score. Also, in future you won’t be able to secure a mortgage unless you pay off the charged off account.

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Before going into the details as to whether or not one should go for mortgage life insurance, let’s check out what it is all about. Well, to define it in simple words, mortgage protection life insurance is a policy which will help your heirs to pay off the home loan after your death (if it’s not fully paid off).

Once you’ve taken a mortgage, you will get an offer to buy an insurance policy from your lender or an insurance company who is associated with him. In my opinion, it doesn’t make much sense to go for mortgage life insurance. Here are some of the reasons why you shouldn’t go for it:

Insurance may not cover everything - Your mortgage life insurance may only help your heirs to pay off the loan if you die from an accident. If you die from illness, it may not help your heirs in paying off the home loan. Thus, your family will face hardship in saving the property from the lender.
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The tax season is knocking at the door. You should know the tax breaks so that you would be able to receive it’s benefits.  You may get some extra tax breaks if you’ve bought a new home, purchased a car or if you’ve a college student in your family. Have a look at the available tax breaks in 2010:

Homebuyers…
All the first-time homebuyers who’ve bought a home after January 1st, 2009 will be eligible for a tax credit of up to $8,000. The best part is that you won’t have to repay the tax credit if you live in the house for the coming 3 years. You will be able to get this benefit this year even if you close your home purchase by June 30, 2010.

If you are not a first-time buyer, you’ll still be receiving certain benefits. If you are staying in your home for 5 of the last 8 years before you purchased a new house (bought after Nov. 6, 2009), you’ll receive a tax credit of $6,500 for your 2009 taxes.

Homeowners facing problems…
If you’ve faced a short sale and the deficient loan amount was forgiven by the lender, then that amount could be held taxable by the IRS. It would be considered as your income. However, there are certain exemptions in this regard. If your mortgage company forgives up to $2 million in debt on your primary home, you can exclude this from your income. However, you can get this benefit if the sale of the property took place between Jan. 1, 2007, and Dec. 31, 2011.

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