In March 2009, the federal government introduced the Home Affordable Modification Program (HAMP), which assists homeowners by providing incentives to lenders which are willing to modify the terms of an existing primary or secondary mortgage and allow for lower monthly payments.

Qualifying homeowners whose mortgage lenders agree to participate in the HAMP program can benefit from lower monthly payments that result from a renegotiated lower interest rate as well as a 40 year repayment period.

Eligibility is limited to borrowers who are facing foreclosure on their primary residence, which was financed on or before January 1, 2009 and which has an unpaid principal balance of $729,750. The goal of the modification is to ensure that monthly mortgage payments do not exceed 31% of the borrower’s monthly income, so that any or all of the following steps may be considered when modifying the terms of the loan:

• Reduction of the interest rate to as little as 2%
• Extension of the loan term to 40 years
• Reducing the amount of the principal that must be repaid per month by deferring part of the principal repayment until the loan is paid off – in such cases, interest on the deferred part of the principal can be waived.

Once a homeowner qualifies and the monthly payments are modified, a trial period of three to four months is necessary to ensure that the new monthly payments are indeed kept current. After the successful conclusion of the trial period, the mortgage is permanently modified, and the new monthly payments and terms remain in force until the loan is paid off.

It should be noted that there is no fee to participate in this program, and that the Department of Housing and Urban Development (HUD) provides free loan counseling as a part of the HAMP program, and paying for any type of HAMP related consultation or advice is strongly discouraged. However, the final determination of whether or not a borrower is able to participate rests with the lender, which determines eligibility according to federally issued guidelines and formulas.

Lenders are granted incentives for each HAMP modification that they approve; however, they are under no obligation to approve any application and they do so only in cases where it is clear that the incentives make it worthwhile for them not to proceed with foreclosure. The decision of whether or not to approve a HAMP application takes into account not only the ability of the borrower to make the lowered payments on a regular basis, but also the lender’s own interests concerning the property.

In addition to lender incentives for participating in the program, a lender receives additional incentives for the first three years so long as the borrower makes timely monthly payments. The borrower also receives the same incentives of one thousand dollars per year in monthly installments for every mortgage payment made on time during a given year. Even if the borrower has been late on one or more payments, the incentive payments are made for the months in which the payments were made on time so long as the loan remains in good standing.

Separate programs for secondary mortgages, as well as specific programs for borrowers who become delinquent in their mortgage payments as a result of unemployment, are also available under the HAMP program. While the criteria for qualification are very strictly applied, and the lowered payments may still be too high for some borrowers, the HAMP program offers a viable method of staving off foreclosure for borrowers who are able to qualify and to maintain timely payments under this innovative federally guaranteed mortgage relief program.

The question of when to refinance or even if to refinance has plagued homeowners for years. Millions of people around the country have to take out mortgages on their homes because they are not able to come up with the entire purchase amount for the home that they are buying. A mortgage is a loan, but it’s oftentimes viewed as “good debt” because the loan is on a piece of property that will potentially increase in value over time. For this reason, it is recommended to have a mortgage to help build your financial stability and to establish your credit. Once you have purchased your home and closed on your mortgage you may begin to think about refinancing your home to get a better interest rate. There are a few key points that you should consider when evaluating whether it is the right time to refinance or whether you should wait.

The best time to refinance your home is when you can refinance your mortgage to take advantage of a lower interest rate that will lower your monthly payments. To determine whether it’s a good time to refinance you will need to do a simple calculation to see how long it will take to recoup the expenses that it will cost you to refinance.

Let’s take a very easy example to see if a person would be better served to refinance their mortgage or not. Our example is a mortgage on a home for $100,000 at 6.00% interest. This person has a mortgage for a term of 30 years. The monthly payment for this mortgage would be $600. For our example, let us say that the person has been living in their home for 5 years, so they have 25 years left on their loan, and they are able to qualify for a new lower interest rate of 4.5% if they refinance their mortgage and move it to a new loan company. The biggest question that this person will need to find out is how much it will cost them to refinance. Just like when this person closed on their original loan there are a lot of fees that must be paid to complete a refinance. There might be origination fees, points, appraisal fees, attorney fees, title insurance, or inspections. All of these fees could add up to thousands of dollars. Let’s pretend that this person’s fees would total $1500.

Our next step is to run the numbers. What we find is that when this person does a refinance their monthly payment lowers by about $133. With this lower monthly payment, this person in our example is able to recoup their costs for the refinance in exactly 12 months. If this person intends to stay in their home for longer than 12 months, they will save money by going through the refinance process. Additionally, if this person stays in their home for the remaining life of their loan, they will save over $12,000 in interest because of the lower interest rate.

Rates are at historic lows right now so it would behoove you to run this exact scenario for the current state of your mortgage if you have one to see what rate you might qualify for, and then to see how long it will take you to recoup the cost that you will pay for your refinance. If you plan to stay in your home longer than it would take you to recoup the cost of the refinance, then it is generally a wise decision to go through with the refinance. These steps will help you make the best decision for your situation!

Fannie Mae is the Federal National Mortgage Association, originally a government-owned corporation, and now a private corporation. Its purpose has always been to expand the United States’ secondary mortgage market by securitizing selected mortgages.

In 1938, in response to the Great Depression encompassing the entire country, US President Franklin Delano Roosevelt and the US Congress created Fannie Mae in order to make available federal money to local banks for the financing of home mortgages. The goal was to increase both home ownership in the US and the supply of affordable housing. Fannie Mae buys bank mortgages, in essence creating a liquid secondary market for mortgages. Loan originators can then originate more loans.

In 1954, an amendment to the Federal National Mortgage Association Charter Act turned Fannie Mae into a mixed-ownership corporation which meant that private individuals could own common stock of Fannie Mae. The federal government retained the preferred stock.

in 1968, Fannie Mae was completely converted into a private corporation so that Fannie Mae funds would no longer appear in the federal budget. Fannie Mae was split in two entities, one still called the Federal National Mortgage Association (or Fannie Mae), while the other was called the Government National Mortgage Association, or Ginnie Mae. Ginnie Mae remained a government organization, buying and supporting insured mortgages of the Veterans Administration and Farmers Home Administration, with the complete financial backing of the US government.

In 1970, the federal government gave authorization to Fannie Mae to allow the corporation to buy private mortgages not insured by the federal government. At the same time, the federal government created the Federal Home Loan Mortgage Corporation, called Freddie Mac, as competition with Fannie Mae, in order to build a more efficient and robust secondary mortgage market.

The way in which Fannie Mae works is that the corporation buys mortgages from approved mortgage sellers. Fannie Mae’s form of payment can be either cash, or a mortgage-backed security that promises timely payments of principal and interest. The recipient of that security can keep it, or sell it.

Fannie Mae can also securitize mortgages out of its own portfolio and sell the result to buyers, with the same guarantees of timely payment of principal and interest.

By paying for these mortgages, Fannie Mae gives financial institutions new money with which to originate new loans. Credit and housing markets in the US thereby become more liquid and more flexible, allowing the markets to deal with new financial and business situations more easily.

Fannie Mae sets guidelines for loans that will be accepted by Fannie Mae for purchase — such loans are called “conforming”, while loans that don’t meet the Fannie Mae guidelines are “nonconforming” .

Fannie Mae gets no direct government backing or funding. Securities issued by Fannie Mae have no government guarantee of ever being repaid. Fannie Mae certificates are not an obligation or debt of any part of the United States government. Fannie Mae is the sole issuer of Fannie Mae securities, and is the only guarantor of the certificates, and of payment of principal and interest.

Thanks to the housing recession, reverse mortgages have become increasingly popular. Yet, despite their rise in popularity, getting a reverse mortgage is not necessarily right for everyone. To that end, it is important to explore the pros and cons and to learn more about the ins and outs of a reverse mortgage when trying to determine if this type of mortgage loan is right for you.

Con #1: You Might Not Qualify

Before you start exploring the rest of the pros and cons of a reverse mortgage loan, you first need to determine if you can even qualify to get one in the first place. Some requirements for obtaining a reverse mortgage include:

* You must be at least 62-years-old
* The home must serves as your principal residence
* You must own the home or have a significant amount of equity in the home

Pro #1: Put More Money Back in Your Pocket

While most reverse mortgages are conventional loans, which means they are insured by the FHA, they are different from conventional loans in that they put money back into your pocket. This is because the interest is subtracted from the current value of the home and the difference is given back to the homeowner. The amount you receive from your reverse mortgage depends upon the value of the home, your age and the current interest rates.

Con #2: There May be Added Expenses

While there are no income requirements and creditworthiness is not a concern with reverse mortgages, there are certain expenses associated with taking out this type of loan. For example, you will be expected to pay hazard insurance and you will need to pay property taxes and take other steps necessary to maintain the property. Of course, most homeowners already plan to pay for these expenses, but it is important to note that you will be required to make these investments if you take out a reverse mortgage loan.

Pro #2: Enjoy Flexibility

When it comes to receiving payments from your reverse mortgage, there are several different options available. These include receiving any of the following:

* A single, lump sum payment
* A predetermined payment each month
* A line of credit
* A combination of two of the above options

Con #3: Reducing the Inheritance

Of course, there is a trade-off for getting to use your home’s equity with a reverse mortgage. Namely, the interest and other costs associated with the loan are due after you die. Therefore, the home will likely need to be sold in order to pay off the loan, which means there may not be anything left to pass on to your heirs.

Pro #3: No Repayment Required So Long as the Home Remains Your Principal Residence

While the loan will have to be repaid after your death, the pro is that there are no payments due so long as the home remains your primary residence. As such, you can enjoy the benefits of your equity without having to worry about taking on another bill.

Are you among the many people trying to figure out a way to pay their mortgage and stop foreclosure? Across the country, times aren’t easy right now and more people than ever are losing jobs, leading to other financial problems like keeping up on house payments. Everywhere you look there are companies offering to stop foreclosure. Before you resort to using specialty foreclosure help services, consider some of the other options out there. One option gaining popularity that can be done without the help of third party servicers is renting a room and flipping that income directly into a mortgage payment.

If this sounds like something you’d be interested in, you have to make sure you plan accordingly and do your research. Consider first that you may be able to refinance to better fit your payments to your current situation – with mortgage rates at extreme lows right now, this may be a very realistic option for many, but admittedly harder for those where home values have dropped significantly. If refinancing isn’t a viable option, and renting a room seems like the solution, here are some things to do before you start placing your ads to find a renter.

Is it Legal?
If you own your own single-family home then this probably doesn’t apply to you. But if you’re buying an apartment, condo, duplex or other kind of home that has multiple tenants then you should check with your homeowner’s association (HOA) to see if it’s ok to rent a room for extra income.  There may be stipulations in the rules and regulations of your condominium association that preclude you from renting, or preclude leases that are under a certain duration – increasing the number of residents in a building or unit could be considered by some to detract from the quality of life available in the building, one of the many reasons residents pay HOA fees to regulate such situations.

Insurance & Taxes
Parts of your home owners insurance policy may have rules about having extra tenants in the home. Before you rent out a room, make sure that you’re covered. If you go against the terms of your policy, even if done in innocent error, you could up with a canceled policy. In addition, you’ll have to inform the IRS about the extra income you receive from your tenant. Be sure to check with the IRS and understand what this will mean to you.

Functionality
Ideally, you want the room you’re renting to have its own bathroom and its own entrance. Even a kitchen or small kitchenette, separate from your own personal living space, would be nice. This isn’t a requirement, but you can charge more if it has these features and you don’t have to worry as much about privacy for either you or the tenant.

Credit & Rates
When you’re determining how much to charge, be sure to include the added cost of utilities. There are many calculators you can find online to estimate utility costs. Before you let anyone rent a room in your home, you should run a credit check and criminal check. CriminalSearches.com is a good starting point for the criminal check.

These simple steps will help you figure out if renting a room is right for you and if so, how to get started on doing so. It could very well be a way to stop foreclosure without having to bring in much outside help.

According to a Reuters article released at the beginning of the month, mortgage rates throughout the United States had remained at or near record lows during the last week of May. Furthermore, the 30-year fixed rate came in at ½ percentage point lower than where it was at just one year ago. Additional reports indicated that home loan rates continued to make affordability high, while the demand for home loans fell to a 13 year low in May. Interestingly, during the weeks preceding this low, the demand for loans had spiked as buyers attempted to take advantage of the homebuyer tax credit that expired on April 30, 2010.

According to many experts, the drop in loan requests experienced in May is likely to be only temporary, as many of the increases in sales that typically take place during the spring simply took place a bit earlier as buyers attempted to take advantage of the tax credit. Furthermore, many experts agree that the low borrowing costs coupled with low home prices will likely put the United States housing market on a gradual path toward recovery during the second half of 2010. In fact, during the week that ended on June 3, fixed 30-year mortgage rates averaged a mere 4.79%. Although this is up by 0.01 percentage point when compared to the previous week, it is still a full ½ point lower when compared to the rates one year ago. Furthermore, this rate is still only slightly above the low of 4.71% that was reached last December (2009).

15 year home mortgage loan rates are also remaining quite low. In fact, a new record of 4.20% was set after the rate dropped an additional 0.01 percentage point. This rate is well below the 4.79% rate that was seen just one year ago.

“The economy grew at a slower rate than originally reported in the first three months of the year, according to the Bureau of Economic Analysis, which suggests inflation will remain tame in the near term,” said Frank Nothaft, who is the chief economist for Freddie Mac. “As a result, mortgage rates held at historic levels this week.”

These low rates are good news for buyers, real estate agents and the economy as a whole, as those who are interested in purchasing a home can potentially save thousands of dollars by taking advantage of these low interest rates. Real estate agents, on the other hand, are hopeful that these low rates will encourage people to continue to both sell and purchase homes despite the expiration of the homebuyer’s tax credit. This, in turn, will benefit the United States economy as it continues to work toward recovering from the recession.

Ok, so you have finally found that dream house you’ve always wanted. The price is right, and you’re ready to finalize the purchase. But wait! If you are not one of the fortunate few who can purchase the home with upfront cash, then you need financing, right?

Now comes the hard part, what type of mortgage would be a best fit for your particular circumstance? For the purpose of this article, let’s discuss fixed rate mortgages. Hopefully, you have already been approved for a loan by a lender. A preapproval letter from a lender should, in fact, have been in your possession before you even began house hunting.

By the way, forget about a prequalification letter from a lender. It’s meaningless. All that tells a seller’s agent is that the lender has verified that you are accepted based only on preliminary financial information, and NOT preapproved. Preapproval will only be granted if you pass a more detailed financial inspection.

Although negotiating a mortgage that best suits your financial means can be complex, there are a few basics that should be kept in mind:

• You will have lower overall monthly payments on a 30-year fixed rate mortgage then on a 15-year fixed rate mortgage.
• A 15-year mortgage will have higher monthly payments, but your home will be all yours in a much shorter time, and you will have saved many thousands of dollars interest.
• You can pay off your 30-year mortgage earlier as well by doubling up on your monthly payments, which will also save many thousands of dollars in interest.
• You should carefully scrutinize the terms of your loan to be sure that the lender did not include a “prepayment penalty “clause – prepayment penalties are illegal in Massachusetts. This clause will exact a dollars and cents penalty for an early payoff. This is something you do not want, for sure! For example, if you decide to refinance for one reason or another, the penalty clause would be in affect and cost you money you wouldn’t ordinarily have spent. There should be no penalties whatsoever for paying off a fixed rate mortgage ahead of time.

If you have fallen behind on your monthly mortgage payments and are faced with foreclosure, a mortgage loan modification may be a viable solution. What is a mortgage loan modification? Simply put, it is not a new loan; but an agreement between you and your lender to modify one or more of the terms of your existing mortgage thereby allowing the loan to be reinstated.

While each lender’s program is unique, typical modifications result in the negotiation of a lower interest rate, a fixed rate mortgage, and/or lower monthly payments. The end goal of both the mortgagor and the bank is a payment that the mortgagor can afford, thus facilitating keeping them in the home.

There are countless entities who offer mortgage loan modifications, however, your attorney will be best suited to negotiate the modification and explain its benefits and risks to you given the fact that a mortgage loan modification will result in new legal rights and obligations with respect to your existing mortgage.

With respect to legal fees, foreclosure costs, and late charges, lenders are permitted to capitalize legal fees and related foreclosure costs into the modified principal balance. However, late charges should be waived at the time of the loan modification.

Before contacting your attorney regarding a mortgage loan modification, it’s best to gather some preliminary information:

• the name of your current lender
• your current lender’s contact information
• the loan number
• a brief summary of the current state of the loan
• any documentation that supports evidence of an economic hardship

Preparing this information in advance will provide your attorney with all of the information necessary to negotiate a modification with your lender, thereby expediting the process.

Forbes recently released an interesting article on common mortgage scams, something that is appropriate for Buyers, and those interested in refinancing, to look over before they consider moving forward with a lender.

Scam artists may promise to save cash-strapped home owners from foreclosure but then, instead, steal their money or any remaining home equity. Such scams are becoming more prevalent, and some states are fighting back.

In Florida, one of the nation’s foreclosure capitals, State Attorney General Bill McCollum has filed suit against National Foreclosure Management, a mediation company, for allegedly defrauding troubled home owners. Fraudulent rescue companies in Illinois have been increasingly penalized, while in Massachusetts the for-profit practice of foreclosure rescue transactions has been banned.
Here are the most common ploys scammers use to prey on desperate home owners:

• Bait and switch. The home owner is presented with what appears to be an application for refinancing, but in reality it’s title transfer papers. Once the home owner signs, he loses his home.

• Upfront fees. Scammers ask for money to be used for locating rescue funding. Once the home owner pays, the scam artist disappears.

• Bankruptcy ploys. An attorney – or someone who pretends to be – persuades the home owner that filing for bankruptcy will save the house. The only one who wins is the person who pockets the fees he charges to file.

• Rent-to-buy. Fraudsters offer to buy the property with a provision that the home owner will pay rent while building equity. Once the title is transferred, the former home owner is locked out.

• Fraudulent refinance deals. A scammer offers to use his higher credit score to secure a refinance deal, but first the home owner has to hand over title to the house.

The Wall Street Journal did a recent piece on racking up points onto your credit score that is rather timely given the tightened lending practices that we are seeing out there. Here are some of their top points to consider when trying to improve your credit score, which can range from 300 to 850.

On a related note, if you are tired of receiving all of those credit card application sin the mail, stop into the Opt Out Prescreen website to get off the “list”.