On Monday, rates for 30-year fixed purchase mortgages dropped further, with the average rate on Zillow Mortgage Marketplace at 5.19 percent. For current, up-to-the-minute rates, visit www.zillow.com/Mortgage_Rates/.

Thirty-year fixed mortgage rates varied by state. California mortgage rates, Georgia mortgage rates and Pennsylvania mortgage rates decreased the most, from 5.39 percent to 5.21 percent in California, from 5.32 percent to 5.16 percent in Georgia and from 5.42 percent to 5.26 percent in Pennsylvania. Ohio mortgage rates (5.39%), Illinois mortgage rates (5.36%) and Massachusetts mortgage rates (5.36%) were the highest in the country, while Georgia mortgage rates (5.16%) were the lowest.

The Zillow Mortgage Rate Monitor is compiled each week using thousands of mortgage rates for conforming loans quoted on Zillow Mortgage Marketplace by mortgage lenders to borrowers who have submitted loan requests. State-level data is gathered for the top 20 states with the highest quote volume on Zillow. Learn more about our rates.

For more information, visit http://www.zillow.com/.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

For more real estate tips and topics, see:

Jewel-box Homes are Built Smaller, Smarter 
Sounding an Optimistic Note – 8 Questions for NAR’s Leader 
Are Tighter Appraisals Hurting Home Sales?

Available in English and Spanish versions, the new Freddie Mac video, “Stop Foreclosure: Documents Your Lender Needs to Help You,” can be seen at Freddie Mac’s channel on YouTube(TM) at http://www.youtube.com/FreddieMacWeb.

The two-minute video shows step-by-step which documents borrowers should have on hand when they call their servicer to discuss loan modifications. These documents can cut the time a servicer will need to understand the borrower’s situation, determine his or her eligibility for a workout, and process the application.

According to the video, the key documents borrowers should have when they call their servicer include:

- Most recent monthly mortgage statement;
- Pay stubs or other documents showing their household’s monthly pre-tax income;
- Most recent tax return;
- Second loan or home equity line of credit statements;
- Account balances and minimum monthly payments on credit cards, car loans, student loans or other debt;
- A short, concise description of the financial hardship that is causing – or leading to – a mortgage delinquency.

“America’s servicers are handling an extraordinary volume of calls from distressed borrowers seeking an Home Affordable Modification under the President’s program,” said Ingrid Beckles, senior vice president of default asset management at Freddie Mac.

“By taking a few moments to gather these documents borrowers can help their servicer understand their financial situation and reduce the need for repeat calls.”

For more information on President Obama’s Making Home Affordable program, visit http://www.makinghomeaffordable.gov or www.makinghomeaffordable.gov/spanish.

Borrowers with questions about Making Home Affordable should call 888-995-HOPE.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six home buyers and more than five million renters.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

More homeowner tips and topics on RISMedia.com:

First-time Home Buyer? Get an Inspection
Sellers Struggle to Compete with Foreclosures – The King
A Lesson to Take to the Piggy Bank

1. To have the best credit profile impact, what is the maximum amount of your monthly credit line you should use?
a) 70%
b) 30%
c) 50%

2. What is the top contributing factor to what makes a good credit score?
a) Length of credit history
b) Amounts you owe
c) Payment history

3. If you pay 2% each month on your credit card (typical minimum payment), when will you pay off a $3,000 balance at 10% interest?
a) 18 years
b) 6 years
c) 3 years

4. After paying off a high-interest credit card, you should:
a) Continue using it occasionally
b) Close the account
c) Use the full amount of available credit every month

5. Applying for credit cards in order to just receive a free sign-up gift (t-shirts, mugs, etc.) has no impact on my credit profile?
True or False

6. Rewards points on credit cards are a good deal when:
a) I get cash back
b) I get free airline tickets
c) I carry no balance each month

7. To have a credit score, I must have at least one creditor reporting activity on my credit report for:
a) 12 months
b) 8 months
c) 6 months

8. Credit bureaus that manage your personal credit report data and credit scores are a:
a) Government entity
b) Non-profit agency
c) Regular business corporation

9. Banks and credit card companies think you are credit-worthy by how many credit offers you receive by mail?
True or False

10. Credit scores are used by lenders mainly to:
a) Tell how I compare to other consumers
b) Tell if I make my payments on time
c) Predict the likeliness that I will repay my loan on time

Answers: 1 – c, 2 – c, 3 – a, 4 – a, 5 – False, 6 – c, 7 – c, 8 – c, 9 – False, 10 – c

If you find you answered more than half of these questions wrong, you’re not alone. In a survey, we found that the majority of consumers do not know the answers to these and similar types of questions. On average, U.S. consumers have a total of 13 credit obligations on their credit report. These include installment loans (auto loans, mortgage loans, student loans, etc.) and credit cards (such as department store charge cards, gas cards, or bank cards). As a result of the numerous outstanding credit obligations, combined with the lack of proper knowledge and guidance about what impacts their credit profile, the average U.S. consumer ends up spending thousands of dollars on unnecessary interest expenses.

The good news is that it’s not too late. With a good understanding and proper guidance of how credit works, consumers can learn how to effectively manage their personal credit profile. Improvements can be obtained fairly rapidly with credit coaching services and the proper changes (no more trial-and-error stuff). Our survey group of customers who participated in a credit optimization and coaching service saw their credit scores increase by an average of 30 points in just four months as a result of more effectively managing their credit. More than ever, every responsible consumer should proactively evaluate, optimize and protect their credit before they have a required credit need or an issue arises.

Jeff Mandel is president and Marlin Brandt is COO of ApprovalGUARD.

For more information, please visit www.ApprovalGUARD.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Until recently, buying was the social norm-”having stuff, having name brand stuff, having the new, the bigger, the more,” said George Barany, director of financial education for America Saves, a Washington-based educational nonprofit. Today, he said, wearing last season’s clothes or holding onto a car longer is more acceptable among consumers.

Tough times have also altered one financial planning basic-that consumers with considerable credit card debt should divert money away from savings to those balances. Today, experts say, if you don’t have six to 12 months of living expenses saved, pay the minimum on card balances and grow that kitty. Experts say interest will add up, but if you do not get laid off, you can use some of the fund to help pay down debt once the economy picks up.

People talk about saving for a rainy day, but “it’s raining right now,” said Jon Gaskell, co-founder and head of business development for SmartyPig.com, a virtual piggy bank that combines a savings program with social networking so users identify savings goals and set up automatic deductions from checking accounts.

How to save

You can’t beat the autopilot approach, experts say. Assuming it’s an option, ask your employer to automatically deduct a certain amount each week and deposit it in a savings account, preferably one to which you don’t have too easy access, said John Tweedy, a Floral Park certified financial planner. Some employers also allow you to earmark all or a portion of future raises to savings.

In these tough times, don’t neglect the off-the-radar-screen approach says Ethan Ewing, president of money portal Bills.com. That’s regularly socking away a small, almost unnoticeable, amount, such as stuffing a dollar bill every day into a jar or piggy bank or regularly dropping your small change into a coin jar.

While many people wait until the end of the month to see how much is left to save, Galia Gichon, a financial expert in Manhattan, suggests you work in the opposite direction. Plan ahead for weekly out-of-pocket expenses, take out enough cash, commit to living within those confines, and save the rest, Gichon said.

How much?

As a rule of thumb, money experts suggest putting 10% of take-home pay toward long and short-term savings/investing. But that depends on individual circumstances.

What’s most important, said Barany, is to start saving on a regular basis-whatever the amount. You don’t have to “go from zero to 100 in one step,” said Barany, who added that it’s crucial for singles and families alike to maintain a minimum of $500, preferably closer to $2,000, to cover unexpected expenses.

Paying with cash can often save you money. If you have the cash to buy new tires for, say, $300, you can say to the merchant, who has to pay a service charge on credit card transactions, “I have the cash right here. Can you give me a discount?”

Roberta Schroder, chairwoman of the economics and finance department at Nassau Community College, said she suggests students have a safety cushion of three months’ living expenses. They often feel that just one month will do as, “my mother will pay for it.” But these days, Schroder reminds students that mom may have her own financial headaches.

Where to put emergency money

For money you may need to access quickly, Tweedy suggests researching online money market accounts that pay the highest interest rates, ones that are insured by the Federal Deposit Insurance Corp. Check rates at Bankrate.com.

Ann Diamond, a chartered financial consultant in Manhattan, who also coordinates financial literacy programs, suggests the following: Those with emergency funds of nine to 12 months of expenses, invest:

- Three months in an online money market fund — recently Bankrate showed a high rate of 2.53%
- Three months in a slightly higher-yielding short-term CD, with a recent six-month CD rate of 2.57%
- Three more months in a longer-term slightly higher paying CD, with a recent nine-month CD at 2.71%, and so on.

Cut back on 401(k)?

Experts say don’t do it unless it is temporary and to build up ready cash. If your employer matches your contributions, the “plan is the best deal in the world. It’s free extra money, nontaxable, and if you do the math, you’ll see why,” said Michael Kresh a certified financial planner in Islandia, NY. That’s even if, like so many, you’ve seen your balance plummet. This year employees can put in up to $16,500, with those age 50 and up allowed a further $5,500 as a catch-up.

“Think of your retirement savings as a forest,” he said. “After the wildfire passes through, when it seems like there’s nothing left, the forest returns, slowly and steadily … a retirement portfolio can recover if you continue to fund it.” Even if your employer stops matching your contribution, as many have, “you should still be saving as much as you possibly can,” he said.

Investing

“First, do not let fear overtake you,” Kresh said.

When it comes to stocks, look for companies that don’t have a lot of debt and do have cash flow at the end of the day.

Also, “people still need to buy food and household goods. The future of this country depends upon infrastructure and an expanding green technology and energy sources,” Kresh said. “Fear is driving down the prices of companies that will be very successful in the next three to five years. Let those who sell in fear give us bargains now.”

Copyright © 2009, Newsday, Melville, N.Y.
Distributed by McClatchy-Tribune Information Services.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Related headlines on RISMedia.com:

• As Housing Slips and Credit Tightens, Assessments become Far More Critical
• To Appreciate the Appreciation in Real Estate, Long-Term
• Will the Stimulus Benefit Homeowners and Buyers?

Here’s how to get that loan.

Car loans

A consumer’s down payment, credit history and the value of the car all play a role.

At Fresno-based Murphy Bank, Vice President Richard Laxton says the bank is looking for people with a credit score of 700 or more.

“You pick up the newspaper and you read about thousands and thousands of job layoffs,” he said. “If somebody has got a weak FICO score at the moment, that’s not somebody we want to gamble on right now.”

FICO, or credit, scores range from 300 to 850, and most people score in the 600s and 700s (the higher the better), according to the Consumer Federation of America.

Brett Hedrick, general manager of Hedrick’s Chevrolet in Clovis, was reluctant to place a minimum credit score on buying a new car because of varying factors.

The down payment plays a big role, he said.

“The worse your credit is, the more money you need down,” he said.

Laxton said a typical down payment is about 15%. He said that borrowers may have better luck with small banks and credit unions because those lenders, in general, are not feeling the same pressures as big banks.

Hedrick said some dealers may be willing to search for credit for customers, but some small banks may require the customer come directly to them.

The same rules apply to used cars.

On the plus side, Laxton said, prices are low right now and so many perks are available that it’s a great time to buy.

Hedrick agreed. He encouraged shoppers wondering whether they’ll qualify to go for it.

“When you find what you want, it doesn’t hurt to give it a try and shop around,” he said.

Home loans

The days of no down payment and not-so-great credit are over.

First-time home buyers looking to buy through the government’s Federal Housing Administration loan program need a credit score of at least 600, said Mike Baker, manager of Fresno-based Resource Lenders.

The loans require a 3.5% down payment, he said.

For a conventional loan, lenders want a credit score of at least 680, Baker said. The greater the percentage of the house that must be paid for with the loan, the higher the credit score needs to be, he said.

A 20% down payment is preferred, though 10% down payments are common, he said.

Granville Homes’ preferred lender likes to see credit scores of 720 and above for a conventional loan, said sales manager Michelle Brunn.

Customers can get financing below that, but their options might be limited.

If a credit score isn’t good enough, lenders will look for “compensating factors,” Baker said. That includes getting the buyer to come up with a large down payment and show a long and steady work history.

The good news is there are easy and relatively quick credit fixes that can put buyers in a better position.

For instance, lenders don’t like to see customers who regularly go over 50% of their available credit on items like credit cards. Paying down to below 50%–and especially 30% — could cause their credit score to “skyrocket,” Baker said.

However, paying off accounts and closing them is not a good idea because it can cause scores to drop dramatically.

Granville offers buyers a monthly seminar to help improve their credit.

Brunn recommended that potential buyers meet with a reputable lender long before they make the decision to buy to come up with a game plan.

Copyright © 2009, The Fresno Bee, Calif.
Distributed by McClatchy-Tribune Information Services.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Related homeowner tips and topics on RISMedia.com:

9 Trends Not to Miss for Your Home
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1. Expansion of Home Improvement Tax Credit.”The tax credit for making energy efficient home improvements is now 30% of the cost of the improvements up to a maximum of $1500,” Nicholas said. “This means that if the improvements cost you $4,500, you would receive a tax refund of $1,500 when you file your tax returns.”

Eligible improvements include energy efficient exterior doors and windows, insulation, heat pumps, furnaces, central air conditioners and water heaters.

“Generally, most modern improvements like windows, furnaces, and air conditioners meet the necessary standards for energy efficiency,” Nicholas said. “If you’ve been holding off on making some of these improvements, now is a great time to get a move on it – especially with all the great deals being offered.”

2. Expansion of First-time Home Buyer Tax Credit.

The tax credit available to first-time home buyers was increased from $7,500 to $8,000 for homes purchased between January 1, 2009, and December 1, 2009. Also, the credit no longer needs to be paid back as long as the buyers live in the home without selling it for at least 3 years.

“The previous version of the credit expired on July 1, 2009, and required home buyers to pay the funds back over a 15 year time frame,” Nicholas said.

The income limitations remain the same ($75,000 for single tax payers claiming the full credit and $150,000 for married tax payers), as do most other qualification requirements. Also, the credit remains refundable. “This means that first-time home buyers who owe less than $8,000 in taxes for the year are still eligible for the full $8,000 credit when they file their tax returns, and the IRS will write them a check for the difference between $8,000 and their actual tax bill,” Nicholas said. “In fact, the credit can be claimed on your 2008 tax returns that you file by April 15 of this year, even if you buy the home in 2009.”

There is one catch, however: if you bought the home in 2008, the credit remains $7,500, and it still needs to be paid back over a 15 year timeframe beginning in 2011 when you file your 2010 returns.

3. Higher Reverse Mortgage Loan Limits.

The loan limits for FHA-insured reverse mortgages have been increased to $625,500 across the entire country-not just the higher cost areas. The previous limit was $417,000 across the country.

“This is especially important because the FHA program is virtually the only game in town as private and jumbo reverse mortgage programs have nearly all evaporated,” Nicholas said.

This coincides with another little-known change in the reverse mortgage
arena: the availability of reverse mortgages on home purchase transactions.

“This is a fantastic opportunity for senior citizens to buy a new home and live mortgage payment-free without having to wait for their old home to sell,” Nicholas said. “Seniors could also use this strategy to buy a new home and turn the old home into a rental or otherwise wait for market conditions to improve before trying to sell the old home.”

4. $729,750 FHA and Conforming Loan Limits Restored in High Cost Areas.

“The $729,750 maximum loan limit had been in force throughout 2008, but was reduced to $625,500 in 2009,” Nicholas said. “The economic stimulus plan restores the $729,750 maximum. This makes higher cost homes more affordable – especially in the coastal housing markets that tend to have higher than average home values.”

For more information, visit http://gibrannicholas.com and www.CMPSInstitute.org or call 888.608.9800.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Related articles on RISMedia.com:

Are Lower Mortgage Rates Working? For Some, Yes; for Others, No
House Approves Revised Stimulus, Again without Republicans

As the jobless rate climbs, many people find themselves falling behind on credit-card bills, struggling with living expenses and bogged down with a mortgage or car payment.

Consolidating debt through a credit negotiator may sound appealing, but experts urge caution in this economic environment ripe for scammers.
Sometimes unscrupulous companies will ask for an upfront or monthly fee, saying they can renegotiate your debt, but what they actually do isn’t clear, said Kim States, interim president and CEO of the Better Business Bureau of Southern Arizona.

In the meantime, if you’re not paying minimum fees on credit cards, your credit score plummets.

“You end up in further in debt because you’ve paid this scam artist the money and nothing happened,” States said.

It’s a lesson that one Sierra Vista woman learned the hard way.
Christina Rawl, a 36-year-old disabled Army veteran, said she lost her job about a year ago and bills started piling up. She and her husband had about $20,000 in debt on five credit cards, a mortgage and two car payments.

She went online and found a company called Clear Your Debt LLC. The company started taking $500 out of her account every month.

“The way I understood it, I was saving money, and while I was saving the money, they were negotiating with credit companies,” she said.

But Rawl said those negotiations never took place, and she is now being sued by two creditors.

Her husband, who works for the federal government, is now having his wages garnisheed.

David Jones, president of the Association of Independent Consumer Credit Counseling Agencies, said what typically happens is the negotiating company claims it can settle the debt for 20 or 30 cents on the dollar.
In the meantime, the debt consolidator takes hundreds of dollars from your account every month and purportedly puts it into another account to pay off the renegotiated debt.

Consumers don’t realize that sometimes the company will first collect its fee, so no money is used to pay any bills for several months. The creditors will then go to a collection agency or take legal action because of the unpaid bills.

Depending on the terms of the contract, such action may be legal, but “it’s certainly unethical,” Jones said.

Calls to Clear Your Debt, based in Austin, Texas, were not returned.

Consumers have filed 136 complaints with the BBB against Clear Your Debt in the past three years, said Erin Jones, a spokeswoman for the BBB that serves Central, Coastal and Southwest Texas.

The company has a rating of F, the lowest on the BBB’s grading scale, because consumers complain they get enrolled in the program when they think they are only applying for eligibility, Erin Jones said. Consumers also complain about the lack of communication between the company and its customers’ creditors, she said.

The BBB has concerns with the debt consolidation industry in general, Erin Jones said.

“A lot of these folks are very vulnerable because of the desperate situation they may be in, and it’s very important that customers take their time and understand what they’re signing,” she said.

In Southern Arizona, there has been a marked increase in complaints about debt consolidators.

Last year, the BBB of Southern Arizona received 1,733 inquiries about debt consolidation companies, a 90% increase from the previous year.

In Arizona, the Attorney General hasn’t taken legal action against any debt consolidation companies, said spokeswoman Anne Hilby. But she said consumers should still be diligent about researching a debt negotiator, so they don’t end up in a worse situation.

The Pima Council on Aging has also seen a spike in the number of people calling its office with financial concerns, officials said. They refer people to one of three nonprofits with local offices.

Nonprofits get money from fees paid by customers and from contributions from the creditors themselves, said David Jones, of the AICCCA. Reputable for-profits do exist, he said.

States, of the local BBB, said whether the company is nonprofit or not, consumers should check them out and make sure they have a local office with a physical address.

And Jim Murphy, the CEO of the Pima Council on Aging, said if consumers are going to enter into a debt consolidation program they need to make sure they’ll have enough money to pay back that debt. And they need to be careful to read the fine print because there may not be any recourse.

“There are some groups who are doing things legally,” Murphy said. “But they’re not moral.”

Steps to Become Debt-Free

Step 1: Set up a household budget. Examine monthly income and expenses. If expenses exceed your income, you need to boost your income or cut expenses to bring the totals in line. Cutting discretionary spending — restaurants, entertainment and travel — is the first place to start.

Step 2: Don’t go deeper in debt. Put credit cards away and pay cash or use a debit card. If you must charge something in an emergency, use the card with the lowest interest rate.

Step 3: Find small ways to save money. Forgo the daily coffee; take public transportation; use coupons; eat home-cooked meals; seek out lower-priced auto insurance; cancel your cable TV; or switch your cell phone provider.

Step 4: Correctly prioritize debt repayments because not all carry equal weight:
- Pay off high-interest rate balances first. Review the interest rates and terms of payment for each credit card. Pay double or triple the minimum monthly payment each month on the credit card with the highest annual percentage rate until its balance is paid off then apply payments toward the next highest-rate balance. In the meantime, make the minimum due payments on remaining cards.
- Consider transferring balances to the lowest-rate card.
- If you must miss a payment, carefully consider which debt is most important. Ignoring your mortgage or rent payment could cost your home. Your car loan may be critical if you’re dependent on transportation for your job.

Step 5: Ask creditors to reduce interest rates or for a new payment schedule. Be honest about your challenges and assure them that you’d like to remain a loyal customer.

Step 6: Make extra payments whenever possible.

Step 7: Contact a credit counseling agency if your efforts are not successful.

Source: Better Business Bureau

Warning signs that you may be dealing with a questionable debt negotiator:

- Demands that you provide account numbers or other financial details before it will discuss its services or fees. Reputable credit counseling will provide free information about their services.

- Boasts it can “lower your monthly payments by 30% to 50%,” which is rarely true.

- Promises that it can “get you out of debt easily.” Avoid counselors who promise a quick fix.

- Avoid any agency that claims it can evaluate your situation in just minutes, or that offers to do so quickly over the phone. Experienced counselors may want to spend an hour reviewing your financial situation.

- Claims it can remove negative information, such as bankruptcy, from your credit report. Accurate information cannot be removed from a person’s credit report.

- Issues a blanket recommendation for a debt-management plan. The plans-which pay down debt through monthly deposits to the credit counseling agency-are not for everyone. Do not agree to establish one unless and until you have reviewed your personal situation with a certified credit counselor who recommends such a plan and then customizes the plan to best manage your debt.

- Reluctance to provide the organization’s business name and address.
- Insists upon an immediate decision.

Source: Better Business Bureau

How to Choose Debt Adviser

The Association of Independent Consumer Credit Counseling Agencies urges consumers to consider the following when considering a credit counselor:

Third party accreditation, which demonstrates that the counselor meets industry standards.

Certified counselors: Counselors have undergone training and met financial education guidelines.

Non-profit agency. They generally work toward the best interest of their customer, but it’s not the sole criteria to judge an agency.

Good customer-service record. Check with the local Better Business Bureau or Attorney General’s Office to find agencies with few or no complaints.

Full disclosure of policies and operations. All services, procedures and fees should be outlined in writing before entering into any agreement.

Reasonable fees. A reputable agency won’t charge a large upfront fee or request a voluntary contribution such as the first month’s payment of a debt management plan. Fees should not exceed $75 to set up a debt management plan or $50 per month to maintain the plan. If the consumer is unable to pay fees, the agency should be willing to work at no cost to the consumer.

Copyright © 2009, The Arizona Daily Star, Tucson
Distributed by McClatchy-Tribune Information Services.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

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The following tips apply whether you are working directly with your lender or teaming up with an attorney or other professional you hired to represent your interest. If you hired professional representation, team up with your representative and defer all correspondence and phone calls from your lender to your representative – don’t communicate with your lender unless your representative specifically advises you otherwise.

Come clean – honesty is the best policy

It can be tempting to bend the truth when you are trying to convince a lender to approve a loan modification. Some homeowners are embarrassed by something they did to place their finances in jeopardy – possibly a gambling addiction of substance abuse. Others try to fudge the numbers to make themselves eligible for a loan modification they cannot otherwise qualify for. Even worse, some homeowners lie to their partners or try to conceal the problem until it is too late to do anything about it.
Only by laying all your cards on the table and disclosing the truth can you begin to attend to the root cause of your financial hardship and then develop and implement solutions that put you back on the path to long-term financial health.

Understand your lender’s point of view

Regardless of how you ended up in the situation you’re in, blaming the lender or the mortgage broker or loan officer who placed you in your current mortgage does little good, unless you can prove your point in court. Usually, you have a better chance of resolving the problem by understanding your lender’s point of view, even if you don’t agree with it.

So, what is the lender’s point of view?

Lenders lack any emotional attachment to the situation. To them, it all boils down to money. If you can show them that modifying your loan cost them less than a foreclosure and they believe you will honor the terms of the loan modification, they are likely to approve it. If not, then they are likely to reject it.

Keep in mind that some homeowners who don’t need loan modifications are also applying for them. Lenders need to protect their own interests from homeowners who are trying to cheat them out of their profits. As a result, they need to carefully screen out ineligible applicants, which can often make the process much more difficult and frustrating for homeowners who genuinely suffer financial hardship and need a loan modification.

Keep a cool head

Understandably, homeowners often become frustrated and angry when seeking assistance from their lender. Unfortunately, anger can result in the following:

“Accidental” disconnects: The customer service rep you’re speaking with may put you on hold permanently or hang up “accidentally.”

Lost files: Your file may get “lost” or “misplaced.”

Rejection: Your lender may decide that you are unreasonable and that foreclosing would be less costly overall.

A bad offer: Your lender may offer a workout solution that is worse than what you would get had you been nice about it. Or, you may be so exhausted that you agree with the first offer your lender puts on the table rather than negotiating a better deal rationally.

Tip: If you doubt your own ability to remain calm, cool, and collected during the entire process, consider hiring a professional to represent you.

Give them what they need

Prior to applying for a loan modification, call your lender or visit its website to obtain an application packet or a list of items you need to submit with your application. Some lenders allow you to apply online, but you usually have to ship or fax supporting documentation separately.

Find out exactly which forms you need to fill out and which documents your lender needs to process your application, and provide everything to your lender or representative in the manner specified. Label everything clearly and legibly with your name and loan number and provide a checklist of all items you’re submitting in your application packet. Arrange the items in the order listed by your lender, so whoever is processing your application does not have to search for items. Include a cover page that in large print lists your name and loan number as well as an items-included list.

Ask for what you want

Before discussing the terms of the loan modification with your lender, you should have a fairly clear idea of what you want and need. Answer the following questions for yourself. This will help you field questions from your lender:

- How much do you owe in late or missed payments?
- Can you catch up the missed payments?
- Do you need additional time to catch up on missed payments?
- How much can you realistically afford to pay each month?
- Do you really want to keep your home or would you prefer to sell if you could walk away not owing anything?
- State clearly what you want up front. If your lender is unwilling to agree to the terms you need, you’re better off knowing that up front, so you can explore other options. Don’t waffle – it will only lead to misunderstandings and unsatisfactory “solutions.”

Let them do their job

While you should track the process of your loan modification application and any negotiations, avoid the temptation to micromanage the process. Knowing the timeline in advance can help you develop realistic expectations of when you will hear back from someone, so you don’t have to keep calling to check progress. Remember, the more time they spend on the phone consoling anxious applicants, the less time they have to review your application and work out a solution.

The lender should have a timeline for just about every step in the process. Your lender can probably even tell you how many days it takes for items you fax in to get to where they need to be. Some lenders have a 4-day delivery period for faxed items. Most timelines are in place because of the volume of requests. Ask how long the steps in the process take. Follow up when timelines near expiration.

Get your financial house in order

Most homeowners, even those who can readily afford their monthly house payments, could benefit from reviewing their income and expenses and drawing up a monthly budget. If you don’t have some way of tracking income and expenses with realistic goals in mind, put a tracking system in place today and start developing a budget.

If you have a computer, a personal accounting program, such as Quicken or Microsoft Money can come in very handy. These programs allow you to assign each entry to a specific category, such as groceries, clothing, entertainment, utilities, auto insurance, auto: gas, auto: maintenance; and so on. You can then generate reports showing monthly totals for spending in each category.

If you’re budget challenged, consider hiring an accountant or credit counselor to get you on track. It’s worth the investment.

Keep everyone posted of any changes

If anything changes related to your financial situation, be sure to keep your representative or lender (if you’re negotiating the loan modification on your own) in the loop. Withholding information that may affect your eligibility could cause problems.

Make sure the lender’s offer is truly affordable

Assuming you qualify for a loan modification, your lender will present you with an offer. Be sure to review the offer carefully and have your attorney look it over – before you sign on the dotted line. Make sure the monthly payment is truly affordable. If the loan modification is unaffordable or makes your budget so tight that you’re only one car repair or medical bill away from defaulting again, head back to the negotiating table to try to work out a better deal. It doesn’t do you or your lender any good to accept an agreement that puts you on the path to repeating this same scenario.

Hold up your end of the bargain

By the time you finalize your agreement, you and your lender will have invested a great deal of time and effort in hammering out the details. To ensure long-term success, put some effort into keeping your budget on track. If you are having trouble, consult a credit counselor, who can help hold you accountable for your spending. Budgeting can be tough at first, but it pays huge dividends down the road. Most people who acquire the necessary skills discover that by tweaking their spending priorities they have more than enough to cover their expenses.

The key to success is discipline and commitment. All the effort you spend setting up a plan is of no use if you don’t follow the plan you created. It’s like signing up for a gym membership and then never walking through the doors to work out. Reestablishing your financial health will be work, but the results will be worth the effort. Like that gym membership, you won’t realize results over night, but commitment to the routine will pay off.

Remember, loan modification success is a team effort. Do your part to achieve long-term success.

Ralph R. Roberts is a consumer advocate, host of KeepMyHouse.com, and author of numerous books, including Foreclosure Self-Defense For Dummies. Ralph is based in Sterling Heights, Michigan and can be reached at RalphRoberts@RalphRoberts.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

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I was, of course, suspicious, since my lender has my address and phone number, and has been informed that I don’t consider e-mail valid communication and will not respond to it.

My wife, whose name is also on the loan, hadn’t received a similar e-mail. There were no phone messages or letters from the lender, and, when I checked my account, I was up to date. That was enough to convince me I was being “phished,” or scammed via e-mail.

In happier times, you and I were typically phished by widows of Third World dictators looking for a U.S. account to stash their husbands’ vast legacies, or by someone from the English National Lottery explaining we could collect our winnings.

Scams are not limited to e-mail, of course-no one is immune. One elderly reader told me that she had received a letter from an Illinois company saying that she didn’t have a copy of the deed to her property, that she needed one, and, if she sent them $78, the company would provide one. (Public records contain all the contact information necessary for this sort of thing to occur.)

The reader had a copy of her deed or could easily get another from the county if she needed one-and for less money.

Lately, my snail-mail scams have come in the form of offers from a mortgage broker to refinance my FHA mortgage. I don’t have an FHA mortgage, which means he may have access to public records, but doesn’t know how to read them.

The financial meltdown has put us all on edge, and people having trouble finding enough money for their bills or mortgages are the ones likely to be phished successfully.

Among the chief scammers are mortgage modifiers and credit repairers, both unregulated. Probably these are the same folks who let baby sitters claim the salaries of corporate executives on subprime mortgage applications-resulting in the national foreclosure crisis.

Eliot Feldman, whose Sewell, Pa., company, Advanced Capital Mortgage Services, doesn’t do modifications, says, “Virtually every company doing them is a scam.” If you are in mortgage trouble, contact legitimate, government-approved credit-counseling agencies instead.

Federal data show that more than half of all modifications in the first six months of 2008 resulted in higher monthly payments, so clearly someone is profiting. It isn’t the consumer. Anyway, the FDIC says there are ways to recognize Internet scams.

You receive an e-mail from what appears to be a known reputable entity, describing an urgent reason to verify or resubmit confidential information by clicking on a link. The link, which looks official, takes you to the scammer’s site.

If you get one of these e-mails, report it to the real institution on a reliable site or by phone. Also, report it to the Internet Crime Complaint Center at www.ic3.gov.

Alan J. Heavens is the real estate writer for The Philadelphia Inquirer

© 2009, The Philadelphia Inquirer.
Distributed by McClatchy-Tribune Information Services.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Don’t miss other real estate tips and topics on RISMedia.com, see:

• The Road to ‘Sold’
• FHA Loans Become Hot Option – Less-stringent standards Spurs Local Popularity
• Moving with Pets – Impossible or Possible?

You may incur all the fees normally associated with a mortgage, including closing costs, title insurance and processing fees.

When you refinance, you will incur all the closing costs that go along with getting a new mortgage. So unless you’re doing extensive renovations and can get a mortgage interest rate at least two points below your current loan rate, you may want to select another financing option.

However, a borrower who has worked hard to reestablish good credit may be shown some leniency by the lender. And the circumstances surrounding the bankruptcy may also influence a lender’s decision. For example, if you went bankrupt because you were laid off from your job, the lender may be more sympathetic. If, however, you went through bankruptcy because you overextended personal credit lines and lived beyond your means, it is unlikely the lender will readily give you a break.

A quality lender will expect you to show that you have cleaned up your credit. Providing a reasonable explanation about the circumstances that led to the foreclosure – such as exuberant medical expenses – is also helpful.

This process is called a “short sale,” which occurs when a lender agrees to write off the portion of a mortgage that is higher than the value of a home. But, usually, a buyer must be willing to purchase the property first.

A short sale may be more complex if the loan has been sold in the secondary market. Then the lender will need permission from Freddie Mac or Fannie Mae, the two major secondary-market players.

If the loan was a low down payment mortgage with private mortgage insurance, the lender also will need to involve the mortgage insurance company that insured the low down payment loan.

The short sale can keep the homeowner from landing in bankruptcy or foreclosure. But it is not an easy procedure to approve, and it involves as much, if not more, paperwork than an original mortgage application.

Instead of proving your credit worthiness and financial stability, you must prove you are broke. And any remaining difference between your home’s value and the balance on your mortgage is considered a forgiveness of debt, which usually means it is taxable income.

If you have mortgage insurance, the insurer may also be interested in helping you. The company can temporarily pay the mortgage until you get back on your feet and are able to repay their “loan.”

If your money problems are long term, the lender may suggest that you sell the property, which will allow you to avoid foreclosure and protect your credit record.

As a last resort, you could consider a deed-in-lieu of foreclosure. This is where you voluntarily “give back” your property to the lender. While this will not save your house, it is not as damaging to your credit rating as a foreclosure. Exhaust all other viable options before making a decision.

Whether to file a homestead exemption will depend on your situation. Contact your county recorder’s office for details.

By law, any unfavorable information in your credit file can stay there from 7 to 10 years. Today, however, a creditor must remove credit blemishes in a timely fashion if you challenge them and they turn out to be false.

The first step in any recovery plan is to get copies of your credit records. You are entitled to free copies if you have recently been turned down for credit. Otherwise, request copies for a fee from the three major credit-reporting agencies: Experian, (800) 311-4769; Equifax, (800) 685-1111; and Trans Union, (800) 916-8800.

If you see any incorrect information, let the credit reporting agencies know. Also contact the companies that reported the negative claims against you.

If the credit report is correct, move immediately to take care of any outstanding delinquencies, tackling a little at a time until you get back on the right track. In fact, make an effort, if at all possible, to repay your debt in full and on time for six months to a year to prove you are working hard to repair any damage.

Other black marks include a judgment filed against you – perhaps for non-payment of spousal or child support – or any collection activity.