Mortgage Modification Plan For Unemployed Begins July 1st

President Obama's administration's foreclosure prevention efforts have been work in progress as we continue to deal with issues in the housing market. This past March, in reaction to the fact that on top of sinking home prices, unemployment issues have also hurt borrowers' ability to repay their mortgages, a mortgage assistance program for the unemployed was announced. That plan will go into effect very shortly, with a start date of July 1, 2010. Under the new plan servicers would be required to offer forbearance plans to all qualified jobless borrowers for at least three and as long as six months. Under the plan, the unemployed could see their monthly payments reduced to 31% of income or less or even suspended entirely.
Borrowers must meet HAMP eligibility requirements as well as submit evidence that they are receiving unemployment benefits. They must also be in their first 90 days of delinquency.
After the assistance period ends, homeowners would be evaluated for a loan modification or foreclosure alternatives, such as short sales.
This plan is as we mentioned just around the corner, but we will have to wait to see how effectively this new initiative is put into action.

Fannie Mae LQI Credit Update

There have been some changes and upcoming changes regarding the re-pull of a credit report a few days before closing.

Mortgage lenders are likely to begin ordering a second full credit screening immediately before closing. This report will be designed to find out whether the borrower has obtained, or even shopped for, new debt between the date of the loan application and the closing. The added debt could render the borrower ineligible for the mortgage because they now appear unable to handle the payments without a strain on their household budget. When pulling the last minute credit report, lenders are also looking for things like new credit accounts, increased credit lines, increased balances on existing accounts, undisclosed or newly recorded liens, second mortgages, etc., anything that may have changed since the initial application that might impact the borrowers debt-to-income ratio. Fannie Mae instructions say that "lenders must determine that all debts of the borrower incurred or closed up to and concurrent with the closing" are considered in the final loan analysis.

How should home buyers and refinancer's prepare for the credit check procedures? Follow one rule: abstinence. Between the application for a mortgage and the date of closing, resist spending. Don't apply for new credit unless it has been discussed in advance between the borrower and lender and a green light is given.