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This week’s Mortgage Update contains information about mortgage modifications, foreclosure sales and evictions, and credit maitenance.

Mortgage modification fails to slow state, Inland foreclosures
The number of California households receiving notices of default — the first step in the foreclosure process — rose 122 percent between November 2008 and December 2008, following a three-month decline, according to RealtyTrac.

Some real estate analysts believe a California law that required mortgage lenders to provide customers with 30 days notice, before filing a default, only postponed the foreclosure, but did not resolve the challenges associated with loan defaults.

Freddie foreclosures, eviction plans continue during moratorium
Fannie Mae and Freddie Mac have agreed to suspend foreclosure sales and evictions through the end of January 2009; however, Freddie Mac, unlike Fannie Mae, is continuing the foreclosure process and filing the necessary paperwork.  According to Freddie Mac, even though the process is continuing, the actual sales and evictions have stopped.

Clean up your credit
With financial institutions, auto dealers, and credit card companies more cautious about lending than in previous years, consumers are advised to closely monitor their credit history and FICO score to ensure they receive the best interest rates possible.

MAKING SENSE OF THE STORY FOR CONSUMERS

·      Consumers considering the purchase of a home should first get their credit and finances in order.  Reducing spending, limiting credit card balances to no more than 25 percent of the available balance, and monitoring credit reports are highly recommended by most financial experts.  Even borrowers with less than ideal credit scores and credit histories still may qualify for a home loan.  Some lenders will be more forgiving if the borrower has started meeting monthly debt obligations in the last six to 12 months.  Consumers can view their credit reports from Experian, Equifax, and TransUnion by visiting www.annualcreditreport.com.  The free credit reports will provide a borrower’s credit history, but not the credit score.  The credit score can be purchased for approximately $10 from the credit reporting bureaus.

·      Borrowers who already have received their free annual credit report can purchase a copy from www.myfico.com.  The cost is approximately $16 for the score from one credit bureau, or $50 for all three.

·      Good credit doesn’t mean simply paying bills on time; it also can mean job stability.  Most lenders require borrowers to have worked for the same employer for at least one year, possibly longer before they will approve the home loan application.  For self-employed individuals, most lenders will want at least two years of tax returns before approving a conventional loan.

·      Many large financial institutions have been forced to write off high levels of credit card debt. As a result, borrowers are being required to have higher FICO scores than previously required.  A year ago, a FICO score of 720 was considered excellent.  By today’s standards, a credit score of 740 or higher likely will mean the borrower is approved, but not necessarily at the best interest rate possible, according to an executive with LowCards.com.

·      Inaccuracies on a credit report can be disputed with each credit reporting agency.  Typically, the process takes 30 to 45 days for the bureau to investigate the dispute.  Although this process can be time-consuming, it is well worth the time and effort.  Incorrect notations, such as an account that has gone to collection or a home in foreclosure, could cost the borrower 100 points or more on their credit score.

·      Credit advisors recommend that borrowers pay their accounts in full each month, if possible.  If that is not feasible, then borrowers should pay at least the minimum amount owed, and ensure the payments are made on time.  Late payments will likely lower a credit score and could automatically result in a higher interest rate.