Does it Matter if I Have a Bad Credit Score?

The Impact of Mortgage Default in a Credit Score

Credit scores really matter.

This is the reason why many homeowners who realize that they may lose their homes primarily worry about how it will impact their credit scores.

Homeowners can allow their homes to be foreclosed and their scores will be affected for 7 years. Another option is to have a deed as a foreclosure substitute wherein the home is given to the lender in exchange for the loan’s cancellation but this also results to a negative credit score.

Getting out of a mortgage through short selling the home is also a way to get rid of the house. In this option, the owner sells the house in a lesser price compared to the amount of his or her loan. This is also bad for the credit score.

A recent report from RealtyTrac Inc. showed that there is a 19% increase in the rate of preforeclosure transactions for quarter one and two of the present year. This rate oftentimes includes short sales. The data shows that short sales accounted for 12% of the total housing sales in quarter two. This is a rise from the 10% rate during the same time in the past year.

But is a there a specific order by which the ever-present system in credit scoring considers a short sale better than a foreclosure or a deed instead of foreclosure?

In case a person with a history of mortgage problem applies for a loan in the future, some lenders might look at a short sale as a better record compared to a foreclosure. However, the scoring system used in determining credit looks at the defaults as equally unpleasant.

Bradley Graham, FICO’s scores product management senior director, said that according to the examination of information that lenders communicate with credit bureaus about mortgage defaults, the weight of the different types of default are almost always equal in determining credit risk in the future.

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More Blacks and Hispanic Latinos are Losing their Homes to Foreclosure

They lost their homes, they do not have a credit card to use and they are paying for a more expensive rent compared to their mortgage payment.

The decline of the housing market had a tremendous effect on almost all races. However, the most severely hit are the black Latino groups. This led to a decrease in the rate of homeownership to its lowest state, shows the new data of the 2010 Census.

Around 36% of blacks still have their own homes. But this is lower than the 40% rate of homeowners in their population in 2000. For the Latino group, the homeownership declined to 47% from the 49% from way back in 2000.

On the other hand, whites have a 67% ownership while Asians at 62%. This is an increase from its rate in the past decade.

Almost all races experience an increase in the rate of homeownership during the boom of the housing market and the doubling of home values between 2001 and 2006. But, in the following housing bust, it changed as the whites and Asians suddenly lost a lot of what they had already gained. As for Blacks and Latinos, they almost lost everything they had gained and even more.

The reason for this is that the number of blacks and Latinos who took out subprime loans during the housing boom were higher. The loans were taken because they were able to afford it and they wanted to take advantage of the housing boom for any price, said a number of real estate experts. Moreover, Traditional loans which are safer required plenty of upfront cash. The loans which basically had low rates of interest suddenly increased in the following years which led to a consistent number of foreclosures.

But, almost six interviewed experts said that the lenders and mortgage brokers in a few cases aimed for blacks and Latinos to obtain subprime loans in order for them to earn money from higher rates of interest and lending charges. As proof of this claim, they determined studies that show how lenders oftentimes sold the subprime loans to most Latinos and blacks who were eligible for less expensive traditional loans.

The results of this have been devastating. A lot of minorities lost their most important property. Plenty of homes in neighborhoods where most minorities live can be purchased with the price of a car. Moreover, bad credit combined with the struggling economy have caused the unemployment rate and income reductions to continuously increase in the groups of Latinos and blacks.

85% of whites are now more likely to own a home compared to blacks and 45% compared to Latinos.

Two-thirds of Past Due Mortgage Payments on Loans come from 2005 to 2007

Mortgage loans that were obtained between 2005 and 2007 account for almost two-thirds of delinquent balances said Equifax. Although there is a decrease in the number of past due accounts of at least 30 days, those for 60 and 90 days are still continuously increasing.

In 2010, first mortgage loan write offs, installment loans and revolving accounts of home equity totaled to $304.6 billion. According to the analysis of Equifax, the number will keep on rising without any indications on when it will reach its peak. This number is way above the $126.7 billion total of loan write offs in the year 2006 and 2007.

According to the estimates of Equifax, as of May 2011, the total amount of first mortgage in the early stages of foreclosure is at $319.7 billion. This started in the years 2006 and 2007, a not surprising fact since those were the years when subprime lending activity started to rise.

REO properties is a main obstacle to the recovery of the economy, says Equifax. The reason for this is that REO rates stay high while lenders are struggling to get rid of their properties through short sales and auctions.

The completion rate of foreclosure is at 1.45%. This is in the same level as bankruptcies which are at 1.6% at the present time. Equifax says that the same rates indicate that most REO properties are brought about by the bankruptcy proceedings.

Equifax Mortgage Services’ senior vice president and general manager Craig Crabtree says that real estate owned properties and shadow inventory are performing a main role in the current mortgage market and slowing down the road to recovery of the economy.

Even if there are some stabilized lending sectors, there is still a high volume of past due first mortgage loans which has caused a slowing down of the foreclosure process. The mortgage market will keep on impacting the growth of the economy until the foreclosures are processed.

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Loan Modification Should Be Done By Professionals

It is safe to say that the loan modification process can be very confusing. It all seems like a bunch of jumbled nonsense to a newbie. People often ask how they can do this all on their own. Funny, why do it yourself when you can get professional help?

[I:http://www.uniquearticlewizard.com/extras/pics/championseo1image8.jpg]Make a few phone calls. Don’t worry about being good on the telephone. It doesn’t matter, what matters is getting the information you need. Don’t be fooled, there are some scams out there. There are companies making promises to do all sorts of things. They will often tell you they need to receive a fee. A fee! Even if they have not done anything!

In speaking to people from these businesses, I found that many conversion loan companies make all kinds of commitments. They tell you they will do this, or that. Some, before anything else happens, want you to pay a fee. But, with this fee they can not give any certainty that they can accomplish anything. That would be like paying my mechanic to work on my car and he takes the money without doing a thing.

There is a wealth of information available on the Internet. Yes, you will need to do some work. But, in the end it will be worth your while. Most websites have phone numbers where you can call and talk to a person. Ask questions. Never be afraid to make inquiries. If the person does not know, request for someone who might help you.

Get on the Internet! You can find out so much information on the world wide highway. You will have to work and you will have to read. Study. Take notes! You will be able to better understand those you speak with if you will just take the time to research.

The books on do it yourself loan modifications are very informative. You may feel that you can not do it. But, give yourself time to become familiar with the procedure.

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To learn more information about mortgage loan modification, visit Janian & Associates for the best advice from a qualified loan modification attorney.

Three Ways You Can Stop FOreclosure on Your Home

Once a bank has started foreclosure proceedings, it is difficult to get them stopped. However, there are three different ways that it may be possible to stop foreclosure on your home. Those three ways are refinancing, bankruptcy and loan modification.

First, you can try stopping the foreclosure process by refinancing your mortgage. This is the process of obtaining a new loan to replace your current mortgage. If you qualify, your old lender will be paid off during the loan closing process for your refinance loan, and the foreclosure will be terminated.

It is much easier to qualify for refinancing if you apply before it is obvious that you are having trouble making your payments. You will have much better luck with this if you have not yet fallen behind on your mortgage payment. The closer you are to being caught up with your payments, the better. If you are thinking about refinancing, try to get the process started as soon as possible to improve your chances.

You can also halt foreclosure proceedings by filing for chapter thirteen bankruptcy reorganization. This procedure can sometimes save a home from foreclosure because it allows you to come up with a plan for paying off your debts that creditors must go along with. However, when you file for bankruptcy, it can stay on your credit report for ten years.

If your concern is more for remaining in your current home than keeping your credit report from getting too filled up with negatives, this solution might be right for you. You should talk about your situation with a qualified bankruptcy attorney who has plenty of experience representing people who are going through foreclosure. You may be able to get a free consultation so that you don’t have to pay the attorney unless you go through with the bankruptcy.

The third way to stop foreclosure is to work out a loan modification with your lender. You have to time things just right in order to be able to do a loan modification. Most banks will not consider a loan modification if your payments are still current, no matter how hard it is for you to pay them. They also won’t work with you if the foreclosure process is too far along.

Negotiating a loan modification can be difficult, but there are experts available who can help you get your loan modification approved. If you are a do-it-yourself kind of person, you can purchase a book that tells you what to expect and explains how to fill out the forms that your lender will require.

These three techniques for stopping foreclosure all have pros and cons. You should investigate each option thoroughly before deciding on a course of action. The method you choose will depend on how far along in the foreclosure process you are and whether your ultimate goal is to keep your home or salvage your credit the best you can.

Once a bank has started foreclosure proceedings, it is almost impossible to get them stopped. However, there are a couple of different ways that it may be possible to Stop Foreclosure on your home. The first being Foreclosure Help.

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