Modify Madness

Question: If we start a loan modification program with our lender what's the likelihood of success?

Answer: Let's look at some recent history. Remember the much-publicized "Hope for Homeowners" program? In fiscal 2009 this government program produced just 23 loan modifications.

OK, remember FHASecure? That program - now gone - allowed about 4,000 delinquent conventional borrowers to refinance into FHA loans.

According to the most recent report from the Office of the Comptroller of the Currency, 56.2 percent of the loan modifications it surveyed were at least 60 days late within a year. In effect, they had re-defaulted.

The latest government program, Making Homes Affordable, reports that as of the end of November, 31,382 borrowers had successfully passed trial periods and permanently refinanced their loans with lower monthly costs.

However, many trial programs were still underway at the end of period, so expect the number of successful borrowers to grow as more trials are completed.

The bottom line: Mortgage modification programs generally don't work, but if you're facing foreclosure they may represent a last way to avoid the loss of your home. If you need a loan modification program and can qualify, go for it.

Question: What's a good credit score for a mortgage application?

Answer: The typical credit score for FHA borrowers is now 694 - that's up considerably from the average 621 in fiscal 2008. Fannie Mae recently began requiring a minimum score of 620 for most loans, up from 580.

Some lenders "layer" credit score standards by demanding higher numbers then underwriting standards require. This means that an FHA loan may be available to you from one lender but not another so it pays to shop around.
To get the best rates and terms check your credit report to assure that it does not include any items that are factually incorrect or out of date. To see your credit report without cost or obligation, go to AnnualCreditReport.com.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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