If you’re having trouble meeting mortgage payments, you certainly are not alone.

The Mortgage Bankers Association recently reported that the national foreclosure rate is now at 3.3%, and over 11% of all mortgages are either delinquent or in the process of foreclosure.

Now, due to the state of the economy, even some homeowners who are still managing to keep up with payments are being tempted to abandon the mortgage and start over.

If you’ve been thinking of making that move, first consider what it will do to your credit rating.

A repossession on your credit report will instantly reduce your FICO score by at least 100 points – and it doesn’t matter if you walked away voluntarily or were forced out through foreclosure.

Worse, after a foreclosure, the lender can still come after you for any difference between what you owed and what they are able to gain through the eventual sale of the house.

For some, a better alternative is the short sale. In this case, the bank agrees to forgive that difference and mark your debt paid. If you’re very lucky, they will even report it to the credit bureau as “paid satisfactorily” so that it doesn’t damage your credit score. If they report it as “settled for less than the full amount due” your score will take a hit, just as if you’d gone through foreclosure.

The big benefit is that if this was your primary home and the forgiven debt was less than $1 million ($2 million for couples filing jointly) then you will not owe income tax on the forgiven debt. This, by the way, is a temporary tax law change and only affects debt incurred between 2007 and 2012.

A better alternative to either foreclosure or a short sale is negotiation. Lenders really don’t want to own houses. It costs money, and what they want is money coming in, not going out.

If you’re falling behind financially, contact your lender right away and work to negotiate a lower rate or other terms that will allow you to keep the house and stay afloat.

If you need help with these negotiations, you can get it – at no charge. The National Foundation for Credit Counseling recently got $16 million in federal funding to help troubled homeowners, and has trained counselors who will assist in negotiations.

HUD also has approved counselors in every state who don’t charge anything to help homeowners stay in their homes. To find a counselor in your state, go to http://www.hud.gov/foreclosure/local.cfm

Under the Homeowner Affordability and Stability Plan, the government is offering help to up to 9 million families so they can avoid foreclosure. So don’t wait – if you need help, ask for it.

Note* The National Foundation for Credit Counseling warns that it is not necessary to pay for help with your negotiations. Stay away from companies that offer to help for $500, $1,000, and even $1,500. Often these services are bogus – and they’re always available for free.

Author:Marte Cliff
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

The Veterans Administration security breach in 2006 is a graphic example of how your most personal data can easily get into the hands of identity thieves.

Although taking data home was against the rules, a data analyst did just that – and when his suburban home was burglarized in May 2006, the thieves took both his laptop and the external hard drive containing names, birth dates, and Social Security numbers of every Veteran who had been discharged after 1975 – up to 26.5 million veterans.

The laptop was eventually recovered and VA spokesman Phil Budahn was quoted as saying “…there is no evidence that the information involved in this incident was used to harm a single veteran.”

No one knows if the thieves had any idea about what was on that computer or if they copied data while it was in their possession.

Veterans were informed of the security breach in late May – about 3 weeks after it occurred – and the following month five veterans groups filed a class action lawsuit on behalf of all veterans. The lawsuit asked for $1,000 in damages for every veteran whose information was compromised in the theft.

Now, after nearly 3 years, the parties have come to an agreement that leaves most veterans out of the settlement. Veterans who can show proof of actual harm, such as emotional distress leading to physical symptoms, or expenses for credit monitoring, will be eligible to receive payments up to $1,500.

Once the settlement is approved by a U.S. District Judge, the terms will become final. Then notices will be published in magazines and newspapers across the country, giving veterans a toll-free number for information on filing a claim. Any funds remaining from the $20 million after payment to those veterans will be donated to veterans’ charities.

The VA, of course, is not the only entity to lose personal records. In a June 2006 news article, the Privacy Rights Clearinghouse estimated that in the previous 16 months, 170 data breaches had occurred – exposing more than 80 million Americans to potential identity theft.

The VA itself had a second security breach in 2006. Again, a missing computer was the cause. Unisys, a subcontractor providing software support to the Pittsburgh and Philadelphia VA Medical Centers, reported the loss on August 3. This time insurance data for 16,000 living veterans and about 2,000 deceased veterans was compromised.

Again, VA spokesmen stated that there was no evidence of the information being used to harm any veteran. All veterans affected were notified, however.

These occurrences are often the result of stolen laptop computers – computers which should be left at the office but are taken home instead.

CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.

The freeze on foreclosure sales and evictions has now been frozen until the end of January, according to a statement issued January 8 by Fannie Mae and Freddie Mac.

In an effort to help people avoid losing their homes, Fannie and Freddie began taking part in the Streamlined Modification Program, which allows borrowers to lower their interest rates, extend the life of the loan, or temporarily defer payments on the principal.

Previous announcements had delayed evictions on single-family homes until after the holidays.

The program extends only to those borrowers who use the property as their primary residence, and who have not filed for bankruptcy. To qualify, borrowers must have fallen seriously behind on their mortgage payments – missing 3 or more payments.

Another requirement is proof that the borrower has contacted their lender to try to reach an agreement on modifying the loan. This contact must have been made at least 10 days prior to filing for help under the Streamlined Modification Program.

Citibank has also agreed to a program that would allow judges to reduce mortgage debt for people filing for bankruptcy.

The IRS is also stepping up to the plate to assist.

Since many consumers in trouble with home mortgage payments have also fallen behind on income tax payments, many of the homes in question carry IRS tax liens. Over 600,000 such tax liens are filed each year.

The IRS has vowed to accelerate requests by homeowners to make a federal tax lien secondary to lender liens when a homeowner is refinancing or restructuring a mortgage. By law, tax liens are always take precedence over any other liens.

In the case of a home being sold for less than the value of the mortgage, the IRS will now move the lien to a different property, enabling the transaction to close.

This type of transaction, known as a Short Sale, used to carry severe tax consequences. The balance of the loan that was “forgiven” in order to complete the sale was treated as income for tax purposes.

Now, Under the Mortgage Forgiveness Debt Relief Act of 2007, up to $2 million of the cancelled debt on a principal mortgage is now tax free. This relief applies only to a principal residence, not to second homes or rental income property.

Marte Cliff

Everyone seems to realize that having a high credit score is great, but there are even more advantages than most people know. Qualifying for loans tends to be the advantage that most people focus on, but discovering the other advantages might really ignite an interest to work toward a higher score.

Yes, loan eligibility is an amazing credit score benefit, but getting lower interest rates on those loans is even more important. The better interest rates you qualify for put money directly back into your own pocket. This goes for rates on other services as well. Having a low credit score can actually add one to two points to a motor vehicle insurance premium. Why is this related? Your ability to make responsible payments is also important to insurance agencies, credit card companies, cell phone providers, and more. Maintaining a great score will help you to save money in all of these areas.

If you are an owner of a small business, getting a line of credit or small-business loan may be imperative to your success. If a business is less than three years old, personal credit plays a huge factor in your eligibility and interest rates. At this stage of small business, lenders have trouble making a distinction between your business credit history and your private credit score.

If you are not a business owner and work better in a job atmosphere, there are even rewards in the job market. Many professional employers actual do a credit check before a new hire. These high level employers consider your credit score a representation of your responsible behavior. An employee that has difficulty managing their own finances might not be the best person to take care of company needs. This is especially true for employment in fields that are especially tied to financial practices such as banks, accounting firms, and treasuries.

The biggest advantage to a high credit score is the buying power you will possess. The possibilities for investment and rates on large purchases are much better. You will spend less on a new car, be able to make a big investment in a growing real estate market, or get the loans you need to send your children to the best college. The opportunities are almost limitless when credit is handled well. If you don’t have a great score right now, it is never to late to get started on your way to rebuilding it or building it up for the first time. There are a number of helpful online sources to assist you. Start by getting a free credit score report from an online provider.

Author: Mike Clover