I am underwater with my Freddie Mac mortgage by $100,000. Does Freddie Mac "forgive" the difference between loan and value in a loan modification?
—JoAnn, Sussex County, Del.
First, the entity that decides whether to modify a loan is usually the loan servicing company, not Fannie Mae or Freddie Mac. Loan modifications vary widely in the terms and conditions under which changes to a loan can be made. As a general rule, however, being underwater on your mortgage isn't an acceptable reason for requesting a loan modification. And the federal regulator overseeing Fannie and Freddie has indicated in recent months that he's not interested in reducing the loan principal of people who owe more than their house is worth.
Most loan servicers will not consider modifying a mortgage unless the homeowner is behind in mortgage payments or can demonstrate that he or she won't likely be able to continue making those payments, according to Skip Dyer of Randolph Bank in Cary, N.C. If that's the case, the loan modification may include a reduction in the amount owed. Modifications can also involve lowering the interest rate, deferring payments for a period of time or extending the term of the loan. Also, any modification will be contingent upon your demonstration that you are likely to be able to make the new payment on the mortgage.
If you're still interested in pursuing a loan modification, Dyer urges you to avoid companies which claim they can get you a loan modification, since success can never be guaranteed. If you pay a third party upfront for such a service, you'll probably be throwing away your money.
Although your main point of contact should be your loan servicer, know that both Fannie Mae and Freddie Mac have programs designed to help out struggling homeowners. One such program is the Home Affordable Refinance Program (HARP), which provides low cost refinancing options that can help lower your monthly mortgage obligations. Additional information about HARP and other programs that may prove helpful to you are available at knowyouroptions.com and at freddiemac.com.
-- Jeff Wuorio
What's a good first credit card to build my credit score? Right now I use a debit card (and pay student loans).
—A.L., Washington, D.C.
Your strategy is sensible. Timely student loan payments help your credit score, but using a credit card responsibly will, after a ding for opening a new account, boost it further, according to the credit-scoring company Fico.
If you can't qualify for a no-fee card, get a credit MORE
Apr 2, 2012 6:00 AM ET
I have a large number of open credit card accounts with $0 balances. I open them for the promotional offers, and then I pay them off and never use them again. I was advised that if I close them, I would lower my credit score. I only have one credit card that I use. How can I handle this without lowering my credit score? –- Name withheld You heard correctly—closing unused MORE
Mar 27, 2012 6:00 AM ET
I have been married one year, and during that time I allowed my name to be added to my husband's credit card. I have only charged $1,500 onto it over that time, and I have proof that I paid him back. Now he wants a divorce, and when I looked up my credit report, I see there is over $13,500 on the card (which has a limit of $14,000). MORE
Mar 13, 2012 6:00 AM ET
I recently took my 10-year-old daughter to open her first bank account. The bank officials warned me she is the victim of identity theft. Somebody opened and abused a bank account using her social security number in Everett, Wash.
I need to learn how I can monitor her identity (or credit) in addition to her two brothers (all under the age of 18). I tried using identity/credit monitoring services, however, it MORE
Mar 8, 2012 5:05 AM ET
I am hoping to consolidate my student loans. I am currently heavy in debt, late on payments, and scrambling to pay four different student loans at various interest rates.
Where do I go to consolidate my student loans? What is the best bank/company? What steps do I need to take?
-- Name withheld
It's a smart move to be tackling this problem before running into the serious risk of default. Unfortunately, the deeper MORE
Mar 6, 2012 9:52 AM ET
Almost daily, I receive credit card solicitations telling me that I have been pre-approved for a credit card with an APR between, say, 8.99% to 18.0% based on my credit worthiness.
If I apply for a credit card, at what point will I find out what my APR will be? Can I opt out before getting the card issued with an APR I do not want? -- Stephen MORE
Mar 2, 2012 5:05 AM ET
I have gotten a few credit cards — which I pay off each month—because they will allow me to gain free travel. Now, however, I feel I have too many, and I'd like to close some of them. How do I do that without hurting my credit score (now 766)? Is there a formula or a method of determining which ones are less likely to ding my score? --Name withheld
Mar 1, 2012 5:54 AM ET
I keep getting "pre-selected" offers for credit cards. Does it hurt my credit score if I am turned down for a pre-selected offer? — Name withheld
There's a common misconception that pre-selection means automatic approval. Not so, says Beverly Blair Harzog, credit card expert with Credit.com. You've received the offer because your credit score and other demographics fit within the credit card's target market. If you respond to the offer, though, MORE
Feb 23, 2012 5:05 AM ET
In the interest of teaching my young daughter the value of saving money, I recently attempted to open a savings account for her at a local bank. Much to my surprise, the teller informed me that the bank would not open an account for her unless I was an account holder as well. Is this a legitimate prerogative of the bank? — Name withheld
While some banks will welcome MORE
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