Long-term Unemployment Up Adds Home Mortgage Loan Risks

According to a joint report of the Office of the Comptroller of the Currency and the Office of Thrift Supervision, 51.5% borrowers who received U.S. delinquent loan modification mortgage default in this month again. At the same time, the increase of long-term unemployment adds to the foreclosure worries.

According to the Associated Press, the number of people who had been out of work six months or longer reached 6.7 million in April 2010. That was an all-time high. These people made up 45.9 percent of all unemployed people, also a record high. With increasing long-term unemployment, more and more homeowners now fall into the exhaustion of saving and have a difficult time making their residential mortgage payment. Many of them have to face foreclosure risks now.

House Mortgage Rate Modification Application for Unemployed Homeowners

The long-term unemployed homeowners will have a new option to avoid or delay foreclosure. The Obama Administration has created a new home equity loan modification scheme called Unemployment Forbearance Plan through their Making Home Affordable Program. The scheme will launch in this fall.

Around 4.5 million foreclosures applications will be expected in 2010, according to Irvine, California-based RealtyTrac Inc. The Obama Administration launched in February 2009 the Home Affordable Modification Program to provide eligible homeowners the opportunity to modify their mortgage rate to make them more affordable. According to the makinghomeaffordable.gov, more than one million homeowners have got help under the program, which will help 3 to 4 million homeowners by 2012.

In order to be eligible for a mortgage rate modification, a homeowner should meet certain criteria. The home must be the homeowner’s primary residence. The current mortgage must have been got before January 2009. The mortgage payment (including principal, interest, taxes, insurance and homeowner’s association dues) must be greater than 31% of the homeowner’s gross income. The forthcoming Unemployment Forbearance Plan may provide other eligibility requirements for a residential mortgage modification.

Can the Unemployment Forbearance Plan Stop Foreclosure?

The forthcoming Unemployment Forbearance Plan can not consequentially help unemployed homeowners stop foreclosure. But it gives a homeowner who may soon get a job a few months without the strain of making a house mortgage payment, or offers someone whose foreclosure is inevitable more time to make living arrangement. A homeowner can contact his house mortgage lender or a home loan counselor for to find his best modification option. Commercial mortgage web sites that provide services of purchasing and refinancing home loans and home equity consolidation could help homeowners make better mortgage payment arrangement too.

How to Choose a Student Loan for College: Should an Undergraduate Apply for a Federal Loan or Private Loan?

A university education is one of the most expensive investments most people are likely to make. There are three main types of loan available to help with these costs, including federal loans that come direct from the government, federal loans that are made by banks and backed by the government and private loans with no government backing at all.

Perkins Loans

The Perkins loan is available to undergraduates in greatest financial need, such as low-income students. This should always be the first choice for those who qualify because the maximum rate of interest is currently capped at 5%.

Stafford Loans

Two types of Stafford loan are available to undergraduates. Whilst the first type is open to everyone, a second subsidized federal loan is also available to students in genuine financial need. The beneficiary not only pays a lower interest rate, any interest accrued is paid by the government until they leave college. The maximum rate of interest is currently capped at 6.8% on standard loans. Subsidized Stafford loans, where the interest is paid by the government, is capped at 6%.

PLUS Loans

Parents can take out Parental Loans for Undergraduate Students or PLUS loans. This particular student loan can be taken out to cover ‘attendance costs’. The definition is broad and includes tuition fees, books, room and board, transportation and miscellaneous expenses. The maximum rate of interest on a direct loan is currently capped at 7.9% and 8.5% if from a bank or non-government lender.

Private Loans

Undergraduates that require more money than is available through a federal loan will need to try to identify a suitable private loan. They work in the same way as any other method of bank lending, although the rate of interest will be higher than on federal loans. Rates are also variable. Whilst the forms are easier to complete, there are also fewer options available in the event of student loan default.

Undergraduates should always seek a federal loan because they offer a lower rate of interest and more options in the event of both financial difficulties and student loan default. The Perkins loan is preferable, but there is a means test which means that not all will qualify for the discounted rate. Student loans cannot be written-off by filing for bankruptcy so they will need to be re-paid. Students are also reporting that private loans are difficult to find in the current economic climate.

Readers seeking ways to address financial difficulties prior to student loan default may be interested in identifying alternative ways to make student loan repayments.