Making Homes Affordable: Does a Loan Modification Program Affect Scoring and Credit History?
Most people not only are unfamiliar with Genworth Financial, they have never heard it. Yet they are well known in the mortgage business. This company provides mortgage insurance for those home buyers who make a down payment of less than 20% when they buy a home. For those home buyers who make less than a 20% down payment, a mortgage insurance company actually insures the mortgage company. If a home buyer falls behind and cannot make their monthly loan payments, their mortgage insurance company steps in and reimburses the mortgage company for a portion of the money they have lost. The home buyer pays for this coverage provided by the mortgage insurance company with their monthly loan payment.
There are several different mortgage insurance companies that provide this coverage. Genworth Financial is one of these. Normally the mortgage company or the broker through whom the loan is obtained selects the provider of the mortgage insurance. In most instances the home buyer is never aware of which mortgage insurance company they have. In normal times a mortgage insurance company accurately predicts how many foreclosures will occur. The premiums they collect are sufficient to cover the money they pay out. However at those times where there are a higher number of foreclosures than normal, these companies lose more money than they anticipated and they suffer financially.
Very early in this financial crisis which has gripped the United States, Genworth Financial realized that it would suffer financially because of the higher than expected number of cases where it would have to reimburse mortgage companies for losses when the people whom they insured would not be able to make their loan payments and were foreclosed. So they set up a unit in their company to help people facing foreclosure get loan modifications and save their homes.
The requirements vary in accordance with the type of bankruptcy filed, however. Chapter 7 and Chapter 13 bankruptcies are very different forms of liquidation, and each has a different affect on your ability to get approved for FHA loans after bankruptcy. It is important to understand how each type of proceeding impacts your ability to deal with the FHA. In a Chapter 7 filing, you are legally required to have been discharged from the proceeding for at least 24 months, and to have maintained a perfect payment history since then. When it comes to your ability to get approved for FHA loans after bankruptcy in Chapter 13 proceedings, the news is even better. You can actually obtain an approval after 12 months as long as you are still making timely payments.
Lenders prefer that you begin the process of establishing your credit again – though this is not always a requirement. Many people, after all, prefer to avoid incurring new debts so soon after emerging from bankruptcy. To get approved for FHA loans after bankruptcy, you will need to be able to document payment history and compliance, so plan accordingly. Though the process can involve more time and effort than traditional market-based home loans, it is good to know that even borrowers who have recently suffered the worst effects of a sour economy can still have access to this critical part of the American dream.
Learn more about Obama Making Home Affordable Mortgage Program.