The government is currently working on the rescue plan that they hope will save our economy. Meanwhile however, this plan may lighten the credit crunch but will, most likely, not immediately effect the housing slump that we are currently experiencing.

It has been forecast that the housing market will probably not begin returning to normalcy until mid 2009 or later. At this time we have many sub-prime mortgage borrowers going through foreclosures. The really unfortunate part is that the economy is so bad that we now have prime mortgage borrowers experiencing foreclosures and losing their homes. This, of course, has the potential to drive prices down even further.Being near a foreclosed home is a negative for any neighbors. Being surrounded by them almost guarantees your home value is sinking weekly and there is nothing you can do.

The areas of our country leading the way in home foreclosures are the same areas where prices rose at the fastest rate over the last few years. In August, California had one-third of all foreclosure activity, Florida was second with 14.5%, followed by Arizona, 4.7%, and Nevada, 3.9%.

The rescue package will most likely not resolve the housing market problems at this time, but they would most like be considerably worse if no package was passed by the government.

There is no doubt that layoffs are looming, leaving people without incomes or health insurance, and hard economic times are ahead for all of us. We can only hope that our economy will bounce back in the future and return us to the standard of living we’ve all been enjoying for many years. Meanwhile, it is time for everyone to stay constantly aware of their financial situation.

If you are considering paying off your mortgage, please weigh the following facts before making a final decision. As with most things, there are positive and negative factors to be analyzed.

Should money be applied towards a mortgage or would it be more beneficial to invest the funds in bonds or the stock market? If market fluctuation makes you uneasy, consider prepaying your mortgage which will reduce your total interest expense.

As soon as you have reached mortgage equity of 80% of your home’s value or more, be sure to cancel your private mortgage insurance (PMI). Be certain to do this as soon as possible so that you will not be paying unnecessary premiums.

Peace of mind is always a prime consideration when considering paying off a mortgage. For some people, owning their home outright, is psychologically rewarding. This is a positive thing as long as it does not lead to high-interest credit card debt or at the expense of retirement savings.

Consider prepaying your mortgage while you are still employed so that you will not have to use your retirement funds to cover this expense.

Reasons not to pay off your mortgage debt:

The stock market, although it fluctuates often, generally offers a better return on your money than prepaying your mortgage.

If you prepay your mortgage, you will lose the interest tax deduction offered by the government. If you are in a high tax bracket, this could be very costly and the decision should be analyzed carefully.

Some adjustable rate mortgages do carry prepayment penalties. Be sure this is not the case with your mortgage before deciding to prepay. The cost of a penalty may negate any benefits you are anticipating from prepayment.

Foreclosures are everywhere. People are losing their homes in record numbers. We would all like to think that this can’t happen to us, but we would be mistaken. It doesn’t take very long to move from a responsible bill payer to someone unable to meet their obligations and be forced to face the loss of their home. A simple life occurrence such as a job loss or a serious health issue can change everything. Statistics show that 32% of people who experienced a job loss fell behind in their home payments. Another 25% found they were unable to keep up with their obligations after a health crisis. With that thought in mind, this would be a good article for everyone to read. Even if you are fortunate enough not to have this experience yourself, chances are you may know someone who is going through this difficult time.

When financial problems arise, regardless of the cause, the first thing a person should do is discuss the situation with your mortgage holder. Call the number provided on your statement and ask what they can do to help you resolve this problem.

Usually a mortgage company will respond by putting you on a repayment plan. This will generally involve reducing, or possibly suspending, your payments for a period of time. You will still be responsible to pay this money, but it will be rolled back into your loan at a later date. Meanwhile, this action will give you a chance to find a job or, perhaps, recuperate from an illness. If this plan does not resolve the situation, it is possible that the company will offer to modify the loan’s interest rate.

If you do not find that your lender is cooperating satisfactorily, you may be able to obtain help elsewhere. One of your first contacts should be with an organization called HOPE NOW. This is an alliance of counselors, mortgage services, and investors who can be reached at (888/995-HOPE).

If you are still dissatisfied with the help you are receiving, it might be time to find a credit counseling service, but be certain that they have a housing counselor on staff. Information on counseling services in your area can be found on the web at www.HUD.gov .

Everyone knows that home purchases and new mortgages have decreased dramatically over the past year. One very surprising fact, however, is that the 2^nd quarter of 2008 showed a 42 % increase in loan fraud activity over the same period in 2007. This is an amazing increase when you consider that the volume of loans decreased by approximately 30%.

There are apparently many ways to commit fraud when filing for a loan, and information regarding many of them is readily available on the internet. These methods of fraud consist mainly of phony income verifications and credit reports, falsified employment records, financial assets being “rented” from others, and inflated appraisals. It is the availability of the necessary forms, etc. (all with disclaimers that they may not be used for fraudulent purposes) that are enabling people to become criminals. Many families are so used to all of the luxuries they have had over the years that they are desperate to continue their former lifestyles. With income down and costs up, they are finding it necessary to lie and cheat to maintain this way of living. It is sad to think that people are willing to break the law simply to maintain their creature comforts.

Another scam being used to obtain a mortgage fraudulently is to search the web to locate what is known as “straw buyers”. These are people with good credit scores and incomes who are willing to sell their financial identities temporarily to unqualified buyers. Of course, they wish to be paid very well for their part in this scam.

This large increase in loan fraud is a direct result of the economic problems facing our country. It is also, however, a terrible statement about the characters and morals of many of our citizens that they would allow themselves to become thieves.

It seemed ridiculous when we first read about them and apparently they were. I am referring to the undocumented loans that were being offered by banks and mortgage companies a few years ago. These were loans with no income verification. The mortgage industry named them “liar loans” since they required no proof of income or existing assets. Some of these people were not even employed when these loans were approved. Obviously, the people granting and approving these loans were motivated solely by their own greed.

Just as we believed the housing market was possibly starting to improve, many of the “liar loans” are defaulting in record numbers. Most of these mortgaged properties are located in states where home prices have decreased the most, such as California, Nevada, Arizona and Florida. The homeowners with these loans are unable to refinance because they paid record prices at purchase and the homes have since sharply devalued. This leaves only foreclosure as an option.

Many of the lenders who provided “liar loans” are now defunct and others may soon be following. Brokers who provided borrowers with this type of loan earned greatly inflated commissions, as the loans themselves carried substantially higher fees and interest rates. A broker who might earn between $2,000 and $4,000 on a normal mortgage loan was earning close to $15,000 on a “liar loan”. Unfortunately, we, the taxpayers, are picking up the cost and dealing with the problems generated by this unseemly business practice.