Here are four steps you should take as soon as you start thinking seriously about buying a home:

* Find out your current credit history and score. You don’t want any surprises down the road. If you have no credit history, or have had credit problems in the past, there are steps you can take to build, improve, and maintain strong credit. Contact a HUD-approved housing counselor for free advice.

* Start gathering all of your documentation. Responsible lenders today will want documentation verifying your income (W-2 forms, tax returns, employment records), credit history, and assets (such as bank statements to verify your savings).

* Consult with your lender to review your income, expenses, and financial goals to determine the type and amount of mortgage you qualify for. One important question you’ll need to answer is whether you’re better off with a fixed-rate mortgage – where you lock in the interest rate for the life of the loan – or an adjustable rate mortgage in which the interest rate changes. While fixed-rate mortgages are by far the most popular choice, you need to know your options.

* Talk to your lender about applying for a mortgage and getting a pre-approval letter. This letter provides an estimate of what you might be able to borrow – provided your financial status doesn’t change – and demonstrates to home sellers that you’re a serious buyer.

Today’s market continues to evolve, but all of the tried-and-true homebuying rules still apply. So do your research, reach out to the professionals, stick to your budget, and be sure you’re ready to take on the financial responsibilities of being a homeowner. If you do all that, this can be a very good time to buy a home.

The final rule implements a provision of the Dodd-Frank Act that increases the annual percentage rate (APR) threshold used to determine whether a mortgage lender is required to establish an escrow account for property taxes and insurance for first-lien, “jumbo” mortgage loans. Jumbo loans are loans exceeding the conforming loan-size limit for purchase by Freddie Mac, as specified by the legislation.

In July 2008, the Board issued final rules requiring creditors to establish escrow accounts for first-lien higher-priced mortgage loans. A first-lien mortgage is considered a higher-priced mortgage loan if its APR is 1.5 percentage points or more above the current average prime offer rate. Under the final rule being issued today, the escrow requirement will apply to first-lien jumbo loans only if the loan’s APR is 2.5 percentage points or more above the average prime offer rate. The APR threshold for non-jumbo loans remains unchanged. The final rule is effective for covered loans for which the creditor receives an application on or after April 1, 2011.

The Board is also proposing a rule that would expand the minimum period for mandatory escrow accounts for first-lien, higher-priced mortgage loans from one to five years, and longer under certain circumstances, such as when the loan is delinquent or in default. The proposed rule would provide an exemption from the escrow requirement for certain creditors that operate in “rural or underserved” counties, as authorized by the legislation.

The proposal also would implement new disclosure requirements contained in the Dodd-Frank Act. Disclosures would be required at least three business days before consummation of a mortgage loan to explain, as applicable, how the escrow account works or the effects of not having an escrow account if one is not being established. The proposed rule also would require consumers to receive disclosures three days before an escrow account is closed. The Board is soliciting comment on the proposed rule for 60 days after publication in the Federal Register, which is expected shortly.

The proposed rules would amend Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing) to implement a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Effective July 21, 2011, the Dodd-Frank Act requires that the protections of the Truth in Lending Act (TILA) and the Consumer Leasing Act (CLA) apply to consumer credit transactions and consumer leases up to $50,000, compared with $25,000 currently. This amount will be adjusted annually to reflect any increase in the Consumer Price Index.

TILA requires creditors to disclose key terms of consumer loans and prohibits creditors from engaging in certain practices with respect to those loans. Currently, consumer loans of more than $25,000 are generally exempt from TILA. However, private education loans and loans secured by real property (such as mortgages) are subject to TILA regardless of the amount of the loan.

The CLA requires lessors to provide consumers with disclosures regarding the cost and other terms of personal property leases. An automobile lease is the most common type of consumer lease covered by the CLA. Currently, a lease is exempt from the CLA if the consumer’s total obligation exceeds $25,000.

The notices that will be published in the Federal Register are attached. Comments on the proposals must be submitted by the later of 30 days after publication in the Federal Register or February 1, 2011.

Created pro bono by The Kaplan Thaler Group, a New York-based advertising agency, the new campaign is available in English and Spanish and features real homeowners from across the country who have benefited from the program.

“Even though the economy is getting stronger, many Americans are still facing the fear and uncertainty of losing their home to foreclosure,” said Treasury Secretary Tim Geithner. “The Administration’s loan modification programs have given more than a million responsible homeowners a chance to stay in their homes, and we want to do all we can to help make sure that struggling homeowners know about these free resources for help.”

“Many responsible borrowers continue to face challenges due to unemployment, negative equity or because of soaring utility payments,” said HUD Secretary Shaun Donovan. “These public service announcements will help us to reach at-risk borrowers now, while they are still current on their payments and eligible to receive help through the Making Home Affordable Program or our expanded options for Federal Housing Administration (FHA) refinancing.”

“We are proud to partner with the Treasury and HUD on this critical campaign to educate Americans about free resources available to help them prevent foreclosures,” said Peggy Conlon, President and CEO, the Ad Council. “We hope Americans who are struggling will be empowered by these compelling PSAs and take simple actions to help them stay in their homes.”

The Ad Council will distribute the new PSAs to more than 33,000 media outlets nationwide. The campaign includes television, radio, print, out of home and web advertising. The PSAs will air in advertising space donated by the media.

The Making Home Affordable Program was launched in February 2009 to help homeowners who are at risk of foreclosure through no fault of their own make their monthly mortgage payments more affordable. Since then, more than 1.5 million homeowners have been offered help under the program, and almost 1.3 million homeowners have started a trial plan. Homeowners in permanent modifications under the program have a median monthly savings of over $500 each month or about one-third of their previous payment.

Any homeowner who is struggling with their mortgage is encouraged to visit MakingHomeAffordable.gov or call 1-888-995-HOPE (4673) to learn about options they may have and to speak with a HUD-approved housing counselor for free.

To view the PSAs, visit http://www.makinghomeaffordable.gov/psa/about.html.

The Advertising Council

The Ad Council (www.adcouncil.org) is a private, non-profit organization that marshals talent from the advertising and communications industries, the facilities of the media and the resources of the business and non-profit communities to produce, distribute and promote public service campaigns on behalf of non-profit organizations and government agencies. The Ad Council addresses issue areas such as improving the quality of life for children, preventive health, education, community well-being, environmental preservation and strengthening families.

WASHINGTON, DC – The U.S. Department of the Treasury and the Department of Housing and Urban Development (HUD) today released February data for the Administration’s Home Affordable Modification Program (HAMP). As of the end of the month, more than one million borrowers were receiving a median savings of $500 each month – a 36 percent median monthly payment decrease. Permanent modifications have been granted to 170,000 homeowners and an additional 91,800 permanent modifications have been approved by servicers and are pending only borrower acceptance.

Do our credit policies and mortgage practices advance responsible lending?

The principles drive our business. They also reflect the public mission in our congressional charter. And together, they have led Freddie Mac to take on a greater role in the current economic crisis. Indeed, the Obama Administration has asked us to help stabilize mortgage markets and, in effect, use the infrastructure and distribution system of Freddie Mac to implement specific initiatives on its behalf. We have responded enthusiastically by making them a top corporate priority.

Rather than implementing Administration initiatives outside our normal functions, we have integrated them into our core business, producing a more powerful range of mortgage options for consumers. Let me explain how we have done this, and what benefits have been produced.

During the economic crisis, much of our single-family business activity has involved helping homeowners to manage existing mortgage obligations and costs. We do this through a combination of loan refinancing and loan modification programs. Depending on the homeowner’s individual circumstances, we provide a continuum of solutions to reduce mortgage costs. Which option is the best fit?

Let’s begin with homeowners whose credit profile meets our standards, have sufficient home equity, but whose mortgage rate is higher than the current market rate. Here, refinancing is the most widely used option. And for good reason: mortgage rates are near historic lows, and refinancing produces an immediate and permanent reduction in mortgage payments. Last year, through our traditional mortgage products, Freddie Mac refinanced $344 billion in home loans for 1.6 million families. The cost savings to homeowners were substantial: an estimated reduction in mortgage payments of $2,600 annually, on average. Put another way, our traditional refinancing produced an estimated $4.13 billion in economic relief for homeowners. Even better, this stimulus repeats itself year after year.

But what about homeowners whose houses are worth much less today than when they took out their original mortgage? Normally, some of these homeowners would not qualify for refinancing, or if they did only at unfavorable terms. This is where an Administration initiative, the Home Affordable Refinance Program (HARP), applies. Last year, we developed a new offering, the Freddie Mac Relief Refinance MortgageSM, for a targeted set of homeowners: those whose loans are owned by Freddie Mac and are current in their payments, but whose home equity is low or even negative. As we have seen during this decade, house prices can fluctuate wildly. But unlike some who walk away from their mortgage obligations – a practice known as strategic defaults — most responsible homeowners pay their mortgage regardless of current property values.

For these homeowners, our Relief Refinance Mortgage is a good fit. Here, we refinance high-balance loans. Indeed, the amount still owed on a mortgage can exceed the current value of the home by as much as 25 percent. Importantly, we do not require new or additional mortgage insurance. For example, take a homeowner who put more than 20 percent down on an original mortgage and did not purchase mortgage insurance. If current property values have driven down the equity position to less than 20 percent, or even negative equity, we do not require the homeowner to purchase mortgage insurance on the refinanced loan.

We launched the Relief Refinance Mortgage in the second quarter of 2009, and finished the year refinancing $35 billion of loans for 170,000 families. The estimated annual cost savings: about $2,200 per homeowner, on average, or $368 million in total. Waiving mortgage insurance requirements produced additional cost savings. We even found that homeowners with adequate home equity used this product as well. Relief Refinances have steadily climbed in our monthly reports and represent a growing percentage of our refinances.

All this is well and good for homeowners who qualify for refinancing. But what about homeowners who do not? In other words, families who have lost some or all income, suffered a medical crisis, or experienced another event that prevents them from paying the mortgage? Unfortunately, in an economy where the unemployment rate has touched 10 percent, too many families have found themselves in this situation. Throughout the United States, there are roughly five million homeowners who have missed at least three consecutive monthly payments and/or face imminent default. Freddie Mac guarantees or owns less than 10 percent of these loans. For these homeowners, we provide an array of options to help them avoid the cost and stigma of foreclosure.

Our first option comes from the Administration: the Home Affordable Modification Program (HAMP), which was rolled out in the second quarter of 2009. HAMP is suited for homeowners who have suffered a long-term reduction in income. The loan modification reduces mortgage payments to as low as 31 percent of monthly income through a combination of reducing mortgage rates, lengthening the loan term and/or deferring principal. Under HAMP, homeowners must make three consecutive payments at the new, lower level before the modification becomes permanent. This trial period helps ensure that a sustainable alternative is in place. At year-end 2009, 129,000 homeowners with existing Freddie Mac loans were in this trial period, and 14,000 had their modifications made permanent.

What if homeowners do not qualify for HAMP or fail to make it through the trial period? Here, we turn to our traditional foreclosure prevention options. These include other forms of loan modification or forbearance plans that allow homeowners to skip several payments before completing a permanent modification. In 2009, Freddie Mac used these options to help 120,000 families stay in their homes. When even these options do not work, and the homeowner simply cannot afford to hold on to the property, we still make it possible to avoid foreclosure. For example, last year we arranged for the pre-sale of houses for 23,000 families.

Of course, modifying loans requires regular contact with the homeowner. However, many families in need do not reach out to their mortgage Servicers because they believe the process will be too intimidating or confusing. That’s why Freddie Mac has invested significant resources to reach as many homeowners in need as possible. We have done so both inside and outside of our lender network. For example, we have:

Launched a nationwide telephone help network for homeowners
Opened help centers in four major cities with non-profit housing counselors
Dramatically expanded our in-house servicing and call center staff
Placed loss-mitigation specialists on site at key Servicers
Redesigned the FreddieMac.com home page to highlight a tool that enables consumers to easily determine whether Freddie Mac owns their loan
Our commitment is clear: we want to work with struggling families to help them avoid foreclosure.

I hope this discussion gives you better perspective on the options available to homeowners seeking to manage their mortgage expenses. At Freddie Mac, we have long-standing refinancing and loan modification programs. And we have integrated the Administration’s programs into our core business to maximize their effectiveness. Combined, they provide a broader continuum of options for homeowners seeking mortgage relief. More than two million families benefited from our efforts in 2009. We are working hard to assist additional families in 2010.

Many people avoid calling their lender when they have money troubles. Most of us are embarrassed to discuss our money problems with others or believe that if lenders know we are in trouble, they will rush to collection or foreclosure.
Foreclosure is expensive for lenders, mortgage insurers and investors. HUD/FHA, as well as private mortgage insurance companies and investors like Freddie Mac and Fannie Mae, require lenders to work aggressively with borrowers who are facing money problems.

Lenders have workout options to help you keep your home. However, these options work best when your loan is only one or two payments behind. The farther behind you are on your payments, the fewer options are available.

Do not assume that your mortage problem will quickly correct itself. Don’t lose valuable time by being overly optimistic. Contact your mortgage lender to discuss your circumstances as soon as you realize that you are unable to make your payments. While there is no guarantee that any particular relief will be given, most lenders are willing to explore every possible option.

Finding Your Lender
Check the following sources for lender contact information:

Your monthly mortgage billing statement
Your payment coupon book
Search the web
Directory assistance or phone book.

Information To Have Ready When You Call:
To help you, lenders typically need:

Your loan account number
A brief explanation of your circumstances
Recent income documents such as pay stubs, Social Security benefits statements, disability, unemployment, retirement, or public assistance. If you are self-employed, have your tax returns or a year-to-date profit and loss statement from your business available for reference)
List of household expenses

Expect to have more than one phone conversation with your lender. Typically, your lender will mail you a “loan workout” package. This package contains information, forms and instructions. If you want to be considered for assistance, you must complete the forms and return them to your lender quickly. The completed package will be reviewed before the lender talks about a solution with you.

Do Not Ignore Mail or Phone Calls From Your Lender
Your lender will try to contact you by mail and phone soon after you stop making payments. It is very important that you respond to the mail and the phone calls offering help. If your lender does not hear from you they will be required to start legal action leading to foreclosure. This will substantially increase the cost of bringing your loan current. Do not ignore contact from your lender.

If You Have an FHA Insured Loan

HUD’s National Servicing Center works closely with customers who have FHA insured loans. Check your mortgage document or ask your lender if your loan is FHA insured. Do you feel your lender is not responding to your questions? Do you want assistance contacting your lender? HUD’s National Servicing Center is ready to help you.

This information is brought to you through the collaborative efforts of HUD/FHA, the Department of Veterans Affairs, Department of Labor, Fannie Mae, Freddie Mac, and members of the mortgage industry.

You can find out by asking yourself some questions:

Do I have a steady source of income (usually a job)? Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?
Do I have a good record of paying my bills?
Do I have few outstanding long-term debts, like car payments?
Do I have money saved for a down payment?
Do I have the ability to pay a mortgage every month, plus additional costs?

If you can answer “yes” to these questions, you are probably ready to buy your own home.

2. HOW DO I BEGIN THE PROCESS OF BUYING A HOME?

Start by thinking about your situation. Are you ready to buy a home? How much can you afford in a monthly mortgage payment (see Question 4 for help)? How much space do you need? What areas of town do you like? After you answer these questions, make a “To Do” list and start doing casual research. Talk to friends and family, drive through neighborhoods, and look in the “Homes” section of the newspaper.

3. HOW DOES PURCHASING A HOME COMPARE WITH RENTING?

The two don’t really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing.

Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that’s an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it.

4. HOW DOES THE LENDER DECIDE THE MAXIMUM LOAN AMOUNT THAT CAN AFFORD?

The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. According to the FHA,monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, 4 should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.

5. HOW DO I SELECT THE RIGHT REAL ESTATE AGENT?

Start by asking family and friends if they can recommend an agent. Compile a list of several agents and talk to each before choosing one. Look for an agent who listens well and understands your needs, and whose judgment you trust. The ideal agent knows the local area well and has resources and contacts to help you in your search. Overall, you want to choose an agent that makes you feel comfortable and can provide all the knowledge and services you need.

6. HOW CAN I DETERMINE MY HOUSING NEEDS BEFORE I BEGIN THE SEARCH?

Your home should fit way you live, with spaces and features that appeal to the whole family. Before you begin looking at homes, make a list of your priorities – things like location and size. Should the house be close to certain schools? your job? to public transportation? How large should the house be? What type of lot do you prefer? What kinds of amenities are you looking for? Establish a set of minimum requirements and a ‘wish list.” Minimum requirements are things that a house must have for you to consider it, while a “wish list” covers things that you’d like to have but aren’t essential.

The federal financial regulatory agencies and the Conference of State Bank Supervisors (the regulators) issued a statement today on prudent lending to creditworthy small business borrowers. 1 The regulators recognize that small businesses play an important role in the economy and know that some are experiencing difficulty in obtaining or renewing credit.

The statement emphasizes that financial institutions that engage in prudent small business lending after performing a comprehensive review of a borrower’s financial condition will not be subject to supervisory criticism for small business loans made on that basis. Financial institutions should understand the long-term viability of the borrower’s business and focus on the strength of a borrowers’ business plan to manage risk rather than using portfolio management models that rely primarily on general inputs, such as a borrower’s geographic location or industry.

The regulators are working with the industry and supervisory staff to ensure that supervisory policies and actions do not inadvertently curtail the availability of credit to sound small business borrowers. The statement builds upon principles in existing guidance, including the Interagency Statement on Meeting the Needs of Creditworthy Borrowers 2 issued in November 2008 and the Policy Statement on Prudent Commercial Real Estate Loan Workouts 3 issued in October 2009.