Merchant Funding

So far nearly 6,400 borrowers have dropped out after the loan modification was made permanent. Most of those borrowers likely defaulted on their modified loans, but a handful either refinanced or sold their homes.

Credit ratings agency Fitch Ratings projects that about two-thirds of borrowers with permanent modifications under the Obama plan will default again within a year after getting their loans modified.

Obama administration officials contend that borrowers are still getting help — even if they fail to qualify. The administration published statistics showing that nearly half of borrowers who fell out of the program as of April received an alternative loan modification from their lender. About 7 percent fell into foreclosure.

Another option is a short sale — one in which banks agree to let borrowers sell their homes for less than they owe on their mortgage.

A short sale results in a less severe hit to a borrower’s credit score, and is better for communities because homes are less likely to be vandalized or fall into disrepair. To encourage more of those sales, the Obama administration is giving $3,000 for moving expenses to homeowners who complete such a sale or agree to turn over the deed of the property to the lender.

Administration officials said their work on several fronts has helped stabilize the housing market. Besides the foreclosure-prevention plan, they cited government efforts to provide money for home loans, push down mortgage rates and provide a federal tax credit for buyers.

“There’s no question that today’s housing market is in significantly better shape than anyone predicted 18 months ago,” said Shaun Donovan, President Barack Obama’s housing secretary.

The mortgage modification plan was announced with great fanfare a month after Obama took office.

It is designed to lower borrowers’ monthly payments — reducing their mortgage rates to as low as 2 percent for five years and extending loan terms to as long as 40 years. Borrowers who complete the program are saving a median of $514 a month. Mortgage companies get taxpayer incentives to reduce borrowers’ monthly payments.

Consumer advocates had high hopes for Obama’s program when it began. But they have since grown disenchanted.

“The foreclosure-prevention program has had minimal impact,” said John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer group. “It’s sad that they didn’t put the same amount of resources into helping families avoid foreclosure as they did helping banks.”

Popularity: 5% [?]

Loan Term – The length of time the borrower has to repay debt.

Long Term Debt – Financing used to purchase or improve assets such as plant, facilities, large equipment and real estate.

Maturity – A loan’s maturity is the life of the loan; that is, how long you have to repay the loan. It usually applies to term loans and not lines of credit.

Multi-Lender Environment – Numerous lending institution sharing the same site and information to provide instant financing to small businesses.

Personal Guarantee -A guarantee that the primary owner will assume personal responsibility for repayment of the loan, should the company not repay the loan.

Prime Rate – The rate a lender charges its best customers. The rate is calculated differently by each lender.

Revolving Credit – It is the same thing as a line of credit: an amount of money, which a business can borrow against at times it needs capital. Often accessed by check, ATM, or business card.

SBA Loan – Loans to small businesses unable to secure financing on reasonable terms through normal lending channels. The program operates through private-sector lenders that provide loans, which are guaranteed by the Small Business Administration (SBA) — the SBA has no funds for direct lending or grants.

Secured Loan – A loan secured by specific collateral. Creditor may foreclose and seize the specific property that is collateral to satisfy an unpaid secure loan.

Small Business Administration -Established by Congress, the SBA provides financial, technical and management assistance to help Americans start, run, and grow their businesses.

Short Term Debt – Financing used to secure cash for accounts payable and inventory.

Subsequent Draw Fee – It’s a fee that the financial institution may charge each time you use the line of credit after the initial use.

Term Loan – A loan for a specific amount of money. It has either have a fixed or variable interest rate, matures in between one and ten years and has a set repayment schedule.

TransUnion Corporation – One of three leading providers of personal credit information.

Unsecured Loan – A loan granted upon the good credit of the borrower. No collateral involved.

Variable Interest Rate – An interest rate that changes during the life of a loan.

Popularity: 41% [?]