The White House announced another program designed to help homeowners headed for foreclosure.  In addition, the nation's largest loan servicer has swung into action with a new program that promises some possible relief by reducing the balance owed on a homeowner's mortgage.

The government’s new program is specifically targeted at homeowners who are behind on their mortgages due to unemployment. Borrowers have to be collecting unemployment benefits and be less than 90 days late on their mortgages. The program does not provide forgiveness, as any missed payment will be tacked on to the loan balance to be paid later.  It is not clear whether homeowners whose unemployment benefits have terminated will also be helped.  While this is good news for a small slice of those borrowers in distress, it does not address the needs of the millions of people facing imminent foreclosure.

Another program, again one that is narrowly defined, is designed to help homeowners whose homes are slightly under water. If the old lender is willing to forgive debt that exceeds 115 percent of the home's value, the government-controlled FHA program would issue them a new fixed rate loan.  At that loan-to-value, borrowers are untouchable under loan standards now in place. The borrowers would need to qualify for the new loan payment, but it gives them a presumably lower payment and a risk-free loan.

The government also acknowledged that out of 1.1 million borrowers who had been offered temporary modifications, only 170,000 people successfully transitioned to a permanent modification.  This number is further evidence that the foreclosure prevention programs have not been well designed.

Bank of America is offering borrowers holding so-called Option ARMs the ability to get a new loan, one with a principal balance as much as 30 percent less than their current mortgage balance, if they are under water. Of the forgiven loan amount that would be set aside, 20 percent would be forgiven each year if the borrower continues to make payments. At the end of five years, the entire amount would end up having been forgiven.

This is another very modest program whose borrowers must have a specific type of loan, be behind in their payments, and have a loan balance greater than the value of the home. Not to mention that 45,000 is a small percentage of the well over 1 million of the bank's loans that are currently more than 60 days delinquent.

This program will not likely hurt the company's earnings as, according to the 2009 3rd Quarter 10Q filed with the Securities and Exchange Commission: "Certain acquired loans of Countrywide that were considered impaired were written down to fair value at the acquisition date."

It's worth noting that Bank of America had previously entered into an agreement in 2009 with the Attorneys General of most of the states that set aside more than $8 billion dollars to re-write the loans of these same types of borrowers, holders of Option ARMs. The bank has never reported statistics on the progress or performance of activities under these agreements.

The government and the industry keep waltzing around the edges of the problem. They are helping borrowers by the tens of thousands, while some analysts say that as many as 12 million borrowers are facing foreclosure over the next three years.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

The White House announced another program designed to help homeowners headed for foreclosure.  In addition, the nation's largest loan servicer has swung into action with a new program that promises some possible relief by reducing the balance owed on a homeowner's mortgage.

The government’s new program is specifically targeted at homeowners who are behind on their mortgages due to unemployment. Borrowers have to be collecting unemployment benefits and be less than 90 days late on their mortgages. The program does not provide forgiveness, as any missed payment will be tacked on to the loan balance to be paid later.  It is not clear whether homeowners whose unemployment benefits have terminated will also be helped.  While this is good news for a small slice of those borrowers in distress, it does not address the needs of the millions of people facing imminent foreclosure.

Another program, again one that is narrowly defined, is designed to help homeowners whose homes are slightly under water. If the old lender is willing to forgive debt that exceeds 115 percent of the home's value, the government-controlled FHA program would issue them a new fixed rate loan.  At that loan-to-value, borrowers are untouchable under loan standards now in place. The borrowers would need to qualify for the new loan payment, but it gives them a presumably lower payment and a risk-free loan.

The government also acknowledged that out of 1.1 million borrowers who had been offered temporary modifications, only 170,000 people successfully transitioned to a permanent modification.  This number is further evidence that the foreclosure prevention programs have not been well designed.

Bank of America is offering borrowers holding so-called Option ARMs the ability to get a new loan, one with a principal balance as much as 30 percent less than their current mortgage balance, if they are under water. Of the forgiven loan amount that would be set aside, 20 percent would be forgiven each year if the borrower continues to make payments. At the end of five years, the entire amount would end up having been forgiven.

This is another very modest program whose borrowers must have a specific type of loan, be behind in their payments, and have a loan balance greater than the value of the home. Not to mention that 45,000 is a small percentage of the well over 1 million of the bank's loans that are currently more than 60 days delinquent.

This program will not likely hurt the company's earnings as, according to the 2009 3rd Quarter 10Q filed with the Securities and Exchange Commission: "Certain acquired loans of Countrywide that were considered impaired were written down to fair value at the acquisition date."

It's worth noting that Bank of America had previously entered into an agreement in 2009 with the Attorneys General of most of the states that set aside more than $8 billion dollars to re-write the loans of these same types of borrowers, holders of Option ARMs. The bank has never reported statistics on the progress or performance of activities under these agreements.

The government and the industry keep waltzing around the edges of the problem. They are helping borrowers by the tens of thousands, while some analysts say that as many as 12 million borrowers are facing foreclosure over the next three years.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

Here’s a sobering statistic: 285,000 Facebook users in the United States are going to die this year. But that’s not because Facebook is deadly (at least not in most instances). Rather, it’s an indication of just how many of Facebook users there are -- over 100 million in the US alone.

What happens when a Facebook user dies? Well, if a relative mails in the proper documentation to Facebook, the page can be changed to “Memorial Status.” Other popular Web sites have different policies. When a PayPal, Gmail, Flicker, or online bank account user dies, their accounts usually end up in limbo, until a legally-recognized representative can convince the online companies (who often have little in the way of customer service) to reveal the password of the deceased person’s account. It can be a difficult, time-consuming ordeal for a relative to gain access to a deceased person’s accounts.

I started thinking about my own digital assets after I experienced a water-damage mishap with a bunch of important paper documents I’d been storing in a plastic bin (see my story here). I have a lot of online accounts that are important to my family -- banking, investment, credit cards, photos, mortgage, etc. -- but I am the only person who knows the account numbers and passwords. If something happens to me, my wife will have a real financial mess to deal with.

I ended up taking the time to write down the usernames and passwords for every online account I have and putting this piece of paper in a safe deposit box. I feel pretty good about this solution. A week or two after I did this, I learned about an online service called Entrustet that improves on my solution. The basic service is free and allows users to list all their blog, photo, e-mail, PayPal, Web domain, banking, and other accounts, and assign them to different heirs. An Entrustet user designates one executor who is responsible for mailing the user’s death certificate to Entrustet, after which the usernames and passwords will get forwarded to the rightful heirs.

Entrustet, which is still in the public beta phase, was started in November 2008 by two University of Wisconsin undergrads named Jesse Davis (age 23) and Nathan Lustig (24). Davis told me he got the idea for Entrustet while reading The World is Flat, by Thomas Friedman. In the book, Friedman writes about a US Marine named Justin Ellsworth who died in Iraq. His parents asked Yahoo! for access to their son’s e-mail account so they could keep his correspondence as a way to remember him, but Yahoo! said it was against policy to give out passwords of users -- even deceased ones -- to anyone other than the account holder.

Ellsworth’s parents hired a lawyer and eventually got a court order to force Yahoo! to turn over the password. Davis said he stopped reading the book at that point and has pretty much devoted his life to creating Entrustet with his friend and business partner, Nathan Lustig, ever since.

Since Davis and Lustig are neither programmers nor lawyers, they partnered with a software firm to develop the site and a law firm to make sure everything follows estate laws.

I asked the founders about security because I’m concerned about sharing my banking passwords with a third party. Davis and Lustig said they brought in an independent security company to ensure that the records would be safe. They claim that the level of encryption Entrustet uses is more secure than the kind used by online banks. A deceased user’s encryption key is released only after the user’s executor sends in the death certificate and Entrustet follows up by contacting the records office to verify the validity of the certificate.

I asked Davis and Lustig what would happen if Entrustet went out of business. They said that it costs very little to run the business, and that they have set aside cash for the express purpose of running the servers for two to three years so that users have time to migrate to another service.

Entrustet’s basic offering “Account Guardian” is free and covers everything described above. For an additional fee, Entrustet has premium features that will be available in the coming months, such as an “Account Incinerator” that will, on confirmation of the subscriber’s death, wipe out accounts the user wouldn’t want anyone to know about. Another premium service, “Digital Heirlooms,” is the “online equivalent of an old trunk” that you can fill with photos, videos, and other digital files to share with designated heirs.

Unless my situation changes, I'm not sure Entrustet is something I really need. My wife is the sole executor and heir of all my possessions (both physical and digital), and I don’t care if she finds out my passwords while I’m still alive, so I don’t really need everything Entrustet has to offer. But for anyone whose situation involves multiple heirs, or who wishes to keep their usernames and passwords a secret until after death, Entrustet could be a great solution.

Mark Frauenfelder – Editor-in-chief of MAKE magazine and the founder of the popular Boing Boing weblog, Mark was an editor at Wired from 1993-1998 and is the founding editor of Wired Online.

This is a common question that I get quite often so I thought I'd take a moment to share. When you open a new account there are several items that can impact your credit scores. They are...

The inquiry – The lender is going to pull at least one of your three credit reports in order to determine your creditworthiness. This means at least one of your credit reports is going to have a new credit inquiry, which can lower your score for up to 12 months.

The new account – The lender is likely going to report the newly opened account to all three of the credit reporting agencies. This new account can lead to a lower score because the account will be brand new and can lower the average age of your credit history.

New debt – If you choose to use the card, you will incur debt, which will be reported to the credit bureaus. The more debt, the more potential damage to your scores.

A new credit limit – The credit card you open will likely have a credit limit, which will be reported to the credit bureaus. This can help your scores, especially if it’s a high limit and you carry debt elsewhere.

Opening the account is really what causes the damage. Closing it doesn’t reverse that damage because it doesn’t remove the inquiry and it doesn’t remove the account from your credit reports. If you open an account it’s actually better to keep it open because as it ages, it will help your scores. It would be even smarter to use it periodically and pay it off each month so you don’t incur interest fees (but the lender makes a little revenue from the merchant fees, also called interchange).

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.

What's now a million-dollar question was only a 25-cent question yesterday, because everyone already knew the answer: How long does it take for your credit scores to recover from a short sale or a foreclosure? Years, right? These incidents remain on your credit reports for seven years and short sales are reported as either charge-offs or settlements. Those two events, as well as foreclosures, are all seriously negative and could significantly damage your credit scores for many years.

So why has this suddenly become a topic of debate, discussion, and conflicting answers? Because in March 23rd’s American Banker, Barrett Burns, the CEO of credit score provider VantageScore Solutions claimed, "...it can take borrowers as little as nine months to repair their credit score after a short sale or foreclosure."

Wow, that’s great news! Or is it? I found this difficult to believe, so I interviewed Craig Watts from FICO – credit score inventor, and VantageScore’s prime competition – to get the company’s input on how long it takes to repair your credit scores after such an event. Here’s the full transcript of my interview, unedited.

Ulzheimer: Is FICO willing to go on the record discussing the impact of a foreclosure and/or a short sale on a consumer’s credit score?

Watts: "FICO has consistently found that past payment history is the single most predictive category of information when we empirically develop credit scoring models using consumer credit histories. As an example, we recently looked at a sample of about 10 million credit reports representing a highly diverse U.S. population. We examined that group's most recent, twelve-month performance window. We found a default rate of 2.9% for the subset of all consumers with a clean credit record, and a default rate of 49% for the subset of all consumers who had had a recent foreclosure. In other words, consumers who recently experienced a foreclosure were about 17 times more likely to default on a credit obligation in the next 12 months than were people with a clean credit record. Obviously, recent credit defaults are vitally important when one is objectively assessing default risk."

Ulzheimer: How long does it take for a consumer’s score to recover after a short sale or foreclosure? And by recover, I mean fully recover.

Watts: "A consumer with a foreclosure or similar default on her credit report can expect her score to begin recovering after a couple of years if she consistently pays all her bills on time, keeps any credit card balances low, and takes on new credit only when needed. As the default event ages on her credit report its influence on her score will diminish, until the credit bureau removes the record from her file after seven years."

The bottom line is this: You can't fully repair your credit score in as little as nine months unless you can convince the credit bureaus to remove the items from your credit reports. And as long as the items are accurate they will remain for seven years. Your scores will begin to recover in time as the item gets older and older and loses predictive value, but unfortunately it won’t happen after only nine months.

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.