Economy

The push in September 2009 to extend unemployment benefits before approximately 400,000 workers from last year's layoffs lost theirs at the end of the month wasn't successful - and unfortunately, the extension has yet to be confirmed. This is due to a long-standing debate in Senate as to how just long the extension should last, as well as which states should receive the extension. In the meantime, unemployed workers have to find other ways to manage their expenses.

Last month, the House passed a bill to extend benefits by 13 weeks to those workers in high-unemployment states (states with unemployment rates higher than 8.5 percent). When the bill reached Senate, they were urged to pass it quickly to avoid a lag in benefits to workers in need. However, disagreements among Senate members has resulted in a stalled decision.

Sen. Max Baucus is pushing for a nationwide extension of benefits of four weeks in addition to the 13 extra weeks for high-unemployment states, while Sen. Jeanne Shaheen wants to extend benefits by 17 weeks to all 50 states. The proposals would be funded by extending the unemployment tax paid by employers, possibly through 2011.

Currently, the Senate Democrats have set no date to vote on the bill. Senate Republicans have declined to comment at all until they see the bill.

While the debate continues in Congress, nearly 400,000 unemployed workers have to figure out how to make ends meet until a decision is made. One can only hope that they've set aside emergency savings funds and have cut expenses in anticipation of something like this occurring.

Have you lost, or are in danger of losing your unemployment benefits? If so, do you have a financial backup plan?

In an effort to help homeowners modify their mortgage loans, some lenders are taking steps to lower the principal amount, according to a new report from the Office of the Comptroller of the Currency (OCC). The report shows that while many lenders are taking the route of temporarily suspending interest to allow homeowners to catch up on payments, others have become even more lenient, lowering the amount of the principal owed for struggling borrowers.

The number of lenders taking this route has increased dramatically. In fact, from the first quarter to the second, the number of loan modifications involving a shift in the principal jumped from 3.1 to 10.1 percent.

There are a few reasons that banks are considering this option:

• Mortgage-servicing firms receive financial incentives for making modifications.
• Banks have more flexibility to modify loans because their balance sheets are starting to stabilize - and they're starting to raise fresh capital.
• "Taking the hit" now with a portion of the loss upfront is worth the possibility of having the remaining adjusted balance - with interest - paid in full down the line.

Of course, it doesn't hurt that the Obama administration has be putting pressure on banks to since the Home Affordable Modification program was put in place in March. Also, many banks simply saw that modifications weren't doing the trick; a whopping 56 percent of borrowers whose loans were modified in 2008's second quarter were default again a year later.

But experts say to not expect a principal adjustment as the first course of action from your lender. First, the lender will likely adjust or temporarily suspend your interest rate. If that doesn't work, the lender may extend the term of the loan. And finally, you may have some of the principal deferred.

Have you had a loan modification? Was part of your principal deferred in the process?

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