Posted on Fri, Jul. 30, 2010
Later than expected, 4.5 percent fixed-rate mortgage arrives
By Alan J. Heavens
Inquirer Real Estate Writer
The 4.5 percent fixed-rate mortgage is here, although more than 14 months late.
That magic number, or a close approximation, was reached Thursday, when Freddie Mac reported a 30-year rate of 4.54 percent.
The possibility first arose in early 2009, when the government began mass-purchasing mortgages from Fannie Mae and Freddie Mac to prop up housing.
Just about everyone predicted the rates would hit what builders and real estate agents call a "sweet spot" in a few months, and the housing recovery would begin, especially if consumer confidence had recovered to prerecession levels as well.
"What gets people buying again?" asked mortgage broker Peter Buchsbaum of Arlington Capital Mortgage Corp., of Horsham. "The answer is confidence - confidence in the value not falling and confidence they'll still have a job."
So even if behind schedule, the 4.5 percent rate has arrived, but in an environment that buyers perceive as anything but inviting.
Consumer confidence fell again in July, and why?
Jobs and sagging real estate values.
"People will start buying houses again when they feel securely employed, house prices are rising, and they can make low down payments," Bankrate.com columnist Holden Lewis said.
"I don't see any of those conditions coming anytime soon, at least in most parts of the country," Lewis said. "Job security is the most important factor. Who feels secure in their job? Nobody, except the people who work in the unemployment office."
Suburban home builder Marshal Granor said that "when we went under 6 percent, I was amazed and excited, but 4.5 percent artificially increases affordability. If rates start to climb, it will severely dampen already spotty sales."
Moody's Economy.com chief economist Mark Zandi concurs.
"The key to more home buying is more jobs," he said. "Once job growth kicks in earnestly, household growth will ramp up and so will demand."
Zandi added that despite these "extraordinarily low rates," many prospective buyers have little savings for a down payment and tattered credit scores.
The securely employed, however, appear to be nibbling at the bait.
"There's a new group of buyers just entering the market because of the low rates," said Art Herling, regional vice president of Long & Foster Real Estate Inc., although the weather is keeping them "from totally getting into the buying mood."
Buchsbaum also reports "a greater influx of buyers than past summers."
Philadelphia Realtor Fred Glick compared the economy to a driver with his "feet on both the accelerator and the brake at the same time."
"Until the jobs are produced, the banks start lending, and the underwriting guidelines start to make sense, we'll be caught in this conundrum," Glick said.
What about home prices?
Although the Case-Shiller Home Price Index rose again in May, economists say they believe that prices nationally will drop 6 percent to 8 percent more through the end of the year.
May's increase, economists say, is attributable to the federal tax credit that expired April 30, and to seasonal buying patterns that typically boost prices.
The indexes are three-month moving averages, "so May's readings reflect transactions in 20 markets that closed in March, April, and May," IHS Global Insight Inc. economist Patrick Newport said.
With the credit gone, "we expect them to rise for two months, then start to decline," with recovery in 2011.
Although Philadelphia's prices rose 1 percent in the second quarter of 2010 from the same period in 2009, Fiserv Case-Shiller predicted that prices here would fall 2.8 percent in the next year.
That means a lot of buyers will remain on the sidelines until prices level off completely. The lowest fixed interest rates in 50 years will not be enough to draw them in.
"Many people are bottom-fishing," Herling said.
On the other hand, "People are starting to view houses as places to live and build equity over time, not financial assets where they can make a killing," said economist Joel L. Naroff of Holland, Bucks County. If that is the case, demand for housing would increase much more moderately.
"Add to that the lack of equity and the difficulty in qualifying for a mortgage, and the outlook for sales is not great," Naroff said.
Interest rates are rock-bottom because the economy is rock-bottom. As more investors shift their money out of a volatile stock market and to the safety of Treasurys, rates will drop further, at least in theory.
"I think you'll see them stay low until there is real improvement in employment," said Jerome Scarpello of Leo Mortgage in Spring House.
"No one can say for sure how low they will go, but what I can guarantee is that they will go higher," he said.
Assuming "the debt crisis abates and the economy doesn't double-dip, both of which seem more than likely," Zandi expects rates to close in on 5 percent by year's end and over 6 percent next year.
"I wouldn't bet my mortgage payment on rates remaining this low for a long time," Lewis said. "If I were refinancing, I would lock now instead of floating in hopes of rates falling further. I think there's a greater possibility of rates rising than falling."
"Then again, I said the same thing when rates were 5 percent," Lewis said. "So what the [heck] do I know?"
Read more: http://www.philly.com/philly/business/20100730_Later_than_expected__4_5_percent_fixed-rate_mortgage_arrives.html#ixzz0vBGVNAWt
Watch sports videos you won't find anywhere else
Contact the Mortgage Mark with any questions!
http://www.themortgagemark.com/
mwilkins@capitalfmc.com
Friday, July 30, 2010
Thursday, July 22, 2010
Today’s Mortgage Definition is: Appraisal Cutting
Today’s Mortgage Definition is: Appraisal Cutting
Main Entry: ap·prais·al cut·ting
Pronunciation: \ə-ˈprā-zəl ˈkə-tiŋ\
Appraisal Cutting – A Simple Definition:
When you buy a new home or refinance an existing home, you typically will be required to obtain an appraisal for the property. Getting an appraisal done involves hiring a licensed appraiser who produces an opinion of value in the form of an “official” appraisal. This number is known as the “appraised value” of the property.
Occasionally, when an underwriter reviews the appraisal provided by the licensed appraiser, they will engage in the sport of Appraisal Cutting by reducing the appraised value provided by the appraiser by a random, arbitrary number.
Appraisal Cutting – An Expanded Definition:
The sport of appraisal cutting has long been practiced by many underwriters and has left plenty of potential homeowners wondering what exactly happened. In my experience, it was a common practice for many transactions involving cash-out-refinances but I thought it had tapered off recently. Apparently, it still happens enough to catch the eye of Fannie Mae who recently announced that they are outlawing the practice of appraisal cutting by underwriters.
Effective Sept. 1, Fannie Mae is prohibiting lenders who sell loans to them from changing appraisers’ appraised value numbers. In guidance issued June 30, Fannie Mae said that if an underwriter has an issue with an appraised value, they must contact appraisers to “resolve” any disagreements about the valuation. If it is not possible to resolve an opinion-of-value dispute, then the only option available to the lender is to order a second appraisal – they are no longer allowed to just chop the value that the appraisal states.
Which makes sense (to me at least) if you think about it – an appraiser goes through the licensing process and is a practicing licensed professional who physcially inspects the property and then comes up with an opinion of value based on his expert opinon according to standard methodolgies.
If an underwriter happens to have a different opinion of what a property is worth, does it make any sense to allow them to engage in the sport of appraisal cutting?
According to Fannie Mae, not any more.
Contact me at mwilkins@capitalfmc.com or www.themortgagemark.com with any questions
Monday, July 19, 2010
How long does it take to close on a home mortgage?
Turn that around with another question, “how long does it take to get to work?” Yes it is that variable and those variations come from every aspect of the loan process so we must examine the major processes in closing a loan. By the end of this short article you should know how to help your loan close quickly and smoothly as possible. Just as the answer for one person getting to work on one particular day can be quite different for another person in another city mortgage closing times are subjective and cannot be stamped with a cookie cutter type guarantee.
With every loan the first step is the application. This step takes only a short time but if it is completed sloppily or with inaccurate answers to the questions there could be delays later in the process. To make the process go quicker and more smoothly you should have your most recent pay stub and your bank account information, including your account numbers and balances, readily available. There are four pages to the application and if you have those items ready you should easily be able to complete an accurate application in less than thirty minutes.
Next is the pre-approval process which can take as little as 15 minutes if you are getting only an automated approval. Essentially the loan officer will “pull your credit” and import it back into the application software then digitally submit the entire application and credit to an automated underwriting engine (essentially a network based computer application). If they receive what is called an “approve eligible” (eligible to be approved) you will then have an automated underwriting pre-approval decision. The application along with all supporting documentation must later be submitted to a human underwriter to verify the “findings” delivered by the automated underwriter. Other scenarios can occur but those are beyond the scope of this article.
If you are refinancing or have already made an offer which has been accepted on a home purchase (never a good idea unless you have already been pre-approved) then all you need to do is sign the application package along with federal and state disclosures and perhaps some lender specific forms along with reviewing the federally mandated Good Faith Estimate (no signature required but you must review it). After this is provided, initially, there is a 7 day waiting period before the loan can be consummated. If the GFE has to be redisclosed due to significant changes in particular prices there is an additional 3 day mandatory waiting period.
During the mandated waiting period after the borrower has signed the “Intent to Proceed” which is an acceptance of the terms proposed on the GFE the loan officer should order the appraisal, title, proof of insurance, proof of income/employment verification, and any other verifications. You, the borrower, should be prepared to provide all of the following for each borrower even if you are not asked for it. Additionally the underwriter may ask for something not on this list: the last 1 month’s worth of pay stubs, the last two months of all bank statements all pages, up to three years of tax returns all schedules all pages, the name address and phone number for all of your employers over the last 2 years, the name address and phone number for all of your landlords over the last 2 years, the last 2 years of W2s from all jobs, copies of government issued identification, letters of explanation if you have applied for any credit in the last 90 days or so, and any other documents the loan officer asks for.
Sound like a lot? Remember, you are asking a complete stranger to buy a home for you and trust you to repay them a very small portion of the sales price every month. Be glad you are getting a loan at all in this economy!
All said if everything falls into place a good lender, like the author’s company, could conceivably close your loan in as few 10 days. However that is highly unlikely due to many reasons not limited to waiting on the fully executed sales agreement to return, any title/appraisal issues to be resolved, and possibly even for you, the borrower, to find all of your paperwork. Therefore the more accurate truth is it takes anywhere from 21 to 30 days to close most standard loans for the average buyer or home owner by most direct lenders. Mortgage brokers and banks may take a little longer. If you expect to close or have been told you can close in a shorter time prepare to be disappointed and be handed a fresh copy of the disclaimers from the lender who guaranteed you a shorter closing.. If your expectations are reasonable and the lender does their job you’ll close quickly and smoothly.
To wrap it all up if you have all of your documentation ready including the fully executed sales contract it is much more possible to close your loan quickly. It is not, however, recommended to find yourself in a position where if you do not close in 10 days something not so pleasant will occur in your life.
Contact The Mortgage Mark with any questions. http://www.themortgagemark.com/ mwilkins@capitalfmc.com
With every loan the first step is the application. This step takes only a short time but if it is completed sloppily or with inaccurate answers to the questions there could be delays later in the process. To make the process go quicker and more smoothly you should have your most recent pay stub and your bank account information, including your account numbers and balances, readily available. There are four pages to the application and if you have those items ready you should easily be able to complete an accurate application in less than thirty minutes.
Next is the pre-approval process which can take as little as 15 minutes if you are getting only an automated approval. Essentially the loan officer will “pull your credit” and import it back into the application software then digitally submit the entire application and credit to an automated underwriting engine (essentially a network based computer application). If they receive what is called an “approve eligible” (eligible to be approved) you will then have an automated underwriting pre-approval decision. The application along with all supporting documentation must later be submitted to a human underwriter to verify the “findings” delivered by the automated underwriter. Other scenarios can occur but those are beyond the scope of this article.
If you are refinancing or have already made an offer which has been accepted on a home purchase (never a good idea unless you have already been pre-approved) then all you need to do is sign the application package along with federal and state disclosures and perhaps some lender specific forms along with reviewing the federally mandated Good Faith Estimate (no signature required but you must review it). After this is provided, initially, there is a 7 day waiting period before the loan can be consummated. If the GFE has to be redisclosed due to significant changes in particular prices there is an additional 3 day mandatory waiting period.
During the mandated waiting period after the borrower has signed the “Intent to Proceed” which is an acceptance of the terms proposed on the GFE the loan officer should order the appraisal, title, proof of insurance, proof of income/employment verification, and any other verifications. You, the borrower, should be prepared to provide all of the following for each borrower even if you are not asked for it. Additionally the underwriter may ask for something not on this list: the last 1 month’s worth of pay stubs, the last two months of all bank statements all pages, up to three years of tax returns all schedules all pages, the name address and phone number for all of your employers over the last 2 years, the name address and phone number for all of your landlords over the last 2 years, the last 2 years of W2s from all jobs, copies of government issued identification, letters of explanation if you have applied for any credit in the last 90 days or so, and any other documents the loan officer asks for.
Sound like a lot? Remember, you are asking a complete stranger to buy a home for you and trust you to repay them a very small portion of the sales price every month. Be glad you are getting a loan at all in this economy!
All said if everything falls into place a good lender, like the author’s company, could conceivably close your loan in as few 10 days. However that is highly unlikely due to many reasons not limited to waiting on the fully executed sales agreement to return, any title/appraisal issues to be resolved, and possibly even for you, the borrower, to find all of your paperwork. Therefore the more accurate truth is it takes anywhere from 21 to 30 days to close most standard loans for the average buyer or home owner by most direct lenders. Mortgage brokers and banks may take a little longer. If you expect to close or have been told you can close in a shorter time prepare to be disappointed and be handed a fresh copy of the disclaimers from the lender who guaranteed you a shorter closing.. If your expectations are reasonable and the lender does their job you’ll close quickly and smoothly.
To wrap it all up if you have all of your documentation ready including the fully executed sales contract it is much more possible to close your loan quickly. It is not, however, recommended to find yourself in a position where if you do not close in 10 days something not so pleasant will occur in your life.
Contact The Mortgage Mark with any questions. http://www.themortgagemark.com/ mwilkins@capitalfmc.com
Summary of FHA changes for 2010
What was just hearsay and what has actually happened?
A summary of FHA changes since the first of the year, 2010.
The main changes are…
1. 3.5% down payment. This happened last year, actually, from the 3% down mark of previous years. The amount is an extra $500 from a home buyer purchasing a $100,000 home. We didn’t even feel the change – if HUD gets excited about lending $500 less, then I say we let them have this one. The upside is that the payment gets better by $3 to $5 per month.
2. 2.25% Up-Front Mortgage Insurance premium. This used to be 1.75%. On a $100,000 mortgage it means an extra $500 in the loan amount and around $3 to $5 per month more in the payment for a 30 year or 15 year fixed loan respectively. Yes, the increase here exactly offsets the savings in #1 above.
3. The monthly mortgage insurance premium will also increase in certain situations. Right now the monthly amount is .55% per year in most cases, and on a 15-year fixed loan with 10% down, the monthly is not required. FHA intends to add tiers to their Mortgage Insurance Pricing. For lower credit scores, you pay higher MI. For less down, your rate will be higher. For a combination of the two, the rate is higher still. The good news here is that FHA becomes more palatable for more people. If you have good qualifications, then you’ll shoulder less of the cost of the riskier loans. This will be a good move. It has not taken effect yet.
4. Credit score minimums have risen again. FHA estimated that 580 would be the lowest score they would allow. Most lenders, however, have already set the number at 620 or even 640 for some. FHA can sometimes allow for more risk than some lenders are willing to take on. This is one of those areas. See my article on Zillow about increasing your scores with the help of a credit action report.
The following link outlines the main changes that have been proposed by the FHA. We believe that by the end of the year ALL of them will have taken effect.
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-016
Contact The Mortgage Mark with any questions.
http://www.capitalfmc.com/
mwilkins@capitalfmc.com
A summary of FHA changes since the first of the year, 2010.
The main changes are…
1. 3.5% down payment. This happened last year, actually, from the 3% down mark of previous years. The amount is an extra $500 from a home buyer purchasing a $100,000 home. We didn’t even feel the change – if HUD gets excited about lending $500 less, then I say we let them have this one. The upside is that the payment gets better by $3 to $5 per month.
2. 2.25% Up-Front Mortgage Insurance premium. This used to be 1.75%. On a $100,000 mortgage it means an extra $500 in the loan amount and around $3 to $5 per month more in the payment for a 30 year or 15 year fixed loan respectively. Yes, the increase here exactly offsets the savings in #1 above.
3. The monthly mortgage insurance premium will also increase in certain situations. Right now the monthly amount is .55% per year in most cases, and on a 15-year fixed loan with 10% down, the monthly is not required. FHA intends to add tiers to their Mortgage Insurance Pricing. For lower credit scores, you pay higher MI. For less down, your rate will be higher. For a combination of the two, the rate is higher still. The good news here is that FHA becomes more palatable for more people. If you have good qualifications, then you’ll shoulder less of the cost of the riskier loans. This will be a good move. It has not taken effect yet.
4. Credit score minimums have risen again. FHA estimated that 580 would be the lowest score they would allow. Most lenders, however, have already set the number at 620 or even 640 for some. FHA can sometimes allow for more risk than some lenders are willing to take on. This is one of those areas. See my article on Zillow about increasing your scores with the help of a credit action report.
The following link outlines the main changes that have been proposed by the FHA. We believe that by the end of the year ALL of them will have taken effect.
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-016
Contact The Mortgage Mark with any questions.
http://www.capitalfmc.com/
mwilkins@capitalfmc.com
Tuesday, July 13, 2010
Fannie Mae will ban lenders from cutting appraised values
Did you know that lenders across the country have been appraised values when they decide that an appraiser has over-valued a property? It's true, and it has been going on for a couple years now. But, thankfully, Fannie Mae is stepping in to ban this practice, at least on loans that are pre-sold to Fannie Mae.
To understand the problem we need to back up a little to what has transpired with appraisals over the last few years. When the housing crisis began, part of the bank "almost failure was that lenders were being forced to issue was due to forced buy backs of home loans that had been sold to Fannie and Freddie if it was found the appraised values were over-inflated.
The answer to this issue was passage of HVCC (Home Valuation Code of Conduct) which mandated that all appraisals for loans to be sold to Fannie and Freddie, had to be performed by AMCs (Appraisal Management Companies). Seeing yet another opportunity to make more fees, many lenders, including the biggest banks, opened their own AMCs and kept up to half the appraisal fees that were being charged.
Most independent appraisers refused to work for these companies because they were being paid half what they were used to making for the same amount of work, so the AMCs were forced to hire inexperienced appraisers, and often sent out these inexperienced appraisers to areas they were unfamiliar with. To make matters worse, these appraisers didn't even have access to local real estate information. The result was these new appraised values became a "crap shoot.," Real estate agents, sellers, buyers, builders, and anyone else involved in the process never knew where a value was likely to come in. We saw wildly low values, because foreclosures and short sales were being used as comparable sales, and sometimes we saw crazy high values as well because the appraisers did not know the areas.
Historically, lenders have always required the down payment amount to be based on either the sales price or the appraised value, whichever was lower. So, when appraisals started coming in very low, lenders increased the required down payment to keep the loan to value ratio the same, based on the appraised value. The result was sales were falling apart across the country. There are too may stories of builders losing sales on new homes because the appraisal came in below the actual cost to build, nevermind a profit for the builder.
Buyers often will not, or cannot pay the additional down payment - sellers usually will not, or cannot come down on price, so sales have been falling through in astonishing numbers since this fiasco began.
Enter the lenders - becoming ever more cautious - some lenders have taken this to another extreme and have actually been reducing the valuations their own appraisers brought in, for fear of potentially having to buy back a loan they thought they had sold to either Fannie or Freddie. They base their lower valuations on a computer value (such as Zillow - we all know how inaccurate Zillow is). The computer values do not reflect the condition of a house - they don't increase values for remodels, are often lacking information even on room additions - so, like Zillow, they can be grossly inaccurate. There is never an on-site inspection with computer models, as there is with a real appraisal. Nevertheless, lenders are using these valuations as justification to reduce appraised values, and sales continue to fall apart.
Fortunately, Fannie has announced that effective September 1, lenders will no longer be permitted to reduce appraised valuations. Instead, they will be required to contact the appraiser to resolve discrepancies between their value and the computer model. If the disagreement cannot be resolved on that level a second appraisal must be ordered by the lender. It has not yet been disclosed who will be responsible for the cost of the second appraisal, should one be required by the lender.
In addition, Fannie is looking at some other issues that have arisen due to HVCC (which was recently adopted by FHA as well.) Among issues being researched is the increasing number of inexperienced and non-local appraisers employed by AMCs. The dilemma here, of course, is that if AMCs are required to utilize only more experienced appraisers, either they will have to accept a lesser share of the fees, or appraisal costs will very likely rise.
Experienced appraisers are applauding this new action as there has been an uproar among the appraisers, builders, real estate agents, and independent mortgage brokers since HVCC went into effect.
Fingers crossed that fewer home sales will fall apart due to appraised values soon. This has been a nightmare for buyers and sellers alike
Contact mwilkins@capitalfmc.com with any questions http://www.themortgagemark.com/
To understand the problem we need to back up a little to what has transpired with appraisals over the last few years. When the housing crisis began, part of the bank "almost failure was that lenders were being forced to issue was due to forced buy backs of home loans that had been sold to Fannie and Freddie if it was found the appraised values were over-inflated.
The answer to this issue was passage of HVCC (Home Valuation Code of Conduct) which mandated that all appraisals for loans to be sold to Fannie and Freddie, had to be performed by AMCs (Appraisal Management Companies). Seeing yet another opportunity to make more fees, many lenders, including the biggest banks, opened their own AMCs and kept up to half the appraisal fees that were being charged.
Most independent appraisers refused to work for these companies because they were being paid half what they were used to making for the same amount of work, so the AMCs were forced to hire inexperienced appraisers, and often sent out these inexperienced appraisers to areas they were unfamiliar with. To make matters worse, these appraisers didn't even have access to local real estate information. The result was these new appraised values became a "crap shoot.," Real estate agents, sellers, buyers, builders, and anyone else involved in the process never knew where a value was likely to come in. We saw wildly low values, because foreclosures and short sales were being used as comparable sales, and sometimes we saw crazy high values as well because the appraisers did not know the areas.
Historically, lenders have always required the down payment amount to be based on either the sales price or the appraised value, whichever was lower. So, when appraisals started coming in very low, lenders increased the required down payment to keep the loan to value ratio the same, based on the appraised value. The result was sales were falling apart across the country. There are too may stories of builders losing sales on new homes because the appraisal came in below the actual cost to build, nevermind a profit for the builder.
Buyers often will not, or cannot pay the additional down payment - sellers usually will not, or cannot come down on price, so sales have been falling through in astonishing numbers since this fiasco began.
Enter the lenders - becoming ever more cautious - some lenders have taken this to another extreme and have actually been reducing the valuations their own appraisers brought in, for fear of potentially having to buy back a loan they thought they had sold to either Fannie or Freddie. They base their lower valuations on a computer value (such as Zillow - we all know how inaccurate Zillow is). The computer values do not reflect the condition of a house - they don't increase values for remodels, are often lacking information even on room additions - so, like Zillow, they can be grossly inaccurate. There is never an on-site inspection with computer models, as there is with a real appraisal. Nevertheless, lenders are using these valuations as justification to reduce appraised values, and sales continue to fall apart.
Fortunately, Fannie has announced that effective September 1, lenders will no longer be permitted to reduce appraised valuations. Instead, they will be required to contact the appraiser to resolve discrepancies between their value and the computer model. If the disagreement cannot be resolved on that level a second appraisal must be ordered by the lender. It has not yet been disclosed who will be responsible for the cost of the second appraisal, should one be required by the lender.
In addition, Fannie is looking at some other issues that have arisen due to HVCC (which was recently adopted by FHA as well.) Among issues being researched is the increasing number of inexperienced and non-local appraisers employed by AMCs. The dilemma here, of course, is that if AMCs are required to utilize only more experienced appraisers, either they will have to accept a lesser share of the fees, or appraisal costs will very likely rise.
Experienced appraisers are applauding this new action as there has been an uproar among the appraisers, builders, real estate agents, and independent mortgage brokers since HVCC went into effect.
Fingers crossed that fewer home sales will fall apart due to appraised values soon. This has been a nightmare for buyers and sellers alike
Contact mwilkins@capitalfmc.com with any questions http://www.themortgagemark.com/
Monday, July 12, 2010
N.C. Law to Slow Military Foreclosures Could Wind Up Hurting Military Borrowers
Foreclosing on active-duty military members might become more difficult for lenders in North Carolina if a bill that passed the state Senate this week eventually becomes law.
At quick glance, that would seem to be cause for celebration. But this appears to be a case where the cure could be worse than the disease.
The proposed legislation would basically slow down the foreclosure process against active-duty service members and require lenders to seek relief from a judge, who would have the discretion to disregard a foreclosure sale depending on the individual circumstances.
The problem is that lenders might have to begin evaluating — and charging — military borrowers differently knowing that it’s significantly more difficult to foreclose. Lenders worried about losing money are likely to take steps to insulate themselves, such as requiring bigger down payments or higher credit scores.
And that has the potential to make it increasingly difficult for some military families to secure home loans.
The proposed legislation could impact borrowers seeking all manner of financing, but VA loans could be particularly hard-hit. VA loans require no down payment and typically have more flexible underwriting standards. The average credit score for a VA borrower last year was slightly more than 700, about 50 points below the average score for all borrowers.
North Carolina has a huge population of military homebuyers, including nearly 21,000 who received a VA guarantee in 2009.
Finding ways to keep military families in their homes is an important task. But this may not be the best path. In fact, it might keep deserving military members and their families from becoming homeowners.
Contact me if you have any questions http://www.themortgagemark.com/ mwilkins@capitalfmc.com
At quick glance, that would seem to be cause for celebration. But this appears to be a case where the cure could be worse than the disease.
The proposed legislation would basically slow down the foreclosure process against active-duty service members and require lenders to seek relief from a judge, who would have the discretion to disregard a foreclosure sale depending on the individual circumstances.
The problem is that lenders might have to begin evaluating — and charging — military borrowers differently knowing that it’s significantly more difficult to foreclose. Lenders worried about losing money are likely to take steps to insulate themselves, such as requiring bigger down payments or higher credit scores.
And that has the potential to make it increasingly difficult for some military families to secure home loans.
The proposed legislation could impact borrowers seeking all manner of financing, but VA loans could be particularly hard-hit. VA loans require no down payment and typically have more flexible underwriting standards. The average credit score for a VA borrower last year was slightly more than 700, about 50 points below the average score for all borrowers.
North Carolina has a huge population of military homebuyers, including nearly 21,000 who received a VA guarantee in 2009.
Finding ways to keep military families in their homes is an important task. But this may not be the best path. In fact, it might keep deserving military members and their families from becoming homeowners.
Contact me if you have any questions http://www.themortgagemark.com/ mwilkins@capitalfmc.com
Friday, July 9, 2010
Credit Action Transforms Credit Scores with Precision
Most home buyers today are not aware of a report that is available to them through their lender that will allow them to see a significant increase in their credit score based on precise action taken on their part.
Credit action reports are available at minimal cost through all three of the main credit repositories; TransUnion, Equifax and Experion.
In the past, it was a loan officer’s “best guess” as to which credit action would produce a credit score increase and then if it did, the amount of the increase was uncertain. The following proposed actions are among the more normal ones:
1. Pay down the balance on a credit card or revolving account to an amount lower than 25% of the limit.
2. Pay off a small medical collection for $88 and have the paid off account reported as paid.
3. Remove a disputed late payment from the past 12 months of history on a current automobile loan.
Any of the above three credit actions will almost definitely produce some sort of positive credit score benefit. But will the benefit to taking this action be enough? Let me give you an example.
Many lenders who offer FHA loans are requiring a 640 minimum credit score as the borrower’s middle score (of the three repositories mentioned above). In fact, FHA now requires a minimum score of 620 and by now, all FHA lenders are requiring this as well.
A hopeful borrower who has had some credit difficulty in the past and finds his middle score at 545 right now would normally be given a few “hints” from a lender and told to call back when he has taken care of them. He calls around for a second opinion and finds that some of the advice he gets is conflicting. One lender suggests opening a new credit card (which is never a great idea for various reasons) while others suggest paying off a car loan. The disoriented borrower stumbles forward and tries again in a few months only to find that his scores have not risen all that much. This depressing scenario plays over and over leaving the person in essentially the same place for months.
Today we can do much better. With the credit action report tool, we can tell this borrower exactly which credit actions to take, in which particular order and estimate the actual numeric credit score benefit that will likely be seen with each one.
This gives the borrower confidence that taking these actions will produce a helpful result and thus increases the chance for follow through.
Other applications include getting better rates on conventional loans for both refinancing and purchasing; as well as increasing your standing with insurance companies that use credit scores as part of their matrix for evaluating risk and premium levels.
Put it on your list to talk to your local lender and request a “credit action report”. Make the improvements now before you need them – it could save you both time and money.
Contact me at http://www.themortgagemark.com/ or mwilkins@capitalfmc.com
Credit action reports are available at minimal cost through all three of the main credit repositories; TransUnion, Equifax and Experion.
In the past, it was a loan officer’s “best guess” as to which credit action would produce a credit score increase and then if it did, the amount of the increase was uncertain. The following proposed actions are among the more normal ones:
1. Pay down the balance on a credit card or revolving account to an amount lower than 25% of the limit.
2. Pay off a small medical collection for $88 and have the paid off account reported as paid.
3. Remove a disputed late payment from the past 12 months of history on a current automobile loan.
Any of the above three credit actions will almost definitely produce some sort of positive credit score benefit. But will the benefit to taking this action be enough? Let me give you an example.
Many lenders who offer FHA loans are requiring a 640 minimum credit score as the borrower’s middle score (of the three repositories mentioned above). In fact, FHA now requires a minimum score of 620 and by now, all FHA lenders are requiring this as well.
A hopeful borrower who has had some credit difficulty in the past and finds his middle score at 545 right now would normally be given a few “hints” from a lender and told to call back when he has taken care of them. He calls around for a second opinion and finds that some of the advice he gets is conflicting. One lender suggests opening a new credit card (which is never a great idea for various reasons) while others suggest paying off a car loan. The disoriented borrower stumbles forward and tries again in a few months only to find that his scores have not risen all that much. This depressing scenario plays over and over leaving the person in essentially the same place for months.
Today we can do much better. With the credit action report tool, we can tell this borrower exactly which credit actions to take, in which particular order and estimate the actual numeric credit score benefit that will likely be seen with each one.
This gives the borrower confidence that taking these actions will produce a helpful result and thus increases the chance for follow through.
Other applications include getting better rates on conventional loans for both refinancing and purchasing; as well as increasing your standing with insurance companies that use credit scores as part of their matrix for evaluating risk and premium levels.
Put it on your list to talk to your local lender and request a “credit action report”. Make the improvements now before you need them – it could save you both time and money.
Contact me at http://www.themortgagemark.com/ or mwilkins@capitalfmc.com
Wednesday, July 7, 2010
How mortgage changes have impacted home buyers
Independence Day is a time we all (should) be reflecting on the formation of this great nation and the challenges our founders faced in those times. Meanwhile we sit today in a stalled housing market with home construction at a very low, home sales volume very low, interest rates at or near an all time low, and guidelines for qualifying for a home mortgage as stringent as at any time since the 1980s. Leaving out everything but the major changes in lending practices, with or without government interference, let’s revisit for just a moment the changes since July 4, 2007.
Anyone who has paid attention to home mortgage qualifications over the last several months knows the ability to borrow money has returned to, and in many cases, passed a level of reasonableness to both allow for home purchases and mortgage refinancing. In the summer of 2007 the non-conforming mortgage industry had already begun to change and, at the time at least, we really believed the changes to be for the good of the economy and the good of home buyers and home sellers.
Non-conforming loans, also called sub-prime loans because they were made to people who did not meet conforming loan qualifications, allowed people who did not have the ability to prove their income to “state” there income. These stated income loans were originally intended for home buyers who were self-employed and who may have used part of their home for their business and their activities resulted in erratic pay cycles but still with enough Adjusted Gross Income with add-backs of certain deductions to qualify for a home loan. Over time almost anyone, including an order taker at a fast food restaurant, was allowed to state their income. Fortunately that was corrected but unfortunately it was so over-corrected the self-employed with good but obfuscated income are also no longer allowed to use the technique.
Another way lending has changed I can’t find anything bad to say about and that is the disallowance of stated asset loans. Never did I support someone saying they had money or income they did not have. However the market made these loans available and literally millions of loans were approved with people stating both their income and their assets. Although they were dubbed “liar loans” I did not support that phrase until stated asset home loans entered the picture.
Building on the stated income, stated asset home loans theme along came a mortgage loan called the “no doc” meaning there was no stating of anything - the borrower simply did not show or state income or assets. This loan was issued based on credit score and payment history. It probably would have been okay had it been limited to people with credit scores in the high 700s and credit accounts at least 10 years old with no late payments or other derogatory credit information in the last 5 years but it was not.
To sum it up there are people who deserve a home today who cannot qualify because of their self-employment but there are also millions of homes not being sold to people who have not established a historicity of deserving a home loan. In the end the changes are good, at least better than what we had that helped lead to the financial collapse. And while this is true there would have been a much better way out of this mess than we had and yes, we do know what that answer was.
Contact me at http://www.themortgagemark.com/ mwilkins@capitalfmc.com
Anyone who has paid attention to home mortgage qualifications over the last several months knows the ability to borrow money has returned to, and in many cases, passed a level of reasonableness to both allow for home purchases and mortgage refinancing. In the summer of 2007 the non-conforming mortgage industry had already begun to change and, at the time at least, we really believed the changes to be for the good of the economy and the good of home buyers and home sellers.
Non-conforming loans, also called sub-prime loans because they were made to people who did not meet conforming loan qualifications, allowed people who did not have the ability to prove their income to “state” there income. These stated income loans were originally intended for home buyers who were self-employed and who may have used part of their home for their business and their activities resulted in erratic pay cycles but still with enough Adjusted Gross Income with add-backs of certain deductions to qualify for a home loan. Over time almost anyone, including an order taker at a fast food restaurant, was allowed to state their income. Fortunately that was corrected but unfortunately it was so over-corrected the self-employed with good but obfuscated income are also no longer allowed to use the technique.
Another way lending has changed I can’t find anything bad to say about and that is the disallowance of stated asset loans. Never did I support someone saying they had money or income they did not have. However the market made these loans available and literally millions of loans were approved with people stating both their income and their assets. Although they were dubbed “liar loans” I did not support that phrase until stated asset home loans entered the picture.
Building on the stated income, stated asset home loans theme along came a mortgage loan called the “no doc” meaning there was no stating of anything - the borrower simply did not show or state income or assets. This loan was issued based on credit score and payment history. It probably would have been okay had it been limited to people with credit scores in the high 700s and credit accounts at least 10 years old with no late payments or other derogatory credit information in the last 5 years but it was not.
To sum it up there are people who deserve a home today who cannot qualify because of their self-employment but there are also millions of homes not being sold to people who have not established a historicity of deserving a home loan. In the end the changes are good, at least better than what we had that helped lead to the financial collapse. And while this is true there would have been a much better way out of this mess than we had and yes, we do know what that answer was.
Contact me at http://www.themortgagemark.com/ mwilkins@capitalfmc.com
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