Mortgage News

President Obama announced a plan to ease eligibility rules for home owners who want to refinance to take advantage of ultra-low rates and lower their home loan payments. The administration hopes that by broadening its requirements for the Home Affordable Program that about 1 million home owners will now be able to qualify. Here are more details about the newly announced changes to the program:

• What is HARP? It’s a program started in 2009 that allows home owners to refinance their home loans at lower rates without having to meet the typical requirement of having at least 20 percent of equity in their home to do so. Under current guidelines, many underwater borrowers have been ineligible for the program because their home values had to be no more than 25 percent below what they owed their lender.
• What’s changing? Many of the extra fees to participate in the program have been waived, and home owners’ eligibility won’t be contingent on how far their home’s value has fallen. 
• Who’s eligible? Home owners with loans backed by Fannie Mae or Freddie Mac can participate. Home owners must also be current on their present home loan. 
• When will it take effect? The changes could take effect by Dec. 1. HARP also is being extended through 2013 to allow more home owners the opportunity to qualify.
• How successful will this be? The administration hopes that by home owners being able to lower their monthly payments they’ll be more likely to stay current on their home loan and avoid foreclosure. Also, the administration hopes that it will then free up household money to start spending more on other things, which could provide an overall boost to the economy. However, the administration says it realizes that aiding the housing market requires much more than a refinancing plan. 

Sources: Fannie Mae, Associated Press and Reuters.  Want to know if your loan is eligible to be refinanced under this plan? We can help you by finding out if your home is backed by Fannie Mae or Freddie Mac and analyzing other aspects of your eligibility. Just contact us.

With low home prices and ultra-low rates, the housing market is offering “perhaps the best deals of a generation,” notes a recent article by Bloomberg Businessweek. Since the housing boom of 2006, home prices have fallen about 31 percent. Also, rates have been hovering at record lows for the past few weeks. “It’s hard to see the possibility of losing on a home purchase right now, with these rates,” says economist Dean Baker. “Prices may go lower, but not by much.” The article notes the following scenario: Buying a $300,000 home with a 4 percent rate and a 20 percent down payment would mean a $1,145 monthly payment. The Mortgage Bankers Association recently predicted that home prices may fall another 3.5 percent by mid-2012 but rates will increase by a half-point. So for that same loan under that scenario, a home would sell for $289,000 while the monthly payment would be $1,171–only a $26 difference. For those who can qualify for a home loan , "playing the waiting game" won’t result in much gain, Nariman Behravesh, chief economist at IHS in Englewood, Colo., told Bloomberg Businessweek. Source: Bloomberg Businessweek

http://socl.tk/2p

Economic Update

The Numbers Game

When the government releases numbers, there is a mad scramble by economists to analyze what just happened. And what you see in the headlines is not only what is important. For example, on Friday the government reported that the unemployment rate dropped slightly. Even though it was a slight drop, any movement lower is good news. But wait, analysts were predicting an increase of almost 100,000 jobs last month and the increase was only 80,000. So that is bad news. We need at least 150,000 jobs added each month just to keep up with population growth. On the other hand, the previous two month’s job numbers were revised up by over 100,000 jobs. So that more than made up for the deficit. This is good news. Is anyone besides us confused as of yet?

The bottom line is, the report was not extraordinary in any way. That means that the economic recovery is continuing. It also means that the recovery is tepid at best. Despite the overall negative feeling, one has to remember that almost half of economists were predicting that we were slipping into a double dip recession just a few months ago. Now we realize that the double dip is less of a risk and we are moving forward. The economy’s growth rate of 2.5% and an average of around 125,000 jobs added each month are indicative of an economy getting stronger but nowhere strong enough to make up for jobs we have lost. We need at least 100,000 more jobs added every month to wake up the housing sector. So it is not what happened last month that is important. It is where we go from here. If Europe could actually finish their debt plan and move that focus from the front pages for a few months, that would help. Also Congress coming up with a debt plan will help. Remember the budget? Well, the time is getting short for a solution to this issue as the deadline for an agreement is again coming up later this month. Wouldn’t it be nice if the headlines were not marred with our representatives bickering during the month of November?

http://socl.tk/2p

How to Avoid Credit Repir Scams

It’s not always easy to separate good advice from bad. Here are some tips to help you when it comes to hiring a professional to help you with your credit challenges:

rn

Get Educated

rn

Knowing how to separate good advice from bad is not easy, but it can be done if you do your research. I have several Fact Sheets that you can read to educate yourself on how the credit system works. All you need to do is ask.

rn

Ask For a Referral

rn

Asking for a referral from a source that you can trust is a great step toward separating bad advice from good. In many cases you will find that your realtor, your mortgage professional, your accountant, or your attorney can recommend a trust-worthy credit improvement expert. I have a great resource for you.

rn

Don’t Buy Into a Sales Pitch

rn

How to Avoid Credit Repair Scams

rn

Firms that advertise on television or in the newspaper are generally staffed with salespeople, not specialists who can help you.

rn

Expect to Pay

rn

Don’t expect to receive good advice for free. Everyone has to make a living. If you call on a professional credit expert for advice or help, expect to pay as you would an attorney or accountant.

rn

Ask Questions

rn

Make sure the credit specialist you are talking to or taking advice from can tell you how credit scores are calculated. Without this knowledge, it would be impossible to create a strategy to successfully improve credit scores.

rn

Be Realistic

rn

Improving credit scores takes time. Watch out for companies or individuals promising miracles will occur in a few days or weeks. Remember, it took time for your scores to get where they are, and it will take at least 3-6 months, depending on your challenges, to improve your situation. It can take up to a year or more if you have multiple collections, tax lien, bankruptcy or identity theft issues.

rn

Participate

rn

Make sure that you are working with a company that requires your participation. It will not only ensure a higher level of success, it will also ensure a greater knowledge base.

http://socl.tk/2p

What makes my credit score go down?

here are many things that affect your credit score negatively. Not having enough credit, having too much credit, not paying your bills on time, maxing out your credit card accounts, applying for credit and being denied. It is important that you spend some time educating yourself on how the credit scoring system works. We can help you.

rn

For a detailed list of the items that lower credit scores, please ask for our Fact Sheet: 15 Reasons Why Your Credit Score Is Low.

http://socl.tk/2p

How long can negative items remain on my credit reports?

The Fair Credit Reporting Act (FCRA) requires that most negative credit items be deleted from your credit bureau file in no more than seven years, except for bankruptcy, some tax liens and judgments (public records) which can be reported for up to ten years. The creditor or the credit bureau can choose to have the negative credit information deleted whenever they please. Inquiries may remain on the credit report for up to two years. Don’t let this discourage you. You can start rebuilding your credit at anytime, and if you stay current on your payments and balances, your score can get better even after a bankruptcy.

rn

For more information, ask for our Fact Sheet: Credit Reporting & The Seven-Year Rule.

http://socl.tk/2p

How to Maintain Strong Creidit

It is easier to avoid credit problems than it is to come back from a credit mistake.

rn

Why It Matters

rn

Strong credit means lower interest rates, lower down payments, and more money for retirement!

rn

What You Need to Know

rn

There are five factors that make up your FICO score. Here are some tips on how to improve your score in each factor, resulting in a better score overall.

rn

Payment History Tips:

rn

rn
• Make timely payments. One 30-day late payment can drop your score by up to 100 points instantly.
rn
• If your credit becomes unmanageable, contact your creditors to negotiate other arrangements or seek credit counseling immediately. Once you get it under control, your score will improve over time
rn

rn

Amounts Owed Tips

rn

rn
• In order to be rated in this factor which is 30% of your score, you must have open credit card.
rn
• Keep your credit card balances below 30% of their limit on statement date.
rn
• Don’t close unused credit card accounts. It’s better to let them become inactive.
rn

rn

Length of Credit History Tips

rn

rn
• Make sure all of your open accounts are reporting to all three credit bureaus.
rn
• Don’t open a lot of new accounts at once. That strategy will lower your average account age.
rn

rn

Types of Credit Used Tips

rn

rn
• Stay away from department store cards. They are considered third-party credit and when trying to rebuild or establish credit, you should apply for major credit cards ONLY.
rn
• A good mix of credit would be 2-3 credit cards and an installment (i.e. an auto or mortgage loan).
rn

rn

New Credit Tips

rn

rn
• Shop for the best rate in a focused period of time. If several mortgage or auto inquiries occur in a short amount of time, they are counted as a single hard inquiry.
rn
• If you see any unauthorized inquires reporting on your credit reports, dispute those items immediately.
rn

http://socl.tk/2p

FICO 08 – The Algorithm Has Changed

FICO 08 – The Algorithm Has Changed

Beginning last year, Fair Isaac & Co. implemented changes in how your FICO score is computed, calling the new system FICO 08. The model replaces the existing FICO model, which has remained relatively unchanged since the 1980s.
Per Fair Isaac, here are the key changes in the new model:

• Do Authorized User Accounts Still Work? One of the credit-repair tricks that became popular in recent years was paying thousands of dollars to be listed as an “authorized user” on the account of someone with good credit (usually a stranger), thereby improving your FICO scores enough to get into that home or auto loan immediately. That stops with FICO 08, and rightfully so – because this practice was an obvious form of fraud.
  Here’s the good news-the new model will still allow legitimate authorized users such as a spouse and/or family member.  And I can tell you confidently that this credit building technique still works for spouses and children who have the same last name as the credit card owner.  There have been two cases in the last 60 days where I have seen my clients’ credit scores jump 50-60 points after being added to their spouse’s credit card account.
  It’s always a good idea to build your own credit, when possible, because that gives you power and control, but as a last resort this option will help. To maximize the benefit of this option, you should make sure that the account you are being added to belongs to someone you trust, has NO negative history reporting at all, has and keeps a balance under 30% of the limit and is at least 2-3 years old. 
• Having just one big black mark on your credit, like a repossession, will matter less than it used to if your report demonstrates responsibility overall.
• Collection accounts with balances less than $100 will not impact the credit score any longer.
• Maxing out those credit cards will drag your score down even more than it used to! FICO 08 increases the emphasis on having available credit.
• Having a mix of credit is also more important in FICO 08. This means you MUST have at least 1-2 active major credit card accounts.

FICO said that the new model would have less impact on credit scores under certain circumstances, however, in my experience, the new model appears to be producing lower scores under almost every circumstance.  Especially when it comes to credit card balances and late pays.   So if you are one of those people who are out there wondering why your credit scores have dropped in the past few months-even though nothing has changed, this could be why.
http://sntk.in/bw