Evidence is growing that more borrowers will be approved for a mortgage without increasing risk to lenders through more sophisticated credit risk scoring that uses alternative data, such as unsecured credit and property history in consumer credit report analysis, according to a new report by the CEB TowerGroup.
“Traditional credit data and analytics continue to be relevant, but are not sufficient to satisfy the consumer credit reformation of today,” says the CEB TowerGroup’s senior research director, Craig Focardi. (More …)
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by Dean Hartman on March 8, 2012
There have been a few developing (and some already existing) programs that are worth mentioning, as the newspaper headlines applaud the opportunity. With interest rates remaining at near historic lows for quite some time, many people have been unable to take advantage of these rates because of problems in securing a high enough appraised value.
To that end, here are a few thoughts to consider:
New FHA Streamline Announcement
HUD announced that they will be rolling back the insurance premiums on this program for loans closed prior to June 2009. The Upfront Premium (the one that is added into the loan amount) will be .01% and the annual premium (the one that is paid in the monthly payment) will be slashed to .55%. These cuts could reduce borrowers’ expenses drastically. This program can be done where the lender pays the closing costs – without an appraisal, income verification, or even a credit check. Most lenders will look for a good mortgage payment history.
The VA IRRL – (Interest Rate Reduction Loan)
For people with existing VA mortgages, this program allows reasonable closing costs to be added into the loan. There is no new appraisal required, nor is there an income calculation. Basically, as long as the veteran is getting a payment at least $50 lower, it is good to go. In some cases, veterans may choose to reduce the term of their loan (instead of a monthly savings). This can be done with some documents delivered to the lender.
This is a program for loans currently owned by Fannie Mae and Freddie Mac wherein the house is underwater. Under this program, lenders may be able to reduce your interest rate despite your loan-to-value. Each mortgage investor is developing their own underwriting and risk criteria, but the good news is that people with good payment histories can take advantage of the great rates – even though their home has declined in value.
I gave you a very general overview of some loan products here today. There are many considerations (ex. closing costs and time you intend to stay in the home) and qualification items that will pertain to your individual circumstance. My intent was to heighten awareness and get you to reach out to your favorite mortgage professional and see if there is an opportunity for you. Print This Post
RISMEDIA, August 11, 2011—Mortgage rates continued to move lower as investor concerns over the health of the U.S. economy increased, reports mortgage rate research website, ForTheBestRate.com. Interest rates advertised on the site have dropped to near their lowest point of 2011 for most products, with the 15 year fixed reaching historical record lows. On August 4, 15 year mortgage rates as low as 3.250% were posted (APR: 3.387%, Lender: Gateway Bank Mortgage).
Mortgage pricing has edged lower while US and global stock markets are seeing losses, including a drop in the Dow of more than 500 points on Thursday, August 4, the largest single day loss since December of 2008.
The downward trend of mortgage rates was confirmed in the weekly survey from Freddie Mac, a government sponsored enterprise that purchases residential mortgage loans in the secondary market. The data released August 4 showed a decrease in the average 30 year fixed rate pricing to 4.39% (0.8% points) from 4.55% (0.8% points) from the previous week. 15 year fixed rates fell to a new historical low, an average of 3.54% (0.7% points), after averaging 3.66% (0.7% points) the week before.
5 year adjustable rate loans also moved lower to an average of 3.18% (0.6 points), down from 3.25% (0.6% points) the week of July 28.
“While we’d love to see more positive economic news coming from other sectors, right now there is a huge opportunity for homeowners,” comments Shaun Hamman of American Financial Resources, a National mortgage lender offering a range of products including home improvement loans and debt consolidation mortgages. “Buying a home or refinancing a higher rate mortgage at these incredibly low rates can allow one to make a significant positive impact on their long term net worth,” he adds.
For more information, visit http://www.ForTheBestRate.com. Print This Post
by Dean Hartman on June 9, 2011
As people go through the mortgage process today, I believe that they wonder if their lender has gone insane. Lenders ask for documentation repeatedly, constantly updating, asking for further clarification and explanation for everything. Income, credit, assets and appraisals are scrutinized at a level unseen in my 25+ years. It almost seems like they are trying to find reasons NOT to lend.
But, I assure you, that is not the case. The only way lenders can stay in business is to lend money. It is what funds the operation and pays for salaries, rent and paper clips. Lending is what creates the value of the company. No closings, no revenue, no company.
So why the perception of over-documentation and over analysis when we know the lenders have to make loans? This is the reality of a post-subprime world. Lenders got too liberal and under-documented files and forgot the primary role of underwriting (judging a borrower’s ABILITY and WILLINGNESS to repay the loan) as they approved files. And now, the pendulum has swung back to a very conservative stance. Common sense seems to have been replaced by a “Cover Your Butt Mentality”.
No one is immune. Appraisers error on the side of lower valuations and heightened criticism of a home’s condition. Underwriters labor over pay stubs, tax returns, bank statements and credit information. Closing agents meticulously examine title and closing documents. Each of them has learned that their mistakes, miscalculations, or errors in judgment (no matter how minor) can result in a loss of their job, a bad loan, and/or monetary damages to their companies.
So, today I just wanted to counsel home buyers. Your lender WANTS to make your loan. However, understand that they have been burned by borrowers, burned by their bad judgment, burned by moronic industry trends of the past. Lenders are going to be a little gun shy. If you can prove that you are willing and able to repay the loan, lenders have lots of money available at incredible (once-in-a-lifetime) rates. When you think your lender is asking for too much, know it’s because they want to say “yes” AND know that their decision is both a good and defendable one. Print This Post
RISMEDIA, February 16, 2011—The National Association of REALTORS® welcomes the Obama Administration’s call for an orderly transition from the current form of the secondary mortgage market to a new structure that would enable Americans to achieve affordable, sustainable mortgages.
“NAR believes that we cannot have a restoration of the former secondary mortgage market with entities that took private profits while pushing losses onto the taxpayer. The new system must involve some government presence, outside of FHA, USDA, and the Department of Veterans Affairs, to ensure a continued flow of capital to housing markets during economic downturns when large lenders flee the housing market,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., in response to the plan.
“As the leading advocate for homeownership, NAR recognizes that the existing system failed and that changes are needed to protect taxpayers from an open-ended bailout. We believe there must be a certain level of government participation to provide middle-class families access to affordable mortgages at all times and in all markets,” Phipps said. (More …) Print This Post
RISMEDIA, February 3, 2011—People are having to make tough financial choices today, but many don’t have to wreck their credit scores if they know how the system works, according to credit expert Eddie Johansson, president of Credit Security Group.
“With the same amount of money, you can make decisions that kill your credit score or ones that keep your score—or at least give you the ability to rebuild your score quickly later,” he said. “Most people have wrong or little information about how the system works, and that’s a big reason scores go down when difficult decisions are made during a recession.” (More …) Print This Post
By Ronald D. Orol
RISMEDIA, January 3, 2011—(MCT)—A behind-the-scenes battle is forming over a provision to the sweeping bank reform law that will affect mortgage availability. At issue is a provision in the sweeping Dodd-Frank Act that requires banks to have “skin in the game” by retaining some of the risk of loans they package and sell.
The goal of the measure is to eliminate a problem leading to the financial crisis where lenders packaged and sold subprime mortgages they knew would fail. Lawmakers drafting the legislation also included a measure that would exempt certain mortgages from the risk retention rule if their loans met certain high underwriting standards.
But reaching an agreement on what the criteria will be for these high-standard loans dubbed “qualified residential mortgages” (QRM) is expected to be difficult and, depending on how regulators rule, a huge slice of the mortgage market could be exempted from risk retention—or only a small piece of the market.
That could have a major impact on what kinds of mortgages are available, and for what price. Mortgage rates have remained near historic lows but mortgage activity is near decade depths. (More …) Print This Post
By Alan J. Heavens
RISMEDIA, December 1, 2010—(MCT)—Long considered a key ingredient of American homeownership, the income-tax deduction for mortgage interest is now on the menu of the commission looking for ways to trim the federal deficit. Among the $3.8 trillion in debt-cutting options being considered by National Commission on Fiscal Responsibility and Reform is a scaled-down tax deduction eliminating second homes, mortgages of more than $500,000, and home-equity loans.
Reaction to even the hint of a change came quickly—and stridently.
“For a battered housing industry, which is struggling with a 21 percent unemployment rate among construction workers, this is absolutely the worst time to be considering changes,” said National Association of Home Builders President Bob Jones.
Diminishing or ending the deduction “would exert further downward pressure on home prices, leaving more homeowners with mortgages larger than the value of their property and fueling even more foreclosures,” he said. (More …) Print This Post
by The KCM Crew on November 17, 2010 ·
There appears to be some confusion regarding the amount of shadow inventory that currently exists and the impact it will continue to have on the real estate market. Today, we want to bring some clarity to both of these issues. First, let’s define shadow inventory because part of the confusion is in differing definitions. Originally, the term ‘shadow inventory’ was used by some to define a supposed ‘secret’ inventory; mysteriously hidden by banks from their investors and the general public. This definition caused banks to come forward and announce that they were not holding a ‘secret’ stash of foreclosures.
Those announcements were misinterpreted by some to mean there was no backlog of distressed properties. That is not what the banks said. There definitely are millions of distressed properties that have been and will continue to be placed on the market. The banks were just explaining that the number and process is totally transparent.
What actually is ‘shadow inventory’?
The most common definition of shadow inventory is given by Standard and Poor’s:
Outstanding properties that are (or were recently) 90 days or more delinquent on mortgage payments, in foreclosure, or real estate owned (REO)—that haven’t yet hit the market. (More …) Print This Post
By Tom Petruno
RISMEDIA, November 8, 2010—(MCT)—The Federal Reserve has announced a new “quantitative easing” plan aimed at bolstering the economy. So what’s quantitative easing? The term is a mouthful, but is simple in execution: The central bank plans to boost its purchases of U.S. Treasury bonds in the open market, hoping to push longer-term interest rates lower, or at least keep them from rising significantly.
The Fed has already “eased” its monetary policy—tried to get more money into the economy—by slashing short-term interest rates. (Raising rates is known as tightening).
But short-term rates are already near zero. So the Fed now is focused on longer-term rates.
The “quantitative” refers to a specific quantity of money—in this case, $600 billion, which is the sum of Treasury debt the Fed said it would buy by next June, on top of about $300 billion of purchases already planned. (More …)