In a recent Wall Street Journal article entitled “Mortgage Lenders Ease Rules for Home Buyers in Hunt for Business” by Nick Timiraos and Annamaria Andriotis, we continue to hear that banks are beating the bushes for borrowers; and they are relaxing some of the tough lending requirements that have stymied may would-be homebuyers in the last few years. The reason? The refi boom which was triggered by ever lower interest rates has about run its course. In the search for other profit centers, many banks are trying to fill the void with loan origination business. Continue reading “Are Mortgage Lending Rules Easing?”
A change in how the most widely used credit score in the U.S. is tallied will likely make it easier for tens of millions of Americans to get loans. ~Wall Street Journal Online, August 7, 2014.
According to a recent Wall Street Journal online article [FICO Recalibrates Its Credit Scores], FICO is going to get under the hood and re-jigger some of its proprietary algorithms, to deal with the realities of the damage wreaked on distressed homeowners over the past five years. Continue reading “Fair Isaac Co. (aka “FICO”) Just Got Fairer!”
Introduction. On September 2, 2013 the online Wall Street Journal carried an article that should be of interest to thousands of folks who have weathered the last five years of unpleasantness, but in the process suffered a short sale, foreclosure or perhaps a deed-in-lieu-of-foreclosure. The full article can be found here. Continue reading “New FHA Underwriting Guidelines – Good News For Former Distressed Homeowners Re-Entering The Marketplace”
Having counseled approximately two hundred Oregon homeowners drowning in negative equity, I have discovered that many, if not most, believe that somehow their lenders can literally swoop down and take not only their home, but all of their bank accounts, savings, retirement funds, and/or daily wages. In truth, the only real power most banks have over a borrower, is the ability to negatively impact their credit, and by extension, their future ability to borrow. On the other hand, one’s credit is a composite of many different data points, not simply a single “black mark” from one distressed property event. To that extent, a credit rating can be strengthened over time, and like a muscle, it builds up through consistent and prudent use over time. In today’s rental marketplace (which is populated by many former homeowners coming out of a distressed property transaction), a credit score impacted by a single distressed housing event has little or no bearing on whether a landlord will rent a home or apartment to them. In an effort to provide some peace of mind, listed below are certain “rights” that all home owners have under Oregon law. These rights cannot be taken away – they can only be voluntarily given away.
The following Bill of Rights assumes the following facts: (a) The home was used and occupied as a principal residence. A “principal residence” or “primary residence” in my vernacular, is the residence you occupy most of the time, and hold out to the city, state and federal governments (e.g. the post office, DMV, utility companies, etc.) as your “home.” A second home is not, by definition, a “primary residence.” (b) There is only one loan on the property and all of the borrowed funds were used to acquire the home. Second trust deeds can sometimes be problematic. If you have a second trust deed as well as a first, all is not lost – it just requires a little more planning, and some smart negotiations with the bank.
Caveat: This summary is not meant to be legal advice, as each person’s factual situation is different. No attorney-client relationship is sought or created by this post.– PCQ
As the Realtor® industry enters into 2011, there is little question but that short sales are going to be around for a while. It will take at least two more years as excess inventory from all sources – banks, distressed owners (current and non-current with lender), unsold new construction, new condos, and sellers waiting on the sidelines – depletes itself. However, this is not the only factor causing the current glut of real and shadow inventory. Significantly, the employment picture and general overall confidence in the state and national economy must improve substantially. The consumer exuberance during the holidays does not – in my opinion – necessarily translate into good news for the housing market. It says, at best, that the retail segment of our economy enjoyed some good news for a change.
The bottom line for short sale transaction is that for the foreseeable future, they are going to remain a significant part of many Realtors®’ book of business. Avoiding these transactions is a luxury reserved for the very few. For those Realtors®who saw short sales as a good marketing opportunity early on, they are to be congratulated. However, for those thinking about dipping the veritable “toe in the water,” it’s not too late. I say this because the conventional wisdom about short sales a couple of years ago – if any existed back then – is ancient history. Much has changed for 2011:
- Banks have come to accept short sales, and in so doing, they have streamlined their protocols in dealing with them;
- With the foreclosure fiasco in the fall of 2010, many lenders are seeing their REO inventory inflate, which suggests they may be more receptive to short sale approvals;
- With each new short sale, Realtors® are gaining more experience;
- Thanks to the Internet and other sources, the public is becoming more educated about short sales;
- Today, the typical homeowner confronting a distressed transaction (i.e. short sale, deed-in-lieu, or foreclosure) is generally not the old “sub-primer” or “flipper” of 2004-2007 who acquired their home with easy credit, no money down, and a “liar loan;”
- Today’s distressed homeowners are our neighbors and sometimes ourselves. Many had significant equity at one time. Continue reading “2011 – Realtor® Best Practices For Short Sales”
Background. The residential loan market experienced tremendous growth between 2004 and 2007. Lenders were able to accommodate millions of borrowers, because they quickly sold the loans they made into the secondary mortgage market, thus “recycling” their funds for further loans. Initially, the secondary mortgage market was dominated by two major players, Fannie Mae and Freddie Mac. Upon receipt of the loans they purchased from the banks, Fannie and Freddie, in turn, bundled them into pools, and sold them as securities to pension funds and other large investors.
The vehicle of choice for these mortgage-backed securities (“MBS”) was the REMIC. The term stands for “Real Estate Mortgage Investment Conduit.” In short, a REMIC is a trust into which pools of promissory notes (debt instruments – like an IOU) and mortgages or trust deeds (the security instruments which permit foreclosure if the notes are not paid).
These loan pools range in risk from the highest quality down the credit chain to the lowest quality. The loans are, figuratively speaking, sliced and diced into many “tranches” (French for “slice”), each one varying in degrees of risk of default. At this point, the loans lose their identity as individual notes and mortgages, and consist only of blended pieces of loans. The tranches are investment graded by their contents. Some tranches are rated safer than others, depending upon the loan mix each contains. The riskier the tranche, the better the yield. Although the safer tranches have lower yields, their investors receive returns before those holding the higher-yielding, but riskier tranches. Continue reading “What’s in Your REMIC?”
General – Today, credit scores are more important than ever. Yet, many, many owners of distressed properties are at a loss to know what will happen to their credit score if they complete a loan modification, short sale, a deed-in-lieu-of-foreclosure (“DIL”), or are foreclosed. This is an unanswerable question, because everyone’s credit history is directly a function of their own specific circumstances. There are no cookie-cutter answers. In the final analysis, a credit score is a number that calculates the level of risk a lender or creditor will be accepting if they make you a loan, sell you a car, or do any number of things that would result in an extension of credit. And many businesses such as phone and insurance companies rely upon your credit score in deciding whether, and upon what terms, they will provide their services or products to you. In short, the better your score, the better the rate, terms, and pricing of the product or service you are seeking.
Credit Scoring – Here are some of the factors that go into determining your credit score:
- The number and type of credit accounts you have;
- How timely you pay your bills;
- The existence of any prior collection action taken against you;
- Your outstanding debt;
- The age of your accounts (that is, the number of days from date of invoice to date of payment – 30, 60 90 days, etc.)
This type of information is put into a statistical program and your information is compared to that of other consumers with similar profiles.
Credit Reports. According to the Federal Trade Commission (“FTC”), you have a right to a free copy of your credit report from each of the three national consumer reporting companies once every 12 months. Under the Fair Credit Reporting Act (FCRA) you also have a right to obtain your credit score from the national consumer reporting companies. They are permitted to charge a “reasonable fee,” which is generally around $8.00.
Seeing your credit report and your credit score is essential, since it is the first step you must take if you are to improve it.
HyperLynx: For more information on improving your credit, go the FTC Website.
HyperLynx: To order your free annual report visit AnnualCreditReport.com.
