Tuesday, February 27, 2007

Mortgage Industry tightening up

We are starting to see some serious tightening in our industry due to the foreclosure rates across the country. The last couple of years have been a bit of a free-for-all for the sub-prime / Alt-A side of the industry. The proliferation of 100% financing programs for home buyers with low credit scores and for investors buying non-primary residence properties has been unprecedented. Unfortunately, those loans are not performing and are ending up in foreclosure.

There have been numerous news articles and no shortage of internal memos about the sub-prime mortgage market tightening up. We are seeing Loan to Value limits being cut back, credit score requirements raised and rates (especially on 2nd mortgages) increasing.

These changes will affect people with credit scores in the sub-660 range the most. We will see the use of LPMI (Lender Paid Mortgage Insurance) programs proliferate in the absence of second mortgage options. The silver lining is this will give home buyers the ability to have just one loan rather than two.

Monday, February 19, 2007

Trigger leads -- Advice if you are seeking a home loan

So some news has come to the forefront that credit bureaus are betraying our trust. The big credit bureaus are reportedly looking to increase their revenue by selling something called "trigger leads." The scenario might go something like this -- you go to your trusted Mortgage Advisor and get your credit pulled to be sure that you are in good shape for your upcoming purchase or refinance loan. The credit bureaus then capitalize on this opportunity and sell your information to other mortgage companies. Those mortgage companies then contact you with the knowledge that you are looking for a mortgage loan.

So far, this sounds like a semi-reasonable, capitalistic practice (I'll leave the legalities of it to the experts). Things change, though, when the mortgage companies go to the dark side with their tactics -- "We were contacted by your lender and they asked us to get going on your loan" or "Please sign these loan papers and send them back to us."

It gets worse -- collection agencies may also be able to purchase these lists. Why would they be interested? Because they know that some mortgage loan programs require old collections to be paid off in order for borrowers to be approved. If those credit bureaus update their records or sell the accounts, it could actually lower your credit score due to the affect that recent activity on derogatory accounts has on your credit score.

Jeez -- pretty stinky, huh? What can you do? Go to www.optoutprescreen.com and opt out of credit offers, insurance offers, etc for either 5 years or for life. Not only will this get you off of these "trigger" lists, but it will also greatly reduce your chances of being a victim of identity theft.

I have a good bit more information on this subject, so please contact me and I'll be happy to send it to you.

Thursday, February 15, 2007

Housing Market Predictions

The Chief Economist of the National Association of Realtors (NAR) has released his predictions for the housing market in 2007 and beyond.
"After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and into 2008."

He predicts that mortgage rates will remain favorable with a gradual increase over the course of the year. Overall, good news for home buyers.

Fed Chief speaks & helps mortgage rates

Ben Bernanke, Chairman of the Federal Reserve Board, spoke yesterday and helped out mortgage rates in the process. With inflation being the arch-enemy of bonds and mortgage rates being tied directly to bonds, his words about inflation being fairly well in check is good news for homebuyers and people looking to refinance.