Archive for the 'Qualifying' Category
States Weigh Mortgage Loan Suitability Standards
What’s next for the mortgage lending industry, beset by deepening accusations of predatory lending and mortgage fraud?
Well, several states are considering the creation of suitability standards, similar to what stock brokers and investment advisors live with in the securities industry. If this movement takes shape, mortgage lenders might be required to furnish evidence that the loan program recommended was suitable for the client’s needs, level of understanding, and sophistication.
However, Kurt Ptotenhaur, senior vice president of the government affairs for the Mortgage Bankers Association (MBA) argues that “Making the lender responsible for determining which loan is suitable for a borrower will limit consumer choice and could deepen the slowdown in the housing market,” and may result in discrimination at worst and subjected decisions made by the lender about who should have access to certain loan programs. See the MBA’s Policy Paper for more.
read comments (4)4 Reasons to Keep the Wage Earner Stated Income Loan
In the eye of the hurricane, where mortgage fraud mixes with over-inflated real estate prices, lies the stated income loan. For those unfamiliar with this bit of mortgage slang, stated income loans allow a borrower to claim a level of income they don?t have to prove. How?s that for temptation?? Care for a bite of apple?
Dubbed the liar loan by mortgage pundits and blamed universally for the current foreclosure crisis, there is an irony in all this that I can?t allow you to overlook. The irony is this: the liar loan was created to allow another tribe of liars?the self-employed, who perpetually lie?
Conflicting Credit Scores Cause Confusion
This excerpt comes directly from an Old Republic Credit Services monthly newsletter. It underscores what I’ve been telling clients. Mortgage credit reports and consumer credit reports use different scoring models to generate credit scores. Consumer credit scores are notreliable when planning for a mortgage.
Conflicting Credit Scores Cause Confusion
There is a lot of confusion in the marketplace today regarding credit scores. Television, magazine and newspaper ads encourage consumers to purchase their credit score. The confusion arises when a consumer buys a credit score online, and then finds out when purchasing a mortgage loan, that it is not the same score the mortgage lender/broker is using. Mortgage brokers and lenders say it happens frequently: A mortgage applicant says that he checked his credit score online. Then the Loan Officer orders the credit report and finds that the score is many points lower than the generic credit score the applicant quoted.
What causes the confusion?
Credit Scores developed by Fair Isaac Corporation (FICO) are the predominant credit measure used by the mortgage industry. FICO scores are used to predict a borrower’s likelihood of future nonpayment, with higher scores indicative of better creditworthiness. The score range is from 300-850.
Other commercial scoring models are widely available to consumers on the Internet. These scoring models use similar criteria to the FICO score but are based on different methodology and scales. While these models may accurately predict credit risk, the scores are developed for consumer use only and can vary from FICO scores.
Sacramento Short Sales: A Response from Freddie Mac
What effect will “short sales” have on a borrower’s credit and ability to secure another home loan? Without the public Notice of Default that precedes a foreclosure and notifies the credit bureaus, will “short sales” slip under the radar? Are they less onerous than a completed foreclosure as many people suggest?
Yesterday, I received this answer from Freddie Mac about the way Loan Prospector, its automated underwriting system, will react to the typical short sale comments found on a borrower’s credit report. The answer was obtained for me by Scott St. John, an officer of American Pacific Mortgage who serves on the advisory board for Freddie Mac.
Ever played “telephone”?
That’s the childhood game where a bunch of kids sit in a circle and one starts by whispering a phrase to the kid sitting next to him. The second passes the phrase to the third and so on around the circle. The game usually ends with last person and the entire group laughing wildly at the mutated final version of the original. Where credit is concerned, it sometimes feels like a game of “telephone”.
It’s not that people are stupid. The three big credit repositories don’t want us to know exactly how it works. If people find the cheat codes, then an 800 Fico score becomes meaningless. But it’s also true that much of what enhances credit scores defies common sense.
The Brave New Real Estate World
Do you feel the change coming?
No, I don’t mean the dramatic downturn in home sales and prices. To be sure, that storm is grabbing headlines and bringing heartache to many people.
But the howling winds on the surface mask another change, more profound and permanent. If you are still, you can feel the low rumble of tectonic plates shifting beneath our feet.