Columbia Mortgage Blog

NEW York (CNNMoney.com) – People who are denied credit or a job because of their credit history may soon be able to get their credit score free of charge, thanks to an amendment passed by the Senate Monday evening.

The measure, part of the massive Wall Street reform bill being debated in the Senate, would expand an existing law that, in December 2003, gave consumers the right to one free credit report every year from each of the top three consumer reporting agencies — Equifax, Experian, and TransUnion.

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The credit score is a numerical representation of the information in a consumer’s credit report, which covers a consumer’s entire credit history — all debts, payment habits, and jobs held. The credit score is widely used as a shortcut by lenders, so monitoring it is crucial.

But options for getting a credit score have been limited to many “for-fee” sites. Some have lured consumers in by offering a “free” score in return for signing up to a credit monitoring service that could cost $14.95 a month or more, if consumers don’t opt out before the end of the trial period.

The amendment “dramatically increases the number of people getting this critical piece of information,” said Jennifer Talhelm, a spokeswoman for Sen. Mark Udall, D-Colo., who is sponsoring the effort.

A recent survey from the National Foundation for Credit Counseling found that some 65% of adults have not checked their reports in the past year. And nearly one-third of adults don’t know their credit score.

Your credit score is used to determine far more than the cost of borrowing money.

Finding a job. More and more often, employers are using credit reports to help make decisions about job applicants. Employers conducted credit checks on 60% of job candidates in 2009, according to a recent survey from the Society of Human Resource Management, looking for top red flags such as bankruptcies or accounts that are in debt collection. By law, your employer must inform you if you’re denied a job because of your credit history.

Buying a house. The consumer credit rating agencies use different numerical scoring systems, but generally speaking a 680 and above sits within the “good to excellent” range, while scores below 680 are labeled “ok to poor.”

Only a credit score of 740 or better get the best mortgage rates, according to Greg McBride, senior financial analyst for Bankrate.com. A score between 700 and 740 could jack up interest rates by 0.5% to 0.8% on average. Anything less than 700 could be problematic in today’s tight credit market.

Credit cards and student loans. If your credit score is 700 or better, you’re in great shape to get the most competitive credit card rates, which average about 14% for a variable rate card. For those with marginal or poor credit, it will be more difficult to get a card at all. And those who do qualify will see lower credit limits, rates in the high teens to low 20% range, and more credit card fees, said McBride.

Even college students need to pay close attention to their credit scores because it’s the primary factor in determining the rate on private student loans, which can range anywhere from 5% to 13% these days.

Auto insurance premiums. Insurers look at things like payment patterns, length of credit history, and the number of new applications for credit when calculating their risk formulas.

Not only can credit problems signal that you have little cash on hand to absorb the cost of an accident, making you more likely to file a claim, but studies have shown a correlation between bad credit and accidents. This could translate into higher premiums.

Consumers should not apply for loans, just to get their scores. Multiple “inquiries” on your credit report can lower your overall credit score.

Although experts say Udall’s bill is a step in the right direction, some are concerned that it will fall flat if it doesn’t address the fact that lenders use multiple scores to assess creditworthiness.

“The most widely used score is the FICO,” says Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling, “but the top three bureaus’ are proprietary scores based on their information.”

And some say that without context, including credit score ranges and scores relative to other credit rating agencies, consumers will not gain much.

“That’s the type of context consumers will need to get the most benefit from having this type of information,” said McBride. “Otherwise, [the credit score] is just a 3-digit number, which wouldn’t be terribly meaningful to many consumers.”

Still the bill may open the door to wider availability of free credit scores – for example, not just when you’re denied credit, but perhaps once a year as is the case with your credit report.

“The government’s website (annualcreditreport.com) started much in the same way, where consumers got their free credit report when denied credit,” said Gail Cunningham, a spokeswoman for the National Foundation of Credit Counseling. “This may be a first step toward universally providing free credit scores to consumers.”

The continued availability of government guaranteed mortgages for rural homebuyers was virtually assured yesterday when the House Financial Services Committee voted to approve H.R. 5017. The unanimous vote will send the Rural Housing Preservation and Stabilization Act of 2010 to the full House of Representatives where sources said it was fast tracked for a vote as early as next week.

If passed, the bill will correct the Section 502 Single Family Housing Guaranteed Loan Program to make it self-funding. Section 502 assists homebuyers living in rural areas to obtain affordable mortgages guaranteed by the Department of Agriculture (USDA). These loan guarantees have become enormously popular during the financial crisis and consumer demand has tripled the annual number of loans that are typically issued each year. The program is set to exhaust its available funds within days. Under the new legislation, lenders will pay up to a 4 percent premium for the guarantee at the time the loan is initiated which will enable the financing of the program to move from a combination of government funding and industry fees to a self-sustaining initiative. The bill authorizes the department to guarantee up to $30 billion in loans in FY 2010.

NAR Launches New Consumer Web Site to Give Agents Resources Directly

The National Association of Realtors (NAR) announced the launch of HouseLogic, a new, comprehensive consumer website about all aspects of homeownership. HouseLogic helps homeowners make smart decisions and take responsible actions to maintain, protect and increase the value of their homes.

“Backed by the resources and industry insights of NAR and its Realtor members, HouseLogic will engage and involve consumers throughout the lifecycle of homeownership,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “It makes sense that, as the first, best source for real estate information, NAR should collaborate with today’s consumers to help them make the most out of owning a home. HouseLogic will help us do that.”

The free website helps homeowners plan and organize their home projects and provides timely articles and news; home improvement advice and how-tos; and information about taxes, home finances and insurance.

“Unlike other homeownership websites, HouseLogic helps consumers view their home through a financial lens and make smart, informed home improvement investment decisions,” said Golder. “Families can set goals for saving money on their home or increasing its value, and easily track the progress they are making on those goals.”

Registered users can save relevant information, create to-do lists and set project reminders. The website can also be customized for individual homeowners depending on how handy or ambitious they are regarding home projects; how much money they want to spend or save; where they live; and their priorities, such as increasing the value of their home or improving their neighborhood.

HouseLogic also empowers homeowners who want to get more actively engaged in shaping community life and advocate neighborhood and homeownership issues that matter most to them. The site provides users with the tools and know-how to effect change and address concerns, like establishing a neighborhood watch program, building a community playground, or participating in city or county planning efforts.

“For more than 100 years, Realtors have been bringing America home,” said Golder. “HouseLogic takes owning a home to the next level, partnering with consumers to truly help people build their futures through homeownership.”

For more information, visit www.houselogic.com

Rising energy costs have consumers thinking about energy conservation and the green must-haves for their home.

The Energy Efficient Mortgage (EEM) is federally recognized and has benefits for both buyers and sellers. Buyers can stretch their dollar with the energy-saving measures in the home that will help save on utility bills. Sellers who use an EEM to make improvements on their home will make older homes more comfortable and more attractive to buyers looking to go green. Homeowners looking to remodel or refinance also gain benefits from EEM by making improvements that will help save on utility costs and potentially increasing the resale value of the home down the road.

Buyers who qualify for a home loan may also qualify for the EEM. Availability is not limited by location, home price or utility company. When applying for an EEM, a Home Energy Rating System report must be completed on the house. An energy appraisal is done by an inspector and the results are certified. More information about EEMs please contact a Columbia Mortgage Consultant.

Tax credits also are available for energy-saving home improvement products placed in a home in 2009 and 2010. For specific details visit http://www.energystar.gov/index.cfm?c=tax_credits.tx_index.

As we head into the fall, recent housing numbers and anecdotal evidence, suggests that home buying has certainly picked up. One of the reasons for the increase in home sales, outside of lower prices and interest rates, is the $8,000 first time home buyer tax credit. This credit applies to new home buyers (or those who have not owned a home in the past three years) and it comes to an end on Monday November 30, 2009.

What that means, is that in order to take advantage of this credit, your home purchase must close by that date. With most home closings taking between 30 and 45 days in the current market, that means we are getting closer and closer to the deadline to where new home buyers will be certain they will be able to take advantage of this credit.

For those that have interest in purchasing and obtaining the tax credit, now would be the time to act. Especially if you have concerns which may lengthen the process, such as credit or down payment issues that may affect the loan process.
What this all means is that this is certainly an opportune time to purchase, with the combination of affordability and tax credits in the current market for buyers. However, with the time length from start to finish of purchasing a home in the current market, November 30th is a lot closer then it may seem.

Now may be the time to contact a Columbia Mortgage consultant to begin the prequalification process.

For more information on home purchase loans or refinance programs, please contact a Columbia Mortgage consultant or online at www.columbiamortgage.net

Mortgage Corner: “What’s happening in the mortgage biz and why you should be informed—the inside scoop you won’t get from the media.”

I had a friend of mine ask me the other day what’s different about the mortgage business versus 2 years ago, and all I could say was “Oh…wow! Where do I even start?” Because our industry was on the front of the recession, we in the real estate business were the first ones to experience financial pain and career uncertainty.

So what do those of us who want to buy or refinance a home face in today’s lending environment, is it true that banks are not lending and how long is it going to take to regain a sense of normalcy in the real estate sector? I will address these questions separately:

One of my clients mentioned to me in an email how disenchanted he was with the whole mortgage financing process of buying a home this spring, and I had to tell him that I haven’t had anyone who’s bought a home before tell me they had an easy experience. For those who haven’t bought a home before and are considering jumping in now, you’ll only know how challenging it is, so you won’t know any better and will only appreciate how much simpler it will be the next time around . So what does it look like to get residential financing currently? It’s pretty paperwork-intensive and very, very regulated to the extent that peoples’ close of escrow dates as written into the contracts between buyers and sellers are no longer the date that–up until recently–was an absolute deadline all parties were expected to perform to. Now, we as lenders–and also the real estate brokers–have a PR tightrope we have to walk in explaining to our clients that we may or may not close their transaction on time, that they must be flexible in all respects and be prepared for having to provide what were previously considered unreasonable requests on the part of underwriters but are now very much the norm.

It is true that banks are approving and closing residential real estate transactions, be they refinances or purchases (commercial transactions, on the other hand, are something quite different). BUT, the banks are rigorously underwriting people’s loan files to the extent to which they are having to chase down items for underwriters from the initial underwriting of the file all the way down to the closing table. This can be–and is–a very frustrating process for people, whether they’ve closed multiple real estate transactions in the past or they’re just buying their first home. All of this makes it incumbent upon us as mortgage and real estate professionals to properly set the expectation level from the onset so that people are aware that there are some minor inconveniences to grapple with during the processing of the loan that make the reward that much sweeter of a lower rate and payment at a time when mortgage rates are near historic lows, or the purchase of a new home at a time when the housing affordability is at its highest level in 18 years.

To answer question #3 sufficiently, we have to briefly analyze the circumstances that gave rise to the current state of mortgage lending and explain why the banks have tightened so dramatically their lending standards. First, we should all have a basic understanding of what happened in the mortgage and real estate industry over the past few years regardless of who shares what portion of accountability. Second, banks are in a mad scramble right now to make sure that every single loan they fund and wish to turn around and re-sell to the secondary market (i.e., Fannie Mae and Freddie Mac/the taxpayers) conforms to every single conceivable underwriting standard in these two Government Enterprises’ (previously known as Government-Sponsored Enterprises, but I will refer to them as GE’s) underwriting guidelines–and rightly so. They have to continue to rebuild their reputation in the minds of the American taxpayers who are buying these securities as well as in the minds of foreign investors, whose money they (and we) desperately need to keep the wheels of the industry turning. What’s more, the banks are making good money off of the mortgages that they’re re-selling to the GE’s. So how long will it take to get back to reasonable underwriting? That all depends upon our economy, but it’s going to take a few years.

So what’s still available out there in the world of home mortgages? Everything that always was available for people who can qualify for the loan. There’s 100% government financing for first-time homebuyers, there’s government financing for buyers who are fortunate enough to have parents or an employer who can gift the money for the down payment and/or closing costs, there’s jumbo financing for people needing to refinance or buy a home with a loan greater than $417,000 in our market, and there’s conventional financing for 5%, 10% or 20% down payment buyers.

Right now is truly one of the best times in recent history to buy a home with the $8000 first-time homebuyer tax credit that expires on November 30th, 2009, the low rates and the impressive affordability with home prices sagging. You just need to align yourself with a seasoned mortgage professional to help you navigate the marketplace so that you can reap the benefits.

Jay Bennett, Columbia Mortgage

503-593-9893 jaybennett@cmortgage.net

Tighter underwriting makes the mortgage business more difficult – but potentially safer

In a time of massive upheaval inside the mortgage industry, one area experiencing significant change is underwriting. Many transformations taking place affect industry professionals and consumers alike. They also make it more difficult to close purchase and refinance transactions.

In 2004, the Bush administration loosened underwriting guidelines to help more American qualify for home loans. Those changes, however, led some consumers to enter agreements that required them to live beyond thier means. In addition to the relaxed guidelines, alternative mortgage products such as pay-optoin ARMs and stated-income loans caused even more problems.

Some mortgage professionals are unhappy with the tightening of previously loose guidelines, but market restrictions are necessary. Considering this, mortgage brokers and borrowers must be prepared to provide more documentation to support what’s listed on loan applications.
This includes:
* Income documentation: New guidelines require submissions of pay stubs for all employed borrowers and tax returns for self-employed borrowers. Previously, many lenders required only a verbal verification of employment for many loan types.

* Asset documenation: Lenders now typically review and inspect bank deposits much more closely.

* Appraisals: Lenders now commonly scrutinize appraisals thoroughly, especially declining markets. Finding recent comparables, those within six months – often is more difficult, and support for estimated values can be hard to find.

* Employment verification: A two-year work history often is required for all borrowers. Previously, many underwriting guidelines required proof of employment for a shorter amount of time.

The trend toward plain-vanilla loans and the retreat from exotic lending vehicles might make it harder to do business, but it also makes it safer. Tightened underwriting guidelines and conservative changes to loan programs have caused many brokers and other industry professionals to change careers. In many cases, those who have left the industry should never have entered it to begin with.

As today’s tightened market continues for the foreseable future, upstanding brokers will continue to find funding for solid borrowers. The road ahead may be rough, but at least we’re headed in the right direction.

According to a recent RISMedia article; nationwide housing affordability jumped 10 percentage points during the first quarter of 2009 to its highest level in over 18 years.
Buying a home is always a highly personal and emotional decision. But the challenges – and opportunities – of today’s real estate market have elevated the scope of those decisions to a whole new level. Every buyer today has a very personal agenda. They want to achieve the maximum results possible, and in the end, feel good about the transaction. Columbia Mortgage is equipped for the job to be their trusted consultant, to guide them throughout the process and better help them reach their goals.

The recent enacted first-time homebuyer tax credit is boosting a big opportunity for REALTORS across the country. Traffic and interest have increased as the word has spread to potential homebuyers. With limitations and rules with the credit, a large percentage of people stand to benefit. According to NAR’s economists the credit could contribute up to 500,000 more home sales this year. With first-time homebuyers making up nearly 40% of the market in the most recent NAR home sales release; coupled with historic affordability and record low interest rates, the new credit is yet one more reason why it is a good time to buy for many people who have been sitting on the fence. According to Ed Formand, Founder, Chairman, Watson Realty Corp. in Jacksonville, Florida; even “low technology” can attract today’s first-time buyers. “Our sales associates go to lunch most days wearing badges that say”, “Ask me about the $8,000 tax credit”. You might be surprised at how many people are actually stopping to ask. As always, knowledge of the market will separate you from the competition, and increase your clients’ confidence in you.

The great thing about challenging times is that they create opportunity. But the funny thing about opportunity is that it is often very hard to see until the window is almost closed. Imagine the potential response of first-time and other borrowers who are looking at their options. They may say “WOW! Homes are now deeply discounted. There’s an abundance of choices, so I don’t have to settle and sellers are willing to negotiate the most favorable terms for me! But wait, I will need a mortgage and what incredible luck for me, to be in the market for a mortgage when interest rates continue to be close to historical lows. Think about that. For some in the trenches, these opportunities may not be obvious if they are focused on only the challenges.

Today’s young buyers are much savvier than the first-time buyers of five years ago, who were only just beginning to look online for listings. Today’s young buyers are far more informed about mortgages, property value, short sales, market conditions and the way to cultivate their business is through technology and social networking. We must give them everything they need the way they want to get it.

We all need to remember that rates continue to be low by historical standards; it’s crucial that we stay steadfast in our commitment in both creating & improve our relationships with our referrals sources. Our long term success & survival is directly related to our positive energy, passion, commitment, communication, utilization of tools, industry knowledge, a reputation that we are experts in our field and a mindset that we are the best.

Keep moving forward, Keep prospecting, Keep the attitude and energy up……tomorrow is a new day with new opportunities.