Archive for the ‘Mortgage Loans’ Category

Improved Equity Position Empowering Trade-Up Buyers

Posted by Joel pate in Home Builders, Mortgage Loans. Tagged: , , , , , , , , , , ,

Housing demand by trade-up buyers is rising as the home equity available to these prospective buyers is improving; at the same time, foreclosure sales are declining nationwide while those properties are in high demand in many fast-rising markets.

According to FNC’s Foreclosure Market Report, the foreclosure market has rapidly improved in recent months with foreclosure rates approaching pre-crisis levels — an indication of strengthening supply-side conditions. On the demand side, steadily rising home prices and an expectation of continued recovery have stimulated housing turnover by prospective buyers who are in a position to take advantage of low home prices. In the meantime, higher home prices are bringing out trade-up demand from existing homeowners who are experiencing rising home equity, and that supports a down payment on their next bigger house.

“We’ve seen hard data from the past 18 months that show rising home prices and a foreclosure market with diminished impact due to decreasing foreclosure inventories and fewer new foreclosure filings,” said FNC Director of Research Yanling Mayer. “Meanwhile, a very encouraging trend that has been developing is the rising participation of trade-up buyers who are seeing improving home equity position and positive capital appreciation on existing homes.

“An important sign of a healthy and sustainable recovery is increased housing turnover driven by trade-up buying, which is more or less discretionary spending,” Mayer said. “These buyers are typically more responsive to market conditions and financial incentives.”
FNC’s report shows that foreclosure price discounts, which compare a foreclosed home’s estimated market value to the price paid by investors or home buyers, have dropped to a 10-year low at about 8.1% in Q2 2013, down from 12.5% a year ago. At the height of the mortgage crisis in 2008 and 2009, foreclosed homes were typically sold at close to 25% below their estimated market value. In many fast-rising markets, such as Phoenix, Las Vegas, and California, investor activity and low foreclosure inventory drove foreclosure prices up, frequently resulting in a price premium relative to estimated market value.

FNC publishes the mortgage industry’s first market-value based foreclosure price discount to gauge the degree of market distress. For more information about the foreclosure price discount, please refer to FNC’s March 2011 report.

According to the FNC report, investing in foreclosed property continues to be profitable with gross capital appreciation — the annualized percentage difference between a foreclosed property’s sales price and subsequent resale price — averaged at 7.8% on sales of homes previously purchased at foreclosure sales. In the meantime, ownership duration on distressed investment is up, along with the average ownership duration of all existing home sales.

More highlights from FNC’s Foreclosure Market Report:
Single-family REO and foreclosure sales are 12.2% of total home sales as of July, down from 17.3% a year ago.

The median foreclosure price is $98,000 or $67 per square foot, up 6.8% since the housing recovery began 18 months ago. In comparison, the median price on non-foreclosure sales is $205,000 or $118 per square foot, up 21.7% during the same 18-month period. Foreclosure price discounts are typically larger for low-tier properties, averaging 13.7% in Q2 2013. One in four homes continues to be discounted heavily. High-end properties, on the other hand, are typically sold close to their market value.

At 86% of total foreclosure sales, low-tier properties continue to account for the bulk of foreclosure sales. Prior to the housing bubble, low-tier homes contributed more than 90% to foreclosure sales.

Collateral depreciation on foreclosure sales — the difference between a property’s prior purchase price and foreclosure sale price — continues to decelerate, down to 3.8% in Q2 2013 from 6.4% a year earlier. Among the re-sales of non-distressed homes, for 16 consecutive months the median home has sold at a price above its prior purchase price, enabling potential trade-up buyers to capture a small capital appreciation.
Despite declining foreclosure rates, Michigan continues to be the nation’s most distressed market with one in three homes sold during Q2 2013 being foreclosed properties.

Arizona, California, Nevada, and Oregon have seen the fastest declines in foreclosure rates in the ongoing recovery, down respectively from 30.7%, 33.4%, 44.9%, and 24.2% entering 2012 to 11.9%, 12.4%, 15.3%, and 7.2% by Q2 2013. At 3.2% of total home sales, the District of Columbia has the lowest foreclosure rate.

States with continued high foreclosure rates include Alabama, Illinois, Michigan, Ohio, Rhode Island, South Carolina, and Tennessee. More notably, foreclosure rates in Alabama, Illinois, Indiana, and Kentucky are trending steadily upward in recent months, dampening home prices.
Among the largest housing markets (MSAs), New York, Boston, Portland, San Francisco, and Washington D.C. have the lowest foreclosure rates at 4.3%, 5.4%, 6.8%, 7.0%, and 8.3%, respectively, compared to a national average of 14.8% in Q2 2013. In contrast, Detroit, Chicago, Cleveland, Atlanta, and Cincinnati have the highest foreclosure rates at 34.7%, 27.1%, 24.3%, 19.4%, and 19.3%, respectively.

Of the cities identified by the Federal Reserve Board as the largest REO inventory markets entering 2012, Los Angeles, Phoenix, and Riverside, CA., have since improved and are in strong recovery. The recovery in Atlanta is on par with the national trend, and in the 18-month period, home prices are up 9.8%; foreclosure rates are down from 32.0% to 19.4%; and the foreclosure price discount is down from 18.8% to 8.7%. Conditions in Detroit are improving despite continued high foreclosure rates. Chicago, however, lags behind the rest of the country in the ongoing recovery — foreclosure rates are elevated at about 27%, contributing to the continued weakness of home prices.


Mortgage Closing Costs Increase in 2013

Posted by Joel pate in Mortgage Loans. Tagged: , , , , , , , , ,

The average fees that mortgage lenders charge consumers to close on a home loan have increased in the past year in most states, according to Bankrate’s annual closing-cost survey.

A homebuyer getting a $200,000 loan pays an average of about $2,400 in origination and third-party fees, such as the appraisal, according to this year’s survey. That’s a 6% jump from 2012, when the same fees averaged about $2,264.
Most of the increase is tied to fees paid directly to the loan originator. Excluding third-party costs, origination fees alone were up about 8.4% compared to last year.

Why fees are up

The low-mortgage-rate environment has played a role in the rise of closing costs in the past year, says Anthony Sanders, professor of real estate and finance at George Mason University. As historically low rates attracted large waves of refinancers, lenders didn’t have to compete as much for business, Sanders says.
The increased demand for loans has allowed lenders to charge higher fees while they can, he says. “Banks realize that rates are going to go up and are trying to capture fees early on. They know when rates go up, loan applications plunge, so they are trying to generate more earnings on anticipation of lower application volume and lower profits.”
As rates climb and fewer homeowners can save money by refinancing their mortgages, loan originators will likely reduce origination fees to attract more borrowers, he says. “They will have to lower the closing costs where it’s possible to attract more business.”

New rules cost banks

Many lenders say closing costs have increased partly because lenders have been facing higher expenses to implement a series of new Consumer Financial Protection Bureau mortgage regulations. Many of these rules go into effect next year, but lenders are gearing up for compliance in advance.
“The cost of compliance is enormous,” says Anders Hostelley, chief production officer at Honolulu HomeLoans. “As a mortgage banker, we are having to staff up. We just hired another compliance person recently.”

Hawaii is most expensive state

Hawaii had the highest closing costs among states in the 2013 survey, with $2,919 in fees. It had the second-highest lender fees and the highest third-party fees.
Closing costs are so expensive in Hawaii partly because of the limited supply of mortgage professionals and third-party vendors such as appraisers on the islands, Hostelley says.
“We are always looking at our competitors, trying to recruit someone away, and that drives up the average cost per loan,” he says. Training new professionals or recruiting them from out of state is an option, but the costs aren’t necessarily lower. The average salary that we have to pay is still pretty high compared to what we would have to pay on the mainland.”
Hawaii, whose population is about half that of Chicago, has a 4.7% unemployment rate — well below the national average.
Alaska was the second-most-expensive state for closing costs this year, followed by South Carolina and California, which has the highest origination fees in the nation. The survey does not include title insurance, escrow and local taxes.
The least expensive states to get a mortgage were Wisconsin, Missouri and Kansas.

Borrowers encouraged to shop for lower closing costs

It’s unlikely, of course, that someone would move to Wisconsin just to pay low closing costs, but a borrower can shop around and compare fees from different loan originators to make sure he or she gets the best deal in their area.
When applying for a loan, homebuyers should make sure the lender gives them a form called the good-faith estimate, says Alex Jacobs, executive vice president and national production manager for SunTrust Mortgage. The government-mandated form gives borrowers an itemized summary of the loan terms, including origination fees, which are the fees paid to the lender to originate the loan.
“The good-faith estimate is probably the best way to compare costs,” Jacobs says. “All lenders are required to provide that to the borrower.”
Some lenders may offer lower closing costs but charge a higher interest rate — and vice versa. One useful tool to compare apples to apples is to look at the annual percentage rate on the form. The APR incorporates closing costs into the interest rate you are quoted to show you the annual cost of the loan, Jacobs says.
“I encourage consumers to look closely at their good-faith estimate,” he says.

By: Polyana da Costa,

SoLoMo Marketing is a Big Deal

Posted by Joel pate in Home Builders, Mortgage Loans. Tagged: , , , , , , , , ,

How are you connecting with homebuyers and sellers? Are your advertising dollars going into a black hole or into the honey hole? recently polled real estate professionals and consumers to determine home search habits, marketing trends and their respective perceptions of local housing conditions. This insight and infographic will help real estate pros evaluate their SoLoMo (Social Local Mobile) marketing strategies to better target potential clients and drive traffic back to your business.

Word of Mouth Recommendations Still Carry the Most Weight

No surprise here: Both real estate professionals and consumers chose personal, word-of-mouth recommendations as the top means by which they connect with one another. In this day and age of technology, an old-fashioned, genuine recommendation from a trusted friend or family member is the primary source when deciding on a real estate professional.
This goes to show that building and maintaining authentic relationships with your clients is still paramount. To build and compliment your endorsement library, focus on building a strong presence in your local market by collecting and promoting client endorsements on your websites and social channels.

Since first impressions are always the most important, provide them with really unique marketing materials and professional, well-designed listing presentations to demonstrate that you are the person for the job.

National Real Estate Sites are Paying Off

Forty-seven percent of real estate professionals are spending the majority of their marketing dollars on national real estate listing sites (i.e., and®).

This has proved to be a valuable investment, since 67 percent of consumers prefer these sites when searching for homes via their desktop or mobile device. Furthermore, the majority of real estate professionals report that these sites provide them with the most quality leads and are also their primary source for sharing testimonials (i.e., “word-of-mouse”).

Join the others who have already reaped the benefits of using online resources and create an agent profile to increase your visibility, tell your story and share your praises.

Social Media Promotions Lead to Conversions

Real estate pros reported that social networks were their top choice for promoting client endorsements, listing videos and pictures. In fact, a whopping 75 percent of real estate professionals say that they are actively using Facebook to promote all aspects of their business! Social channels are a great place to promote client endorsements since 71 percent of consumers are more likely to make a purchase based on social media referrals, so maintaining your online visibility will be key to a larger return in building your business.

Mobile Marketing is a MUST

If you’re not mobile yet, you’re simply missing out — big time. Mobile web access is projected to overtake that of desktops by 2014, so it’s imperative that you start advertising here and formatting your marketing materials for mobile viewing. This is especially important when targeting local business, since 94 percent of smartphone owners are searching for local information and 73 percent of these mobile searches trigger follow-up actions. Further, three-quarters of the homebuyers and owners polled in the survey prefer to be contacted by email — most of which are accessed on a mobile device. That said, be sure that your email campaigns are formatted for easy viewing on smartphones.

Understanding Local Market Conditions Makes You an Expert

Local market outlooks give you the opportunity to understand the amount of confidence consumers have in their respective housing markets. We found that 54 percent of homeowners believe that their home values have increased over the last twelve months. To help clear up uncertainties about the state of their local real estate market and to minimize any hesitation to purchase or sell a home, provide your clients and prospects with detailed market reports in your listing presentations, email campaigns and blog. Proving that you are the local expert will give them just another reason why they should feel comfortable working with you for their real estate needs.

While no marketing technique guarantees success, understanding what consumers are looking for during their home search is pretty obviously the best way to drive traffic back to your business. Bottom line, SoLoMo reigns! So invest your time on social networks; make it happen on mobile to engage with local consumers!

Checkout out all the findings from the Real Estate Marketing Trends Survey for an even more in-depth look at what you can do to turn your next prospect into a client. Click here to see the results:

By: Erica Campbell Byrum,

Realtors, Homebuilders, and Manufactured Home Dealers Are Losing Money Because Some Loan Originators Have Not Embraced Pre-Underwriting Homebuyer Development

Posted by Joel pate in Mortgage Loans. Tagged: , , , , , , , , , , ,

“Realtors across America tell me that their loan originator is doing everything possible to get every prospect qualified, when in fact, that is not the case. Yes, they use the “what if simulator” provided by their credit report provider, proven in too many cases to be inadequate. In fact, loan originators normally turn down 10-15% of consumers during the pre-qualification process whom end up purchasing a home from another realtor within 12 months”, according to 27 year industry veteran Joel S. Pate of Mobile AL.

“Realtors, Homebuilders and Manufactured Home Dealers, work too hard, spend too much on advertising, not to require their loan originators, embrace the process of Pre-Underwriting Homebuyer Development” said Pate at the Annual Convention of the Alabama Mortgage Brokers Association meeting in September, 2013.

As a recent study by the Federal Trade Commission proves “the number of errors on credit reports (SIC) is eye opening,” according to Howard Shelanski, Director of the FTC’s Bureau of Economics. He went on to say, “The results of this first of its kind study make it clear that consumers should check their credit reports regularly. If they don’t, they are potentially putting their pocketbooks at risk.”

“Loan Originators have been taught by credit report providers that there is nothing you can do to improve a consumer’s credit; that credit reports are materially accurate and that nothing but time can improve a consumer’s credit report,” according to Pate.

Joshua Carmona, Vice President and founder of, the credit repair industry leading provider of software and outsource services, “With an estimated of 2,000 negative, inaccurate and unverifiable trade lines entries repaired from consumer credit reports per week, it is hard to believe that an consensus can be true. We see errors on credit reports every day that are fixed or removed by the data furnishers and the credit reporting agency’s so that the consumer can go on to purchase a home sooner rather than later. Without this work, not only the consumer won’t be able to purchase a home, but the builder, seller, realtor will miss out on a transaction.”

Carmona further stated, “The Consumer Data Industry Association industry report released in May 2011 estimates that 90-98% of credit reports contain no errors, and for that, the industry should be applauded. They have a very complicated task and they are doing it better every day. But, that is little conciliation for the individual consumer that cannot purchase a home, get a car loan, or even a job, because of an error on their credit report. We work diligently every day for that mother or father.”

Pate calls on all Realtors, Builders and Manufactured Home Dealers to immediately have a conversation with their loan originators about these findings and to determine if in fact the originator is actually using all of the tools, resources and services available to help the consumer to not be one of the unfortunate statistics. maintains a list of credit repair advisors that you can refer your home-buying customers to in every market throughout the United States. To have refer a Score Way Credit Repair Business associate just call (877) 876-5921 or visit for more information.

Guide clients to correct reporting errors to qualify for home loans

Posted by Joel pate in Mortgage Loans. Tagged: , , , , , , , , ,

The American dream of homeownership is bubbling up again for many consumers. By aligning yourself properly, your mortgage brokerage or bank will be able to help these families make sound homeownership decisions while also building a profitable line of business for your organization. These future homebuyers are saving money, being careful about expenditures and working to rebuild their credit through wise decision making.

One of the last steps that’s keeping these consumers out of your office and away from the closing table, however, is the inaccurate and unverifiable negative information that’s on some consumers’ credit reports, information that’s a violation of the Fair Credit Reporting Act. The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau have released recent reports that provide substantial evidence about American consumers’ rights being violated in this regard. Equally as troubling is the fact that many consumers apparently are having difficulty correcting such errors.

According to a federally mandated study by the FTC this past February, “Five percent of consumers had errors on their credit reports that could result in less favorable terms for loans.” The FTC study, in which participants were encouraged to use the Fair Credit Reporting Act process to resolve any potential credit-report errors, also found several other intriguing statistics. For instance, as quoted in the report:

• One in four consumers identified errors on their credit reports that might affect their credit scores.

• One in five consumers had an error that was corrected by a credit- reporting agency after it was disputed on at least one of their three credit reports.

• Four out of five consumers who filed disputes experienced some modification to their credit report.

• Slightly more than one in 10 consumers saw a change in their credit score after the credit-reporting agencies modified errors on their credit report.

• Approximately one in 20 consumers had a maximum score change of more than 25 points and only one in 250 consumers had a maximum score change of more than 100 points.

Although all of these findings are interesting in and of themselves, you may find yourself wondering about an even more thought-provoking matter: What happened to the consumers whose errors were not corrected or corrected with only one of the bureaus?

Further, what are some of the specific reasons why inaccuracies exist in these consumers’ credit reports?

Common issues

Although some consumers have bad credit because they simply do not pay their bills on time, many others are in their predicament because of job loss, medical problems or the death of a partner — the same historical reasons why many consumers default on home loans. These extenuating circumstances sometimes can be explained and understood by your underwriter, however.

Regardless, these initial defaults are bad enough and should be reported by the credit-reporting agencies. To a large extent, this simply is a major part of the process that keeps the credit and banking markets intact. If, however, the original creditor is showing a balance but has sold that balance to a collection company — and if the corresponding collection company also is showing the same balance — then there is an error in the reporting on the consumer’s file.

In other words, the consumer does not owe the same amount to both companies; the consumer owes the given amount to the collection company, and the original creditor must report the balance as $0 after the account has been resold to the collection agency. This violation of the consumer’s rights may occur more frequently than many mortgage professionals realize, and consequently, the given consumer will have a difficult time qualifying for a home loan until all of the items on the report are accurate.

Similarly problematic are the credit issues caused by identity-theft or identity-confusion, problems that also may be more common than some mortgage brokers and originators realize. For instance, when Hispanic consumers use both their father’s last name and their mother’s maiden name, those consumers may encounter trouble because some credit applications in the United States simply don’t accept two last names. In turn, this can cause confusion among the credit-reporting agencies, resulting in a blended file with other family and non-family members who use similar names.

Embracing Pre-Underwriting Home Buyer Development

Although the credit-reporting agencies tell consumers that they can repair their own credit and don’t need to hire a professional, it may strike some as interesting that even the FTC used a trained “study associate” to assist its sample of 1001 consumers to dispute the errors on their credit report, according to the executive summary of the FTC’s February study. Regardless, it can be difficult for average consumers to navigate their credit reports and the solution processes by themselves. In addition, many mortgage brokers and originators may be uncomfortable in assisting consumers with their credit reports, as they do not have sufficient training to do a good job for their clients. Mortgage professionals should know, however, that several training resources are available to them, including continuing-education courses, certifications from industry websites, trade associations and industry training companies.

In today’s market, potential homeowners are increasingly interested in purchasing a home that they’ll be able to afford down the road. They need the assistance of credit and mortgage professionals to guide them to the closing table. Mortgage company owners and lenders should realize that the goal of credit repair is not to help consumers purchase homes they cannot afford, but to assist them in accessing the credit markets with the credit that’s legally due to them under federal law.

Fed Wrestles With How Best to Bridge U.S. Credit Divide

Posted by Joel pate in Mortgage Loans. Tagged: , , , , , , , , ,

Wall Street Journal | Updated June 19, 2012, 9:50 a.m. ET

The U.S. recovery is hobbled by an economic divide that separates Americans not by income or wealth but by their access to credit.

The housing bust left behind millions of people with credit records damaged by plunging home prices, lost jobs, past overspending or bad luck. Many are now walled off from the low interest rates engineered by the Federal Reserve to spur the economy and remedy the aftereffects of the borrowing boom.

Millions with good credit, meanwhile, are taking advantage of the easy money, a windfall in many cases for people who don’t especially need it.

The U.S. recovery is hobbled by an economic divide that separates Americans not by income or wealth but by their access to credit. Jon Hilsenrath has details on The News Hub. Photo: Michal Czerwonka for The Wall Street Journal.

Last year, nearly 90% of all new mortgages originated went to households with high credit scores; before the financial crisis, it was about half, according to Moody’s Analytics and Equifax Inc., a credit monitoring service.

Shrunken access among credit have-nots is triggering more than personal plight. It has weakened the influence of the Fed—one of the best hopes for spurring stronger economic growth—and raised doubts within the central bank about whether it is doing much to reduce unemployment.

The debate is especially important now. Fed officials are weighing new steps at their policy meetings Tuesday and Wednesday, following a period of disappointing jobs growth and financial turbulence in Europe.

The credit divide factors into their thinking. Fed officials have been frustrated in the past year that low interest rate policies haven’t reached enough Americans to spur stronger growth, the way economics textbooks say low rates should.

By reducing interest rates—the cost of credit—the Fed encourages household spending, business investment and hiring, in addition to reducing the burden of past debts.

But the economy hasn’t been working according to script.

After surviving a crisis caused partly by loose lending, banks remain reluctant to extend credit to households with even a hint of financial problems. Fannie Mae and Freddie Mac, the two government-backed mortgage finance firms, tightened their own standards after the crisis. Banks worry Fannie and Freddie will return any troubled mortgages.

Interest rates are now falling more for people with good credit than those with poor credit. Rates on a 30-year mortgage for households with high credit scores of 750 using Fair Isaac, or FICO, ratings, have fallen from 4.44% to 3.53% in the past year, according to the website For households with low credit scores of 650, they have moved from 4.82% to 4.04%.

The central bank has said it planned to keep short-term interest rates near zero through 2014. It also has purchased more than $2.7 trillion-worth of government and mortgage bonds to reduce long-term interest rates in less conventional fashion.

The Fed could decide to buy more bonds, or shift its portfolio toward longer-term bonds or mortgage debt to help bring down long-term interest rates. Fed chairman Ben Bernanke said in early June that all options were on the table but was noncommittal about whether he would act.

Some officials worry about the effect of the credit divide. “I’ve taken a position of some skepticism, at least under the current conditions, that more policy action would make that much of a difference,” Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said in a May interview.

Mr. Lockhart has since wavered. He said in a speech earlier this month that he would consider more action if the outlook worsened, then later added he wasn’t yet “quite convinced” that the Fed should do more.

Chris Hordan, who emerged from the financial crisis financially unscathed, is one of the beneficiaries of Fed policies.

With a good income and pristine credit, he has refinanced the $417,000 mortgage on his home in Hermosa Beach, Calif. three times in 17 months, shaving his monthly payments by $390. Multiply the fruit of cheap credit across millions of households—with healthy portions of interest savings spent on goods and services—and the U.S. should be recovering more quickly, according to textbook economics.

But Mr. Hordan doesn’t need the money to buy things. His electronic test equipment business has annual revenues of roughly $1 million and he could easily pay off his mortgage with savings, he said. But why bother? Borrowed money is cheap—his mortgage rate is 3.875%—and there are tax benefits for paying mortgage interest. Instead of retiring his mortgage, he is investing the money.

“If you don’t need the money, you can get it all day long,” he said. “Thank you, Ben Bernanke.”

One problem is that financially secure households are less likely than lower-income households to spend their interest rate savings. Wealthier households are more likely to save or invest a windfall because they can already consume as much as they want, according to standard economic theory and research.

Mr. Hordan, for example, is spending his mortgage savings on such investments as gold, emerging markets, U.S. stocks and European banks.

In previous downturns, the lowered interest rates triggered broad waves of mortgage refinancing and new borrowing. The spending that resulted helped power the recoveries.

This time around, many would-be borrowers with lower incomes or blemished credit histories are finding it difficult and more costly, or sometimes impossible, to refinance their mortgages or get new loans.

Giuliana Bernales, a 33-year-old bank analyst in Miami, Fl., bought her Miami condominium two years ago. She lost her job eight months later and made late mortgage payments.

Ms. Bernales said her new job pays roughly $45,000 per year. But she can’t refinance her $152,000 mortgage, which is backed by the Federal Housing Administration, because her credit score has fallen, along with her home’s value. If she could lower her 5.5% mortgage rate to the current 4% or less, she would save $200 a month.

“For me, that would be a lot of help,” she said. “They told me I need a year at least of on-time payments.” She recently submitted a new application.

The American credit divide doesn’t always distinguish between rich and poor. Bill Hall, a 52-year-old Seattle firefighter, has a six-figure income. He bought his home in Cle Elum, Wash., a Seattle suburb, just as the property boom was about to fizzle in 2007. He paid $320,000, borrowing all of it. The home would now fetch less than $200,000. He said refinancing, even if possible, wouldn’t be worthwhile because he would still owe far more than his house was worth.

Mr. Hall suffered a second setback in 2009: a bladder cancer diagnosis that kept him out of work for months. The cancer is in remission but his financial status remains impaired. After a lifetime of timely payments, he said, he stopped paying his mortgage last November. Amid frustration over the prospect of his home never regaining its value and worries about saving for retirement, he said he decided to let the home go into foreclosure, though he remains living there for now. His credit score fell from near 800 into the 600s, from solid to sketchy.

A decade ago, he borrowed against his home to buy cars, boats, motorcycles. “My whole adult life,” he said, “I was encouraged to be a good consumer.” Now, he plans to live without debt while he repairs his credit score.

Nationally, there are signs the credit gap is narrowing. Broad refinancing activity has picked up and housing markets have started to improve. Credit has started flowing more freely to low-credit-score households in the auto-lending market.

In 2011, banks and finance companies issued $169 billion in car loans to households with credit scores below 700. That was up 26% from 2010, though still down 32% from before the financial crisis, according to Equifax. Car loans to households with credit scores above 700 were $207 billion in 2011, up 8% from a year earlier and up 12% from before the bust.

Many Fed officials say their efforts to reduce interest rates have been appropriate if imperfect. Elizabeth Duke, a Fed governor, said in an interview last month that central bank policies lowered rates for corporate borrowing and consumer loans, with broadly positive effects on the economy.

Fed policies have also helped to push stock prices higher, which spurs growth. The Wall Street Journal examined 18 instances when new Fed measures were either announced or foreshadowed since November 2008, the time of the central banks’ first bond-buying program.

The S&P 500 rose by 0.7% on average during days of Fed news. The average increase in the index on all other days was much smaller, 0.05%, over the same period. Here, too, the spoils of easy money were unevenly divided: Wealthy households hold a large proportion of the nation’s stocks.

The benefits of Fed policies are being spread broadly in other ways, however. The cheaper dollar, which since 2007 has dropped 4% against a broad basket of other currencies, is making exports a bit easier to sell abroad and, by extension, helping create blue-collar manufacturing jobs in the U.S.

But credit is the most important and most direct channel through which Fed policies affect the economy. The problem for the Fed is that the pipes in the financial system through which its easy money travels are clogged.

An April Fed survey found that 83% of banks were less likely to approve a new mortgage for a household with a low credit score of 620 and a 10% home down payment than they were in 2006, even a loan guaranteed by Fannie or Freddie.

“This is a big limitation on the potential effects of monetary policy,” Charles Evans, president of the Federal Reserve Bank of Chicago, said in an interview last month. “Normally we’d have a very large refinance boom. People would be able to trade in their high-interest-rate mortgage for lower ones and their mortgage payment would go down. That would put more spending power in the hands of anybody in a position to do that. That would increase aggregate demand. That is the way it is supposed to work.”

Fed officials triggered a spat with Republican lawmakers earlier this year when they released a paper suggesting ways Congress and regulators could spur refinancing and ease credit to households not getting it. The Fed, for instance, urged regulators to allow Fannie and Freddie to waive fees and take on more mortgages. Some Republicans accused Mr. Bernanke of meddling in legislative affairs and taking the side of the White House.

Research shows how Fed efforts have yielded uneven results. A 2010 study by Paul Willen, a researcher at the Federal Reserve Bank of Boston, and Andreas Fuster, a New York Fed economist, found the Fed’s mortgage purchase program in 2008 and 2009 led to a tidal wave of refinancing, but mostly by households with superior credit records.

Households with credit scores above 760 saw a sevenfold increase in refinancing after the Fed launched a $1.25 trillion mortgage-purchase program, while refinancing doubled among households with scores below 700, according to the study. A credit score near 800 is considered excellent, while scores in the 600s reflect some late payments or other past financial trouble.

“You want the money to go to people for whom credit is an issue, and those are exactly the people to whom credit isn’t going,” Mr. Willen said. “Monetary policy is having no effect on the vast majority of people.”

Since 2009, the Fed has launched several other mortgage bond-buying program and a similar bottleneck emerged. An analysis by Lender Processing Services Inc., a mortgage data research firm, shows that in April borrowers with credit scores of 760 or greater had paid more than 22% of their mortgages early, largely through refinancing, while borrowers with scores below 620 had prepaid less than 9% of their mortgages.

“Even though we have the greatest monetary policy stimulus in the history of the Fed, we really have not managed to lower the funding costs for a large swath of people,” said David Zervos, a bond strategist with Jefferies Inc., a Wall Street investment bank. He called Fed efforts “monetary policy for rich people.”

Fed officials said they have a long-standing congressional mandate to minimize unemployment and inflation, not to micromanage the distribution of wealth, income or credit in the economy. “That is expecting the Fed to do way more than it can possibly do,” said Ms. Duke.

The Fed’s interest rate lever, Mr. Evans said, is a blunt instrument.

Housing Market Rebound Coincides with Gains in Credit Repair Leads

Posted by admin in Credit Repair, Leads, Mortgage Loans. Tagged: , , , , , , , , ,

This is a recent article from the Wired PR News:

Housing Market Rebound Coincides with Gains in Credit Repair Leads

2012-05-25 11:54:04 (GMT) ( – Business, Press Releases)

05/22/2012 (press release: McClain Concepts) // Mission Viejo, CA, US //

Although credit repair leads are still selling hot, the housing market had its strongest month in five years. For many people, though, this news means little, as many Americans and people around the world continue to fight their way out of debt to once again be able to enjoy the benefits of a good credit rating.

With the new data obtained by the National Association of Realtors, though, it appears as though the data is actually correct, showing that the home sales now are 10.5% better than a year ago. Credit repair leads have been selling like hotcakes upon signs that the housing market in the US has been in the process of recovery. Although signs have been pointing to that for awhile, data collected during the autumn and winter months is an inaccurate gauge, since many people are more reluctant to go house hunting in the biting cold.

Shockingly, aside from the influx of home-buyer credits which inflated the number of sales, April was the strongest month for the US housing market since before the crash of the economy in September of 2008. However, credit repair leads sales have indicated that there is still a long way to go before the celebration begins, since becoming a home buyer necessitates a good credit rating. What the numbers show, though, are that there are still a large number of people licking their wounds from the years of living hand to mouth.

The Commerce Department stated that there was an unadjusted 21% increase in the number of new single-family homes in April, which is all well and good, but if someone happens to be a part of the multitudes that make up the huge sales in credit repair leads still being sold, then it makes little difference that the National Association of Home Builders noticed their highest level of foot traffic from those looking to buy a new home in five years. For those people, it is certainly a light at the end of the tunnel, but the real benefits of such are still a ways away.

The improvement in the housing market, though, does show signs that the number of high-quality credit repair leads may be diminishing soon. After all, more people need to have good enough credit to be buying these homes in the first place. Furthermore, banks have been making improved efforts to break the war of attrition that has resulted from lenders being too tight with their purse strings, with some banks in Florida offering six-figure discounts on houses in that area due to a stale housing market. Regardless of those factors, though, higher numbers generally translates to higher consumer confidence, and that means a stronger economy and a stronger job market.

For more information about credit repair leads and mortgage leads please visit

How Credit Bureaus Experian, Equifax and TransUnion Rose to Power as the “Big Three”

Posted by Joel pate in Auto Loans, Credit Cards, Credit Repair, Mortgage Loans. Tagged: , , , , , , , , , ,

Most of us at one time or another have had to take out a loan to buy a new car or a home. During the process, the lender will pull your credit report and score to find out if you’re worthy of receiving a line of credit. They want to know whether you can repay the money that you’ve borrowed on time, or have a history of being late with your payments. The rates or fees you have to pay on your loan may be based on how well you’ve handled credit over the years.

We’ve all come to accept the fact that we’ll have our credit checked these days when trying to get a loan, but where did the process originate and when did the the three major credit bureaus rise to power?

History of the Credit Bureau

So when did the idea of the credit bureau get it’s start? As far as back as the 1860s we can find traces of the ideas behind credit bureaus. Local merchants would share and maintain lists of individuals who were high credit risks. That allowed them to offer more credit to people who weren’t on the lists, whereas previously, most merchants only extended credit to people they knew personally.

Later on as populations became more mobile and a wider group of merchants across the country needed information to help determine the creditworthiness of individuals, credit bureaus as we know them today began cropping up.

What Are the Three Credit Bureaus?

Over the years, as the number of people seeking credit grew, the ability to find consolidated credit reporting information took on added importance. Today, some 2 billion data points are entered every month into credit records in the U.S, and approximately 1 billion credit cards are actively being used in the U.S. That’s a lot of data to process!

A variety of big and small credit bureaus have been on the scene to help track credit, but a majority of lenders and financial institutions now use one of the “Big Three” credit bureaus in order to assess whether someone is worthy of receiving a loan. The 3 agencies include Equifax, TransUnion and Experian. Let’s take a brief look at their history.

History of Equifax

Equifax was founded way back in 1899 as the Retail Credit Company. They grew at a furious pace and had offices throughout North America by the 1920s. By the time the 1960s rolled around, they had credit information for millions of Americans on file, and weren’t afraid to share it with just about anyone.

The passage of the Fair Credit Reporting Act of 1970 placed some limits on what information could be shared with who, as well as put laws in place to govern the credit industry and protect consumers. Retail Credit Company suffered a bit of an image problem, but by 1975 they had successfully re-branded as Equifax.

TransUnion History

TransUnion was the second of the Big Three to come along. Founded in 1968 as the holding company of Union Tank Car, a rail transportation equipment company, TransUnion jumped into the credit sphere in 1969 when they began acquiring regional and major city credit bureaus. They’ve grown over the years to the point where they now have over 250 offices across the U.S., as well as in 24 other countries.

History of Experian

Experian is the latecomer to the Big Three. They were founded in 1980 in England as CCN Systems. They expanded to the United States in 1996 by acquiring a company called TRW Information Services. They’ve continued to grow their operations to the point where they now have a presence in 36 countries.

Credit in the Internet Age

With the dawn of the internet age, credit bureaus now offer the ability for consumers to view their credit reports online, as well as give them access to dispute incorrect items that may have shown up on their credit. In the past, this process would have to be done by mail.

Consumers can also now get a free annual credit report from each of the big three agencies through the government’s website at There are also ways to get a look at your credit score from one of the three agencies via other free or paid services more than once a year, so it’s easier than ever to for you to determine how good, or bad, your credit situation is.

The FHFA’s Bulk REO Rental Plan Makes Sense

Posted by Joel pate in Mortgage Loans. Tagged: , , , , , , , , ,

Since late 2008, John Burns Real Estate Consulting has been pushing for a program that allows the owners of REO to sell the homes as rental units. Financially, we have nothing to gain other than the benefits that accrue to everyone from a stable housing market.

Two years ago, a Housing and Urban Development Department executive agreed with us, calling it a “no-brainer” and championing it through Washington.

But at last year’s REThink conference hosted by HousingWire, the consensus view of attendees seemed to be that it was a bad idea. It became clear to me over the course of the conference, however, that many of the attendees benefit from transactions that involve a sale and a mortgage. They were speaking from self-interest rather than a belief in doing what is right for the country.

At the risk of being castigated, let me lay out my thinking. Encouraging investors to buy REO homes and rent them out helps stabilize home prices and neighborhoods and improves REO asset recoveries. It also prevents rents from rising too quickly and removes a huge cloud hanging over the future of the housing market.

The most effective rental REO policy would involve a joint-venture structure that allows experienced professionals to manage the portfolio according to free market conditions, with the only significant stipulation being that they can sell no more than 20% of the homes in any given year.

The best economic recovery would include seller profit-and-loss participation, similar to the successful policies utilized by the Federal Deposit Insurance Corp. and, when feasible, a market-rate lease option to the foreclosed homeowner. That would eliminate the costs associated with vacancy and leasing while also providing relief to the former homeowner.

Finding Stability

We estimate that more than 8 million distressed home sales will occur over the next five years, representing approximately 30% of all transactions. This will put downward pressure on home prices, unless the government-sponsored enterprises, HUD and the major banks implement a massive rental REO policy. Regulatory and political hurdles need to be removed to allow the decision-makers at these institutions to make the right decisions. Home prices cannot stabilize until the volume and percentage of distressed transactions declines significantly.

Vacant homes contribute to neighborhood deterioration, and there were approximately 2.4 million more vacant homes than normal at the end of 2011, which we forecast will take until late 2014 to normalize. (Our forecasts vary significantly by market and neighborhood.) A rental REO policy will fill up the homes much more quickly than the current path, which keeps many homes vacant for months.

Investor Involvement

Investors already play an enormous role in determining home prices, as they are purchasing more than 19% of all homes, according to the National Association of Realtors. Some of these investors “flip” the homes for a quick profit, while others rent the homes for a marginal annual return with the potential upside of future price appreciation. Selling homes in bulk will and can recover more than selling individually because bulk buyers will be able to purchase homes without the expense of brokerage commissions and other selling expenses.

They also will have the ability to finance their portfolio with debt, allowing bulk buyers to pay more than individual investors who pay with all cash. Finally, the seller can reduce carrying costs, including overhead and transaction costs, including brokerage commissions.

Limited restrictions on the buyers, as well as access to quality due diligence, will help increase the price paid. An REO rental policy should not be mandated for all homes, as there are instances where the economics are more favorable for disposition.

We believe rents will rise as the economy recovers, unless there is plenty of rental supply. More rental supply will help moderate rental increases, which will hold down the cost of living for renters and allow renter households to save and to use more of their disposable income to help the economy recover. Also, since “owner equivalent rent” is 23% of the consumer price index, lower rental rate increases will have the additional benefit of limiting inflation, saving taxpayers huge dollars on entitlement increases tied to inflation.

The shadow inventory of future distressed sales is keeping investors and homebuyers on the sidelines. A rental policy that reduces future distressed sales will alleviate much of their concerns and contribute to growing confidence in a housing rebound.

Answering the Critics

Critics of the rental REO policy tend to fall into three camps: 1) transaction-based companies such as real estate agents and appraisers, 2) REO/servicing employees who want to preserve their jobs, and 3) armchair quarterbacks, some of whom are granted media airtime because they know a lot about a particular segment of the housing market, but have not studied this issue in depth.

One key criticism is that there is better asset recovery on individual sales than bulk sales. We estimate that there is a 10% cost savings associated with a bulk transaction, and that a significant rental REO effort will prevent further deterioration in home prices. The notion that bulk investment buyers will pay less for homes is most likely not true, given that 29% of all transactions are already to cash buyers/investors.

Critics contend that investment groups will bid low to cover the risk of unknown capital expenditures. The seller solves this problem by providing excellent information on the portfolio.

Some argue the government is giving up large future profits to investors, but the FDIC adopted a transaction structure that returns a portion of the profits to the FDIC after the investor has received a reasonable return, essentially guaranteeing a FDIC share in any windfall, if it occurs. This same policy could be adopted by the seller.

One hurdle is bank capital requirements. A new policy that allows banks to hold “investment in housing rental REO” with minimal capital set-aside required would help the banks make the right economic decisions.

We also don’t buy the argument renting REO is merely delaying the distressed sale to a future date. The entire addition to the single-family rental stock will be, at most, 9 million homes, and I can’t imagine a scenario where 15% or more of those owners decide to sell in the same year. If they did, that would still be fewer distressed transactions than in 2010 and 2011.

The properties should be sold to investors who work with professionally managed and experienced property management companies who have a great track record of property maintenance and fairness with tenants. We don’t believe it wise to have the federal government act as the property manager.

Some critics contend there are no large property management companies to handle the growth. There were 12.6 million single-family rentals in 2010, and we believe there will be 17.5 million in 2015, for a 7% annual growth rate. With this program, that growth could possibly go to 21 million, an annual growth rate of 11%, which we believe can be reasonably achieved.

Capital isn’t interested say some critics. Based on the phone calls we have received, and the more than 4,000 submissions the FHFA received, we are confident that this is not an issue. We agree with critics who say we need to let the free market take over. Current regulatory practices and political realities prevent the free market from occurring. Capital restrictions on REO investments prevent bank executives from renting significant REO. Also, repeated threats of shutting down Fannie Mae and Freddie Mac have caused the GSEs and their regulator to delay the resolution of REO. Banking and GSE leadership should do what is best for their shareholders/conservators, which also happens to be in the best interest of the U.S. economy and taxpayer.

Taking our pain via expedited foreclosures just won’t cut it. With 12.5% of mortgages currently delinquent, allowing an expedited foreclosure process could result in another collapse in home prices, resulting in rising bank failures and a recession. While we all want this crisis to be over, the pundits who call for laissez faire have not completely thought through the ramifications, or more likely want a better investment opportunity when home prices tumble.


Posted by Joel pate in Auto Loans, Banks, Business, Credit Cards, Credit Repair, Leads, Management, Mortgage Loans, Sales. Tagged: , , , , , , , , ,

Dear Friends,

In life we are fortunate when we can say that any court ruled in our favor but when it is the Supreme Court of the United States, it is definitely a great day.

As you may know, Compucredit was sued a few years ago under the Credit Repair Organizations Act.
The details of the case are important but the really important facts are that the Supreme Court ruled that Consumers can be required to be compelled to arbitrate a case, if the company has the proper provisions in their Contract.
So act quickly to make sure that your contract has the appropriate and legally binding clause to protect yourself against consumer lawsuit.

For more information follow this link.


Joel S. Pate, President

Ox Publishing