June 11, 2010
By JIM PUZZANGHERA
Los Angeles Times, (MCT)
Housing Starts Turn Ugly in May
Housing starts fell 10% in May to an annualized rate of 593,000 units, far below the expectations of many analysts who were looking for a consensus reading of 648,000. The Commerce Department reported that applications for new building permits, a sign of future activity, also declined, sinking 5.9% to an annual rate of 574,000, the lowest level in a year. Meanwhile, April's numbers were revised downward to 659,000 from 672,000. According to a report by Barclays Capital, "The weakness in housing starts today was driven entirely by single family starts, which fell to 17.2%, to 468,000 from 565,000, completely reversing the 5.6% gain in April." There was some good news: multifamily rose 33% in May to 125,000 from 94,000. Regionally, the decline was concentrated in the South (-21.3%) and the Northeast (-6.3%). Analysts say builders are scaling back their construction plans now that federal tax credits for first-time and certain move-up buyers has expired.
Friday, June 18, 2010
Thursday, June 17, 2010
Tuesday, June 15, 2010
Google Mortgage Rates
Google is rolling out a new search function that allows consumers to shop and compare mortgage offerings from about 15 participating lenders.
The service, part of its AdWords Comparison Ads initiative, will display rates in specific states where there is matching mortgage coverage from participating lenders. Google’s technology partners in the service include Mortech, Insight Lending Solutions’
PriceMyLoan mortgage price engine, and lead management software firm Leads360. The feature does not require Google visitors to enter any private information during the search.
The service, part of its AdWords Comparison Ads initiative, will display rates in specific states where there is matching mortgage coverage from participating lenders. Google’s technology partners in the service include Mortech, Insight Lending Solutions’
PriceMyLoan mortgage price engine, and lead management software firm Leads360. The feature does not require Google visitors to enter any private information during the search.
How To Select A Loan Officer
Finding Right Loan Officer
Understanding how an originator operates
July 16, 2001
By Mortgage Daily staff
Finding the right loan officer can make the difference between owning the home you want and losing it because you couldn't obtain adequate financing by the closing date. That's because there are many programs for many situations, and a good loan officer knows which program is best for you.
Loan officers are also known as "loan originators," "loan agents" and "sales reps," among other titles. In order to choose a capable loan officer, it is a good idea to know that a loan officer is a salesperson. Some loan officers earn a base salary in addition to bonuses or commissions, and others work on straight commission with no base salary. In either case, the loan officer is responsible for convincing prospective borrowers that he or she can obtain financing under acceptable terms in time for the closing. Loan officers don't generally have any authority to approve loans. However, a good loan officer will usually have a productive relationship with the underwriter -- the person that does have the authority to approve your loan. In any event, the loan officer will often be the primary contact at the mortgage company you choose.
Loan officers can be employed by a lender or a mortgage broker. Working directly with a lender means that you are working with the company that has the authority to approve your loan. A direct lender loan officer is more likely to have a sound understanding of the guidelines and procedures of that specific lender, which can help the transaction process to move more smoothly. However, a loan officer employed by a mortgage broker -- who doesn't actually lend money but can work with many lenders -- usually has access to many different programs. If you are turned down by a direct lender, you will usually have no options. But with a mortgage broker, your loan package can be resubmitted to other lenders that may still approve your application. Because mortgage brokers acquire & service the customer and process much of the paperwork, lenders will give them wholesale pricing. For this reason, it is possible for a mortgage broker to provide terms as competitive as a direct lender. There are even some direct lenders that only accept applications from mortgage brokers and have no loan officers of their own.
In addition to points and fees, loan officers can earn income from yield spread premium. Basically, this means that an interest rate higher than the market rate will earn the loan officer additional fees (about 1 percent of the loan amount for each additional one-third percent in interest rate obtained). For instance, if the market interest rate for a particular day is 7.50 percent, but the loan officer convinces you to accept a rate of 7.875 percent, the loan officer will earn an additional 1 percent of your loan amount.
Mortgage loan applicants will often look to loan officers for guidance about where interest rates are heading. Mortgage rates are closely tied to Treasury securities and are impacted by movements in the bond market. A good loan officer won't necessarily try to predict whether mortgage rates will go up or down, but instead will inform you about your option to lock your interest rate or let it float, and about the risks associated with floating your rate. If you choose not to lock your rate, your loan officer -- knowing that you are unlikely to switch lenders near the closing date -- might have an opportunity to earn more yield spread premium.
Once you do lock your interest rate, you should be able to obtain a written confirmation of the rate lock, including the date it expires. In the case of a mortgage broker, you should obtain a copy of the lock they received from the lender.
Big producing real estate agents will usually only work with dependable, quality loan officers, so these referrals can be quite valuable. Some agents have in-house loan officers. A benefit to this situation is that the real estate broker carrying the license of your agent has a greater interest in seeing the transaction close and may offer some flexibility in commission rates or loan fees. However, a loan officer that is assured of getting the loan because of a strong referral may not always provide the most competitive terms; it is a good practice to compare the closing costs of at least three lenders by obtaining good faith estimates. Let each of the lenders review all of the competing estimates and point out problems they may see. This process will also help you begin to develop a relationship with the loan officer you eventually choose.
Builders often have their own in-house financing. It is not unusual for builders to provide less favorable terms if you use an outside lender. For instance, while some builders will pay for an owner's title policy if you use their in-house mortgage company (which is regularly paid by the sellers in most situations anyway), they won't pay for the policy if you go outside for your loan. You can still use the comparison of competing estimates to determine that the builder's deal is the best one.
A loan officer with many consecutive years' experience has likely been through many situations only encountered with the passage of time. This person also has been able to sustain a living in the mortgage profession, indicating a history of successful closings. While a new loan officer may have the best intentions, there are many variables involved in the mortgage process that can cause favorable terms to worsen or deals to fall through, and experience helps prevent this.
Most mortgage companies now offer instant automated approvals for borrowers with good credit and verifiable income. With an automated approval, not only do you immediately receive confirmation of your loan approval, but you will likely be required to provide far less documentation that traditionally required. Your loan officer should be familiar with these systems to ensure you are not needlessly rejected because of poor data input.
In summary, loan officers are salespeople that are compensated only when your mortgage loan successfully closes. There are advantages and disadvantages to working with a lender versus a broker, and both can provide competitive terms. Loan officers charge fees and earn yield spread premiums, and you should utilize good faith estimate comparisons to determine which mortgage company has the best terms for you, especially when considering a builder's or real estate agent's in-house mortgage company. Finally, much value can usually be associated with many years' experience in mortgage lending.
Understanding how an originator operates
July 16, 2001
By Mortgage Daily staff
Finding the right loan officer can make the difference between owning the home you want and losing it because you couldn't obtain adequate financing by the closing date. That's because there are many programs for many situations, and a good loan officer knows which program is best for you.
Loan officers are also known as "loan originators," "loan agents" and "sales reps," among other titles. In order to choose a capable loan officer, it is a good idea to know that a loan officer is a salesperson. Some loan officers earn a base salary in addition to bonuses or commissions, and others work on straight commission with no base salary. In either case, the loan officer is responsible for convincing prospective borrowers that he or she can obtain financing under acceptable terms in time for the closing. Loan officers don't generally have any authority to approve loans. However, a good loan officer will usually have a productive relationship with the underwriter -- the person that does have the authority to approve your loan. In any event, the loan officer will often be the primary contact at the mortgage company you choose.
Loan officers can be employed by a lender or a mortgage broker. Working directly with a lender means that you are working with the company that has the authority to approve your loan. A direct lender loan officer is more likely to have a sound understanding of the guidelines and procedures of that specific lender, which can help the transaction process to move more smoothly. However, a loan officer employed by a mortgage broker -- who doesn't actually lend money but can work with many lenders -- usually has access to many different programs. If you are turned down by a direct lender, you will usually have no options. But with a mortgage broker, your loan package can be resubmitted to other lenders that may still approve your application. Because mortgage brokers acquire & service the customer and process much of the paperwork, lenders will give them wholesale pricing. For this reason, it is possible for a mortgage broker to provide terms as competitive as a direct lender. There are even some direct lenders that only accept applications from mortgage brokers and have no loan officers of their own.
In addition to points and fees, loan officers can earn income from yield spread premium. Basically, this means that an interest rate higher than the market rate will earn the loan officer additional fees (about 1 percent of the loan amount for each additional one-third percent in interest rate obtained). For instance, if the market interest rate for a particular day is 7.50 percent, but the loan officer convinces you to accept a rate of 7.875 percent, the loan officer will earn an additional 1 percent of your loan amount.
Mortgage loan applicants will often look to loan officers for guidance about where interest rates are heading. Mortgage rates are closely tied to Treasury securities and are impacted by movements in the bond market. A good loan officer won't necessarily try to predict whether mortgage rates will go up or down, but instead will inform you about your option to lock your interest rate or let it float, and about the risks associated with floating your rate. If you choose not to lock your rate, your loan officer -- knowing that you are unlikely to switch lenders near the closing date -- might have an opportunity to earn more yield spread premium.
Once you do lock your interest rate, you should be able to obtain a written confirmation of the rate lock, including the date it expires. In the case of a mortgage broker, you should obtain a copy of the lock they received from the lender.
Big producing real estate agents will usually only work with dependable, quality loan officers, so these referrals can be quite valuable. Some agents have in-house loan officers. A benefit to this situation is that the real estate broker carrying the license of your agent has a greater interest in seeing the transaction close and may offer some flexibility in commission rates or loan fees. However, a loan officer that is assured of getting the loan because of a strong referral may not always provide the most competitive terms; it is a good practice to compare the closing costs of at least three lenders by obtaining good faith estimates. Let each of the lenders review all of the competing estimates and point out problems they may see. This process will also help you begin to develop a relationship with the loan officer you eventually choose.
Builders often have their own in-house financing. It is not unusual for builders to provide less favorable terms if you use an outside lender. For instance, while some builders will pay for an owner's title policy if you use their in-house mortgage company (which is regularly paid by the sellers in most situations anyway), they won't pay for the policy if you go outside for your loan. You can still use the comparison of competing estimates to determine that the builder's deal is the best one.
A loan officer with many consecutive years' experience has likely been through many situations only encountered with the passage of time. This person also has been able to sustain a living in the mortgage profession, indicating a history of successful closings. While a new loan officer may have the best intentions, there are many variables involved in the mortgage process that can cause favorable terms to worsen or deals to fall through, and experience helps prevent this.
Most mortgage companies now offer instant automated approvals for borrowers with good credit and verifiable income. With an automated approval, not only do you immediately receive confirmation of your loan approval, but you will likely be required to provide far less documentation that traditionally required. Your loan officer should be familiar with these systems to ensure you are not needlessly rejected because of poor data input.
In summary, loan officers are salespeople that are compensated only when your mortgage loan successfully closes. There are advantages and disadvantages to working with a lender versus a broker, and both can provide competitive terms. Loan officers charge fees and earn yield spread premiums, and you should utilize good faith estimate comparisons to determine which mortgage company has the best terms for you, especially when considering a builder's or real estate agent's in-house mortgage company. Finally, much value can usually be associated with many years' experience in mortgage lending.
How To Raise Your Credit Score
How to Strengthen Your Credit Score
Secrets to keeping your credit score high
May 17, 2010
By JENNIFER WATERS
MarketWatch, (MCT)
CHICAGO -- A happy consequence of this Great Recession is that Americans are widely expected to be better consumers.
That means we'll only take on loans that we can afford, pay off credit-card debt at the end of each month and sock money away. It also means our credit scores will reach what the industry calls super prime, the top score achievable.
Or will they?
Turns out our scores are not just a reflection of our ability, or lack thereof, to pay on time, but they tell a story of how we run our lives. If there's a blip in that story, say a 30-day late payment, the red flags pop up and all those years of paying dutifully can fall flat quickly.
Much attention has been focused on credit scores during this recession as consumers have struggled to keep up with their mortgage payments and revolving debt. Many consumers -- even those who have long had outstanding credit ratings -- have complained that their scores have fallen as credit-card companies slashed limits and closed inactive cards.
But people shouldn't worry so much about their scores, according to experts. "It's less about the score than it is about the information that's contained in the report," said Steve Katz, senior director of consumer education for TransUnion. "The score is only a reflection of what's in the report."
The most important information in your credit report is your bill-paying history. It bears repeating: Pay your bills on time every single month. A whopping 35 percent of your FICO credit score is tied to that payment history.
Another 30 percent of your score is based on your outstanding debt. Lenders expect you to use credit cards but to do so prudently. If you have three credit cards with a total of $30,000 in available credit, they will look at how much of that you're using. That's called your utilization rate. Don't max those cards out. In fact, don't even come close to it.
Figuring out your utilization rate is easy math. Add up all your outstanding balances and divide by your total credit limit, which should produce a number less than 1. If it hits 1, you're maxed out.
Most credit experts, including the credit bureaus, will advise you to keep your credit utilization under 30 percent of the total limit.
But here's a secret: Make sure you do it for each card. If you exceed that threshold on one card -- say you use 70 percent of that limit but only 10 percent on another card and nothing on a third card -- you're under 30 percent of the total limit, but you'll still get dinged for using so much of the limit on the first card.
How much of your limit you use in any given month can turn the tide on your card. If, for example, you max out your American Express card every month but pay it in full, you can still get slammed for hitting your limit. The credit card companies don't report if you've paid off your card; only how much you spent.
"Whether you pay in full or not is not relevant," said Maxine Sweet, vice president of public education at Experian. "If I charge $5,000 this month, the credit history is not going to know if that $5,000 is part of a longer-term bill or not.
"From a scoring standpoint, what's important is: How does my balance of $5,000 compare to my total credit limit?" she said.
Also, some 15 percent of your score is based on your credit history, which doesn't bode well for college graduates just getting on the bandwagon. But if you've been managing your credit well for a couple decades or more, chances are your numbers are pretty lofty.
But remember this: The higher you climb, the further and faster you fall. If you've been doing a stellar job of managing your credit for 20 or 30 years and one month you miss a payment -- say, you landed in the hospital with a bad leg break -- not only do the red flags go up but the warning sirens go off at full blast. You automatically get put into a much riskier credit category than the neighbor who tends to be a bit late on his monthly payments.
Seems unfair, you say? It's because you're exhibiting uncharacteristic behavior. The system reads that as something is wrong, so wrong that you now might not be able to pay your car loan and the department-store credit card on time.
Craig Watts, public affairs director at FICO, which produces credit scores, described it metaphorically as this: You're the perfect angel of a child during all of grade school and junior high, but then you get to high school and discover partying is not the bad thing your parents said it was. You become so good at it that your angelic history is now mud.
"Your reputation is suddenly skewed heavily to the left," Watts said. "It will take time to restore that pristine reputation. The same thing happens with credit risk and credit score."
The lesson here: Your credit score is your credit reputation.
Here's another thing you probably didn't know: Many banks rely on a proprietary statistic known as the odds-to-score ratio that has more to do with people like you than you alone. It tells lenders what the likelihood is of a 90-day delinquency based on what your score is.
For example, a FICO score of 780 tells a lender that for all the consumers in his marketplace with a score of 780, one out of every 400 will become 90 days late in the next two years, meaning your odds-to-score ratio is 400-to-1. The ratios fall in tandem with the scores.
Your credit scores are also affected, though less so, by your pursuit of new credit. And they are a catch-all of your history.
"Everything in your credit history will have an impact," Sweet said. "A credit score will have many factors and considers every element in the credit history."
When you actively seek new or more credit, your rating gets what's called a "hard inquiry" that pares a few points off your score. When the banks check your credit -- most of them do it every 30 days -- that's considered a "soft inquiry" and won't affect your rating. Same is true for mailers with pre-approved credit lines.
"Don't apply for too much credit in a short period of time," Katz said. "You start to look credit-hungry, and each one of those applications triggers an inquiry. Three or four in a short period of time start to add up."
The type of history you have also shows up in your scores. Banks typically like to see that you have a good track record with revolving credit and installment loans.
"A good mix of credit can be useful to your score, but not so useful that you should open a credit card to get it," Watts cautioned.
Given all this, it might be hard to swallow that credit scores are actually a good thing for consumers. They're discriminatory for sure, but on risk, not on race, age or gender.
"It's the kind of tool that the courts and government have favored because by design it doesn't discriminate in an unpalatable manner," Watts said.
Finally, should you be checking your credit score regularly? The answer is: It depends. There are services you can sign up for that will track even the tiniest of changes to your score, for a fee.
TransUnion's Katz said everyone should know what their score is at all times. "Your accounts are being updated by your creditors every 30 days," he said. "You should know what they contain because it can change."
But Experian's Sweet, who has a regular check on her score, doesn't think it's necessary to be obsessive about it.
"People are chasing their score too much," she said, adding that consumers should spend more time understanding how their credit actions affect their scores. "You have to be educated enough to know what is in your credit report and how it is scored."
FICO's Watts said you should simply be financially fit. "Rather than micro-manage your FICO score, it's way easier to adopt careful management habits," he said.
"If you do that and your score is high, like the upper 700s, you don't have to worry about dings if you close an account and open another one. Who cares?" he said. "Don't worry about the little stuff."
And don't forget the good news: credit scores are salvageable.
"The worse the situation, the longer it's going to be to recover," Watts said. "A bankruptcy or foreclosure will take several years to fix. But the nice thing is your score can recover," he said.
"Bankers have come to respect the fact that people do learn new rules, and that many can go through difficult times and become good borrowers again."
Secrets to keeping your credit score high
May 17, 2010
By JENNIFER WATERS
MarketWatch, (MCT)
CHICAGO -- A happy consequence of this Great Recession is that Americans are widely expected to be better consumers.
That means we'll only take on loans that we can afford, pay off credit-card debt at the end of each month and sock money away. It also means our credit scores will reach what the industry calls super prime, the top score achievable.
Or will they?
Turns out our scores are not just a reflection of our ability, or lack thereof, to pay on time, but they tell a story of how we run our lives. If there's a blip in that story, say a 30-day late payment, the red flags pop up and all those years of paying dutifully can fall flat quickly.
Much attention has been focused on credit scores during this recession as consumers have struggled to keep up with their mortgage payments and revolving debt. Many consumers -- even those who have long had outstanding credit ratings -- have complained that their scores have fallen as credit-card companies slashed limits and closed inactive cards.
But people shouldn't worry so much about their scores, according to experts. "It's less about the score than it is about the information that's contained in the report," said Steve Katz, senior director of consumer education for TransUnion. "The score is only a reflection of what's in the report."
The most important information in your credit report is your bill-paying history. It bears repeating: Pay your bills on time every single month. A whopping 35 percent of your FICO credit score is tied to that payment history.
Another 30 percent of your score is based on your outstanding debt. Lenders expect you to use credit cards but to do so prudently. If you have three credit cards with a total of $30,000 in available credit, they will look at how much of that you're using. That's called your utilization rate. Don't max those cards out. In fact, don't even come close to it.
Figuring out your utilization rate is easy math. Add up all your outstanding balances and divide by your total credit limit, which should produce a number less than 1. If it hits 1, you're maxed out.
Most credit experts, including the credit bureaus, will advise you to keep your credit utilization under 30 percent of the total limit.
But here's a secret: Make sure you do it for each card. If you exceed that threshold on one card -- say you use 70 percent of that limit but only 10 percent on another card and nothing on a third card -- you're under 30 percent of the total limit, but you'll still get dinged for using so much of the limit on the first card.
How much of your limit you use in any given month can turn the tide on your card. If, for example, you max out your American Express card every month but pay it in full, you can still get slammed for hitting your limit. The credit card companies don't report if you've paid off your card; only how much you spent.
"Whether you pay in full or not is not relevant," said Maxine Sweet, vice president of public education at Experian. "If I charge $5,000 this month, the credit history is not going to know if that $5,000 is part of a longer-term bill or not.
"From a scoring standpoint, what's important is: How does my balance of $5,000 compare to my total credit limit?" she said.
Also, some 15 percent of your score is based on your credit history, which doesn't bode well for college graduates just getting on the bandwagon. But if you've been managing your credit well for a couple decades or more, chances are your numbers are pretty lofty.
But remember this: The higher you climb, the further and faster you fall. If you've been doing a stellar job of managing your credit for 20 or 30 years and one month you miss a payment -- say, you landed in the hospital with a bad leg break -- not only do the red flags go up but the warning sirens go off at full blast. You automatically get put into a much riskier credit category than the neighbor who tends to be a bit late on his monthly payments.
Seems unfair, you say? It's because you're exhibiting uncharacteristic behavior. The system reads that as something is wrong, so wrong that you now might not be able to pay your car loan and the department-store credit card on time.
Craig Watts, public affairs director at FICO, which produces credit scores, described it metaphorically as this: You're the perfect angel of a child during all of grade school and junior high, but then you get to high school and discover partying is not the bad thing your parents said it was. You become so good at it that your angelic history is now mud.
"Your reputation is suddenly skewed heavily to the left," Watts said. "It will take time to restore that pristine reputation. The same thing happens with credit risk and credit score."
The lesson here: Your credit score is your credit reputation.
Here's another thing you probably didn't know: Many banks rely on a proprietary statistic known as the odds-to-score ratio that has more to do with people like you than you alone. It tells lenders what the likelihood is of a 90-day delinquency based on what your score is.
For example, a FICO score of 780 tells a lender that for all the consumers in his marketplace with a score of 780, one out of every 400 will become 90 days late in the next two years, meaning your odds-to-score ratio is 400-to-1. The ratios fall in tandem with the scores.
Your credit scores are also affected, though less so, by your pursuit of new credit. And they are a catch-all of your history.
"Everything in your credit history will have an impact," Sweet said. "A credit score will have many factors and considers every element in the credit history."
When you actively seek new or more credit, your rating gets what's called a "hard inquiry" that pares a few points off your score. When the banks check your credit -- most of them do it every 30 days -- that's considered a "soft inquiry" and won't affect your rating. Same is true for mailers with pre-approved credit lines.
"Don't apply for too much credit in a short period of time," Katz said. "You start to look credit-hungry, and each one of those applications triggers an inquiry. Three or four in a short period of time start to add up."
The type of history you have also shows up in your scores. Banks typically like to see that you have a good track record with revolving credit and installment loans.
"A good mix of credit can be useful to your score, but not so useful that you should open a credit card to get it," Watts cautioned.
Given all this, it might be hard to swallow that credit scores are actually a good thing for consumers. They're discriminatory for sure, but on risk, not on race, age or gender.
"It's the kind of tool that the courts and government have favored because by design it doesn't discriminate in an unpalatable manner," Watts said.
Finally, should you be checking your credit score regularly? The answer is: It depends. There are services you can sign up for that will track even the tiniest of changes to your score, for a fee.
TransUnion's Katz said everyone should know what their score is at all times. "Your accounts are being updated by your creditors every 30 days," he said. "You should know what they contain because it can change."
But Experian's Sweet, who has a regular check on her score, doesn't think it's necessary to be obsessive about it.
"People are chasing their score too much," she said, adding that consumers should spend more time understanding how their credit actions affect their scores. "You have to be educated enough to know what is in your credit report and how it is scored."
FICO's Watts said you should simply be financially fit. "Rather than micro-manage your FICO score, it's way easier to adopt careful management habits," he said.
"If you do that and your score is high, like the upper 700s, you don't have to worry about dings if you close an account and open another one. Who cares?" he said. "Don't worry about the little stuff."
And don't forget the good news: credit scores are salvageable.
"The worse the situation, the longer it's going to be to recover," Watts said. "A bankruptcy or foreclosure will take several years to fix. But the nice thing is your score can recover," he said.
"Bankers have come to respect the fact that people do learn new rules, and that many can go through difficult times and become good borrowers again."
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