AOL Real Estate - Blog http://realestate.aol.com/blog AOL Real Estate - Blog http://realestate.aol.com/blog/media/feedlogo.gif AOL Real Estate - Blog http://realestate.aol.com/blog en-us Copyright 2013 Weblogs, Inc. The contents of this feed are available for non-commercial use only. Blogsmith http://www.blogsmith.com/Should You Put a Real Estate Investment on Your Credit Card?http://realestate.aol.com/blog/2013/05/20/real-estate-investment-credit-card/http://realestate.aol.com/blog/2013/05/20/real-estate-investment-credit-card/http://realestate.aol.com/blog/2013/05/20/real-estate-investment-credit-card/#commentsFiled under: , ,

credit cards stacked to resemble a housebigger pockets logo

By Paula Pant

Imagine: You're a beginner real estate investor. You want to flip a house for the first time. You don't have much money.

Someone recommends that you get a Home Depot or Lowe's credit card, which offers 0-percent financing for 12 months, and use that credit card to fund the material purchase costs for your flips. What little cash you have can be used to pay for labor (and/or your own sweat equity can be used for labor). You'll presumably sell the house within a few months, use the profits to pay off the credit card before a single penny of interest is due, and pocket a decent payout, as well. Should you do it? In my humble opinion: Abso-freaking-lutuely NOT. No, no, no, no, no.

I don't have insanely strong opinions when it comes to most real estate investing topics. If you ask me if you should flip houses, become a landlord, try wholesaling or stick to REITs, I'll shrug and say, "Well, that depends." Then I'll walk you through the pros and cons of each. If you ask me if you should buy rentals in stable vs. shaky neighborhoods, I'll tell you that it depends on your goals and risk tolerance.

But I'm a fundamentalist on the issue of credit cards. I firmly believe that if you can't pay a credit card in full, immediately, on the same day that you make a purchase -- don't use it! Why? I can explain my stance in one word:

Risk

You hope that everything goes according to plan. You hope that your labor and material costs are close to the amount you estimated. You hope that you don't find any nasty surprises. You hope that the city inspector doesn't throw a wrench in your plans. You hope that you can sell the house in the amount of time you estimated, for the amount of money that you estimated.

Oh, you know that not everything goes according to plan. So you made conservative estimates. You tacked a 20 percent margin of error onto the material and labor costs. You pinned a 10 percent margin of error onto the after-repair value. And you hope that those margins of error are sufficient. But hope cannot defeat the reality of risk.

ANYTHING could happen that might derail your plans. The city could condemn your home. A major earthquake could cause your home to collapse and insurance could refuse to pay for the damage. Or Wall Street financiers could buy subprime mortgages and sell them to Norway as AAA-rated collateralized-debt obligations, feeding a complex chain reaction that results in housing values plummeting by 50 percent. All those situations sound far-fetched, I know. But s--t happens.

If you've borrowed at reasonable interest rates (e.g. single-digits), the fallout from risk-gone-wrong won't be as bad. It'll still be a setback, of course, but assuming you've leveraged wisely, it will be manageable. If you have tens of thousands in debt on a credit card which suddenly escalates into a 29 percent interest rate, though, you've dug yourself into the deepest pit of a hole that's going to be excruciating to climb out of.

When Can I Use a Credit Card?

Refer to my rule: Don't use a credit card unless you can pay the bill in full, immediately, on the same day that you make a purchase. If you have $20,000 sitting in a savings account, earning 1 percent interest, and you want to make a $20,000 purchase on your credit card at zero-percent interest for a year, go ahead. You have the cash in the bank to pay the credit card in full at a moment's notice. And you'll pocket the 1 percent spread. Congratulations, now you have an extra $200. (Personally, I'd spare myself the trouble and just pay the card immediately, but if you want to pinch pennies, be my guest.)

But if you don't have the cash on hand, don't subject yourself to the risk of getting hit with high-double-digit interest rates. It's not worth the risk.

Paula Pant runs a content marketing company and writes a blog, Afford Anything, which discusses wealth, freedom and living life on your own terms. This article was originally published on BiggerPockets.com.

See more on BiggerPockets.com:
5 Things Mom Taught Me That Made Me the Real Estate Investor I Am Today
How I Decide What I Buy
29 Pieces of Advice From a Seasoned Real Estate Investor

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Find out how to calculate mortgage payments.
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How to Use Credit Cards Responsibly

 

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]]>buying a home on a credit cardcredit cardsreal estate investingreal estate investing adviceBiggerPockets.com2013-05-20T12:30:00+00:00What to Do If Foreclosure Is Killing Your Credithttp://realestate.aol.com/blog/2013/04/12/foreclosure-credit-report/http://realestate.aol.com/blog/2013/04/12/foreclosure-credit-report/http://realestate.aol.com/blog/2013/04/12/foreclosure-credit-report/#commentsFiled under: , ,

By Deanna Templeton

Foreclosures can do a number on your credit report, even for years after they happened. With the Great Recession causing an upheaval in the housing market and many homeowners behind on payments, the aftermath of foreclosures is still a reality for many Americans today. One reader wrote to Credt.com asking for help with a foreclosure on her credit report:

My home has been foreclosed but the second mortgage is still showing an outstanding balance on my credit report -- should that be? How do I remove this? I expect "foreclose" status to remain for seven years but not the amount. Am I right?

When a bank or mortgage lender forecloses on a mortgage, the loan will typically be reported as a "foreclosure" or "foreclosed" in your credit report. However, just because the mortgage has been foreclosed doesn't necessarily mean the outstanding balance is automatically wiped out. Typically, credit reports with a foreclosed mortgage will show the entire outstanding balance, so the way the first mortgage is being reported is actually accurate and can't be removed until it reaches the seven-year expiration timeline.

Foreclosure and Deficiency Balances

Foreclosure laws vary by state, but typically when a home goes into foreclosure the bank or mortgage lender will then attempt to sell the home to recover their losses. If the sale price of the home doesn't cover the outstanding debt, the remaining amount may be considered a "deficiency." Depending on your state laws, the lender may legally be able to attempt to collect on the deficiency amount or they may report the deficiency as "income" to the IRS if the debt is forgiven. This means you could end up receiving a 1099 (showing the forgiven deficiency as income) at the end of the year.

Foreclosure and Second Mortgages

A second mortgage is separate from the first mortgage, and even though the first mortgage was foreclosed, the second is not automatically included in the first mortgage's foreclosure. This means the second mortgage will continue to be reported and the outstanding balance will remain. The second mortgage will not show "foreclosed" because it's a separate loan and not part of the original/first mortgage, unfortunately. For more detailed information about foreclosures, second mortgages, deficiency balances and your rights, here are a few resources that will provide much more detail:

Underwater? Negotiating a Settlement On a Second Mortgage
Understanding Your Foreclosure Rights: A Consumer Law Review
1099-A In the Mail? How to Avoid Taxes on Cancelled Debt from Foreclosure or Short Sale
Foreclosure vs. Short Sale: What's Worse for Your Credit?

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Find out how to calculate mortgage payments.
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What Not To Do If Your Home Is In Foreclosure

 

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]]>credit reportdeficiency balanceforeclosuresmortgagessecond mortgageCredit.com2013-04-12T14:00:00+00:00Real Estate 2012: The Year the Housing Market Turned the Cornerhttp://realestate.aol.com/blog/2012/12/21/real-estate-2012-housing-market-highlights/http://realestate.aol.com/blog/2012/12/21/real-estate-2012-housing-market-highlights/http://realestate.aol.com/blog/2012/12/21/real-estate-2012-housing-market-highlights/#commentsFiled under: , , , ,

2012 will probably be considered the year that a sinking housing market finally hit bottom and began to rise again. Home prices, home sales and new home construction all substantially increased amid shrinking inventory and record-low mortgage rates. Adding to the drama (and perhaps aiding the recovery): Lenders finally agreed to atone for illegally foreclosing on thousands of borrowers, and politicians and industry stakeholders seriously began talking about mortgage-debt forgiveness.

Here's a look back at 2012's major developments in residential real estate -- along with insight on what lies ahead for the housing market in 2013.

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]]>2012 real estatehousing market improvehousing market recoveryreal estate 2012real estate recoveryreal estate trendsTeke Wiggin2012-12-21T11:45:00+00:00Reverse Mortgages Pose Big Risks for Seniors, Warn Attorneys and U.S. Officialshttp://realestate.aol.com/blog/2012/12/06/reverse-mortgages-risks-seniors-government-warning/http://realestate.aol.com/blog/2012/12/06/reverse-mortgages-risks-seniors-government-warning/http://realestate.aol.com/blog/2012/12/06/reverse-mortgages-risks-seniors-government-warning/#commentsFiled under: , , ,

Warning on reverse mortgages

By Jim Avila and Serena Marshall

Linda and Jim McMahan said that they could not believe their luck in 1993 when they found their dream house.

"We loved it," she said. "It wasn't a huge house, but it was a nice size. ... It had the big trees in the yard. And we have deer in the yard every day, and wild turkeys. What more could you want?"

As is true for so many Americans, the McMahans' home in St. Croix, Wis., was the couple's dream and nest egg. That is, until their home was drained of its 19-year equity by a reverse mortgage and sold out from under Linda McMahan to pay it back as soon as her husband died.

Linda McMahan: reverse mortgage took her home."They must read the death notices, because I'd say within two days, I get a letter: 'Sorry to hear about your husband passing away,' " said Linda, pictured at left. "And they said, 'Well, you either have to buy the house or move out.'"

Only people 62 and older qualify for reverse mortgages. They work by giving homeowners the option of an immediate cash payment in exchange for the future value of their house upon death or sale.

When the McMahans applied for the reverse mortgage in 2005, Linda was under 62, so her name was not included on the reverse mortgage. When her husband died, Linda had no claim to her home of nearly two decades. She lost it.

The McMahans did receive the required counseling before receiving the mortgage and were aware that she would no longer be listed, but were unclear about the process needed to add her name -- which would have required another refinancing when she turned 62 as outlined in their mortgage documents.

Related: HUD Mortgage Sale Could Help or Hurt Thousands of Distressed Borrowers

It's only one of the dangers inherent in the reverse mortgage that government officials are warning consumers about today.

According to the Department of Housing and Urban Development, right now in America, 57,000 seniors like McMahan are in danger of losing their homes -- a 9.8 percent foreclosure rate, four times higher than for traditional mortgages.

Reverse mortgages peaked in 2009, rising to an all-time high of 114,639; so far in 2012, 54,676 have been issued.



California currently has the most reverse mortgages with nearly 7,000 issued just this last year; Texas and Florida follow with 4,800 and 3,300 respectively.

Critics say the TV commercials, with celebrities like Fred Thompson and Henry Winkler, prey on vulnerable seniors by claiming that homeowners can "turn their equity into tax-free cash."

Today, the government is warning: Reverse mortgages are not free money.

Prescott Cole, senior staff attorney for California Advocates for Nursing Home Reform, says seniors are a target because many have money saved, are often isolated and at times have "cognitive impairments" reducing their ability to make rational decisions.

"They're not being told about the downsides," Cole said. "When we hear about reverse mortgages, we're hearing the good things ... that these are loans that don't have to be paid back either until the senior dies or permanently moves out of the home ... they're told, nothing to worry about."

Peter Bell, the CEO and president of the National Reverse Mortgage Lenders Association, says the commercials are not misleading.

"How much can you get in a 30-second commercial?" Bell said. "These are not ads to get a reverse mortgage, but ads to get more information and learn about reverse mortgages."

Seventy percent of the time, seniors exchange the equity in their homes for the reverse mortgage payout as a lump sum and the money is too often spent by the time it's needed for late-in-life hardships.

Warning on reverse mortgagesThe Department of Housing and Urban Development is expected Thursday to recommend that Congress limit large lump-sum payments, and that seniors be very careful with reverse mortgages.

Hubert H. Humphrey III, the assistant director for the Consumer Financial Protection Bureau's Office of Older Americans, says that a reverse mortgage should be the last option.

"This is your nest egg. This is what you use when you don't have any other resources," he said. "People are not taking this out as a last available resource, they're all too often taking it out at age 62, right when they just qualify, and so they live another 15, 20, 25 years, and when they really need the money there's nothing there."

Humphrey said that couples who live together should always borrow together to protect both parties' interest in the property, so that the McMahans' experience will not happen.

By law, the Department of Housing and Urban Development requires counseling before someone receives a reverse mortgage, and recommends that extended family also take part to ensure that the risks are clear, a stance that the NRMLA supports.

The National Reverse Mortgage Lenders Association also says that the industry itself has worked to improve counseling for potential borrowers.

"All in all there is a concentrated effort by all parties involved to improve counseling and we have seen a steady trajectory of its improving," Bell said.

According to the NRMLA, reverse mortgages have helped more than 750,000 senior households and if the Department of Housing and Urban Development does recommend a limit on borrowing, the association will support it fully.

For Linda McMahan, the risks of her reverse mortgage -- an option that she wishes she had never been presented -- now means living in a small apartment a block from her dream house.

"It's a wonderful house," she said. "I hope somebody will enjoy it."

See more on ABC News:
Will the Mortgage Deduction Survive the Fiscal Cliff?
2013 Business Predictions Include a Future Fiscal Cliff, Easier Credit Access
Bank of America Delays Fees Again

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]]>reverse mortgagereverse mortgage risksreverse mortgagesseniors reverse mortgagesABC News2012-12-06T13:12:00+00:00After Foreclosure, 3 Steps to Getting Back on the Road to Buyinghttp://realestate.aol.com/blog/2012/11/29/buying-home-after-foreclosure/http://realestate.aol.com/blog/2012/11/29/buying-home-after-foreclosure/http://realestate.aol.com/blog/2012/11/29/buying-home-after-foreclosure/#commentsFiled under: , ,

Buying after foreclosureBy Samantha Debianchi

Finding your dream home is truly a special and momentous occasion, but sometimes the honeymoon doesn't last. Just as money is the root of many divorces, it is also the root of many foreclosures. But once the long and tedious process is finalized, how do you get back in the game and find a new match?

Waiting and Reflecting.

While it can take as long as seven years (three years under extenuating circumstances and FHA loans, and 2 years for VA loans) to buy again after foreclosure, at least you'll be prepared and know 110 percent what you're getting yourself into. Use the long waiting period to reflect on what went wrong and to prepare yourself -- financially and emotionally -- for the bigger and better options that you'll eventually have down the road. Don't get discouraged; good things come to those who wait.

Get your credit back in shape.

While going through a foreclosure will have a negative impact on your credit, there are some ways that you can strengthen your credit score and make it "fit" again. Paying off debt, re-establishing credit, cutting the fat on unnecessary expenses and building your savings are all great routines to add the muscle back into your score. Living within a budget and spending your money more wisely also will allow you to move forward with confidence and a better understanding of how much home you can afford when the time comes to buy again.

Honesty and Communication

Learn from your mistakes. Be open and honest with yourself and know what you want and what you can afford. If the luxury downtown penthouse was what got you into trouble in the first place, then why not "restart off" with a more subtle place in the suburbs and have something to look forward to in the future? Remember, communication is key. When reapplying for a mortgage, discuss what happened with your lender and, most importantly, explain what you did to resolve it. While it's never fun to rehash painful parts of your past, it's very much necessary and will help you in your decision-making process. Don't make the same mistake twice.

See more on Zillow:
Boomerang Buyers: Buying Again After Foreclosure or Short Sale
Building Your Real Estate Dream Team
How to Make Sure 'the One' Doesn't Get Away

 

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]]>buying a homebuying after foreclosureforeclosureforeclosure homebuyershomebuyershomebuyingZillow2012-11-29T10:05:00+00:00Fixed Mortgage Rates Hit New Record Lowshttp://realestate.aol.com/blog/2012/11/15/fixed-mortgage-rates-record-lows/http://realestate.aol.com/blog/2012/11/15/fixed-mortgage-rates-record-lows/http://realestate.aol.com/blog/2012/11/15/fixed-mortgage-rates-record-lows/#commentsFiled under: ,

fixed mortgage ratesWASHINGTON -- Average U.S. rates on fixed mortgages fell to fresh record lows this week, a trend that has helped the housing market start to recover this year.

Mortgage buyer Freddie Mac says that the average rate on the 30-year loan dipped to 3.34 percent, the lowest on records dating back to 1971. That's down from 3.40 percent last week and the previous record low of 3.36 percent reached last month.

The average on the 15-year fixed mortgage also dropped to 2.65 percent. That's down from 2.69 percent last week and also a new record.

The average rate on the 30-year loan has been below 4 percent all year. It has fallen further since the Federal Reserve started buying mortgage bonds in September to encourage more borrowing and spending.

Low mortgage rates have helped boost sales of newly built and previously occupied homes this year. Home prices are also increasing, and builders are more confident and starting work on more new homes.

Lower rates have also persuaded more people to refinance. That usually leads to lower monthly mortgage payments and more spending. Consumer spending drives nearly 70 percent of economic activity.

Still, the housing market has a long way to a full recovery. And many people are unable to take advantage of the low rates, either because they can't qualify for stricter lending rules or they can't afford the larger down payments that many banks require.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for 30-year loans was 0.7 point, unchanged from last week. The fee for 15-year loans also remained at 0.7 point.

The average rate on a one-year adjustable-rate mortgage declined to 2.55 percent from 2.59 percent. The fee for one-year adjustable rate loans one-tenth to 0.3 point.

The average rate on a five-year adjustable-rate mortgage ticked up to 2.74 percent from 2.73 percent. The fee was unchanged at 0.6 point.

See also:
Lifelong Renters Dodged the Housing Bust but Face the Fallout
Buy That Vacant Foreclosure Next Door? Not So Fast!
For First-Time Homebuyers, It's Still a Tough Market

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]]>30 year mortgage30 year mortgage ratesfreddie macfreddie mac mortgage ratesmortgage ratesThe Associated Press2012-11-15T15:50:00+00:00Credit Scores of Potential Homebuyers Are Improvinghttp://realestate.aol.com/blog/2012/11/09/credit-scores-for-homebuyers-are-improving/http://realestate.aol.com/blog/2012/11/09/credit-scores-for-homebuyers-are-improving/http://realestate.aol.com/blog/2012/11/09/credit-scores-for-homebuyers-are-improving/#commentsFiled under: , ,

credit scores for homebuyersThere have been numerous improvements in the economy and the housing market, specifically in the last few years, and that is reflected in the type of credit ratings carried by potential homebuyers nationwide through the end of last year.

With the slowly improving economy and jobs numbers, many consumers are now finding themselves in better financial shape than they were just a few years ago, and as a consequence, some are now mulling big financial decisions such as a return to the housing market, according to a report from the Federal Reserve Bank of Atlanta based on information in the Home Mortgage Disclosure Act database. In fact, through the end of 2011, the median credit score of a potential borrower who filed a home loan application was up 40 points from the end of 2006, more or less when the housing bubble burst. Further, that was the highest point observed in the past 12 years.

Related: Ready to Buy a Home? Use AOL Real Estate's Homebuying Guide

Interestingly, this comes at the same time as borrowers seemed to be more honest about their financial standing, the report said. Prior to the housing meltdown, it was not uncommon for borrowers to intentionally inflate and misrepresent their actual incomes -- and for banks to sign off on loan applications nonetheless. This was a major reason for the real estate crisis in the first place, as borrowers were granted home loans they couldn't afford (often with banks knowing full well that this was the case), then eventually defaulted and were foreclosed upon.

"Comparing home-purchase borrower incomes reported in the HDMA data with income reported by homebuyers in household surveys suggests that incomes on mortgage applications were likely significantly overstated during the peak of the housing boom," the Fed researchers said. "In more recent years, there is no evidence of overstated incomes."

Related: AOL Real Estate's Mortgage Calculators Will Help You Find the Right Loan

However, despite the improvements, many consumers also faced a continued problem obtaining approval for their loan applications, the report said. Though consumers' median rating improved, the rate at which they were turned down for mortgages did not, holding steady from the 23 percent observed in 2010. Altogether, there were only 7.1 million mortgages approved last year, down 10 percent from 2010 and the lowest since 1995′s 6.2 million.

Consumers who are interested in buying a home may want to make sure their credit standing is as good as it possibly can be before applying, as many lenders say they will keep restrictions tight for some time.

See more on Credit.com:
How Refinancing Can Affect Your Credit
Will Getting Pre-Qualified for a Mortgage Ding My Credit Score?
Can You Really Get a Credit Score for Free?

What's Your Number? - Credit Scores Are a Messy Calculation



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See celebrity real estate.

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]]>credit scorecredit scoresFederal Reserve Bank of Atlantahomebuyers credit scoreCredit.com2012-11-09T12:30:00+00:00How Refinancing a Mortgage Can Affect Your Credithttp://realestate.aol.com/blog/2012/09/27/how-refinancing-a-mortgage-can-affect-your-credit/http://realestate.aol.com/blog/2012/09/27/how-refinancing-a-mortgage-can-affect-your-credit/http://realestate.aol.com/blog/2012/09/27/how-refinancing-a-mortgage-can-affect-your-credit/#commentsFiled under: ,

refinancing mortgage can affect creditBy Gerri Detweiler

It hardly seems possible that mortgage rates can get much lower, but they have. Homeowners are taking notice and refinancing their mortgages. Freddie Mac reports that 30-year fixed-rate mortgages have reached an all-time record low at 3.4 percent for the week ending Sept. 27, down from last week's 3.49 percent.

So if you're on the fence because you are afraid that refinancing (again) will hurt your credit, relax.

"It will neither help nor hurt your score in the short-term," insists Anthony Sprauve, director of public relations for myFICO.com. "Any impact will be minimal and brief. The true impact will be how you manage the new mortgage over time."

While that makes refinancing sound like a no-brainer, there are a couple of potential traps you'll want to watch out for.

Why the Calendar Is Critical

The first is the impact of shopping for a new loan on your credit scores. Each time you apply for credit, that sparks an "inquiry" into your credit history. "The typical additional inquiry can be expected to lower a credit score by five points or less," says Barry Paperno, a credit scoring industry veteran and manager of the Credit.com forums.

But in the case of mortgage loan inquiries, "you can incur any number over a focused period of time, such as 14 or 45 days, and they will only count as one inquiry," Paperno explains. "Also, while on your credit report for two years, inquiries are counted for only the first year by the credit scoring models."

Steve Ely, CEO of eCredable.com agrees, adding: "Like most things in the science of credit scoring, the thicker your credit file, the smaller the impact on your credit score."

The take-away? If you are going to shop for a new lower-rate home loan, it's a good idea to do so in a relatively short period of time.

The other risk when you refinance? A missed mortgage payment. This trap isn't common, but if you're affected, you can see a significant drop on your scores.

It works like this: You are approved for a new loan to pay off the current loan. Your loan officer tells you that you can skip this month's payment on your current loan because the new loan will take care of it. That's true -- provided the loan closes and funds on time. But if the payment from the new lender arrives more than 30 days after your current payment to your "old" lender is due, that lender may consider that last payment late. And one late payment can really hurt your scores.

So keep an eye on the calendar, and if it looks like you might be cutting it close, talk with your lender and loan officer about making that mortgage payment to keep your good credit intact.

If all goes smoothly, though, your credit report should list the old loan as paid in full with a zero balance. Pay the new loan on time and your credit will be just fine. Not to mention your budget.

See more on Credit.com:
How Much Will One Late Payment Hurt Your Credit Score?
When is Debt Consolidation Legitimate?
The Ultimate Credit Report Cheat Sheet

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]]>credit scorerefinancerefinance mortgagerefinancing mortgageCredit.com2012-09-27T14:30:00+00:00Ways a Mortgage Can Help or Hurt Your Credithttp://realestate.aol.com/blog/2012/09/20/ways-a-mortgage-can-help-or-hurt-your-credit/http://realestate.aol.com/blog/2012/09/20/ways-a-mortgage-can-help-or-hurt-your-credit/http://realestate.aol.com/blog/2012/09/20/ways-a-mortgage-can-help-or-hurt-your-credit/#commentsFiled under: ,

mortgage creditBy Gerri Detweiler

Will a mortgage help -- or hurt -- your credit? If you're thinking, "Well, both," you're exactly right. But there are subtleties involved that may surprise you.

To get a mortgage these days, a lender is going to closely scrutinize your income, debt and credit history before giving you the loan. That makes a mortgage a sign of financial responsibility that can help your credit scores, says Sarah Davies, senior vice president, risk and analytics, for VantageScore. "They see you as a highly creditworthy consumer," she says.

"You might notice that most credit reports single out mortgages in their own category, separate from installment loans and revolving loans," Steve Ely, CEO of eCredable points out. "Lenders looking beyond the credit score want to quickly see how well you're doing living up to this obligation. For example, if you are responsible enough to take on a mortgage, and can make the ongoing payments on time, you are rewarded by having your credit score increased over time."

Another way a mortgage can help your credit is by rounding out your credit history. "Over the long term, adding a mortgage to your credit report can improve your credit "mix" if, for example, your credit report only contains revolving (typically credit card) accounts," explains Barry Paperno, community director for Credit.com and an expert in credit scoring. "Having multiple types of credit -- revolving and installment -- indicates you're able to manage different types of credit products, and leads to lower risk."

But that's not a huge advantage he warns, since only about 10 percent of your score is based on your mix of credit. (He's talking primarily about FICO scoring models here.) "Don't expect the addition of a mortgage to add more than a few points to your score even under the best of circumstances."

What about homeowners who have paid off their mortgages? While that may be the smart thing to do financially, it's not likely to mean a boost to your credit scores. While a paid-off mortgage is still considered when your credit scores are calculated, "it doesn't play as significant a role," as one that is still in repayment, Davies warns. One reason for that is that the scoring model can't tell if the homeowner paid the loan off or simply refinanced it.
And what about the size of the loan? Is it better to have a larger mortgage? That may help a little bit, Davies says. But by the same token if you fall behind, the hit to your scores can be greater.

And, yes, a mortgage can also hurt your credit. The millions of Americans who have missed payments or lost their homes to foreclosure in recent years know that firsthand. Miss a mortgage payment and your scores may drop significantly.

A VantageScore report explains it this way: For most credit card models, missing a credit card payment has less impact than missing a mortgage or auto payment. This is because credit score models consider late payments on your larger, secured debts as higher risk than being late on smaller, unsecured debts such as credit cards.

"The bigger the asset, the more foundational it is, and the bigger the hit to your credit score," warns Davies.

But even if you've made all your payments on time, there is another way a mortgage can impact your credit scores. It's due to the way new accounts impact your scores. Paperno explains:

The immediate impact upon adding a mortgage (or any new account) to your credit report is usually a drop in your score. Research has shown that a consumer who has opened a new account recently is more likely to have problems paying on time in the future than someone who has no recently opened accounts. Fortunately, any points lost for this reason tend to be regained within six months after opening the new account, provided all payments are made on time, account balances are kept low and additional new accounts are opened only as needed.

Ultimately, like most types of credit, a mortgage can help your credit if you manage it well and make the payments on time. That may be easier said than done for some these days, but if your goal is a strong credit score, it's worth keeping in mind.

See more on Credit.com:
8 Surprising Things That Affect Your Credit
The Ultimate Credit Report Cheat Sheet
How Can I Get a Loan After Credit Issues?

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]]>Barry PapernoFICOhow mortgage helps credit scorehow mortgage hurts credit scoremortgage creditrisk and analytics VantageScoreSarah Davies senior vice presidentSteve Ely eCredableCredit.com2012-09-20T15:45:00+00:00Facebook CEO Mark Zuckerberg Refinances Mortgage Loan Down to 1%http://realestate.aol.com/blog/2012/07/16/facebook-ceo-mark-zuckerberg-refinances-mortgage-loan-down-to-1/http://realestate.aol.com/blog/2012/07/16/facebook-ceo-mark-zuckerberg-refinances-mortgage-loan-down-to-1/http://realestate.aol.com/blog/2012/07/16/facebook-ceo-mark-zuckerberg-refinances-mortgage-loan-down-to-1/#commentsFiled under: , ,

Mortgage rates have fallen to record lows. But if you're in the market for a home loan, you're going to have a tough time matching the deal that Facebook founder and CEO Mark Zuckerberg got on his mortgage.

Like millions of Americans have done in recent years, Zuckerberg decided to refinance his mortgage. But according to Bloomberg, the rate he got was amazing low: just 1.05 percent.

How did he do it? And can non-moguls get a similar deal?

Taking a Monthly Gamble

The key to understanding why Zuckerberg got such a great deal on his mortgage is that he didn't get a conventional fixed mortgage. Rather, he decided to refinance his $5.95 million loan on his Palo Alto, Calif., home with an adjustable-rate mortgage.

Adjustable-rate mortgages, or ARMs, got a lot of notoriety during the housing boom. With lower interest rates, ARMs helped many homebuyers afford high-priced homes, because they often offered low teaser rates for an initial period of time. But after that teaser rate went away, borrowers were stuck making higher monthly payments, which many blame for what eventually cracked the housing bubble.

Even so, the average ARM, which locks in rates for one year at a time, carries a rate of 2.7 percent. What helped Zuckerberg get an even lower rate was his willingness to accept monthly resets of his interest rate. That means his monthly payments could rise as soon as August.

Despite that theoretical risk, few people expect interest rates to rise anytime soon. The Federal Reserve has said that it plans to keep rates low at least for the next couple of years, and many analysts expect an even longer period of low rates.

That said, there's not much downside to the Facebook founder even if the Fed raises rates. That's because Zuckerberg has a huge reserve of wealth behind his loan. Unlike most homeowners, he can simply sell assets and pay off his mortgage loan if the interest rate on his loan suddenly skyrockets.

How the Rest of Us Should Play the ARMs Race

The trend that most homeowners have followed recently is to get rid of adjustable-rate mortgages in favor of fixed loans. With average rates on 15-year mortgages at 2.86 percent and 30-year mortgages fetching 3.56 percent, ordinary homeowners don't get much benefit from taking on the risk of an adjustable-rate mortgage.

Despite Zuckerberg's cheap rate, trying to follow in his footsteps isn't a smart idea for most homeowners. Refinancing to a fixed-rate mortgage will help you lock in affordable, predictable payments no matter what happens to interest rates in the future.

You can follow Motley Fool contributor Dan Caplinger on Twitter here. The Motley Fool owns shares of Facebook.

See also:
Anderson Cooper's Manhattan Pad Sells for $3.8 Million
Listing Fails: The Best of the Worst in Real Estate This Week
Countrywide 'VIP Loans': Few Pols Resisted Mortgage 'Gifts'

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]]>1 percentadjustable rate mortgagesARMFacebookfacebook ceo mark zuckerbergMark Zuckerbergmortgageone percentZuckerberg mortgageThe Motley Fool2012-07-16T15:15:00+00:00Fed Report: Housing Meltdown Hit Middle Class Hardesthttp://realestate.aol.com/blog/2012/06/14/fed-report-captures-housing-meltdowns-massive-blow-to-wealth/http://realestate.aol.com/blog/2012/06/14/fed-report-captures-housing-meltdowns-massive-blow-to-wealth/http://realestate.aol.com/blog/2012/06/14/fed-report-captures-housing-meltdowns-massive-blow-to-wealth/#commentsFiled under: ,

housing meltdown personal wealthA report recently released by the Federal Reserve offers new figures that capture the full scope of the housing bust's devastating impact on household wealth.

Median family net worth plunged by close to 40 percent during the economic crisis, the report found. The study shows that the real estate market's collapse was largely responsible for the decrease: Family median income before taxes fell 7.7 percent and non-housing assets also depreciated in value. But the Fed said plummeting home prices issued the largest blow to families' net worth.

"Although declines in the values of financial assets or business were important factors for some families, the decreases in median net worth appear to have been driven most strongly by a broad collapse in house prices," the report said.

The report also said that the recession hit the U.S. middle class hardest, since much of their wealth was concentrated in their homes.

National Association of Home Builders CEO Jerry Howard says its findings suggest that the housing slump remains one of the largest roadblocks to an economic recovery. In fact, the report is a call to action for the U.S. government, he says, which should do more to revive the real estate market.

"In [government] conservatorship [Fannie Mae and Freddie Mac] are as close to being dead in the water as you can possibly be," he said. "In these current climates, the access to mortgage credit is so restricted that it is an impediment to the recovery, not just because people can't get it, but people are afraid to apply for it because it is such a burdensome and intimidating process right now.

Howard believes that lenders, many of whom service mortgages that conform to Fannie Mae and Freddie Mac-dictated requirements, should perform more "holistic" evaluations of mortgage applicants. But other experts see current mortgage requirements as appropriate, given the lax standards of the housing boom, which Howard admits made it "much, much too easy for people."

The government's failure to do more to jumpstart the housing market betrays its 50-year history of championing homeownership, Howard says.

"For most baby boomers, from the time that they entered the job market, they were encouraged to build your ... nest egg around housing."

See also:
How to Get Your Mortgage Above Water
Underwater Mortgages Keeping Housing Market Afloat?
Should Underwater Homeowners Just Walk Away?

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Fed Reports How Much Recession Shrank US Wealth

 

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]]>federal reserve reportJerry HowardJerry Howard NAHBmedian family net worthmedian household wealthNAHBnational association of homebuildersrecession family wealthrecession household wealthTeke Wiggin2012-06-14T18:30:00+00:006 Ways to Get a Great Mortgage Dealhttp://realestate.aol.com/blog/2012/04/30/6-ways-to-get-a-great-mortgage-deal/http://realestate.aol.com/blog/2012/04/30/6-ways-to-get-a-great-mortgage-deal/http://realestate.aol.com/blog/2012/04/30/6-ways-to-get-a-great-mortgage-deal/#commentsFiled under: , ,

mortgage great dealBy Ismat Sarah Mangla,
Money Magazine

Finding an affordable house is no longer a problem but qualifying for a mortgage can be. Here are six tips to getting a mortgage and a good rate.

1. Put your credit on ice.

The higher your credit score, the lower your rate: The best rates go to those with a 760 or more, says credit-score expert John Ulzheimer.

So keep that plastic in your wallet (and don't apply for new cards or other loans) for at least three months before you go loan shopping. One large balance -- even if it's paid off at the end of the month -- can ding your score by 20 points or more.

2. Ask for time.

Most sales contracts give you only 10 days to nab a loan or the seller can move on. Negotiate for an additional five to 10 days to give you some room to shop around.

3. Get at least six quotes.

Rates on a 30-year fixed conforming loan can vary at least as much as a quarter of a percentage point. Get quotes from national lenders at mortgagemarvel.com and find out what your local credit union or regional bank is offering as well. Inquire about fees; while lenders aren't required to give you a good-faith estimate of closing costs (which average 2 percent of the loan balance) until you actually apply, some will provide it if you ask.

4. Match the lock period to the loan.

You now need 60 days or more to close a loan, says Wharton professor and mortgage expert Jack Guttentag of mtgprofessor.com, and getting an extension on a lock will cost at least a couple of hundred dollars. Ask your lender how long it's taking to close loans like yours -- and don't lock for less.

Understanding Adjustable Rate Mortgages



















5. Opt for an ARM.

If you know you're not going to be in a house for more than seven years, adjustable-rate mortgages can mean big savings, says Guttentag. The monthly payment on a $300,000, seven-year ARM at the recent rate of 3.23 percent is $1,302, vs. $1,455 for a 30-year fixed at 4.13 percent.

6. Talk to a broker.

Those who need a jumbo loan or have an unusual situation (say, you're self-employed) will get the best deal from a mortgage broker who has access to and experience with a lot of lenders. Find a fee-only one at upfrontmortgagebrokers.org.

Read more on CNNMoney:
Best deal on remodeling
America's cleanest cities
It's safe to sell your home again

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]]>credit home mortgagegetting a mortgage dealJack Guttentagmortgage advicemortgage great dealshopping for mortgagetips getting mortgageCNNMoney2012-04-30T13:30:00+00:00Loan Thaw? Average Mortgage Up by $20,000, Study Sayshttp://realestate.aol.com/blog/2012/04/12/home-loan-thaw-average-mortgage-up-by-20-000-study-says/http://realestate.aol.com/blog/2012/04/12/home-loan-thaw-average-mortgage-up-by-20-000-study-says/http://realestate.aol.com/blog/2012/04/12/home-loan-thaw-average-mortgage-up-by-20-000-study-says/#commentsFiled under: ,

By Kerri Panchuk

The average loan size that lenders issued to borrowers in the past three months grew by $20,000, suggesting a thawing in mortgage lending, Capital Economics said Wednesday.

While the report, which was released by Capital Economics analysts Paul Dales, Paul Diggle and Amna Asaf, stopped short of calling the good news a full lending recovery, Dales said, "it may be an early sign that buyer confidence is improving."

In 2012, the average amount of a mortgage went from around $215,000 to $235,000. The higher loan amounts are not the only positive economic indicator highlighted by the research firm.

Capital Economics reported a 20 percent drop in visible home inventory over the past 18 months, resulting in a situation where a months' supply of unsold homes is now at a level where existing home sales can support current prices. At the same time, Capital Economics believes there are currently 3.9 million homes in the nation's shadow inventory.

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Even though employment numbers fell below the average analyst's expectation of 200,000 new jobs in March, Capital Economics is more optimistic with the current three-month new jobs average sitting at 212,000 positions.

"We are not too alarmed by the 120,000 rise in payroll employment in March, which was exactly half the 240,000 gain in February," Dales wrote. "Just as the unusually mild weather meant that employment grew at a faster rate than the underlying trend in the previous few months, it may now be growing at a slower rate than the underlying trend."

Even though mortgage rates grew slightly in March, Capital Economics said the uptick will have little effect on housing activity since prices still remain affordable and undervalued.

The researchers believes there are signs in the market of a price bottom, but said significant home price gains are not expected in the near term since tighter lending restrictions are prohibiting a boom in real estate activity.

Read more on HousingWire:
Fannie, Freddie and the FHA Lead Surge in Multifamily Lending
Mortgage Applications Fall 2.4% as Purchases, Refinances Decline
RealtyTrac: Foreclosure Filings Fall to 4Q 2007 Level

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How to Shop for a Home Loan

 

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]]>average home loanaverage mortgageaverage mortgage amountaverage mortgage increasesCapital EconomicsCapital Economics housingCapital Economics mortgagesHousingWire2012-04-12T12:02:00+00:00House of the Day: Luxury by Lake Tahoehttp://realestate.aol.com/blog/2012/04/03/house-of-the-day-luxury-by-lake-tahoe/http://realestate.aol.com/blog/2012/04/03/house-of-the-day-luxury-by-lake-tahoe/http://realestate.aol.com/blog/2012/04/03/house-of-the-day-luxury-by-lake-tahoe/#commentsFiled under: ,



This $6.785 million residence, located in the luxurious Martis Camp community of North Lake Tahoe, Calif., boasts four bedrooms, 5½ baths, and an incredible array of cutting-edge amenities -- including a home iPad interface system and hydronic heating throughout the flooring.

The master suite, which offers commanding views of majestic arboreal wilderness, includes a fireplace and spa-inspired bath. The lower level features a recreation-media room, complete with a surround-sound system and a bar, as well as a 1,000-bottle wine cellar and an exercise den. Moveable glass walls divide the living room from an outdoor patio and walk-out terrace, which offer extensive outdoor entertaining space including a spa, fire pit, dining area and landscaped lawn. Furnishings throughout are a combination of the rustic and the ultramodern.

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As if this all weren't enough, Martis Camp residency offers several extra layers of luxury, including an 18-hole golf course, and a family recreation center with swimming, bowling, basketball, cinema and art. Finally, the community includes 26 miles of private trails for hiking, snowshoeing and cross-country skiing.

Brian Hull of Martis Camp has the listing.

Click on the images below to see more homes for sale near Lake Tahoe, Calif.



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Got a tip for House of the Day? Know of an exceptional or unusual property currently listed for sale? Please email krisanne.alcantara@huffingtonpost.com with your suggestions and be sure to include links to listing details and photos. (Due to the volume of response, we unfortunately are unable to reply to each submission.)

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Visit the Ski Resorts of Lake Tahoe, California

 

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]]>home of the dayhomes for sale in North Lake TahoeHouse of the DayLake Tahoe luxury homesLake Tahoe real estateEamon Murphy2012-04-03T06:00:00+00:00Mortgage Principal Reduction on Freddie Mac Loans?http://realestate.aol.com/blog/2012/03/26/freddie-mac-principal-reductions-may-be-headed-homeowners-way/http://realestate.aol.com/blog/2012/03/26/freddie-mac-principal-reductions-may-be-headed-homeowners-way/http://realestate.aol.com/blog/2012/03/26/freddie-mac-principal-reductions-may-be-headed-homeowners-way/#commentsFiled under: ,

By Jon Prior

Freddie Mac CEO Charles "Ed" Haldeman gave a strong signal Friday that new incentives from the Treasury Department may be enough to start principal reduction on mortgages backed by the government-sponsored enterprises.

In January, the Treasury said it would triple incentive payments to mortgage investors who allow principal reduction in Home Affordable Modification Program workouts. The payouts ranged between six and 21 cents to the investors for each dollar forgiven under HAMP, but that will grow to between 18 and 63 cents.

"I have to say recently the Treasury sweetened the program and tremendously increased the incentive payments in their offer to us," Haldeman said at HousingWire's REThink Symposium. "We will reevaluate that to see what may be in our economic best interest. If there are very large incentive payments -- which could be 50 percent of what you could write down -- it may be in our economic self-interest to participate in that."

There are currently 11.1 million borrowers who owe more on their mortgage than the house is worth, according to CoreLogic. Of that, estimates show roughly 3.3 million of those mortgages belong to Fannie and Freddie.

The GSEs and their regulator, the Federal Housing Finance Agency, long shunned principal reduction. Their biggest fear is moral hazard -- that borrowers who are still current on their underwater loan would strategically default in order to get principal written down.

"We thought principal reduction could have unintended, secondary consequences on other borrowers seeking the same kind of reduction," Haldeman said.

One previous analysis showed the GSEs would take significant credit losses if a wide-scale program was put in place. A new analysis from the FHFA, which would cover the new HAMP incentives, is expected to be released in the coming weeks.

NPR and ProPublica reported Friday that the analysis will show a reversal, that principal reduction will work for the GSEs under the new version of HAMP.

"As we complete the review, the public should understand that Fannie Mae and Freddie Mac continue to offer a broad array of assistance to troubled borrowers and have continued to implement HARP 2.0 to enhance refinancing opportunities for underwater borrowers," FHFA said in a statement.

Treasury Secretary Timothy Geithner told a House panel this week he and FHFA Acting Director Edward DeMarco were working out their differences.

Haldeman, who announced in October that he would leave his post at Freddie, said the principal reduction verdict will ultimately reside with DeMarco, but he isn't operating on his own.

"At the end of the day, we are in conservatorship, and he is the conservator. But the way it works on a day-to-day basis is that it's a very close collaboration. It is extremely rare that I had a different point of view than Ed DeMarco," Haldeman said.

Read more on HousingWire:
Fannie and Freddie could reverse course on principal reductions
Negative equity gap nears $4 trillion
BofaA offers distressed homeowners a chance to stay in homes

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U.S. Mortgage Rates Rise With Improving Job Market

 

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]]>ed haldemaned haldeman freddie macfannie maefannie mae principal reductionsfreddie macfreddie mac principal reductionsHAMP incentivesHome Affordable Modification Programmortgage principal reductionHousingWire2012-03-26T10:45:00+00:00'Project X' Copycat Revelers Allegedly Wreck $500,000 Homehttp://realestate.aol.com/blog/2012/03/15/project-x-copycat-revelers-allegedly-wreck-500-000-home/http://realestate.aol.com/blog/2012/03/15/project-x-copycat-revelers-allegedly-wreck-500-000-home/http://realestate.aol.com/blog/2012/03/15/project-x-copycat-revelers-allegedly-wreck-500-000-home/#commentsFiled under: ,



It didn't take long before the carnage in the hit house-party movie "Project X" spilled onto the real real estate market.

Thirteen teenagers are being questioned for their possible involvement in a wild house party that will cost the builder nearly $100,000 in repairs, reports KHOU in Houston, Texas.

"It's devastating. This is a new home that was ready to sell," said private investigator Mark Stephens, who was hired by the homebuilder to observe the property. Stephens estimates the home to be worth $500,000.

A tour of the once pristine, 4,000-square-foot-home today reveals gaping holes in the walls, heaps of broken glass and liquor bottles strewn across the property.



Stephens told KHOU that the night after the property was vandalized, he returned to the neighborhood in the hope of catching the culprits in the act. Just down the street, in another vacant home, he came upon a group of teenagers throwing another massive party.

Police took 13 teenagers into custody, with two minors being young enough to be released back to their parents.

Stephens said that when he asked the teens why they broke into the home, they simply said "Project X."

Yet this isn't the first time the riotous teen flick reportedly has inspired copycat revelry. Another party in Houston turned deadly after an unidentified teen was shot multiple times at an illegal party in another vacant home, ABC News reports. The party, which drew between 500 to 1,000 high school and college-age students, was shut down by police, but the gunman reportedly escaped on foot.

Idle Hands, Empty Homes

An underlying problem in these and other cases of home vandalism is the glut of vacant homes sitting idle on the market. As foreclosures have flooded local real estate inventories, vacant properties have attracted all manner of blight, lowering property values and putting more financial stress on already struggling neighborhoods.

And the vacancy problem could continue to rise. Despite a new report that shows a 13 percent drop in completed foreclosures in the first month of this year, as compared to January 2011, there are signs that foreclosures could soon rise. With the $25 billion mortgage settlement finally underway, experts expect foreclosure activity to increase through 2012, as banks begin to clear a massive backlog of disputed foreclosures. One in every 637 homes received a foreclosure filing in February, according to RealtyTrac.

In Houston, where both wild parties took place, one in every 689 homes received a foreclosure notice in February -- up nearly 10 percent from the previous month.

Also see:
Renters Beware: Fraudsters Still Lurking on Craigslist
'Home Alone' House Sells for $1.6 Million

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]]>foreclosure crisisforeclosure vandalismhouston project xproject xproject x copycatproject x partyproject+x+copycatsproject+x+partiesprojectxcopycatsprojectxpartiesvacant homesvandalismAOL Real Estate Editors2012-03-15T12:44:00+00:00Arthur Livingston, Thought Dead by Bank, Very Alive and Frustratedhttp://realestate.aol.com/blog/2012/02/08/arthur-livingston-thought-dead-by-bofa-very-alive-and-frustrat/http://realestate.aol.com/blog/2012/02/08/arthur-livingston-thought-dead-by-bofa-very-alive-and-frustrat/http://realestate.aol.com/blog/2012/02/08/arthur-livingston-thought-dead-by-bofa-very-alive-and-frustrat/#commentsFiled under: ,



Rumors of Arthur Livingston's demise have been greatly exaggerated -- and they're taking a toll on the South Carolina man's credit rating.

Bank of America, Livingston's bank of choice for the past 14 years, mistakenly declared him dead to the three major credit bureaus in May 2009, TV station WIS in Columbia, S.C., reports. As a result, Livingston has been stonewalled by lenders -- who refuse to loan money to the deceased -- and his dream of building a new home stymied by a 2½-year-old error.

Livingston said Bank of America promised to resolve the issue within 30 days of his complaint. It's been more than three months now and the problem has yet to be resolved, he told WIS.

"I spend every free minute I have either sending a message, calling, faxing or just, you know, wondering if it is going to be resolved today," he told the station.

While Livingston's case is an extreme example, credit report errors are a very common -- and costly -- problem for Americans looking for a line of credit.

According to the U.S. Public Interest Research Group, one in four reports can have an error serious enough to hurt one's chances of getting new credit. This is especially troublesome for prospective homebuyers today as mortgage lenders have, since the housing bubble burst, drastically raised the bar on qualifying for a loan.

Tips to Avoid a Costly Credit Report Error

The most basic step to protecting your credit score is regularly checking in with the three major credit bureaus. And contrary to a slew of popular commercials claiming to provide free credit reports, the only federally endorsed credit reporting site out there is annualcreditreport.com.

Once an error is identified, be prepared to maneuver through an entirely different bureaucracy. "Thousands of [dispute] letters get thrown out," Glamis Haro, a lending manager at a New York credit union, told AOL Real Estate.

To ensure that your complaint isn't lost to the void, Haro suggests sending any correspondence with the credit bureaus by certified mail with a return receipt request.

Under the Fair Credit Reporting Act, the bureaus are required to respond to your complaint within 30 days of receipt.

In Livingston's case, however, because Bank of America has yet to correct the error on their end, his options remain limited. Bank of America told WIS that the issue is under investigation, but resolution has yet to be reached.

See also:
How to Dispute Credit Report Errors
Bank of America Plaza to Sell at Foreclosure Auction
80 Cent 'Typo' Almost Cost Man Home

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]]>Arthur Livingston bankBank of America mistakenly declares man deadcredit applicationcredit ratingcredit rating errorscredit rating mistakescredit reporting errorsmistakenly declared deadAOL Real Estate Editors2012-02-08T19:00:00+00:00New Credit Score Will Tell Lenders More About Youhttp://realestate.aol.com/blog/2011/10/21/new-credit-score-will-tell-lenders-more-about-you/http://realestate.aol.com/blog/2011/10/21/new-credit-score-will-tell-lenders-more-about-you/http://realestate.aol.com/blog/2011/10/21/new-credit-score-will-tell-lenders-more-about-you/#commentsFiled under: ,



Mortgage lenders will soon have access to new details about a prospective borrower's past -- such as past rental applications, inquiries to pay-day lenders, and missed child support payments -- that will be factored in to a new credit score.

Real estate and mortgage data aggregator CoreLogic says it's signed an agreement to work with Fair Isaac Corp., the owner of the widely used FICO score, to develop new credit risk scores for the U.S. mortgage industry.

Much of the data CoreLogic collects on consumers hasn't been available from traditional credit reporting agencies but is important to mortgage lenders, the company said.

CoreLogic says it will serve as a "supplemental credit repository," augmenting data provided by TransUnion, Equifax and Experian with property ownership and mortgage obligation records, property legal filings and tax payment status, rental applications and evictions, inquiries and charge-offs from pay-day and online lenders, and consumer-specific bankruptcies, liens, judgments and child support obligations. The Santa Ana, Calif.,-based company will generate a CoreScore Credit Report for lenders to alert them to bad debts that might previously have gone undiscovered. The reports may also help some consumers by identifying previously hidden credit history that reflects well on them, the company said.

CoreScore consumer information will be "instantly merged" with traditional credit report data "in a single, integrated report only available from CoreLogic," the company said in announcing the new reports last week.

At that time, it was unclear whether the CoreScore reports would also be used to calculate borrower's FICO scores.

Today, CoreLogic and Fair Isaac announced that they plan to offer mortgage lenders a "credit scoring solution" that will combine data from CoreScore reports with Fair Isaac's FICO 8 Mortgage Score. That product will serve as the basis for future solutions that "deliver additional loan level insight and support more intelligent and consistent lending decisions," the companies said.

A spokeswoman for CoreLogic told Inman News that the FICO 8 Mortgage Score "will likely be an input" to a new score that will be provided along with the CoreScore Credit Report. There are no plans to update the FICO 8 Mortgage score itself to use the additional CoreLogic data, she said.

So lenders purchasing services from CoreLogic Credco will get back two scores: The score or scores they use for decisions today, such as the FICO 8 Mortgage Score or classic FICO score, plus a new score that uses the value of FICO 8 Mortgage Score and the CoreScore data.

"By blending the unique data from CoreLogic with the analytic expertise of FICO, we will be able to deliver a new and more predictive credit score with our recently launched CoreScore Credit Report," said Tim Grace, senior vice president of Product Management and Analytics for CoreLogic, in a statement. "Together, this new credit report and credit score will provide the mortgage industry with increased visibility into consumer credit behavior and improved credit risk analysis."

More from Inman News:
Top U.S. Areas With Rising Real Estate Prices
Real Estate Reality TV Family Publishes Fictional Novel
Top 6 Reasons Mortgage Applications Are Rejected

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]]>CoreLogiccredit reportcredit scoreequifaxexperianfair isaacFair Isaac CorporationFICO scoresTransUnionInman News2011-10-21T08:00:00+00:00'Mortgage Prof': 5 Reasons Banks Would Rather Foreclosehttp://realestate.aol.com/blog/2011/10/18/mortgage-prof-why-banks-foreclose-instead-of-settling-for-les/http://realestate.aol.com/blog/2011/10/18/mortgage-prof-why-banks-foreclose-instead-of-settling-for-les/http://realestate.aol.com/blog/2011/10/18/mortgage-prof-why-banks-foreclose-instead-of-settling-for-les/#commentsFiled under: , , , , , ,



"Why won't the bank just reduce the amount of my loan instead of taking my home and then selling it to someone else for way less than I would have been happy to pay?" It's a question that gets asked repeatedly these days, especially by people who are facing foreclosure or are upside down on their mortgages.

For the answer, we turned to Jack Guttentag, the Mortgage Professor and Inman columnist.

Guttentag believes that lenders have been too stingy when it comes to reducing loan balances. Private lenders have offered loan reductions only sparingly, he says, and Fannie Mae and Freddie Mac not at all.

Here's the professor's take on why homeowners can't catch a break on loan reductions.

1. The buck stops there.

The decisions to reduce principal loan amounts are made by the firms that service mortgages -- the same folks who brought the country the robo-signing scandal. As servicing firms, anything they decide must be in the financial interest of their client -- that's your lender, not you. If they depart from customary practice -- and writing down loan balances is a departure from customary practice -- the buck stops with them, Guttentag says. In other words, who's going to take the risk of reducing Joe Homeowner's loan amount and then have to explain it to the boss? To take Nancy Reagan out of context: They just say no.

2. Banks are in the business of making money.

No lender is going to write down the balance of a loan in default just because you owe more than the home is worth. Truth is, there is no benefit to the lender to helping Joe Homeowner keep his house instead of selling it to the next guy. Plus, to help Joe would eliminate the possibility that the bank could also get a deficiency judgment against him. Banks are in this for the squeeze and think of Joe as just the orange. Nothing personal, of course.

3. In this economy, you will likely default anyway.

Sure, you want to believe that the economy is going to turn around and the value of your home will again rise to what you paid for it. After all, hasn't listening to a fairy tale been a surefire way to fall asleep?

From the lender's standpoint, the only reason to write down a loan balance is that it will reduce the chance that you will default. And evidence has shown that people who are heavily underwater -- that's deep in negative equity territory -- are more likely to default than those who aren't. Truth is, negative equity discourages people from making their mortgage payments. They figure: Why keep throwing good money after bad?

4. Banks are short-staffed and the staff they do have is untrained.

Most interactions between mortgage borrowers and servicers are handled by computers or relatively unskilled employees, says Guttentag. Borrowers in serious trouble are referred to a smaller number of more skilled and specialized employees, but until you enter the red zone, you are likely to encounter frustration.

Guttentag says that at the onset of the mortgage crisis, servicers were caught short-handed and the sheer volume of foreclosures in the pipeline hasn't allowed them to catch their breath.

5. Mortgage insurance works against you.

When mortgages carrying mortgage insurance go to foreclosure, banks are protected up to the maximum coverage of the policy, which generally is enough to cover all or most of the loss. This discourages modifications, says Guttentag. Why would a bank do a modification for $15,000 if the $40,000 foreclosure cost is going to be paid by the mortgage insurer? Even if the insurance coverage falls short of the foreclosure cost, the shortfall has to exceed the modification cost before modification becomes financially more attractive.

So there you have it. A five-point plan for keeping homeowners on the hook for that hefty loan balance.

Also see:
Viewpoint: Where's Housing in the 'Occupy' Protests?
Mortgage Mod Hell: Trapped Between Lenders, Collectors
The Mortgage Fix That Can Save the Economy


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]]>foreclosuresJack Guttentagloan reductionsmortgage loan modificationmortgage modificationsmortgage profmortgage professorprincipal loan reductionsprincipal mortgage loan reductionsAnn Brenoff2011-10-18T14:00:00+00:00Viewpoint: Where's Housing in the 'Occupy' Protests?http://realestate.aol.com/blog/2011/10/05/viewpoint-wheres-housing-in-the-occupy-protests/http://realestate.aol.com/blog/2011/10/05/viewpoint-wheres-housing-in-the-occupy-protests/http://realestate.aol.com/blog/2011/10/05/viewpoint-wheres-housing-in-the-occupy-protests/#commentsFiled under: , , ,



Did the voices of the housing crisis just get swallowed up by the anti-Wall Street protests? Marches, sit-ins and confrontations with police -- all part of the Occupy Wall St. movement that organizers say was birthed organically and fed through social media outlets -- are happening in major cities across the country. Without question, windows across America have opened and, just like in the movie "Network," people are shouting "I'm mad as hell and I'm not going to take it anymore!"

The only problem is that homeowners caught in the foreclosure crisis also stuck their heads out those windows and save for a fleeting few seconds, the take-to-the-streets protests have ignored them in favor of taking corporate greed to task. Nowhere on the main Occupy Wall St. website is housing even mentioned. (Pictured above are protesters in Los Angeles.)

Before you accuse us of wearing blinders, it's worth noting that just a few weeks ago, a coalition of community groups called The New Bottom Line organized a nationwide 10-city protest aimed at stopping foreclosures, demanding that banks reduce principal loan amounts of all underwater mortgages and that Wall Street stop hoarding the trillions of dollars it got in stimulus money and start funding small business' efforts to create jobs. Hallelujah to that, we say.

Seeing commonality with the Occupy Wall St. troops, The New Bottom Line demonstrators have joined forces with the faster-spreading Occupiers. The New Bottom Line co-director Tracy Van Slyke says that the excitement generated by the larger protests taking place will transfer energy -- over time -- to relief for housing. Let's hope so. The millions of displaced families who lost their homes to foreclosures deserve a voice shouting on their behalf.

Where The New Bottom Line had been focused on the housing struggles facing the lower and middle class, Occupy appeals to a younger demographic -- those hard hit by rising unemployment and emotionally about as far away from losing a family home to foreclosure as you can likely be.

About all they have in common is anger, which ultimately may be enough.

Also see:
Foreclosed Homeowner 'Booby-Traps' Home
Realtors' Latest Challenge: A Surge of Squatters
Foreclosure Rescue Scammers Busier -- and Trickier -- Than Ever

More on AOL Real Estate:
Find out how to calculate mortgage payments.
Find homes for sale in your area.
Find foreclosures in your area.
See celebrity real estate.

 

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]]>Occupy Wall StreetThe New Bottom LineAnn Brenoff2011-10-05T08:00:00+00:00