Alan's Blog

An Improvement For Appraisals?

On June 30, 2010 Fannie Mae (FNMA) has announced new appraisal guidance effective September 1, 2010. These changes were made as a result of post-purchase reviews of mortgage loan files which identified issues including:

• Inclusion of interior photographs in the appraisal report
• Lender changes to the appraised value and guidance on addressing appraisal deficiencies
• Appraisal selection criteria
• Sources of comparable market date
• Selection of comparable sales

During FNMA's reviews cases were identified where the lender had reduced the opinion of market value in the appraisal report based upon underwriter judgment, automated valuation models, or other methodology.

After the review FNMA updated its appraisal policies to address the practice of lenders changing the appraiser's opinion of value and also provided specific guidance on steps that must be followed when an appraisal is considered deficient.

The announcement also reminded lenders that appraisers selected must have the "the requisite knowledge to perform a professional quality appraisal for the specific geographical location and particular property types." The FNMA Selling Guide has been updated to state that appraisers who lack the requisite knowledge, experience and access to appropriate data must not be utilized.

The guidelines for the selection and use of comparable sales has been updated. It states that "the appraiser is responsible for determining which comparables are the most appropriate for the assignment at hand." The new guidelines state that "Lenders must pay particular attention and institute extra due diligence for those loans in which the appraised value is believed to be excessive or where the value of the property has experienced significant appreciation in a short time period since the prior sale. Fannie Mae believes that one of the best ways lenders can reduce the risk associated with excessive values and/or rapid appreciation is by receiving accurate appraisals from knowledgeable, experienced appraisers."

Hopefully this is the first step in correcting a frustrating problem that was brought about with the establishment of the Home Valuation Code of Conduct (HVCC).

By Chavon Sutton, staff reporterMay 18, 2010: 10:28 AM ET

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

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

The credit score, however, has not been made available for free. It is a numerical representation of the information in a consumer's credit report, which covers a consumer's entire credit history -- all debts, payment habits, and jobs held. The credit score is widely used as a shortcut by lenders, so monitoring it is crucial.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

"The government's website (annualcreditreport.com) started much in the same way, where consumers got their free credit report when denied credit," said Cunningham. "This may be a first step toward universally providing free credit scores to consumers."  

It should be noted that credit scores are different for different industries such as auto, credit cards or mortgages because they look at different criteria.

Alan Gross
Home Office: 240.813.0614
Email: HomeMortgageAdvisor@gmail.com
Web: www.mtg-info.net

Use Google Maps To Search For A New Home!

Google is developing technology that helps in many facets of our lives. We are all familiar with the Google search engine. Many of us are aware of Google mail through gmail accounts. In fact I switched to a gmail (HomeMortgageAdvisor@gmail.com) last fall after using AOL for almost 20 years. I've recently began using Google Voice to receive calls. Some of us use Google Maps to get directions or or a map.

Recent figures indicate that over 80 percent of people looking for a new home use the Internet. I recently learned that you can use Google Maps to search for homes for sale. Below is a short video that goes over how to use Google Maps to search for a new home.

Have Mortgage Interest Rates Hit The Bottom?

On February 18, 2010 the Federal Reserve (Fed) announced a surprise increase in the discount rate form 0.50 percent to 0.75 percent. The discount rate is the rate charged to commercial banks and other depository institutions on loans they receive from the Fed. This differs from the Fed Funds Rate that banks charge each other for loans which also effects the Prime Rate.

While this move does not directly affect the rates on home mortgages, credit cards, auto and other loans it is a sign that the "cheap money" policy is starting to come to an end. In a statement the Fed said. "The modifications  are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy." But the initial knee-jerk reaction was to move mortgage interest rates up slightly. What's going to happen in the next few weeks is anybody's guess.

With the economy still weak, an unemployment rate close to 10 percent and continuing fears of mortgage defaults, few economists expect the Fed to increase interest rates quickly or sharply. Just last month the central bank reaffirmed its intention to keep the key short-term rates it controls at "exceptionally low" levels for an"extended period," a position it has held since last March.

But that doesn't mean you can expect mortgage interest rates to remain low until the Fed decides to move. It is currently winding down it's purchase of mortgage backed securities and if past history is any indication, the market will anticipate the rise and move before it happens.

So, what does this mean for you? If you are looking to purchase a new home or refinance your current home it may be a good idea to act on those plans sooner rather than later. A one percent rise in interest rates on a $300,000 loan will increase your payment almost $200 per month.

I will be happy to answer any questions you may have.

Alan Gross
Home Office: 240.813.0614
Email: HomeMortgageAdvisor@gmail.com
Web: www.mtg-info.net

Time Is Running Out On The Homebuyers Tax Credit

The Worker, Homeownership. and Business Assistant Act of 2009 has extended the $8,000 tax credit up to $8,000 for qualified first-time homebuyers purchasing a principal residence. The act also included a tax credit of up to $6,500 for qualified repeat homebuyers.

The tax credit for first-time homebuyers was extended from December 1, 2009 to April 30, 2010. The income levels were increased for single taxpayers from $75,000 to $125,000. For married taxpayers the income level was extended from $150,000 to$225,00.

To be eligible for the homeowners tax credit: