More Personal Information in the Credit Report

Consumers applying for a mortgage will be sharing more of their personal information with lenders next year.

FICO scores have been based on a person's credit history. But now, tools are being developed to help the lending industry dig deeper.

Fair Isaac Corp., and CoreLogic recently announced a joint project that will result in a separate score that will be available to mortgage lenders and will include payday loans, evictions and child support payments. In the future, the status of utility, rent and cellphone payments may also be included.

Experian, Equifax and TransUnion have recently begun providing estimates of consumer income as an option to the credit report. Experian has also begun including data on on-time rental payments in its reports as of this year.

All this new information could have positive or negative impact for consumers: It may open the door to homeownership to some consumers who otherwise lack sufficient credit histories, and it may help more affluent homeowners who show little use of credit.

On the negative side, the extra information could make a borderline borrower look even worse on paper.

The FICO-CoreLogic partnership will not result in a credit score that will eliminate a borrower for a mortgage backed by FNMA, FHLMC or FHA. This is because the report required for such a loan does not rely on the additional CoreLogic data. It could affect mortgage fees or interest rates charged by lenders who use a risk-based pricing model.This model rewards the most creditworthy borrowers with low rates and tack extra fees onto loans for those with lower credit scores.

It will be interesting to see if the new information will actually expand the number of people who can get a mortgage.

Upper-mid Range California Homes Market Softening

July 28 2011 - The demand for properties in the $650K-$750K space is now shrinking. We can expect softer prices ahead in Orange County, L.A., and the Bay Area. In San Diego, the impact extends down to $555K.

Why? Changes in the maximum loan limits for FHA and high balance conventional loans take effect in the weeks ahead. Filling the void are jumbo loans with higher rates (which require higher income to qualify) and higher down payments and reserves, which require substantially more assets.

For Los Angeles, Orange County, and the Bay Area the maximum loan limit for FHA and conventional (high-balance) lending is reduced to $625,500. For San Diego, it is $546,250.

Originally scheduled for Dec 31,2010, FHA loans need to fund by Sept 1, 2011 to allow time to insure by Oct 1, 2010. Conventional high balance loans must be originated before Sept 30, 2011.

Softer prices ahead in this part of the market spell opportunity for buyers who still qualify. Historically low interest rates remain in effect.

FHA Flipping Waiver extended to 12/31/2011

FHA Flipping Rule Limitations

Waiver has been extended to 12/31/2011.

The waiver to the FHA flipping rule is limited to those sales meeting the following general conditions:

* All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
* In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the sale meets specific lender conditions. (Typically, these will include a copy of the HUD-1 from the previous closing. If more than 20% markup, copies of receipts and contracts for rehabilitation.)

Conventional loans flipping rules will vary from investor to investor, 90 days from purchase is generally required.

FHA extends suspension of 'anti-flipping' rule for another year

The rule was intended to prevent speculators from defrauding the government, but it also stifled the purchase and renovation of foreclosed homes by legitimate investors.For years the federal government prohibited the use of Federal Housing Administration mortgage financing by buyers purchasing homes from sellers who had owned the property for less than 90 days. The idea was to prevent speculators from defrauding the government through quick flips of houses — often involving straw buyers and corrupt appraisers — at wildly inflated prices.

One side effect of that policy had been to stifle purchase-and-renovate projects by legitimate, small-scale investors who buy houses after foreclosure or loan defaults and then resell them in substantially improved condition. In many parts of the country, first-time and moderate-income buyers often sought to buy these fixed-up houses using FHA-insured mortgages with 3.5% down payments, but were prevented from doing so by the "anti-flipping" rule.
This left large numbers of foreclosed, vacant houses sitting unsold and deteriorating, with negative effects on the values of neighboring properties.

Last January, FHA Commissioner David H. Stevens announced a one-year suspension of that rule, permitting qualified buyers to obtain FHA mortgages on properties that were acquired by rehabbers less than 90 days before. The plan, set to expire at the end of this month, came with safeguards for purchasers, including inspections and multiple appraisals in some cases to document the amounts spent by investors on the improvements.

Vicki Bott, deputy assistant secretary for single-family housing at the FHA, confirmed in an interview that the agency expects to continue the policy for another year. Not only have first-time buyers responded overwhelmingly to the opportunity to buy "turnkey" renovated homes with low down payments, she said, but they have performed well on their mortgage obligations.

"Obviously we have concerns about flipping in general," Bott said, but the FHA has seen none of the fraud problems, defaults and re-foreclosures that cost the agency millions in insurance payouts in earlier years.

Investor Paul Wylie, who with a group of partners and contractors specializes in acquiring, renovating and reselling foreclosed and distressed houses in the Los Angeles area, says the government's policy "has been a very positive approach" because "it recognizes the role that [private investors] can play in helping the housing market get back on its feet."

In the L.A. market, Wylie said, FHA financing accounts for 40% of all home purchases and 60% of purchases in predominantly Latino and African American communities.

Buying foreclosed houses "comes with a lot of risk factors," Wylie said. "There's no title insurance. We don't have a good idea of the extent of the defects" inside properties that have been sitting vacant or vandalized for months. Some houses come with delinquent property taxes, which Wylie's group typically must pay.

Then again, the profit opportunities can be significant as well. Most of the Wylie group's houses sell for more than 20% higher prices than Wylie paid at acquisition — a quick turnaround gain that potentially works for buyers, sellers, neighborhoods and, yes, the FHA itself.

kenharney@earthlink.net

Distributed by Washington Post Writers Group

Copyright © 2011, Los Angeles Times

Home prices in many U.S. markets hit bottom

Home prices in many U.S. markets hit bottom in the third quarter, but some large metropolitan areas, particularly in Florida, are still in trouble, according to data from Local Market Monitor.

The real estate analytics company said home price data may be skewed because of recent halts of foreclosure sales as servicers reviewed possible documentation problems.

Local Market Monitor reported a "definite bottom" in Southern California, specifically the San Francisco Bay area, where the average home price stands at $642,159, a 17% drop from the peak in the third quarter of 2006. Analysts forecast that price to hold over the next year and possibly increase 1% over the next two years.

Home prices in Washington, D.C., Minneapolis, Honolulu and Boston also bottomed out in the third quarter.

The biggest drop over the next year is set to occur in the Daytona Beach, Fla. area, where Local Market Monitor said prices should drop another 11%. A number of other Sunshine State cities — Jacksonville, Lakeland, Ocala, Orlando and Cape Coral — should all see prices drop by 5% or more over the next year.

"Our 12 month forecast is still very modest, because the job situation is still weak, but it won't be a surprise if home prices in these markets actually do better," according to the report.

Local Market Monitor reported three Texas areas, Austin, Forth Worth and Dallas, have seen good job growth and "have the potential to beat forecasted price increases over the next year."
-Housing Wire, Dec. 10th, 2010

FHA loan cost is going up

FHA loan cost is going up on Sept 7th, 2010, unless you have an accepted contract by this date and your lender has a case number. (Case numbers can only be obtained if there is an address.)
Monthly mortgage insurance will increase from .50% to .90% for loans over 15 year term. (Despite the new ability to charge 1.55 percent, FHA officials say an increase to 0.90 percent would be sufficient to self-insure its loans.)
In everyday terms, assuming a $200,000 mortgage, the math to a homeowner looks as follows:
* Current Premium (0.55%) : $91.67 monthly mortgage insurance premium
* Expected Increase (0.90%) : $150.00 monthly mortgage insurance premium
* Maximum Increase (1.55%) : $258.33 monthly mortgage insurance premium
The news is not all terrible, however.
FHA has also said it plans to reduce its upfront mortgage insurance premium paid at closing from 2.25 percent down to 1.000 percent.
On the same $200,000 mortgage, that would reduces closing costs by $2,500.
However, the potential for reduced seller paid closing costs from a maximum of 6% down to 3% will mean higher entry cost and higher monthly payments for minimum down buyers.
The California Tax Credit Application Deadline is August 15,2010. Funds are limited, and not all applicants will be accepted.
All in all, several compelling reasons for minimum down homebuyers to get into contract now!