Sunday, April 18, 2010

How has the Credit Score changed our lives

Has anyone noticed how your credit score has determined how people look at you? I have pulled two credit reports for two different borrowers applying for a non-conforming jumbo loan. When the loan application was originally submitted and the credit report was pulled, both borrowers had above 750 scores without blemish one on either report. Another report was pulled by the lender prior to closing and both borrowers had an, out of no where, hit resulting in a 120 point drop in their scores. These people have never missed any payments, have large incomes, long time employment and a low debt to income ratio. One of the reports we were able to get the item completely removed and had the file re-scored but the other just has to wait until the scores rebuild. Regardless of the end results, neither borrower will suffer, the system completely ignores the other credit history. Never missed a payment, willingness to pay and low debt to balance ratio use to mean something. You can have all of these items but one slip and years of credit building erodes. This system needs to be altered. Until it is it will be one of the mysteries in the mortgage business and other businesses relying on credit reports.

Tuesday, March 31, 2009

Mortgage Mystery

Why haven't Fannie Mae and Freddie Mac eliminated or at least reduced the Risk Base Adjustments for all conforming loans? With the new low rates, everyone would like to refinance or purchase a home. These adjustments increase the rates or the cost of either refinancing a current loan or a new purchase money loan. These adjustments are placed on all loans that Fannie Mae or Freddie Mac are going to purchase, which is nearly all the new loans in this current mortgage climate. If a borrower has below a 720 credit score and a loan to value of 80% there is a added charge of .25%. If the credit score falls in the high 600's the adjustments are as high as 1.5% and in the mid to low 600's the adjustments can be as high as 3.00%. Someone has to pay these adjustments and guess what, it's the borrower. It seems that the refinancing of current mortgages and the purchases of new homes will be the engine that drives the consumer confidence higher and the economic recovery for our country. Refinancing home loans will place new disposable income in the hands of consumers who will then purchase the goods and services, which is desperately needed at this time. I do not understand the resistance to modify the Risk Base Adjustments where all credit scores above 720 with an 80% loan to value would have no adjustments. Credit scores of 719 to 680 with an 80% loan to value would be adjusted by .25% and from 679 to 640 an adjustment of .75%. Heaven forbid eliminating these adjustments all together. Remember, these are adjustments that are added to the all ready adjusted rates. These adjustments are hindering the ability of qualified borrower's from being able to take advantage of these low mortgage rates. Fannie Mae and Freddie Mac have the ability to eliminate one of the large barriers to our economic recovery.

This is a Mortgage Mystery.