For the longest time, I thought the credit scoring model was 2 parts magic, one part fairy dust, and three parts pi times the square root of the sum of the numbers in your social security number.  But now I know better; it's all magic.

Black magic for a lot of folks these days.  But there are some things we can do to lift the curse of sub-600 scores from our land.  Stop killing your credit!

IV - THOU SHALT NOT MURDER THY CREDIT

THE SIN- Ignoring the factors that influence your credit score is like ignoring that pesky rash that keeps coming back.  Stop itching and start treating the cause.  There are some obvious things that murder your score like foreclosures, bankruptcy, judgments, collections, late payments, maxed out credit cards, and lack of accounts.  But some of the silent wolves have snuck their way into the hen house and those are the ones that many of our clients are victims of.

I present to you, Exhibit A.  Those evil credit card companies are really sticking it to the consumer these days.  Borrower with a 750 FICO score has a $1500 balance and a $12,000 credit limit.  No big deal.  The fine folks at CITI Cards, switch this fellow's interest rate from 7.9% to a floating rate linked to prime; let's say Prime + 24.99%.  Not only that, they lower his available credit from $12,000 to $2500 despite the fact that he's paid on time for the past 6 years.  His debt ratio on this particular card goes from nothing to 60%, and in turn, his FICO drops 25 points.  I'm sure you've seen this and if anyone has a HELOC, it's either been frozen or the credit limit has been cut to the current balance.  Can I get an AMEN?

THE WIN - If your credit score has dropped or it's been low for as long as the Cleveland Browns last played in the Super Bowl, it's time to bring your FICO back to life!  For folks in the Bradenton-Sarasota area, I urge you to sit down with me and do some mortgage planning.  We can figure out why your score is low, look at the obvious and not-so-obvious contributing factors and scheme how to create a better chance of running your credit through Experian's 10 top-secret algorhythms and coming out on top.  If you're reading this on Active Rain, find a professional in your area to be your credit score bodyguard; they can help protect you from outside forces that can assassinate your beacon, and sometimes, they'll even protect you from yourself.

"But I make $60,000 a year!"  No, according to your 2008 tax return, you make $12,000 a year and that $250,000 home in Sarasota might be just a bit out of your price range.

It's a bitter pill to swallow but there's a lot of pill-popping going on these days and the self-employed borrowers are feeling a bit sick to their stomachs.  If only they would have obeyed Lending Commandment III:

III - THOU SHALT FILE THY TAXES WITH FORESIGHT

THE SIN - What am I talking about?  A classic case of poor planning.  As a self-employed individual myself, I can completely understand writing everything off on my taxes from my home office to the box of paperclips I bought last week.  You want to show as little income as possible so you pay the least amount of tax.  But of course, when you want to buy a home, you want to show as much income as possible.  It's a painful catch 22, and I'm sure a lot of brokers in mortgageville are feeling your pain as well.

THE WIN - Plan ahead.  If you know you are going to buy a home soon, claim more income if you are self-employed.  Rental income, second job income, capital gains.  Bring it on.  True story.  Had a borrower this year that was working for his dad's pool company.  He wasn't making enough to qualify for the loan he needed, so I suggested he increase his W2 pay and decrease his monthly bonus.  He did just that and in 3 months, he quailified for an awesome USDA loan with no problems.

Now, it may take a bit longer for some.  Real estate investors need to have two years rental experience for the most part.  And mortgage underwriters are looking at the past two years for a lot of types of income.  Talk with your CPA as well because they can help you strategize on how to meet your goals.  If you plan appropriately, you'll be on your way to saying "10-40 good buddy" in no time!

Shazaam!  Kaboom!  OK, enough pseudo-expletives.  It's time to revisit the Ten Commandments of Lending as I see them from the top of Mount Mortgage.  Wow, it's apparent I've had too much coffee this morning.  Let thee read on!

II - HONOR THY FICO AND KEEP IT 620

THE SIN: I've pulled hundreds of credit reports and it seems like it's a case of the haves and the have nots these days.  Either folks are near 800 with flawless credit, or they are closer to 550 with a report that's riddled with judgments, collections, and late payments.  If you don't know what your score is, call a mortgage broker and we'll be glad to run a FREE REPORT.  Or you can hit www.annualcreditreport.com once a year to get your free credit report.  There are a lot of simple things you can do to get your score up, but it comes down to getting rid of the bad stuff and adding good stuff.  Most government loan products require at least a 620 these days, so don't be left behind with a sinful score.

THE WIN: Fix your credit!  Mortgage brokers and realtors, can I get an AMEN?  There are reputable services out there that can improve your FICO score hundreds of points in a couple of months.  True story.  I had a client with ONE judgement from our friends at Verizon.  It was only $144, but his score was a 696 because of it.  Not bad you say?  If he had at least a 720 FICO score, his rate would improve by .5%!  He called Verizon, settled the matter once and for all, had it removed from his report, and 21 days later, his score was a 790!  Amazing!  It can make the difference between a RATE and a GREAT.  A deal or no deal.

So honor thy FICO and you'll be walking on holy ground!

Last night, I had a vision of a burning bush.  OK, maybe it was just heartburn, but in any case, the fiery shrub spoke to me in an authoratative voice and told me that there was a new set of lending laws I must bring to the people.  They are wandering around the dry wilderness of delayed closings, suffering through plagues of bad appraisals and frightening underwriting, and they are simply looking for the promised land: The closing table.

In this vision, I was given a cumbersome slab of granite to bring to the borrowers of today.  Unfortunately, it was inscribed in Hebrew and I have no idea how to translate.  I think you actually read right to left if I'm not mistaken.  Enough!  It is time to bring to you, The TEN Commandments of Lending, Circa 2009!  Each of the ten lending "plagues" can be defeated by honoring and practicing these precepts, so if you are looking for divine intervention, heed these words!

I - HONOR THY DOWNPAYMENT OR GIFT

THE SIN - By now, it's clear there are some amazing deals on homes, but some people still can't scrape up the funds to come to closing with.  In the Bradenton/Sarasota, Florida area, there is less than a 6 month supply of homes under $200K which tells me, people are doing what it takes to get a home.  And with the government offering first-timers an $8K tax credit, time is running out on what may be the best buying opportunity we'll have in history.

THE WIN - If you haven't heard, Uncle Sam is footing the bill on an $8K tax credit for first-time homebuyers: I've got a countdown on my FREE Sarasota Mortgage Info site.  And with mortgage products like FHA, VA, and USDA, there are plenty of low to no money down loans available for folks.  Many of these programs allow the downpayment to come from a gift.  So think of someone that loves you, and hit them up for money.  Or pray for check in the mail from a rich relative!

 If mortgage truth can be found in the sprawling vastness of Internet and tucked away in the blurbs of the Bradenton Herald, then surely it can be discovered in the life of my little daughter, Chloe Sky.  I suppose the "experts" would tell you that you need to be intimately acquainted with mortgage backed security trading to know which way rates are going to go, you must study the new MDIA and HVCC guidelines to predict turn times, and you have to be familiar with your 19 different lenders to understand whether or not you can write a loan on a manufactured home in the middle of a giant iceberg.  But the truth is, all that matters is sleep, milk, and attention.

Follow me for a second.  Abraham Maslow, in his 1943 paper entitled, A Theory of Human Motivation, basically ranked our needs as a human.  We will always revert back to curing deficiencies in our lives at the most basic level, starting with physiological needs.  If the needs of the body aren't met, then we can't pursue more intangible needs like love, truth, security, and self-esteem.  My little girl needs food, and if she doesn't get it, the alarm goes off and she responds (usually about 3 AM).  Once she gets those needs met, a peaceful bliss settles throughout our household.  Smiles galore.

So how do we make our clients smile?  Meet their needs.  They could care less about the 50-day moving average and how long their appraisal is going to take.  They are looking for shelter.  4000 square feet of it in some cases, but shelter none the less.  And if we can create a way for them to get this or stay in this home, we are going be successful.  We are the ultimate pacifier in how we handle the process and the information we provide our clients.  Our words and e-mails are binkies and blankies.

So despite the Taylor, Bean, and Whitaker disaster, slow turn times, narrow-minded underwriters, teaser rates on every Internet pop-up ad, chameleon guidelines, whacked appraisals, and the rest of the chaos we are in the midst of, we can create peace and treat people with respect and attention.  I'm drifting off to sleep just thinking about it.  Time for some coffee.

 Our neighborhood held their annual "no-holds-barred" bargainmania called the GreyHawk Rummage Sale.  You know the drill.  Find your junk.  Tag your junk.  Sell your junk.  Get up at stupid-o-clock, start the IV drip of coffee, and hit the up button on your garage door to find a half dozen cars lurking curbside waiting for you to display your wares.

And then the negotiating that would put a hostile corporate takeover begins.  Will you take 10 cents for this 25 cent item?  Throw retail out the window; this is the land of resale and everything must go.  As a seller, you hold on to the believe that your stuff is special and you price accordingly.  By the end of the day you realize your garbage is just like everyone else's and it's buy one get one free.  Or buy none, just take this lime green lamp off my hands.  Ultimately, it's an economy of one thing: CASH.

We are living in a time of Garage Salonomics.  Everything in Florida is being liquidated and the only form of payment that consistently works is green and made of this funny looking paper (I was going to come up with something a little wittier, but I didn't have any bills in my wallet to look at for ideas).  Here's some garage sale principals that are playing themselves out right now:

1. A slap in the face pricing structure.  Zillow did a survey a while back and something like 67% of homeowners in the country still felt their house was worth more than it was.  That number is down close to 30% now.  Price is 95% of what sells right now and if you can suck up your pride and be realistic with your numbers, you'll end up selling your goods.

2. He who has the cash fills up the back of the SUV with the prizes.  If you've played the markets well and didn't follow the trends or do what was popular, then you're in an incredible position to create massive amounts of wealth.  You can buy whatever you want at a deep discount whether that's used baby toys or real estate which in some cases is selling for clearance rack pricing.

3. No plastic please.  Forget about liquidity and credit.  No matter how much money we throw into the system, it's getting harder to borrow.  If the ATM spits out money, take it.  But otherwise, expect to pay in gold dubloons, yen, euros, or wampum.

4. Negotiate like Trump.  Pretty sure I read in one of Trump's books that he uses a very simple negotiation technique that works at garage sales or land sales.  He asks the question, "Is that the BEST you can do?"  Keep asking it until the seller says YES!  He's saved millions of dollars with those words and I've tried it myself and it works.

5. Think outside the driveway.  During my garage sale, I was selling this mini-fridge for a friend, and a guy came up to me and really liked it.  BUT, he had just bought a bigger one down the street.  I said, "Well, why don't we just trade?"  It really confused him and he thought about it for a while and eventually, he bit.  I then turned around and sold the bigger one for five bucks more.  The point?  If you can think creatively, look for ways to get deals done, and just try it, sometimes it works.  Barter if you don't have cash.  Buy and then sell; take the profits and buy more.

There are probably a million more Garage Salonomic principles to cover, but it's past 2 PM and we're shutting the driveway operation down until next year.  Feel free to chime in on your favorite insight and I'll see you at 6 AM parked outside your home soon!  (OK, that sounded kind of creepy).

Mike Tullio is a Managing Partner at Blue Skye Lending and he's got a pocket full of quarters just waiting to be spent this weekend in a driveway near you.

Mike Tullio| Your Personal Mortgage Consultant for Life | 8130 Lakewood Main Street, Suite 205 |Lakewood Ranch, FL 34202 |Cell. 941-228-1020 | Fax. 866-415-7805 | matullio@blueskyeloans.com

Have you heard about Sen. Johnny Isakson, a Republican from Georgia (and a former real estate professional) who has introduced legislation that would beef up the tax credit that currently exists for first-time home buyers?  The news just emerged like a baby chick pecking its way out of its shell and the big idea is to nearly double the tax credit for buying a home this year to $15K AND make it available to anyone buying a primary residence, not just first time homebuyers.  Wow.

Why not just make it an even $20K?  And while the US Treasury prints another $2 trillion, why not step it up to $50K?  The intent is to encourage the step-up buyers to enter the marketplace and start buying homes along with the FTHB that have already flooded the open houses and model homes.  Will it work?

Maybe.  It's a pretty simple equation.  Free money + low rates + cheap houses = More sales.  The ultimate variable though is the emotional aspect of buying.  The paranthetical components of the above equation are (confidence) and (motivation).  Can money really move people to buy homes?  Enough of it will.  People spend millions on lottery tickets and humiliate themselves by eating sheep brains on TV all in the name of winning the ultimate prize: cash.  Isn't a home an even better prize?

 I got nothing else!  It's been some time since I've seen Richard Gere win Debra Winger over and prove to Louis Gossett Jr. that he wasn't some sniveling little punk.  It seems to me that finding a a good loan officer is equally as challenging these days.  We're a small company of 6 full-timers in the mortgage industry and for the past 6 months our search for mortgage consultants has been our own version of a Dan Brown novel: A lot of looking but not a ton of finding.

Right off the bat, we haven't advertised or posted a position.  No Craigslist, Monster.com, local paper.  We haven't run a table at the local Bradenton/Sarasota job fair.  But we have had 3 promising prospects walk through our doors and like what they saw.  Business cards, laptops, a plan to conquer the world one loan at a time, a full-doc gleam in their eye.  They were professing their love of Blue Skye Lending and knew that NOW is the time to position yourself as the lending expert in our local market.

And then, they didn't show up for 3 weeks.  Oh, something "more stable" came along.  Come to find out, finding a loan officer and a gentleman/woman is a little tougher than it would seem.  Overcoming the obstacles of offering someone a straight commission position with no guarantee or draw option is quite a task.  And mortgages are just plain tougher to get done these days; you actually have to be a good salesperson and not just an order-taker.

So how are you finding A Few Good Men?  If you have any suggestions, please let me know as we are looking to grow our company in the next 30-90 days.  Appreciate your advice my fellow officer and love lift us up where we belong!

 Seriously, I'm holding out until rates goes to 4%.  The newspaper and media experts all told me it would happen.  Heck, even the US Treasury Department talked about it.

But here we are at 5.75% (in a matter of a few weeks, after being closer to 4.875% for months) and there's a pretty good chance we are headed toward 7%.  Many blogs ago, I predicted we'd hit 5% (rates were about 6.25% at the time) and just this evening a fellow brother in the mortgage industry, KEVIN HANCOCK, commented on my lucky prognosticating and asked where I thought we were heading.  Back to the 4%'s or up, up, and away?  I figured it was worth posting my response to him in a separate blog entry, so here we go.  Crystal ball time.

Will we hit 7%?  There a pretty good chance we will in the next 12 months.  Hopefully my next post will be sooner than that.

 Imagine this.  You've toiled and traveled months, years even, and you feel as if you have come to the end of your rope.  You look to the heavens in outright desperation, and then the clouds part, and it appears.  The Holy Sale.  Angels sing.

It seems like that is the tale of every mortgage consultant these days.  We are working so hard to get things done.  Transactions aren't just a stroll through the countryside, they are brutal journeys through the most treacherous landscape known to man.  Underwriting.

We are now in the world of appraisal reviews, guideline changes, rising credit score requirements, and bailing MI companies.  Depsite best efforts by President Obama, Congress, the Treasury, and the Fed, it's still a small miracle to get a purchase loan closed.  But to solve our lopsided housing supply/demand curve, we need to get more buyers qualified to buy.  To do that, we need to do a couple of things:

1. Confidence.  You can't legislate fear out of people.  We need a concerted effort by lawmakers, the media, and the real estate community to bring back the love for loans.  When we start hearing the word "bottom", we are well on our way.

2. Credit.  A lot of folks are in a serious liquidity crunch.  Just last week, my credit card company cut my limit and raised my rate.  Just plain evil.  With less money, things start getting paid late.  Mortgages stop getting paid.  With the avalanche of short sales, foreclosures, and loan mods, people with great jobs and plenty of assets can't get a loan.  These are the very people we need in the market as buyers.  By year's end, we will see some type of sweeping credit legislation that somehow allows borrowers to wipe the slate clean on late mortgages and accounts with qualifying hardships.  If this happens, we could see sales back in the black.

3. Common Sense.  Right now, lenders are just plain dumb.  If they'd work with people who are late on their mortgages, we'd have less people trying to short sale.  Less people walking away.  This would normalize property values and you wouldn't have a neighborhood of comparable sales that seem to be dropping lower by the nanosecond.  And on the lending side of things, MI companies and lenders are trying to drink sushi through a straw.  Stop this nonsense with declining markets.  If there were any time to take a risk on using a house as collateral to lend, now is the time.  There just isn't much more room on the downside.  Bring back some reasonable guidelines and the sales will follow.

There are no easy answers, but the Knights of the Closing Table could use a little assistance.  I see brighter visions ahead, so let's continue to pursue the Holy Sale!