Jason Myers's Blog

Most Non-Homeowners Don’t Plan to Buy Over Next 12 Months

Jason Myers Myers — Fri, 03 Oct 2008 13:37:03 -0500

In what looks like more bad news for flagging home sales, 70 percent of non-homeowners said they do not plan to purchase a home in the next 12 months, according to a survey conducted by real estate information service Trulia.

And nearly half (44 percent) of the respondents in the key first-time homebuyer age range (18-34) confirmed that high costs prohibited them from purchasing a property, despite recent home price declines.

Potential homebuyers in the 35-44 age range said concerns about obtaining home loan financing kept them on the sidelines.

And 92 percent of current homeowners who responded plan on staying put during the next year, which makes sense given the current turmoil.

In all, only 12 percent of non-homeowners said they expect to buy a home in the next year, not great new for the National Association of Realtors.

Interestingly, 77 percent of current homeowners who responded to the survey said they had not taken equity out of their homes in the past two years.

Of course, things had already made a turn for the worse back in late 2006, so it's not necessarily indicative of any financial responsibility on the parts of homeowners.

Many, in fact, pulled most of the equity out of their homes prior to the downturn that began around late 2006, and those looking to cash out later were met with low appraisals and more restrictive guidelines.

In spite of the ongoing crisis, 49 percent of homeowners still believe their home is a great long-term investment going forward.

U.S. marks 7th anniversary of 9/11 terrorist attacks

Jason Myers Myers — Thu, 11 Sep 2008 08:42:09 -0500

The nation paused Thursday to mark the seventh anniversary of the Sept. 11 terrorist attacks with a heartfelt ceremony at ground zero and other solemn remembrances around the country.

Relatives of victims killed at the World Trade Center gathered at ground zero in lower Manhattan for readings from dignitaries and a recitation of the names of the dead. Later Thursday, presidential candidates Barack Obama and John McCain were due at ground zero to pay silent respects.

"Today marks the seventh anniversary of the day our world was broken," Mayor Michael Bloomberg said. "It lives forever in our hearts and our history, a tragedy that unites us in a common memory and a common story ... the day that began like any other and ended as none ever has."

The ceremony at ground zero included moments of silence at 8:46 a.m. and 9:03 a.m. - the times that two hijacked jets slammed into the twin towers. Two more moments of silence were to be held at the times the towers fell. Services were also being held in Pennsylvania and at the Pentagon, where a new memorial will be dedicated.

Relatives of victims began arriving at dawn at ground zero, now a huge construction site. American flags were draped over silent cranes.

Maureen Hunt, wearing a T-shirt with a picture of her sister, Kathleen, a 9/11 victim, said that it was comforting to be at the ceremony with so many who have lost loved ones.

"This is a place for us to meet," said Hunt, who has come each year to pay her respects. "It is not getting easier to attend these ceremonies."

Family members and students representing more than 90 countries that lost victims on Sept. 11 read the names of 2,751 people killed in New York, one more than last year. The city restored Sneha Philip, a woman who mysteriously vanished on Sept. 10, 2001, to its official death toll this year after a court ruled that she was likely killed at the trade center.

Among the readers was Laraine Angeline, who lost brother-in-law, Steve Pollicino. "Steve, your smiles live on with us," she said. "Our separation is temporary. Our love for you is forever."

McCain and Obama planned to visit the site after the ceremony concluded Thursday afternoon. The candidates agreed weeks ago to pull their campaign ads for the day and were appearing together Thursday night at a forum on volunteerism and service.

Former Mayor Rudy Giuliani was to speak at the ceremony, as he has every year in New York, along with officials including Bloomberg and Homeland Security Secretary Michael Chertoff.

Last year's reading by Giuliani, then a Republican presidential candidate, drew protests from family members who said the city was ill-prepared for the terrorist attacks under his leadership and questioned whether he should be there while running for the White House. They had no opposition to McCain and Obama' visit this year.

In Arlington, Va., Defense Secretary Robert Gates was scheduled to speak at a ceremony dedicating the memorial at the Pentagon, the first of three major Sept. 11 memorials to be completed.

The 2-acre park, located at the spot where American Airlines Flight 77 crashed into the Pentagon's west wall, consists primarily of 184 cantilevered benches, each bearing a victim's name.

President Bush and first lady Laura Bush marked the anniversary during a moment of silence on the South Lawn of the White House. The president was then to head to the Pentagon memorial.

In Pennsylvania, at least 200 people gathered Thursday morning at an observance in a reclaimed minefield in Shanksville where Flight 93 came down after passengers reportedly stormed the cockpit to thwart terrorists' plans to use that plane as a weapon like the others. Bells were to toll and victims' names would be read as part of the service.

McCain was also attending the memorial service in Shanksville for the 40 people killed aboard the hijacked flight.

Memorials are years away from being built in Pennsylvania and New York. As in past years, two bright blue beams of light will shine at night on the New York City skyline, in memory of the fallen towers.

Government takes over Fannie and Freddie in historical bailout.

Jason Myers Myers — Mon, 08 Sep 2008 08:44:21 -0500

On Sunday, the Treasury Department and the Federal Housing Finance Agency jointly summarized their plan to assume control of the troubled mortgage companies and to back the bonds issued by the companies with the full strength of the federal government.

"Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe," Treasury Secretary Hank Paulson said in a statement Sunday.

Fannie and Freddie own or guarantee more than $5 trillion in U.S. mortgages -- nearly half the mortgage loans in the country.

The takeover won't help current stockholders in the two companies, who will control a much smaller share of the equity. Counterbalancing the loss of equity, to a degree, will be greater confidence in the ability of the companies to surmount the challenges they now face.

Shares of Fannie Mae plunged $5.66, or 80.4%, to $1.38 this morning; Freddie shares slumped $1.06, or 20.8%, to $4.04.

The rest of the markets took off this morning on the takeover news. At 9:32 a.m. ET, the Dow Jones Industrial Average gained 330 points to 11,550. The Nasdaq Composite Index soared 46 points to 2,302, and the Standard & Poor's 500 Index had gained 29 points at 1,271.

In Japan, stocks were up better than 3 per cent on the news from the U.S.; in Hong Kong, they were up more than 4 per cent; and in Europe, between 3 and 5 per cent.

"This is about dealing with an immediate situation," Paulson told CNBC this morning. He said the next administration and Congress will have to decide how Fannie and Freddie will function going forward. Paulson suggested that the takeover " more than any other action that I've seen done here, has advanced the ball" to help push the housing markets toward recovery.

Paul Miller, an analyst at Friedman, Billings, Ramsey, told to MarketWatch this morning that the government move "will be viewed positively by investors in our opinion and should result in a rally in financial stocks."

Fannie Mae, created by the government in 1938, and Freddie Mac, created in 1970, were developed to help Americans purchase homes. Slumping home prices and soaring mortgage delinquencies have caused the companies to suffer a combined $14 billion in losses over the past year.

Details of the takeover

The FHFA will act as conservator of Fannie and Freddie, running the companies until they are restored to better financial health. The FHFA said that dividends on common and preferred shares of both companies' stocks will be eliminated, in order to preserve capital. The Treasury Department has said it will invest up to $100 billion in each firm to keep them from going bankrupt.

Stock Charts (Year)

Fannie Mae

Freddie Mac

The plan will also allow the Treasury Department to buy mortgage-backed securities from Fannie and Freddie.

Under the terms of the takeover, Daniel Mudd, of Fannie Mae, and Richard Syron, of Freddie Mac, will leave their posts as chief executive officers of the companies, but will stay on to help the companies transition to new leadership. Mudd willl be replaced by Herb Allison, who formerly served as chairman of TIAA-CREF and vice chairman of Merrill Lynch. Syron will be replaced by David Moffett, who has been working as a senior advisor at the Carlyle Group, having retired last year as CFO of U.S. Bancorp.

"This program is the best means of protecting our markets and the taxpayers from the systemic risk posed by the current financial condition of the GSEs," Paulson said in a press release. GSE stands for government sponsored enterprise.

"Because the GSEs are in conservatorship, they will no longer be managed with a strategy to maximize common shareholder returns, a strategy which historically encouraged risk-taking."

Reaction to the plan

"This is a historic event," said Brian Gardner, senior vice president at Washington Research, to MarketWatch.com. "It could be the biggest potential government bailout of a generation, much bigger than the savings and loan crises of the 1980s."

But Gardner was cautious about the cost of the takeover: "If the housing market stabilizes, the costs to the government will be on the lower side. If the trends continue with growing credit losses, and no stabilization, then you'll see a higher cost to the taxpayers."

Federal Reserve Chairman Ben Bernanke supported the move.

More from MSN Money

"These necessary steps will help to strengthen the U.S. housing market and promote stability in our financial markets," Bernanke said in a statement. "I also welcome the introduction of the Treasury's new purchase facility for mortgage-backed securities, which will provide critical support for mortgage markets in this period of unusual credit-market uncertainty."

"Effectively, the federal government has now become the nation's mortgage lender," Moody's Economy.com chief economist Mark Zandi told The Associated Press. "This takes a major financial threat off the table."

The mess has cost the financial sector more than $500 billion in losses and write-downs, according to statistics from Bloomberg.

Mortgage Rates Dip Slightly

Jason Myers Myers — Fri, 05 Sep 2008 13:18:56 -0500

Mortgage rates continued their long journey through the doldrums, drifting slightly lower during the week, according to mortgage financier Freddie Mac.

Freddie Mac chief economist Frank Nothaft attributed the improvement in rates to a perceived slowing in consumer spending.

Overall, interest rates continue to be favorable, but with slipping equity and tighter lending guidelines, many won't be able to take advantage of the situation, as evidenced by the lack of refinance applications.

Now is a great time to get your financing needs taken care of!

Raleigh's home prices stay strong

Jason Myers Myers — Tue, 26 Aug 2008 15:46:16 -0500

Home prices grew by 4.8 percent in the Raleigh area between the second quarter of 2007 and the second quarter of this year, new federal data say.

The figures, from the Office of Federal Housing Enterprise Oversight, tend to overstate the actual growth in home prices across the country. But they are useful on a comparative level, and by that measure, they place the Raleigh-Cary region at No. 13 among the nearly 300 areas tracked in terms of home price appreciation.

Prices in the Durham region, which also includes Orange County, grew by 4.1 percent, putting the region at No. 26 overall.

Nationally, OFHEO says, home prices slipped by 1.7 percent in the last year.

The OFHEO data have their limits. Specifically, they do not include homes with mortgages that can't be bought by government-sponsored enterprises Fannie Mae and Freddie Mac. That means most homes owned by subprime borrowers, the hardest hit part of the market, aren't included in the index - helping to make housing price declines look less severe in OFHEO data than in other indices.

For example, another widely cited barometer of housing prices, the Standard & Poor's/Case-Shiller index, said home prices fell by 15.4 percent nationally in the second quarter from a year earlier.

That 20-city index does not provide data on Raleigh housing, though they also provide some indication that North Carolina home prices are holding up better than most. Charlotte showed the lowest drop in prices among the 20 cities tracked, with home prices there falling just 1 percent from June 2007 to June 2008.

NC Says "No" to Yield Spread Premiums

Jason Myers Myers — Thu, 21 Aug 2008 13:36:40 -0500

There seems to be a lot of confusion about this bill and if we still be able to make yield spread.

The bill (HB 2188) which was signed by the Governor Mike Easley (D-NC) contained amendments to the: Mortgage Debt Collection and Servicing Act; the High Cost Loan Statute and the Rate Spread Home Loan Statue contained in HB 1817 which became law in August 2007)

This bill does not eliminate YSP to brokers. Nor does any other bill that was taken up by the NC General Assembly this session. NCAMP effectively kept all significant efforts to reduce YSP out of these pieces of legislation.

The legislation does eliminate the ability for brokers to earn income on a Rate Spread Home Loan (defined in HB1817) as a percentage. A broker can still earn a flat fee on these loans as well as be paid a flat fee by a lender (very similar to how lenders pay on equity lines). The fees cannot increase based on loan size. If the loan amount changes then this fee cannot change.

In other words, you can still have a fee for your work on the loan on Rate Spread Home Loans, but it cannot be based as a percentage on loan amount. The fee has to be flat and fixed.

This provision ONLY applies to Rate Spread Home Loans. Broker compensation (YSP) is still allowed on loans that are not considered Rate Spread Loans.

Are GSEs the Root of All Evil?

Jason Myers Myers — Thu, 21 Aug 2008 13:32:56 -0500

Former Federal Reserve chairman Alan Greenspan offered a bit of optimism about the housing market in an interview this week with David Wessel of the Wall Street Journal. Greenspan said that he expects housing prices to begin to stabilize in the first half of 2009 although they could continue to drift lower for quite some time thereafter, even after essentially reaching bottom. An end to the decline in house prices matters not only to American homeowners but, he said, is "a necessary condition for an end to the current global financial crisis." "Stable home prices will clarify the level of equity in homes, the ultimate collateral support for much of the financial world's mortgage-backed securities. We won't really know the market value of the asset side of the banking system's balance sheet -- and hence banks' capital -- until then." The former Chairman, a rapt student of the housing sector, bases his prediction on the supply of vacant, single-family homes for sale - both new homes and existing ones owned by investors and foreclosing lenders - and a comparison of the current prices of houses with the government's estimate of when it is cheaper to own than to rent. "It's the imbalance of supply and demand which causes prices to go down, but it is ultimately the valuation of the commodity�which tells you where the bottom is." The current excess supply of homes which he places at 800,000 units above normal will stabilize at some price level where investors will be willing to hold inventory and the excess will no longer act to depress prices. He argues that the government should avoid tax or other policies that encourage more home building which would delay reaching that bottom. He also points out that the number of new American households forming each year is about 800,000, exactly where he pegs excess housing inventory and that one third are immigrants and about 150,000 of those are skilled workers who earn enough to purchase a home. While admitting political difficulties in doing so, he suggests a major expansion in quotas for skilled immigrants. Greenspan, however, is not changing his long-standing belief that Freddie Mac and Fannie Mae represent the root of all evil. He acknowledges that the collapse in home prices was and is a major threat to the stability of the two government sponsored enterprises and that government backstopping was unavoidable given the widespread belief that the GSEs have always been backed by the full faith and credit of the U.S. government and the inevitability of government support increased after the bailout of Bear Stearns. He argues, however, with the methods used by the Bush administration. "They should have wiped out the shareholders, nationalized the institutions with legislation that they are to be reconstituted -- with necessary taxpayer support to make them financially viable -- as five or 10 individual privately held units," which the government would eventually auction off to private investors. Greenspan's worst fears about the GSE's are likely to be realized if the majority of economist responding to a poll taken by the Journal are correct. 53 economists felt, on average there was a 59 percent chance that the Treasury Department will have to step in to bail out one of the two if not both of the mortgage giants. Treasury Secretary Henry Paulson assured Congress last month that his plan to either extend credit to Freddie and Fannie or buy stock in the companies was merely a backstop that would hopefully never be used. However, that was before each of the two reported massive losses during the second quarter. One economist noted that "blank checks almost always get filled in and cashed." One third of those polled said that Freddie and Fannie should be nationalized immediately and then split into smaller companies when the housing market improves. The majority of respondents, however, feel that the GSEs should be pushed even harder to raise private capital in hopes that the market will improve and government assistance will not be necessary. Just one economist -- Lou Crandall at Wrightson ICAP -- said the Treasury Department should invest equity in them now, without nationalizing them.

Foreclosures Loom as Possible Public Health Menace

Jason Myers Myers — Thu, 21 Aug 2008 13:29:18 -0500

It seems hard to believe, but there appears to be yet one more thing for which we can blame the mortgage crisis. And this is not a financial problem; it is a public health concern.

Several cable networks have reported over the last few weeks that the hundreds of foreclosed houses covering suburban neighborhoods may be contributing to the spread of the West Nile virus.

This is particularly true in warmer areas such as California, Arizona, Florida, and Nevada where homeowners tend to have a lot of outdoor playthings, chiefly swimming pools.

The pools, even if they had been drained for the winter, are collection spots for rainwater. The pools are not used, the water is not treated, and, instead of refreshing, cool aqua spots in which kids splash and where adults gather for cookouts, they are now dirty, brackish, maybe even bright green with algae. But these pools are prime breeding spots for the West Nile transmitting mosquito.

The West Nile virus does not make most people very sick, but several dozen have died in the few years it has been reported as a threat, and there have been incidents recorded of paralysis and other permanent disabilities.

CNN reports that Orange County, California alone may have as many at 1,500 pools located on properties that have been foreclosed, and while public health authorities are not sure to what extent they are encouraging the growth of the mosquito population, it only stands to reason that there is some impact, at least from a nuisance standpoint.

Banks and real estate agents who have not utilized the energy to secure the houses or mow the lawns are certainly not going to spend time and money to drain and cover pools and, even if the West Nile threat is insignificant, the increase in shear numbers of insects will make for a miserable fall and spring.

In addition to the pools, abandoned and neglected property has other water hazards; a kiddie pool left in the backyard, fish ponds, bird baths, a vertically hung tire swing, all have the capacity to catch and hold sufficient water to cause concern.

Cities and towns that fear a possible epidemic say they have little choice but to clear and/or treat the source at taxpayer expense even though it is the responsibility of the banks. This will not be as easy as it once was, as many of the effective mosquitos and larva sides are now prohibited for use because of their own possible public health problems or will stir up such protests from the community that municipalities dare not use them.

In the 1990s when banks and the FDIC stonewalled condo associations over HOA fees on foreclosed houses, affected states did not hesitate to pass super lien laws that gave the association the ability to levy senior liens for unpaid fees on the units. These liens took precedent over all others except taxes and the financial institutions shaped up pretty quickly. It is past time that legislation is passed to allow senior liens for the costs of securing property, keeping it from further deterioration, clearing out squatters and drug dealers and so forth. If the banks do not pay the bills the towns can foreclose, wipe out the banks' mortgages, and sell the homes to residents or investors at whatever price the market will bear sufficient to recoup taxpayer's losses and get the properties up and running again.

Which States Top the Nation in Closing Costs?

Jason Myers Myers — Tue, 12 Aug 2008 08:40:00 -0500

A new study released by Bankrate, Inc. shows that the cost of getting a mortgage continues to rise despite a soft housing market.

The 2007 average closing cost of $2,736 has gone up to an average of $3,118 in 2008, a 14% increase. In the study's geographical breakdown, New York City leads the nation at an average fee of $4,016, with Texas, Buffalo, Miami and Oklahoma rounding out the top five. North Carolina is the least expensive area with an average fee of $2650, replacing Indiana (now #45 with an average fee of $2878) at the bottom of the list.

"Often times, consumers forget about the added fees involved in buying a home," said Holden Lewis, senior reporter with Bankrate.com. "Closing costs can be extremely expensive if not researched thoroughly. Keeping closing costs at a minimum can make a big difference to homebuyers during difficult economic times."

Bankrate's Closing Cost study was conducted in June and July of 2008 by obtaining four to nine good faith estimates from the Web sites of online lenders. Researchers picked a ZIP code in some of the largest cities in each state and requested information on the closing costs for at $200,000 loan. They requested fees on a 30-year, fixed-rate mortgage for a borrower with a 20 percent down payment and good credit to buy a single-family house. Bankrate's survey includes lenders' origination fees and title and settlement fees, and not taxes or prepaid items.

2008 closing costs averages

2008  2007                   closing   2008  2007                 closing
    rank  rank        State       costs    rank  rank    State         costs

    1      1    New York - NYC    $4,016    30    14  Mississippi     $3,059
    2      2    Texas             $3,975    31    28  Arkansas        $3,048
    3     NA    New York -                  32    13  Louisiana       $3,042
                 Buffalo          $3,845    33    48  Nevada          $3,039
    4      3    Florida - Miami   $3,683    34    38  Washington      $3,028
    5      8    Oklahoma          $3,558    35    20  Virginia        $3,007
    6      9    New Mexico        $3,465    36    34  Montana         $2,970
    7      7    New Jersey        $3,432    37    44  Wisconsin       $2,940
    8      4    Pennsylvania      $3,411    38    18  Rhode Island    $2,932
    9     16    Alaska            $3,409    39    26  Minnesota       $2,929
    10    24    Colorado          $3,358    40*   21  New Hampshire   $2,922
    11    NA    California                  40*   23  North Dakota    $2,922
                 - San Francisco  $3,321    42    31  Georgia         $2,900
    12     5    Ohio              $3,317    43    43  Nebraska        $2,891
    13    17    California - LA   $3,250    44    32  Utah            $2,883
    14    35    Kentucky          $3,213    45    51  Indiana         $2,878
    15    27    West Virginia     $3,201    46    30  Vermont         $2,872
    16    11    Connecticut       $3,200    47    49  Illinois -
                                                       Chicago        $2,869
    17    25    Michigan          $3,191    48    NA  Illinois -
    18    NA    California                             Springfield    $2,826
                 - Sacramento     $3,179    49*   50  Wyoming         $2,804
    19    41    Oregon            $3,161    49*   36  Iowa            $2,804
    20     6    Hawaii            $3,134    51    40  South Dakota    $2,797
    21*   39    Alabama           $3,130    52    29  Maine           $2,792
    21*   12    Massachusetts     $3,130    53    45  Missouri        $2,757
    23    19    Maryland          $3,118    54    42  Kansas          $2,668
    24    15    Tennessee         $3,117    55    47  North Carolina  $2,650
    25    37    South Carolina    $3,103
    26    10    Delaware          $3,098              2008 average    $3,118
    27    46    Arizona           $3,096              2008 median     $3,086
    28    22    District of                           2007 average    $2,736
                 Columbia         $3,086              2007 median     $2,692
    29    33    Idaho             $3,064

Canadians Top List of Foreign Buyers of U.S. Property

Jason Myers Myers — Thu, 07 Aug 2008 13:31:17 -0500

"Many international buyers recognize that real estate is an excellent investment and are drawn today by abundant inventory, low interest rates and a softer dollar," said NAR president Richard F. Gaylord. "These conditions allow them to own their own piece of the American dream."

Gaylord said foreign exchange rates have helped make U.S. homes more affordable for foreigners, particularly in Florida and Arizona. He noted that the euro has surged in value 24% against the U.S. dollar over the past two years.

Single-family vacation homes at an average price of $297,400 were the most popular purchase for international buyers. The most popular states for purchases were Florida, California, Texas, New York, Washington and Nevada, NAR said.

The NAR survey found four in 10 foreign buyers paid for their purchases in cash, compared to 7% of domestic U.S. buyers. It also found that the average international buyer stayed at their U.S. property for 2.6 months during the year.

Purchases by international buyers also tended to be more expensive, with 14% of properties sold valued at $750,000 or more.

The 2008 NAR Profile of International Home Buying Activity survey is based on responses from approximately 4,000 Realtors who serve foreign buyers.

Freddie Mac Shows Another Loss

Jason Myers Myers — Wed, 06 Aug 2008 09:38:02 -0500

Freddie Mac on Wednesday posted a second-quarter loss more than three-times larger than Wall Street expected as more homeowners fell behind on their mortgages.

The loss comes just weeks after the government threw a financial lifeline to Freddie and its sister company Fannie Mae to ward off fears the pair could collapse and take down the U.S. mortgage market. Together, the two hold or guarantee nearly half of outstanding U.S. mortgage debt.

In a troubling sign that mortgage delinquencies and foreclosures are increasing, Freddie set aside $2.5 billion -- more than double what it had reserved in the first quarter.

Freddie Mac Chief Financial Officer Buddy Piszel told The Associated Press that the credit problems are emerging mostly in the company's Alt-A portfolio, which contains mortgages with high risk factors like undocumented borrower income.

Alt-A loans make up 10 percent, or $190 billion, of Freddie's entire portfolio. The percentage of those mortgages that were more than 90-days past due rose to 3.72 percent from 2.32 percent in the first quarter.

For all of Freddie Mac's loans, the percentage of seriously delinquent loans edged up to 0.82 percent from 0.74 percent.

To preserve capital, the government-sponsored company said it expects to cut its dividend this quarter to 5 cents or less a share from 25 cents a share.

The McLean, Va.-based company also said it would sell at least $5.5 billion in stock.

On Tuesday, the Treasury Department said it retained investment firm Morgan Stanley to help the government assess the state of the mortgage market and give a financial profile of Fannie and Freddie.

Also on Tuesday, Fannie Mae said it will double the fee it charges lenders and brokers to help it gird against higher credit risks and losses from mortgages it buys from lenders.

Piszel said Freddie is evaluating its pricing, but isn't announcing any action now.

Fannie Mae reports its quarterly financial results Friday.

USDA Rural Housing Update

Jason Myers Myers — Thu, 31 Jul 2008 12:33:54 -0500

As credit concerns have tightened access to mortgage funding in the United States this year, a record volume of requests have come in to USDA Rural Development for the Guaranteed Rural Housing Program.

In fact, volume has almost doubled since Fiscal Year 2007, and is accelerating. This level of demand has put strain on USDA Rural Development's original appropriation of $4.1 billion, plus $1.5 billion of carry-forward and disaster funds. However unlike FHA, the USDA Guaranteed Rural Housing Program is limited by the budget. Therefore, when demand exceeds available funding, additional funds must be sought.

To meet the demand for this program through the end of Fiscal Year 2008, USDA Secretary Ed Schaefer has directed that $1.1 billion of additional funding be moved into the USDA Guaranteed Rural Housing Program. At this time, these funds are expected to be in place on August 7^th.

This just proves that the USDA Rural Housing program is one of the hottest loan programs around since it still offers borrowers a true 100% financing option. A very good program for that first time homebuyer.

Mortgage Application Volume Lowest Since 2000

Jason Myers Myers — Wed, 30 Jul 2008 13:47:13 -0500

Home loan application volume slid 14.1 percent on a seasonally adjusted basis for the week ending July 25 to fall to its slowest pace since late 2000, according to the latest survey from the MBA.

Appliations are off about 30.3 percent from the same week a year ago.

Much of the slide could be attributed to a 22.9 percent decrease in refinance applications, although purchase apps slipped 7.8 percent and FHA loan applications fell 9.5 percent as well.

The refinance share of mortgage activity fell to just 35.2 percent of total application volume, down from 39.4 percent a week earlier, despite the fact that interest rates improved.

The average 30-year fixed rate came in at 6.46 percent, down from 6.59 percent, while the 15-year fixed dipped to 5.98 percent from 6.10 percent.

'Switch kits' help depositors jump ship

Jason Myers Myers — Tue, 29 Jul 2008 15:17:23 -0500

Switch banks? Some account holders would rather gnaw off a limb than sever the ties that bind them to their financial institutions. Today, we are bound to our banks like never before, thanks to direct deposit and automatic bill pay, sweep accounts and CDs, credit and debit cards, and expanded brokerage and insurance products, not to mention online banking. All things considered, even staying with a bad bank sounds better than the unthinkable hassle of moving on, right? Maybe not. In a curious twist, the same banks that are fighting tooth and nail to retain every breathing customer have actually made it easier for depositors to jump ship, thanks to the recent introduction of "switch kits." What's a switch kit? It's a marketing packet that many banks now use in addition to toasters and iPods to entice you to come onboard. “It's streamlining a process by having everything you need in one place.” Switch kits help you collect the data for all of your recurring electronic deposits and withdrawals -- direct deposits, auto payments, life insurance and mortgage payments, savings plans, etc. -- on one form so your new bank can seamlessly continue those transactions for you. Some kits even include form letters to send to the appropriate parties to switch your direct deposit, redirect your auto payments and close your previous accounts. Switch kits often are available online as well as at bank branches and through the mail. Switching strategies Historically, banks have been reluctant to make transparent -- much less streamline -- this backroom process for obvious reasons: They don't want you to leave -- at least not until a branch manager has had a shot at talking you out of it. But that old-school thinking went out the window with the turn of the new century, when bank consolidation spawned hundreds of upstarts called "de novo banks," which are state banks in existence for five years or less. The switch kit was one weapon the de novo Davids found particularly effective in challenging the new Goliaths. "You'll most often find these in extremely competitive markets," says John Hall, spokesman for the American Bankers Association, or ABA. "It might be a new bank coming into a community and trying to gain market share or it might be a merger or acquisition where there could be some (customer) fallout they want to catch." ABA spokeswoman Carol Kaplan views the sudden ubiquity of switch kits as a win-win for consumers and financial institutions alike. "Banks didn't used to have it all tied up in one neat little package; you would have had a separate form for every different kind of account and have to ask for every form separately," she says. "It's streamlining a process by having everything you need in one place. In a way, it's sort of strange that it took this long for us to figure this out." Switching and 'stickiness' Chase spokesman Tom Kelly says established brands like his quickly recognized that the same switch kits that the de novos used to poach their customers could easily be turned into a defensive retention tool. "If somebody is moving to another state, we say look, we have branches in 16 other states. You don't have to go to all the trouble of closing an account and opening one, you can just shift your account and we can order you some checks for your new city," he says. "You do have to get a new doctor and a new dentist probably when you move, but you may not have to get a new bank," he says. "What we want is to have the chance to save a customer." Switch kits come in particularly handy when one bank takes over another. "In a takeover, depositors usually have a couple options: Come and get your money out or open up a new account with the bank that's taking over," says Kaplan. "Fortunately that doesn't happen too often, but when it does, a switch kit would certainly make that easier." Although switch kits may seem tailored to young, mobile depositors already comfortable with online banking, Kaplan says the real target may be the older, wealthier demographic. "Those people who have been with a bank for 50 years often have a lot of assets," she says. "Those are the people for whom switching banks can be most difficult because they have so many different accounts and automatic payments and direct deposits. "I think the older you are, the more likely it is that you have more complicated finances, greater assets, and all of that makes switching banks more cumbersome. Having these kits makes that easier." Switch kits can help you change banks with less fuss. However, they don't ensure a smooth transition on their own. Here are some switching steps to take in addition to filling out the switch kit.

Off the Beaten Track - Emerald Isle

Jason Myers Myers — Tue, 29 Jul 2008 13:31:42 -0500

Where to stay: No need to scrimp on space here. It's easy to score a three-bedroom house a block from the beach for $1,500 to $2,000 a week -- and that's during the peak month of July. Shorewood Real Estate Inc. calls such rentals "semi-oceanfront." (We stayed at "Zanzibar," a three-bedroom home with a deck overlooking the ocean, outdoor shower and lots of space, for $1,325. For more information check out shorewoodrealestate.net or call Tel. 888-557-0172.) Homes with pools cost a few hundred dollars more, but would be nice to have when the Atlantic Ocean undertow kicks up.

If you prefer a condo, there are several developments from which to choose, such as Pier Pointe, with a pool, tennis courts and outdoor grills as well as Jacuzzi tubs and fireplaces. Rentals are handled by various real-estate companies, such Prudential Sun-Surf Realty (Tel. 800-553-7873, sun-surf.com). It rents Pier Pointe 4-A-1W, a two-bedroom, two-bath oceanfront unit at 2907 Pointe West Dr., for $1,495 a week in midsummer.

Tim Frederick

A surfing class run by Hot Wax Surf Shop.

What to do: The wide, pristine beach is the main draw, with tidal pools, frolicking dolphins, scallop shells and crabs providing a daily show. The massive waves may tempt you into a surfing lesson ($60 for a three-hour lesson, including board rental; Hot Wax Surf Shop, 200 Mallard Dr., Tel. 252-354-6466, hotwaxsurf.com). Go to the North Carolina Aquarium, nearby in Pine Knoll Shores, to see a "Living Shipwreck" exhibit (open 9 a.m. to 5 p.m. daily, $8 for adults and $6 for kids 6-17, 1 Roosevelt Blvd., Tel. 252-247-4003, ncaquariums.org). Then head into Beaufort, a historic fishing village, founded in 1709 and inhabited by Blackbeard, to dine and shop while watching boats at the docks. Duck into the North Carolina Maritime Museum, which has free admission, to learn more about boats, fishing and pirate shipwrecks (315 Front St., Tel. 252-728-7317, www.ncmaritime.org). Kids and dads are fans of the bumper boats at Professor Hacker's Lost Treasure Golf and Raceway, a short bike ride away (967 Salter Path Rd., which is Highway 58, Tel. 252-247-3024, losttreasuregolf.com).

Tim Frederick

Where to eat: Don't miss the shrimpburger -- fried popcorn shrimp, coleslaw, tartar sauce and ketchup on a bun -- at the Big Oak Drive-In and Bar-B-Q (Highway 58 in Salter Path, Tel. 252-247-2588, www.bigoakdrivein.com). Circle Pizza & Subs makes a tasty, take-out pie (3104 Ocean Dr., Tel. 252-354-8885). Flipperz Family Bar & Grill is a fun hangout with delicious seafood salads and burgers (299 Mangrove Dr., Tel. 252-354-7775, www.flipperz.net).

For a Southern seafood dinner, complete with hushpuppies and sweet tea, head to Frost Seafood House (1299 Salter Path Rd., Tel. 252-247-3202). There's ice cream and eccentric tchotchkes to take home at Flip Flops (3305 Emerald Dr., Tel. 252-354-3446). When it's time to man the grill yourself, stock up on the daily catch at Cap'n Willis Seafood Market (7803 Emerald Dr., Tel. 252-354-2500). The pancakes can't be beat at Mike's Place (8302 Emerald Dr., Tel. 252-354-5277).

Oil drops to around $123

Jason Myers Myers — Fri, 25 Jul 2008 13:23:53 -0500

Oil prices sank to their lowest point in weeks Friday as investors questioned whether crude has cooled enough to reflect a serious deterioration in demand. Prices at the pump eased to nearly $4 a gallon and the AAA auto club said that could drop another quarter by Labor Day.

Light, sweet crude for September delivery fell $1.60 to $123.89 a barrel in on the New York Mercantile Exchange. Earlier the contract dropped as far as $122.50, its lowest point since June 5.

In another sign that Americans continue to struggle with soaring energy prices, filling station operators hungry for business ratcheted down the average price for a gallon of regular by 2 cents, according to auto club AAA, the Oil Price Information Service and Wright Express.

AAA spokesman Geoff Sundstrom said such a large decline indicates a deteriorating demand by the world's thirstiest oil consumer. Retail prices have fallen about a dime per gallon in just the past week.

"People say typically prices shoot up like a rocket, fall like a feather. But this time ... it looks like it's different," Sundstrom said. "The retail sector is interested in bringing these prices down as fast as they can to stimulate business in their convenience stores."

A gallon of gas now sells for $4.006, the first time it has been that low in nearly seven weeks. Diesel dropped nearly a penny and a half to $4.774 a gallon.

Sundstrom said prices at the pump should slip below the $4 mark over the weekend and could drop by at least another 25 cents by Labor Day, if oil stays on its downward path.

"We're seeing a historic change in driving habits," he said, although he added that "we still have a long way to go before we get back to the comfort zone, if you will, for the consumer."

Oil traders managed to post a gain of $1.05 a barrel Thursday, but analysts say the market's momentum points to further declines. Crude has fallen in six of the past eight sessions, and is trading more than 15 percent below its peak above $147 a barrel earlier this month.

By afternoon Friday, crude was down nearly 16 percent from its peak above $147 a barrel two weeks earlier. Still, prices remained about 65 percent higher than they were this time last year.

Triangle home sales plunge for 12th straight month

Jason Myers Myers — Wed, 23 Jul 2008 13:22:24 -0500

Sales of existing homes in the Triangle fell by 37 percent in June, the 12th straight month that volume has fallen.

Local homes sales totaled 2,531 in the month, according to the Triangle Multiple Listing Service. That's down from 4,001 in June 2007, the last month during which home sales posted year-over-year gains.

Since that time, the economy has slowed, helping curb demand for homes. In addition, many low-income borrowers who got mortgages they couldn't afford have defaulted on their homes. That's led banks to tighten their lending practices, making it harder to buy a home.

A rising inventory of Triangle houses reflects that situation, as MLS says there is a roughly 10-month supply of existing homes on the market. In part, that reflects the end of spring, which is a traditionally strong time for sales. But inventory is still twice as high as it was during June 2007.

There were 28,662 homes on the local market in June, MLS says, while 2,380 were under contract. That leaves the percentage of homes under contract at 8.3, down from 9.4 in May and 15 percent a year earlier. And the average length a home has been on the market was 150 days in June, up from 145 in May and 103 in June 2007.

Still, the Triangle's housing market remains stronger than most, helped by a job market that's remained strong and stoked demand from people moving into the area. And the Raleigh area never saw the kind of speculative building that's led to crashing housing prices in other areas, such as Florida, Nevada and California.

The average selling price of a Triangle home in June was $255,382, up about 5 percent from $242,437 a year earlier. The figures don't track the same houses over time and could reflect a shift in sales toward higher-end houses, but they tend to rise and fall along with prices.

Fed Chairman Says Fannie and Freddie in No Danger of Failing

Jason Myers Myers — Thu, 17 Jul 2008 08:49:48 -0500

Only time will tell if this is true.

Federal Reserve Chairman Ben Bernanke stood before the House Financial Services Committee today and assured Congress that Fannie Mae and Freddie Mac are in "no danger of failing" and that they are "adequately capitalized."

Bernanke said that a lack of investor confidence in the housing market led to the GSE's inability to raise capital which caused investors to get the jitters, stock prices to plunge, and the Fed to step in.

The intention of the Fed's plan to rescue Fannie and Freddie, if necessary, was merely meant to send a message to the financial community, the industry, and consumers - assuring us all that the government would see to it that Fannie and Freddie would not fail...because they cannot fail. Fannie and Freddie own or back more than half the mortgage debt in the U.S. which amounts to more than $5 trillion. Their survival is crucial to not only the U.S. housing market, but to the nation's overall economy.

The emergency rescue plan involves 1.) the Administration asking Congress to pass legislation that would extend lines of credit on a temporary basis over the current billion $2.25 limit from the Treasury to Fannie and Freddie; 2.) giving the Treasury the option to buy equity in Fannie and Freddie; and 3.) granting the Federal Reserve Bank of New York the authority to lend additional funds to the GSEs.

Both Fannie and Freddie were quick to say the plans are just a precaution. "We continue to hold more than adequate capital reserves and maintain access to liquidity from the capital markets," said Daniel H. Mudd, President and CEO of Fannie Mae. "Given the market turmoil, having options to access provisional sources of liquidity if needed will help to strengthen overall confidence in the market."

Richard F. Syron, Chairman and CEO of Freddie Mac shared Mudd's sentiment, "The company (Freddie Mac) is adequately capitalized, has a large liquidity portfolio and access to the world's debt markets. The company's capital and liquidity resources will enable it to continue to serve its public mission as it has always done."

Should Fannie and Freddie Be Bailed Out?

Jason Myers Myers — Wed, 16 Jul 2008 11:38:57 -0500

Hats off Shelby and Bunning. The latter is threatening to Filibuster Paulson's proposed bailout of Fannie Mae and Freddie Mac. See Paulson Crosses Rubicon Lands In 5th Dimension for Paulson's absurd proposal asking Congress for "authority to buy unlimited stakes in and lend to the companies, aiming to stem a collapse in confidence".

Earlier today Senators Bunning and Shelby Blasted Bernanke on Monetary Policy.

Bunning sure has the Fed nailed with this statement: "Now the Fed wants to be the systemic risk regulator. But the Fed is the systemic risk. I am not going to go along with that and will use all my powers as a Senator to stop any new powers going to the Fed."

Bloomberg picked up the story in Lawmakers Balk at Paulson's Fannie, Freddie Plan. Here are some interesting quotes.

Senate Banking Committee Chairman Christopher Dodd: "I'm uneasy about giving this blanket authority without having any kind of checks."

Shelby: "I've never known Congress" to give "an open-ended blank check for somebody to fill in."

Shelby again: "When you're dealing with the taxpayer's money I don't think ambiguity has a place...We are potentially layering taxpayer resources on top of massive systemic risk."

Democratic Senator Jon Tester of Montana: "It could be a trillion bucks" that Paulson could appropriate under his proposed authority.

Republican Senator Jim Bunning of Kentucky: "The taxpayers have reacted and the market has reacted to your plan by driving down Fannie Mae shares 26% today, right now...Freddie Mac's are down 29% at this moment, just in case you are interested in how the markets are reacting to your wonderful plan."

"Bernanke told lawmakers it's 'important' for Fannie Mae and Freddie Mac bonds and stocks to rise...Paulson said the two companies are 'essential' because they represent the only "functioning" part of the home loan market."

Check that out. Bernanke said it's important for the stock market to rise (specifically Fannie Mae). How many mandates does the Fed have now?

Fed Mandates

Price Stability
Economic Growth
Full Employment
Rising Stock Market

So far you have to give Bernanke an "F" for all accounts.

Five Signs That You're Living Beyond Your Means

Jason Myers Myers — Wed, 16 Jul 2008 08:45:14 -0500

Many people in America are living beyond their means, as personal savings rates are at their lowest levels since the Great Depression, according to the U.S. Bureau of Economic Analysis. Dwindling savings mean that U.S. households are taking on more debt and are less able to absorb a financial blow like the loss of a job or a downturn in the economy.

If you are concerned that your finances could be in danger, there is a way to tell whether you're in over your head. This article will provide you with five key indicators to watch for. If you find that one or more of them apply to you, it is likely time to reevaluate your spending and work on a long-term financial plan. Recognizing the problem is the first step to finding a solution.

Sign No. 1 - Your Credit Score is Below 600

Credit bureaus keep track of your payment history, outstanding loan balances and legal judgments against you. They then use this information to compile a credit score that reflects your credit worthiness. The numerical rankings go from a low of 300 to high of 850. The higher the better. It's this score that lenders use to determine whether they'll grant a loan. In general, any credit score below 600 means that you are probably in over your head.

If you aren't sure what your credit score is, contact any of the major credit bureaus (TransUnion, Equifax, Experian) and have them send you a copy of your credit report. This document will tell you what the bureaus - and ultimately lenders and financial institutions - think of your finances.

Sign No. 2 - You are Saving Less Than 5%

In 2005, the average rate of personal savings was an astonishing -0.5%, according to the U.S. Bureau of Economic Analysis. That means that not only were we spending all of our income, but also that a good number of us were also dipping into personal savings. This was the worst savings rate that Americans have recorded since 1933 when it was -0.7% during the Great Depression. The rate has bounced back into positive territory, but in 2008, it still hadn't cracked 1% (Figure 1).

Figure 1: American household savings rate as a percentage of personal income
Source: U.S. Bureau of Economic Analysis

A savings rate below 5% means you could be in real danger of financial ruin if someone in your family were to have a medical emergency, or your family home were to burn to the ground. With savings this low, it likely means you wouldn't even have the money to pay the necessary insurance deductibles.

Ideally, everyone should try to save as much as they can, but in terms of targets, the rule most financial advisors suggest is 10% of your gross income. Beginning at age 30, if you were to save 10% of your $100,000 annual income in your 401(k), or $10,000 every year, and earn a rate of return of 5%, that money would grow to more than $900,000 by age 65.

Sign No. 3 - Your Credit Card Balances are Rising

If you are one of those people who pays only the minimum due on their credit card balance each month, or if you send in only a small contribution toward the principal balance, then you are most likely in over your head.

Ideally, you should only charge what you can pay off at the end of each month. When you can't afford to pay off the balance in its entirety, you should try to make at least some contribution toward the outstanding principal.

The importance of paying down credit card balances as soon as possible cannot be understated. A person with $5,000 in credit card debt that makes the minimum payment of just $200 per month will end up spending more than $8,000 and take almost 13 years to pay off that debt.

Sign No. 4 - More Than 28% of Income Goes To Your House

Calculate what percentage of your monthly income goes toward your mortgage, property taxes and insurance. If it's more than 28% of your gross income, then you are likely in over your head.

Why is 28% the magic number? Historically, conservative lenders have used the 28% threshold because their experience has told them that this is the rate at which the average person can get by, make their mortgage payments and still enjoy a reasonable standard of living. Certainly, some homeowners can get by spending a higher percentage on their homes, particularly if they cut back elsewhere, but it's a dangerous line to walk.

Sign No. 5 - Your Bills are Spiraling Out of Control

Buying on credit and paying by installment has become a national pastime. It's much easier to buy a new flatscreeen TV when the salesman breaks down the price in monthly installments. What's an extra $50 per month, right? The problem is that all of these bills start to add up, and you end up nickel and diming yourself into bankruptcy. If your monthly income is being sliced and diced to pay for dozens of unnecessary installment purchases and services, you are likely in over your head.

Lay out all of your monthly bills on your kitchen table, and go through them one by one. Do you have a cell phone bill, a PDA bill, an internet bill, a premium cable TV package, a satellite radio bill, and all of those other gadgets that generate countless monthly bills? Ask yourself whether each product or service is really necessary. For example, do you really need a 500-channel premium cable TV package, or would you really notice the difference if you had fewer channels (and paid less)?

Some of the best places to find savings include your telephone bills (cell and land line), your utility bills (turn off the lights, and don't run the air conditioning if nobody is home) and your entertainment expenses (you could stand to dine out less and to pack a lunch for work).

Bottom Line

As a nation, we are digging ourselves ever deeper into debt. To avoid becoming part of the gloomy bankruptcy and foreclosure statistics, it's important to measure your financial health regularly. The five signs presented here are not a death sentence; instead, they should be seen as symptoms that allow you to diagnose a problem before it gets worse.

McCormick & Schmick's

Jason Myers Myers — Wed, 18 Jun 2008 09:57:14 -0500

The nationally acclaimed dining experience of McCormick & Schmick's seafood restaurant (http://www.mccormickandschmicks.com/) will make its Triangle debut July 10 at Crabtree Valley Mall in Raleigh.

Be sure to go to this wonderful seafood restaurant. It is Exellent!

Raleigh is 2nd best place to live, Kiplinger's says

Jason Myers Myers — Wed, 18 Jun 2008 09:55:14 -0500

Kiplinger's Personal Finance magazine has listed Raleigh as the country's second best place to live in 2008, behind only Houston.

The city is "a work in progress," Kiplinger's says in its July issue, which will hit newsstands on June 10 and is currently online. It's long been a good place to work, but big-city cultural amenities have been lacking.

That's changing, Kiplinger's says. Raleigh is increasingly becoming a more exciting place to live, and the excitement of living there is catching up with the benefits provided by the local economy.

In particular, Kiplinger's cites the renaissance of downtown as the reason why 2008 marks "the turning point" for the Capital City. The magazine gives as examples the new Raleigh Convention Center and the downtown RBC Plaza, which are both set to open this year.

Also cited are many of the factors frequently cited when a Triangle-area city makes a "best places to live" list: a relatively low cost of living, a high percentage of workers with university degrees, and strong economic growth.

Kiplinger's says its list encompasses cities "offering strong economies, abundant jobs, reasonable living costs - and fun things to do."

America's Recession-Proof Cities

Jason Myers Myers — Mon, 09 Jun 2008 12:57:43 -0500

Nationally, home prices are falling, unemployment is on the rise and the economy is expected to grow slowly--or even contract--in the first half of the year.

But some cities are doing just fine.

Out of the top 10, Raleigh (#5) and Charlotte (#9) are two of the top 10 recession-proof cities in America.

The others holding steady or improving include Oklahoma City, Okla.; San Antonio; Austin, Texas; Houston; Dallas; San Jose, Calif.; Salt Lake City; and Seattle.

5. Raleigh, N.C.

Median home price: +4%

Unemployment: 4.2% (from 3.7%)

Key growth: Professional and business Services, +7.4%; education and health, +6%

Stable home prices and growth across the different sectors of its economy have kept Raleigh strong. In the last 12 months, all industries measured by the U.S. Department of Labor have grown except for the city's small information sector.

© iStock

9. Charlotte, N.C.

Median home price: +3.3%

Unemployment: 5.4% (from 4.7%)

Key growth: Professional and business services, +4.7%; leisure and hospitality, +4.2%

Despite a recent rise in unemployment, the economy in Charlotte and the nearby surrounding region of Gastonia and Concord has been strong. Home prices have shown healthy growth, and broad classes of industries like professional and business services, leisure and hospitality, transportation, education, and health are expected to float the local economy this year.

USDA Rural Housing

Jason Myers Myers — Mon, 05 May 2008 16:05:55 -0500

If your organization's production has been negatively impacted by:

Declining Market (Distressed Market) restrictions
Loan-to-Value (LTV) reductions
Increased minimum credit risk scores
Reduced seller concession limitations
Increased cost for mortgage insurance
Increased required borrower contribution / Increased post-closing reserves

Then Raleigh Mortgage Group, Inc. would like to remind you that the USDA Guaranteed Rural Housing Program continues to provide financing for the purchase price as well as closing costs and prepaids up to 102% based on the appraised value.

Other benefits of the USDA Guaranteed Rural Housing Program include:

Declining market designations do not affect the loan's maximum loan-to value (LTV), which remains at 102% of the appraised value.
No minimum credit risk score required provided USDA's credit history guidelines are met.
Unrestricted seller concessions for closing costs and prepaids.
No monthly mortgage insurance. The one-time guarantee fee may still be financed above the appraised value.
No minimum borrower contribution.
No post-closing reserves.
30-year fixed terms only, attractively priced.

As always we appreciate your support in this much-needed affordable housing program. If you have any questions or need additional information, please feel free to contact Jason Myers at the numbers listed above.

Piggy Back Credit May Get Loans Outright Rejected

Jason Myers Myers — Thu, 19 Jul 2007 10:03:34 -0500

The practice of adding an applicant as authorized user of an existing credit line to improve the applicant's credit score also known as "piggy back credit" may actually get the loan rejected from several major lenders according to originators around the country.

Recently both FICO and Trans Union have addressed the issue of piggy back credit.

According to Trans Union, the company is working with 6 of the top 10 mortgage lending institutions. The company has developed a customized approach that enables lenders to identify consumers who may have added authorized user accounts to artificially inflate their credit report and standing.

"The practice of artificially boosting one's credit score is not just limited to the mortgage industry and the practice is not going to go away for quite some time," said Dina Anderson, senior director, Analytic and Decisioning Services. "The key is to help the industry and our customers determine the difference between a legitimate use of an authorized user trade line and provide a meaningful risk assessment when the practice is being abused."

Recently, the Originator Times has received several unconfirmed reports from originators around the country that loans containing any type of authorized user trade lines are now being rejected by several major mortgage lenders.

The practice of adding authorized users to improve credit scores was highlighted recently when several companies began selling a matching service. The service would allow borrowers with bad or little credit the ability to be added as an authorized user to a seasoned account for up to $1,500 per trade line.

Fair Isaac Corporation has also announced that it will adjust its FICOscoring formula to compensate for authorized user accounts.

"We will do whatever it takes to protect the reliability and accuracy of FICO credit scores for lenders, and to ensure lenders can continue to use FICO scores with confidence when making their most important customer decisions," said Dr. Mark Greene, CEO of Fair Isaac. "We will continue working with lenders, regulators and others in the credit reporting industry to end deceptive practices that fraudulently misrepresent consumer credit histories for profit."