Mortgage by Randy
monthly update to our clients, colleagues, family & friends
By: Randy Mitchelson, August 2009
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In Issue 17 We Touch On:
R.I.P. Colonial Bank
Easier Access to Personal Loans
Foreclosure Impact on Credit Scores
A month full of travel has delayed the release of this newsletter and it was a great feeling for my head to hit my own pillow last night. Back to School season is upon us. Let's use this as a reminder that kids need to learn about money, credit and loans early on in life so they are well prepared to make good decisions in the future. There are resources available to parents and teachers to help with these subjects and you can always contact me for advice. On to the news....
The current newsletter and all prior newsletters are archived at the MortgageByRandy blog. Bookmark it and share with your friends and family. You can make your own comments and feedback as well. Time for the news...
Mortgage Market: Retail Holds Steady While Commercial/Small Business Needs More Options
Little has changed in the retail mortgage market since last report. Rates have held steady and well qualified borrowers are having success refinancing or purchasing. Less than perfect loan scenarios involving condos, credit blemishes or small down payments are still a challenge in a lot of markets.
Small businesses are starving for more lending options. Recent reports indicate that the new SBA loans are not working due to restrictions about use of funds as well as the maximum loan sizes. One solution that small businesses can consider is private lending. Private lending bypasses banks and opens the door to small loan amounts. Online services like Prosper provide a convenient marketplace where borrowers and private lenders can "meet". The lenders are people who are willing to take a chance on other people.
For example, if a small business owner has $12,000 in credit card debt and is paying 18% interest, they can post their scenario on Prosper and offer to pay a private lender 11% for a fixed amount of time. This is a win-win for both sides. The business owner reduces their interest expense and the lender earns a better rate of return on their money than if it was invested in a savings account.
There are several other lending services available besides Prosper. For more information on how the process works, including collection of defaulted loans, how credit scores are used and how interest rates are determined, contact me.
Personal Credit: Do Foreclosures And Short Sales Have Different Impacts On A Credit Score?
The impact of foreclosures on credit scores is a recurring question we hear and there is conflicting information published on the Internet. First American Credco, a credit reporting agency recently published a definitive summary of their findings. The biggest myth that the report resolved was that a short sale would have a lesser negative impact on a credit score than a foreclosure. Whereas in theory this may make sense, the reality of a short sale situation makes it likely to be just as bad as a foreclosure.
In most cases, a short sale will also entail a public record, like a legal action by the lender against the borrower or a special code called MOP8 (method of payment) attached to the short sale tradeline. Both of these items would make the short sale have a similar impact on the credit score as a foreclosure. Also, if a homeowner is in default on their mortgage, chances are that they also have late payments on other accounts like credit cards, so the score would reflect all of the data, not just a single item.
Although a specific point value cannot be assigned to a foreclosure or short sale, it is safe to assume that a credit score will drop anywhere from 100-300 points depending upon the other factors considered. If a foreclosure is the only blemish amidst a long history of perfect credit, then the drop will be less. If the short sale is just another in a series of late payments on other accounts over the years, the drop will be more severe. Get a detailed credit analysis, including all three credit scores, and personalized action plan and consultation for only $99 by contacting me.
Economy & Financial Insights: More Bank Funerals Provide Reality Checks
The stock market rally which has pushed the DJIA north of 9,000 recently has caused quite the stir in the media and provided hope of an economic recovery. Unfortunately, this news is a false positive. Stock market fluctuations are not predictors of what is really happening in the economy.
The banking industry is still shaking out the weak players. On Friday, BB&T took control of Colonial BancGroup Inc., Alabama's third-largest state-chartered bank, after it was seized by regulators. Colonial's demise was the largest bank failure in Alabama history. It is the sixth-largest bank to fail in the United States and the largest of 74 U.S. banks to fail this year. Read that again....74 banks have failed just this year.
In addition, Taylor, Bean & Whitaker, the 3rd largest FHA mortgage lender in the U.S. and 12th largest overall collapsed August 8, putting almost 1,000 people out of work in the blink of an eye. It placed loans written by community banks and retail mortgage brokers on the secondary market. Unemployment has slowed from the record levels but that's a tough positive spin to tell the almost 600,000 people that are still losing their jobs each month.
Although the national panic button may have been set aside for the moment, it is still within arm's reach. Consumers should continue their pattern of reducing debt, building their liquid savings and avoiding risky investments - we have traveled far through this recession but have quite a bit further until we are out of the woods.
Question of the Month: What Is The Tax Credit Available On New Home Purchase?
Last month's article on the first time homebuyer tax credit contained a math error, but our loyal readers were all over it. The program that has been implemented rewards first-time homebuyers with a tax credit of 10% of the purchase price, up to $8,000. If you purchase a home for $250,000, then your tax credit would be $8,000 (we published $2,500 in error last month). Thanks go out to several subscribers that contacted me about the mistake.
Giving Back: Supporting Our Communities - Angel Artist of The Summer Announced
Nashville singer/songwriter Kim Parent has been chosen as the Summer 2009 Michelle's Angels Foundation Featured Angel Artist. In the studio, Kim's harmonies have graced recordings by Faith Hill, Tim McGraw, Jo Dee Messina, Reba Mc Entire, Jessica Andrews, Billy Ray Cyrus, Kenny Rogers, Phil Vasser, and many others. In concert, she has performed with Martina McBride, Rodney Crowell, Lynne Anderson and Tanya Tucker. For the past five years, she has been touring with Brooks and Dunn. Learn more about this gifted supporter of Michelle's Angels and hear her music in the online jukebox.
Need volunteers? Do you have a fundraising event upcoming? Do you have a personal web site where you are raising donations for your cause? Submit the information to randy@mortgagebyrandy.com by the 5th day of each month and we will do our best to include your information in the next issue.
Home sweet home.
Randy
Mortgage by Randy newsletter, Copyright 2009 Randy Mitchelson. All Rights Reserved.
Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson. Recommendations may change and readers are urged to check with their financial advisors before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.
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You have permission to publish this article electronically or in print as long as the following is included:
Randy Mitchelson, of Estero, Florida, is a business professional, entrepreneur and author with over 15 years experience in financial services. Mitchelson has served in leadership roles for Global & Fortune 500 firms like Bank of America, KeyBank and CIBC.
As a member of National Association of Mortgage Brokers, Randy has earned the Lending Integrity Seal of Approval. He educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy as well as the Daily Dollar newsletter. A licensed mortgage professional, Mitchelson also founded Trinity Home Financing, LLC.
He is owner of Estero, Florida based National Web Leads, LLC, an internet lead generation service matching consumers with lenders for auto, cash advance and other loan products. Through its network of partners, National Web Leads delivers innovative Web 2.0 software solutions such as lead generation platforms and real time desktop widget and mobile reporting tools for lenders and internet marketers.
Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY. He is a founding member and Finance Chairman of the Southwest Florida Regional Technology Partnership Inc. and Vice President for the Michelle's Angels Foundation Inc. He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.
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