|
Mortgage by Randy
monthly update to our clients, colleagues, family & friends
By: Randy Mitchelson, June 2011
======================================================================================
In Issue 39 We Touch On:
100% Financing Makes A Cameo
24 Intimate Facts Your Credit Score Ignores
What Is An Overlay?
We have accomplished a lot of milestones at our company in the past 30 days and I expect the next 30 days to be just as rewarding. That said, we’re keeping the introduction brief this month so we can keep working toward establishing our new mortgage company, hiring some more help and balancing all that with having some fun downtime away from the office.
The current newsletter and all prior newsletters are archived at the Mortgage by Randy 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: 100% Mortgage Financing Makes An Appearance
Just to prove (again) what we already know, the mortgage industry swings like a pendulum from super conservative (like we’ve experienced the past few years) to stupid exuberance (like we witnessed in the first half of the last decade). You might have thought that 100% mortgage financing was dead forever after the tumultuous financial crisis our country has endured. Not so fast…
Like an early Spring tulip bud that breaks through the soil, small signs of the pendulum reversing direction are appearing. For example, take this recent announcement: For a limited time, with NASA Federal Credit Union (yes, that NASA) you can get a mortgage option not readily available through other lenders. This is a unique loan that does not require mortgage insurance, and is available for new primary residence purchases or refinances of a current primary residence, in Maryland, Virginia or the District of Columbia (DC). NASA FCU is offering up to 100% financing for a primary residence purchase up to $650,000 (95% financing from $650,001 up to $850,000) and up to 95% cash out refinancing on a primary residence up to $650,000 (90% cash out from $650,001 up to $850,000).
The offer is for a limited time, in limited states, only for primary residences and only for those with top notch credit so it’s not like the credit union is taking on a whole bunch of risky loans. However, it’s a sign of the times. Banks are under pressure from stakeholders to deliver results. Improved results require more loan volume. NASA FCU’s campaign may just be a blip on the screen in today’s environment but this may be the first domino to fall in a multi-year course reversal for the mortgage market that brings us back to the stupid exuberance that got us in trouble to begin with.
Personal Credit: 24 Intimate Facts Your Credit Score Ignores
We hear all the time about the things that affect our credit score like late payments and how much credit we’re using. This passage flips the coin and looks at all the things which do not get factored into your FICO® credit score (remember, FICO® is just an abbreviation for Fair Isaac & Company who developed a credit score formula).
What’s Not in Your FICO® Score
Although lenders may consider some of the following items separately from your FICO score when reviewing an application you have submitted, the FICO® Score does not. In fact, U.S. law prohibits credit scoring from considering these facts. You may be surprised to learn that your FICO® Score itself does not consider:
1) your race.
2) your color.
3) your religion.
4) your national origin.
5) your sex.
6) your marital status.
7) whether you receive any public assistance.
8) whether you have ever exercised any of your consumer rights under the Consumer Credit Protection Act.
9) your age.
10) your salary.
11) your occupation.
12) your job title.
13) your employer.
14) the date you were employed.
15) your employment history.
16) where you live.
17) any interest rate you are being charged on another credit card or other account.
18) any reported child/family support obligations.
19) rental agreements.
20) inquiries/requests you have made for your credit report, in order to check it.
21) inquiries/requests made by lenders in order to make you a “pre-approved” credit offer.
22) inquiries/requests made by lenders to review your account with them.
23) inquiries/requests that are coming from employers.
24) whether or not you are participating in credit counseling of any kind the trash.
Economy & Financial Insights: European Woes Dominate U.S. Markets Again
Did you miss the almost 1,000 point drop in the Dow this month? As if we don’t have enough challenges at home with stagnant employment, here comes Europe back to the forefront to mess with our heads. The five-headed monster of Portugal, Ireland, Italy, Greece and Spain (a.k.a. the PIIGS) reclaimed headlines as Greece teeters on the brink of debt default.
Famed economist Nouriel Roubini (a.k.a. Dr. Doom for correctly predicting the U.S. financial crisis of 2008) recently wrote “the European Union does not have a common foreign policy or a common defense policy; while economic and financial policy convergence has reached an impasse.” It seems that the EU is U in name only. Why should we care in the United States? This is like looking into the crystal ball. Europe keeps wallpapering over the water soaked and moldy sheetrock that is getting flooded by an unpatched hole in the roof. Eventually the sheetrock will disintegrate and crumble. The same is happening here in the U.S. with our national debt and ongoing spending. Without drastic improvements to the skeletal structure of our own financial house, the U.S. is previewing in Europe what could happen here in the future.
Question of the Month: What Is An Overlay?
To understand an overlay we must first define AU findings. AU stands for automated underwriting, and this is the basis for underwriting virtually all mortgage loans. There are two types of AU, one developed by Fannie Mae (called Desktop Underwriter or DU) and another developed by Freddie Mac (Loan Processor, or LP). DU is the more prevalent of the two. DU and LP are software programs used by mortgage professionals to get decisions on loans. Sometimes the automated decisions come back with stipulations. In other words, the loan is approved if the customer can produce documentation to address the stipulations.
An overlay is a stipulation added by a lender above and beyond the stipulations returned by the DU or LP systems. For example, if you are applying for a loan based on your current income but your income varied widely between 2009 and 2010 there is a chance the loan may be turned down. Here’s a trick: have your mortgage person run DU using the last year’s income (2010) rather than the average of both years (2009 and 2010). If the DU findings (underwriting results) only ask for one year’s tax returns as income verification, then all you have to do is make sure the lender who is underwriting the loan will stick to the findings. In other words, make sure they will go by what Fannie Mae is asking for and not add on their own overlays (like requesting 2009 tax returns). Another mortgage expert that I read about coined overlays as the industry term for unnecessary documentation due to excessive paranoia.
Giving Back: Mitchelson Scholarship Foundation Announces 2011 Fine Arts Award Winner
The Larry Mitchelson Scholarship Foundation is thrilled to announce that the 2011 winner of the Fine Arts Award is Desirae Collins. She is a graduating senior from G. Ray Bodley High School in Fulton, New York and will be attending the State University of New York at Oswego in the Fall. Desirae will be pursuing a dual major in art education and art therapy. Click here to read more about Desirae and see an online portfolio of her many photography, painting and other works. Your tax deductible donations help make this award happen each year and you can give securely online at the foundation website or send a check to the mailing address listed in the foundation website. All gifts will be acknowledged with a written confirmation.
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.
Looking for more tips about mortgages, your credit, banking or other personal money matters? Visit us at Daily Dollar Newsletter and you can also watch YouTube video and iTunes podcast versions. Behind the scenes things are in motion to rebrand and relaunch our mortgage channel. Stay tuned….
Randy
_______________________________________________________________________________________________
Mortgage by Randy newsletter, Copyright 2008-2011 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.
______________________________________________________________________________________________
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 financial products. Through its network of partners, National Web Leads delivers innovative Web 2.0 performance marketing solutions to advertisers and affiliate marketers.
Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY. He is a founding member and Treasurer 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. | 
Comments(0)