Mortgage by Randy
In Issue 72 We Touch On:
Are You On A Trigger List?
Who Does Small Loans Anymore?
Interest Rates On The Move
This edition of my newsletter marks six complete years of publishing free mortgage, credit and other personal finance information. Thank you for reading it. Your comments and questions keep me motivated enough to deliver fresh content each month. Whether you are reading this via email or via social media, all I ask is that you share it with friends and family so that more people can benefit from the information.
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: FHA Loans To Lower Credit Borrowers Being Constrained By Scared Lenders
American consumers wanting to buy a home are finding it tougher than ever and the rules set in place by our own government are at least partially to blame. The Federal Housing Administration exists for the purpose of helping first-time homebuyers and those with lower credit scores or small down payments. Carol Galante, FHA commissioner said "the overall availability of mortgage credit is being constrained." There are millions of people with credit scores between 680 and 580 who are not gaining access to loan programs because FHA lenders are skittish about making risky loans. Galante is having her team undertake an outreach program to lenders to offer them more detailed guidance about how best to lend to this population of borrowers.
Personal Credit: Are You In The Cross Hairs Of A Trigger List?
I recently read a blog post about trigger lists and was surprised by the number of comments from readers who were not aware of the practice employed by the major credit bureaus. So I thought I'd share it with you. The credit bureaus (Equifax, TransUnion, Experian) collect a lot of data about your credit accounts and payment history and they use formulas to calculate a credit score. No big secret there.
What some consumers do not realize is that the credit bureaus sell this information. Trigger list is a common name for a list of records that meet certain criteria defined by the buyer of the data. For example, American Express can buy a list of names from the credit bureaus that have credit scores above a certain threshold and have less than three other credit card accounts.
Or, a car warranty company can buy lists of consumers who have had a car loan aged five years or more.
The credit bureaus make big money selling the data to all kinds of advertisers who use the information to send out direct mail offers to you. The Consumer Financial Protection Bureau (President Obama's watchdog group for all things financial) is now investigating these practices to determine if consumers are being harmed by this practice. In the meantime, you can be sure that the practice will continue.
Ask Me Your Credit Score Questions
Have you been given credit score advice that you are not sure about or read an article that has conflicting credit score information from what you believe to be true? I am here to help. Submit your question and I will be happy to respond. For more free and easy to read credit score tips visit the DailyDollar and click on the Credit Score and Credit Monitoring sections. Remember, to get a truly free approximation of your credit score, read my article about Credit Sesame and try them out.
Economy & Financial Insights: The Party Is Almost Over?
New Federal Reserve Chair Janet Yellen isn't making anyone read between the lines of her remarks. Yellen said this month that the Federal Reserve's program of buying government bonds is likely to end in six months and that they may begin raising interest rates in twelve months. This means that prospective homebuyers that have been fence sitting need to get their act in gear in order to get in on the historically low interest rates that we've been spoiled by since the financial crisis began in 2007.
Fixed mortgage rates crept up in March based on economic data showing better job creation than previously reported in recent months. Higher interest rates means that fewer homes are affordable for buyers requiring financing.
Buying a house takes time. Inventory is low so there are few properties to choose from. Builders are taking it slow too so those wanting new construction have little option but to wait six months for their home to be constructed. Once a home is identified, the mortgage process takes an average of 45 days if not longer. This means that serious buyers need to stop procrastinating and jump into the process now in order to lock in their housing payment before the rates trend up even further.
Question of the Month: Why Is It So Hard To Get A Small Loan?
Most lenders have minimum loan amounts. The primary reason is profit. It takes the same amount of work for the lender to process a $30,000 loan as a $300,000 loan. Government regulations cap the maximum amount of fees that can be charged on small loans. In addition, the introduction of QM (Qualified Mortgages) via the Dodd-Frank Act has further reinforced lender decisions to avoid considering small loans. So where is a borrower to turn?
Unfortunately, these government regulations, designed to help consumers, has adverse consequences that politicians either don't contemplate, don't understand or don't care about. One of the consequences is that consumers, no matter how good their credit is, how much income they have, how much down payment they make, etc. simply can't get certain types of loans, including small dollar mortgages. What options do these consumers have?
One option is hard money lenders. These lenders base their decisions on one thing primarily - how much equity the consumer has in the scenario. Typical equity requirements are 40-60%. These loans are usually very expensive both in terms of rates (10-12%) and fees (6% or more).
Another option that borrowers can consider is owner financing. This is where the seller agrees to carry the mortgage. It becomes a great income source for the seller and let's them earn a rate of return higher than their savings in the bank. Some sellers simply can't afford to carry the mortgage. They need the cash, so this option is hit or miss.
I enjoy helping people who are falling through the cracks of the banking system to get a mortgage. There are often solutions available through specialty lending sources. If you or someone you know is having trouble getting approved for a loan, please have them contact me for a consultation.
Giving Back: Your Tax Deductible Donations
Fundraising for the 2014 Golden Gate Relay For Life is underway and our team at iPartnerMedia.com will be there. I need your sponsorship please! Go to my Relay For Life website to make a secure donation. Our event is April 26 and our team will walk all night to help honor those past and present that have been affected by cancer. To help me achieve my goal, please be one of the next 10 people to go online and sponsor my walk for $20 or more.
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 email@example.com by the 5th day of each month and we will do our best to include your information in the next issue.
March has been a busy month between travel, family events and lots of networking. The launch of the Bonita Bay Networking Group has been rewarding and the Regional Technology Partnership is seeing record attendance at monthly events. I want to wish my mom and dad a happy 45th wedding anniversary with regrets that we couldn't celebrate together like we thought we would.
Mortgage by Randy newsletter, Copyright 2008-2014 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 is an entrepreneur, author and community activist with 20 years experience in financial services. Mitchelson has served in leadership roles for Fortune 500 firms Bank of America, KeyBank and CIBC.
As a licensed mortgage professional and member of National Association of Mortgage Brokers, Mitchelson 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.
He is an online marketing expert and Vice President at iPartnerMedia.com. He founded of Estero, Florida based National Web Leads, LLC, (NWL) in 2005 which helped advertisers drive new customer acquisition through email, web display, social media, keyword search strategies, mobile devices and more.
Mitchelson also writes the DailyDollar™ personal finance newsletter. U.S. News and World Report named DailyDollar to its list of 8 Savvy Personal Financial Podcasts.
Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY. He is a founding member of the Southwest Florida Regional Technology Partnership Inc. and the Michelle’s Angels Foundation Inc. He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.