Richard's Real Estate Thoughts

With tightening mortgage guidelines, increasing foreclosures, growing credit card delinquency, credit standards have become more and more important. In response to growing consumer need,  numerous companies now offer "for fee" credit repair. I had written about concerns with some of these services in a previous post.

A recent NPR story addressed the growing industry that offers to "power wash" consumer credit scores. Many companies promise to increase credit scores over 100 points by removing negative references, including items that are correct and accurate. Most companies even advertise to remove bankruptcy, foreclosure, and judgment references.

In the interview, Charles Helms with non- profit Consumer Counseling North West, points out that credit repair companies cannot do anything that a consumer cannot do on their own.  An informed consumer hiring a repair company to do something that the consumer could do themselves does not bother me.

Disputing credit report items can be tedious, and it may very well be worth it to hire a service. The problem for me is that so many of these services advertise to remove legitimate derogatory items. This would basically make the credit report grossly inaccurate. In cases where accurate bankruptcy, foreclosure, and judgment references were removed, it would either invalidate the credit report  for mortgage purposes or would encourage false disclosure on an application.

The FTC has recently coordinated efforts with many states to crack down on credit repair companies for false advertising, unfair and deceptive practices, violations of the Credit Reporting Act, and violations of various state laws.

List of companies sued by FTC and various states.

The NPR report indicated that federal law provides for a free, relatively easy way for consumers to dispute items on their credit report." I have helped many clients with their credit disputes. In most cases, I have found that it is not so "easy."

The important matter for a consumer is to have an accurate credit report.

Here is a link to some FTC information on credit  .

My process to help clients with credit repair is to start with a detailed review of each reference, verifying that the information is accurate. We determine what the target credit rating is, what the client resources are, and develop a step by step plan.

Possible steps can include paying collections, requesting a deletion letter, issuing disputes with the credit repositories, rapid rescoring.

Clients who need an immediate improvement in their credit scores should be careful not to take well intentioned steps that might actually lower the scores. 

Credit is one of the most significant barriers to home ownership, more so in the current lending environment. Credit repair can be done, but it must be done right.

Richard Smith
American Acceptance Mortgage, Inc
Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

FHA, VA, Rural Development, Reverse Mortgages, Construction Permanent, Renovation,
FHA Renovation, Mortgage Modification and Loss Mitigation

Mortgage lending offices located in Chattanooga, TN
rsmith@aamonline.com

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With all the misspent funds for the $700 billion Bucks for Banks program now well underway, we are still left with millions in home inventory and millions of prospective home owners unable to buy because of a lack of down payment.

Congress will meet next week and look at economic stimulus. The approach will be to spend more money.

If housing is at the center of the problem, it is time to take another look at proven programs that do not use the US Treaury.

Restore 100% conventional programs - My Community, FNMA Flex, Freddie 100, Home Possible, Community Reinvestment Act programs. I have not seen the delinquency figures for these programs. My guess is that the assumption is being made that delinquency is high for these low down payment loans, but that actual statistics do not support the assumption.

Restore FHA seller funded down payment assistance - This program has helped millions. Delinquency has not been unmanageable for these home owners, and can be improved simply by the guidelines similar to what is proposed in HR 6694.

Restore FHA loan amount calculation to 97.75% - Effective January 1 the FHA down payment will be increased to 3.5% and will no longer allow for a portion of buyer closing costs to offset some of the funds required for closing. This makes no sense, if the goal is to build up our housing market.

These three steps would make a great impact helping qualified families purchase homes, and would go a long way to stabilizing our housing market.

Ameridream video - Truth about down payment assistance.

Contact your representatives.

Richard Smith
American Acceptance Mortgage, Inc
Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

FHA, VA, Rural Development, Reverse Mortgages, Construction Permanent, Renovation,
FHA Renovation, Mortgage Modification and Loss Mitigation

Mortgage lending offices located in Chattanooga, TN
rsmith@aamonline.com

Join me on LinkedIn, Facebook, Twitter

Today the significant nonfarm payroll report came out with worse than expected numbers. We have been reading about job losses for weeks, and they continue with evidently quicken pace. Of the 1.2 milliion lost jobs this year, 651,000 have been lost the last 3 months.

Some predictions have unemployment growing to over 8%. We are 6.5% now.

FNMA's economic analysis for October points to the nonfarm payroll as a leading indicator of foreclosures. Of course this should not be a surprise, but for a nation already in a foreclosure crisis caused by dropping property values and high interest adjustable rate mortgages, the threat of additional foreclosure problems from declining employment is not good.

Taken from FNMA Economics and Mortgage Market Analysis

We are using $700 billion to bailout banks for the apparent purpose of purchasing other banks. Our economy is faced with mounting job losses, and the real prospect of a major automotive industry crash.

Over the next few months there will be a debate about the nature of an economic stimulus. The Bush administration is insisting on a targeted immediate impact. Obama seems interested in a more long term solution for employment, such as infrastructure construction or alternative energy development.

My guess is that the new stimulus will stall out until the new administration and the significant democratic majority get started on their economic package during what will likely be a very friendly honeymoon period.

Not real sure what our employment picture will be in three months, but it seems to me the quicker our leaders get started on a broad and coordinated economic plan the better. It seems to be a mistake to rely solely on the $700 billion bank bailout and federal funds target rate cuts.

We need to get people back to work. We need to create a real mortgage modification program. We need to find ways to increase the number of buyers. Two simple ways to do this is to bring back seller funder down payment assistance (or a 100% FHA purchase program) and to bring back 100% conventional loan programs.

We need these quick, before things start to get out of hand.

Richard Smith
American Acceptance Mortgage, Inc
Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

FHA, VA, Rural Development, Reverse Mortgages, Construction Permanent, Renovation,
FHA Renovation, Mortgage Modification and Loss Mitigation

Mortgage lending offices located in Chattanooga, TN
rsmith@aamonline.com

Join me on LinkedIn, Facebook, Twitter

The Treasury gave its first update on the progress of $700 bailout package. So far $125 billion has been distributed or pledged to 9 major banks. The money has not been used for purchasing defaulted mortgages, as was the original proposal. Of course, soon after passage of the bailout proposal, the target was changed to focusing on bank capitalization. Buying defaulted mortgages took a back stage, as it was thought that a capital stock investment would provide more capital for lending. This seemed a good plan with good hopes to open back up the credit markets, although it did not directly address the housing market woes by helping with foreclosures, struggling home owners, mortgage modifications, or home inventories.

As things worked out, the bailout bucks have not been used for new lending either. So far banks receiving bailout bucks seem intent on acquiring other, weaker banks. Supposedly these moves will help our economy.

There are more reports that the Treasury has plans to focus bailout bucks on other, non-bank institutions. 

The report this week does not give any specific information on perceivable improvements. Treasury cautions that we should give the bailout time to bring about economic improvement.

NPR reports some economists comments about the progress report. "Too early." "Banks were evidently worse off than initially thought." "Banks are scared to lend." "We should not expect too much from the bailout." "Lending is just going to be tighter with or without the bailout."

So there you have it.  The big bailout may not have been so big after all.

GM lost $2.5 billion, with sales down 45%. Ford sales down 30%. The big three are looking for their own bailout.

Credit card losses are at historical highs, with a $6.8 billion increase in consumer debt.

Unemployment is at a 14 year high, at 6.5%, with nonfarm payrolls dropping 240k jobs. Employment losses are widespread among all industries and businesses.

Two articles in my paper today spoke about consumer and business credit. Local banks in Chattanooga state that they have plenty of funds to lend. The bottom line is customers need better credit and will pay higher rates. They were speaking about credit cards, consumer loans, car loans, and commercial loans.

An AP article by Stevenson Jacobs indicates that the credit markets are opening, but many potential consumers are not borrowing. Recent retail sales reports indicate that many people may not be interesting in borrowing, even when credit is available. This is likely fears over employment stability. I'm not sure how to reconcile this reported lack of borrowers with the $6.8 billion increase in consumer debt, but there it is.

President-elect Obama is already receiving daily economic briefings. I suspect that much of what takes place over the next few weeks will be done in line with his objectives. We should soon be hearing about a new stimulus package.

It seems to me that the bailout package has not been successful. It is not encouraging consumer spending, employment, credit, investment. It is not helping foreclosures, mortgage modifications, home inventories and prices, new construction. It is not helping to qualify new home buyers. The bailout payout is being executed by a fairly secretive process.  It is evidently encouraging bank consolidations. Is that the plan?

I would really like to see how this can be coordinated with an overall economic restoration plan. We need to ease fears, to qualify more home buyers, to bring employment, to enact reasonable regulation to prevent future abuses with speculative lending practices.

We need something real, and fast. What I think that we will get is another batch of money to more banks and another drop in the federal funds rate.

Richard Smith
American Acceptance Mortgage, Inc
Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.

FHA, VA, Rural Development, Reverse Mortgages, Construction Permanent, Renovation,
FHA Renovation, Mortgage Modification and Loss Mitigation

Mortgage lending offices located in Chattanooga, TN
rsmith@aamonline.com

Join me on LinkedIn, Facebook, Twitter