Lenders continue to reject borrowers with otherwise good credit when they diverge from the standard approval checklist.
Would-be borrowers facing the most problems include the self-employed.
One reason bankers are so nervous are the standards held out by Fannie Mae and Freddie Mac. Not only are Fannie and Freddie demanding credit scores above 720, they are refusing to buy back defaults when the original mortgage application had small discrepancies from the norm. To avoid losses, lenders are being extra careful.
The result is that some borrowers are being rejected for problems that seem completely inconsequential.
Source: The Wall Street Journal, James R. Hagerty and Nick Timiraos (07/10/10)
These days one of the biggest impediments to closing a real estate sale can be the buyer’s ability to get a mortgage.
Here are some tips for anyone who hopes to land a loan:
Turn to the government. The biggest source of loans these days is the Federal Housing Administration (FHA) and the Veterans Administration (VA). These programs accept borrowers with lower credit scores and allow them to put down as little as 3.5 percent of the purchase price.
Document, document, document. Borrowers will need bank statements, brokerage statements, W-2 forms and tax returns.
Boost credit scores. Borrowers should avoid having more than one-third of their maximum borrowing capacity outstanding on one credit card. If necessary, rotate the debt among several cards.
Work your connections. Comparison shopping is easy online, but if your customer has an established relationship with a local bank, suggest they try that lender first.
Source: BusinessWeek.com, Christopher Palmeri (01/23/09)
A pilot program that will be rolled out soon in Philadelphia as part of Mayor Michael Nutter’s plan to curtail foreclosures will mandate that home owners and lenders engage in mediation.
According to County Judge Annette Rizzo, “It will give people an opportunity to be heard, and give them the opportunity to stay in their homes or gracefully exit.”
Residents will learn of the $2 million program through a public service announcement. The city already imposed a moratorium on sheriff’s sales in April and May to address the foreclosure crisis, which is expected to involve 8,500 homes citywide this year.
Source: Associated Press (06/05/08..)
Immigrants Often Targets of Subprime Scams
Immigrants have long been victims of fraud, but the subprime mortgage boom has provided a particularly popular avenue for unethical lenders to take advantage of immigrants.
Housing counselors say they have seen predatory lending to immigrants across the U.S. Among the vulnerable groups: Latinos throughout California, Caribbean and African borrowers in the New York area, and Russian immigrants in Philadelphia.
Immigrants with limited English skills tend to be trusting, especially when people with roots in their own countries offer them what appear to be good opportunities and easy money, says Katrina Vizinau, a counselor at Community Housing Development Corp. in New York City.
Source: The Wall Street Journal, Jonathan Karp, Miriam Jordan (12/06/2007)
Daily Real Estate News | November 12, 2007
Home buyers should take care not to run up a lot of debt between the time they are approved for a mortgage and the day they go to the closing table.
Many lenders are pulling credit history and credit scores within a week of a buyer’s scheduled closing date just to make sure nothing major has changed. What the lender doesn’t want to see is a huge run-up of credit-card debt or other loans.
The lender also may require the borrower to sign a statement at closing affirming that there has been no change in the borrower’s financial ability to repay the loan and that the borrower’s employment status remains the same.
Home buyers should be particularly cautious not to throw their debt ratio out of whack by buying things for the new home before they own it because the added debt might change their credit score and the lender may no longer be willing to lend them money at the rate promised, or maybe not at all.
The best advice, experts say, is to wait to do that shopping until after closing.
Source: Ilyce Glink, Real Estate Matters Syndicate (11/09/2007)