Mortgage News: February 2008

Thursday, February 21, 2008

Foreclosure Crisis... What if?

The following two months bring the highest number of adjustable rate mortgages reaching the first and most shocking payment adjustment. Something over 100 billion a month vs. the 30 to 50 of the last 3-4 months.

Inevitably many will end up in foreclosure.

Nouriel Roubini was on CNBC discussing the new plan to freeze foreclosures for 30 days and follow that up with this post which gave some reasons why it won't help and a possible scenario...


...banks will have to eventually recognize that even a plan that freezes the reset of most mortgages will not be enough. To stop foreclosures
they will have to a accept a reduction of the face value of the mortgage to the lower current value of the home
. While this may be costly to the banks
the alternative of foreclosure and selling such homes in a illiquid market is
worse for creditors. Thus, much more radical policy options should be considered
to avoid the biggest foreclosure crisis in US history.



Do you think this could happen and if it did would it actually
help?

What would be the fair way to select who gets a reduction?

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Tuesday, February 12, 2008

How FICO Credit Scores Get Gamed

Today there was a very interesting article regarding FICO scores on Businessweek that talks about the dark side of the FICO credit score and mortgage lending.

The article is surprisingly clear on the techniques used to raise credit scores.

Generally, the thing that hurts the score the most is having too much debt vs. your outstanding limits. Anything you can do to get your available balances below 50% of the available limit will increase your scores.

Here is the calculation to figure out your balance to limit ratios.

Total Outstanding Balance / Total Available Limits = %

Instead of paying a so called credit doctor, you can often just call your existing card companies and request an increase in available limits and thats free.

If you have legitimate errors on your credit report you can also make use of the Fair Credit Reporting Act yourself by contacting each credit bureaus and following the credit dispute instructions.

- TransUnion
- Equifax
- Experian

The article is worth the read if your curious about how the FICO score system works.

If your not sure whats on your credit report you can request your free annual credit report from each credit bureau from the official public website

Remember that the most important thing is to just make your payments on time. After all when you borrowered the money thats what you agreed to do.

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