How Credit Scores Are Calculated
FICO, like Band-Aid or Kleenex, has become a generic symbol of credit worthiness. Scores can range from 300-850 and is a statistical calculation which is based upon payment history (35%), credit utilization (30%), length of history (15%), credit type (10%), and recent credit checks (10%). Items stick around for seven years; bankruptcy for ten. Maxing out a card, a 30-day late payment, debt settlement, foreclosure (150 point ding) or bankruptcy (150-200 point hit) all negatively impact FICO. Sometimes folks wonder about whether or not a short sale hurts your credit score as much as a foreclosure, and apparently it depends on whether the borrower stays current on their payments and how the lender reports the sale (try for “debt repaid in full”).
Comments From Mortgage Trenches
What are folks saying in the trenches out there?
“Things in my area are good since we didn’t take the value hits that other areas have. Business has been volatile during the last two quarters, but as compared to the record production year we had in 2009 any normal production environment would be off.”
“In specific regions where employment is more stable and values have leveled off, purchase activity has picked up relative to recent months.”
“Purchase deals are slow moving. Prospective homebuyers are requesting prequels, but many of them are being rejected leading to lots of frustrated, hungry loan officers fighting it out for every deal.”
“The industry has become so competitive at the moment – rates rose quickly and borrowers started to panic. This likely resulted in an increased amount of ‘rate shopping’ which forced loan officers to lower their costs to save the deal. Either that or loan officers did not want to re-work GFE’s so they cut points charged to keep APR from rising.”
Chase Net Income $3.3b, Angry Borrowers Mob Chase Exec
JPMorgan Chase was in the news today, for two reasons. First, the company’s earnings were better than expected with net income of $3.3 billion and earnings-per-share 10 cents higher. It had Tier 1 capital of $131 billion. But David Lowman, who runs Chase’s home mortgage business, was “mobbed by angry borrowers” yesterday during a congressional hearing. He was asked by a lawmaker who borrowers could turn to if they felt his bank’s employees were not helping them, and he invited customers to speak to him. As if on cue, 50 borrowers burst from the audience and presented Lowman with a 6-page document alleging his bank reneged on a pledge to help struggling homeowners.
HUD’s Most-Asked Mortgage Questions
Be sure to check out HUD’s website for the revised frequently asked questions. I mentioned this Friday, but though it was important enough to re-mention. There is quite a bit of relevant information in those 62 pages!
Mortgage Applications Down
The MBAA reported that applications fell by 9.6% last week and hitting the same volume levels as last June. Is your company ready for what analysts have been predicting about volumes this year? Refinance activity fell 9% in the latest week and accounted for about 59% of all retail residential applications. The four-week moving average for all mortgage applications fell 6.2%. It appears, however, that locks have increased lately.
Market/Economic News Roundup
Volatility picked up a little bit yesterday in the markets, with mortgage investor prices both improving and worsening during the day. Yields, however, hit their lowest levels since March. Can the economy rebound with no inflation? That would be nice… The day started off slowly from an origination point-of-view (estimated to be less than $1 billion). But as the day wore on, buyers “faded away” according to one trader, and origination doubled in size from levels we saw late last week to $2.5 billion. Mortgage spreads widened to Treasury securities, especially higher coupon mortgages, and if Treasury rates drop much one can expect mortgage prices to lag somewhat.
This morning we had a spate of economic news. Prior to the news the 10-yr was at 3.84%. CPI for March was +.1%, with the core rate (ex-food & energy, for whatever that is worth) unchanged. The CPI was up 2.3% year over year. This is certainly within expectations, and within the Fed’s targeted inflation rate. We also had Retail Sales, doing well recently, for March +1.6% and last month’s figures were revised higher. After the news the 10-yr went to 3.82% and mortgage prices are roughly unchanged to “worse by .125”.
A man is watching a game of golf on TV. But he keeps switching channels to a dirty movie featuring a lusty couple having raucous sex.
“I don’t know whether to watch them or the game,” he says to his wife.
“For Heaven’s sake, watch them,” his wife says. “You already know how to play golf!”