Texas Home Loan Blog: January 2007

State regulators have again gone to the title companies and demanded a reduction in rates.

You see... It seems that title companies(or rather their insurance companies) pay out such a low percentage of their premiums in claims that the govenment felt that they should step in and make a change.... again!!

I think these guys make more than casinos.

Anyway, they cut the premiums by 3.2% effective Feb. 1

And is a 17% reduction since 1998.

Typical homeowners policy on a $100,000 home in 1998 was $1023 compared to today's $843

http://www.inman.com/hstory.aspx?ID=61617

I just got off the phone with a realtor..... MUST close by the 31st!!!!!!

Uh, do we have a contract? "No."
Do we have a survey? "They don't know"
Are we going to have an inspection? "I think so."
When is the option period up? "8 days(gives me 7 days)"

Yet another example of "Don't be THAT guy!!!"

Can I get it done? Yes, of course. Will I be happy about it? Absolutely not.

I have to get the appraisal ordered right away. And title work needs to be ordered right away as well.... that takes up to 5 days in itself. Not to mention the fact that we don't know whether a survey will be needed. And regardless of my current workload... it is kind of hopping around here right now.

Now, I have closed loans in 5 days. So you would think that 2 weeks wouldnt be a problem.... yet, i know this buyer.... and she is going to SCREAM if she has to pay for an appraisal during the option period, BEFORE the home is inspected. Yes, it is only a minor risk, but it is real money to this single mother.

Now, I will let you all guess the answer to the next question.

DO YOU THINK THE REALTOR CALLED ME AND ASKED ME ABOUT THE CLOSING DATE BEFORE WRITING THE OFFER?

Well, if you can afford it.... then it probably isn't worth the price!!!

The credit bureaus have stated that the only thing you can do to 'repair' your credit is pay your bills on time and wait.... and wait.... and wait.

Well, they are partially right. There are some things you can do to speed up the process. But if you have been solicited by someone who says they can remove unpaid collections, or bankruptcies on some little technicality...... RUN!!!

What can you do? Well, that depends on your file, and everyone is different. I will spell out a few things that will help.

1. Don't hide from your debts. If a collection agency calls, be nice and take down ALL of the information you can. Original creditor, amount of principle, interest, late fees.... generally, what makes up that amount they are collecting. Get the name and address of the company along with any account numbers. Then, politely say that you need to research it, or you need time to gather the funds. Immediately, send a 'Cease & Desist' letter certified mail to the collection agency. Huh? Cease & Desist? Yes!!! The collection agency is offering you an undesireable service.... and you can 'fire them'. If you do this right away, there is a great likelihood that it will not get placed on your credit report. If you are in this circumstance, i don't have to tell you, that these debts get sold & resold and can show up 2 or 3 times on your credit report. Stop them in their tracks. Now, I am not suggesting that you NOT pay your bills. But you should pay the original creditor when possible.

2. Keep those credit card balances down. The number one killer of a FICO score is the high utilization of revolving debt. And if you get a Home Equity Line of Credit(HELOC), then get a bigger credit line than you need. Why? Because if you need $10,000 and get a $10,000 line..... it is 'maxed out' from day one. Another little trick you can do is 'convert' that revolving debt to installment debt. A bank or credit union would be where to start. Although you may have to 'secure' that debt with some type of collateral.

3. Pay on time. Yes, it is that simple.... over time, your late pays will hurt your score less and less.... so it is important to come up with a plan that you can stick to and follow that plan. If you can't stick with the plan, ask for help.

4. Debt counseling. I am not talking about those debt cancelling services, because I have yet to find a legitimate one. I am talking about consumer credit counseling(CCCS). If you DO decide to use a service like this, you really, really need to sign up for credit monitoring and make sure they are paying on time. I have seen folks come out of CCCS with a TON of late pays. Ask up front if your scheduled payments will be suficient to bring the accounts current and be reflected as good accounts on your credit report.

5. Seek advice and counsel from someone who understands the FICO score. A good loan officer can show you what steps you need to take to increase your scores. Sometimes that includes opening new accounts. Whatever the steps are, do what you can when you can and watch your scores increase over time.

More about this subject is available on the resources page of my website. I hope this helps someone.

http://www.dallasloanguy.com/resources.shtml

http://www.dallasloanguy.com/docs/about_credit.doc

http://www.dallasloanguy.com/docs/about_credit.pdf

01/03/07

1. When is the effective date of this legislation?

                January 1,2007.

1. Does this legislation apply to purchases, refinances and rehabilitation loans?

We do not have a clear answer to this question at this time. Yes, to purchases, but maybe on refinances and rehabilitation loans. Check with a tax advisor.

1. Will this legislation impact conventional and government loans?

To the best of our knowledge, it applies to both loan types. The legislation mentions both VA and rural housing as eligible. Confusing because neither VA or RHS charge mortgage insurance!  VA has a funding fee.

1. Are all borrowers eligible under this legislation?

No.  The legislation limits the full deductibility to borrowers with an adjusted gross income of $100,000 or less. In the case of a married individual filing a separate return, the AGI maximum is $50,000. The deduction is gradually phased out for borrowers with AGIs up to $109,000.  For each $1000 that the borrower's AGI exceeds $100,000, the amount treated as "interest" will be reduced by 10%.  Because we will never know what the borrower's AGI will be at the time of application or funding, it is even more important not to advise or guide a borrower on any deductibility issues.

1. Will this deductibility last as long as the MI is on the loan, assuming the borrower's income stays at or below the required AGI?

No....at least as the legislation stands today. In fact, the legislation specifically states that unless this legislation is extended, it will expire December 31,2007.

1. What about the upfront premiums paid by the borrower?

We need to remember that on conventional loans, very few borrowers select this option today. However, on FHA loans, we do see this option, which raises several questions. The biggest question: Is the upfront premium considered a premium to cover the expected life of the loan?  If so, it would not be a surprise if the IRS indicated that any deduction should be spread over the life of the loan. However, as noted above, this legislation, as currently written, is only for the year 2007. We've got a "Catch 22".  If a borrower pays an upfront premium on a conventional loan, it would raise the issue of financing the premium, getting a deduction for the interest paid and also applying for the upfront fee. Some feel this sort of double deduction would be frowned on by the IRS.  Again, not for us to say.  Encourage all borrowers to ask a tax advisor.

1. How will Wells Fargo communicate the mortgage insurance paid by the borrower?

Wells Fargo will report what is paid. All deductibility issues will be between the borrower and the IRS. The legislation requires taxpayers to itemize their tax return in order to take advantage of the legislation.  Wells Fargo's servicing team will send out the normal yearly tax statement including what the borrower paid in interest and mortgage insurance. It has not been established how upfront mortgage insurance premiums will be reported.

Seems that my free trial to their online publication has come to an end. And lucky me, they have a discount going on right now.... imagine that!!!

I kindly explain to the gentleman that I get so many free trade rags and free access to so much free online data, that I just couldn't justify paying a fee for something I would not have time to read. Doesn't he know that I have a million blogs to read on ActiveRain? LOL

He kept trying. Letting me know how specialized it was to my industry and localized just for me..... yada yada yada. Still no sale I said. I can't read everything. And they should charge their advertisers more and offer it for free.....

I am seeing a trend these days for free, free, free..... With their revenue dollars being generated by advertisements. I cannot justify paying for an online magazine with stuffy articles about banking. I just didnt see them making me any money. I could only see them keeping me from making money doing other things.

I cannot even count the number of free publications I get. How about you? Do you subscribe to any worthwhile services that provide info you can't get anywhere else?