Southern California Mortgage Blog

Fannie Mae & Freddie Mac Taken Over By the Feds

The Federal Government took over control of FNMA and Freddie Mac this morning.(09/07/2008) As I was reading about it last night and again this afternoon, my thoughts go to how this will affect home buyers and sellers, as well as the economy in general.

The bad news is that it will have a huge and prolonged effect. Credit will become even tighter and qualifying for any type of loan will become more difficult.

As I  take a perfect borrowers' credit report these days, I tell them upfront that I will be apologizing to them until the loan is closed. I will be apologizing because even though I have asked them for everything but the proverbial kitchen sink, the loan process will still be met with things not ever asked for before.

Prior to using credit scoring for loan approvals, we had to document and re-document the source of a home buyer's funds, income, job security, bank records, and every other aspect of getting a loan approval. My experience with that enabled me to ask the borrower for all the needed information up-front. Asking for this information up-front is much less stressful for the home buyer and agents, and of course, me.

In the past year, we have entered a completely different mood in the mortgage business. The news today will make the mood even more serious.

I tell all of my loan clients that it comes down to this: the person who is going to sign off on your loan approval wants to cover every possible thing because they don't want to lose their job.

This is the temper and mood of the mortgage industry in a nutshell.

The good news about the take-over is that more people who are having trouble will get help sooner. There will be more consistency in how mortgages that aren't working are modified so that people can keep their homes. This will keep values up and keeping values up is good for every single American.

I will write more in the coming days. I am very good at helping people improve their credit scores so that the cost of credit can be greatly improved.

Please check me out at http://www.creditfitness.net/calc.html

Timing Is Everything

Any American male can tell you that, in romance, timing is everything!

Flowers delivered two days after her birthday will not be given the same response as on the day of her birthday. There could be hell to pay unless a really good excuse is offered.

When you do something is critically important to your credit scores.

Much of the time, in my business as a mortgage loan officer, I see clients coming in and want to improve their credit scores in one week. Unless a person has a lot of credit debt and money to pay it off right away, this is usually not possible.

Credit scores take a while to show off the grooming you have done, or not done, to them.

Giving yourself a full six months to get ready for your “close-up” will pay off big when you plan to borrow money to buy a car or a house. You may need even more time if you are looking to add over 60 points to your scores.

Many of the “rules” that are taught about credit are written so that you will avoid problems on your way to buying a house or a car. It is said, “Don’t pay off collections”, “avoid inquiries”, and “no closing of accounts”.

A few inquiries for home mortgages will not hurt you because the most modern scoring model expects you to shop for a mortgage. The time frame for this happening on a home loan is 45 days. Be aware that if you submit a loan scenario to Lending Tree you could get as many as 300 inquires of your credit by all the lenders who will make you an offer on your loan. Even 40 inquiries will completely tank your scores

This is also true for auto loans. That time frame for this is 14 days. If you like to test drive cars and they pull your credit once a month for 6 months, you could be doing yourself damage.

Collections can be paid off and the item completely deleted from your report if you negotiate successfully for that prior to making payment. I advise that you avoid paying off any collection without negotiating for a complete deletion.

If they absolutely will not delete, you can pay them off safely after your escrow closes. Most loan underwriters will allow this to happen at the closing of the transaction for real estate.

If you aren’t planning to borrow for a car or a mortgage for the next six months to two years, then do the things that will protect your credit in the future. Close accounts that you must close to protect yourself, pay off collections, open new accounts, and charge your credit cards up past 30% of their limits.

Your credit score is only a number. It’s an important number when you want to borrow money; just don’t lie awake at night worrying about it after the escrow has closed. It’s okay for it to go down at certain times in order to protect or improve your long term credit profile. My book, Credit Repair & Credit Scores: Step-By-Step Guide For Dramatic Improvement contains many recommendations for getting the best results in your credit profile.