Almost true… We are raising your rate
(Note: This post was going to be twice as long, but due to the wonder of the internet/computers – specifically a Squid upgrade on the NetBSD firewall – half of my thoughts were not saved, as I have time and remember, I will follow up on this post)
Nobody has asked me, but here are a couple of thoughts on fixing the housing mess.
First, lock the adjustable rates at 5%. Not for second homes or speculative properties – honest to goodness first homes. We can’t put in a provision that says you have to be behind and in danger of foreclosure, we know these loans are bad; we know that most people were suckered into the low rate that jacked up after a year or two. Lock the rate.
Second, if the government can spend all kinds of money on banks without strings it certainly can work with the home owners. Loans that are in danger where people were encouraged to buy above their means can be modified in the following way: subsidize those homeowners that are in trouble. $1000.00 a month for say a maximum of four years – that’s $4800.00 per household that is in trouble. Tack the $4800 onto the back end of the loan as a form of tax lien, collect no interest on it but get the payoff when the home is eventually sold. This way households that are worried about their next paycheck can get some relief even if their job is unsteady. And the same homeowners would need to attend some kind of credit counseling and budget management program so they don’t slide back into trouble once the helping hand is no longer extended.
$1000.00 month limit would mean that overpriced homes aren’t included and that households would still need to come up with some cash on a monthly basis. Obviously, the banks aren’t increasing lending so they should not be getting additional money unless those funds are directly assisting home owners.
I read something a couple of days ago that suggested that the mark-to-market rule be suspended for banks. Mark-to-market means that accounting adjustments must be constantly made based upon what a bank thinks they can sell their loans for. For instance, a $100,000.00 mortgage might only be worth $90,000.00 (to the bank) since that’s what they could get for selling it to the next bank. But a foreclosed home is only about half the original mortgage value. A $100,000.00 mortgage is only worth $50,000.00 and – if you follow the line of thinking of “strict” mark-to-market rules – every other home in that area becomes worth half of the original mortgage. That’s a huge paper loss.
If you were thinking about grabbing your credit scores from the three bureaus you better hurry. Experian and www.MyFico.com have had a falling out and Experian will no longer allow MyFico to offer your credit scores based upon your Experian data and the deadline of February 14, 2009 is fast approaching.
What does this mean to you? You will no longer have access to the score that Experian is selling to your bank to determine if you are a decent risk or not. Experian will not sell you that score, MyFico will not be allowed to sell you that score either. In other words, your score goes back into a black box and you can only guess whether you will be approved or not. Oh sure, you can still buy a score from Experian, but it has nothing to do with the score that they will sell to your bank – other than they still get the cash. While the FICO score has always been a bit of a black box, presumably so we can’t game the system, now you won’t even get to see the outside of the box.
The MyFico discussion boards are pretty fired up over this.
My wife and I recently talked to some people about our prospects for home ownership – it’s more of a pre-qualification type review. They look over our credit reports and get an idea of our debt to income and all that fun stuff. It turns out that the credit pull seems to have been more of a hard pull than a soft pull (we were told they did soft pulls, but I haven’t looked at a follow up report yet to see if it shows or not) and we got a phone call from “Home Loan Executives” who do something called “trigger leads”. I’m guessing the trigger lead is like pre-screened credit offers, but these guys are looking for people pulling credit reports for a home loan and then calling them about it… as this article says, creepy.
I use Firefox all the time these days as does somewhere around 20% of all internet users. I noticed that Bank of America decided to support my browser of choice: Bank of America Firefox support. Now, if they would only show your account balance on the payment page. There is just a selection for the minimum payment and a blank box for a different amount you have to remember your balance if you want to pay the whole thing unlike the other cards I have that show three choices: the minimum payment, the statement balance, and a blank box for other. So I either missed it on BofA or they choose not to show you your balance on the payment page which is a little weird. At least they officially support Firefox.