Interesting Facts:

Americans’ credit scores, the three-digit number can determine whether an applicant will get a loan and how much they will pay for it, have taken a beating.  Many Americans may not know their actual credit score, but they’ve seen enough marketing by the credit-score companies, including the Fair Isaac Corp., to know that the number, which can range from 300 to a perfect 850, has become a de facto national ID. Lenders rely on Fair Isaac’s FICO score, but so do employers when screening job candidates, insurers when issuing policies for homes and autos, and landlords when renting an apartment. 

Millions of consumers’ scores have dropped; making it more expensive for them to borrow money — or even impossible if the score has sunk low enough.  Two major factors are bringing down credit scores: late payments because of the economy and credit-card companies reducing credit limits, meaning people are using a greater percentage of their available credit.

Falling credit scores are a reflection of the times: plummeting home values, record foreclosures and the overall recession.  At the same time, lenders are applying stricter standards to borrower, including requiring higher credit scores.  With the increased emphasis on the collateral, you may wonder why lenders are so concerned over property appraisals for borrowers with high credit scores.  A report released last month from the Federal Reserve revealed that borrowers with good credit now make up the largest share of foreclosures.  This group includes a high percentage of upper-income borrowers.  The report shows that a 720 credit score has functioned at a level equal that of a 680 score of 2005.  

For consumers, getting your credit report is easy — and free if you go to the right spot — but getting your score can be more complicated.  The three credit bureaus, Experian, Equifax and TransUnion, sell reports and scores to lenders and consumers. Also, Fair Isaac sells the bureaus’ FICO scores directly to consumers via www.myfico.com.  Under the Fair and Accurate Credit Transactions Act, consumers can get one free credit report a year from each of the three big credit bureaus. Consumers who want their credit score will need to pay a fee.  Consumer advocates recommend checking your report periodically. If you see inaccurate information, contact the credit reporting company.

In The News: 

Congress has enacted the Housing and Economic Recovery Act (HERA) which contains a section called the Mortgage Disclosure Improvement Act (MDIA).  In summary, MDIA impacts Truth in Lending (TIL) and many components are considered significant.  Listed below are the high level requirements that are effective with applications dated July 30, 2009 and later: 

1. Initial TIL required on all loan types within 3 business days of application date – extended to all owner occupied loans (SunTrust has been in compliance for 9 months). 
2. No fees can be collected (except credit report fee) prior to initial TIL disclosure received by borrower.
3. 7 day waiting period before closing – must issue initial TIL at least 7 days before loan closing. 
4. Significant Impact – 3 day waiting period if revised TIL required – client must have revised TIL for 3 days prior to closing. 
5. Significant Impact – TIL must be re-disclosed if APR increases more than .125% and the 3 day waiting period also applies.
6. Consumer waivers on the 3 day requirement are not allowed. 
7. Last minute seller credits from a final walk through or undisclosed change orders on new construction can play a major impact on the new law. 

SunTrust Mortgage fully supports these transparency initiatives and firmly believes these new regulations are consistent and complimentary to our commitment to provide our clients with a solid mortgage experience. 

Market Update:

“Good News” popped up several times this week.  Citing housing market gains and unexpectedly lower jobless claims, the Economic Cycle Research Institute confirmed that its leading U.S. index hit a two-year high.  ECRI director Lakshuman Achuthan said, “It is increasingly evident that, despite widespread misgivings based on backward-looking economic data, the end of the recession is at hand.”  The personal savings rate in the U.S. at the end of April 2009 was 5.7%.  Just over a year earlier the nation’s personal savings rate was 0.2%.  Initial construction of homes and building permit applications surged in June according to figures released by the Commerce Department.  Single housing starts jumped to the highest month over month increase since December 2004. 

The economy is recovering, the average household has substantially higher savings, new construction is increasing. We will take that as “Good News” for the week.  

Let’s go get ‘em’!!

Interest Rates:

On Friday July 17^th your purchase client with a 740 credit score putting 20% down could secure a conventional 30-Year Fixed rate at 5.00% with 1.50 points on a 30-day lock (APR:  5.172%).

FHA has established Risk Based Pricing with regards to credit scores.  Borrowers with scores 719 will have a rate improvement.   On Friday July 17^th your FHA purchase client with a 660-719 credit score could secure a 30-Year Fixed rate at 5.000% with 1.50 points on a 30-day lock (APR:  5.666%).  Remember the APR on FHA includes the MI.

Jumbo rates are subject to Risk Based Pricing with regards to credit scores.  Borrowers with scores 759 will have a rate improvement.  On Friday July 17^th your Jumbo purchase client borrowing $1MM with a 740 credit score putting 25% down could secure a 30-Year Fixed rate at 6.000% with 1.625 points on a 30-day lock (APR: 6.170%).