Recently we reported that the Fair Isaac Corporation (FICO) was making changes to its credit reporting. They’re offering a new scoring model that no longer factors in past-due payments that have been paid off and they’re giving far less weight to medical debt.

Now Rep. Maxine Walters (D-Calif.) is introducing the Fair Credit Reporting Improvement Act of 2014. If enacted, this would make major updates to the 44-year-old consumer protection law.

The last time changes were made to this law, consumers were given the right to a free yearly credit report and mortgage lenders were required to let borrowers see their scores.  That provision put an end to disreputable lenders claiming low scores as an excuse for high rates.

The Fair Credit Reporting Improvement Act contains nearly 20 new provisions designed to make access to credit both easier and cheaper for thousands of Americans.

Key provisions include:

Relief to borrowers who were victimized by predatory lenders. All adverse information about loans that were found to be unfair, deceptive, abusive, fraudulent or illegal would be removed.

Shortening the time that adverse information remains on a credit report. Currently adverse information remains for 7 years. The new bill would lower it to 3 years.

Removing fully paid or settled debt from a consumer’s credit report. Like other adverse information, this currently remains on a credit report for 7 years. Under the new law it would be removed immediately.

Giving consumers the right and ability to challenge adverse information on their credit reports. Credit furnishers would be required to maintain all relevant records for as long as adverse information remained on a consumer’s credit report. Consumers would have the right to review and challenge such information.

Erase private school loan default information for borrowers who are making an effort at repayment. As is the case with federal student loans, negative information from private school loans would be removed as soon as the borrower made nine consecutive on-time payments.

Bar employees from using credit information to eliminate job applicants. Do late payments on a car loan mean you won’t be a reliable employee? Ms. Walters says no – this is an unfair practice that leads to long-term unemployment. She also believes that it unfairly targets women and minorities who were victims of the financial crisis.

Is everyone in favor of these sweeping changes?

No. Credit experts such as John Ulzheimer of Credit Sesame worry that removing evidence all debt that has been paid would deny companies information needed to assess the risk in extending credit.

This bill was scheduled for introduction to the house on September 10. We’ll be watching the progress and reporting the results.

Mike Clover

Mortgage Banker

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 234770

Apply at: www.mikeclover.com

Gift funds are the path to home ownership for many today. They may constitute part or all of the down payment, the closing costs, and/or the financial reserves. In fact, most borrowers purchasing a one to four unit principle residence are allowed to close with no money of their own.

However, there are restrictions and regulations, so plan ahead and follow procedure.

Who may supply the gifts?

• A relative – anyone related to the borrower by blood, marriage, adoption, or legal guardianship.
• A fiancé, fiancée, or domestic partner.

How must gifts be documented?

The gift letter: The donor must write a letter specifying the amount of the gift and stating that no repayment is expected. It must include the donor’s name, address, telephone number, and relationship to the borrower. If the gift has already been given, it must specify the date when the funds were / will be transferred from the donor to the borrower.

Donor bank statements: The fact that the donor does own the gift funds must be verified via a copy of the donor’s bank statement. As with the borrower’s bank statement, the document must be complete, with no white-outs, cross-outs, or notes.

If the funds have been transferred: Along with the donor’s bank statement, the borrower must provide a copy of the check or the wire transfer; a copy of the borrower’s deposit slip; and a copy of his or her updated bank statement showing the date on which the funds were deposited and the new account balance.

If funds will be transferred at settlement: The donor must have previously provided the gift letter and proof of funds as above. At closing, the gift funds must be presented in the form of a certified or cashier’s check.

When the donor will live with the borrower…

Funds provided by a fiancé, fiancée, domestic partner, or relative who has lived with the borrower for the past 12 months and who will also occupy the home being purchased are not considered gift funds. These “gifts” can be pooled with the borrower’s funds and considered as his or her own.

This is an important point to note in cases when some borrower funds are required, according to MN mortgage lenders. For instance, borrowers are required to contribute 5% when the loan to value will be greater than 80% on the purchase of a 2 to 4 unit principal residence.

When donor funds need to be regarded as the borrower’s, the donor must provide a gift letter proclaiming shared residency, plus documentation showing that his or her address is and has been the same as the borrower’s. This could be in the form of bills, bank statements, or a driver’s license.

As with all funds, the donor must show proof of ownership via bank statements.

Mike Clover

Mortgage Banker

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 234770

Apply at: www.mikeclover.com

More than one borrower has told us: “I Don’t WANT to show my complete bank statement. How I spend my money is my private business.”

We understand. But we don’t make the rules, and the banks do have reasons for wanting to see your bank statements.

They don’t care where you spend your money, and they aren’t making judgments about you based on where you shop or dine. They DO want to see that you aren’t making payments on a loan that you didn’t disclose. They also want to look at your deposits and verify the source of all money coming into your account.

So if you want the loan, give the bank what it wants: Complete, un-altered bank statements.

That means:

1. Include every page
2. If you get a statement in the mail, photocopy and provide it in its entirety.
3. Do not use white-out, don’t strike through any entries, and don’t make notes.
4. If the statement is an Internet printout, it MUST include the bank name, your name, your      account number, your running balance, and the history of deposits and withdrawals for the months they’ve requested. It must also have the bank’s URL on the page.
5. Do NOT try to get by with screen shots – they won’t be accepted.
6. If the statement was printed in the branch, it needs the bank stamp, date, and teller’s initials on EACH page, in addition to the items mentioned in #4.
7. If you are not the only person listed on the account, the other party must provide a letter stating that you have 100% access to the funds.

If you want to avoid sharing your financial transactions:

Begin planning long before you’re ready to purchase a home. Open a separate savings account more than 90 days prior to making loan application. Lenders must verify the source of funds for any account opened within 90 days of the application date, so start early!

Deposit the funds you’ll need for a down payment and closing costs at least 60 days ahead of time. Ninety days is even better, since you’ll need to supply 2 months’ bank statements and banks don’t always process their statements on the same day each month.

Remember, cash that’s sitting in your safe deposit box or under your mattress needs to be deposited no less than 60 days before you apply. Otherwise, the bank will consider it “unverified funds” and they will not use it in determining whether you have funds to close.

The benefit to your privacy: If you have plenty of money for closing in that account, you won’t be required to share statements from your other accounts.

Mike Clover

Mortgage Banker

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 234770

Apply at: www.mikeclover.com

With all the talk about health care and insurance these days, few people mention the ways in which insurance companies pad their profits and just how destructive their practices are to American consumers’ credit scores.

How do they pad their profits?

• By denying or limiting coverage for many things, leaving their insureds to pick up the slack.
• By simply delaying the payment of charges that should be paid under their coverage.

According to an article in the Wall Street Journal,  as of July about 64.3 million Americans had a medical collection on their credit report – and some aren’t even aware that it’s there. They assumed their insurance provider would take care of those bills (as promised) so didn’t worry when they got past due notices.

How do they harm American consumers?

First, by not informing them when bills will not be paid. Second, by letting bills they should have paid go into collection – causing those consumers’ credit scores to plummet.

Some say that the consumer should have known and should have paid the bills themselves as soon as they got the first past due notice. There are two things wrong with that idea: One is that they might not have the money to pay an unexpected bill. Second is that they’ve paid for the insurance and they’re trusting that their provider will come through.

Unpaid medical debt is on the rise. According to a report released last year by the Commonwealth Fund, as of 2012 41% of U.S. adults (75 million consumers) had trouble paying medical bills. This is up 29% from 58 million in 2005. Part of this is, of course, due to some citizens’ complete absence of insurance coverage in the face of rising rates.

What’s the good news? Big changes in credit scoring.

Fair Isaac Corporation, the nation’s foremost credit scoring bureau, just announced changes to their scoring model.

Their new model will give far less weight to medical collections – a change that could add 25 points to many borrower’s FICO scores.

Since a mere one point can often make the difference between acceptance and denial or acceptance at a lower rater versus a higher one, a 25 point jump is significant.

The expectation is that credit card issuers and auto lenders will implement the new scores first, with mortgage providers being slower to come on board. This is a prediction based on the fact that many lenders are still “two versions behind” in upgrading to the latest scoring models. (Lenders have a choice of which model to use when requesting credit reports.)

Good news, part two:

Fair Isaac also announced that they will discontinue inclusion of collections that have been paid off or settled. This is in bold contrast to the present model, which keeps collections on a consumer’s credit report for up to 7 years.

Collections, even if they’ve been paid in full, can lower a person’s credit score by as much as 100 points. Dropping them is a significant step forward for consumers who are struggling to rebuild credit after a financial blow. If you apply for a loan, you should also remember that there are different credit scoring models, so VantageScore 3.0 vs FICO issue also remains and can effect the final decision on your loan.

Of course there are critics. Some believe the changes will encourage those who can’t handle debt to dive back in and repeat the process.

And of course that could be true for some consumers. But for those whose financial troubles stemmed from the crash of the housing market, the new scoring system will be the blessing that allows them to become homeowners once again.

Are you ready to begin the search for a new home?

The first step is to become pre-approved for your mortgage loan, and we’ll be happy to do that for you. Reach us by phone at 1-800-232-7409 or apply on line at http://www.mikeclover.com.

And remember, we’re now serving clients in both Texas and Washington State.

Mike Clover

Mortgage Banker

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 234770

Apply at: www.mikeclover.com

They want to know, and if you want the loan you have to tell them – then prove it.

Remember the Patriot Act? It added a second layer of caution and curiosity to banks’ inquiries into where you got the money you’re going to use to purchase your new home.

The banks’ original reason for wanting to know the source of your funds was to assure themselves that the money was not borrowed funds. They’ve looked at your income and liabilities and decided to grant your home loan based on that income and those liabilities. An undisclosed loan might make you a poor credit risk.

Then along came the Patriot Act and paranoia that you might be laundering money for terrorists. You might also be a drug dealer or a human trafficker. That’s why any cash deposit of $10,000 or more must be reported to the government.

There’s no getting around either the bank’s curiosity or the Patriot Act, so plan now to comply.

Here’s how to simplify your life as you prepare to refinance or to choose a new home and obtain a mortgage loan:

First, if you’ve been putting cash aside in a safe deposit box, under your mattress, or in the cookie jar, deposit it in the bank (in increments of less than $10,000) just as soon as you start thinking of buying a home. If you don’t already have a savings account to earmark for the purpose, open a new savings account that won’t be used for anything except your refinance or home purchase.  If you’ve been keeping extra money in your regular checking account, transfer that money into the account 90 days prior to making loan application.

If you plan to sell expensive toys such as a boat or motor home to get down payment funds, do it right away and put that money in the same account. If you’ve waited too long and can’t get the money deposited at least 90 days before making your loan application, document the sale carefully. Here’s how:

• Hang on to the records of your prior ownership.
• Keep a copy of the bill of sale signed by both you and the buyer.
• If you accepted a check or a money order, keep a copy.
• Make an extra copy of the bank deposit page showing the date of the deposit and the amount that matches the bill of sale.

The bank wants to know where every dollar in your account came from. So be prepared to document any deposit that isn’t clearly identifiable on your bank statement as payroll, Social Security, a store refund, an income tax refund, etc.

Even if you hold a yard sale, document the funds. Keep a copy of the ad or the flyer advertising the sale, then document the proceeds and put them in the bank immediately after the sale. If you’ve taken checks, photocopy them before making the deposit.

Remember: You can never have too much documentation. So keep verifiable records of everything having to do with money deposited to your accounts.

The easiest solution is for you to have your down payment and closing costs funds in a separate account at least 60 days prior to purchasing (or up to 90 days, depending upon the date when your bank prints statements). Then you won’t be required to prove the origin of funds in your other accounts.

Transferring funds:

If you do need to transfer funds from other accounts just prior to closing, be prepared to prove where you got all the funds in those accounts.

One more thing: Make the transfer properly. Do NOT withdraw funds one day and deposit them to the “house account” the next day. Do a transfer through the bank so you have a valid 3^rd party record of the transfer.

Mike Clover

Mortgage Banker

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 234770

Apply at: www.mikeclover.com

CNN Money recently reported that nationwide, loan fees are up 6% over this time last year. The average cost of closing on a $200,000 loan is now at $2,539. And that doesn’t include prepaid items such as taxes and homeowners insurance, nor does it include Title Insurance or homeowner’s association fees.

Of the $1,539, approximately $662 goes for 3^rd party services, such as the appraisal and credit report, putting the average bank fees at $1,877. Third party fees have remained stable, which means actual bank fees have risen approximately 9%.

In some states the increase is even higher. In Wisconsin, fees are up 28%, in New York 24%, and here in Texas 23%.

Backing the $662 out of the total brings bank fees to:

Wisconsin:          $2,146

New York:           $2,230

Texas:                   $2,384

Is that necessary? No, we at Homewood Mortgage don’t believe so. Our fees remain at a low $1,150 – less than half the state average.

So why have so many banks decided to raise their fees?

According to them, the blame goes to new federal guidelines that are designed to make borrowing safer. Lenders are now required to check a borrower’s credit history, income, and debt – something reputable lenders have being doing all along.

Some lenders say they have had to add additional services in order to comply with the new rules. Among those are a fraud check, an automated valuation model, and a last minute credit check. Do these steps cost an additional $155 per borrower?

What can you do to avoid excessive fees?

In Texas or Washington State, you can call the Mike Clover Group at Homewood Mortgage. Reach us by phone at 1-800-232-7409 or apply on line at http://www.mikeclover.com.

In all other states, take the time to get referrals from your real estate agent, attorney, or accountant. Then shop around. Meet with the recommended lenders and ask to see their closing costs. Lenders are required to give you a GFE – Good Faith Estimate – so you can compare those fees before committing to the loan.

So why have so many banks decided to raise their fees?

Because they can. Because far too many homebuyers don’t realize that fees vary from one lender to another. Thus, they fail to shop and they’ll pay the inflated fees without question.

If you’re in Texas or Washington, call today! 800-232-7409

Mike Clover

Mortgage Banker

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 234770

Apply at: www.mikeclover.com

 I am a 2014 Five Star Mortgage Professional featured in Texas Monthly Magazine

This Award for exceptional client service is only awarded to 1% of all the Mortgage Professionals in the Dallas/Fort Worth region

Download my Mortgage Calculator App! Click link below from your mobil.

Mortgage calculator, daily mortgage news and rates while your on the go!

http://mikeclover.mortgagemapp.com/

Purchase & Refinance Mortgage Rates …….

 All Loans close on-time and within 30 Days or less.

Check out our Jumbo Rates! 4.25% on a 30yr Fixed

Refinance Rates & Purchase Rates could be lower… have your clients call me to discuss.

30 yr Conventional 4.25% – 0 Discount Points – 0 Origination

15 yr Conventional 3.375% – 0 Discount Points – 0 Origination

20 yr Conventional 4.0% – 0 Discount Points – 0 Origination

10 yr Conventional 3.25% – 0 Discount Points – 0 Origination

30 yr FHA 3.75% – 0 Discount Points – 0 Origination

15 yr FHA 3.25% – 0 Discount Points – 0 Origination

30 yr USDA 3.75% – 0 Discount Points – 0 Origination

30 yr VA 3.625% – 0 Discount Points – 0 Origination

15 yr VA 3.25% – 0 Discount Points – 0 Origination

Jumbo 30 yr Fixed 4.25% – 0 Discount Points – 0 Origination

Stated Jumbo 7/1 ARM 5.375% – 0 Discount Points – 0 Origination

Stated Jumbo 5/1 ARM 4.875% – 0 Discount Points – 0 Origination

* These rates are based on a estimated loan amount of $250,000 or above and roughly 4.321% to 5.89% APR depending on loan program. Rates are also subject to change without notice. FHA requires 3.5% down. Conventional requires 5% down. Jumbo requires 20% down up to $1Million. Jumbo APR is estimated 4.42% – 5.422% Some rates are based on a 740 credit score or higher. Some loans require lower LTV, call for details.*

Mike Clover

Mortgage Banker

Homewood Mortgage, LLC

Toll FREE: 1-800-223-7409

O: 469-438-5587

F: 972-767-4370

NMLS# 234770

18170 Dallas Pkwy

Ste.304

Dallas, TX 75287

Web: www.mikeclover.com

Are you a retiree with plenty of assets but not enough income to qualify for a conventional loan on the home that you want?

If so, you may be considering using a loan against your portfolio, but please think twice. This is not an ideal loan for you – or anyone – to use as a long-term loan.

With this type of financing, known as a “margin loan,” you’re allowed to borrow up to half the value of your non-retirement portfolio held in taxable accounts.

The benefit is that there are no appraisals, no closing costs, and no prepayment penalties. You’re securing the loan against your own money, so you won’t have to qualify based on income.

So why isn’t this wise?

First, because margin loans are variable rate loans. Secondly, the rate varies from one broker to another, and it’s a high rate. To find a reasonable rate, you’ll have to shop – and then you might need to move your investments. And still – the rate will be higher than that of a conventional 15 or 30 year fixed rate mortgage.

Next, you face the very real possibility of a margin call if the value of your investments declines. And in today’s volatile economic climate, who can predict whether stocks will rise or fall?

In short – this is a very risky loan. It’s fine for short term loan, but not for a long term home loan.

The next consideration is your tax situation. With a margin loan you won’t be able to deduct mortgage interest. This may or may not matter to you, but is a subject to discuss with your tax professional before making any decisions.

So what should you do?

Consider selling some of those assets to either purchase the house outright or make a large enough down payment to qualify for a conventional loan.

Or… wait just a bit.

Very soon Homewood Mortgage will be announcing the addition of an asset-based loan product.

We don’t have the details yet, so stay tuned. As soon as we know, we’ll announce it right here.

In the meantime, give us a call. You may only think you can’t qualify for the loan you want. Let us find out. If your income falls a bit short, we’ll be glad to work the numbers and show you just how much you’d need to put down in order to qualify.

Call today at 800-223-7409. It’s our job to help you achieve your goals, and we’re pleased to do that job.

Mike Clover

Mortgage Banker

Homewood Mortgage, LLC

Toll FREE: 1-800-223-7409

O: 469-438-5587

F: 972-767-4370

NMLS# 234770

18170 Dallas Pkwy

Ste.304

Dallas, TX 75287

Web: www.mikeclover.com

Ronald Reagan once said that the most dangerous words in the English language are “I’m from the government and I’m here to help.”

All too many homeowners learned the truth of that statement the hard way, after trusting the government sponsored Home Affordable Modification Program (HAMP) to help them keep their homes in the midst of the mortgage crisis.

As you’ll recall, back in 2009 President Obama promised to save 4 million homes through a loan modification program that would lower payments and in some cases, reduce loan balances. To date, about 900,000 have been helped – while far more have been harmed.

The program had no oversight, and the mortgage companies soon found a way to game the system to assure themselves greater profits. Although the government offered an incentive payment to lenders for doing loan modifications, there was a greater financial incentive for mortgage servicing companies in foreclosing than in modifying loans – especially when they could string homeowners along for months, getting them to make trial payments while their mortgage debt escalated.

Loan servicers were clearly and blatantly ignoring the rules that had been set down, but since there was no oversight and no penalty for non-compliance, so what? They used it as an opportunity to line their corporate pockets at the expense of distressed homeowners. Some Bank of America employees even testified that they were given bonuses and gifts for pushing homeowners into foreclosure while they were attempting loan modifications.

Even those few loan servicers who were taken to task over their misconduct were allowed to continue – and were paid their incentives.

For far too many homeowners, HAMP resulted in both emotional and financial devastation. Attempts to use it were the direct cause of many of the 5.6 million foreclosures we’ve seen since the housing bubble burst.

HARP might actually help – but some homeowners no longer trust

HARP stands for Home Affordable Refinancing Program, and it could save homeowners thousands. But after they witnessed what happened to friends and family under HAMP, many people are afraid to trust it.

So far, HARP has helped 3 million homeowners refinance – ¾ as many as HAMP was supposed to help.

But for the remaining 676,000 homeowners who are eligible for a lower interest loan, it’s one of those things that simply sounds too good to be true.

After all, if the bank is collecting 6.5% and you’re making your payments, why would they be willing to refinance your loan at 5% or less – especially without demanding hefty closing costs? And especially if your low credit scores would normally prevent you from getting a new loan?

It sounds too good to be true. Therefore, they doubt that it IS true.

So – why are they willing to give up 1.5% in interest?

Some say that HARP refinancing reduces the potential for future defaults. They also say that the government thinks it will help the economy. If all 676,000 homeowners who are eligible for HARP were to refinance, it would free up $1.6 billion per year that would theoretically be pumped back into the economy in other expenditures.

That’s the government’s reason.

I expect the lender’s reason is that there are substantial financial rewards for those banks who grant their customers lower interest rates. In other words, we taxpayers are probably footing the bill.

Ever hear of redistribution of wealth?

Before you reject the idea of refinancing…

Get in touch. Your equity position and credit rating may have improved enough for you to refinance without using HARP.

It costs nothing to find out, so call us at 800-223-7409or click here to fill out an online application.

Mike Clover

Mortgage Banker

Homewood Mortgage, LLC

Toll FREE: 1-800-223-7409

O: 469-438-5587

F: 972-767-4370

NMLS# 234770

18170 Dallas Pkwy

Ste.304

Dallas, TX 75287

Web: www.mikeclover.com