borrowers with bad credit beware in the golden state

Today, the California Supreme Court ruled that local governments in California may not impose lending rules for mortgages carrying high interest rates for people with risky credit backgrounds. Writing for the majority in a 4-3 decision, Justice Janice Rogers Brown said California's legislature has exclusive authority over mortgage lending laws. Allowing local governments to go beyond state rules on "predatory" lending in the subprime mortgage market would create a market filled with "potentially hundreds of competing and inconsistent measures," Brown wrote.

Don't fall behind in these states

In Georgia, Texas, and Tennessee, once a borrower falls behind and a lender initiates foreclosure, a house can be sold on the courthouse steps in as few as 37 days.

Across most stats, most lenders don't start the foreclosure process until a borrower has missed two or three mortgage payments. But under Georgia law, it's entirely up to the lender when to declare a loan in default, and from there, the process moves swiftly as Georgia allows foreclosures to take place with no judicial or government oversight.

There is a detailed article in the Atlanta Journal-Constitution By CARRIE TEEGARDIN, ANN HARDIE, and ALAN JUDD which goes into depth on foreclosures in Georgia.

Is the real estate bubble going to burst?

In an article written Kenneth Harney, the possibility of a nationwide real estate bubble is discussed. The concern is that real estate markets in California, Nevada, Florida, New England and the mid-Atlantic states have doubled in price over the past 5 years. One question is whether an increase in investor speculation (non-occupant investors) in homes and condos is a sign of a top in the market. Another concern is the recent surge in interest-only loans, which enable a borrower to buy a more expensive home than that they could with a conventional loan. Apparently, back in 2001, interest-only loans only accounted for 1% of loans nationwide but now in hot markets like San Diego, Las Vegas, and Miami, lenders are seeing interest-only loans account for between 10% - 15% of all loans.

"In a new statistical research study, economist Michael Youngblood identifies 27 local housing markets that have reached the bubble stage. Youngblood, who works for Friedman, Billings, Ramsey & Co., an investment-banking firm based in Arlington, Va., defines bubble markets as those where per capita income growth rates severely lag housing price growth and are seriously out of sync with historical price-to-income norms."

Most of these "bubble" markets seem to be in California cities but others are in Boston; New York; Honolulu; Boulder, Colorado; Danbury, Conn., and Bellingham, Wash. The good news is that this economist also says that it would take four straight quarters of economic recession to cause a housing price bust, of which none of the 27 has logged even one quarter of recession.

However, the answer to all of these questions will be revealed when only a very small percentage of potential buyers can actually afford the going prices. Until then, looks like prices will keep movin on up.

good, fair, or poor credit? It's all in your FICO score

So many people spend their time trying to find the best interest rate, or lowest points when what they should do is work to improve their FICO score to get the lower rate.

If you have ever had a credit card, a loan or bill payments, you have a FICO score. FICO stands for Fair, Isaac & Company, the firm that created the computer model used to create your credit score by gathering data from the three major credit bureaus (Equifax, Experian and TransUnion).

FICO scores range from 300-850, with the average being about 640. However, it’s the 720-850 range that’ll get you the choice rates. So these days, rather than pour over your credit report, a lender simply pulls your FICO score and assigns you a rate based upon what range your score falls within.

Based on current rates, here is what you can expect to pay based upon what FICO score range you fall under:

FICO score range / corresponding interest rate

720-850 = 5.66%

700-719 = 5.78%

675-699 = 6.32%

620-674 = 7.47%

560-619 = 8.53%

500-559 = 9.29%

The FICO score is calculated based upon 5 elements of your credit report: 1) on your payment history (35%); 2) on the amount and type of outstanding debt you owe (30%); 3) on the length of your credit history (15%); 4) on the number of new accounts opened recently (10%) and; 5) on the types of credit you use (10%).

I'll write more soon about FICO scores and how you can improve your credit rating.

Michael from ezLoanApply

Wells Fargo launches 10-year ARM w/ interest-only feature

Wells Fargo Home Mortgage is launching an interest-only loan product that doesn't require principal payment for a period of 10 years. Previously, the Wells Fargo interest-only loan was available only as either a 5 year or 7 year adjustable-rate mortgage (ARM). As like most long term interest-only loans, the interest-only payments will go fixed for 10 years, after which the loan will become fully amortized, meaning that the payments will include principal and interest and will fully pay off the loan over the remaining 20 years. The borrower can make principal reductions during the interest-only period.

For more information about interest-only loans and whether one may or may not be right for you, have a look at a recent article we published about interest only loans - when an interest-only loan makes sense

Average fixed mortgage rates dipped for a fourth week in a row according to Freddie Mac today

The following are highlights from an Article, U.S. fixed mortgage rates fall 4th week, written by Rachel Koning, and published on CBS.MarketWatch.com

The rate on a 30-year loan was 5.66 percent, down from last week's 5.67 percent. Rates are little changed from where they stood one year ago. The average then was 5.68 percent, said Freddie Mac, which has tracked mortgages since the 1970s.

The average for the 15-year fixed mortgage this week was 5.14 percent, down from 5.15 percent. A year ago, the 15-year mortgage averaged 4.97 percent.

The five-year Treasury-indexed hybrid adjustable-rate mortgage, or ARM, averaged 5.02 percent, down from 5.05 last week.

Short-term rates continue to rise amid expectations the Federal Reserve will nudge its borrowing target higher next week and possibly in subsequent months.

"Until the market gets a better read of how the economy performed at the end of last year and how the Fed interprets that information, interest rates will likely remain calm," said Frank Nothaft, Freddie Mac's chief economist.

The Fed next meets on Wednesday and is widely seen lifting its current 2.25 percent target to 2.5 percent. Friday's first look at fourth-quarter gross domestic product, the broadest measure of the economy, could also offer a signal on the scope of mortgage-rate changes, Nothaft said.

Economists surveyed by MarketWatch think the economy grew at about a 3.6 percent annual rate in the quarter. It would be the seventh quarter in a row of above-trend growth.

Tid Bits

The average monthly mortgage payment (excluding taxes and insurance) was $1,200 for homes bought in October 2004.

Forty-eight percent of credit card holders had balances less than $1,000 last year. Ten percent had balances of more than $10,000.

These tid bits were gathered from an interesting article about rising interest rates, written by Julius Westheimer, and published on ArbutusTimes.com

Welcome to Loan Chat

This blog is an open forum for all visitors to ezloanapply.com. From time to time we here at ezloanapply will discuss the mortgage market, including news events, articles, trends, and the various players in the business. You may also use this blog to discuss all mortgage related topics with other ezloanapply users and the ezloanapply administrators, including: current interest rates and what direction they may be heading; whether or not now is a good time for you to refinance; what type of new loan should you get; what lenders have worked well / not well for you; etc...