Currently browsing March 2009 monthly archives.

Mark-To-Market : How An Obscure Corporate Accounting Rule Might Impact Your Mortgage Rate

On March 12, 2009, in Mortgage Educational Information, by admin | View Comments

Mark to market accountingYou know you’re in the middle of an economic crisis when an accounting issue become Front Page News, and that’s exactly where we’re at today.

Mark-to-market accounting is having its day in the sun and people in need of mortgage sometime soon would do well to pay attention. 

If you’ve never heard of mark-to-market accounting, don’t worry. Not many people have.  Mark-to-market is a method of valuing an asset based on its what-if-it-was-sold-today value.  Mark-to-market is officially known as FASB Statement 157.

Mark-to-market is one reason why bank balance sheets look so awful right now.  Banks have to assign firesale-like values to their mortgage-backed assets even if those loans are performing, and even if there’s no plans to sell them.  Assigning low values to assets, then, in turn, forces the banks to seek TARP funds and take other measures to solidify their mandated capital requirments. 

Wall Street and Washington are taking notice of mark-to-market’s impact on banking and, by extension, the economy.  Even Fed Chairman Ben Bernanke has expressed an interest in opening a dialogue about the matter.

So, today, starting at 10:00 AM ET, the House Committee on Financial Services meets with key members of the Securities and Exchange Commission, the Treasury, and the Financial Accounting and Standards Board to talk about mark-to-market accounting and whether it should be modified.

It’s unlikely that change will come immediately, but if enough evidence shows that mark-to-market is unduly damaging to the economy, expect changes to the way we value banks to happen soon. 

For homeowners and home buyer, a reversal in mark-to-market rules would be a bad thing.  Almost overnight, bank balance sheets would recapitalize and the economy would spring forward.  This would reverse most of the pressures that have held mortgage rates low for so many months.

A healthy economy, in other words, may be bad for mortgage rates.

Simple Real Estate Definitions : FICO

On March 12, 2009, in Mortgage Educational Information, by admin | View Comments

FICO is a generic name for 'credit score'The basis of most mortgage lending is credit scoring.  In general, the higher a person’s credit score, the lower his offered mortgage interest rate.

Despite the many credit scoring models in use today, however, just 3 are relevant to American homeowners:

  • The Equifax BEACON® score
  • The Experian Fair Isaac Risk Model
  • The TransUnion EMPIRICA®

Generically, these scoring models generate what are commonly known as “FICO” scores.

FICO scores are measurements of probability.  The higher a person’s credit score, by definition, the less likely a person is to default on his home loan.  This is one reason why credit scoring has added importance lately — mortgage lenders are very careful about what they’re lending and to whom.

Notably, minimum FICO thresholds have been added to all types of mortgage loans.

FICO scoring has 5 main components as listed above.  Payment history and credit capacity are two of the largest pieces, but a myriad of other factors contribute to a credit score, too.  For example, the longer your reported history of managing credit, the more favorably your credit score will respond.

The myFICO.com website does a terrific job with credit education, explaining in plain language the ins-and-out of credit scoring and ways to boost your score.  It also makes a free, 20-page PDF available for download. 

Whether you’re a homeowner or lifetime renter — consider it required reading.

If you need guidence with improving your credit scores give Tyler Ford or Todd Abelson of Sunstreet Mortgage in Tucson, Arizona a call.

Below is a great book on how to increase your credit scores.

Buffett’s Words of Wisdom

On March 10, 2009, in Videos / YouTube, by admin | View Comments


The Half-Truth Of The Headline “1 In 8 U.S. Homes Are Late Paying Or In Foreclosure”

On March 10, 2009, in Real Estate Information, by admin | View Comments

foreclosures-20_1236654215

USA Today ran this 2008 Foreclosures By State heatmap last week, reminding us of a simple truth: Headline statistics can be misleading.

According to data compiled by RealtyTrac, 1 in 8 U.S. homes were in various stages of default or delinquency at the end of 2008.  This is a fact and it was widely reported by the press. 

However, as the heatmap plainly shows, in stripping out just 35 of the nation’s 3,232 counties, we can decrease the number of foreclosures nationally by half. 

In other words, yes, 1 in 8 U.S. homes face mortgage trouble.  In your neighborhood, though, the ratio is likely much, much lower.  Real estate is a local phenomenon.  National statistics rarely apply.

Unfortunately Arizona has a high foreclosure rate compared to the rest of the country.

Tucson Mortgage Weekly 3-9-09

On March 9, 2009, in Tucson Mortgage Weekly, by Todd Abelson | View Comments

Brought to you by Todd Abelson & Tyler Ford of Sunstreet Mortgage, Tucson, Arizona.


-
Click here: for our weekly newsletter

« Previous Entries
Recent Entries »

Recent Comments

  • Direct Transfers: I really like this post. I’m from the same industry and i appreciate much this kind of posts....
  • microstore financement: Thank you for sharing an information. I am searching about finance, business, retirement...
  • Gail Cornell: Hi Todd, I am sorry to hear about your friend that passed away last week in your office. Thank you for...
  • Tyler Ford: Wow. It is amazing how the FHA program has changed over the last 10 years.
  • everhome mortgage: This is a great deal. How often can you find no mortgage insurance, well ill answer that now...

Recent Readers