Rebuilding scores — if you ask

Some credit experts call it the best-kept secret in home-mortgage finance. Others say, so what?

Millions of Americans whose credit scores have declined in recent years because of economic stresses could start rebuilding their scores if their rent, utilities, cellphone, insurance and other monthly accounts were reported to the national credit bureaus.

But typically they are not, and as a consequence fail to show up as positive factors on credit-scoring systems such as FICO or VantageScore. These on-time payments essentially go to waste for consumers, even though monthly rents often can be as large as mortgage bills, and years of utilities and other payments are widely recognized as strong indicators of creditworthiness.

Now for the best-kept secret: Under federal law, these unreported accounts need not go to waste. You as a mortgage applicant are guaranteed the right to bring evidence of your unreported on-time payments to lenders, and they in turn are required to consider those records in making a decision on granting you a home loan — provided you request it. If a loan officer refuses, he or she could be open to legal penalties.

Though federal financial regulators generally acknowledge the right to present supplementary data that consumers enjoy under the Equal Credit Opportunity Act, only one — the National Credit Union Administration — has published guidance informing lenders they are required to comply.

Factoring in so-called nontraditional credit accounts not only could provide important help to buyers and owners with recession-scarred scores but could also aid the estimated 35 million to 54 million consumers who don’t show up — or barely show up — in the files of Equifax, Experian and TransUnion, the three national credit bureaus. Many of these are young people with so-called “thin” files with just a couple of credit accounts, and many are minorities.

So where’s the disconnect here? Why aren’t more consumers documenting their otherwise unreported monthly payments? And why are loan officers likely to stare at account records and say: Are you kidding? We only look at credit files.

The problem is complex. Almost no one in the consumer-finance field has paid much attention to the Federal Reserve’s “Regulation B” that interprets the rules on treatment of alternative credit. Lenders who know about it don’t want the hassles of sorting through “shoe box” records that may or may not be accurate. Major players in the mortgage market such as the Federal Housing Administration, Fannie Mae and Freddie Mac all say they’ll accept alternative credit data but have restrictions on what they will consider. FHA, for example, does not permit applicants with low credit scores to boost them by adding positive, nontraditional data.

The credit industry is eager to incorporate accurate, nontraditional information but is ill-equipped to deal with sources that cannot provide large and regular amounts of verified reports.

“The [national] bureaus know that alternative data is highly predictive,” says Barrett Burns, CEO of VantageScore, a joint venture created by Equifax, Experian and TransUnion. “We think millions of people could benefit” if it were collected and loaded into scoreable files. Experian already collects positive rent-payment data on approximately 8 million units in large apartment complexes and incorporates the information into its scores, he said.

But Burns noted that the industry has had difficulty accessing information on utilities payments in some states, and collection of cellphone-account records has raised privacy issues. Without accurate information being available in large quantities, he said, it is difficult to assist large numbers of consumers.

Nonetheless, efforts are under way to mine unreported credit data — potentially the untapped shale gas of the mortgage market — and transform it into something useful. A private firm, Trycera Credit Services, has announced an agreement with the National Credit Reporting Association — a trade group representing companies that provide the merged credit-bureau reports and scores used by mortgage originators — to independently verify the accuracy of consumer-supplied payment records. Those records can then be provided to lenders as part of the standard credit reporting and scoring information used in mortgage underwriting.

Michael G. Nathans, president of Trycera Credit Services, says the project is just getting off the ground but that preliminary information is available at the company’s website, The service will cost $20 to verify rental and mortgage payments, $15 for other verifications. Trycera also offers Visa debit cards that can help consumers document their nontraditional credit payments in a scoreable format.

Of course there are no guarantees that lenders will accept your alternative credit data. But federal law requires them to at least “consider” it — if you ask.

Source: By Kenneth R. Harney, Syndicated Columnist


Improving job market ignites sharp rise in apartment rents

Apartment rents are rising at their fastest pace in years as the U.S. economy creates jobs and spurs demand for rental housing.

Nationwide, rents started edging up last year after several years of little growth or even declines, market researcher Reis says. It predicts apartment rents will jump 4.3% this year, marking the biggest annual increase in four years. MPF Research, which also monitors apartment rents, expects them to rise more than 5% this year, says Greg Willett, MPF Research vice president.

Job growth is driving much of the increase. As more people get jobs, people who doubled up in homes during the recession, especially younger workers, move out on their own, says Ryan Severino, Reis senior economist. Many of those workers are choosing to rent rather than to buy, because of dropping U.S. home values and tight lending standards that make it harder to buy homes, Severino says.

Lack of construction is also helping rents. This year, just 40,000 new apartment units are expected to be added to the U.S. supply, Reis says. That’s down from about 130,000 new units each year for much of the past decade.

Apartments make up about half the nation’s rental supply, Willett says. Single-family homes and condominiums account for the rest.

MPF and Reis both say San Jose and New York City are the strongest rental markets. In the first quarter, rents in those markets were up 4.6% and 4.4%, respectively, from the same period last year, Reis’ data show. Nationwide, rents rose not quite 2% from the first quarter of 2010 to the same quarter this year, Reis says. Vacancies fell 1.8 percentage points to 6.2%.

Other markets seeing first-quarter year-over-year rent increases in excess of 3% included suburban Virginia and Maryland; San Francisco; Rochester, N.Y.; Portland, Ore.; and Denver, Reis says.

Real estate broker Richard Gonzalez of Realty World sees the market tightening in San Jose as homeowners who lose homes to foreclosure or short sales become renters. “They’re starting over and need to rent,” Gonzalez says.

Las Vegas was one of the few metropolitan areas in which rents fell in the first quarter, Reis and MPF say. They dropped almost 3% year-over-year.

Las Vegas has the highest foreclosure rate in the nation, and investors are buying homes there and turning them into rentals. The city hasn’t seen apartment rents rise since the third quarter of 2008, Reis says.

Increasing demand and lack of new rental supply will boost rents for the next couple of years, predicts Paul Dales, economist at Capital Economics. Eventually, though, as rents rise and home prices drop, “homeownership becomes more valuable again,” says Jim O’Sullivan, chief economist at MF Global.

Being a Landlord Can Be Increasingly Profitable

Despite falling rents and rising vacancies, the profitability of residential rental property is improving.

Investments in apartment complexes are generating annual returns of 7-8 percent immediately because purchase prices have declined.

Buying a rental property isn’t for everyone. It requires putting down at least 50 percent in cash because banks are reluctant to lend more. And buyers need to be able to hold the property for at least three to five years or more to give the investment time to gain value.

Source: The Wall Street Journal, M.P. McQueen (02/20/2010)

Status of the $8k First-Time Homebuyer Tax Credit

With the November 30th deadline quickly approaching the fait of the $8k first-time homebuyer tax credit is still looming. With all the activity that the tax-credit is responsible for how could the current administration not extend it or open it to more than just first-time homebuyers. Easy according to opponents, there are a lot of pressing economic issues including talks of another stimulus package.

With record low interest rates, low prices its easy to assume that we can do without an extension on the tax credit. So with less than a week left to lock in a deal that will allow you to close a your transaction and take advantage of the pure $8k tax credit are you willing to risk it?

I’ve noticed as I just went through the home currently available thier are a lot of families that are not willing to risk it and are locking in deals right now. Out of the 20 homes that I’ve kept an eye on over the last month I will estimate that 10, if not more, of them have had a smart family’s lock up a contract on them and have them pending inspection within the last week. These homes and condos fall within the price range of a first-time homebuyer.

Another home that I have a client looking at in the morning got an offer on it today. Let the games begin, multiple offers come in and the mad rush begin. It reminds me of the stories that you here about or watch on the news regarding the day after Thangiving sales. People are getting trampled and smothered trying to get their hands on that prized electronic or in this case its that house or condo that has the price tag as if it were 2004.

According to the article written by Jeanne Sahadi, a senior writer at, “While momentum is building on Capitol Hill to extend the $8,000 first-time homebuyer credit, President Obama’s housing secretary said Tuesday the administration has not decided whether to support its expansion.

Housing Secretary Shaun Donovan told the Senate Banking Committee that the administration wanted more time to better assess the cost of the credit, which expires on Nov. 30.

“Within a few weeks we’ll have sufficient data to get to a conclusion on this,” Donovan said. “It’s a question of understanding more fully the costs to the taxpayer.”

He said there is “clear evidence” the credit has had some positive benefits and that its expiration could have “some negative implications” for the housing market.

At the same time, Donovan said that the end of the credit would not be “catastrophic” because of other actions the government is taking to support the flagging housing market. Interest rates are being kept low and the Federal Housing Administration is playing a more prominent role in lending to homebuyers.

But lawmakers pushing to extend the credit are concerned the housing market is going “to die a sudden death” after Nov. 30, as Sen. Johnny Isakson, R-Ga., said Tuesday.

Isakson and other supporters believe that keeping the credit in place could further boost home sales, stabilize housing prices and generate jobs.

Isakson and Senate Banking Chairman Christopher Dodd, D-Conn., have co-sponsored an amendment that would extend the credit until the end of June 2010 and be available to single filers making up to $150,000 and joint filers making up to $300,000. Currently the credit is limited to homebuyers who haven’t owned a home for the past three years, who make half those amounts and who close on their purchases by Nov. 30.

Why Here Why Now

Maybe you’re still on the fence or uncertain about purchasing a home because you’re not sure what the future holds in Washington State, more specifically in King County and surrounding areas. First and foremost you have to look at purchasing a home as a marathon not a sprint. Now more than ever before you have to look at purchasing a home as a long term not short term investment. If you’re still questioning or wondering why is that you are here in this beautiful state and why now you have an opportunity of a lifetime let me help you out.
Ask yourself is this a place that has longevity? I and a few others seem to believe so. There are certain reasons why we have not suffered the same ramifications as other states when it comes to price drops. For one we have several Fortune 500 companies that keep our economy going and growing and keep our residents employed. Companies such as Microsoft,, Starbuck’s and Boeing just to name a few. Even though these companies have taken losses, along with countless others, they are here to stay and will not be going anywhere anytime soon. Not only are these companies providing high paying jobs that are attracting the young leaders and innovators of tomorrow but they will also be the companies hiring in droves once the economy rebounds from the greatest recession since the Great Depression. Simply stated by Dr. Florida, “Seattle is a high-tech and lifestyle Mecca.”
According to Money Magazine, King County had three cities that ranked in the top 25 Best Place to Live. One of those Mukilteo was ranked in the top 10. We have consistently ranked in the top tier of most educated populations in the country. In a recent article in the Wall Street Journal, Seattle was tied for first place as the Next Youth-Magnet Cities. According to Sue Shellenbarger,
“Where young adults settle is no small thing. People 18 to 29 are the most mobile age group, and their past migration patterns have defined the future of regions, from the long rural exodus of the 1900s to the Silicon Valley boom of the 1990s. Youth-magnet cities gain an enviable cultural allure and a labor-market edge.
The young are likely to be more restless than usual when the recovery comes. The recession has brought migration to a grinding halt: Fewer people moved across state lines in 2008 than at any time since 1950, when the population was smaller by half, says William Frey, a senior fellow at the Brookings Institution, a nonprofit Washington research organization.”
Simply put this is the place to be and you now have the opportunity of a lifetime so take advantage while you can of low housing prices, record low interest rates, and tax credits that you may never see again in your lifetime.

Time is Running Out

The deadline for the $8,000 first-time federal home buyer tax credit is quickly approaching. In order to qualify for the tax credit your transaction must be completed or closed by the deadline of November 30.

With the deadline quickly approaching what’s going to happen if the contract you have on a home is not completed by November 30th?

This very question could effect thousands of people and thousands of transactions especially if the home that you have dreamed of purchasing is in a short sale situation.

Right now its hard to say with any certainty if the tax credit will be extended but my professional opinion is that it will for how long and what dollar amount is the real question. Currently there is legislation on the table to extend the tax credit and broaden the scope of those that would be able to take advantage of it.

According to Charles McMillan, president of the National Association of Realtors, “the tax credit has been working beautifully, helping push home sales higher in April, May, June and July. We estimate that up to 2 million first-time home buyers will take advantage of the $8,000 tax credit this year-with about 350,000 of those sales coming as a direct result of the credit. The delays we’re all experiencing as a result of distressed sales and new appraisal rules mean that many buyers probably won’t make the November 30 closing deadline. That’s why we’re asking Congress to continue the credit and expand it all home buyers”

For those of you waiting until the last minute keep in mind that the normal time frame to purchase a home from start to finish takes 30-45 days, which doesn’t include house hunting. With some of the new regulations put in place, especially with appraisers, transactions are averaging close to the 40 day mark. Which means you have about 3 weeks max to find that first home you’ve dreamed of and worked so hard for all these years putting you one step closer to your slice of the American Dream.

Home Prices Increase

I’ve been talking about this for the last couple of months and now there are statistics to back it up. Home prices are back on the upswing. Still riding the fence wondering if the market is going to keep going down. Watching to see if the consumer confidence and spending starts to pick up. What more do you want? In a couple of months it’s going to be what was I thinking and why didn’t I take advantage of the opportunity. If you don’t act soon you’re going to miss out on $8,000 tax credit, low interest rates and the cream of the crop in terms of homes available at super discounted prices. Just like the “cash for clunkers” program time is running out to take advantage of the tax credit.
The monthly index of 20 major cities increased 1.4 percent from May to June to 142, the second straight month the index registered a gain. All but two cities, Las Vegas and Detroit, saw home prices rise, and Dallas and Denver clocked their fourth-straight monthly increase.
Of course, homes should be selling. Prices have fallen more than 32% from their peaks, set in the summer of 2006. Plus, mortgage rates near historic lows makes the cost of purchasing a home lower than they’ve been in nearly 20 years. That’s great news for those families that have been shut out because of the price of Real Estate in certain markets.
In the Seattle area, prices of existing homes were up slightly, 0.4 percent from May to June, but down 16.1 percent from a year earlier. Now remember the housing market is not all of a sudden going to take off and correct itself like it did in the late 90’s early 2000’s. It’s going to take time, how long, I’m not sure but I can tell you that if you get in now it will be well worth it in the end.