A provision in the Dodd-Frank financial reform law, which took effect this week, is requiring lenders to provide consumers with a free credit score, which will help provide new insights into why they may have been rejected for a loan or did not qualify for the best, lowest rate.

While borrowers can access their credit scores from the credit bureaus, the credit score that a lender uses isn’t always the same one that the credit bureau provides you. According to a report by the Consumer Financial Protection Bureau, some credit bureaus sell consumers “educational” scores that aren’t the same ones used by lenders, or these bureaus may base the score on a different model than the one lenders use.

Now, borrowers for the first time will get a more accurate view of what credit score lenders are using to base their mortgage on. Under the new provision, lenders will be required to provide potential borrowers with a free credit score whenever they reject an application for a loan. Lenders must provide borrowers with an “adverse action” notice, which will include their credit scores as well as an explanation of why they were rejected for a loan.

Lenders will also be required to provide a free credit score and an explanation whenever they approve a loan but at a higher rate than what is given to their best customers.

Mark Greene, CEO of FICO, says that many borrowers may be surprised to learn that they didn’t qualify for a lender’s lowest rate when applying for a loan.

via Music Gives Brain Natural Buzz.

Congress allowed the NFIP to expire March 28, 2010. By law, flood insurance is required for the purchase of real estate in a 100-year floodplain. The lapse in flood insurance resulted in many delayed, and even cancelled, transactions.

During the lapse period, NAR worked with Federal agencies, GSEs and bank regulators to clarify what lenders and insurers may and may not do to help work through the program’s expiration.

NAR will work closely with its congressional allies to help ensure a lasting reauthorization and extension prior to the May 31 deadline.

Five states hardest hit by foreclosures have six weeks to decide how to spend millions in federal money to reduce the impact of the housing crisis.

The states that will receive money (and the amount they will get) under the Treasury Department’s Fund for Hardest Hit Housing Markets are California ($700 million), Arizona ($125 million), Florida ($418 million), Nevada ($103 million), and Michigan ($154.5 million). These are all states where home prices have declined by at least 20 percent.

Federal guidelines give these states a lot of leeway in how they use the money. Ideas under consideration include allowing unemployed homeowners to take a year’s vacation from payments, and writing down amounts owed with the stipulation that the government will share in any future appreciation.

First on their agenda could very well be the $1.25 Trillion Mortgage Backed Security Program (MBS Program) that is set to expire in the next six weeks.  This program has certainly been the “training wheels” for interest rates for the past year and a half now.  The MBS program has essentially kept rates artificially low for this time period.  It’s important to note that the while interest rates are certain to rise as a result of the termination of this program, the rise will not be as dramatic as the media would like us to believe.  However, this is important information to pass on to your potential clients that are “waiting” for interest rates to drop.  Towards the end of March, it is very likely we will see long term interest rates tick up a bit. 

On Wednesday, recently re-elected Fed Chairman Ben Bernanke (the man widely credited with preventing another Great Depression) is scheduled to testify before the House Financial Services Committee to discuss the Fed’s plan to withdraw emergency stimulus from the economy – including the $1.25 Trillion Mortgage Backed Security Program.  The speech will be VERY closely followed by the financial markets not only here but across the world.  Mr. Bernanke will certainly be mindful of his tone and his words but we can probably expect some sort of volatility either in stocks or bonds…possibly both on Wednesday. 

The above information was provided with permission, by Michael McDermott, Mortgage Planner with PrimeLending, A PlainsCapital Company

www.arizonamortgageplanner.com

FHA announced changes in the following areas: 1) The upfront mortgage insurance premium (UFMIP) will increase but may be financed; 2) Borrowers with a credit score below 580 will be required to have at least a 10 percent down payment, however, the minimum down payment will remain at 3.5 percent for all other borrowers; 3) FHA will seek legislative authority to increase the annual premium (currently capped at .55 percent); and 4) Seller concessions will be reduced to 3 percent from 6 percent.

On January 21, 2010, FHA released Mortgagee Letter 2010-02 and 2010-03, which provide details on the UFMIP increase and new procedures for terminating lenders underwriting authority for FHA insured mortgages. The UFMIP increased to 2.25 percent up from 1.75 percent for purchase mortgages and streamline refinances. ML 2010-03 states that HUD will review defaults and claims of approved lenders every 3 months. Lenders will be evaluated based on their default rate within the geographic area served by a HUD office and a default rate that also exceeds the national rate.