Credit card companies are feeling their own pain with the credit crunch. According to American Express and several other companies they are seeing more and more consumers falling behind on their credit card payments. They are also seeing higher balances than before with people being driven to use their credit cards for paying some monthly bills. Their way of combating this though could hurt the average consumer.

One of the actions they are taking is lowering credit limits. And most of the time it is without your knowledge. Credit card companies are supposed to notify cardholders 15 days in advance of making changes, but often this is noted on your monthly statement in very small print that can be easily overlooked. Their feeling is that lowering limits is a way that they can control cardholder risk by not giving them as much available credit.

The problem with this is that lowering your limit could make your balance to high credit ratio off kilter. This is something the credit card companies don’t explain. Let’s say for example that right now you have a limit of $10000 on a card and a $5000 balance. Your credit card company decides it’s in your best interest for you to not have so much available credit because you might use it so they lower your limit to $6000. Now it looks like you are almost maxed out on your credit card, which can have an extremely negative impact on your FICO score.

Credit card companies that we know are initiating this practice are Washington Mutual, HSBC and Wells Fargo. According to the consulting firm Institutional Risk Analytics that helps monitor credit card activity there will be many other companies following in their footsteps.

Does what you buy determine your credit limit and interest rate? It can now. Along the same lines some credit card companies are actually paying attention to what you are buying with your credit card and either lowering your limits or raising your interest rates based on these purchases. Let’s say you are going through marriage counseling and you are paying the counselor with your credit card – your credit card company takes note of this and decides you might be at risk for a challenging divorce, so they decide to raise your interest rate to reduce their risk if you default or they lower your credit limit so there is not as much temptation available to you. Or let’s say you stop on your way home every Friday to have a drink with co-workers before you go home, they will track your history of those charges and may decide you could indulge a bit too much – you might become irresponsible and default on your credit card so they exercise their right to change their terms of service.

So what you can do about this? Keep your balances low. This way if your credit card limits do get lowered it won’t have the impact it would if you had high balances to begin with. If you do get a notification that they are lowering your limit, call them. See if you can reason with them not to. Limits are often lowered randomly so it does not hurt to call them and see if they will leave your limit alone. Try not to pay your monthly bills such as utilities, etc with credit cards. This makes the credit card companies very nervous as to them it makes you look desperate and they could, in turn, take some measures that could hurt your credit score.

I know all this sounds like “big brother” is watching…and in today’s financial climate they are. Watch what you spend, watch where you spend and you will be fine. It’s never to late to learn!

Mindy Leisure, mindy@advcredit.com, and Jim Kaiser, jim@advcredit.com
Advantage Credit Inc. of Colorado www.advcredit.com

     What was the explanation?  The borrower had been transferred to Tennessee and did buy an owner occupied home.  Before he got there the company decided for business reasons against the transfer and now the client was faced with buying his home in Denver as a rental property.  Are you kidding? 

April showers may bring May flowers but those storms may not be over yet.  The key is to protect you from the possible damage that may come from an unexpected storm.  Protecting your credit is somewhat the same.

Up until now lenders have always considered a 680 credit score as “A” paper.  If you had a score above 720 you were practically gold.  This is all about to change.  Fannie Mae and Freddie Mac have recently announced some major changes.

Imagine having to pay 2.75% in points and you’ve never had a late payment on anything!  As of June 1st on loans with LTV’s about 70% Fannie Mae will penalize borrowers by 50 basis points for a score below 720.  And Freddie Mac will penalize borrowers 30 basis points for a score below 740.  This is on top of the loan level pricing they have both implemented for borrowers with scores below 680.

What does this mean?  It means borrowers could pay hundreds of dollars more each month or thousands more at closing.  For example – on a $250000 loan, if a borrower has a score below 620 they would pay a 2.75% delivery fee at a cost of $6875.  More then ever it is important for borrowers to get their scores as high as possible. (more…)

In the example provided, the seller transfers the title to the property from him/her personally to this Land Trust which may or may not be in the Seller’s name.  Many times, this is put not only into the seller’s name but into the name of another individual or entity as well which is what will trigger the FHA flipping rule.

Please make sure when you are reviewing the contracts or title work that there is no reference to a Land Trust being the seller of the property.  If you find an instance of this then the 90 day rule must be applied. 

Remember you can not use FHA financing to buy the house unless the seller has been in title for at least 90 days.  There is an exception to this on bank owned properties and some non profit organizations.

Part 4 creating a unique positioning statement.

     Remember this whole exercise is to help me realize how I am different in the market place as well as help me create a “unique positioning statement” that allows me to tell others in one or two sentences “here is what I do and here is why that information might interest you.”  We are finished with the exercises and now it is time to create the statement.

     “I am a residential mortgage lender with Universal Lending.  I run my business differently than most mortgage professionals.  I would love to show you what I do.”

That statement always elicits the required question, “how are you different?”

Now is the time for the unique positioning statement:

“I do everything I can to make the mortgage process understandable and to make my clients feel that all their questions and concerns are important and need to be addressed to their satisfaction.  At the end of the process my clients feel they made a wise and safe choice.”

I am interested in your input, what do you think of my unique positioning statement?

     There is no more stated income, there are a lot less “bad” loan officers, there are no more “B” paper lenders and the concept of just saying yes and we will see what sticks is finally over.  

     The key is that these people who I have been talking to who are saying they qualified for $300,000 (a payment of about $2100/month) only made $2500 a month gross.  They NEVER “really” qualified for $300,000 but they are in total shock when I tell them they can only qualify for about $140,000. 

     You may ask how can they be that *&%$#@, but the truth is, the mortgage industry and certain Realtors not only said it was possible but actually closed the clients friends and coworkers, who made exactly what they made, on the $300,000 house.

     So what do we do now?  Start over, get the correct answers and instead of being angry about how much you qualify for be thankful that you did not buy last year!

     So what is the problem?  The mortgage industry.  All the fall out from the past that actually has brought FHA and CHFA back from the dead is now bringing other players into the mortgage decision process.  This time it is the companies that provide mortgage insurance, at one time a mortgage service that was taken for granted is now part of the decision process. 

     If you are doing a 100% conventional CHFA loan in a declining market (almost all of the front range), such as My Community or Home Possible you now need to supply the mortgage insurer the following: the loan application, credit report, income documentation, sales contract and appraisal for their review. 

     What does that mean?  Best case scenario -more time (4-5 days as of today).  Worst case scenario - they say no.

     It appears that we will be able to go to $362,790 on FHA loans without a price hit.  The FHA increased limit for most of the front range is now $406,250.  So, if you are over the $362,790 you will experience increased cost to get that loan.  That cost is still undetermined but best guess is that it will be between 2.5 - 4 points.  WOW! 

Part 3 of finding and developing a story that differentiates me from my competitors.

The next step is to define your target client clearly and easily.  According to “The Seven Minute Difference”: you can build stronger skills and grow your business more effectively when you are able to concentrate your efforts on the tasks that best suit the business you want to have.  The business you want to have is directly dictated by the clients you have. 

So, lets define my ideal client.  Now in my case you have to understand that I serve 3 types of clients.  The first is borrowers.  The second is referral sources such as Realtors, builders, financial planners, accountants, etc., but Realtors make up 90% of my referral business.  Third is human resource managers who do my House$mart program.  (more…)