Credit Its A Brand New Day

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  • 1. Credit – It’s a Brand New Day How to Protect Your Clients & Pay Check Post Mortgage Market Meltdown Your Name Company Name
  • 2. <619 – What Can It Cost You?
    • Borrower
      • $300K to $400K or More in Interest Costs
    • Buyer
      • 12-28% Less Purchasing Power
    • Realtor
      • $3,360 to $28,000 in Commissions Per Sale
      • Result of Lower Sales Price or Walking Buyer
    • *Assumes $400,000 sales price, financing 90%
  • 3. What is a Credit Score?
    • A 3-digit number used by lenders to evaluate the risk associated with lending money.
    • Generated by a mathematical model created by Fair Isaac Corporation in the 1960s.
    • There are 3 major credit bureaus: Equifax, Experian® and TransUnion® - 3 Scores.
    • Scores range from 350-850.
  • 4. Why It’s Important Now
    • 2007 Mortgage Meltdown
      • ARM Resets to Higher Payments
      • Declining Property Values
      • Homeowners Walk
    • Subprime Contagion
      • First Subprime Companies Fold
      • Hedge Funds
      • A and Alt-A Paper Follow
  • 5. Score Talk
    • Above 720 = Excellent
    • 680 = Good
    • 620 = Fair
    • Below 620 = Poor
  • 6. Why Are Higher Scores Good? It’s All About the Likelihood of Default
  • 7. Bad Credit – What’s the Cost?
    • What’s The Damage of Lower Credit Scores?
    Home Financing: A 30-year fixed with a loan principal amount of $360,000
    • If your score improves to 720-850, you could save an additional $318,329
    • If your score improves to 700-719, you could save an additional $308,047
    • If your score improves to 675-699, you could save an additional $263,094
    • If your score improves to 620-674, you could save an additional $163,422
    A borrower who increases his or her credit score from 620 to 720+ can potentially save $884 per month on mortgage payments, $10,608 per year , and approximately $318,329 over the life of the 30-year loan. $903,960-$983,160 $2,511-$2,739 8.531-9.289% Below 620 $649,080-$726,840 $1,803-$2,019 6.020-7.120% 620-719 $633,600 $1,760 5.800% Above 760 Total Payments Paid Monthly Payment APR FICO Score
  • 8. Loan Level Price Adjustments
  • 9. Credit Score Factors
    • Payment History
    • Late Pays
    • Collections
    • Charge-Offs
    • Repossessions
    • Foreclosures
    • Tax Liens
    • Bankruptcies
    • Judgments
    Amounts Owed Credit Cards Mortgage Loans Auto Loans HELOCs Installment Loans Length of History New Credit Soft Inquiries Hard Inquiries Types of Credit Used A Mortgage Loan An Auto Loan 2-3 Major Credit Cards
  • 10. Payment History: 35% How do your borrowers pay their bills?
    • A recent 30-day late can cost 50+ points.
    • Paying a collection that is more than 2 years old can hurt a score.
    • Being past due on an account can cost 50+ points.
    • Derogatory accounts do NOT always fall off of a credit report automatically after 7 years. They must be disputed.
    • A divorce decree does NOT take precedence over the creditor agreement.
  • 11. Amounts Owed: 30% Managing Debt
    • New debt temporarily decreases a score.
    • Balances should be kept below 50% at all times to maintain a score.
    • Balances should be kept below 30% of the limit for 3-6 months prior to applying for a home loan.
    • Debt should NOT be consolidated, it should be distributed evenly over all credit card accounts.
    • Going over the limit on a credit card, even by $1, will cause a serious penalty.
    • HELOCs can be considered revolving debt, not mortgages.
    • Credit card accounts should NOT be closed except in special circumstances.
    • Unused credit card accounts will become unrated in 3 months.
  • 12. Length of History: 15% Mix of Credit: 10%
    • Borrowers should hold onto old credit cards, even if the rate is not great.
    • New credit users can NO LONGER add themselves to another person’s account as an authorized user to generate a score.
    • Mixture is best.
    • The type of credit card DOES matter.
    • 3 to 5 revolving credit cards with established history is optimal.
  • 13. Inquiries: 10%
    • Hard vs. soft Inquiries.
    • 14-day window for pulling reports.
    • Inquiries affect a score for one year.
    • Inquiries can cost between 2 and 30 points, depending on the current score.
    • Pre-approved card offers are NOT really pre-approved.
  • 14. BORROWERS NEED TO WORK ON OPTIMIZING THEIR CREDIT TODAY!
    • Step 1 - Order Credit Reports & Scores : The first step is for borrowers to get a complete picture of their current credit situation by ordering a copy of their credit reports and scores for all three national credit bureaus - TransUnion®, Equifax and Experian®.
    • Step 2 - Verify the Data Being Reported : It is the consumer's responsibility to verify the accuracy of the data being reported.
    • Step 3- Dispute Any Inaccurate Information : Have borrowers contact their creditors and send letters of dispute to the credit bureaus to have errors on their report corrected. These must be sent via CERTIFIED mail.
  • 15. Partnerships Are Critical!
    • Not the time to refer three lenders!
    • You need one “go-to” lender
      • Wide array of available products
      • Expert in underwriting
      • “Credit analysis and repair” partnerships
      • Local and accountable
  • 16. Buyer/Seller Action Steps
    • Review Credit Report Every 3-6 Months
    • Pre-Qualifications Are Worthless!
    • Pre-Approvals Good for 120 Days
    • Do Not Accept Pre-Approvals From the Unknown and Non-Local
  • 17. Next Action Steps
    • Seller Action Meetings
      • Inform
      • Risk analysis meeting involving originator
      • Assess willingness to navigate waters
      • Promote aggressively to buyers’ agents
    • Buyer Action Meetings
      • Inform
      • Pre-approve with mortgage lender
      • Direct toward realistic sellers
      • Continually communicate with other listing agents
  • 18. Contact Us
    • Your Company Name
    • Address
    • Phone
    • Fax
    • URL
    • Email