Bill McCord's Blog

West End Middle School, Cleckheaton (Photo credit: Wikipedia)

API SCORES
I’m currently working with several buyers and finding an overwhelming interest in API scores for any interesting properties.
In researching multiple School Districts I detect an interesting pattern across all areas. Elementary Scores are significantly higher than Middle Schools, which in turn are significantly higher than High Schools.
On average the difference is about 10% from one group to the next.
One thing that could cause this would of course be a reduction of aptitude as kids get older. I don’t like this concept.
A more likely cause is that today’s Middle and High School pupils did not have the benefit of the current higher quality Elementary education now in place.
If so it’s reasonable to assume that Middle and High Schools scores will steadily improve as better prepared students come through the system. This would lead to a steady year to Year improvement in API Scores in the Middle and High categories.
Assuming that the API is really measuring what it was designed for this will lead straight in to better qualified students going into College and/or vocational training.
Any thoughts or opinions will be welcome.

Factors contributing to someone’s credit score, for Credit score (United States). (Photo credit: Wikipedia)

There’s a lot of talk about the new Credit Scoring model called VantageScore. Proponents say that it will boost your score and help people with no credit history build a strong credit score.

Here’s the bottom line: don’t waste a single memory cell on it.

Now… the back-story for those those want it:

Until the majority of lenders are using a new scoring model, the FICO score will remain the main credit scoring system out there.

As of right now, major lenders like Fannie Mae and Freddie Mac are not using VantageScore. In fact, I have never heard of a single lender who does use it.

When deciding whether to extend a loan to you, your potential creditors want to know how risky you are. Currently, the model they use to determine your creditworthiness is FICO, and almost exclusively FICO.

So if you want to qualify for a loan, or if you want to qualify for better terms on your existing loans/credit cards, you must follow the FICO model and do things which will improve your FICO score.

Ignore everything else because it will not make an ounce of difference if your lender is not looking at it. All it will do is paint an unrealistic picture of what loan terms you can expect.

I want you to focus on reality. And the reality is this: Almost every lender out there relies on FICO and only FICO when determining a credit score.

NOTE 1: When referring to FICO I mean the credit scoring model used by the 3 major Credit Bureaus, EQIFAX, TRANSUNION, and EXPERIAN.

NOTE 2: Be very careful of anyone claiming to be able to improve your Credit Score. I am aware of many scams but only 3 legitimate services that will actually get it done.

Global Real Estate Bubble (Photo credit: Ryan Harvey)

Zillow.com launches! (Photo credit: Billiard)

Housing forecasters remain optimistic that property values will continue to increase over the next several years and exceed pre-bubble rates by 2017, according to the first-quarter Zillow home price expectations survey.
Based on predictions from 118 economists, real estate experts, and investment and market strategists, these respondents believe home prices will end 2013 up on average 4.2% and rise cumulatively by 22% over the next five years.
Similar to this year, survey respondents anticipate home values will escalate another 4.2% in 2014 before moderating somewhat to annual appreciation rates between 3.6% and 3.8% over the next three years. With an annual 4.1% prediction in housing unit prices expected between 2013 and 2017, this represents the first time the average annual growth rate has surpassed pre-housing bubble (1987-1999) since the Seattle-based analytic firm began its survey three years ago.
The most optimistic of panelists predicted a 6.1% increase in home values this year, while pessimistic economists projected for an average jump of 3%. Furthermore, through 2017, the outlook for cumulative home price change projections ranged from 34.2% among the most positive quartile respondents to 11.7% for the most discouraged housing forecasters.

NOTE: These predictions cannot be used to discuss any specific area.They are for the whole of the Country. In my area, Silicon Valley, these folks are about 2 years behind the times. In other parts of California, mostly inland areas, are only now seeing early signs of recovery.

Silicon Valley (Photo credit: Wikipedia)

For about 2 years now my market (Silicon Valley) has seen a steady increase in sales prices. This is finally causing changes in Banks approach to Short Sales.

I just had my 1^st experience where a Bank (BofA) cancelled a previously approved short sale when they realized that the current value of the property is now higher than the amount of the loan.

They have now re-started the Foreclosure process where they can expect to get all of their money back and not have to take a loss after all.

This also gives the owner/borrower the opportunity to minimize the Credit hit by selling the property before the foreclosure completes, and maybe even get a little money back themselves.

I firmly believe that the age of the Short Sale Specialist is coming to it’s end and all those useless seminars will disappear with them.

However, there

Bank (Photo credit: 401(K) 2013)

for the home owner who is falling behind  if the Banks begin to think it might be smarter to foreclose and lose a lot less than previously, rather than expend time and effort trying to keep the afloat.

The next 6 month will be very interesting.

Interest Rates (Photo credit: 401(K) 2013)

FHA loans with a 3.5% minimum down payment are often the only choice for 1st time buyers.
They get a lot of bad publicity from uninformed sources who compare them wrongly to conforming loans needing much higher down payments.

The reality is that the FHA loan is neither designed, nor sensible, for high down payment buyers.

However it does have one very powerful advantage over the traditional conforming loans; FHA LOANS ARE ASSUMABLE at the same interest rate as they started at.
In future years this may be a very valuable feature when selling the property.

First let’s understand that 1st time buyers in California typically sell that 1st house after approx 5 years.

Now let’s consider what level mortgage interest rates will be at that time, and compare with todays. We will assume a $400,000 FHA mortgage

CURRENT (historically low) 3.5% = $1,796/ month.

FUTURE (5 years)(20 year average) 6.0% =$2,398/month.

SAVING = $602/Month.
Now in 5 years time you are selling your home and have a smart buyer trying to decide which of 2 similar houses is the best deal might they well prefer the one where you can:
1. Buy and take over the existing mortgage which is $602/month cheaper for all time
OR
2. Go through all the hassle of getting a much more expensive mortgage for as long as you own it.
Assuming they sell after a typical 5 year period there is a difference of $36,120!!!.

MAYBE IT’s WORTH FINDING OUT WHICH IS THE BEST MORTGAGE FOR YOU, Not for the loan Agent who did not take the time to explain ALL your options, and the long term implications of each one.

About 6 years ago the greedy incompetent Banks managed to effectively take mortgages back to the Dark Ages. Since then the idea of having mortgages designed in the interest of the Borrower has been totally abolished.

Now at last we are hearing stirrings of intelligent ideas coming from the industry.

BEFORE READING THE REST OF THIS ARTTICLE PLEASE BE AWARE THAT THERE ARE NO SUCH THINGS AS “SUB PRIME MORTGAGES”. THERE ARE ONLY “SUB PRIME BORROWERS”.

Housing advocates are pushing for a new type of loan, called the “Dignity Mortgage,” They are approaching bankers and federal regulators proposing this.

The Dignity Mortgage would be geared to applicants who have rebuilt their finances since losing their homes and or jobs during the past 5-6 years, but who have been able to get steady employment and repaired their credit scores since then.

Despite this it is very difficult to get a regular mortgage from the standard lenders at this time says Faith Bautista, who heads the National Asian American Coalition.

The Dignity Mortgage would target Borrowers who had a good credit history prior to the collapse, and have been able to save at least a 10% down payment since then.

Since it would be a higher risk loan, it would come with a higher rate for a higher risk. For example, borrowers would pay 1.25 percentage points above more creditworthy borrowers (e.g. 4.75 percent if more A+ borrowers were paying 3.5 percent), the Los Angeles Times reports.

However, if borrowers made timely payments for five years, the deal could greatly improve.

“At that point, the extra money they had paid in interest would be used to reduce the mortgage balance, and their rate would be cut to whatever borrowers with sterling credit and 20 percent down payments were charged at the time the loan was made,” the Los Angeles Times reports in explaining the proposal.

Source: “New Type of Subprime Loan Pushed,” Los Angeles Times (Jan. 29, 2013)

Loan (Photo credit: Philip Taylor PT)

San Francisco Bay Area highlighted in red on a map of California (Photo credit: Wikipedia)

Another sign that Real Estate is fast recovering from its bottoms is that investors, individual and business, are making major moves to capitalize on today’s opportunities all over the Country.
A recent story from Bloomberg covered how Blackstone Group, the largest U.S. private real estate owners, sped up its purchases of homes to try to beat out fast rising prices.
This is a sign for on the fence buyers to start their hunt before the weather heats up and they face more competition than they can handle.
This is just one of the many indicators that point to a continued increase in prices, and proof once again that where the Bay Area leads the rest of the Country will follow

In stark contrast to this time last year, the housing market is chugging into 2013 with a head of steam.
Home-listing prices were up 5.1% nationally in December on a year-over-year basis, according to data released Thursday by real-estate listings and data company Trulia. Out of the 100 major metro markets covered by the report, 82 of them saw year-over-year gains. At the end of 2011, asking prices had fallen 4.3%, and only 12 markets had posted positive price changes.
“Prices are going into 2013 with strong tailwinds,” said Jed Kolko, chief economist for Trulia. He cites a general strengthening of the job market, which in turn means more families able to cover a sizeable down payment. An increase in household formation, which is also the product of improving job prospects, and home construction could further bolster demand.
Mr. Kolko notes that the sharpest tightening of inventory is taking place in Western states. Four of the top 10 cities to see the largest asking price recovery were in California, including Oakland, San Jose, Sacramento and Fresno.

New homeowner protections go into effect Jan. 1
The start of the new year brings more protections to California homeowners, mainly those who are trying to save their properties from being repossessed.
Making sense of the story
• The Homeowner Bill of Rights, signed by Gov. Jerry Brown in 2012, is a set of new laws that puts the onus on banks to help consumers through the foreclosure process. The legislation, which went into effect Jan. 1, forces banks to stop dual tracking and robo-signing, and assign one point of contact to borrowers who are trying to obtain a loan modification.
• Dual tracking is the process of starting the foreclosure process while a loan modification has been submitted or is being reviewed by the bank. Borrowers in the past have lost their homes to foreclosure as a result of this situation.
• Under the new law, banks must give loan-modification applicants a response before starting the foreclosure process. Banks now also have to inform consumers who don’t apply for a loan modification that they have the right to do so.
• Robo-signing, the process of approving foreclosure documents without proper review, also is prohibited.
• One of the laws also allows borrowers to sue loan servicers for violating any foreclosure laws.