Discussing the need for changes to the credit scores used for mortgages, possible help for affordable housing, construction spending and much more…
In Need of an Update: Credit Scoring in the Mortgage Market
From Urban Institute:
The credit score model currently in use for mortgage lending is outdated by nearly two decades. More recent models are available and should be used by the GSEs and mortgage lenders to encourage competition and transparency, and to allow the market to more fully and fairly serve all creditworthy borrowers seeking a mortgage.
The credit score model the GSEs essentially require mortgage originators to use for mortgage lending—FICO 4—is outdated, based on models estimated in the late 1990s. Both FICO and VantageScore have much more recent models, including FICO 9 and VantageScore 3. VantageScore is also rolling out VantageScore 4.0 this fall. These models have the following advantages over FICO 4:
- More granular data
- Better information on student loans
- More consumer-friendly treatment of collections data
- More consistent, robust information
There is no doubt that we need to ensure that credit worthy people can get the credit they need to buy a home.
The question is whether or not we will see any changes…
Wells Fargo Caught With Their Hand in the Cookie Jar Again
Wells Fargo & Co. customers accused the bank in a lawsuit of forcing them to pay for unnecessary auto insurance that drove some of them so far into a financial spiral that their vehicles were repossessed.
The complaint comes after a year of handwringing and internal changes brought on by an earlier snafu at Wells Fargo. Bank workers opened up possibly 2.1 million checking and credit-card accounts without customers’ permission over about half a decade, and the bank paid $185 million to regulators to settle.
Now, the bank is accused of bilking millions of dollars from “unsuspecting customers who were forced to pay for auto insurance they did not need or want,’’ pushing almost 250,000 of them into delinquency and resulting in almost 25,000 vehicle repossessions, according to a proposed class-action lawsuit filed Sunday in San Francisco federal court.
Remember they are innocent until proven guilty. But this (and ALL of the other negative stories about Wells Fargo) is something to think about when deciding on a mortgage lender…
Possible Help for Affordable Housing
NAHB today called on Congress to pass the Affordable Housing Credit Improvements Act of 2017 (S. 548), legislation that would promote the construction of sorely needed rental apartments and help alleviate the nation’s affordable housing crisis.
Testifying before the Senate Finance Committee, NAHB Chairman Granger MacDonald told lawmakers that it is essential to increase the resources supporting housing production in order to meet the growing need for affordable rental housing.
The number of renter households considered “severely cost burdened,” meaning they spend more than half of their monthly income on rent, is at an all-time high of 11.4 million, according to the Harvard University Joint Center for Housing Studies. In starker terms, that translates to more than one in four of all renters in the U.S.
With the extreme need for more affordable housing, this seems like a pretty good idea. But I have to wonder what are the negatives?
And if we do not have affordable rentals, how many people will be trapped as renters forever?
How many people will be faced with rising rents every year and never experience the joys of owning a home?
An interesting report from Consumer Affairs discussed how rents are rising:
The cost of putting a roof over your head continues to go up. Not only are home prices still rising, but the cost of rent rose 0.5% in June.
That isn’t all. Consider this snippet from the Joint Center for Housing Studies at Harvard University’s 2017 State of the Nation’s Housing Report:
Despite a slight improvement from 2014, fully one-third of US households paid more than 30 percent of their incomes for housing in 2015. Renters continue to be more likely to face cost burdens…the number of cost-burdened renters (21 million) considerably outstrips the number of cost-burdened owners (18 million) even though nearly two-thirds of US households own their homes.
I hate to think about people struggling to pay bills while trying to save money to buy a home.Especially when it can be cheaper to buy than rent…
You may remember me talking about the latest Rent vs. Buy Report from Trulia that shows buying a home is less expensive than renting IF you use a 30-year fixed rate mortgage in the 100 largest metros in the country.
Maybe you’ve saved more than enough money to buy your next house. A national survey of about 24,000 renters revealed that 80% of millennial renters intend to ultimately purchase a home.
However, 72% say affordability is their major challenge. In addition to affordability, 33% of millennial renters are worried about their credit scores and 53% say that the down payment is an issue.
Lots of home buyers think they must have a large down payment to buy a home. The truth is, most people can save a 3% down payment in less than two years. Plus there is the very popular USDA mortgage that requires even less down payment!
I suggest that if buying a home makes sense for you, take the first step and talk to a mortgage lender to discuss your options and budget.
Construction Spending Increased in June
From the Census Bureau:
Construction spending during June 2017 was estimated at a seasonally adjusted annual rate of $1,205.8 billion, 1.3 percent below the revised May estimate of $1,221.6 billion. The June figure is 1.6 percent above the June 2016 estimate of $1,186.4 billion. During the first 6 months of this year, construction spending amounted to $577.0 billion, 4.8 percent above the $550.5 billion for the same period in 2016.
Spending on private construction was at a seasonally adjusted annual rate of $940.7 billion, 0.1 percent below the revised May estimate of $941.3 billion. Residential construction was at a seasonally adjusted annual rate of $502.9 billion in June, 0.2 percent below the revised May estimate of $504.0 billion.
In June, the estimated seasonally adjusted annual rate of public construction spending was $265.1 billion, 5.4 percent (±2.6 percent) below the revised May estimate of $280.3 billion.
While we should not be discouraged, this is not as strong as we want or need.
Commercial/Multifamily Borrowing Up 20 Percent Year-over-Year
From the Mortgage Bankers Association:
According to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations, second quarter 2017 commercial and multifamily mortgage loan originations were 20 percent higher than during the same period last year and 28 percent higher than the first quarter of 2017.
Nice but most of the increase was from industrial and office properties. Not that this is a bad thing…
Infrastructure Still In Decline
Ten years ago, the Interstate 35W bridge over the Mississippi River in downtown Minneapolis collapsed, sending cars, trucks and even a school bus that were crawling over it in bumper-to-bumper rush hour traffic plummeting into the river below and onto the rocky shore.
Thirteen people were killed, 145 more were injured, many of them seriously.
The bridge collapse sparked immediate calls in Minnesota and across the country invest big in repairing and replacing the nation’s aging and crumbling infrastructure.
A decade later, experts say there have been some improvements, but there are still tens of thousands of bridges nationwide that need to be fixed or replaced.
Imagine all the good paying jobs that would be created from repairing our infrastructure…
Private Sector Employment Increased by 178,000 Jobs in July
While we should be happy at the increase, look at how many jobs were in the goods producing sector (manufacturing) and how many were in the service sector.
We really need more good paying jobs. Manufacturing has been the best way for many Americans to earn a decent wage. Sadly, manufacturing is not where it once was and according to many “experts”, it may never return to it’s former levels.
If only there was something that could create good paying jobs.
You know, something like repairing our crumbling infrastructure?