Consumer Credit: Tips for the Way to Better Credit

In spite of general information available online, many consumers are still "in the dark" about how credit scoring functions and the best actions to take to improve it.
In spite of advice on repairing credit, a tip from an professional who has been in the business for many many years, often the best way to improve your credit is to simply pay your bills on time and reduce your credit line debt as much as possible--your payment history accounts for 35% of your FICO score.
Many consumers have recently experienced reduction of their credit lines, which then increases the percentage of debt, which then lowers their credit score. If a line of credit allows up to $50,000 and the outstanding debt is $45,000, but then the line of credit is suddenly reduced to $30,000, the borrower now appears to have exceeded the credit line. So now, the FICO score may be lowered, even though the borrower is always on time with payments.
Another factor that can impact credit scores is that not all banks report their credit limits for a borrower, but instead reports the highest balance--this actually can end up lowering the borrower's credit score because the debt utilization percentage does not show up. (See Liz Pulliam's "Weird Stuff that Hurts Your Credit.")
Borrowers, in an effort to simplify their credit history, make the mistake of voluntarily closing a credit account. This actually can be a very bad thing, especially if it was established much earlier in the consumer's credit history.  Your credit history accounts for 15% of your score, so you could anticipate seeing that much of a reduction on your score: A score of 750 could be reduced to less than 650. And, for instance, if you had a bankruptcy, you may be categorized with others who have also, but if you have that bankruptcy removed from your record, you will now be compared differently, which can impact your score negatively.
Something else not generally known, is that simply by paying bills on time and reducing debt, your FICO score can also improve in a short period, sometimes in as little as 30 days (or a few months), depending on the various factors of your credit history. The FICO score is a mathematically produced number based on certain elements that are used by the Fair Isaac Corporation, and is very complex, but you can know its basic components:

• Type of Credit:               10%
• New Credit Inquiries:      10%
• Payment History:             35%
• Length of Credit History: 15%
• Amounts Owed:              30%

Further, many borrowers think that the credit scores they obtain online from a free credit reporting site is an accurate representation of their score, but in fact, they cannot substitute for the ones lenders must obtain when working with a potential homebuyer or refinance borrower.
Further, many borrowers believe that it is best for them to pay down all debt prior to obtaining a home loan, when that is not always the case.
Another important thing to know is that Fair Isaac Corporation, the maker of the FICO score, changes its model, and may be doing so again at this moment--this can change how much you are going to pay for your home loan. If you are looking into borrowing or refinancing at this time, current information would be extremely important for you.
One company works on "credit mapping" as opposed to credit repair. The borrower is advised to investigate what either type of company could do for them, but in general credit repair companies may cost $800 or more and in certain cases has not helped the borrower through it's actions. Another company uses credit mapping outlines for a particular borrower--at a much lower fee cost--based on their credit report and other circumstances, and what may best work for them, as opposed to the generic information found on sites such as http://www.myfico.com/ .  For more explicit information about credit mapping and general advice, see this article in the Orange County Register published last September.
In summary, you really need to know about your particular situation to best know what to to, before you make a move.
More tips about credit:  Improving Your Credit Score, Recognizing a Credit Repair Scam

California Market: Neither the Best Nor the Worst?

The Housing Predictor has published its 25 best and 25 worst markets for 2011, and fortunately or unfortunately, California is not on either list. Are things getting better finally? The appreciation predicted for the 25 best areas ranges from 2.3% to 3.6%, and depreciation in the 25 worst markets ranges from 8.2% to 11.5%.  For Los Angeles County, Housing Predictor foresees an overall 5.4% loss for 2011, with Sacramento and San Diego faring a little better in the 3-4% loss range, with Sacramento also on the list for one of the first markets to recover.  Sacramento is considered one of the most affordable cities in the state. Meanwhile, pointing out that California is the world's 6th largest economy, and that it's not "falling into economic ruin", the sluggish housing market is still affecting Los Angeles County. The tax credit that boosted sales in 2010 is not around now. Per Realist Tax Data, in fact, the overall median price of a single family home did increase from October to November in Los Angeles County, from $330,000 to $335,000--but the median price of a condo decreased by $5,000 from $305,000 in October to $300,000 in November.

Per data by Dataquick released yesterday and published today by the LA Times, a Southern California median home price was up by 1% in December from November, even though lower when compared to the end of 2009, while sales volume was up (Dataquick tends to lump both house and condo prices into one overall median).

However, did you know that a long-gone single family loan type has returned? The 3% down conventional loan for houses is back on the scene--and some condos and condo buyers may be eligible for a 5% down conventional loan. These loans should be a great help to the conforming loan market buyers and sellers.

This would be a good time to review The Cost of Waiting To Buy -- a blog article that receives the most hits since last May.

New Listing: 2 Bedroom Condo in Emerald Villas in Downtown Long Beach

This is a well-situated condominium in the gated Emerald Villas, a 1991 complex with resort-like surroundings.  This light and spacious-feeling 2 bedroom, 2 full bath unit features indoor laundry, including the stackable washer/dryer, a cozy fireplace in the living room and a city lights view towards the east. Both bedrooms are carpeted, and the hall area provides extra counter space and cabinets for work area and storage. There's plenty of closet space in each bedroom.

Parking is in a secure, gated garage for two side-by-side spaces. The central courtyard in the common area has a beautiful pool and spa, and the fountain and the well-planted entry area are a gracious introduction to this beautiful complex. The HOA also features a BBQ area, sun deck and exercise room, and is within short walking distance to a nearby school and park, and is very convenient for freeway access. More information on this unit listed at $189,000 at 555 Maine Ave., #208, Long Beach, CA 90802.
Julia Huntsman, Broker
Lic 01188996

NOTE: off market 9/7/2011

New Listing: Lakewood Single Family Home $379,900

A cute vintage 1942 home, ready for a buyer in Lakewood. It has a master suite with higher ceilings, and a large family room with a rock-faced fireplace. One bedroom could work well as an office or library, and there's room in the backyard for the spa and playspace. An attached 2-car garage has a door into the family room, and the huge tree in the front yard provides plenty of shade for this west-facing home.
While it needs some work, it has plenty of charm in this circular floor plan. Hardwood floors in the formal dining area, living and front bedrooms. Very well-priced for the area and the size, at $379,900.
Please see more at http://www.juliahuntsman.com/featured-listings.html.
2/25:  Now $365,900!!

Julia Huntsman, Broker
Lic 01188996



Monthly 1-Minute Newsletter

See my monthly newsletter below for December, 2010. Just click on the logo below for the best summary around of local and regional market info! Have a very Happy New Year in 2011!



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Are You Having Trouble With a Loan Modification?

It's probably no surprise to many mortgage borrowers by now in this Christmas season to realize that they've had a tough time getting their loan modified this year. If they do not qualify for the Home Affordable Loan Program (HAMP), they try their bank's program. Often this application process goes on for months, while the homeowner may grow short on funds and cannot continue the monthly payment, and then they begin the process for a short sale, or worse, foreclosure. This story has been repeated over and over by many borrowers. If a loan modificaton is approved by the lender, often times the delinquent payments and refinance fees are added to the principal, making the new higher payment very unattractive, so the borrower rejects it.
One issue is that lenders have very little incentive to modify loans, as the cost of doing so cannot be billed back to the investor, and the work involved is very labor intensive and is not easily automated. Many banks have not invested in qualified staffing to take care of the high volume of distressed owners. And their agreements with investors on securitized mortgages may not actually cover the details of completing loan modifications, but do address foreclosure, so they believe they are in a risky situation with fulfillment of their contract terms.
In a 31-page study by the Federal Reserve, based on data from over 105,000 loans from 94 loans servicers dating from 2005 from California, Oregon and Washington, to determine who receives a loan modification (no discernible differences according to race and income differentials were found, "In fact, we find that Blacks/African Americans, Hispanics/Latinos and Asians are slightly more likely to receive a loan modification, and that these loan modifications have slightly larger reductions in their interest rate than those of similarly situated white borrowers"), it was still unclear after its research into the behavior of various financial institutions as to why the number of loan modifications was still falling well short of the number of foreclosures, even though the HAMP program has been declared effective with borrowers who received one, a group with a low re-default rate, despite literature published to the contrary.  Here is the complete Federal Reserve study. 

Another very clear problem is that some banks do reach out to their customers, but many borrowers fail to make contact with their banks, even after being contacted by them. And the longer a delinquent borrower spends in delinquency without contacting their bank, the more likely the home will be lost to foreclosure.

If you are interested in a loan modification, you might be successful, and you should contact your loan servicer.  But it's important to understand that possibly no matter how much information you submit to your bank, for a variety of reasons you may not get one, or you may have to struggle for up to a year or more with them. Banks are not equal in this situation--one of the factors may be if your loan is a portfolio loan or one securitized with investors. The study mentions the "lack of transparency" because data is issued in the aggregate, and information directly linked to borrowers is still difficult to track. Also, according to this study, 52% of foreclosure sales lack "reciprocal servicer contact" (does that mean the bank didn't return the borrower's initial contact)?

Overall, banks recoup a little more money if a property is sold in a short sale, rather than going into foreclosure and coming back on the market as an REO. This usually costs banks more money, and their "loss severity" rates are looked at closely when making their decisions.

The bottom line is: If you are having trouble making payments, contact your bank now. If you have to keep submitting your information over and over again for periods of 30-60-90 days, then you should obtain assistance through a Realtor who is familiar with short sales, or an attorney who specializes in loan modifications, not just any attorney, for further help. Don't wait too long.

Is the Southern California Market Stabilizing?

With so many analyses and predictions going on about the direction of the real estate market, the average person is often uncertain about the real truth. Recently, I've heard a few prospective buyers that I've been talking with express the belief that the market is going to drop even more by a certain percent, or just drop in general, all depending on what they've most recently read. But there's one truth that most real estate experts and practitioners agree on, all across the country: All real estate is local. So whether or not a large bank stops foreclosures for a while, or some other wave hits on the financial scene, it may or may not affect your immediate market in your part of the state, county or city, or even your neighborhood, depending on the many economic characteristics and forces that make up your area.
So, having said all real estate is local, in general, the number of Southern California residential sales for November fell, but overall, prices stayed stable. Southern California means the six counties of Los Angeles, Ventura, Orange, San Bernardino, San Diego and Riverside.
For Los Angeles County, the sales volume dipped by 11.5% compared to the prior year, but the median price (lumping new and resale houses and condos all together) for LA County decreased by only 1.2%; Orange County's median increased by .6%; San Diego and Ventura Counties increased price by over 3% and 2%, respectively; San Bernardino, hard hit by foreclosures, decreased another 5% in median price over last year. Per Dataquick,  the overall median price for all six counties increased by .7% even though the sales volume decreased by 15%.
Local cities, per the most recent information for new and existing houses and condos published through October 2010 by California Association of Realtors, show:

• Long Beach decreased its median price by 4.7% from prior October.
• Cerritos increased its median price by 5%.
• Lakewood stayed the same.
• San Pedro decreased by .1%.
• Bellflower decreased by 1.7%
• Gardena increased by 9%
• Buena Park increased by 3%
• Huntington Beach stayed the same
• Westminster increased by 1.1%
• Newport Beach increased by 17%
• Downey decreased by .4%.

Breaking down by zip codes in some cities show that certain areas such 90810 and 90813 in Long Beach are showing increases, but the higher priced 90803 zip code is still showing decreases in median price. That's a similar story for other zip codes such as in Newport Beach, when compared to a higher priced section within the same city.
And, to top it off buyers, the past two weeks or so saw the biggest jump in interest rates in the past several months. Many mortgage professionals believe the floor of close to 4% may be permanently gone, and as of today, FHA quotes were at 4.75%, while a 5% down conventional loan for a condo was quoted at 5%. It's easy to take a calculator to check out this would affect your monthly payment. A free calculator download is at Real Data.
Buyers should start making hay while the sun is shining!

Have a wonderful Merry Christmas, Happy New Years, and Happy Holidays.

Christmas Homes Afternoon Photo Time

Getting into the local neighborhood Christmas spirit!

How Many Properties Under $300,000 in Signal Hill?

This is a good price point to consider because it works for second home buyers, 1st time buyers, and people looking for a good investment in a desirable location. The property in this price range will most likely be a condo but if a buyer is willing to consider North Long Beach or West Long Beach, it could be a single family home. For a two-income couple, the total monthly payment (principal, interest, taxes, HOA dues and insurance) may be $2000 or less at current interest rates. It's actually a very competitive price range because of the number of investors able to invest cash or a very large down payment, and it's an affordable price range for many buyers. Some areas of Signal Hill have great views towards the mountains and toward the ocean, and in fact, the City has taken a stance to protect those views. It has gone through much development in the last 20 years to shed its oil derrick image, and most recently a new grocer's has opened up across from Home Depot on Cherry Ave.

Right now in Signal Hill, 29 properties are listed at $300,000 or less (out of a total of 66 active listings in showing in the MLS as of today). This is almost 50% of the inventory, where the average of all list prices is over $400,000.  All of these properties are condos, except for two single family homes, and almost half are standard sales. With interest rates still under 4.75% (but see this article from Zillow about the biggest change in 5 months) a buyer could possibly meet the goal of keeping the total payment under $2000.
To see Signal Hill properties now, click here.

Opportune Time for Buyers.

National Association of Home Builders comments on the current market, both for new housing and existing homes. Prices nationally --and locally -- have returned to the 2003 levels. NAHB believes there is price stabilization in many areas of the country. Future household formation--which has slowed in the current economy--will eventually demand more housing. This is the "opportune time for buyers" because buyers who are motivated to buy and are qualified at this time should take advantage. Los Angeles County, though experiencing fewer sales than one year ago, has not lost in the median price point of a single family homes since one year ago: Year-to-date in LA County the median price of a single family home is $340,000, Click on the video for more on housing market conditions currently.