Why’s my FICO score dropping? Here’s an answer

The New York Times’ Lynnley Browning writes,

“IF you’re looking to refinance or buy a home, potential lenders and mortgage brokers will be checking your credit scores. And if those scores are being verified, chances are they are going down.

“Yes, you read that correctly. Each time a credit score is pulled from one of the three credit bureaus as part of a loan application, it can decline by as much as 20 points, or more. Call it the Great Credit-Score Ding.”

While information about credit scores and their use is becoming more widespread, “few buyers know this goes on — or what to do about it.”

“Most consumers are unaware that this happens,” said Paul Stephens, the director of policy and advocacy for Privacy Rights Clearinghouse, a consumer advocacy group in San Diego.

The so-called FICO score is sold to the three credit bureaus — Equifax, Experian and TransUnion — “which each then use different formulas to compute a consumer’s creditworthiness.”

The higher your credit score, the lower your interest rate.  So why does your score get affected by credit report inquiries?

“It is the “hard pull” inquiry — in which lenders and brokers learn that you are in need of money, and check your credit in order to process your application — that can most damage your score.”

This can result in a 20 point or more drop in your score each time you authorize a lender to check your credit.

“So how can borrowers minimize the blow, especially those shopping for the best mortgage rates and working with more than one lender or broker?”

“If all the requests are made within a short time, they usually will count as only one check.”

There is some good news, “borrowers who check their own credit scores through a less invasive “soft pull,” to get an estimate of creditworthiness and of loan rates, do not see their scores go down.” So, ask your lender to do “a soft pull before deciding which loan to go with, at which point a formal inquiry is made.”

Read the full column, Preventing Credit Score Dings

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A little planning can save Mom's home

Bankrate.com’s Steve McLinden fields questions about real estate. Here’s a column with a question that will resonate with more folks as time goes by.


Dear Real Estate Adviser,

My elderly mother needs assisted living. She owns a home in which she has lived for 50 years. If she sells the home, valued at about $150,000, she wouldn't be eligible for Veterans Affairs benefits for assisted living.

Is there any way she might be able to place the home in some kind of trust and not realize any monetary benefit from the sale?   -- Steve F.

Dear Steve,

Yes. A family trust might be the solution to the asset-retention challenge your mother -- and ultimately the rest of the family -- will face.

Also known as a living trust or revocable living trust, this type of trust protects a home and other assets such as stock from remaining on the books as part of her net worth. In addition, it covers how those individual assets will be handled prior to and after your mother's passing.

The trust would also leave control of the home in the hands of your mother while she is alive, provided she remains mentally competent.

Once your mother -- who is considered the grantor in this case -- passes away, the appointed family trustee would take over and be required by law to distribute the property precisely as the grantor desired.

In the case of a house, the children typically would receive equal shares after the parent's passing. At that point, the house could be sold, or one or more of the heirs could elect to buy the others out and take ownership. There may be some overhead to maintaining a trust, by the way.

Gifting the house outright to the children, who could then sell it, is another option, particularly if you need to raise money soon for your mother's assisted-living expenses.

The negatives to this are the tax consequences, since federal law only permits an annual exclusion of up to $13,000 per family member without payment of federal gift tax. It would be prudent to have the home appraised by a professional appraiser before doing this to avoid any questions of value by the Internal Revenue Service.

As your family plans out a strategy, take into consideration any Medicaid benefit planning in addition to the VA assisted-living planning as part of a comprehensive long-term elder-planning approach. Realize the gift of a house can result in a period of ineligibility for Medicaid benefits.

For these and many other reasons, you should first consult with an estate-planning attorney or other asset-protection professional who is steeped in knowledge of VA pensions and assisted-living benefits.

You also might take another look at the U.S. Department of Veterans Affairs "Survivors and Dependents Benefits -- Death After Active Service" section. The VA's toll-free line for income verification and means-testing questions is (800)929-8387.

Good luck in sorting this out and best wishes to your mother, whose needs should remain paramount to others in this matter.

Note- Always seek competent legal advice on issues such as estate planning. Your local bar association is a good source to locate specialists in the field of estate planning. This column should not be construed as legal advice!

See the column on line - Family trust could save mom's benefits

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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The FDIC strikes back

The FDIC has announced it will be filing lawsuits alleging negligence by bank officers at several closed banks, the Washington Post reports. It’s about time.

“The Federal Deposit Insurance Corp. has authorized lawsuits against more than 50 executives at failed banks across the country in an attempt to recover more than $1 billion of the agency's losses during the credit crisis.

“More than 50 bank officers and directors were negligent, committed fraud or otherwise breached their duties and are, therefore, legally liable, the FDIC concluded after lengthy investigations into the first wave of bank failures.”

The FDIC has paid our over $75 billion since 2008 in connection with bank failures. Previous recovery efforts in the late 1980s were successful.

"These investigations are now beginning to produce results, and we anticipate that many more will be authorized," FDIC Chairman Sheila C. Bair said in a statement Friday evening. "As a matter of policy, the FDIC believes strongly in accountability for directors and officers whose personal misconduct led to a bank's failure."

Only one lawsuit has been filed so far against officers of IndyMac Bank.

I hope we see more.

Read the full story.

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From Market Watch - Two more banks fail; U.S. tally at 127

The FDIC recently closed two banks.  The total for the year has reached 127.  It's never clear from FDIC reports why a particular bank is closed, but the number of closed banks continues to increase suggesting that things are still not well in the finance marketplace.

Read the full report: Two more banks fail; U.S. tally at 127 - MarketWatch

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Good News for Wells Fargo Customers - your modification may be around the corner

Attorney General Paula T. Dow announced today that Wells Fargo Home Mortgage has agreed to provide New Jersey consumers with nearly $67 million in loan modifications and pay the state $3.98 million to resolve allegations that companies it acquired – Wachovia Corporation, Golden West and World Savings — deceptively marketed adjustable rate mortgage loans.

What happened to bring about this announcement?  A loan with negative amortization, that's what.  Negative amortization loans generally kept your monthly payments artificially low.  They were not sufficient to pay down any principal and, in fact, usually neither the interest.  At the end of 5 years, you could owe as much as 125% of the money you borrowed.

New Jersey homeowners accounted for about 5 percent of the “Pick-a-Payment” loans acquired by Wells Fargo as part of its acquisitions of Wachovia, Golden West and World Savings in 2008.

Under terms of the settlement, Wells Fargo will provide across-the-board forgiveness of accrued interest and late fees for eligible delinquent borrowers who live in the homes on which they took out “Pick-a-Payment” mortgages.

Starting on December 18, 2010, the company also will provide loan modification terms that enable affordable payments and reduce principal for some consumers. Modified loan terms will vary according to the circumstances of the borrower, but can include principal forgiveness, loan extension, interest rate reduction, and principal forbearance (which gives the borrower additional time to pay off the loan principal). Borrowers who remain current on their modified payments over three years will earn additional principal forgiveness. Borrowers who qualify may also convert into a fixed rate loan. All modification fees and pre-payment penalties will be waived. The modification program will extend until June 30, 2013.

I'm sure by now we are tired of reading about lender's abuse of their customers but it's good to see that the state is doing something to correct a past abuse.

What do you think?
Read the full story from Real EstateRama- Attorney General Announces Settlement with Wells Fargo Home Mortgage

For your next title order or

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