Monthly Archives: September 2013

Credit Scoring


Credit Scoring
Part I: Good Credit Translates into Lower Rates for the Consumer

In the 1960s, Fair Isaac Corporation started working on a system lenders could use to evaluate the likelihood of receiving repayment on loans. Prior to that, it was really a matter of trusting an individual to be a “man of his word,” so to speak. Fair Isaac sought to take human error out of the equation with a reliable system that could determine whether or not consumers were truly worthy of credit, and thus FICO was born. This evolved to become the standard for lenders by the 1980s.

Credit scoring has an enormous impact on a borrower’s ability to purchase a home. It can mean the difference between getting a good interest rate and the home of their dreams, or whether they even qualify at all. For this reason, it is important for borrowers to understand the credit scoring process, and to know what their credit score is when they look to obtain mortgage financing.

What the credit scoring model seeks to quantify is how likely the consumer is to pay off their debt without being more than 90 days late on a payment at any time in the future. Credit scores can range between a low score of 350 and a high of 850. The higher the client’s score is, the less likely they are to default on their loan. Only a rare one out of approximately 1300 people in the United States have a credit score above 800. These are the slam-dunk clients that walk away with the best interest rates. On the other hand, one out of eight prospective home buyers are faced with the possibility that they may not qualify for the loan they want because they have a score between 500 and 600.

Stay tuned for Credit Scoring, Part II: The Five Factors of Credit Scoring.


The Best Mortgage Broker on Staten Island


The Best Mortgage Broker on Staten Island

         Finding the best mortgage broker, mortgage banker, or mortgage lender on Staten Island is not an easy task. You have to ask yourself this question. What is the most important quality I am looking for? After you have answered this question, I recommend you interview 3 mortgage professionals from Staten Island. Remember, this is a large investment and for the most part it ca be a long investment, so every dollar counts.
          Honest, integrity and responsiveness are my core strengths and values. When dealing with myself and my company, you are not just a number, you are a CLIENT FOR LIFE. We work with you personally, unlike Staten Island based Wells Fargo, Chase or another large institution here on Staten Island. We answer our phones at night and on the weekends because we realize you WORK for a living and sometimes cannot find the time during normal business hours.
        Give me a call for a no cost analysis and a face to face meeting at your home or one of our local offices here on Staten Island and let me explain why I am the Mortgage Expert and how I have done business for 16 years on Staten Island, all based on referrals from satisfied “Clients for Life”.
                                                                 1110 South Avenue, Staten Island, NY 10314


Interest Rates and Loan Pricing




Lenders us risk-based pricing to determine the interest rate and discount points that they charge. This disclosure explains the basics of risk-based pricing and gives you notice of lenders practices and procedures in determining the interest rate and costs for lenders mortgage loan.

What is Risk-Based Pricing?
Risk-based pricing is a system that evaluates the risk factors of lenders mortgage application and credit profile and adjusts the interest rate and discount points up or down based on this risk evaluation.

What Factors Can Affect My Loan Pricing?
Various factors interact to adjust lenders loan pricing. The major factors include:

Credit Profile: They will obtain a credit report that shows the amount of debt you have outstanding and how you have historically paid your debt and obligations. The credit report will also contain a “credit score” that ranks lenders credit history. Credit scores look at five main kinds of credit information, namely: payment history; amount; length of credit history; new credit; and types of credit in use. Generally, if you have had any history of nonpayment or late payments on any loans or debt, this may lower your credit score and increase lenders interest rate and costs. People with high credit scores consistently: pay their debts on time, keep balances low on credit cards and other revolving loans; and apply for and open new credit accounts only as needed.

Property: The type of property you are mortgaging also impacts lenders loan pricing. For example, investment property, condominiums or multifamily housing are usually considered to have a higher risk to lenders than single-family detached homes. The value of the property (usually determined by an appraisal) as compared to the amount you wish to borrow (the “loan-to-value ratio” or “LTV”) also impacts lenders loan price. The higher the LTV, the higher the interest rate and costs. LTV’s over 80% also usually require mortgage insurance. The price of mortgage insurance may vary based on lenders credit profile.

Income/Debt: The amount of lenders mortgage payments and total debt payments as compared to lenders income, (“debt-to-income ratios”) may also impact lenders loan cost. The higher lenders debt-to-income ratio, the higher lenders risk, and so the higher the interest rate and fees.

Other Factors: Other factors may also affect lenders risk, and lenders interest rate and origination charge. These factors include, but are not limited to: previous bankruptcies, foreclosures or unpaid judgments; and the type of loan product applied for, such as adjustable rate versus fixed rate, or cash out refinance versus rate and term refinance.

How And When Is My Price Determined?
Lenders price is determined by evaluating all the risk factors that are involved in lenders loan, and determining where you fit into lenders risk/price range.

They will give you an estimate of lenders risk-based pricing after they have done an initial evaluation of lenders credit history and a review of lenders proposed property.

REMEMBER, that lenders risk-based pricing may change from this initial estimate if any of the risk factors discussed above change – for example, if the appraised value of the property is determined to be different than the value used for lenders initial estimate or if your credit profile changes from the time of the initial estimate and closing.

If you choose to “lock” a rate range prior to the final risk assessment, you will be locked for the interest rate range available at that time. Lenders actual price will be established based on where lenders final risk level fits into that particular interest rate range. Lenders final risk level is determined at time of closing, when there are no further changes to lenders credit profile or loan factors.


Is There a Way to Obtain a Lower Interest Rate?
If you are not in the lowest price bracket available, you may be able to obtain a lower price if you are able to lower lenders risk. You may accomplish this in various ways, such as: by putting more money down and lowering the LTV; finding a co-signer with additional income to support the loan; clearing inaccurate items on lenders credit report; paying off other debt to lower your debt-to-income ratio; changing from a cash-out refinance to rate and term refinance; or changing the term on the loan.


The Day Ahead: Last One Before FOMC

Larry Summers’ gift to bond market trading on Sunday/Monday was that we now have the honor of approaching Wednesday’s FOMC events with the “Larry Summers Discount” factored out of bond prices.  it turns out this isn’t quite as big as it looked to be early Monday morning, but it may have provided a slight adjustment for the previous approach.
In conjunction with the chart below, consider that the approach to FOMC had been occurring with 10yr yields (in red) trading above the teal, white, and yellow lines all month.  The Summers adjustment  now affords 10’s the opportunity to approach in a slightly more aggressive stance, but as you can see, even at it’s most aggressive levels, it wasn’t a game changer.  It barely challenged the longer term green line and wasn’t able to close outside it.
If bond markets were so clear to return near previous levels after that, it’s not overly likely that today’s Consumer Price Index data is going to do any better (forecast to rise slightly at the Core level from 1.7 to 1.8), let alone the NAHB Housing Market Index which is forecast to NOT reflect any of the recent concerns seen in other housing market metrics (59 vs 59 previously).
Week Of Tue, Sep 16 2013 – Fri, Sep 20 2013
Mon, Sep 16
NY Fed manufacturing
Capacity utilization mm
Industrial output mm
Tue, Sep 17
Annual Core CPI
Consumer Price Index (CPI)
Core CPI
NAHB housing market indx
Wed, Sep 18
MBA Mortgage market index
Housing starts number mm
Building permits: number
FOMC Announcement
FOMC Economic Projections
FOMC Chair Press Conference
Thu, Sep 19
Current account
Initial Jobless Claims
Existing home sales
Philly Fed Business Index
Leading index chg mm
10yr TIPS Auction

Housing markets about to get squeezed

Some communities will likely be hit harder by mortgage loan limits


A plan to lower the cap on federally backed mortgages may hit home buyers particularly hard in several pockets of the country, new data shows.


The Federal Housing Finance Agency plans to reduce the maximum size of mortgages backed by Fannie Mae and Freddie Mac this January. The current limits are $417,000 in most parts of the country and up to $625,500 in more expensive markets. The agency hasn’t announced how much it will lower loan caps, but data compiled for MarketWatch by Lender Processing Services, a mortgage-data tracking firm, shows that a decline of just $25,000 from the current caps would impact hundreds of thousands of home buyers in middle-priced and upper-middle-priced housing markets — areas that are relatively upscale but far from the most expensive. “You are really talking about communities that are comfortably well-to-do; you’re not talking about communities with large numbers of hedge fund managers and the like,” says Robert Hockett, a professor of law at Cornell Law School with expertise in real estate finance.




In total, more than 214,000 of the agency-backed mortgages originated last year were within $25,000 of the current caps, according to LPS. For the first six months of this year, the number was just over 95,000. By one measure, they’re most in demand in Cook County, Ill., where 10,510 mortgages originated in 2012 and 4,137 during the first six months of this year were within $25,000 of current cap levels — the highest number in any county nationwide, according to LPS. In contrast, Manhattan, which has some of the most expensive real estate in the country, had just 1,187 and 460 of such large loans, respectively, for each time frame.


Nationally, these loans have accounted for less than 3% of all Fannie Mae and Freddie Mac mortgages given to borrowers during this time, though the share is much higher in some regions. In Colorado, North Carolina and South Carolina as well as in the District of Columbia, they account for more than 5% of agency mortgages that borrowers signed up for last year. They had over a 10% share in three Colorado counties, Boulder, Denver and Gunnison, during the first half of this year.


A greater number of borrowers could be impacted if mortgage caps drop by a larger amount. Housing experts say a $25,000 drop is likely conservative, and if the real cut is bigger, more borrowers will be left with fewer mortgage options going forward.


Fannie Mae and Freddie Mac mortgages weren’t always so generous. They were mostly capped at $417,000 until 2008, when legislation increased their loan limits in more expensive markets, and by late 2011 they settled at the levels currently still in place. The moves were meant to stimulate home buying and lending in the wake of the housing downturn. As private investors fled the mortgage market, Fannie Mae and Freddie Mac took their place and have since been buying most of the mortgages that lenders have been providing to borrowers. Higher caps on federally backed mortgages allowed more buyers, who might have otherwise been unable to buy a home, to qualify for those loans.


Now that the housing recovery is gaining steam, the government is trying to reduce its role in the mortgage market. A spokesperson for the FHFA says that the agency “shares the administration’s view that a gradual reduction in loan limits is an appropriate and effective approach to reducing taxpayers’ mortgage risk exposure, shrinking the footprint of Fannie Mae and Freddie Mac in the marketplace, and expanding the role of private capital in mortgage finance.”


But analysts caution that lowering their caps could have a domino effect on home sales. Many borrowers who use the maximum dollar amount of Fannie Mae and Freddie Mac loans tend to live in high-cost areas and rely on these mortgages to buy homes. If they’re unable to get financing, given that the private mortgage market is more selective, sales could stall and prices as a result may drop, says Jack McCabe, an independent housing analyst in Deerfield Beach, Fla. “This will be a real eye-opener,” he says.


In some areas, it would take just a small number of buyers to shake up home sales: In Cape May County, N.J., just 313 mortgages within $25,000 of the agency caps were given out during the first six months of the year, and they accounted for nearly 11% of all agency mortgages given in that time in the county. In Garrett County, Md., it was just 26 mortgages, which accounted for almost 8%.


The change would also come at an inopportune time for buyers: With home prices rising in many markets, experts say, it’s likely that a growing number of buyers will need larger-size mortgages.


To get a mortgage, most of these buyers will have to turn to private lenders, which include banks, credit unions, and independent mortgage lenders, who originate mortgages to borrowers on their own terms and either hold them on their books or sell them to a small number of private investors. But private lenders have been very selective over the past few years, lending mostly to affluent borrowers with large down payments who are buying multi-million-dollar homes. In many cases, these borrowers have the cash to buy their home outright.


It remains to be seen whether these lenders will open up to more borrowers. “If the private market doesn’t step in to take borrowers who are less than perfect, then those are the people who are going to be on the losing end of this,” says Georgette Chapman Phillips, professor of real estate at the University of Pennsylvania’s Wharton School.

Refinancing Plummets as Rates Rise; Purchases Fail to Pick up Slack

The rally in refinancing reported last week by the Mortgage Bankers Association (MBA) was short lived.  Rates rose again during the week ended September 6, sending refinancing applications into a tailspin.  MBA’s Refinancing Index, a measure of refinancing volume dropped 20 percent and has now fallen 71 percent from its recent peak during the week of May 3.  The last time the Refinancing Index was lower was in June 2009.

Refinancing represented 57 percent of mortgage applications compared to 61 percent the previous week and was its smallest share since April 2010.  The Home Affordable Refinance Program held on to the previous week’s share of refinancing applications, 38 percent.  MBA’s Market Composite Index, a measure of all application volume, was down 13.5 percent on a seasonally adjusted basis from the week ended August 30 and 23 percent on an unadjusted basis.

The Purchasing Index was also off, decreasing 3 percent on a seasonally adjusted basis from the previous week.  The unadjusted index was down 14 percent week-over-week but was 7 percent higher than during the same week in 2012.  The week’s results included an adjustment for the Labor Day holiday.

The MBA survey shows that both contract and effective interest rates increased across the board.  The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,000 or less) increased to 4.80 percent from 4.73 percent and points increased to 0.46 from 0.33.  The jumbo 30-year FRM (with balances over $417,000 had an average rate of 4.84 percent with 0.41 point compared to 4.71 percent with 0.25 point the previous week.

The rate for 30-year FRM by the FHA increased 8 basis points to 4.56 percent with points increasing to 0.28 from 0.03 and the rate of 15-

The average contract interest rate for 15-year FRM was 3.83 percent with 0.42 point.  The previous week the average was 3.75 percent with 0.30 point.

The adjustable-rate mortgage (ARM) share of activity was unchanged at 7 percent of total applications. The average contract interest rate for 5/1 ARMs increased to 3.59 percent from 3.49 percent with points increasing to 0.43 from 0.37

Rates quoted are for loans with an 80 percent loan-to-value ratio.  Points include the origination fee.

MBA’s survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.


For more information visit

Job Openings in U.S. Fell in July to Lowest in Six Months

job openings in the U.S. fell in July to the lowest level in six months, signaling uneven progress in employment.

The number of positions waiting to be filled declined by 180,000 to 3.69 million, from a revised 3.87 million the prior month that was weaker than initially reported, the Labor Department said today in Washington. Hiring rose and firings cooled.

The report, following data last week showing payrolls grew less than forecast in August, indicates the labor market was struggling to gain momentum at the start of the third quarter. Federal Reserve officials, due to meet Sept. 17-18, are debating whether the economy and job market have improved enough to warrant trimming $85 billion in monthly bond purchases.

“The labor market is still recovering, though slowly,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “We’re going to see businesses become a little more cautious.”

Today’s report helps shed light on the dynamics behind the monthly employment figures.

Payrolls expanded by 169,000 workers last month after rising 104,000 in July, Labor Department data showed on Sept. 6. The jobless rate dropped to 7.3 percent in August, the lowest since December 2008, as workers left the labor force.

Today’s Jobs Openings and Labor Turnover Survey, or JOLTs, report showed the number of people hired climbed to 4.42 million in July, keeping the hiring rate at 3.2 percent.


Buying a Home on Staten Island

Buying a home is one of the most important decisions you may make in your lifetime. I am asked over and over “What is my first step”? The answer is simple GET PRE-APPROVED. Buying a home on Staten Island is almost impossible unless you have a pre-approval to submit with your offer. Here is what happens when you are pre-approved. Your mortgage broker or Mortgage Banker* will sit down with you and take a look at your credit, income and assets (savings, etc.), once an in debt analysis is completed you will then be able to be pre-approved for a certain amount of money for a certain term. THIS DOES NOT MEAN THAT YOU SHOULD ACCEPT THIS! You MUST also be comfortable with what you are being approved for. For example “Just because your income states you can afford $2500.00 per month does not mean you can afford that. Remember, any increase in what your housing expense is now and what it will be in the future will change your life. What are you willing to sacrifice if anything to make up this difference? Other things to note:

  • How long are you going to stay in the home?
  • Are you growing a family (is there room to grow)?
  • Is your employment secure?
  • Is your income increasing?

All these factors and more come into play when looking to buy a home. A good realtor will assist you and finding a mortgage broker in Staten Island that knows there business (like me), will be instrumental for your success. Contact me for a free analysis and Best Of Luck !!!

The Best Mortgage Broker on Staten Island

Okay, so we are talking about finding the best mortgage broker on Staten Island. Everyday I receive calls from people who have absolutely no idea about mortgages but are just calling everybody they can to see who is offering the lowest rate. NOW, since rates do not vary that much from bank to bank and lender to lender, it seems “the best liar” wins the business. Those of us who refuse to compromise our integrity give as accurate a quote as possible and explain that to really quote a rate, “We need to see the prospects information”. We are not trying to buy time or string them along, this is just how it works.When it comes to conventional loans there are all different tiers of pricing. For instance; Someone with a 620 credit score is going to be “Paying” for a rate that let’s say someone with a 660 credit score “Does not have to pay for”. There are buckets for different credit scores 620-640, 640-660, 660-680 etc.
     The frustration felt by myself and other ethical Mortgage Bankers on Staten Island and Mortgage Brokers on Staten Island is at an all time high. We receive calls after these people close stating that “We were right” and that they were a victim of a “Bait and Switch” but IT’S TOO LATE. On most purchase transactions, the borrowers will not forgo the closing for a higher rate or higher fees than what they though they were getting. They will be angry and complain but they will 99% of the time close anyway.
    So to sum it up, AGAIN, if you are being quoted a lower rate from one mortgage professional/Company than all the other’s YOU ARE PAYING FOR IT SOMEWHERE ELSE. 
    My advice is simple, DON’T SHOP RATE, Shop Mortgage Professionals and ask the following:
  • How long have you been in the business?
  • What are the average rates at Today (you have to ask as not to scare them)?
  • Do you charge points?
  • What are your total bank charges/fees?
  • How do you get paid for doing my loan?
  • How do I lock in a rate and is there a fee?
Once you have found the Broker or Banker that you are comfortable with and submit initial information and documentation, then you can ask everyday, “What would my rate be if I locked today”? You can also ask for advice as to what you can do to see how rates are moving (in a volatile market this is key) and you can ask you loan officer or mortgage broker, “what time each day can I get in contact with you to see what rates are doing”?  I know this blog may seem redundant BUT 8 out of 10 people think it’s all about RATE, when it’s all about YOUR MONTHLY PAYMENT and WHAT IT COST to get that payment. I hope you found this useful.
Sal Criscuolo “The Mortgage Expert”
1110 South Avenue, Staten Island, N.Y.10314 Article 1033 Mortgage Brokers on Staten Island