Low Credit Score? Don’t Fret Over It

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VaCAP Board

Coalition of Appraisers in Virginia at Virginia Coalition of Appraiser Professionals
Coalition of individual appraisers working together to unite, promote and protect the collective interests of all appraisal professionals in Virginia; to promote needed changes in laws, rules, regulations, policies and standards affecting all appraisers in Virginia; to observe and report the actions of regulatory, legislative, oversight, and standards-setting entities of the Commonwealth.
VaCAP Board

Latest posts by VaCAP Board (see all)

Credit Worthiness Based on Magazine SubscriptionsGot a low credit score and can’t get a loan? Don’t fret over it, just subscribe to a magazine. Sounds absurd doesn’t it? According to an article on MSN, banks are using other means to determine your credit worthiness. We all understand alternative credit, such as phone and power bills, but companies are now considering consumer data such as magazine subscriptions, the stores your shop at, what you purchase, what restaurants you eat at and how much you spend at them. Based on your consumer data a risk score on your ability to repay a loan is determined.

For decades, banks and other financiers have relied primarily on consumers’ borrowing history to make lending decisions. Now revenue-hungry companies are considering metrics both mundane and peculiar, like whether applicants shop at discount stores, subscribe to magazines or pay their phone bills on time…

Critics say the changes could make millions of borrowers appear safer than they are, diluting the value of credit scores and reports. Others say the alternative metrics, like a consumers reliability in paying electric bills, don’t translate into a likelihood they will repay their loans

The article is an interesting read and makes you wonder how much data is out there on each of us. What could possibly go wrong? See the entire article here.

The head of FHFA, Mark Calabria testifies before the US Senate Committee on Banking, Housing and Urban Affairs.

A root cause of the 2008 financial crisis was imprudent mortgage credit risk backed by insufficient capital. This fundamental problem remains unresolved today. While borrower average credit scores have modestly improved, the Enterprises’ shares of low-down-payment and high debt-to-income mortgages are back to 2004 levels. Fueling rapidly rising home prices with easy mortgage credit from under-capitalized entities is a mistake. We should not repeat it.

In their current financial condition, the Enterprises are not equipped to withstand a downturn in the housing market.

Another sign of trouble ahead. Do we need to say more?
 

VaCAP Board

VaCAP Board

Coalition of individual appraisers working together to unite, promote and protect the collective interests of all appraisal professionals in Virginia; to promote needed changes in laws, rules, regulations, policies and standards affecting all appraisers in Virginia; to observe and report the actions of regulatory, legislative, oversight, and standards-setting entities of the Commonwealth.

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3 Responses

  1. Avatar CJK says:

    The majority of the FHA appraisals I am doing are for 0% down, 100% financing with the seller paying all of the CC for the buyer. It appears that they did not learn anything from 2008-2010. When did home ownership become an entitlement program anyway? With FNMAs appraisal wavers and desktop “appraisals” does anyone want to pick the year for the next crash? If I can hold out for 2-5 more years I am done with this disaster.

    New from FNMA:

    https://www.fanniemae.com/content/news/current-appraiser-newsletter.pdf

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  2. VA has had zero down payment borrowing for over 65 years. Their losses are not excessive. FHA’s trend higher due to greater flexibility in UW.

    Low or no down payments are not the cause of past losses. Low or no down payments coupled with lousy underwriting is. Alternative ratings such as consumer preferences and retail trade buying history (as opposed to retail trade PAYING history is a concept that should never have made it past the lips of whoever first proposed it.

    No doubt, a “Big Data” software huckster. Perhaps even Amazon since they have everyone’s shopping profiles already. Or perhaps one of those corporate hackers that routinely breach all major sources of credit and consumer data online.

    Which specific idiot came up with this concept is not important. Why any otherwise presumably sane and sophisticated banker ever agreed to it is. Has common sense completely disappeared?

    I’m also curious about how these new experiments conform to various fair trade and consumer protection laws. Are the algorithms designed to rate marital status; whether one has children or not? Perhaps race? Income derived in part from SS? It’s very hard to identify unfair lending practices when they are buried inside algorithms.

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  3. Baggins Baggins says:

    Digital price manipulation is a thing right now, read up on it. There are ongoing accounts of consumers viewing great deals online, only to have those prices change at checkout, or when the stores digital systems recognize the customers ‘smart’ phone, associates their known earning and spending profile, and then jacks up the price for them individually. And now apparently if you swipe at the restaurant, that’s going to hurt your qualification ability. Reasons to return to cash immediately and permanently. Suddenly my credit profile contains every idiots mis spelling of my name from every solicitation and magazine subscription I’ve ever had. They’re associating credit with charity, mailers, and just every big and tiny data broker out there. Tech and credit companies are consuming data lists at an alarming pace and continue to seek to monetize all digi data. More great reasons to return to paper, cash, owned items, refusing to lease and subscribe to recurrent software and charges if you are able. Like moths to a flame, consumers come back for more.

    A thousand to one leverage ratio? They’re almost keeping up with the fdic’s exposure. Conveniently the supposedly knowledgeable regulator makes no mention of the federal reserve rolling off fiat currency at alarming paces, and instead places the blame for elevated housing prices with poor local planning and lack of discount labor services. Government is certainly non partisan in this regard, none of them dare look at the real reasons for runaway inflation. They don’t want to operate on a real world cash basis budget. Fractional reserve lending and limited ratio capitol requirements for gse’s is promoting the fraud. Of course when granted freedom to loan other peoples money without consequence, there will be inadequate risk management. It does not take a rocket scientist or qualified financial advisor to know that. Bold reforms may include a 1 for 1 cash on hand leverage basis for lending, an audit of the federal reserve, and immediate monetary correction to tie the dollar back to gold and silver. Money out of thin air is only beneficial for the first receivers of money, the rest down the fiat pipeline pay that price in the form of taxation and inflation.

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Low Credit Score? Don’t Fret Over It

by VaCAP Board time to read: 1 min
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