DISQUS

--- "Are Credit Scores Obsolete?"

I hate to ruin anyone's day - but ....

Instead of our political shit brains trying to figure out another stimulus package that won't work ... how about if they try working on the basics, like the credit system that went obsolete 10 years ago and is one of the major causes of our horrible situation today.

Up until the late 90's the "Beacon score" was used instead of the FICO score .... the Beacon score was a small combination of points and a large combination of your credit history (remember when your actual credit history counted for something.??)

At that time, you had lenders that could actually read and understand a credit report - (unlike today). Their decisions were based on small items like: your current and past employment, current and past income, a small thing called a "debt ratio" -- (remember the days when your "debt ratio" counted.??)

Now today .. we have folks that come out of school and work at a Home Depot or a Dillards and 6 months later get a VISA and "bam", they have a 780 FICO score making $1,500 a month .... and we wonder why folks are driving $30,000 SUV's and can't make their house payments -- they couldn't afford a $10,000 vehicle, let alone an expensive SUV and rent, let alone any mortgage payment ... the super sad part is, their loan(s) were probably approved by a 26 year old "loan officer" who can't read a credit report and still lives with his parents - and hasn't owned a home yet.

The FICO system has been a joke for the last 10 years --- (but we're looking at stimulus packages??) .. are you aware that FICO punishes consumers for paying off their credit lines and getting rid of the card.??

Does anyone in Washington even understand the "basics" of the financial market.???



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Hmm, interesting article...

According to the Charlotte news, 17 of the lottery states have seen a 20% decline in sales ... what's that tell you.?

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Personally, I don't have an issue with supporting those that have had health issues or lender issues or giving a hand for those that have, or might lose their job in the next 12 months....

But ... these folks are the minority, a very small minority in our society - maybe 2% of the consumer market..

What I have an issue with, is the hourly news reports about the guy living in his (3rd house) a $350,000 or his 850,000 3rd house and he won't be able to pay his mortgage payment when the payment adjusts in July.

Let's do this in a simple way, let's look at his (or her) credit history - it takes all of 5 minutes... that should clear up any sad stories in a hurry that CNN loves to publish.

The reality is simple ... 9 times out of 10, it's "NOT" the mortgage payment adjustment that will affect the budget, it's that $400 a month credit card bill they didn't have 30 months ago .. it's $600 a month lease car payment they didn't have 20 months ago .. and it's that $750 a month HELOC payment they didn't have 15 months ago....

Let's pull some credit history's on all of these so sad stories -- let's take a *close look* ..... I look at 400/500 credit reports a month, it's amazing how consumers (with a straight face) will blame their adjustable mortgage payment, when their debt ratio went up 40% in the last 30 months and the new payment isn't due for 6 months...



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>>>The appraisal process today is tight as a drum.<<<

Really..? .. maybe if you live in Tibet....

One of the major reasons for the market collapse, is *because* of the phony appraisals...

How many agent/realtors used "their" appraiser of their "A" list..? .. 1 out of 2000.? 1 out 1,500.? .. maybe 1 out 500.? ... how about 50%++..

Realtors are in a commission driven business, they want their deals to travel the quickest way from point A to point B ....

Do you think they're going to use an appraiser that is usually dead on the money, or .. are they going to use an appraiser they know will miss a bad roof tile from here to there and not be afraid boot an appraisal an extra $10/$30/$50,000.? --- it's *not* rare ---- it's Common.

You can't really use a comp unless you've seen it, walked it and felt it ... anything else, is just paper-mâché ..

I've been buying and selling real estate for over 30 years in 5 states .. If I was buying a piece of property, I always used my own appraiser - as always, it always seemed to be the one the one agents despised the most.

The appraisal business (as well as the Real Estate business) should have come under scrutiny and changed 20 years ago ....

Realtors telling potential buyers there is offers when they haven't seen one in 100 days is a farce, or.. the offers they have received, are by consumers that couldn't buy steam off a hotdog - another reason why home values are so distorted ... "buyers agents" telling consumers the house has only been on the market for 9 days, when it's actually been on the market 209 days (because it's been re-listed with it's 3rd realtor and they've lied about it's "actual" DOM) is not only a farce, but should be a Criminal Offense (and handled in that fashion) - how many folks paid $385,000 for a home yesterday that was listed 5 months ago for $345,000.? -- again, another major reason why home values are so distorted...

Changing the "system" would be the quickest and the cleanest way, it would save the market billions ... anyone with $200 and 30 hours of time on a computer can get a real estate license (depending on the state) it's not much different for appraisers ... make it a college class with actual requirements and limitations and a degree, and you won't get a repeat of: 1999 - 500,000 agents ... 2008 - 1,800,000 agents, and all of them looking for that next commission, the same for appraisers.


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Morgan,

Absolutely a superb post...!

It's of great importance that consumers are allowed to know the history, facts and figures of the lenders, realtors and everyone else that has involved themselves in the raiding of America's wealth.

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>>>There's plenty of credit available at rock-bottom rates<<<
>>> Stop the bailouts! Let the chips fall where they may<<<

Bingo..! .. two excellent points ...

The Fort Lauderdale International Boat Show (the largest in the world) just ran from Oct 29-Nov 2, 2009 and more than 130,000 consumers attended.

There was plenty of credit available for the $20,000 boat buyer or the $2 million boat buyer .. obviously good credit was in play - as it should be.

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.. Fine, let's give money to the auto industry...

But, if we do .. we need to make the auto industry equal.

GM/Ford/Chrysler are now paying for the retirement and medical programs for their employee's from 1969, 1975, 1989 and 2005 which is running into the billions ---

On the other hand .. except for plants being run in the United States, Toyota/Honda/Nissan, etc are now paying for -0- as in "Zero" for their employee's, because retirement and medical benefits for the Japanese are held by the state, by the government - not by a private business like GM/Ford/Chrysler.

The very first retirement/medical costs were first inccurred by Honda when they built their first plant in Marysville Ohio in 1982, and net costs didn't happen until 1990 because of tax credits .. in the meantime all plant profits went back to Japan.

-- The point is simple ... the American auto industry pays 80 cents on the dollar for benefits of their employees --

In the meantime, Japanese companies like Honda/Toyota/Nissan, etc, are subsidized by their own government, and have been since 1972, so that HUGE cost is never incurred - so their costs are less than 15cts, while the American companies are choking on 80 cents+...

... and we wonder why the American companies can't compete.??


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One of the main reasons why we're in this mess is because regulation was taken out during the Clinton administration ... then, slowly but surely Acorn moved and manipulated the lenders and bad deals were bought and sold.

The current administration tried to install new regulations in 2001/2003/2005, but was shot down by every congressman that thought their constituents would be better off in a home loan with no regulations and no money down...

--- obviously they were wrong - again.

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>>>Lack of jobs will decrease illegal immigration<<<

Really...? You need to get out more than 2 hours a week...

Until we put a severe penalty in place for hiring "illegals", there won't be any reason to decrease there hiring ...

Corporations and small companies are saving "billions" by hiring them ... they don't pay Workmans Comp, they don't need to pay any hospital benefits .. but most of all, they're paying someone $3.00/$5.00/$10.00 less per hour ...

Companies are saving $3/$5/$10.00 an hour X 40 hours a week .... home builders in California love them because their build cost runs 10/20+ sq ft less on a 2,000 sq ft house -- that's $20,000 to $40,000 less than their law biding competitor...

The builder benefits in his profit margin .. but, the consumer picks up all of the extra crime costs, car insurance costs and let's not forget those Emergency rooms costs that have increased by 30% that the consumer is now paying in sky rocketing hospital and insurance premium costs ....

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I sincerely feel for the small minority of folks that were lied to and were taken advantage of by realtors, home Inspectors and lenders with garbage rates and limited terms ..

I can feel for the ones that had little or no credit, and even less knowledge on the biggest purchase of their lives, then got consumed into a situation they had very little control of (emotionally, pyschologically and now financially) ...

But what about the majority of buyers that had had full knowledge of what they were doing..?

Do you purchase a $450,000 house when your current $250,000 home hasn't even sold yet..? ... and when it doesn't, you want to file bankruptcy..?

If I don't like my current car, do I quit making the payments on it, and then purchase another one..? ... if my new $700 golf clubs don't improve my golf game this weekend, do I quit making my Visa payments on them..?

I find it fascinating that everyone today is "Under water", they have "negative equity" - has anyone looked at their credit reports lately.? ... I don't mean their FICO score, I mean actually "LOOK" and read their credit reports.

I look at 300/400 credit reports a month .. I find it amazing that most of these homeowners that want to file bankruptcy, or just want to "walk away" from their mortgages have accumulated thousands upon thousands of dollars of debt - and it makes their upcoming mortgage payment look like a gumball machine..

The mortgage is 60 months old, but they leased 3 new BMW's in the last 58 months which increased their monthly expenditure by $900 a month ... and at 52 months they couldn't live without that $10,000 home theater or those 2 new $600 chairs to sit in while watching "The price is right", which increased their monthly expenditure by $400 ... of course, they couldn't live without the new stainless steel upgrades in the kitchen and the new granite counter tops, so a they got a HELOC for $18,000 48 months into the purchase of the home and that runs them another $500 a month, then another renewal on another car 10 months ago ...

So let me see if I've got this right, their mortgage payment will reset in 5 months - right.? ... they knew this 60 months ago (but still leased $80,000 in vehicles) .. they knew this 52 months ago but still couldn't live without that $10,000 home theater .. they knew this 48 months ago before the HELOC and they knew this 10 months ago before the lease renewal ...

--- And they want to blame the housing market and discharge all of their bad debt on the American public..???


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Between all the bad realtors and all the bad loans given by the lenders, it's a miracle they could wrangle up $700 million ... oop's that's right, that was $700 Billion...

-- Now we have to figure out how we're going to get the deadbeats to pay their mortgage payments after their BMW purchase 10 months ago and their golf trip to Scotland last month ... that whole time they're crying for a bailout - how about paying your bills first.?

... I think we need to get Barbara Corcoran out of her $80,000 Limo's and get her back to a little reality on the streets ...

.. You have agents that haven't seen a paycheck in months .. you have Consumer Reports, Market Watch and a dozen others great publications demanding consumers negotiate their commissions to 4% or less ... but Barbara thinks consumers should pay 8% .l.o.l..

.. Barbara were you sober when you recommended that.? -- come out of that Limo and look around...



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...I'm not much of a fan of Glenn Beck, but this time - he's smack on target.

The NAR commercials and their realtors is like asking plumbers for a root canal nowadays ...

If they have so much experience, why are 50% of the realtors today losing their homes.? -- these are the very last people I would be asking for any advice.


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