Harris Fallon asked:




A 2nd mortgage loan allows a homeowner access to the equity in his home. This is the appraised value of the property less the amount of the first mortgage. Traditionally, second mortgage loans were used to finance improvements.

Homeowners might remodel the kitchen, add a deck or finished the basement to provide a family room or home theater. The equity was used to send students to college or to provide startup capital for a small business. The second loan for most homeowners was a one-time loan meant to cover a specific purpose.

Twenty years ago only the most credit worthy individuals could qualify for a second mortgage that, when added to the first mortgage, would total more than 80% of a home’s value. When mortgage interest rates declined in the early 2000s, second mortgages became more common. A contributing factor was the housing bubble that caused home prices to rise by double digits annually in many parts of the country.

Large financial institutions began to ease the underwriting restrictions on second mortgages in the 1990′s and by 2001 a homeowner could leverage 100% of the value of his home with a second mortgage loan. The low interest rates were attractive to homeowners. It has been common for those living above their means to consolidate their debt with a second mortgage on their home by refinancing the second mortgage year after year.

In the past, a 2nd mortgage could be expected to be at a higher rate of interest than the first mortgage on a property. Variable rate second mortgage liens were offered with initial interest rates as low as 3%. Some homeowners began to use the equity in their home as a mini-bank. They would take a 10 year second mortgage to pay off credit card debt and their monthly payments on the new loan would be substantially less than the payments made on the high interest credit cards.

However, it is important to realize that when you take a second mortgage loan on your personal residence, you are in a position of increased risk. Almost all second mortgage loans have a cross default policy. That means failure to pay the second loan will cause the first mortgage to go into default and you may lose the home through foreclosure. In the current economy, the rapid decline in home values has meant thousands of homeowners now have first and second mortgages that are much higher than the market value of their home.

Equity in your home is like have emergency cash in a bank account. Homeowners who treat the cash generated by such a loan as an excuse for a shopping spree may find themselves struggling to keep their home. Used wisely, a second mortgage loan is an option available to pay for medical expenses, college tuition, or to improve your property. Used unwisely, homeowners may find themselves facing the loss of their home altogether. As such, you should weigh the extra cash that you generate with the extra risk you will take on before deciding to take on a second mortgage for your home.

Ron

Jared Lee asked:




Several types of mortgage loans are being floated in the market by multiple financial institutions. However, it is advisable to have information regarding various criteria that are taken into consideration by mortgage lending firms while determining the eligibility of a borrower for a mortgage home loan. As these criteria determine the interest rate on the loan, knowledge about them is even more vital.

The most important criterion that lenders usually go for is about the repayment capability of the borrower. Credit history and FICO scores of the borrower provide ample information regarding financial status and the repayment history of the borrower. Lenders usually give prime importance to borrowers having a reasonable credit history with credit scores of more than 600. Credit reports of the borrower can be obtained from any of the three leading credit bureaus in the U.S.. Credit reports contain details such as the income of the borrower, his credits, and any late payments made towards rent, mortgages and credit card bills.

Another important criterion is the debt-to-income ratio of the borrower that determines the eligibility and interest rate on the loan. Borrowers having a debt-to-income ratio of 28/36 are considered ideal for a mortgage loan. However, certain lenders entertain customers with a poor debt-to-income ratio. But, loans to these customers are provided at a higher interest rate and require a high down payment.

Apart from these, the customer is expected to have a steady income and a satisfactory employment record so as to multiply his chances of getting a mortgage loan approved. The customer must be employed with a single employer for a minimum period of 2 years in order to be eligible for a loan.

Interest rates on the loan also vary if the loans are federally insured or assured by any private mortgage insurance companies.

Earl

Jack Levine asked:




The current century is running on banks, finance, loan and Mortgage. From the number one businessman to a middle class individual everyone needs to know about mortgage and financing advice. Mortgaging is a kind of commitment and agreement done till death. Mortgage means taking a financial loan or advance from any business institution, bank or loan firm. Today, lot of people needs mortgaging advice because of poor and bad credit issues. Poor credit history is responsible for ruining a person’s professional and financial life and hence, he gets excluded from the list of credit worthy people in the eyes of banks and financial institutions.

On the ground of present market scenario, it becomes impossible to deal with mortgaging along with bad credit. Bad credit history can either be a result of a bankruptcy or liquidity. Looking at these conditions, any bank and firm gets disappointed for giving mortgage and loan to such a person- who has not paid the earlier loan installments on time. To get the benefit of mortgage and financing advice or benefit, you can take help of online financial institutions. These online financial institutions take care to provide you mortgage even after knowing your bad credit ratio. People with credit ratio below than 350 are not applicable for mortgage and loan from local banks but these institutions even provide loan after bankruptcy or liquidity.

How to find online banks and institutions?

Getting a loan approved from bank is a big deal for many businessmen but with the help of online financial institutions and banks, loan and mortgaging has become simple and speedy. Getting mortgage for buying property, auto or personal needs is possible with the help of online banking institutions. To know more about these firms, you can simply Google it. With the help of Internet, you can reach too many online banks and institutions that provide minimum interest loan in spite of knowing bad credit history and bankruptcy. Trusting these firms is not a big deal because you can find many of your local friends taking loan and mortgaging advice from the same firm.

Thus, mortgage and financing advice becomes easy, quick and simple with the help of advanced Internet technology. To mortgage a property or personal loan, you just need to visit these online institutions and submit all the required details. Mortgaging has become easy with the introduction of these firms.

Marian

Loan to Loan asked:


When it is the question of a mortgage, proper care should be taken while choosing one. A little mistake on your part can make you end up paying overages that’ll increase your budget. Hence, it is advisable to opt for the services of a reputed mortgage Broker. The services from a trusted source will not only save your money but will also guarantee you a good mortgage rate with long term benefits. Moreover, dealing with authentic mortgage Brokers also keep your mortgaged property safe. Hence, if you want to bag the lowest home mortgage rates in UK, then try to take the help of a mortgage Broker. While banks and other financial institutions are there to offer you help, dealing with an experienced mortgage Broker has other benefits too. As a borrower, you can also try online financing services. There are a good number of financial service companies. You can choose their services to know about the current mortgage rate in the market.

From the borrower’s point of view, it should be your first priority to bag easily the lowest mortgage interest rates available. If you are one who is on the lookout for the lowest home mortgage rate, then you can also take clues from a mortgage broker. They are a good medium to gain access to a large number of lenders who provide better opportunities to compare mortgage rates and terms. Apart from them, you can also negotiate with banks and other financial institutions to find a mortgage rate that suits your budget.

Some lenders in UK offer capped rates for mortgages, having the maximum interest rates which the borrower is required to pay at any time within the term of the loan. In case of capped rates, there are many early repayment charges. It basically has higher interest rates than those of comparable fixed rates.

Here are some tips which might help you in the quest for a good mortgage quote comparison.

· Consider the Interest Rates

· Bigger Deposits Mean Better Options

· Evaluate Mortgage Quotes having Same Points

· Check the Mortgage Fees

· Consider the Time Duration

· Consider Mortgage Flexibility

Loan 2 Loan UK is a great option in case of Mortgage Loan, However, a great advancement has come into effect in the financial market and the fraternities have turned up with several lucrative offers for the Debt Consolidation.





Laurie

legend4real asked:


Its long but well worth the read, it’s very informative.

Equifax, Experian and Transunion have begun limited marketing of a new consumer credit scoring algorithm to Risk Based Lenders. According to David Rubinger of Equifax, the planned nationwide rollout to Risk Based Lenders is scheduled for July, and will be followed, approximately 9 months later, with the public disclosure of these scores to consumers.

An algorithm is a mathematical formula that is written to assign value to specific data in order to attain a final score. Risk Based Lenders are financial institutions that lend money based upon a consumer’s credit history and the consumer’s ability and historical willingness to repay a loan. These types of lenders cover the full range of financial institutions lending money for credit cards, auto loans, unsecured loans and mortgage loans.

David Rubinger, the national marketing contact for Equifax, explained “approximately one year ago, the analytical managers for the 3 credit bureaus got together for the purposes of addressing variations within the present scoring models in use. Under the current system, the three major credit-reporting agencies use three different algorithms that produce three different and unique scores, regardless of the data being scored. The primary issue to be addressed was how they could create a solution for Risk Based Lenders who wanted fewer variations within the credit scoring models they were using to make lending decisions.”

The solution for the three agencies was to create a single algorithm that would produce a more “predictive score” by creating a single variable in scoring, which would be the data. To do this, they came up with a solution that involved creating an independent company called VantageScore, LLC. Each credit-reporting agency would own an equal share in the company, and purchase a license to use and sell the resulting scores to risk based lenders under the VantageScore service mark. The hard part was creating the uniform scoring that the three credit-reporting agencies were attempting to design and sell.

To achieve as close a model as possible, the three credit agencies tested the initial base algorithm on 15 million active credit files. Throughout the testing process, changes were made to the algorithm as were needed to create a more stable scoring model until the finished product created an acceptable level of score variance in the finished product.

By creating an independent LLC company, the three credit reporting agencies are now able to offer a single product that has only one variable, the data being scored. Where the credit information reported is the same, the score for a consumer file will be the same, regardless of whether the score comes from Transunion, Experian, or Equifax. Where the credit information is different, the variations in the actual score will be significantly reduced.

Under the new VantageScore product, the three agencies decided to change the scoring formula from its current 450 to 850 scoring range to a new 501 to 990 range. When asked about why they would do this, Rubinger responded, “The new scoring model is to help consumers better understand their credit score. By basing it on a grading scale used throughout the K through 12 school system, consumers can look at their score and know exactly what they have”. Unfortunately for Risk Based Lenders, the new scoring model will require they spend thousands of dollars in updating software to incorporate the new scoring model.

When asked about some of the negative aspects of the change, Mr. Rubinger declined to answer any questions.

The initial question that Down Payment Solutions has relates to anti-trust laws and where the congressional oversight is. As we only have three major Credit Reporting Agencies, how is it they can bypass any oversight to create an LLC company in order to offer a single uniform product in which all can sell, with the goal appearing to be the complete replacement of the present day independent scoring algorithms?

When contacted for comment on this matter, the Department of Justice – Anti-Trust division – declined comment and suggested consumers who have concerns should e-mail them at antitrust.complaints@usdoj.gov. Neither Senator Bill Nelson (D – FL), Senator Mel Martinez (R – FL), Congressman Jim Davis (D-FL) or Congressman Michael Bilirakis (R- FL) offices would offer any comments for this article.

Jan Helder of the Helder Law Firm called the formation of a LLC by the three Credit Reporting Agencies “shady, at best” and advised that, unfortunately for consumers, they “cannot file an anti-trust suit until they have experienced a financial loss resulting from the new VantageScore credit scoring system, and then they will have to prove financial loss in court.” This will be well after low to moderate-income families, and the businesses dependent upon them, have felt the tightening of credit nationwide.

“The new VantageScore model creates a significant financial risk to consumers in their ability to obtain affordable financing,” according to Dwayne Singletary of Allstate Mortgage and Loan Corp in Tampa, Florida. “Many risk-based lenders in the mortgage industry use all three credit-reporting scores–also known as a Tri-Merged Credit Report–and have programs that allow them to use the credit-reporting agency that has the highest credit score. A reduction in that higher score will most likely result in home buyers needing more money out of pocket for a down payment, or require them to pay a higher rate of interest…” under the VantageScore model, whether refinancing or purchasing.

In the installment and revolving credit market, most risk-based lenders do not use the scores from all three reporting agencies. Rather, each lender selects the reporting agency that best fits their type of borrower. A reduction in any one score across any credit-reporting agency, via adoption of the VantageScore algorithm, could result in consumers being unable to obtain credit, or consumers paying a significantly higher rate of interest to borrow the same money tomorrow, versus what they would pay under the current separate credit-scoring models.

Rubinger contends the new scoring model is designed to help consumers better understand their score. However, given the thousands of dollars in financial costs that will be incurred by Risk Based Lenders in updating programming, it leaves the impression the new scoring model may actually be designed to mislead consumers into believing the new VantageScore system actually improves their credit scores.

Under the current system, in theory, if a consumer has a Transunion credit score of 600, then potentially under the new VantageScore model, they could have a score as high as 720. This certainly would go a long way towards silencing a potential consumer backlash if someone with challenged credit sees a dramatic increase in their credit score. This is potentially misleading, and may be the reason for the delay in consumers having access to their new VantageScore credit score for any given credit-reporting agency.

At present, it has not been disclosed how consumers will know what model they are being scored under. As consumers apply for credit, most will assume they are being scored under existing Credit Models, when in fact; they may have been scored under the VantageScore system if a particular financial institution adopted it.

Consumers who are concerned about the potential implications that VantageScore has on their financial future should contact the DOJ – Anti-Trust Division. In addition, we strongly encourage you to contact your Congressman via www.congress.org.

Down Payment Solutions believes that before this new Credit Scoring System is implemented, both the DOJ and Congress have some over sight as to how, when and if Transunion, Experian and Equifax, can implement this type of product in order to protect every American consumer and the businesses dependent upon them.

You are free and encouraged to reproduce, link to, e-mail and redistribute this article in its entirety as long as you leave the below author information intact.

Author: George Chaney, President, Down Payment Solutions, Inc. http://www.downpaymentsolutions.com

Nellie