Mark Daya- Foreclosure Prevention/ Short Sale Specialist

A 4 percent mortgage sounds too good to be true – and for more than 90 percent of borrowers, it is.

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http://money.cnn.com/2011/10/19/real_estate/mortgage_rates/index.htm?iid=Lead

Last year, more than two million people were turned down for homes, according to federal data, often because the applicants didn’t meet certain lender requirements or because their applications were incomplete or otherwise problematic.  With lenders’ underwriting criteria becoming more rigorous in recent years, it’s important buyers know the most common triggers for mortgage-loan rejection.

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• Insufficient income: Lenders want to be sure borrowers can afford to make the mortgage payments.  Lenders typically look for at least a two-year track record of income, which could hurt those who have changed jobs recently.
• Cloudy financial picture: Generally, total debt payments, including the mortgage, cannot exceed 45 to 50 percent of a borrower’s adjusted gross monthly income.  Overtime and bonuses are included only if the borrower has worked for the same employer at least two years, and has a history of receiving them.
• Poor credit: Lenders typically reject applicants with FICO scores below 620.
• Low appraisal: One of the predominant reasons buyers are turned down for home loans is because the appraisal on the property is too low.  A buyer may think he or she is purchasing a house worth $800,000, but if the appraisal comes in less than that, the lender will not loan the borrower the money.
• Property problems: Sometimes issues turn up within a house, like a major repair or safety issue that needs to be addressed, before an application can be approved.
• Information mix-ups: Approximately 12 percent of new mortgage applications were denied because of unverifiable information or incomplete credit applications, according to the Federal Financial Institutions Examination Council.

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http://www.nytimes.com/2011/10/09/realestate/mortgages-triggers-for-rejection.html?_r=1&ref=realestate

Strategic default has become an urgent and costly problem for lenders. University of Chicago Booth School of Business studies indicate that roughly 35 percent of mortgage defaults are strategic, and FICO estimates this makes strategic defaults more than a $20 billion problem annually.
FICO Labs researchers announced earlier this year that they had developed a method for predicting which borrowers are at greatest risk of strategic default, focusing especially on the six million U.S. homeowners with current-loan-to-value ratios of 120 or higher, making them twice as likely to consider defaulting on their mortgage. FICO’s strategic default prediction algorithms are now being employed by four of the 10 largest U.S. mortgage servicers. FICO estimates the collective benefit of its solution for these servicers could reach $2 billion in the first year.
Additional information on FICO’s strategic default research can be found in the white paper “Predicting Strategic Default,” available for free at www.fico.com/Insights.
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Struggling homeowners can sometimes benefit from hiring a lawyer to try to modify a mortgage or avert foreclosure, but avoiding scam artists and sketchy practices requires vigilance.

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