Is the New Credit Score Model Helping Home Buyers?

Credit Expert Eddie Johansson believes the improved FICO 08 credit scoring model will increase the credit scores of a significant segment of borrowers, but it’s not helping home buyers. According to Johansson, president of Credit Security Group, a leading nationwide credit analysis and rescoring firm, that’s because the largest sources of home financing, Fannie Mae and Freddie Mac, have not yet approved it.
“When Fannie and Freddie approve it, it has arrived- but not until then,” he said. Neither organization has provided its schedule or intentions for approving the FICO 08-based credit scores available from two major credit bureaus. Credit scores help lenders determine whether a mortgage loan is approved and the interest rate offered. In general, the higher the score, the easier it is to get a mortgage loan and the lower the interest rate.
Johansson said his analysis predicts the new model- if approved- will have the most impact on the current refinancing boom and mid-to-higher-end home sales. Speaking to 150 bank executives at the Independent Bankers Association of Texas Leadership Conference in San Antonio and to banking educators attending the Financial Literacy Summit at the Federal Reserve Bank of Dallas, Johansson said, “If it’s implemented as expected, it is a great opportunity to boost the housing market.” Johansson believes the new model will be a more accurate measure of credit risk. “It takes into account more of the borrower’s history and penalizes them less for a single unusual event,” he said. “It also has more score card levels, allowing finer adjustment of credit scores.” He said it will reduce the power of unscrupulous credit collectors too, since a single bad event- reported in error- will have less impact on scores.
FICO 08’s developer, Fair Isaac Corporation, predicts it will help lenders reduce default rates on consumer loans 5 to 15%.
Fannie Mae and Freddie Mac own or guarantee almost 31 million home loans worth about $5.4 trillion, which makes it all the more important that they approve the new score model.

Read more: http://rismedia.com/2009-09-08/is-the-new-credit-score-model-helping-home-buyers/#ixzz0QblwNFHv


Welcome to the Baugh Family and their friends! This video is a progress report about the Baugh’s new home being built in the Coachella Valley. We’ll take a little tour of the development as well as go through the house itself — no hard hats needed!
Sit back, relax and enjoy!

Jeff Palmer


The city of Palm Springs was ranked No. 2 in CNNMoney.com and Money Magazine’s list released Tuesday of the top 25 best places to retire in the U.S.

It will be featured in Money Magazine’s October issue, which hits newsstands this month.

The list looks at the perks and “bang for your buck” that retirees could expect to find. It factors in local amenities, home prices — including the drops in prices after the recent housing bust — state income tax rates and the percentage of population over 50 to help determine the rankings.

Palm Springs was the only Coachella Valley city on the list, which put the typical price of a Palm Springs three-bedroom home at $250,000 — down some 44 percent in the housing burst. The list released Wednesday also estimated 42 percent of the city’s 48,000 residents were above the age of 50.

“It’s easy to see the appeal of living in the desert town beloved by Frank Sinatra’s Rat Pack,” Money Magazine’s editors wrote. “Residents get 332 days of annual sunshine, 360-degree views of the mountains, and as much culture and design as they can pack in.”

Maureen Gessel, associate manager with Palm Springs-based The Gaffney Group,  which represents seven homeowners associations in the city, wasn’t surprised Palm Springs scored so high. “The city is so friendly and welcoming,” Gessel said “It doesn’t matter what your background is.“Being listed nationwide, it’ll definitely generate more interest around the country” in Palm Springs, Gessel said.

Last year, Where to Retire magazine listed La Quinta as one of the top eight places in the nation to retire for music and art lovers.

New York: Narrow Home Lists for $2.7 Million
Reduced real estate prices don’t seem to be affecting the sale of the house billed as the narrowest in New York City.

The three-story, red brick house in Greenwich Village, which measures 9.5 feet wide and 42 feet long, is on the market for $2.7 million. It last sold in 2000 for $1.6 million.

Practitioner Alex Nicholas, senior vice president of the Corcoran Group, who listed the property, predicted it would sell for the listed price because it is unique, has an interesting history, and is well located.the outrageousness of real estate!!

They’ve got US by the proverbial….

Ray Robinson thought he had a really good credit score, but then he applied for an auto loan and the panic set in. His once very good 758 score had dropped to 692. The most widely used credit scores run from 300 (very poor) to 850 (immaculate). First, Robinson rushed to assess what triggered the change- he pays his home loan on time, all the credit cards and the other auto loan are kept up to date too. He wasn’t using his credit cards more than usual, so what happened?

Well, the economy continues to take its toll in more ways than one. As banks and lenders continue their ongoing effort to stabilize their portfolio risk they are closing a record number of credit card accounts (over 50 million were announced last week alone) and reducing millions of dollars in credit lines. This pull back reflects an unprecedented amount of credit-up to $2 trillion on cards alone by 2010.

As the credit lines tighten up, even some consumers with excellent credit and spotless payment records are seeing their credit scores reduced because of the diminished credit lines. Yes, our friend Ray with the once 758 score hasn’t changed the way he manages his credit or makes purchases but the credit limits he once had to support those purchases have changed. By dropping his credit limits it would “appear” that he is using a higher percentage of what credit he has available. He might even incur a “over limit fee.” Credit card providers collect around $15 billion in penalty fees each year.

So what does a few points on your credit score really matter? It’s always mattered a lot. Almost all banks, home lenders, credit card providers and even insurance companies now use your credit score to decide how risky you are for their products. If you have anything less than a 730 – 750 credit score, you typically will pay varying degrees more in the way of higher fees and interest rates. How much more? In a recent survey at bankrate.com, a consumer with the best credit could get a credit card interest rate below 8% (not including promotional/teaser rates) while those with the worst credit could see rates over 23%. It’s estimated that the typical household could pay as much as $300,000 in extra interest over a lifetime based on situations like this. This is just one of many examples that are changing the landscape of consumer credit management.

So what do you do about it? Experts will tell you to review your credit report at least once every 90 days or so and watch for any changes in your profile. But just watching and waiting is not enough. The need to proactively manage your credit profile to assure you are aware and prepared for situations like Ray’s has never been greater. Additionally, having direct access to a trusted advisor who can address all your questions about your credit report as well as provide you guidance on building a plan to more effectively manage your credit and debt profiles is of the upmost importance. Let’s face it, if you are Ray and you just realized what has happened to your credit scores, you may end up either paying a higher interest rate or not being approved for your car loan if you haven’t taken the proper steps to reduce this risk.
Read more: http://rismedia.com/2009-08-26/credit-card-limits-to-be-cut-by-2-trillion-by-2010-how-does-this-impact-you/#ixzz0POb3y3GV

The Desert Real Estate market is continuing to move.

Agents in my office are continuing to see lots of activity.  We’ve all been surprised how busy this summer has been – and the numbers tell the story…

Home sales activity in Coachella Valley has surged 33 percent through June, with 4,615 valleywide sales — 2,598 happening in the second quarter of the year. The gain has been sustained since 2007.

“The measurement of active buyers in the marketplace, and deals getting made, is showing a dramatic increase,” said Bob Thomas, head field consultant for Real Data Strategies, the Brea-based firm that provides quarterly data to the Palm Springs Sun for an assessment on housing sales.

Activity is up roughly 30 percent over a year ago, Thomas said, with Palm Springs market activity described as mixed.

The city’s ZIP code section of 92262, with 216 sales in the second quarter, posted a 12.5 percent gain in market activity and it’s up 17.3 percent through June over 2008 with a total of 359 sales. The 92264 ZIP code sector has tracked 4.5 percent fewer sales for the quarter — with 169 sales — and is down 17.3 percent for the year.

The average sale price on a Desert Area Multiple Listing Service property in Palm Springs under $500,000 was $210,937 in the second quarter. That’s down from $292,620 in 2008 and from $313,716 in 2007.

“This market is healing itself from the bottom,” said Greg Berkemer, executive director of the California Desert Association of Realtors.

“It collapsed from the bottom, and it’s healing itself that way.”

“The market is very different today,” Thomas said.

“We called the bottom three to four months ago,” said Fred Bell, executive officer of the Building Industry Association Desert Chapter. “I think we’re there.”

And since people are sensing the bottom has been hit – they are moving back into the marketplace.  Investors and first home buyers are now making offers on properties.

Personally, our office is seeing multiple offers on “great deals” – especially foreclosures.  It’s not uncommon these days to get 5-10 offers in on a property with the resulting purchase price well above the asking price.

So now’s the time to start seriously looking at the market if you are interested in buying.  With inventory still plentiful (but being reduced quickly) and interest rates still wonderfully low – contact me so we can find you the right home at the right price.

You have your Pre-Approval Letter…

You know how much you can afford…

Now it’s time to start the search.

Before meeting with your Realtor — here are some questions you should ask yourself. If you are not the only one involved in the purchase — you really need to include them also. So when the search begins — everyone is playing the same game.

What neighborhood(s) do you like?
School District important?
House or Condo?
What style home? Spanish, Contemporary, Mid-Century etc.
What size home?
single level?
How old ?
How Many Bedrooms?
How Many Baths?
Family Room?
Garage or Carport?
Yard size?
Fixer? Define what fixer means to you.
Perimeter Fencing/Wall

And just as important — what you don’t want!

You and your Realtor will go much more in depth about these, but it is good to think about these points before you meet.

If you have seen homes that you like in real estate ads — clip them out. If you have gone to Open houses — bring in the flyers. This gives your realtor great information on what you like so he can tailor the search to meet your wants and needs.

Now it’s to sit down with your realtor and go over your lists of wants and needs. Together you will come up a great list that will give you a roadmap to find your home.

Then the process usually will include:

The Realtor will start searching the MLS (Multiple Listing Service) that lists any home for sale by any realtor. He will ask his co-workers if they know any properties. There are also the properties he has personally seen on realtor caravans.

He will email you all the properties that match your wants and needs so you can see them and start eliminating the ones you don’t like and keeping the ones you want to see. Then you will all meet and go out and actually look at the ones on your list.

This process will end up with you selecting a property that fits. You will then make an offer. (We’ll talk about the offer process in another post.)

Start the nail biting!

Can you think of anything more unhinging and exciting than buying your first home? Those of us who have been thru the process tend to forget with time how huge it is. But the process can be overwhelming if not exposed to the entire picture and then taking it one step at a time.

That’s the role of a good realtor.

So let’s take a look at the first step of the process…

Pre-Qualification/Pre-Approval Letter — Before anything, you want to get Pre-Approved. Only a short while ago getting Pre-Qualified was all that was necessary. But in today’s real estate market — you really need to get a Pre-Approval letter. With the new and more strict lending rules — Sellers and banks are looking much harder to see if a buyer can qualify to buy their house. They want the information up front. So many sellers now require a Pre-Approval to accompany an offer. On Foreclosed properties, you have no choice — you must provide the letter with the offer.

It’s not that difficult — here are the steps…

1. Get the name of a lender from your friends, co-workers or real estate agent. It can be someone in the Loan Department of a bank or a Mortgage Broker. (I know several that I can refer you too).

2.Meet with them to get Pre-Approved. A pre-approval letter involves verification of financial and credit information. Rather than taking your word on faith, the lender will ask for documentation to confirm your employment, the source of your down payment, your credit and other aspects of your financial circumstances. NONE OF THIS IS SHARED IN THE LETTER.

3. Get the Pre-Approval letter. After the loan person crunches all the numbers — you’ll know how much money you can qualify to borrow. Most home buyers have a rough idea of how much they would feel comfortable paying every month on their mortgage. However, there’s no quick-and-dirty way to translate that monthly payment into a specific maximum mortgage amount because other factors — down payment percentage, mortgage insurance, property taxes, adjustable interest rates and so on — are part of the calculation. And, you might not be qualified to borrow as much as you think you should be able to borrow, depending on your income, your debts and your credit history. The lender will give you a letter stating that you are Pre-Approved for a certain dollar amount.

Now you know what price range you can look at! No disappointments. A clear and focused journey.

4. You’ll have more leverage in negotiations with the seller. Sellers often prefer to negotiate with pre-approved buyers because the sellers know such buyers are financially qualified to obtain the financing they need to close the transaction. A pre-approval letter is an especially favorable point in a close multiple offer situation. Foreclosed properties require one. And, you might feel more confident about making an offer with a pre-approval letter in hand and the knowledge that you’ll be able to obtain a mortgage.

5. Your real estate agent will work harder on your behalf. A simple fact of life — A pre-approval letter signals to your real estate agent that you’re a well-qualified buyer who is serious about purchasing a home. The increased likelihood of a closed sale — and a commission — will naturally motivate your agent to devote more time and energy to you.

I have learned the hard way — for myself and for my buyers — not to start showing property without first having the buyer obtain a Pre-Approval letter. I have spent countless hours showing homes to a buyer only to find out the were not qualified to buy a house. And buyers have had their hearts broken putting in an offer on a home only to find out there was no way they could afford it. So to save both the Buyers and myself time, money and disappointment — I require any buyer who wants to work with me to get Pre-Approved.

5. A few caveats: Pre-approval letters aren’t binding on the lender, are subject to an appraisal of the home you want to purchase and are time-sensitive. If your financial situation changes (e.g., you lose your job, lease a car or run up credit-card bills), interest rates rise or a specified expiration date passes, the lender will review your situation and recalculate your maximum mortgage amount accordingly.


This is my first blog entry.  It is a typical summer’s day — 104 degrees (but it’s a dry heat…) in Palm Springs CA.

My hope with this blog is to introduce prospective buyers to the incredible village of Palm Springs and keep local up to date on what’s happen in the world of real estate in their town.

I’m am one of the few people actually born here.  I was born in Indio 20 miles “down valley” because there were no beds available in the tiny Palm Springs Hospital.  I lived here until I went away to college (San Diego State) and came back with my Joe (my life partner of 21 years) 10 years ago.

I have seen the Coachella Valley grow from a collection of tiny towns hugging the coves to a vibrant mix of places and people.

I will share more of this in later entries.

Please do not hesitate to email me or call if you have any questions regarding real estate in Palm Springs and the Coachella Valley.