Refinance Free Credit

In somewhat of a surprising move, the White House yesterday signaled its opposition to a proposed bi-partisan housing bill agreed upon last week by Senators Chris Dodd (D-CT) and Richard Shelby (R-AL), from the Senate Committee on Banking, Housing and Urban Affairs.

The so-called Foreclosure Prevention Act of 2008 proposes a $10 billion increase in tax-free, state-issued bonds to help troubled homeowners refinance, $4 billion in community development block grants to permit states to buy foreclosed properties, and an additional $100 million for housing counseling. The bill would also establish a $7,000 tax credit to buyers of foreclosed homes, and would include FHA modernization provisions designed to further increase the government lending program’s footprint in mortgage banking.

“In the end, it appears that the Senate versions of even those proposals, because of changes that they made to it, raise concerns here,” White House press secretary Dana Perino said in a press conference yesterday. “And therefore, this is not a bill that we could support.”

Perino outlined the administration’s stance to the proposal, saying that the bill “will likely do more harm than good by bailing out lenders and speculators,” and singled out both the proposed tax break for buyers and additional funding of community development block grants as problematic. Administration officials have said they want to see a housing bill that modernizes the Federal Housing Administration, as well as a more focused effort to reform oversight of both Fannie Mae and Freddie Mac.

ABC News reported that the White House’s opposition caught a prominent GOP senator by surprise:

…nobody told Senate Republican Leader Mitch McConnell the White House didn’t like the bill.

Asked by a reporter about Perino’s comments, McConnell said, “You’re telling me something I was unaware of. It was unclear that the White House had a stated position yet on this bill.”

“They wouldn’t support it,” the reporter followed up.

“Yes. Well, we’ll see how the Senate feels about it at 2:15,” McConnell said.

In the end, the Senate overwhelmingly passed a key test vote on the proposal Tuesday anyway, winning bipartisan support from 92 senators — well above the 60 needed to fast-track its consideration. But it seems clear that any passage of the bill will face rough sailing in the House, where Democrats there have signaled a desire to pull together a package that includes hotly-contested provisions regarding so-called bankruptcy cram-down legislation.

“We have serious concerns that these elements and others would do little to help homeowners avoid foreclosure or reduce housing inventories,” Perino said. “Fortunately, it doesn’t appear likely that this bill will come to the President’s desk, as the House has indicated that it plans to go its own way anyway.”

Experts that spoke with Housing Wire have said that the strong difference in opinions between House and Senate lawmakers, as well as the strong stance being taken at the White House, may provide a significant roadblock to the fast passage of any housing relief measure by Congress.

Al Yoon at Reuters yesterday interviewed Office of Federal Housing Enterprise Oversight director James Lockhart, and peered into what the GSE regulator is thinking next after reducing a capital surcharge for both Fannie Mae (FNM: 28.12, -3.03%) and Freddie Mac (FRE: 24.83, -2.47%), and also relaxing portfolio growth constraints for both housing enterprises.

From the story:

“The key thing will be their capital raise, and how much it is and when it is,” James Lockhart, director of the Office of Federal Housing Enterprise Oversight, told Reuters. “That, to me, will decide what the next step should be” on lowering the capital surplus again, he said …

The GSEs have not decided on amounts of capital they will raise, but it should be an amount that makes an impact on the housing market, Lockhart said.

Freddie Mac will not raise capital until after its quarterly earnings report in mid-May, according to Lehman Brothers analyst Bruce Harting, citing in a report notes from a meeting with the McLean, Virginia-based company last week …

“Certainly we’re encouraging them not to do the bare minimum, but to try to have enough capital so they can really fulfill their mission,” he said.

Each GSE is expected to raise $3 to $4 million, likely via a preferred shares offer, sources have suggested to Housing Wire. The last such offer from both GSEs, late last year, was heavily oversubscribed.

Despite discussions of further reductions in capital requirements, at least some are worried that even the additional capital won’t be enough. Both Fannie and Freddie were the subject of a critical analysis yesterday by Goldman Sachs analysts that pegged Fannie Mae at a target price of $16, and Freddie Mac at a target price of $15 per share.

The analyst group, led by James Fotheringham, said that credit costs remain a primary concern, even with the additional capital in the works.

“Both Fannie and Freddie have exposure to subprime, Alt-A, negative amortizatin, interest-only and investor property mortgages,” the Goldman analysts wrote. “[W]e believe that losses will be greater this cycle than that experienced in the early-90’s cycle, when GSE risk exposure was even more oriented to prime-fixed mortgage products.

The research note also argued that the GSEs’ collective exposure to so-called “bubble” states has yet to materialize fully, noting that while 25 percent of the collective book of business sits in California, Florida, Arizona and Nevada, such states only accounted for 15 percent of credit costs absorbed during 2007.

Some sources that spoke with Housing Wire contested that notion, saying both GSEs had hedged against key exposure.

“What’s missing, I think, is a look at how existing hedges at Fannie and Freddie will limit quite a bit of the credit costs that have Goldman so worried,” said one source, a MBS analyst that asked not to be identified.

Disclosure: The author owned no positions in FNM or FRE when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

Ironies abound in the current mortgage mess/financial crisis. One of the most poignant, from my perspective – that’s one with over 20 years in MBS/ABS research — is the fact that, by abandoning the Great Depression as the worst-case benchmark and shifting to models based on contemporary mortgage performance, the ratings companies helped create the current house price crash and credit squeezes that are routinely compared to the Great Depression.

So, for history buffs, I am going to quickly review the basis on which the ratings companies quantified credit support requirements for private issue MBS in the first ten or fifteen years of mortgage securitization. And for those who endure the walk down memory lane, I am going to also highlight a great little study by UBS structured products analysts that addresses the question ‘which companies ratings are the most reliable?’

But first, a comment on terminology: I insist on using the term ratings companies. Calling them “agencies” makes it sound as if they perform some kind of administrative or quasi-governmental function, as if they function as watchdogs or ombudsmen for investors’ interests. The performance of rated subprime, Alt-A and ABS CDOs gives the lie to that notion. These enterprises may assert a freedom of speech defense, model error, or outlier event (like a hundred-year storm or thousand-year wave), but the reality is that each sold their ratings in a competitive marketplace, like any other for-profit firm.

Where it all started
A recent consulting project had me scrambling around the files in my attic, where I unearthed a short piece from S&P, “Texas Default Study Confirms Loan-Loss Assumptions,” originally published in November 1990 and reprinted in February 1993. The title refers to the assumptions that once underlied S&P’s ratings of mortgage-backed securities.

S&P originally defined its loan-loss assumptions in the mid-1970s – it rated the first private MBS in 1977. At the time, there wasn’t much contemporary information on which to base extreme stress scenarios. In the decades following WWII, credit losses on existing mortgage portfolios were insignificant – nationwide foreclosures amounted to fewer than one-half of 1 percent of all conventional loans (not FHA/VA). To develop a worst-case, benchmark scenario of mortgage foreclosures and losses, the company had to look back to the Great Depression.

Although data was very limited by contemporary standards, S&P was able to derive base foreclosure-frequency assumptions from a study of the behavior of urban mortgage loans originated by 24 life insurance companies between 1920 and 1946 (published by the NBER). Based on this study, S&P defined a AAA depression as one in which 15 percent of all borrowers in the lowest risk category will default, a AA depression as one in which 10 percent will default. (In other words, to be rated AAA, a bond would require credit support that would withstand a number of iterations of the AAA depression scenario.)

The benchmark loan is a first-lien mortgage on an owner-occupied, single-family, detached house with an original LTV of 80 percent or less. (At the time, it was also fully underwritten to a borrower with good credit. Loans made in the early 20th century by banks and insurance companies tended to have low LTVs, shorter maturities, partial amortization and bullet repayments. Thrifts, holding about 1/5th of residential mortgages, introduced the 30-year, fully amortizing loan.) Foreclosure frequencies would be adjusted higher for loans with additional risk factors, including historical delinquencies and severities, lien type, loan type, geographic concentrations and borrower quality.

The other component of the loss formula is loss severity, as most in the industry know. Again, S&P’s original benchmark for market value losses was the Great Depression. In an extreme stress scenario, market value declines would be a major component of loss. (Other components include unpaid accrued interest, legal and selling costs, property maintenance, and so forth. The severity of these vary from state to state as well as with economic conditions.) Based on Depression experience, S&P had determined the market value of single-family detached properties would decline by 37 percent under the AAA depression scenario, 32 percent under the AA scenario.

Moody’s began rating RMBS in the 1980s, and it also originally used the Great Depression as the basis for its credit enhancement requirements. Moody’s identified positive correlations between mortgage performance and economic events, which in turn were employed in a Monte Carlo model to generate a worst-case loss distribution for a pool. Credit protection was quantified based on that distribution – for instance, Aaa losses equated to approximately three standard deviations from the mean, Aa losses about 2.5 SDs and A losses 2.0 SDs and so forth. Ultimately, credit enhancement levels were defined such that expected losses would result in maximum declines in annual yield consistent with expected basis point yield changes for similarly rated corporate bonds.

The birth of modern ratings models
The ratings companies got their first look at a contemporary benchmark-quality housing downturn during the mid-1980s in Texas, oil-patch and southwestern states. These regional housing depressions coincided with the collapse of domestic oil and gas booms, accompanied by overbuilding fed by easy credit from competing thrifts and banks. Citing Fannie’s study of loans in its portfolio as well as foreclosure and house price data from other sources for Houston (Harris County, TX, one of the hardest hit markets), S&P affirmed its methodology.

Texas/Oil Belt experience is of particular interest in the present crisis. The Fannie study indicated lifetime default rates of 8.5 percent on Texas loans originated in 1981-1983, while other data indicated foreclosures in Houston between 1980 and 1989 amounted to 16 percent of housing stock. Houston home prices declined about 30 percent. Likewise, S&P found loss severities reported by Fannie (and largely attributed to the Oil Belt states) were easily in the ball park of Depression-based assumptions: the GSE charged off 25 percent of aggregate principal balances of foreclosed loans in 1987, 28 percent in 1988 and 31 percent in 1989.

The fresh Texas experience was also reflected in other MBS rating methodologies. Fitch, whose original methodology was similar to S&Ps, devised new benchmarks based on the 1980s Texas depression (using the Fannie as well as FHA data). Moody’s, already using a Monte Carlo model to size credit support, augmented its data sets with the Texas information, as well as its own surveillance data from the early 90s housing downturns in California and the Northeast.

Bear in mind, private MBS issuance was negligible until 1986, when tax code changes enabled issuers to use a senior/sub credit structure. Still, issuance averaged just about $11 billion a year through the end of the decade. The private MBS market exploded with the early 90s rally, jumping from $24 billion in 1990 to $98 billion in 1993 (issuance statistics from Inside Mortgage Finance Publications). This massive increase in rated deals, as well new attention given to reporting by most issuers, gave the ratings companies machine-readable performance data from which to build risk models.

It also provided an excuse to stray from the Great Depression benchmark.

When the Fed brought the mortgage rally to a halt in 1994, originator/issuers shifted from prime to off-prime loans to keep their pipelines full. These were the loans stranded when the thrift industry collapsed in the late 1980s and ignored in the 90s rally. Subprime (called home equity at the time, because borrowers were required to make down payments as large as 50 percent) and Alt-A (originally, good borrowers, but not benchmark, fully documented loans) lending both got their start during this lull.

This watershed change in mortgage lending practices coincided with the transition to newer models at the ratings companies. By 1995, S&P was using the predecessor of its LEVELS model, and Moody’s had refined its model to accommodate the new borrowers and vehicles. At the same time, the GSEs and and big private lenders introduced their automated underwriting systems, beginning the sweeping shift away from fully documented manual underwriting relying on a complete credit history. The age of the machine – and the almighty FICO - had arrived.

Although they may still assert the underlying Depression-style stresses still lurk in the depths of the ratings models, the addition of data has effectively recalibrated those stresses to the performance of thousands of pools issued since 1987, the preponderance of which have enjoyed unprecedented home price appreciation.

The result is that the lessons of the Great Depression ended up buried under an avalanche of more recent good news. Put another way: there is no variable in newer rating methodologies for “originated in a period of free money, easy credit, lite documentation and double digit home price appreciation.”

UBS takes a look at credit risk
Fast forward to the present. A year or so into this disaster, with no end in sight — John Mack’s pep talk to Morgan Stanley shareholders notwithstanding — UBS structured product analysts have performed a fascinating and simple experiment on Moody’s, S&P and Fitch subprime ratings. Taking as their sample the bonds underlying the four rolls of the ABX, they asked which company rates them lowest and, given the bonds UBS expects to default on its model, where do the three ratings companies rate them?

The sample includes 400 bonds, all of which have S&P and Moody’s ratings. Fitch on the other hand, only rated 200. This is a direct reflection of competitive forces in the ratings industry.

Fitch has always been third in terms of market share in the RMBS market, but its share shrank pretty dramatically as the subprime market expanded. In part, this reflects investors’ reflexive reliance on the two larger, older bigger name companies, but most market insiders think it also is a function of Fitch’s tougher credit criteria (which translates into less profitable “execution” for the originator customers of underwriters).

Certainly in UBS’ experiment, Fitch is the most conservative. On average, Fitch currently rates the ABX bonds an average 2.3 rating notches lower than S&P, S&P 2.7 rating notches lower than Moody’s. Of the 400 bonds in the index, UBS analysts predict that 292 will default. Only 134 of those are rated by Fitch, but all are rated AA+ or lower, and 77 are rated CCC or worse. By contrast, of the bonds expected to be written down, Moody’s still rates 35 of them AAA, S&P 24. By both tests, also-ran Fitch is the most conservative.

Which leaves us looking to the future: While the pols, policymakers and public interest groups are busy pushing forward high-profile, spintastic solutions, common sense suggests we start by putting the current mess into historical perspective – a lot of things we used to do in mortgage finance weren’t broke until we fixed them.

Editor’s note: Linda Lowell is a mortgage market veteran, and principal of Offstreet Research. We’re just glad to know her, ourselves.

New research from a well-known consumer advocacy group, released earlier this week, claims that subprime borrowers with brokered loans end up paying significantly more than their counterparts who deal directly with lenders. The study is the latest blow to the brokered mortgage model, which industry critics have argued help fuel questionable lending practices now threatening millions of homeowners.

According to a study conduction by the Center for Responsible Lending, in the first four years of a mortgage, a typical subprime borrower who has gone through a broker pays $5,222 more than if he or she obtained the loan directly from a lender.

“These findings confirm that mortgage brokers steer many of the most vulnerable borrowers to higher-priced loans than they deserve,” said CRL president Michael Calhoun. “At a time when one out of five families with a subprime loan is losing their home, we must rid the market of perverse incentives that practically guarantee overcharges.”

The research — the group claims it is the first to empirically examine the effect of broker compensation on a broad spectrum of borrowers — reveals what it calls “troubling patterns.”

Over the 30-year span of a loan, the cost difference between a loan obtained via a broker and a retail-originated loan grows to almost $36,000, the group alleges. The report also argues that for borrowers with better credit, the difference in loan prices is less pronounced — and that borrowers with very high credit scores may actually fare better by going the third-party route.

The CRL said that yield spread premium, which it characterized as “kickbacks from lenders,” gave brokers an incentive to steer borrowers into overpriced products.

The report is an interesting one for industry participants, many of whom are accustomed to a knee jerk reaction against CRL studies. In this case, industry managers interviewed by Housing Wire expressed a different tone.

“I can’t believe I’m going to agree with the CRL,” said one source, who asked not to be named, “but I think most of us on the origination side wouldn’t be surprised by what their study is finding — even if agreeing with the CRL makes me sort of sick to my stomach.”

For more information, visit http://www.responsiblelending.org.

Wednesday's bond market has opened in positive territory following early stock losses. The stock markets are showing weakness with the Dow down 70 points and the Nasdaq down 24 points. The bond market is currently up 15/32, but we likely will not see much of an improvement in this morning's mortgage rates as a result of weakness in bonds late yesterday.

Yesterday's Fed minutes release actually gave us favorable news. The Fed was clearly concerned about economic growth and likelihood of a recession during the last FOMC meeting. They indicated that the economic slowdown could continue well into next year, which surprised many analysts. This is generally good news for bonds because weak economic conditions make stock less appealing to investors. As a result, funds are shifted into bonds, leading to lower mortgage rates.

There is no relevant economic news scheduled for release today. The first piece of monthly data is February's Goods and Service Trade Balance report tomorrow morning. This data gives us the size of the U.S. trade deficit, but unless it varies greatly from forecasts, it likely will not cause much movement in mortgage rates.

Also tomorrow are weekly unemployment claims from the Labor Department. After last week's spike in claims, this report may draw a little more attention than it usually does. It is expected to show that claims fell back to 380,000 last week. If it tomorrow's release reveals a figure near or above 400,000 again, we should see the bond market react favorable and mortgage rates move slightly lower.

There is a 10 year Treasury Inflation Protected Security (TIPS) sale tomorrow also. We could see some weakness in bonds ahead of the sale as investing firms sell current holdings to prepare for it. This weakness is usually only temporary if the sales are met with a decent demand. The results of the sale will be posted at 1:00 PM ET. If the demand from investors was strong, the bond market could rally during afternoon trading, leading to lower mortgage rates. If the sales were met with a poor demand, the afternoon weakness may cause upward revisions to mortgage pricing tomorrow afternoon.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Freddie Mac (FRE: 24.95, -2.00%) said Wednesday that it will expand disclosures on its mortgage-backed securities, commonly known as participation certificates, or PCs. The GSE said that in June it will begin providing investors nine new loan-level disclosures, and will expand two existing disclosures on its single-family fixed-rate and adjustable-rate mortgage participation certificates.

It will also update disclosures on PC securities issued on or after December 2005, and will begin in August providing expanded disclosures on third-party originations for newly-issued securities.

The move comes as market participants have clamored recently for greater transparency, and regulators have directly suggested a need for greater disclosure in mortgage-backed securities. Both Freddie Mac and sister GSE Fannie Mae are facing increased pressure from legislators to play backstop to the troubled U.S. housing market, and sources suggested to Housing Wire that the new disclosures are one way the GSE is looking to reassure investors as it takes on a wider book of business.

“Investors aren’t sure what sort of debt is going to be stuffed into the GSE box right now,” said one source, who said that uncertainty was part of the reason agency rate spreads remained historically high. “This might help soothe some nerves once it’s in place.”

Fannie and Freddie, together with Ginnie Mae, have accounted for more than 90 percent of MBS issuance to start 2008.

“This latest expansion of Freddie Mac’s loan- and pool-level disclosures demonstrates our continued commitment to providing the market a more transparent view of our mortgage-backed securities,” said Mark Hanson, vice president of mortgage funding. “These expanded disclosures are timely, particularly in light of continuing volatility in the housing and mortgage markets, and we believe they will help investors better evaluate our securities and help support our mission to provide liquidity, stability and affordability to America’s home financing system.”

Freddie Mac’s new loan-level variables include information on whether income, assets, or employment was documented or not, CLTV values, whether the loan represents a first-time homebuyer, as well as the original debt-to-income ratio. Expanded loan-level data will include information on whether the loan was originated by a broker, a retail loan officer, or a correspondent lender.

For more information, visit http://www.freddiemac.com.

Disclosure: The author owned no positions in FRE when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

Technology providers in the origination space are clearly facing a tough market right now; many are finding that partnering — if not outright mergers — with complementary solutions can be an effective way to drive incremental revenue. To be sure, technology in this industry has always been about partnering, bundling, and integration; but as HW has covered in previous stories, the downturn has sped up the process here for many tech firms.

With that as background, Lender Support Systems Inc., a global provider of e-mortgage enabled lending and loan servicing technology software, said Wednesday that it had formed strategic alliance with Loan Score Decisioning Systems, an automated underwriting platform provider — both firms are well known on the origination side of the business.

Under the agreement, LSSI and Loan-Score plan to bundle and integrate their core products, as part of an effort to offer increased end-to-end support for lenders and originators. Poway, Calif.-based LSSI provides initial disclosures, document preparation, loan servicing software and compliance services; Irvine, Calif.-based Loan-Score offers decisioning and automated underwriting solutions that can be extended to the point-of-sale.

“Given the breadth of our solutions coupled with the ease of integration each platform‘s architecture permits, a strategic alliance made a lot of sense,” said William McCord, chairman and CEO of Loan-Score. “By integrating and packaging various origination and servicing solutions together, we deliver more value to existing customers while also expanding the markets we can sell.”

“The increasing utilization of advanced Web services is helping the industry deliver on the promise of service-oriented architecture,” said Cary Burch, chairman and CEO of LSSI. “Loan-Score and LSSI’s orchestration of business services will enable customer’s to improve efficiencies via transparency of communication, integration and the fluid exchange of data from our system to theirs.”

LSSI and Loan-Score will announce specific integrations between select products during the second quarter of 2008. For more information, visit http://www.lendersupport.com or http://www.loan-score.com.

This post is from the Blown Mortgage Hall of Fame.  It originally appeared back in July 2007 on my series on credit.  Now more than ever your credit score is vital to securing financing.  I’m on vacation from Saturday until Tuesday the 15th so enjoy some of the classics while I’m gone. 

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In part 1 of this series on credit we talked about how important credit has become in surviving the current home depreciation environment and avoiding the ARM Reset Foreclosure Trap. In part 2 of the credit series we looked at the elements that comprise your credit score. Part 3 covered improving your score on your own and outlined the importance of credit management and protecting your credit report. In this part of the series we’ll look at options for improving your credit using third party services.  Here is a recap of the series so far and where we are at to date:

Credit Series Overview

1. Why credit is so important
2. Understanding elements of credit
3. Improving your score organically
4. Improving your score using 3rd party help
5. Managing your score

A note before we begin. Before you agree to work with any third party to improve your credit score you need to do the following things:

• Know and understand your current score, and understand the items on your credit report. You can do this by signing up for MyFICO, an inexpensive, accurate way to keep tabs on the accuracy of your credit report.
• Know and understand what is legal and what is illegal when it comes to credit repair.
• Check with the Better Business Bureau for any third party you choose to work with.
• Carefully examine the fees charged and the results guaranteed by the party you choose.

How to Avoid Scams

Just like in mortgage, if it’s too good to be true, it probably is. Ignore any company that makes any of the following claims:

• We can erase your bad credit - guaranteed!
• We can remove bankruptcies and judgments permanently!
• Get new credit instantly!
• Form a personal corporation and get all the credit you need, now!

These all represent untrue statements about credit repair. You are setting yourself up for disappointment if you do business with these types of firms.

Your Rights When Engaging a Credit Repair Service

From the Federal Trade Commission Web site on Credit Repair:

By law, credit repair organizations must give you a copy of the “Consumer Credit File Rights Under State and Federal Law” before you sign a contract. They also must give you a written contract that spells out your rights and obligations. Read these documents before you sign anything. The law contains specific protections for you. For example, a credit repair company cannot:

• make false claims about their services
• charge you until they have completed the promised services
• perform any services until they have your signature on a written contract and have completed a three-day waiting period. During this time, you can cancel the contract without paying any fees

Your contract must specify:

• the payment terms for services, including their total cost
• a detailed description of the services to be performed
• how long it will take to achieve the results
• any guarantees they offer
• the company’s name and business address

I have heard horror stories of people sending thousands of dollars to “credit repair” companies only to find their situation unimproved and their precious cash squandered on false hope. Do not let this happen to you. As with all financial situations do not rush in to a decision; and always get a referral if possible.

Types of Third Party Credit Repair Companies

Consumer Credit Counseling - These companies take all of your outstanding debt, analyze the creditors, balances and interest rates compared to your monthly income. They then negotiate with all of your creditors to reduce your overall debt and monthly payments. While this sounds good; it really looks bad on a credit report. This is a red flag to an underwriter reviewing your credit history. Some banks will consider this almost as negatively as a bankruptcy. While it may be beneficial to consult with a credit counselor to help game plan a way out of your debt; it can be very costly to your future credit options should you engage them to restructure your outstanding debt.

If you choose to work with a credit counselor simply use them to help remove disputed items that appear on your report. They can provide you templates and contacts to help you remove incorrect information on your report.

Consumer Law Offices - Lawyers like to tout that they are more effective than credit counseling companies because, well, they are lawyers. The truth is that they take the same steps as everyone else to remove disputed items. There is nothing inherently bad about using a law firm to remove credit items that are erroneous; its just that they don’t have different avenues than other organizations that may be less expensive.

Individual Credit Counselors - There are many independent “credit experts” who offer services to repair or improve your credit score.  They may be former employees of the above types of firms or not.  As long as you use the same precautions in researching and selecting them as the above companies they can be a reasonable alternative to the above.

The Best Alternative?

Most people turn to third party companies when they are desperate and in need of help.  This is the wrong time to begin to work on your credit profile.  The best bet may be to do it yourself.  Using a copy of your credit report and some template correspondence you can effectively clean up your credit report with out having to pay the fees associated with the above services.  The bottom line is that, all things considered, being your own credit counselor may be your best bet.

If you’d like samples of the template letters you can use to dispute items on your credit report please email me at morganb@blownmortgage.com and I’ll be happy to send them to you.  if you’d like a detailed white paper on how your credit score impacts your home financing options please email me as well.  Much of this information is based on the FTC’s Consumer web site on Credit Repair - you can learn more byvisiting the FTC site.

Underscoring the new-found market presence for FHA-insured mortgages, a weekly report of mortgage application activity showed that borrowers continued to flock to government loans last week. A widely-watched composite index of overall mortgage application activity rose 5.4 percent to 725.6 for the week ending April 4, according to data released Wednesday morning by the Mortgage Bankers Association. The index was up 10.9 percent compared with the same week one year ago, the trade group said.

The application index is calibrated to March 16, 1990; a reading of 725.6 means that application activity was roughly 7.3 times greater than when the index was first established.

Both purchase and refinance activity rebounded after a previous drop one week earlier, the MBA said, with a refinance index rising 3.4 percent and a purchase index rising 8.1 percent. Mortgage rates increased modestly, according to data compiled by the trade group; widely-watched rate surveys from both Freddie Mac and Bankrate.com will be released tomorrow.

A government index of application activity, largely tracking to FHA applications, surged 15.2 percent for the week as well. Interest in FHA loans has surged as the government-sponsored agency continues to offer mortgage programs that others do not; many private lenders have pulled back dramatically from offering credit in high loan-to-value scenarios.

Mortgage activity decreased to 52.2 percent of total applications from 53.4 percent the previous week, the MBA said; ARM share of activity increased to 6.5 from 5.4 percent of total applications from the previous week.

For more information, visit http://www.mortgagebankers.org.

Relegated to the back burner during the recent housing boom, the Federal Housing Adminstration is seeing borrowers once again flock to the Depression-era agency. Demand for FHA-insured loans is the highest it has been in decades, thanks to Congressional-led efforts to revitalize the FHA lending program amid continuing troubles in the U.S. mortgage and housing markets.

Industry publication Inside Mortgage Finance reported Tuesday that Ginnie Mae MBS production, as a result, has surged in the first quarter of 2008. Ginnie Mae, which guarantees loans issued by the FHA, saw MBS issuance rise 94 percent year-over-year to $35.7 billion for the quarter; the agency issued just $18.4 billion one year earlier.

Ginnie’s MBS share reached 11 percent during Q1, as a result, the publication reported.

Wall Street firms flocked to FHA lending as well during the quarter, with J.P. Morgan Chase posting an eye-popping 427 percent increase in Ginnie Mae activity; the company produced $6.5 billion – or 18 percent of the total market – in Ginnie-backed MBS for the quarter, according to statistics culled by the publication.