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While borrowers with “super prime” credit scores accounted for just 5 percent of the mortgage delinquencies, about 28 percent of their defaults were calculated and strategic.

This relatively small actual number is nevertheless causing the credit industry to look at new ways to evaluate walk-away risk even among the very creditworthy.

Credit bureau Experian reports that borrowers in California, Florida, and other hard-hit states are more likely to walk away than people living in states with more stable markets. Also, residents of states where lenders have no recourse are more likely to toss in the towel.

People with small amounts of negative equity also are more likely to stay and pay.

Source: Washington Post (07/03/2010)

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  You can email me @  chance at ballard-company.com or http://www.myspace.com/chancegates

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• Credit scores drop to new lows in US (americablog.com)

Today’s pick is the Tampa Bay Rays:  Tampa is playing great on the road (26-13) this season and when putting Price on the mound who is 11-3 with a 2.44 ERA there is no reason to think this trend will change.

My Secondary pick is the Florida Marlins:  Johnson is 8-3 with 1.83 ERA.  Be careful with this one because the Braves are tough at home.

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  You can email me @  chance at ballard-company.com or http://www.myspace.com/chancegates

By Nirvi Shah

RISMEDIA, June 28, 2010–(MCT)–Jenny Camacho moved to South Florida in December, hoping the weather would be easier on her health than the frigid, snowy winters of New York and looking forward to living closer to two of her children.

She had spent four years working as a cook at a senior center in Brooklyn, fine-tuning her skills at preparing meals for people with special dietary needs. Despite the recession, she thought she would find a job in a region known as a snowbird and senior roost.

Jobless six months later, she had run up debt on her credit cards, trying to preserve some of her savings and still make ends meet. Camacho rents an apartment in Sunrise, Fla., with her youngest daughter, Priscilla.

But Camacho, 51, recently met with counselors from Sunrise-based American Debt Counseling after hearing them speak at Workforce One, a Broward County employment office. Ever since, she has stretched her budget enough that she hasn’t used her credit cards since April.

“Right now there is no income. They teach you how to control your spending,” Camacho said.

In this economy, it’s difficult to think about boosting credit scores, building savings or erasing debt. But it’s not impossible — and the recession may be just the right boost someone at any income level needs to brighten their financial picture, said Barbara Stark, director of community development and education for American Debt Counseling.

Her nonprofit company and several others in South Florida offer free advice and help to people in need of credit counseling and money management.

“There’s always hope,” Stark said. “It’s not a question of how much money you have. It’s how you manage it.”

For example, she said, the true cost of using a credit card can be really scary — if you know what that true cost is. A $50 dinner charged on a card with an interest rate of 22 percent can cost $2,500 paid over 20 years, she said.

“Once they begin to see they’re not earning any more money, yet they’re living a better life, it makes sense,” she said. “You should get help before you really need it, so you don’t get into a dire situation.”

In Camacho’s case, things were pretty dire by the time she requested help, said Andrea Mitchell, a certified credit counselor.

Mitchell talked to Camacho’s creditors, who agreed to lower the interest rates on her debt — a service that Camacho is paying for. Mitchell has helped Camacho find occasional work, including baby-sitting. And she counseled Camacho to rely on her family.

“She helped them and now they’re reciprocating,” Mitchell said. Camacho’s son also lives in Broward. “Jenny is very much a survivor. She came to me wanting to survive. There’s no other word to describe her.”

In addition, Mitchell came up with a spending plan for Camacho — who was already spending little more than for basic necessities.

MAKE A SPENDING PLAN: Knowing what your monthly expenses are is key, said Ellen Siegel, a certified financial planner in Miami.

Figure out how much money is coming in from every source: a paycheck, child support, alimony, social service agencies.

Then figure out what’s going out — fixed expenses, such as rent and a car payment; variable expenses, necessary items that aren’t a set amount each month, such as food and medical bills; and discretionary spending, things you don’t need, but want, such as a vacation, movie tickets, birthday presents.

“Too many people have no idea whatsoever where their money is going every month,” Stark said.

Siegel, a member of the Financial Planning Association of Miami-Dade, is a volunteer with the group’s new Money 101 program, which offers services at the United Way of Miami-Dade’s new Center for Financial Stability in Hialeah.

She takes the idea of building a spending plan one step further.

“How do we get into trouble? Money’s not real,” Siegel said. It’s in the form of a credit card, debit card, check or bank balance.

Once a month, she cashes a check and puts the cash into different envelopes for the month’s expenses — gas, groceries, clothing, rent or mortgage payment, utilities and an emergency fund, a must for everyone, no matter their net worth.

“That’s a very, very powerful strategy,” Siegel said. It shows how far your money goes — or doesn’t.

KEEP YOUR CREDIT CARDS: When someone is in debt, it may be tempting to cut up credit cards so they can’t be used to accumulate more debt, Siegel said.

While that sounds like a good idea, those credit cards may be needed at some point.

Her suggestion: Put them in a plastic bag and put the bag in a cup of water. Put the whole thing in the freezer.

“If the car blows up and you have to use your credit card, you can,” she said. Any time the cards are needed, it will take patience to use them. They’ll have to be thawed — and slowly, since microwaving the frozen cards would melt them.

“You can’t just be hungry, angry, lonely or tired and go shopping.”

Building a good credit history and improving a credit score actually requires having some debt, or a history of paying off debt regularly, Stark said. And credit cards held for a long time are good for a credit score.

Although Camacho isn’t using her credit cards anymore, she’s still making payments each month.

“We got them to lower the interest rate so much so that she was able to make a minimum payment,” Mitchell said. It’s low, but not so low that Camacho will be paying off her debt forever. She should be able to pay off the debt she has now in five years or less.

One financial guru’s philosophy is to line up every bill in size order. Pay the minimum on every bill. Whatever money is left over should be used to pay off the smallest bill.

The advice isn’t typical — many financial planners would suggest putting more toward the bill with the highest interest rate, Siegel said, but faith-based financial expert Dave Ramsey’s method offers a sense of accomplishment.

LOOK AT CREDIT REPORT: Credit reports are free. But that doesn’t mean people are looking at them, said Angelo Gonzalez of Miami Saves, who is director of the Economic Independence Program at the nonprofit Cuban American National Council.

“We encourage people to look twice a year,” he said. “We’re lucky if they pull it once every five years.”

The only truly free reports — that don’t require signing up for any additional services — are at annualcreditreport.com. Beware of impostor sites that prey on people who misspell the website.

The reports don’t include scores, however. Those must be purchased.

The reason to look at the reports: Find errors, forgotten debts and fraud — and start fixing the problems, Gonzalez said.

That is, if you can tell what they are. “The other challenge is, have you ever looked at your credit report? It’s like reading Greek. A credit report is useless unless you know how to read it,” he said. “We’ll hold a workshop and go item by item.”

While all of his organization’s services are free, they can also pull credit reports — one from each bureau — for about $13.

SEARCH FOR SAVINGS: They also teach a variety of courses and offer suggestions on how to stretch a limited budget.

Some ideas are more obvious than others, he said, such as buying more fruits and vegetables and less meat and seafood to lower food bills.

Partnering with another family while shopping may also cut costs: Buy in volume at a wholesale store and divvy up the items.

“You end up saving a lot of money. People get that. That resonates more than putting $10 in a savings account,” he said.

Negotiate with everyone, Siegel said, even if you think someone won’t budge on the price.

“If there’s a doctor bill, if there’s a car bill, just ask. Say, ‘I need some consideration. What can you do for me?’ ” Siegel said. “The world is sympathetic now. Everybody is feeling it.”

FIND MORE INCOME: Consider renting out a room in your home — to someone you trust — to bring in more income, Gonzalez said, and be sure to have the renter sign a lease agreement.

And don’t think collecting unemployment means you can’t work, he said. The income must be declared, but if you can find suitable part-time work, take it. Camacho’s youngest daughter, Priscilla, 19, is working part-time and Camacho is willing to take any job, even if it doesn’t involve working in a kitchen.

Whatever someone’s situation, there’s a way out.

Linda Eads, founding principal of MAST Academy, recently created the Youth and Family Financial Literacy Institute in Miami-Dade. The nonprofit’s aim is to teach financial literacy in schools and families — and, she hopes, prevent some of the situations people have found themselves in during this recession.

“As I matured, I realized, ‘Wow, I can do so much more with this if I would budget even better,’ ” Eads said. “No matter how old you are, you can change your ways.”

Jenny Camacho agrees — although she said she doesn’t have the money to pay her bills beyond the end of June.

“Everything is going to come out OK. We’re going to survive with whatever we have,” she said. “Sometimes you struggle but something better comes out on the other side.”

(c) 2010, The Miami Herald.

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  You can email me @  chance at ballard-company.com or http://www.myspace.com/chancegates

RISMEDIA, March 13, 2010—(MCT)—Phil Kelly had 18 more months to go before the fixed rate on his $2.5 million mortgage became adjustable. But when Kelly, a former computer executive living in Rancho Santa Fe, California learned he could knock his interest rate down by a full percentage point by refinancing, he went for it.

“It’s always tough to pick the exact bottom or top of anything,” Kelly said. “But I think this rate is about as low as you’re going to get.”

Rates on jumbo mortgages — loans of more than $729,750 in counties with the highest-cost housing — shot up during the financial crisis as lenders and loan investors shunned anything tainted with even a whiff of higher risk. Rates on big mortgages were especially high relative to those on smaller loans.

But in a boon for borrowers in California’s expensive housing markets, the jumbo-loan market is starting to return to normal.

Two weeks ago, the average interest rate on 30-year fixed-rate jumbos dropped to 5.79%, a nearly five-year low, according to rate tracker Informa Research Services of Calabasas. It edged up to 5.88% on Tuesday, still very attractive by historical standards. The average is down from well above 7 percent in late 2008.

Rates are even lower on so-called hybrid adjustable mortgages, on which the rate is fixed for, say, five years and then adjusts annually. Kelly’s new loan is a five-year hybrid adjustable identical to his old one, except that he’s paying about 5%, down from 6%.

Banks are also relaxing slightly some of their requirements for jumbo loans. That’s an encouraging sign because the market for jumbos, in contrast with the rest of the mortgage business, isn’t being propped up by Uncle Sam.

The lower rates and somewhat easier terms reflect newfound confidence among banks in the housing market. That’s because, by definition, jumbos are too big to be bought by Freddie Mac and Fannie Mae or to be insured by the Federal Housing Administration. Plus, the private market for mortgage-backed bonds dried up when the meltdown hit. So lenders making jumbo loans these days must be willing to take the risk of keeping them in their portfolios.

The maximum amounts for Freddie Mac and Fannie Mae “conforming” mortgages, and for FHA mortgages, are set by Congress. The cutoff for single-family homes was $417,000 from 2006 until February 2008, when lawmakers increased it temporarily to $729,750 in certain high-cost areas, including Los Angeles, Orange and Ventura counties in California. Conforming loans top out at $500,000 in Riverside and San Bernardino counties and $697,500 in San Diego County.

The increased upper limits, which have been extended until the end of this year, have created a three-tier system in expensive areas, mortgage professionals say: loans of up to $417,000, which are the easiest to obtain and carry the lowest rates; “conforming jumbos” from $417,000 to $729,750, which are somewhat harder to get and have slightly higher rates; and true jumbos, with the toughest standards and highest rates.

In the boom years of 2005 and 2006, interest rates were typically no more than a quarter of a percentage point higher on jumbo loans than on conforming loans, according to Informa Research. That widened as the mortgage meltdown intensified and home prices dropped in late 2007. The spread ballooned to nearly 1.7 percentage points in early 2009 after the entire credit system froze.

But this year the rate spread has narrowed to less than a percentage point. It could shrink more if conforming-loan rates rise as expected after the Federal Reserve wraps up a $1 trillion-plus program to support the market for conforming loans next month.

In addition to lower rates, down-payment requirements are being relaxed in some cases. For example, to write a jumbo loan in coastal areas of Los Angeles and Orange counties, Wells Fargo Home Mortgage looks for a 20% down payment or that percentage of equity, down from 25% last year, said Brad Blackwell, a national mortgage sales manager at the lender.

The reason: Wells believes high-end home prices are stabilizing in those coastal counties. But the bank still requires higher down payments in the Inland Empire and other battered housing markets such as Florida, Nevada and Arizona, where prices for jumbo-size homes don’t appear to be stabilizing, he said.

Jumbo loans remain much harder to get than before the credit crunch and recession. Borrowers typically must have a credit score of at least 700, compared with boom-era minimums in the 600s, though Laguna Niguel mortgage broker Jeff Lazerson said at least one lender was again making sub-700 jumbos available.

What’s more, unless their down payments are very large, borrowers must provide evidence of high income, have sizable bank accounts as a cushion against the unforeseen and occupy the houses themselves.

But there are clear signs that the jumbo market has loosened. One is an increasing availability of “stated income” loans — those that don’t require proof of income — of as much as $2 million to borrowers with at least a 40 percent down payment, said mortgage broker Gary Bluman, owner of Real Estate Resources in Brentwood.

Also, instead of a true jumbo loan, some “piggyback” second loans are available again to help certain borrowers with 25% down payments pay for high-priced homes, Lazerson said.

Of course, adjustable, stated-income and piggyback loans were big contributors to the mortgage meltdown. But such provisions are less risky if a borrower has 25% to 40% equity.

Despite the confidence in the market that such terms imply, lenders and mortgage investors are still dealing with piles of bad jumbos made during the boom.

Delinquencies of 60 days or more on prime jumbo loans that were packaged into securities jumped to 9.6% in January, up from 3.7% a year earlier, Fitch Ratings reported this month.

The jumbo delinquency rate in California climbed to 11.3% from 4.1% a year earlier.

For now, the jumbo market remains limited to the volume of loans that banks are willing and able to keep on their books. But there is hope for a return to private outside funding.

Although no jumbos have been turned into securities for at least two years, packages of delinquent jumbos have begun to be sold again to “vulture” investors, a sign that the secondary market for the loans may revive, said Michael Fratantoni, vice president of research at the Mortgage Bankers Association.

“The ice sheet,” he said, “is starting to crack here and there.”

As a Reno/Sparks real estate consultant I always welcome any comments or questions on the Reno/Sparks real estate or any of the articles I posted.  You can email me directly at chance@ballard-company.com

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