Monday Morning Cup of Coffee: FICO switch boon to mortgage lenders?

Plus, how to keep tenants from punching in hollow-core doors

Monday Morning Cup of Coffee takes a look at news crossing HousingWire's weekend desk, with more coverage to come on bigger issues.

What will FICO's revamp of its credit scoring model mean for lenders? The Fair Isaac Corporation announced last week that its FICO Score 9 will be a "more nuanced way to assess consumer collection information" and will no longer weight medical debt as heavily as it has in the past. Some consumers could see a credit score jump of 25 points or more, meaning more prime borrowers for mortgage lenders. Indeed, reporting by The New York Times would seem to suggest this as a motivating factor:

The new scoring approach came after FICO spoke with some of its largest customers, including major lending institutions, as well as regulators, who suggested that medical debt collections were unduly weighing on consumers’ scores. FICO said it then analyzed new data from the credit bureaus, and compared how consumer behavior varied depending on the type of collection debts on their credit reports.

“We found that for someone where medical collections is their only derogatory, it is not as negative as a regular unpaid collection would be,” said Anthony Sprauve, a FICO spokesman. “So we adjusted the algorithm.”

The only fly in the ointment could be Fannie Mae and Freddie Mac, who have to adopt the new model in their underwriting software for a significant number of lenders to make the switch. 

As HousingWire reported last monthinternational buyers accounted for sales of $92.2 billion in the U.S. real estate market between April 2013 and March of 2014. That's a substantial increase from the 2012-2013 level of $68.2 billion, and much of that purchasing is in all-cash transactions. An article in on Sunday questions whether that kind of international investment in Miami is not only creating a huge bubble, but also serving as the perfect money laundromat.

Why Miami? Because it's much less expensive than other major metro areas. "The average price of a unit in a current selling project is $662,439. It's not pocket change; but it's also less than half the average condo price in Manhattan. Median sale prices in San Francisco recently topped $1 million," the article stated.

Although the national unemployment rate has come down from its Great Recession high of 10% in October 2009, posting a somewhat disappointing 6.2% for July, the unemployment rate by itself doesn't tell the whole story, as an analysis by the Motley Fool on Sunday points out. Even as overall unemployment eases, the time it takes for the unemployed to find work is lagging seriously behind. 

"In contrast, the recovery we've witnessed since the Great Recession ended in 2009 has been far slower. The average length of unemployment spiked by 24 weeks (from 16.5 weeks to 40.7 weeks), but the latest unemployment report shows that average unemployment length is still 32.4 weeks — a decline in the recession based spike of only one third."

The problem with that duration of unemployment, the article points out, is that half the country would be in serious trouble if they were unemployed for longer than 13 weeks, almost five months short of the average time it takes to find another job.

California would seem to have a blissful real estate situation compared to much of the rest of the nation, as we recapped here, but the slowdown of activity in the recently overheated Orange County market has apparently caused some agent consternation and negative self-talk in the industry. To remedy that, Jonathan Lansner of the Orange County Register listed Nine culprits in housing's chill, so everyone knows exactly who to blame. 

It's officially August vacation season, when the rich and famous — or at the very least, our elected officials — head for the Hamptons or Martha's Vineyard. TripAdvisor recently named the latter as the most expensive family summer vacation spot in its TripIndex Vacation Rentals for 2014. A weeklong stay in a two-bedroom vacation rental property on the island would cost an average of $3,409.94, and that's with no guarantee of a selfie with the president. Other top spots: La Jolla, California at $2,245.03; Miami Beach at $2,210.12, and Maui at $1,971.97.

New trends show that It's a landlord's world, you just rent in it, which makes this list of 23 lifehacks for landlords even more timely. My favorite? Put floor length mirrors from Wal-Mart on the backs of bedroom doors to keep renters from punching their fists through them. No doubt cheaper than anger management classes.

The Federal Deposit Insurance Corp. reported no banks failing for the week ended Aug. 8, 2014.






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