Mirror, Mirror . . . Who's the Best? (Hint: It's Not Suze)

This morning while paying bills on-line, I had CNNMoney.com’s video clips playing in the background. When I heard a piece on “who do you trust and what makes a good financial advisor” with Suze Orman, I was reminded again of how important it is when dealing with your finances to find someone who really knows you.

“The best advisor,” Suze said, “is the one you see looking back at you when you look in the mirror.”

No one knows your habits, your strengths, your limits and your risk profile better than you. And no one, but no one, cares more about your money than you.

Whatever you may think of Suze Orman and her advice to the masses, it’s hard to argue the point she made here, and it serves as a great rule of thumb whether you’re talking about credit building, financial planning, mortgage financing, insurance plans or whatever.

While we all know ourselves better than anyone else does, it’s unlikely we know financial planning, mortgage financing or how to reduce and eliminate debt as well as an experienced professional. That’s why it’s essential to find someone technically sharp and adept at dealing with the problem you are trying to solve.

More important, however, is finding someone willing to get to know you--your priorities, your needs and where you are in your life—if not as well as you do yourself, as close as they can come.

In conversations with prospective clients, I sometimes worry about them feeling they are in the interrogation room when 7 out of 10 questions have nothing to do with their current financing or interest rate.

It comes from my commitment to knowing what they really need before suggesting loan programs, rates and payment scenarios. In fact, it’s my way of determining whether we are truly a good fit in the first place.

So when you are searching for your next loan, make sure you’re listening for the way you’re being listened to. After all, we mortgage advisors have to look in the mirror every morning, too.

And some of us actually care about who we see looking back.

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160 Million “We’re So Sorry’s” and One Big Opportunity

“We’re so sorry, Uncle Albert

We’re so sorry if we caused you any pain

We’re so sorry, Uncle Albert

But there’s no one left at home

And I believe I’m gonna rain”

Can you say “We’re so sorry” 160 times? And do it again a million times over?

That’s exactly what one credit bureau promised last week.

In the largest class action settlement in US history, credit reporting giant TransUnion agreed to a preliminary settlement in Chicago federal court Wednesday that would provide 160 million Americans free access to their credit scores and six months of credit monitoring with no strings attached.

“This is astonishing,” said Ken McEldowney, executive director of Consumer Action, a national advocacy group based in San Francisco. “It’s everything we tell consumers that they need to find out if they have problems with their credit. They are getting information on how to improve it and information about whether they are creditworthy,” said McEldowney.

The settlement entitles consumers to six months of a TransUnion monitoring service—the one I use myself—that allows them access to information in their credit reports as well as their current scores at any time.

And for those of us who love being lazy, it even notifies subscribers by email of significant changes to their files, including reports of late payments or accounts opened in their names. TransUnion normally sells the service for $59.75 or more—meaning the settlement is worth as much as $10 billion.

How did borrowers get so lucky? Plaintiffs in the case alleged that anyone who had a credit file maintained by TransUnion (nearly half the U.S. population) were inundated with junk mail from marketers who bought data from the credit reporting giant. Federal law prohibits the sale of a person’s private credit information except under certain circumstances, such as when he or she has applied for a loan. The plaintiffs argued TransUnion crossed the line in the sale of private information.

The settlement represents a big opportunity to both borrowers and TransUnion. By filing a claim under the lawsuit, eligible plaintiffs receive 6 to 9 months of free access to one of the industry’s premier credit monitoring services. TransUnion offers a wide range of credit monitoring and educational resources.

The settlement represents a boon to TransUnion in that the company does not admit to any wrongdoing and at the same time offers a free trial to 160 million potential customers. Six months is more than enough time to get a handle on your credit profile, and it’s likely that after a free trial lasting 6 to 9 months, many will continue to subscribe to the company’s service.

Anyone who had any type of loan account between January 1987 and last Wednesday (and there must be some sort of prize for anyone who does not fit in that category!) is eligible to file a claim under the settlement. Claims can be filed starting June 16^th at the settlement web site https://www.listclassaction.com/ or by calling 866-416-3470.

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(Source: Chicago Tribune, May 31, 2008, Kathy Kristof)

Guess What Number Could Doom Your Loan Now (Hint: It’s Not Your Credit Score)

“I’m thinking of a number . . .”

Unless you’ve been living under a rock for the past 10 years, you've seen the ubiquitous FreeCredit.com commercial featuring a too-smart-for-his-own-good looking guy in a director’s chair and those 5 famous words.

In fact, I apologize if you’ve somehow finally succeeded in banishing this annoying phrase from your mind only to be reminded again by this post.

As annoying as this guy was, the commercial helped wake America up to the importance of the mysterious 3 digit number known as your credit score. Without the right number, your chances of qualifying for favorable interest rates—or qualifying for a mortgage at all—are often doomed from the start.

These days, however, there is a new number wreaking havoc with borrower’s attempts at obtaining mortgage financing. And unlike the credit score, there is virtually nothing borrowers can do to change it when it doesn’t come in at the right level.

The new number killing otherwise successful loan applications today? Appraisal value.
Several factors, all a function of the collapse of the mortgage market and subsequent declining home sales, have converged to give appraisal value an increasingly prominent role in loan approvals:

Declining markets
A new “declining market” designation has meant tighter lending guidelines for certain properties, reducing the maximum loan-to-value allowed on a given loan by as much as 5%. A loan originally approved for $285,000 on a $300,000 property in a declining market is now limited to $270,000—a $15,000 reduction in funds available to the borrower.

Tougher appraisal review
Appraisal reviews by lenders have resulted in greater scrutiny of appraisal reports. After reviewing an appraisal, the lender’s market review “experts” often order values to be reduced by tens of thousands of dollars before approving a loan. A recent legal settlement regarding mortgage broker-appraiser relationships will place even further restrictions on appraisal practices.

Foreclosure and short sales
Perhaps most important has been the rise in housing inventories, foreclosures and short sales. Slow sales and increased supply places downward pressure on home prices, while below-market sales resulting from foreclosure and short sale prices compound the pressure.

While it is illegal for loan officers to consult with or advise appraisers concerning home valuation, some lenders are setting up “valuation desks” independent of their appraiser to conduct preliminary searches of recent comparable sales data before ordering an appraisal. By considering whether recent comparable sales figures are likely to support the value needed for a loan to work, borrowers can better determine whether it’s worth it to order and pay for an appraisal for a property that may come up short in value.

Short of picking up and moving a house to a neighborhood that is retaining its values, there is little a borrower can do to compensate for the new threat to qualifying.

But judging from the number of borrowers stopped in their tracks by unfavorable appraisal values, the grating memory “I’m thinking of a number” conjures may help keep expectations realistic, and could even help save a few hundred dollars when the numbers don’t add up.

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