Shocking News on American FICO Scores - 07.13.10 | Vincent K. Mohr : First Priority Financial, Inc. : Fairfield, CA

ThePhoenix: (July 13, 2010 8:53pm)

Your approach to underwriting credit is a nice thought but misses a few issues. The term "strategic default" is usually associated with the business aspect but another valid reason for a "strategic default" that you do not discuss with the lender/servicer is related to stated income loans in which the income was overstated, by the consumer or the broker originating. This misrep has the potential for civil or criminal liability so the only choice is for the consumer to be quiet and say nothing to the lender/consumer giving the impression of a "strategic default" under FNMA guidelines. Fact is, we need all consumers to come back to the market and the best approach is to give some consumers a "free pass" for certain periods of time and situations. Counter to many people's thinking but if we don't I am afraid we will not have a recovery anytime soon. After all, employers are pulling credit scores these days, all these folks with bad credit cannot even get a job = no recovery.

5pence: (July 13, 2010 8:13pm)

My typical comment in case anybody is interested : SITE AND VIEW VALUE ESTIMATES ARE BASED ON COUNTY RECORDS, MARKET EXTRACTIONS & ANALYSIS OF ALL AVAILABLE SITE SALES AS PARTIALLY ILLUSTRATED HERE: Then a few MLS site sales are listed that bracket the site value concluded. Have they never heard of sensitivity adjustments? ;^)

5pence: (July 13, 2010 8:07pm)

Thanks for the response joe. I figured it out. It's external obsolescence that's the difference. I'm going to adjust up any comps on that same street for external ob (market), proven through comps & hand it in. Next street-prices are normal. I was actually wondering if the FDIC is setting the price-because it was low. And if they are, what's in it for the banks handling their low sales? I reviewed F & B's FDIC video and it became somewhat clear & I was looking for a little input. Anyway, turns out they are to be short sales-hence external ob due to the foreclosures there & a less than arms length transaction. All around that cul-de-sac listing prices appear normal but there's no sales. It is what it is and I'm confident in the value. This bank also wants site sales where there are none & if extraction is used they want to see how I did it. Like I'm going to devote a whole 2 more pages to site value-HA! The site value is derived from historical sales data tempered by 20 yrs experience.

joecolorado: (July 13, 2010 6:04pm)

gotta go, will log on tomorrow

joecolorado: (July 13, 2010 6:03pm)

5pence-what does it matter if you have appraised the property above the sales price,there is no direct relation between sales price,cost and value.If you are confident that the value you have taken from the market is defensible by you,there should be no discussion.If they dont like your figure,they are quite within their rights to get one of their own,and as for them lowering the sales price for a quick sale,would their value be "correct" if they reduced the asking price to $100,000?all things being equal.I mean how far do you go to sell a house,and how far do you need to go to ignore the valuer qualified to estimate the value.If they want to give money away,there is nothing you can do about it,but if you appraise another home in this area,I would cite this sale as atypical for the market in my report.That pre-empts & covers U/W's using that as a comparable property lowering the estimate of value,which directly affects the market.

5pence: (July 13, 2010 5:37pm)

Ok - whhheeeeeeeeeewwwwwwwwwwwwww. That's the sound of that question going over your heads. I'll take care of it, thanks anyway. Have a great evening !!

5pence: (July 13, 2010 3:51pm)

Particulars. Valued by me about 4 months ago at $365k. Lots of fairly good comps. Good territorial view. Property listed in early June at $325k, didn't sell in 1 month so they dropped it to $309k and it's now pending at around $290k. All I can say is ???!!!!! OK, I can understand a 10% drop from MV to list and move it fast, but all my comps sold under 90 days and it should have too. It appears they couldn't wait. The banks are getting nearly full price anyway? Just trying to understand this the way you guys do.

5pence: (July 13, 2010 3:42pm)

I have a question for you guys. In an appraisal I'm doing the FDIC has set the price for a home on this cul-de-sac at about $40k too low. Good comp too. Is it the FDIC that sets the price or the realtor? It's really screwing up neighborhood values and seems criminal. They don't seem to care about market value. Thanks

CALappraiserGal: (July 13, 2010 3:30pm)

[email protected] kinda curious myself....:)

Valuequestor: (July 13, 2010 2:46pm)

Disclosing the actual fee on the appraisal is covered by HUD and most of the states. Everyone should be doing it and the amcs can no longer demand you remove it. They (amcs) are beginning to smell the coming beatdown. Woo..woooo. The gravy train is coming to the end of the line.

Valuequestor: (July 13, 2010 2:39pm)

Whats wrong with shorts? How else can the ladies see my tan, athletic legs? Ladies....does your man look like me? Old Spice....yeah!

DPatterson: (July 13, 2010 2:04pm)

I quit appraising in 1999. Saw the writing on the wall and never looked back. Sorry to see things haven't changed (the same gripes being made by appraisers vs. banks & AMCs) except that they appear to have gotten even worse!! I feel for you folks. Attaway to do it, "Monterey Apprais", with your proactive "get 'em back" approach by leveraging the fine print. I once had a snot-nosed underwriter tell me I HAD to do a last minute new construction final inspection in the boondocks so a deal could close the next day. I pointed out her employer was 4 months late paying me for the appraisal (despite many collection attempts by me). SHE said that didn't matter!! I said "oh yes it does" and that she'd need to WIRE the past due plus pre-pay the final that day if she wanted it done for the next day. She said "no". I told her to hop on a plane do the final herself! She said "the borrowers won't be happy". I said "have them call me and I'll explain". I didn't do the final; it felt good.

Owl Tree: (July 13, 2010 1:29pm)

The issue was not that sub-prime and Alt-A paper was orginated on the street; rather, that it was graded properly at the street level, but improperly in the secondary market. Once our rulers get around to recognizing that, perhaps we can extend financing to those who have been shut out of the marketplace.

Frank Garay: (July 13, 2010 12:42pm)

Hey JWilkinson - If you want to advertise on our show click on the Partner with TBWS button. Thanks!

iam 2520: (July 13, 2010 12:10pm)

No doubt it is way more than 25%... and climbing !The secret system is flawed, it dings you for activities that the banks allow and are acceptable like making min. payments for a period of time, extending above 50% of available credit line, having "excessive" anything. Rating agencies are flawed PERIOD... How about a rapid re-score for congress ? Maybe some of these 25% are just following the Gov't. model? gimme YOUR checkbook I am so generous to all my friends! Financial Reform should start at the top... Nice move Sen. Scott Brown...nose.

CALappraiserGal: (July 13, 2010 11:54am)

5pence..thanks for the info..im emailing their office today

Monterey Apprais: (July 13, 2010 10:21am)

Here is a comment that I have in bedded in to all of my lender appraisals. It is sandwiched in between a bunch of legal comments, and I have not been asked to remove it once. I know it is buried, but a carful reader will find it, and it could be used to show how much the AMC’s are keeping. The fees paid or to be paid to the appraiser for the preparation of this appraisal report only are $ .00, and does not include any other fees charged by any financial institution or appraisal management company. Any additional fees charged by any financial institution or appraisal management company over the fee paid to the appraiser for the preparation of the report are not known by the preparing appraiser of this appraisal report.

5pence: (July 13, 2010 10:10am)

Oh, almost forgot - and no flip flops! How can tey expect me to work??!! I needs my tank top, shorts and flips flops and, well, the kids help with the measuring and, the dogs are there to keep me company while I measure and inspect. So what if I smell of alcohol and like I've been sleeping in my car with the dogs? This is what you got, take it or leave it. "Thing is they can't leave it - there is no consumer protection".

5pence: (July 13, 2010 10:04am)

I've seen where some amc's (not worth capitalizing) send out notes that you should not show up drunk, with your kids or your dogs and that the "appraiser" should not wear tank tops, shorts or t-shirts - LOL!!! Strange but true. They are hiring "appraisers" that will work for beer.

5pence: (July 13, 2010 10:01am)

CALappraiserGal : I think it's great you're being pro-active. Here's a law firm that is presently handling at least 2 class action lawsuits against AMC's and the banksters. I don't know how good they are, but they are willing to pursue such actions. Here's their link - check them out for yourself. Give them a call and they'll steer you to the right attorney and maybe a class-action you can join or start a new one. http://www.hbsslaw.com/home/

JUSTFRANK101: (July 13, 2010 9:52am)

Hey Brian, I think everyone will agree allowing your daughter to join the show is a great idea. Good going guys keep it up!

thevinehouse: (July 13, 2010 9:22am)

I'm really glad to hear that someone has identified a huge piece of the problem holding the "real" recovery from taking affect. Simply put, you cannot expect any kind of economic recovery as long as millions of consumers have lost or continue to lose their homes and jobs! Period. Everyone agrees that consumers need to start spending again to get things moving again. How does that happen when 25%+ have FICO scores at 599 or worse? How could anyone in Congress pass a financial reform bill without addressing the need for a complete revision of our credit scoring systems is beyond me. The good news is that when it finally affects the decision makers of this country in the wallet (apparently it hasn't yet), then we'll have movement! Expect more - much more - from your elected officials! It truly is part of the solution. Thank to TBWS for finally addressing this critical issue.

mark: (July 13, 2010 9:21am)

cpappraisal - AMC review the report to make sure that it meets requirements. All they actually do is run the report through a computer program that looks for key words and based on that, the software kicks the report out for "correction". Then it goes to the underwriter who then wants more stuff. I know the software because I was considering setting up and AMC and using the software and contracting with my appraisers to randomly assign reports. Consumers don't know what they are paying for because the AMC(Banks) somehow got it through RESPA that the appraisal fee does not have to be seperated on the HUD 1 between the AMC and the Appraiser (actually by not breaking it down, the AMC is not providing the appraisal report and it is in my mind a violation of RESPA as a markup). I would join any class action. Not sure why NAMB, NAR, Appraisal Institute have not gotten together and formed one suit.

cpappraisal: (July 13, 2010 8:47am)

Forgot to add continuing ed fees to our bundle of expenses that the AMC's expect us to pay with $200 or less an appraisal....such a joke...I know several good appraisers who are also out of the industry for now because of this too. It is a shame...

CALappraiserGal: (July 13, 2010 8:43am)

just a heads up to all appraisers, i had a relative get hired as a spy for a national AMC as an "order assigner" he was written up on several occasions for giving the appraiser more $$ for an appraisal assingment and not making the company more a "profit". This company wants to make minimally $150 to $250 off the appraisal fee and the appraiser is left with squat. He ultimately got fired but i have enough amo to take on the AMCS if i can find an attorney to take the case

cpappraisal: (July 13, 2010 8:40am)

Why are the AMC's reviewing appraisal reports anyway? That is not their place. That is what the underwriters are there for. All they are there for is to order the appraisal. The fee to order an appraisl should be $50 at the most and I doubt if consumers will even be willing to pay that.

CALappraiserGal: (July 13, 2010 8:37am)

im looking for a congressional law attorney to take on a federal class action lawsuit against HVCC since it was founded on the basis that an IVPI would be established and of course they knew it was never gonna be so appraisers are literally getting screwed everyday and nothing is being done. Can you imagine if this became a national federal class action suit and the amount of $$ that appraisers should and would have to be re-imbursed for stolen wages?

cpappraisal: (July 13, 2010 8:34am)

mark-I have not read it. I will though thank you. I am a little out of the loop right now as I have taken another job outside of the industry as I refuse to do appraisals for $200 or less with what we have to pay in licensing fees, database fees and E&O $200 for an appraisal is a joke. I will keep my license current but until something changes with the fees I am done. Luckily I had something else I can fall back on but I sure did love doing appraisals. Thanks again for the info. By the way, again pardon my ignorance but didn't Congress already pass a Financial Reform Bill? Is this a second version?

GODLIKE: (July 13, 2010 8:23am)

Speaking of credit repair agencies, for decades we have helped our customers get their credit scores where they should by - FOR FREE! It's not hard, but it does take a little time. The difference between lenders isn't rate or closing costs as we have no control over them. The difference is service. He who gives the most service gets the most loans.

GODLIKE: (July 13, 2010 8:10am)

Of course the Financial Reform Bill isn't going away till after the next election. They are pushing thru every lame bill they can come up with while they have the votes. Just wait until you see all the lame duck bills (and riders) that get pushed thru after the election.

SandyInSantaBarbara: (July 13, 2010 8:08am)

First off; I don't work for Google, (perhaps I should). This new gadget is totally hip, slick, and cool. Regarding your comment about loosing deals because you didn't get the lead info: Here's a sure way to avoid that in the future. GET A GOOGLE VOICEMAIL ACCOUNT! You register with GoogleVoice (available on your Google webpage, and it's free),and Google gives you a new phone number. This one phone number will ring every number you tell it to. So when your clients call this new number, it will ring your home phone, office phone, and cell phone. Let's say you were unavailble at the moment they call? GoogleVoice will send a text message to your cell phone. The beauty of this is that if you change employers, you keep your same number. Check it out!

mark: (July 13, 2010 8:08am)

cpappraisal - have you read ML 2009-28? That is what I provided to the AMC and it finally shut them up. When you tell them that they are violating HUD guidelines they seem to listen. I hate the AMC and HVCC with a passion and I'm doing all htat I can to get it stopped but the Bank will not allow it as they are becomeing cash rich from their owned AMC's. Crooks - that is a nice word for them.

mark: (July 13, 2010 8:04am)

I jus think that it is kinda funny that they have to tell you not to wear shorts and sandals, if you are going to be late callthe client. This is just common courtesy - something that seems to be lacking these days. I'm trying to gather information in order to present it our National Association's so that they have actual proof of the unfair fees being paid to appraisers and that the extra expense that has come out of the HVCC for the consumer. I also wanted to prove that AMC's are not really worth the $170 fee for pressing a few butons and having a computer program scan the report for "key words". If an AMC is going to review and question an appraisers report, they should at least carry the same requirements and credentials as appraisers.

cpappraisal: (July 13, 2010 8:02am)

mark-That is about par in regards to the fees and all they are doing is ordering an appraisal. Go figure. They are crooks and no one seems to care or thought that appraisers would be taken advantage of when the HVCC was passed. $170 is actually low. I have had several AMC's wanting to take 60% of MY FEE. Until they are regulated and we can collect our own fee seperate of theirs at the door bad appraisals will continue to pop up. AMC's will continue to steal appraisers money for as long as they can as there is no way they can stand on their own and charge what they are taking from us. No one is going to pay $200 to order an appraisal. That is why they don't disclose this information.

BrandyT: (July 13, 2010 7:59am)

Re: "sleazy credit repair companies" Like in many industries a few bad apples have given a bad name to credit repair. There are companies out there that actually advocate for their clients, analyze and research before filing disputes, and provide results. My company has been helping Americans repair their credit for close to twenty years with not so much as one BBB complaint. Good credit repair companies do exist and the process does work. My LO's tell me that by working with us they are able to turn a good month into to a great month or save a bad month. People still need access to loans, bad credit or not and this rising number of defaults is often times through no fault of their own. Credit Repair gives people a fresh start and will help you close more loans. If you are not working with the right credit repair company you are missing out on a large segment, now 25%, of the market that you could be turning into buyers. [email protected]

joecolorado: (July 13, 2010 7:51am)

have a look at this link, its from david harvey and economics poobah from Britain,but it explains a lot of what is happening in lay man terms.....http://www.youtube.com/watch?v=qOP2V_np2c0

mic1: (July 13, 2010 7:39am)

You can thank the credit card companies for those 599 and below scores. I can't tell you the number of clients I have who have great credit, never a late pay or collection, whose scores are tanking because of the credit card companies. 35% of what makes up your score is what you owe vs what you have available on your revolving credit. So, in December the credit card companies started lowering peoples limits to what there balances were, jacking up the rates or closing the accounts all together. People who had 750 scores before have seen them drop 100 points because it appears to the scoring models that they are maxed out on all of the credit cards. Thanks for Everything BOA, Citi, Wells, Chase....

joecolorado: (July 13, 2010 7:33am)

Wearing clothes is necessary,but when I am told by someone NOT my mom what to wear,tells me the type of appraiser that they have been using in the past,where this problem obviously has arisen.I re-consider the request and whether I want my name to be associated with that company and make a decision as to whether I need the money enough to maybe taint my name by working for them.Usually its not worth it.BUT anyone who doesnt respect him/her/self enough to dress properly in representing their own appraisal company and profession isnt generally worth their salt as they just dont care enough to dress respectably,what kind of job are they going to do with your appraisal?.My mom said"Have some self respect,if you dont respect yourself how do you expect others to do so".

joecolorado: (July 13, 2010 7:24am)

Dont forget,its not unacceptable to say no.If there is an issue that you dont like in an appraisal request from a company,then just say no.Perhaps if we were stronger as appraisers to say no when there was an issue,we perhaps would not be in the position we find ourselves in today.

mark: (July 13, 2010 7:22am)

The problem is that when the AMC calls or actually emails, they state what they are to pay and you are required to sign an agreement. If you do not agree with their compensation level, they tell you that you will not receive any work. They even have the nerve to tell you what you can and cannot wear while out on the inspection.

joecolorado: (July 13, 2010 7:18am)

I dont accept work that is below my worth and I have no problem with stating my fee in the report.I give a good report for that fee and dont mind anyone seeing what I got paid for that appraisal.If the requestor has a problem with fees being stated in the report,there is obviously a reason they want to hide it.THAT gives me a good indication of the type of people I am dealing with and allows me to reject their requests without a conscience pang.If the borrower phones and asks information I give them what they need to know,I dont have a problem with my fees,if the investor has a problem,that is something they need to reconcile with themselves.openness is the key,if you have nothing to hide,why worry about something being hid?

mark: (July 13, 2010 6:59am)

Joecolorado - yep I know that all too well. My wife had been appraising for 26 years and her income is down just like everyone else. Would be easier and more cost effective to work at McDonalds. Appraisers are to be paid what is fair for the market place and if we do not have proof of the raping that is going on, we will have no leg to stand on. Every appraiser should automatically put their compensation in the report. I'm requesting that for every report and threatening a lawsuit if it is not included. Forthermore, I'm tracking who the AMC is and what they are getting from the "split' fee for the appraisal report(I still see this as a violation of RESPA for fee splitting and up charging). Spread the word so get all appraisers to include this in the report.

joecolorado: (July 13, 2010 6:50am)

MARK-If you think that is bad now look at what the appraiser was paid for the liability accepted when S/He took the job.

joecolorado: (July 13, 2010 6:46am)

here is an ever better idea,perhaps dont buy something until we can afford it,that way there wont be a problem.Credit score will not be affected and we wont be in debt.Banks will be put in our direct control,because we wont be so dependent on them lending us money that we dont need at exorbitant rates we dont control,dictated by someone we dont know and who doesnt care.Stop using our houses' equity as an ATM and start using common sense when wanting things.There is a big difference between want and need,maybe we need to learn to realize the difference.

mark: (July 13, 2010 6:38am)

I anybody else out there tracking what appraiser's are actually being paid via the appraisal management company? The appraisal that I got today, after several conversations with the AMC (they are not willing to provide this request and I had to threaten a lawsuit to get it in the report) the amount that went to the AMC from the fee I paid was $170!! Are you kidding me?? This is a disgrace. Start getting the AMC to have the appraiser provide the actualy compensation they are getting so that we can have the proof of the sham that the HVCC and AMC really is.

barbara: (July 13, 2010 5:20am)

Here's a novel thought: credit scoring should reward good behavior. Pay off a collection account, and see your score rise!

linda-joey: (July 13, 2010 5:16am)

Brian - I want to hear more about the homing pigeon idea, sounds very environmentally safe and cost effective!

GaryP: (July 13, 2010 4:05am)

I hate to say this, as I am usually anti-regulation, but hopefully the FICO situation may actually stimulate Congress into doing something about the sleazy practices of collection agencies. I'm sure that its no surprise to many of you when I say that their business models seems to be based on doing as much damage to a borrower's credit as possible in order to get them to pick up the phone and arrange for a settlement. This, in turn can actually do even more damage to their credit, in the short term. Most borrower's are clueless about dealing with these issues amd most think that paying off an old dipute will help their score. One of the biggest issues in this country, in my opinion, is the lack of knowledge among consumers about how the credit scoring system actually works. On the other hand, there are more than a few sleazy "credit repair" guys out there that are willing to take money from them and then do "shotgun," undocumented disputes that do even more damage in the long run

GaryP: (July 13, 2010 3:56am)

I couldn't help but laugh at your headline. What's so shocking? People out of work whose score is going down? Increased defaults and lates causing scores to go down? I was actually waiting for some sort of announcement like this. It's definitely going to be a challenge to the entire industry for years to come. We'll be dealing with the residual impact of the current real estate market and jobs situation. I live and work in a low FICO area. It was one of the capitals of sub-prime lending, back in the day. Our average FICO was already in the 500's before the current set of circumstances. Luckily, we we haven't been as hard hit with lay-offs. It becomes a volume game here. You just have to increase the number of prospects to find the ones that do qualify. Obviously, that increases the time spent prospecting, not to mention the money spent with the credit agencies. It's just the cost of doing business in my market and I am sure many of you are already seeing this as well.