March | 2009 | Mortgage By Randy

Impact of Name & Address Typos & Variations on Your Credit Score – Mortgage by Randy Newsletter – March 2009

Posted on March 21, 2009 by Randy Mitchelson

Mortgage by Randy

monthly update to our clients, colleagues, family & friends

By: Randy Mitchelson, March 2009

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In This Issue We Touch On:

Impact of Name & Address Variations on Credit Reports

Update on Futile Government Economic Intervention

Can “Bad” Economic News Be “Good”

March has turned into a very productive month in the office. Mortgage inquires are on the rise. Demand for credit seminars is growing as well. Fifth Third Bank hosted a credit seminar on March 19 in Naples. We welcome the new readers that attended and thank you for the great questions. On March 26 I will be presenting to a group of residents in Estero, Florida. If you would like to host a one hour credit seminar at your company (great employee perk or customer retention strategy) contact me for details. On to the news….

The current newsletter and all prior newsletters are archived at our blog space mortgagebyrandy.spaces.live.com. Bookmark it and share with your friends and family. You can enter your own comments and feedback as well. Time for the news…

Mortgage Market: More Examples of Government “Pushing On A String”

Mortgage rates remained flat in recent weeks but the recent announcement by the Federal Reserve that they will begin purchasing hundreds of billions in mortgage backed securities and long term treasury notes is designed to artificially drive market rates lower. Remember, the Federal Reserve has already used all its bullets in cutting the discount rate (the rate the Fed charges for loans to commercial banks). Most of our variable rate credit cards, mortgages other adjustable rate loans are indirectly tied to the discount rate. That rate is just above zero so that tool has been exhausted and this new plan is the next in the long line of programs that have been released since last summer.

Remember the hoopla around the Hope for Homeowners program last summer? At last count, this program has helped a whopping 25 homeowners. Worse, the massive effort to encourage loan modifications is also failing, but not in the way you might expect. Loan modifications are indeed happening in great numbers (note: if you missed it read last month’s newsletter on Nightmare Loan Mods). However, the untold story is that 55% of homeowners that benefit from a loan modification still end up defaulting on their mortgage after about 6 months.

Personal Credit: The Dreaded AKA and OKA on your Credit Report Could Cost 5+ Points

One of the lesser known factors in calculating a credit score involves the number of variations of your name and address that have been used to apply for credit over the years. AKA stands for “also known as” and OKA stands for “other known addresses”. These two sections toward the end of your credit report capture a history of all the different versions that have been captured over time. If this list grows lengthy it can have a minor negative impact on your score. Five or ten points may not sound like much but for some people it can be the difference between a 715 score and 720 score which for some lenders means you would be in a lower tier of credit and have to pay a higher interest rate and/or higher down payment for a car or home.

Think about the process that takes place when you apply for a credit card or loan. Sometimes, you fill out a paper application which is then processed by another person who types in the information. Sometimes you dictate your personal information over the phone to a processor. In other situations you might type your own information on an Internet application. These different methods can give rise to mistakes, typos, inconsistencies, etc.

For example, let’s use our Peanuts Gang friend Lucy van Pelt as an example (yes that is her real last name- don’t you play Trivial Pursuit?!). Lucy goes on the Internet to apply for a credit card. She types Lucy in the first name field, “A” (for Anne) in the middle initial field and van Pelt in the last name field. Eventually, on the AKA section of Lucy’s credit report it will show “Lucy A van Pelt”. On Lucy’s car loan application, there is no field required for middle name so upon submission of that application her AKA section will record “Lucy van Pelt”. Then, Lucy goes to Target and they are running a 15% off promotion if you apply for a Target credit card. Lucy agrees, and they put her on the phone to provide her personal information. The Target rep on the phone listens to Lucy carefully and types “Lucy A Vanpelt” into the application (note the no space between van Pelt). Lucy becomes a psychiatric doctor and her public relations staff encourages her to change her name for publicity purposes to L. Anne Van Pelt because it “sounds cool and distinguished” and helps dismiss public association with her cartoon persona and negative perception about her qualifications as a doctor.

With her new alias and career, Lucy now buys a house. She shops around for a mortgage and her credit is pulled a few times using “L Anne van Pelt” and “L Ann van Pelt” and on one application with no middle name field she puts simply “Anne van Pelt”. Lucy’s career takes off with consistent appearances on Oprah and Dr. Phil, and she eventually meets and marries a Hollywood star named Charles Brown. Against her handlers’ wishes, Lucy legally takes the last name of Brown and the happy couple buys a condo in the Bahamas. Lucy’s name on the condo association application? You guessed it – ”L Anne van Pelt Brown.” However, the application form for the condo mortgage didn’t have room for all 4 parts of Lucy’s name so it says “L Anne Brown”. The power company required a credit pull before they would extend Lucy and Charles credit to turn the lights on in their condo and on that credit check, the power company rep typed in “Ellen Van Pelt Brown” (say it out loud and you can hear how this could easily happen over the phone).

Already, there are 9 variations or “AKAs” recorded on Lucy’s credit report. Women are especially susceptible to this credit challenge due to name changes from marriage (and divorce). Hispanics also face this challenge because in their culture many people have a surname included in their full name (ex. Carlos Enrique Ramiro Mendoza). Since most US credit applications only accept first, middle and last name fields, it is easy to see how a lot of AKAs can be generated.

We have not talked about OKAs, but it is the same concept. Small variations in your address due to typos (or putting Ave. instead of St.), combined with a number of legitimate address changes can create a long list of OKAs.

When you monitor your credit report throughout the year, keep your eye on these two sections of your report to help keep your history as clean as possible. Remember, that the impact of AKAs and OKAs is minimal, but for borderline credit scores can make a big difference.

Economy & Financial Insights: We Are In a Catch-22 Situation

When is bad economic data good news? If the data is “less bad” than prior months’, it alerts us that a positive trend may be emerging. For example, retail sales are still slumping (bad news) but improved in February compared to previous months (good news). Housing prices continue to deflate (bad news for some) and are becoming more affordable in some neighborhoods (good news for first time homebuyers). However this deflation is keeping many homebuyers on the sidelines waiting…waiting….waiting for lower prices (bad news) and maybe a lower interest rate.

Last month we reported that our national savings rate had climbed to 2.8% in November. January 2009 data was recently released and our savings has climbed to 5% (good news). As people shift their behaviors and pay down debt, the flow of discretionary spending away from purchases continues to stall our economic recovery (bad news for retailers). For each piece of news there are almost always two opposing interpretations. Depending on which news source you are relying on, could influence your interpretation of the facts.

Question of the Month: Will My Credit Score Go Down if I Pull My Own Credit Report?

NO!!!! You have a legal right to a free credit report from each of the three credit reporting agencies one time per year. Accessing the three reports will NOT impact your score at all. This is one of the many myths out there about credit. The BEST source to access your free annual credit reports is www.annualcreditreport.com. Do not be fooled into using any other source. This free service will NOT provide you with your scores (ask yourself other than curiosity why do you need your score anyway) but you will get a complete credit history.

There are many television and Internet advertisements for “free” credit reports. Many of these are bait and switch gimmicks which involve you paying upwards of $30 to purchase your 3 credit scores and then the companies “give” you your credit report for free. Buyer Beware! If you are ever in doubt, just email me.

Giving Back: Supporting Our Communities –

The American Diabetes Association (ADA) annual Tour de Cure is a series of cycling events held in 40 states nationwide. This event raises millions of dollars for diabetes research. Click here to learn more about Tour de Cure and find the closest event to where you live. Our friend Adam rides in this event each year and as Adam says, “Diabetes does not take any time off just because the economy is down”. Most of us know someone affected by diabetes and in their honor, let’s support Adam’s cycling team with whatever feels good from your wallet. It is easy and safe to do your part by making your tax-deductible donation on Adam’s web page.

The ADA treats personal data such as credit card information as critical assets that must be guarded at all times against loss and unauthorized access. To ensure the security of credit card and personal information, this Web site employs industry-standard security methods, including the Secure Socket Layers (SSL) protocol for the encryption of transmitted data.

Need volunteers? Do you have a fundraising event upcoming? Do you have a personal web site where you are raising donations for your cause? Submit the information to randy@mortgagebyrandy.com by the 5^th day of each month and we will do our best to include your information in the next issue.

Nashville in July! If you love great live music, celebrating with fun people and a contributing to a great cause, keep the weekend of July 10 open on your calendar and find a way to get to Nashville. Details coming soon!

Randy

Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson. Recommendations may change and readers are urged to check with their financial advisors before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.

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You have permission to publish this article electronically or in print as long as the following is included:

Randy Mitchelson, of Estero, Florida, is a business professional, entrepreneur and author with 15 years experience in financial services. Mitchelson has served in leadership roles for Global & Fortune 500 firms like Bank of America, KeyBank and CIBC.

As a member of National Association of Mortgage Brokers, Randy has earned the Lending Integrity Seal of Approval. He educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy, accessible at mortgagebyrandy.spaces.live.com. A licensed mortgage professional, Mitchelson also founded Trinity Home Financing, LLC.

He is owner of Estero, Florida based National Web Leads, LLC (www.nationalwebleads.com), an Internet lead generation service matching consumer finance lenders with customers. Through its network of partners, National Web Leads, LLC delivers innovative Web 2.0 software solutions such as lead generation platforms and real time desktop widget and mobile reporting tools for internet marketers.

Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY. He is a founding member and Finance Chairman of the Southwest Florida Regional Technology Partnership (www.swfrtp.org) and Vice President, Strategic Planning for the Michelle’s Angels Foundation (www.michellesangels.com). He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.

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Nightmares of Loan Modifications – Mortgage by Randy Newsletter – February 2009

Posted on March 21, 2009 by Randy Mitchelson

Mortgage by Randy

monthly update to our clients, colleagues, family & friends

By: Randy Mitchelson, February 2009

=========================================================================================================================

In This Issue We Touch On:

Loan Modification Nightmares

Tips to Handle a Collection Agency

Benefit of Pre-Approval Letters

Is that a stimulus package in your pocket or are you just happy to see me? Just how many spouses of our elected officials used that line recently is the real $800 billion question! Now is a good time to buy stock in companies that manufacture printing machines. The government will be requiring a lot more printing presses to create all the money committed in this law. A necessary evil? Only time will tell, but no doubt our government has less than a stellar track record of positively impacting our economy with spending legislation. On to the news….

Mortgage Market: Another Potential Homeowner Nightmare: Loan Modifications

In the right circumstances, a mortgage loan modification can be an effective strategy for a homeowner who is behind on their payments due to job loss or other catastrophic life events. However, with the massive amount of delinquent homeowners combined with the rash of media attention the housing and mortgage market is receiving, unscrupulous people have started cold calling homeowners to offer loan modification services and making thousands of dollars in fees, much of which is unearned.

The scam goes like this…..you, the homeowner, regardless of whether you are behind on your loan, receives a phone call or email from a loan modification “specialist” offering a service which will allow you to skip making mortgage payments and eventually reduce your mortgage balance and future payments. The “expert” informs you that it will take several months before the bank gets serious about collecting on your loan so you can pocket all those unpaid mortgage payments. Then, when the bank finally comes after you, the loan modification company promises to represent you to renegotiate your loan balance and payments to get you a lower balance and payment. Sound too good to be true? It is.

First, if you are not behind on your mortgage, why in the world would you let someone convince you to stop making your payments to the bank? This will ruin your credit rating for years. One thing is true: banks, due to their huge backlog of bad loans, will take several months to begin aggressively coming after you. So what? By then, your credit is tarnished, you are wearing the scarlet letter of being a delinquent borrower, and your family name is duly recorded in the county public records as being sued for foreclosure. Heck of a triple crown there. Oh, and by the way, your fate is in the hands of that loan modification company that you already paid $2500 or more to. If you receive an offer like this, run away.

For anyone that is legitimately in trouble with their mortgage, there are a number of FREE services available to try first. Previous editions of this newsletter have addressed some so visit our blog site to read the back issues. As a last resort, retaining a competent real estate attorney to represent you in a loan modification effort is ok and many lawyers are achieving success getting folks a revised loan. If you are ever in doubt as to what to do, just get in touch with me for advice. Note: for my Florida friends please note that Florida State law BANS the collection of any upfront fees for loan modification services.

Personal Credit: How to Deal with a Collection Agency

Collection agencies purchase delinquent accounts from creditors like Home Depot, Sears, Verizon, etc.

It takes 4-12 months before the creditor gives up trying to collect a bad debt and they sell the account for pennies on the dollar to a collection agency. At that point, it is usually too late for the debtor to deal with the original creditor. The first step in working with a collection agency is to validate the debt. This is done by written request. You can contact me for a template of the letter. The letter should be sent via certified mail so that you have proof of it being received.

The letter accomplishes several things to protect you. First, you will require the agency to send you written proof that the debt is indeed yours. Second, the letter will prevent you from receiving harassing phone calls at home or work. Third, it puts the collection agency on a 30 day deadline within which they must comply with your request. Finally, the letter is written in such a way to inform the collection agency that you know your rights as a consumer and will not hesitate to exercise those rights to the fullest extent of the law if the collection agency fails to meet your conditions.

Economy & Financial Insights: We Are In a Catch-22 Situation

Roughly two-thirds of our economy is driven by consumer spending. Since most of us are spending less these days, our economy continues to spiral downward. Does that mean we should spend again?

People are learning how to be more frugal. Consumer oriented websites like wisebread.com are educating people about how to save on food bills and other everyday expenses.

Debt is also an addiction that many Americans are dealing with (not to mention our government). Our collective savings rate was 0% during the “boom” years and now that our economy has gone “ka-boom”, our savings rate has already increased to 2.8% as of November, according to a Kansas City Star article. Today, people are more focused on paying down debt, but only a few years ago they were using their homes as ATM machines and their credit cards like water to buy new cars, new TVs, bigger houses, stainless steel appliances, front loading washers, game systems, iPods and anything else their heart desired. Good for the economy? Not in the short term, but over the long run, a reduction in our collective $52 trillion in debt is good for our financial standing in the world and our moral fabric.

Question of the Month: Do I Need a Pre-Approval Letter When Shopping for a Home?

Most licensed real estate and mortgage professionals will advise that you obtain a pre-approval letter from a bank or mortgage broker. There are several benefits of doing this. First, when you are house shopping, a seller will take you more seriously. When a seller has more than one party making an offer, a buyer that already has pre-approved financing will oftentimes be awarded the sale even if their bid was slightly lower than a competing party without a pre-approval. Second, it saves time down the road. Mortgages, on a good day, take a minimum of 2 weeks to get done and in these times of super scrutiny, 2 weeks can often turn into 4 weeks or more. To obtain a pre-approval you will need to provide preliminary documentation like a W-2 and paystub and in most cases a credit review. Therefore, a pre-approval gets the ball rolling earlier in the home buying process. Pre-approvals should not take more than 24-48 hours once the required documentation has been provided. They should be free of charge too (except for the cost of pulling your credit report)

Giving Back: Supporting Our Communities – CCCS: A Reliable Resource for Financial Counseling

Consumer Credit Counseling Service (CCCS) is a nonprofit organization dedicated to financial wellness. Whether you need help getting out of debt, or into a new home, CCCS has a team of nationally certified counselors that undergo continuous training and education so that they are always in the best position to help. There are other companies out there that offer debt consolidation services, etc but some of them are scam artists and are simply trying to profit from those that are in trouble already.

The boys of summer have arrived & spring training is underway….yet another perk of living in paradise.

Randy

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You have permission to publish this article electronically or in print as long as the following is included:

Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY. He is a founding member and Finance Chairman of the Southwest Florida Regional Technology Partnership (www.swfrtp.org) and Strategic Planning Director for the Michelle’s Angels Foundation (www.michellesangels.com). He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.

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