Rates
Rates improved this week to lowest levels of June, not quite lowest levels of the year, but getting closer.
This week economic news was pretty much neutral to good, so once again, rates should of worsened. But as we all know, it isn’t all about the US is it now.
Russia and Ukraine have come back into the news. They are not talking to each other and Ukraine is signing a new trade agreement with the EU, and Russia isn’t happy about that.
Russia also cut off natural gas supplies to Ukraine, not a huge issue right now, but will be in the coming months as winter sets in.
So more and more Europeans have been purchasing US bonds, thus keeping rates low.
Then we have Iraq, what a mess. But the overall concern is the rebels have taken over major oil fields, thus oil prices are rising.
Higher oil prices means higher prices at the pump, thus less people spending money, thus economy goes flat. I think this will be a key factor in rates for the next few weeks.
So turning to the US economy, not really going to go much into the numbers, because they are not influencing rates right now. BUT….
Next week is unemployment week, these numbers will always influence rates, Thursday we will get Job Numbers, which will move the markets, but I suspect lenders will keep rates high over the holiday weekend, just in case Russia invades Ukraine or Iran invades Iraq.
Cautiously floating right now, we say about a .125% improvement over the last 2 weeks in rates. Federal Reserve is on track to stop artificially lowering rates in late September early October, something to watch for.
Credit Karma & Credit Scores
Lately, quite a few people have come in, indicating that their credit scores are, let say 720. But when I pull a credit report, their credit score is 679. Which has caused some confusion on the difference.
So here is a quick explanation:
There are many mathematical calculations for determining credit scores. The Lending industry use a FICO calculation, which is utilized by all 3 credit reporting agencies, Experian, Equifax, TransUnion.
FICO (Fair Isaac Corporation) is the current standard.
Now places like Credit Karma, who give you a “Free” Credit score utilize different score model. Not to say there is anything wrong with the score, it is just not recognized in the mortgage world.
Here is the “Fine Print” from Credit Karma:
I received a credit score from another service and it was different. Why is that?
There are many, different types of credit scores available from different lenders, credit bureaus, and credit score providers. The three major credit bureaus each offer their own brand of credit score, such as TransUnion's TransRisk score, based on their individual proprietary models for calculating a credit score. Each credit score model derives information from your credit report as provided by that particular bureau, and credit report data can also vary from bureau to bureau. Additionally, independent companies such as Fair, Issac and Company and its FICO score, distribute their own credit score based on their proprietary model that takes into consideration credit reports from all three major credit bureaus. Credit Karma provides the TransRisk New Account Score, VantageScore, and Auto Insurance Risk Score from TransUnion.
I do encourage people to review their credit scores and get copies of their credit report each year, but the Score from these “Free” places, typically will NOT match what the lender pulls.
And to throw a National Lender under the bus, they sent out Free “Advantium” Score a few months ago, got all their clients excited, but when they borrowers went into apply for a loan, the loan officer pulled “FICO” scores for them and turn a lot of them down. I felt this was a HUGE bait and switch scheme.
Payday loans
So I totally hate payday loans, and hate is a very strong word. I am a capitalist to the core, but regulation for these guys needs to happen. Did you know, the average interest rate for a payday loan is 300%!
Well Idaho is making progress, beginning 7/1/2014, new law goes into affect that they can’t lend on more than 25% of the income of the borrower, so if a borrower makes $2500 per month, the loan can’t be for any more than $625. And they need to do extended plans.