Average 30-year mortgage rate up to 4.12%

WASHINGTON (AP) – Sept. 12, 2014 – Average long-term U.S. mortgage rates rose slightly this week but remained near their lows for the year.
Mortgage company Freddie Mac said Thursday the nationwide average for a 30-year loan edged up to 4.12 percent from 4.10 percent last week, where it had stayed for three straight weeks.
The average for a 15-year mortgage, a popular choice for people who are refinancing, rose to 3.26 percent from 3.24 percent.
At 4.12 percent, the rate on a 30-year mortgage is down from 4.53 percent at the start of the year. Rates have fallen even though the Federal Reserve has been trimming its monthly bond purchases, which are intended to keep long-term borrowing rates low. The purchases are set to end next month.
Mortgage rates often follow the yield on the 10-year Treasury note. The 10-year note traded at 2.54 percent Wednesday, up from 2.41 percent a week earlier. It was trading at 2.53 percent Thursday morning.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for a 30-year mortgage was unchanged from last week at 0.5 point. The fee for a 15-year mortgage also remained at 0.5 point.
The average rate on a five-year adjustable-rate mortgage rose to 2.99 percent from 2.97 percent. The fee was stable at 0.5 point.
For a one-year ARM, the average rate increased to 2.45 percent from 2.40 percent. The fee held at 0.4 point.
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Why You Should Call Your Credit-Challenged Prospects Now

From Market Leaders Blog by Jason Van Steenwyk on August 18, 2014

Agents! Brokers! Have you been working with someone who wants to buy a home, but has some credit issues? Anyone who was a borderline case and got denied for the credit terms they needed to make the deal work? Have any clients who backed out of buying when they saw their FICO score?
The good news is that the rules are changing to the benefit of consumers. This gives you the all-important opportunity to call them back – this time as someone who is clearly in their court and has information that can help them!

Shifts in the FICO Score System

Last week, Fair Isaac Corp., the company that administers FICO, the most important measure of consumer creditworthiness in commerce today, announced that it is cutting people who have experienced past hardships a little slack when it comes to calculating credit scores.
The new algorithm, called FICO Score 9, includes some key updates:

1. If a consumer has had a debt that went to collection – and later paid it off or settled it – then that former debt will no longer count against them in their FICO score calculation.
2. Debts related to medical bills will not be weighted so heavily against the consumer.
3. The company is also rolling out some new methodologies to better assess the credit worthiness of people who don’t have an extensive credit history.

Medical Debt Considerations

In part, the changes come from pressure from the Consumer Financial Protection Bureau, which has held that medical debts should belong in a different category than other consumer debt, because they are frequently not the result of irresponsible consumer behavior, but rather the result of fallout from disputes between health care providers and insurance companies.
The medical debt provision alone could affect as many as 64.3 million Americans, according to data from Experian. The American Association of Credit and Collection Professionals indicates that medical debt accounts for about 38 percent of the debt that gets collected, according to a report from the Associated Press.
Further, The Commonwealth Fund reports that as of 2012, 75 million people, had trouble paying medical bills, up from 58 million in 2005. That’s 4 in 10 people.  
The rule change associated with medical debt alone won’t be a total game changer – for consumers whose only major black mark is medically-related debt, the typical FICO score will probably increase by about 25 points, according to Fair Isaac.

Time to Pay Up on Old Debts

The first new provision provides consumers looking to finance homes or cars with a strong incentive to contact their creditors and settle up.
And if they haven’t done so yet, a call from a real estate agent informing them of the new rules could give them the prompt they need to clear up outstanding debts.  It will cause red marks to disappear from credit scores, as far as FICO is concerned (though they may still show up in credit history reports from TransUnion, Experian and Equifax).
This provision could make a 100 point difference, John Ulzheimer, the president of consumer education at CreditSesame.com, told the Wall Street Journal. Now, that is a game changer for a lot of people.
The effects won’t be immediate: The rollout of FICO 9 won’t be online until this fall. And even then, not every lender subscribing to FICO is going to buy the new version.

Credit Basics Still Apply

Naturally, agents should still remind clients and prospects that while the rules for calculating FICO scores have changed, the fundamentals of credit management have not changed at all.
Once they pass the basic FICO thresholds, borrowers still have to show that they can afford the payments. That is, unless the loan is an asset-based loan, secured by collateral and made without regard to income.
Homebuyers must still pay close attention to these important factors:

• Debt to income ratios (both front-end and back-end)
• Overall debt levels
• Age of average account
• Number and severity of delinquencies