Thursday, Jan. 22
Written 10:15 a.m. EST
FHA CHANGES: The Federal Housing Administration is raising its price for mortgage insurance and making it a bit harder to get an FHA loan. I shared some details in this week's mortgage analysis, and I'll have a more complete story about it, to be posted Monday.
By the way, rates fell for the third week in a row. The average rate on a 30-year fixed was 5.15 percent.
SILENT SERVICER: "We are in the process of doing a refi with a V.A. loan," a reader named Karen writes. "Our potential new lender said that our current mortgage servicer, MGC Mortgage, is not showing up on our credit report(s). MGC took over from HSBC in October 2009. As of this writing, we have made Oct/Nov/Dec 2009 and Jan 2010 payments on time or even early. We have never made a late mortgage payment in our history to any lender/mortgage servicers. Are our credit scores affected by MGC not reporting our stellar payment history?"
I asked Craig Watts, spokesman for FICO. He replied:
The FICO credit score bases its calculation on the credit history present on the person's credit report at the moment the score is calculated. The score looks at various aspects of each reported account including its age, type, payment history and so on. It also considers that account information in the context of other credit accounts on the person's credit report. Having a stellar payment history on one account is certainly a plus, but its impact to one's score will be influenced by those other factors on the credit report. This makes it difficult to generalize about the specific effect that one absent loan account could have on the borrower's score if that loan were instead reported to the bureaus.
FICO has long encouraged lenders to report fully to credit bureaus. The better informed lenders are about their current and prospective borrowers, the more objective and fair their credit decisions can be. And credit scoring models can do their best job of assessing risk when credit reports are as complete as possible.
NEGATIVE CASH FLOW LANDLORD: A reader named Lee writes: "My wife and I own two properties. We can afford to make the mortgages on both, but is it a good idea to keep paying for a (rental) property that can't rent for enough money to cover the mortgage? We lose over $1,400 a month on our rental property because of this. We're thinking of walking away from it. We bought the place two years ago, and have no equity in it."
I'm the wrong person to ask. A lawyer would deliver good advice about the legal implications of walking away from an investment property.
As far as the ethical implications, Lee has a duty to inform the tenants that he is considering walking away from the mortgages. It would be uncool to leave them in the dark and not give them the opportunity to clear out before deputies knock on the doors to evict them. I don't like it when landlords collect rent from their tenants, then stiff their mortgage lenders. It happens all the time, and I think those landlords should be thrown in jail.