This Lender Says It’s Going FICO-Free

This Lender Says It’s Going FICO-Free

SoFi, an online lender, is making a bold move: Eliminating FICO scores from its consideration when reviewing borrowers’ for a mortgage. It claims to be the first large lender to embrace the “FICO-Free Zone.”

The company says it plans to use three other factors instead to determine whether borrowers are credit-worthy: Employment history, the applicant’s record of making on-time payments and meeting financial obligations; and monthly cash flow minus expenses.

“Banishing traditional credit scores stems from SoFi’s belief that the FICO model is flawed and outdated; it’s less of an indicator of how a borrower will behave in the future, but rather, a reflection of past behavior,” the company states. “While the industry is moving toward evaluating non-traditional factors during the application process, most lenders still incorporate FICO scores into their proprietary algorithms and underwriting models.”

The move could help millennials, a group where credit scores could be becoming less relevant too. Sixty-three percent of millennials between the ages of 18 and 29 say they don’t have a credit card, according to a survey by Bankrate and Princeton Survey Research Associates International.

“Our approach to underwriting is based on transparency and balancing the needs of our members and investors, and we found that the FICO score was anything but transparent. So we threw it out,” says Mike Cagney, CEO and co-founder of SoFi, a company that has funded more than $6 billion in loans. “We’re proud to be the only major lender that does not use the score for any lending. Instead of relying on a three-digit number to tell us who’s qualified, we look for applicants who have historically paid their bills on time and make more money than they spend. It’s that simple.”

SoFi’s announcement comes at a time when the industry has been taking a closer look at the accuracy of FICO scores. For example, a current bill being considered – the Credit Score Competition Act of 2015 – would allow Freddie Mac and Fannie Mae to be able to use credit scoring models besides FICO, if approved.

Source: “Lender Drops FICO From Underwriting Decisions; Stearns’ TRID Defects,” Mortgage News Daily (Jan. 14, 2016)

How to Celebrate 100 Years of REALTORS®

How to Celebrate 100 Years of REALTORS®

This year marks the centennial of the REALTOR® mark. The National Association of REALTORS® adopted the term “REALTOR®” 100 years ago to identify that its members are committed to protecting property ownership.

To celebrate, NAR has launched a website for REALTORS® to submit pictures and stories that highlight the work they’ve done across the nation.

“In 2016, we are proud to celebrate 100 years of distinction of REALTORS® and the power they hold in protecting the American dream, advocating for property ownership and healthy communities, and making tomorrow a better place to live,” NAR notes on the site.

NAR’s latest consumer advertising campaign also focuses on defining the value of the REALTOR® brand. The campaign sets out to help consumers understand how REALTORS® offer a competitive edge and greater insights into local markets, serve as consumer advocates, and form connective tissues in their communities. The campaign uses the “Get REALTOR®” logo, and NAR is asking its members to watch for the messaging on social, digital, radio, and television platforms beginning later this month and into early February.

Source: “REALTOR®: Celebrating 100 Years of Distinction,” RISMedia (Jan. 13, 2016)

Things to Never Say When Selling a Home

Things to Never Say When Selling a Home

It’s a lesson worth remembering: Home sellers need to watch what they say to home buyers and their real estate agents.

Real estate professionals recently shared with realtor.com® the phrases they say sellers should never utter:

1. “Our house is in perfect condition.”

“The home inspection may reveal otherwise, and, as a seller, you don’t want to wind up putting your foot in your mouth,” says Cara Ameer, a real estate professional with Coldwell Banker. “There simply is no such thing as ‘perfect condition.’ Every house, whether it is brand new or a resale, has something that needs to be fixed, adjusted, replaced, or improved upon.”

2. “We’ve never had a problem with …”

Sellers need to be careful to not utter any fibs, even those that seemingly are small, when selling their home. “You’re setting yourself up for potential liability,” Ameer says. “You may not even be aware of the problem at first, but it could  translate into an embarrassing moment upon inspection.”

3. “It’s been on the market for …”

Sellers should never talk how long the home has been on the market with potential buyers, says Pam Santoro, a real estate professional with Berkshire Hathaway HomeServices. The information is available on the home’s information sheet for buyers to see for themselves. Sellers who wish to highlight this may find buyers believing they can get cheaper since it’s been on the market longer or have buyers wonder what’s wrong with the home that it has been lingering.

4. “We spent a ton of money on X, Y, and Z.”

Sellers who think that just because they spent a ton of money on some upgrade to the home shouldn’t believe that upgrade will be so desired by home buyers nor will it necessarily get them a ton of money back at resale. “The buyer doesn’t care whether you spent $10,000 or $100,000 on your kitchen,” says Ameer. “They are only going to offer what they feel the home is worth in relation to area comparable sales.”

5. “I’m not taking less than X amount for my home.”

“If you send a message that you are inflexible or not open to negotiating, it may not invite buyers to even try to work out acceptable price and terms as they will feel defeated from the start,” says Ameer. “Word may spread that you have this sentiment as a seller, and people may start to avoid the house.”

Source: “6 Things You Should Never Say When You’re Selling Your Home,” realtor.com® (Jan. 12, 2016)

5M Buyers Could Save Big

5M Buyers Could Save Big

Mortgage rates have been near record lows for years, but still more than 5 million borrowers who could qualify and benefit from refinancing have not taken advantage, shows a new report from Black Knight Financial Services.

Mortgage rates have recently fallen back below 4 percent. That means about 2.4 million borrowers stand to save $200 or more on their monthly mortgage payments. An additional 1.9 borrowers could save $100 to $200 per month.

“If rates go up 50 basis points from where they are now, 2.1 million borrowers will fall out of the running; a 100-basis-point increase would eliminate another million, leaving only 2 million potential refinance candidates, the lowest population of refinance candidates in recent history,” says Ben Graboske, senior vice president at Black Knight Data & Analytics.

As such, borrowers who want to see savings better act soon. Mortgage rates are largely expected to rise this year.

While rising home prices have given more home owners equity in the last year, home owners who haven’t seen prices rise as much can take advantage of a government refinance program called HARP. The program is geared for those who have loans backed by Fannie Mae, Freddie Mac, and FHA and who still owe more on their mortgage than their home is currently worth. Black Knight estimates that about 430,000 borrowers could still benefit from HARP.

With rising home values, Black Knight also predicts a rise in home owners taking out of home equity lines of credit, or HELOC. The popularity of HELOCs increased in 2015, up 35 percent year-over-year. About 37 million borrowers are estimated to be able to pull out an average $112,000 before hitting the amount of equity most banks require them to keep in the home.

California is the state that has the most borrowers eligible for a refinance or HELOC, according to Black Knight. Meanwhile, Texas and Florida are next with the most home equity that can be tapped.

Source: “Why Home Owners Are Leaving Billions on the Table,” CNBC (Jan. 11, 2016)

Foreign Investors See Big Opportunity in U.S.

Foreign Investors See Big Opportunity in U.S.

Foreign investors are expected to pour more money into U.S. real estate this year than they did last year, according to a newly released survey by the Association of Foreign Investors in Real Estate of about half of the group’s 200 members.

The survey showed that 64 percent of respondents said they intended to make modest to major increases in U.S property investments this year. Thirty-one percent said they plan to maintain their holdings or reinvest sales proceeds into other U.S. assets.

New York remains the top target market globally, according to the survey.

“This is a very strong response,” says Jim Fetgatter, chief executive of AFIRE. He noted to Bloomberg that China’s economic slowdown, Brazil’s recession, and Europe’s immigration crisis have instilled in international investors that “the U.S., at the moment, really is the safest place for them to go.”

The U.S. ranked as the country with the best opportunities for price appreciation in 2016, followed by Brazil, Spain, Ireland, and the United Kingdom, according to the survey.

Investors from Canada, Asia, Europe, and Australia in search of higher yields have been making investments in office towers, warehouses, apartment buildings, shopping malls, and hotels.

In the residential sector, foreign buyers have remained strong too. About 209,000 homes were estimated to have been sold to foreign buyers in the 12 months ending March 2015, according to a report released last year by the National Association of REALTORS®, “The 2015 Profile of Home Buying Activity of International Clients.”

What’s more, foreign buyers, on average, paid nearly $500,000 for a home – compared to about $256,000 overall for the U.S. average house price. NAR’s report showed that the four states accounting for 50 percent of international sales last year were Florida, California, Texas, and Arizona.

Source: “U.S. Real Estate to Draw More Foreigners in 2016, Survey Says,” Bloomberg (Jan. 3, 2016)

Apartment Rents Are Still Skyrocketing

Apartment Rents Are Still Skyrocketing

Apartment rents surged 4.6 percent in 2015, posting the largest gain since before the Great Recession. It’s a good time to be a landlord, but not a renter, according to the latest report out by Reis, a real estate research firm.

Apartment rents nationwide now average nearly $1,180, which is up from $1,125 a year ago, Reis reports.

The fourth quarter “wrapped up an incredible year for the apartment market, probably the strongest we’ve ever seen,” says Jay Denton, senior vice president of analytics at Axiometrics Inc., an apartment research company that also released a report showing rents rose 4.7 percent in the fourth quarter compared with the same quarter a year earlier.

For the past six years, rents have been on the rise. Increases have ranged from 2.3 percent in 2010 to about 4 percent in the last two years.

The higher rents edge up, the more difficult it proves for young adults to save enough to become home owners. The number of first-time home buyers in the real estate market, as such, has dipped to a three-decade low, according to the National Association of REALTORS®.

The apartment market may be showing some signs of peaking, however, as a greater supply of apartment buildings hit the market. Vacancy rates edged up slightly in the fourth quarter to 4.4 percent compared to 4.3 percent in the previous quarter.

The increase in competition is causing landlords to limit the amount that they can raise prices, says Bob DeWitt, president and chief executive of GID, a Boston-based apartment owner and developer.

“We certainly believe that over the next two or three years rent trends are going to slow and in some places they may actually back up,” he told The Wall Street Journal.

Some hot apartment markets are already showing signs of slowing. For example, rents in the San Francisco area rose 7.6 percent year-over-year in the fourth quarter, compared with 11.8 percent in the third quarter, according to Axiometrics. Also, rents in San Jose, Calif. rose 7.1 percent compared with 9.9 percent in the third quarter.

Source: “U.S. Apartment Rents Rose the Most Last Year Since Recession, Survey Says,” The Wall Street Journal (Jan. 6, 2016)