According to an article in the LA Times, homeowners who find themselves struggling with mortgage payments whether the situation is a short sale, foreclosure, or walking away from their homes, should look at how any of these actions could impact their credit scores.
Vantage Solutions, a scoring company created by the three national credit bureaus, suggested loan modifications may increase a borrowers’ scores, while refinancing mortgages that are upside-down may not have any or very little impact. Short sales on the other hand can trigger large declines in credit scores. Homeowners with an excellent score might see a 120 to 130 point decline after a short sale. Homeowners who walk away and stop making payments can expect their credit scores to dip 140 to 150 points. Those who file bankruptcy can have an average hit of 355-365 point drop.
Consumers who contact their lender early on may have less of an impact to their credit scores. In any of the above cases, if consumers are really having troubles due to the declining market, lenders will probably take this era into consideration when granting mortgage loans.
If you’ve been looking for a home in the Silicon Valley lately, chances are you competing with several other potential home-buyers on the same property. Sounds almost like a few years ago during the dot.com era. But this time, instead of the higher priced properties being snatched up, it’s the lower valued properties that a drawing the attention.
It’s great that the low prices are attracting buyers, but it’s also becoming frustrating when a lot of investors are snatching up the properties with higher-priced offers and paying cash.
A lot of bank-owned or short sale homes are pulling 20 to 30 offers. Most of these homes are in the San Jose area. Homes in the more expensive areas like Los Gatos and Saratoga are not getting as much traffic, but still get multiple offers.
Even though overall prices are starting to stabilize, we are not in a normal market yet. Buyers will have to be patient. It may take 6 to 8 months to get the property your looking for. Our team was able to get a home for one buyer after the initial counter-offer, but it was the 5th or 6th property we had made an offer on. With other clients we weren’t as successful because even though we overbidded, we were passed up because of non-cash offers.
I recently answered a question about what happens when a bank is taken over by the government. This got me thinking a little bit more about the pros and cons to having that happen. Would it be a good or bad or make any difference at this point?
To sum it up bank nationalization means a bank is owned and ran by the government. This has happened in our country’s history before and we came out ok. Case in point being the S&L debacle a few decades ago. The government took over and slowly sold off the banks’ assets and then eventually there was recovery. This also happened in Sweden and France, but France may be restarting the process. Below are my thoughts about the good and the bad regarding nationalization.
The good:
- More loans being made to consumers. More flexible guidelines would exist and more borrowers would qualify….
- Current deposits remain insured thru FDIC. Since FDIC can borrow money straight from the US Treasury, they would never run out of money.
- Equity holders would be wiped out..
- Possible guarantee of all deposits at US Banks…not just the one’s who are in trouble.This would raise levels confidence with consumers where they have their money, and shareholders as well..
- Foreclosure slow down…thereby banks won’t loose as much money and home values should normalize..
The bad:
- Customer service quality impacted. There would most likely be a decrease in quality service as banks become more conservative and lose employees…
- Closure of more branches
- Loans made to meet social objectives, quantity not quality. Banks may have a more political agenda…
- US Taxpayers taking on more expense/debt
Would nationalization solve the problem of bank failures? Or will this increase the crisis?
Will smaller banks be able to compete? Should the government discontinue anymore bailout programs and let the foreclosures run its course? It’s hard to say, anyway you look at it’s still going to be a challenging road….
