TD Bank eases mortgage rules

by Shelton on May 1st, 2014

filed under Below Average Credit

* Changes to help first-time home buyers qualify for loans represent a new sign of a letup in the credit crunch

Cherry Hill-based TD Bank, which has 45 Bergen County branches, is making it easier for first-time home buyers to qualify for financing by offering them loans that require little money down and no mortgage insurance, a company official said.

The changes made by TD, as well as by some other lenders, are the latest sign that a credit crunch thats frustrated many potential buyers, especially first-timers, may soon ease up.

The traditional first-time home buyer has been significantly underrepresented in this housing recovery, said Malcolm Hollensteiner, TDs director of retail lending sales and production in Washington, DC We hope [the loan program] will increase first time homeownership in many of our markets on the East Coast.

Last week, TD dropped the down payment requirement for its Right Step first-time home buyer program to 3 percent of the homes value from 5 percent, and it stopped requiring mortgage insurance – which is paid by the borrower but protects the lender from default risk and can add more than $100 to a monthly payment.

Another change is that the program has been opened up to borrowers whose income is above 80 percent of the median, as long as the homes they are buying are in low- to moderate-income census tracts. Interest rates are at or below market, Hollensteiner said.

Some other lenders are easing off strict loan requirements for prospective home buyers. San Francisco-based Wells Fargo, which has more than 300 branches in New Jersey, has since the beginning of the year returned to making loans to those with credit scores as low as 600, a market that used to be commonly described as subprime. A spokeswoman said its too soon to say how well the program is working.

A number of wholesale lenders, including Carrington Mortgage Services LLC in California, also have recently lowered credit score requirements.

Companies are easing loan-qualifying criteria as the post-financial crisis regulatory landscape has become more clear to lenders, who are reeling from a steep drop in refinancing and are eager to drum up new business, industry experts say.

Mortgage companies are turning once again to customers with modest savings and tainted credit histories, said Don Frommeyer, a mortgage originator in Indianapolis, who is president of the Association of Mortgage Professionals. Everybody needs volume, Frommeyer said.

Even so, lenders are more discerning than they were a decade ago in the run-up to the subprime crisis. Keith Gumbinger, vice president of, a mortgage information firm in Riverdale, pointed out that loans backed by Fannie Mae and Freddie Mac, the large government-sponsored mortgage guarantee firms, still require credit scores of at least 620.

Now, Frommeyer said, a borrower may be able to get a loan with a below-average credit score, but you still have to be creditworthy. Some lenders are digging deeper into customers financial backgrounds to approve loans and are showing some flexibility, case by case.

One of the problems during the real estate boom was that lenders were taking high-risk loans and pricing them the same as everybody elses loans, said Wendy Nastasi, owner of Crossroads Finance Discount Mortgage in Wayne.

Many of those loans were securitized and sold to ill-informed investors, who were left holding the bag when loans went bad.

The lenders reaching out to subprime borrowers today are usually pricing in the risks, either with higher interest rates, mortgage premiums or higher down payment requirements, according to Nastasi.

A wholesale lender she works with, which she declined to identify, recently introduced a loan program geared for the self-employed who have credit scores as low as 620, and who do not want to use tax returns to prove their income. They can use 12 months of bank statements instead.

The catch: They have to put 45 percent down, Nastasi said.

TDs Hollensteiner said that banks recently liberalized first-time buyer loan requirements meet new federal rules that require lenders to take steps to verify that the borrower has the ability to repay.

The loan programs minimum FICO score is unchanged at 660. The total debt-to-income and housing-payment-to-income ratios at 41 percent and 33 percent, respectively, also were unchanged. Typical of first-time buyer programs, borrowers must take a homeownership class to assure prospective homeowners that they understand their financial responsibilities.

Lots of options

Doug Rotella, executive vice president of HomeBridge Financial Services Inc., a mortgage lender with a regional office in Hackensack, said his company has begun making loans to Veterans Administration and Federal Housing Administration borrowers with FICO credit scores as low as 580, but only if theres other evidence that the borrower will be able to handle the monthly payments. For example, he said, HomeBridge usually requires that the down payment come from the borrowers own savings, not from a gift.

Number of the Week: Only Best Credit Scores Getting Mortgages

by Shelton on May 1st, 2014

filed under Credit Scores

755: The average FICO score for a conventional mortgage

Mortgage credit continues to loosen up, but getting a loan to buy a house is still difficult for the average American. This is especially true for people without top credit scores.

The average FICO score for a conventional mortgage – one that’s sold to mortgage giants Fannie Mae and Freddie Mac was 755 in February, according to Ellie Mae’s latest mortgage origination report.

The average FICO score for FHA loans – which are backed by the government and attract buyers with lower credit in part because FHA loans require down payment as low as 3% – was 686.

The US average FICO score was 711 in October 2013, the latest available data, so conventional mortgages remain difficult to get for most borrowers. A look at the distribution of credit scores shows why this is: Banks continue to avoid the worst borrowers like the plague.

The accompanying chart, from CoreLogic, shows the historical credit score distribution of purchase mortgages. As you can see, the largest losses have been among buyers in the lowest two tiers, and they aren’t budging much.

Borrowers with FICO scores below 620 accounted for 0.35% or mortgages in January, down from about 13% in February 2003 and a peak of 17% during the frothiest peaks of the housing bubble. The best borrowers, with scores above 780, have taken their place, swelling from about 13% or originations in 2003 to a little less than 30% today.

But, as the chart shows, the share mid-range borrowers those with scores of 640 to 779 are in line with their historic norms.

Consumers have more options for getting free credit scores

by Shelton on May 1st, 2014

filed under Credit Scores

Linzi Hansen of Elk River, Minn., requested her credit report after the Target breach, but the 24-year-old found the report frustrating and incomplete.

No one had told her how to read it, and no credit score was included. #x201c;I was taught how to balance a checkbook in school,#x201d; she said, #x201c;but why didn#x2019;t they tell me how to read a credit report or interpret a credit score?#x201d;

What Hansen and other consumers who get a credit report are discovering is that it doesn#x2019;t include a credit score, the all-important piece of financial information that is used by banks, mortgage companies and landlords to assess the credit risk of applicants. While it#x2019;s a powerful enough number to cause consumers to be turned down for a loan, they have had to pay for the privilege of seeing it.

A credit score typically ranges from 280 to 990 depending on the provider. FICO, for example, ranges from 280 to 850, while VantageScore Solutions, a joint venture of Experian, TransUnion and Equifax, ranges from 500 to 990. Recently, the Consumer Financial Protection Bureau urged credit card companies to start offering free credit scores to their customers.

Only a few are doing so, including Discover, Barclaycard of Barclays and First Bankcard of First National Bank of Omaha. Discover cardholders, for example, now receive an updated FICO credit score on each monthly statement.

#x201c;The response from Discover card members has been overwhelmingly positive,#x201d; said Julie Loeger, senior vice president of brand and acquisition at Discover.

Darryl Dahlheimer of LSS Financial Counseling in Minneapolis thinks the expansion of free credit score availability is good, but he#x2019;s leery of companies that may offer them with a catch. #x201c;Don#x2019;t do it if you have to pay an annual fee or a higher interest rate just to get the free credit score,#x201d; he said.

Getting a free FICO score from a credit card is a new occurrence, but similar scores from competitors such as Vantage have been offered free for much longer, said John Ulzheimer, president of consumer education at

Ulzheimer expects the number of credit card companies or other financial institutions, such as mortgage companies, offering free FICO credit scores to expand. Even though companies offering the free FICO scores are paying parent company Fair Isaac for the service, they may see other benefits if customers request cheaper online statements or a reduction in inactive or closed accounts.

FICO senior consumer credit specialist Anthony Sprauve said that FICO is working with every major credit card company, banks, mortgage companies and auto lenders to get them to offer free FICO scores as part of their service.

Currently, about 30 million consumers are getting free FICO score access, although some choose to pay $20 to see their scores at Free scores that are available at sites such as,, and are not from FICO and probably use a slightly different scoring system.

Ulzheimer warns consumers that sites such as, or find a way to charge for their service, sometimes up to $30 per month.

Inside the Secret World of Alternative Credit Scores

by Shelton on May 1st, 2014

filed under Credit Scores

A new report by the World Privacy Forum describes the proliferation of consumer scores and calls for rules that would make them more transparent to the public. These scores differ substantially from traditional credit scores, which are compiled using loan payment histories from credit reports. Instead, consumer scores rely on other data, such as retail purchase histories, demographic information and social media activity. Consumer lenders use some of them to evaluate loan applicants. Heres a rundown of selected scores and some of the World Privacy Forums related warnings, including one that calls for updating existing consumer protection regulations.

GE Capital Provides $7MM Senior Secured Credit Facility to AirXpanders

by Shelton on May 1st, 2014

filed under Secured Credit

GE Capital, Healthcare Financial Services announced that it has provided a $7 million senior secured multi-draw term loan credit facility to AirXpanders Inc., of which $3.5 million has been funded. AirXpanders is a Palo Alto, CA-based company that’s developing an alternative technology for women who require tissue expansion for breast reconstruction following a mastectomy. GE Capital is acting as administrative agent and sole lender for the credit facility.

AirXpanders’ AeroForm is an injection-free, patient-controlled tissue expansion system under investigation in the United States. The credit facility provides additional flexibility for AirXpanders’ product development needs. Specifically, it will be used primarily to fund the completion of the US clinical trial and implement semi-automation into the AeroForm manufacturing process to increase throughput as the company seeks to file for 510(k) clearance in the US Outside the US, the company will initiate a limited market release in Australia, following Australian Therapeutic Goods Administration (TGA) approval in November 2013, in addition to conducting a key opinion leader assessment in Europe.

“We thank GE Capital for supporting the company as we work towards our goal of offering women who undergo a mastectomy a new, more convenient, needle-free option to expand tissue during breast reconstruction surgery,” said Scott Dodson, AirXpanders’ president and chief executive officer. “As we conclude our US trial and await regulatory approval, we are confident that our device will prove to be a significant advancement in breast reconstruction allowing patients greater control, convenience and a faster method of recovering their shape than the current technology provides.”

“We’re pleased to provide financing to AirXpanders, given their novel approach to tissue expansion for those who seek breast reconstruction,” said Neil Bonnano, segment leader, GE Capital, Healthcare Financial Services, Life Sciences. “We’re excited to support such a promising company through its development phase.”

AirXpanders Inc. is a tissue-expansion company focused on the area of breast cancer reconstruction. By employing a revolutionary patient-controlled expander, activated by a wireless remote control, the often painful process of recovering one’s feminine shape after cancer can potentially be eased with this needle-free technology that is easy to use and may enable the patient to proceed to a permanent implant much faster than the current standard-of-care. At this time, AirXpanders’ products are not cleared or approved for sale in the United States. AirXpanders is backed by Vivo Ventures, GBS Venture Partners, Prolog Ventures, Heron Capital and Shalon Ventures.

With in-depth industry knowledge and expertise, GE Capital, Healthcare Financial Services has provided more than $65 billion in financing over ten years to companies in 45 healthcare sectors including senior housing, hospitals, medical offices, outpatient services, pharmaceuticals and medical devices. Our team of professionals creates business and financial solutions tailored to meet the individual needs of our customers.

First ever program launched to help Northlanders build credit scores

by Shelton on May 1st, 2014

filed under Credit Scores

April 2, 2014

Updated Apr 2, 2014 at 10:09 PM CDT

Duluth, MN ( — Whether youre in debt, looking for a loan, or just trying to build your credit score, a new program launched today in the Northland will help you do just that.

The new Credit Builder Program, launched Wednesday at Park State Bank in Duluth, is designed to help consumers build credit for the first time or improve damaged credit scores.

Clarifying credit: Scores are more easily seen but still confusing to consumers

by Shelton on May 1st, 2014

filed under Credit Scores

Fargo — Whenever Morgan Almer, a financial counselor at the Village Family Service Center, gives a presentation, the topic inevitably turns to credit scores.

“Everybody is hung up on this score,” Almer says. “It’s starting to tie into everything.”

Beyond just affecting your ability to get financing or the terms of your loan, credit scores are often looked at by potential employers, landlords and insurance companies.

“It’s an indication of how you handle your money,” Almer said.

Consumers are increasingly able to see their credit score for free. But even when consumers know their FICO score – a number between 300 and 850 – they don’t always know what it means, or how to increase it.

Paul Jarvis, managing director at United Capital in Fargo, said people seem to pay more attention to their score at times of life changes, such as a divorce.

“That’s reactionary … rather than having a plan and proper education around it to prepare you for the need for credit and the need for higher scoring,” Jarvis said.

A credit score is based on your credit history, including your payment record, amounts owed, length of credit history, new credit and types of credit used. It takes time for positive actions to improve a score.

Generally, a score of 700 or above is considered good, Almer said. An extremely high score isn’t necessarily any better than a high one, he said.

For example, in the mortgage world at least, a 740-plus is the “crème de la crème,” Almer said. Someone with a 741 will be treated the same as someone with an 820, he said.

A 600 or below is a poor score, Almer said. Most lenders use 620 as their cut-off, he said.

Credit card companies were urged by the Consumer Financial Protection Bureau to start offering free scores to their customers. It’s now included on Discover’s monthly statements.

Several websites offer free scores, though some may not be truly free. Almer recommends

Or, you can pay $20 to see their FICO score, the mostly commonly used number, at

Jarvis suggests checking your score, as well as your credit report, six months to a year before a major purchase like a home. This gives the consumer time to review it for inaccuracies and correct any.

Paying accounts on time, not using too much of your available credit, and a long history all aid your score.

“Resist the urge to bounce from card to card or chase teaser rates,” Jarvis said.

When shopping around for interest rates, do so in a 14-day window, Jarvis suggested. “FICO distinguishes between a search for a single, new loan versus many new credit lines.”

Sometimes people may make poor financial decisions in the name of their credit score.

“Some people assume ‘I have to carry a balance on my card and make a payment because it’s good for my score,'” Almer said. “You don’t need to carry a balance.”

Just use the card occasionally and pay it off on time, he said.

Closing a credit card account can ding your score, but that may be the best option for someone trying to get out of debt who can’t control the urge to use the card.

“We’re almost to a mentality of people being fearful of not having a credit card,” Almer said. “What is really the goal? The credit score or paying off the debt?

“I’d rather see you have a little lower score and no debt than an average score with tons of debt,” he added.

Almer has had people for whom bankruptcy is best worry how it will affect their score.

“Usually somebody in that situation, the credit is not so good,” he said. “Bankruptcy might improve their credit quicker.”

The Star Tribune (Minneapolis) contributed to this report.

Readers can reach Forum Business Editor

Sherri Richards at (701) 241-5556