Mortgages

WHEN ROBOTS PROCESS YOUR HOME LOAN

AI’s Role in the Mortgage Industry

BY TANYA SVOBODAMarch 2020

Artificial Intelligence (AI) is no longer a futuristic, sci-fi concept. In fact, it’s likely you’re already interacting with AI every day without realizing it. You use “supervised AI” when you ask Siri to provide driving directions. It’s supervised because your human prompt sets off an automated process.

If you own a Roomba or a self-parking car, AI is also doing something called “unsupervised AI”. Your Roomba is quite literally learning the measurements of your home and then applying that knowledge to alter its behavior. It’s making decisions and taking action, without any prompt from you. The AI in your self-parking car takes things a step further by using machine learning to differentiate between a car, person or tree when backing into a space. Pretty wild.

AI is also playing a role in your homeownership journey, especially when it comes to your loan approval process. Housing Wire predicts that by the end of 2020 most mortgage applications will involve unsupervised AI, with little to no human interaction. From beginning to end, your entire loan approval process could be handled entirely by AI.

So what does the increasing use of technology in loan processing mean for home loan applicants? If all goes as predicted, it means faster processing and more comprehensive approval criteria. Below are two big examples.AI SPEEDS UP THE HOME LOAN PROCESS

The Forbes article “AI Is Coming To Take Your Mortgage Woes Away” discusses how labor-intensive applying for a home loan can be for prospective buyers. Applicants need to gather “two years’ worth of tax returns, W-2s, bank statements, copies of identification plus any name changes, proof of other income, and so on.”

On the flip side, lenders need to organize input and evaluate all the information you dug out of file cabinets in order to determine if you qualify. AI was built to take on the burden of labor-intensive data, doing it faster and more accurately than your loan processor could. “For instance, while right now you could expect to wait about three weeks for a mortgage application to be approved, AI will probably reduce that to one day within a few years.”AI CAN LOOK AT MORE THAN JUST YOUR FICO SCORE

Because AI is able to capture and analyze massive amounts of data by itself – it can expand the parameters of your loan approval process. Historically, your home loan approval has been heavily based on your three-digit FICO score. The problem is that FICO is just one part of the picture when it comes to determining creditworthiness. Forbes writes that, “Mortgage applicants are complex people whose ability to pay their home mortgage is best foretold by looking at the whole mosaic of their lives.”

Making FICO the primary decision-maker when it comes to mortgage approval can also discriminate against minority applicants. Matt Diffanis, past President of Illinois REALTORS® and fair housing advocate explains, “FICO score minimums tend to disadvantage those who don’t use credit (e.g., immigrants who use cash or borrow from family and friends, leaving no credit footprint) or a black renter whose FICO score is low due to medical collection, but who has a spotless rental and utility payment history.”

The National Association of REALTORS® (NAR) agrees that homeownership shouldn’t be out of reach for low-income, rural and minority borrowers who lack access to traditional forms of credit. NAR supports ongoing efforts to take into account consumer payment history not typically considered, such as rent, utility, telephone, and other regular payments and urges regulators, the Consumer Financial Protection Bureau (CFPB), the Government-Sponsored Enterprises (GSEs), and lenders to work to strengthen these efforts.WILL THE NUMBER OF SELFIES YOU TAKE IMPACT YOUR HOME LOAN APPROVAL?

Presently, there is not an across-the-board standard that lays out what the next level of data AI should be looking at during the approval process. It’s a bit of a wild west right now, with startups like LenddoEFL and Zestfinance creating algorithms that explore very new ways to determine creditworthiness.

MarketWatch’s article “How artificial intelligence could replace credit scores and reshape how we get loans” explains how in addition to your financial data, Lenddo NFL’s AI also looks at your online and smartphone behavior.

“Whether you avoid one-word subject lines (meaning you care about details) and regularly use financial apps on your smartphone (meaning you take your finances seriously). Lenddo also looks at the ratio of smartphone photos in your library that were taken with a front-facing camera, since selfies indicate youth, helping the company divide people into customer segments.”WHAT’S NEXT?

Up until now most of the AI that the banking industry has relied on has primarily been supervised AI. The mortgage processor inputs the data that they have determined is the most important. And a human-dictated process called an algorithm is created, instructing the AI on how to process the data that has been entered. AI is rapidly speeding up the number crunching to shorten the time it takes to get a mortgage approved – but overall, it’s not making decisions by itself.

However, with AI’s capacity to objectively look at more data than we could ever imagine getting our heads around, unsupervised AI is coming soon. Your home loan may be approved without any human interaction at all, making the process even faster and more objective. The vast amount of data that AI can access will likely also influence which parameters the banking industry uses to determine your creditworthiness in the future.

Mortgage Closing At Risk

www-cnbc-com.cdn.ampproject.org/c/s/www.cnbc.com/amp/2020/03/24/mortgage-closings-at-risk-as-coronavirus-shutters-title-offices.html

Did You Know That Title Is An Insurance?

Insurance of all types is crucial for the smooth functioning of real estate markets. Most mortgage financing is insured, through private mortgage insurers or public insurers like FHA, the U.S. Department of Veterans Affairs, and the Rural Housing Service. In addition, securities collateralized by mortgages—known as mortgage-backed securities—are backed by the federal government, through Fannie Mae, Freddie Mac, and, in the case of federally insured loans,  Ginnie Mae. Other types of insurance are important in real estate: title insurance, which protects lenders should questions arise about the ownership of a piece of property, flood insurance, which is required in flood-prone areas and is almost entirely provided through the federal government, and other types of disaster insurance and home warranty insurance. In addition, real estate professionals are themselves consumers of insurance, mainly errors & omissions (E&O) insurance, which helps protect them in the event they’re sued.

Real estate professionals often must buy their own health insurance, since, as independent contractors, they don’t get insurance through an employer.

FICO Corp. Under DOJ Scrutiny

March 17, 2020

The Department of Justice will be conducting a civil investigation into FICO Corp.—the company formerly known as Fair Isaac Corp. that calculates credit scores–over alleged “exclusionary conduct” claims. While few details of the investigation have been released, HousingWire reports that “exclusionary conduct” typically refers to an investigation over a company’s activities that have led to market dominance in a particular area.

No information has been released yet on what area of lending or credit system the DOJ is investigating with FICO. However, FICO has emerged as a dominant credit score model used by mortgage lenders. Mortgage financing giants Fannie Mae and Freddie Mac use the FICO credit score model in mortgage underwriting.

One of the main competitors to FICO scores is VantageScore, which was created by the three largest credit bureaus (Equifax, Experian, and Transunion).

“FICO intends to fully cooperate with the Department of Justice and looks forward to a constructive dialogue about the state of competition in our industry,” the company said in a statement. “Lenders have multiple choices of analytic models to use in credit decisions and are free to choose the credit score that works best for them.”

Lenders choose which credit scoring to use for a loan application, so consumers are unlikely to notice any noticeable changes initially, Bankrate.com reports on the investigation.

The DOJ has not released a comment on the pending investigation.

FICO Corp. and the three credit credit bureaus have had a litigious past. In 2006, Fair Isaac sued Experian, Equifax, and TransUnion over VantageScore, alleging antitrust violations. A federal judge sided with the defendants, saying VantageScore did not violate trademarks or engage in unfair competition against Fair Isaac. In 2017, Fair Isaac sued TransUnion, alleging breach of contract, copyright infringement, and other allegations. TransUnion countersued, alleging antitrust violations against Fair Isaac. A Chicago federal judge ruled that TransUnion could move forward with its antitrust allegations.

Fair Isaac’s statement this week on the DOJ’s action refers to past legal battles with TransUnion.

“FICO is confident the Department will conclude that it has not engaged in any exclusionary conduct,” FICO’s statement reads. “To the extend the Department’s inquiry was initiated based on TransUnion’s antitrust claims in the parties’ ongoing private litigation—claims TransUnion made only after FICO filed its lawsuit to recover millions in royalties from TransUnion—we are equally confident the department will find them to be without merit.”Source: “Credit Scoring Firm FICO Hit With DOJ Antitrust Investigation,” Bankrate.com (March 16, 2020)and “DOJ Investigating FICO’s Dominance in Credit Market,” HousingWire (March 16, 2020) andComment

Michael Gould
©2020 Michaelgouldgroup.com

Need Money For Your Business

SBA Economic Disaster Assistanceu s small business administration

A New Day!

NEWS RELEASE

PRESS OFFICE

Release Date: March 17, 2020 

Release Number: 20-26

Contact: Jennifer.Kelly@sba.gov, (202) 205-7036

Follow us on Twitter, Facebook, Blogs & Instagram

SBA Updates Criteria on States for Requesting Disaster Assistance Loans for Small Businesses Impacted by Coronavirus (COVID-19)

WASHINGTON –Today, as part of the Trump Administration’s aggressive, whole-of-government efforts to combat the Coronavirus outbreak (COVID-19) and minimize economic disruption to the nation’s 30 million small businesses, U.S. Small Business Administration Administrator Jovita Carranzaissued revised criteria for states or territories seeking an economic injury declaration related to Coronavirus (COVID-19). The relaxed criteria will have two immediate impacts:

  • Faster, Easier Qualification Process for States Seeking SBA Disaster Assistance. Historically, the SBA has required that any state or territory impacted by disaster provide documentation certifying that at least five small businesses have suffered substantial economic injury as a result of a disaster, with at least one business located in each declared county/parish. Under the just-released, revised criteria, states or territories are only required to certify that at least five small businesses within the state/territory have suffered substantial economic injury, regardless of where those businesses are located.
  • Expanded, Statewide Access to SBA Disaster Assistance Loans for Small Businesses. SBA disaster assistance loans are typically only available to small businesses within counties identified as disaster areas by a Governor. Under the revised criteria issued today, disaster assistance loans will be available statewide following an economic injury declaration. This will apply to current and future disaster assistance declarations related to Coronavirus. 

“We’re very encouraged that banks and financial institutions are responding to the President’s efforts to mobilize an unprecedented public-private response to the Coronavirus (COVID-19) outbreak. As a result, most small businesses that need credit during these uncertain times will be able to obtain it. However, our goal is to ensure that credit is available to any and all small businesses that need credit but are unable to access it on reasonable terms through traditional lending channels,” said Administrator Carranza. “To that end, the SBA is relaxing the criteria through which states or territories may formally request an economic injury declaration, effective immediately. Furthermore, once an economic injury declaration has been made in a state or territory, the new rules allow the affected small businesses within the state or territory to apply for a disaster assistance loan.” SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance for each affected small business. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. Process for Accessing SBA’s Coronavirus (COVID-19) Disaster Relief Lending

  • The U.S. Small Business Administration is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19). Upon a request received from a state’s or territory’s Governor, SBA will issue under its own authority, as provided by the Coronavirus Preparedness and Response Supplemental Appropriations Act that was recently signed by the President, an Economic Injury Disaster Loan declaration.
  • Any such Economic Injury Disaster Loan assistance declaration issued by the SBA makes loans available statewide to small businesses and private, non-profit organizations to help alleviate economic injury caused by the Coronavirus (COVID-19).
  • SBA’s Office of Disaster Assistance will coordinate with the state’s or territory’s Governor to submit the request for Economic Injury Disaster Loan assistance.
  • Once a declaration is made, the information on the application process for Economic Injury Disaster Loan assistance will be made available to affected small businesses within the state.
  • These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
  • SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
  • SBA’s Economic Injury Disaster Loans are just one piece of the expanded focus of the federal government’s coordinated response, and the SBA is strongly committed to providing the most effective and customer-focused response possible.

For additional information, please visit the SBA disaster assistance website at SBA.gov/Disaster.

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About the U.S. Small Business Administration

The U.S. Small Business Administration makes the American dream of business ownership a reality. As the only go-to resource and voice for small businesses backed by the strength of the federal government, the SBA empowers entrepreneurs and small business owners with the resources and support they need to start, grow or expand their businesses, or recover from a declared disaster. It delivers services through an extensive network of SBA field offices and partnerships with public and private organizations. To learn more, visit www.sba.gov.

Your Landlord Was Foreclosed On. Now What?

Tenants: Your Rights When Your Landlord is Foreclosed On

Authored By: Legal Services Alabama LSC Funded

Information

Are you renting an apartment or home that’s in foreclosure? The laws that protect you have changed. Know your rights..

My landlord got a foreclosure notice. What happens to me?

  • Nothing right away.
  • Even if you get a copy of the notice, it is not like an eviction notice.
  • The notice means that your landlord has to pay off the debt on the house, or the house will be put up for auction.

How does a foreclosure happen?

  • If your landlord doesn’t work something out with the lender (the bank), the house may be sold at an auction, usually on the courthouse steps.
  • Usually the bank makes the only bid and buys the house. Sometimes, someone else steps in and buys.

If my rental home is up for foreclosure sale, do I still owe rent?

  • Yes. Your lease is still a binding contract. You should keep making your rent payments to your landlord until you learn that someone else bought the house at the foreclosure sale.
  • If you do not pay your rent, your landlord may be able to evict you.
  • The bank’s lawyer will usually send you a letter letting you know that the house was sold. That letter will tell you the new owner.

What should I do when I get the letter?

  • You should get in touch with the new owner to let them know you are living in the home.
  • You may also want to give the new owner a copy of your lease.

Can the new owner make me leave right away?

  • No. The new owner needs to end your tenancy before they can evict you.
  • If your lease has not expired, you may be able to stay until the end of the lease term. You would have to pay your rent to the new owner each month.
  • If you stop paying your rent, the new owner can end your lease by sending you a seven-day notice.
  • The new owner may pursue a lawsuit against you to evict you from the property if you refuse to leave after your lease ends.

What if my lease is ending and I want to stay longer?

  • Unfortunately, a federal law that protected tenants in foreclosed properties ended at the end of 2014.
  • If your lease was signed on or after January 1, 2015:
    • The new owner will need to file an eviction lawsuit against you if you choose not to leave.
    • You will be served with the lawsuit. You will need to respond to it within seven (7) calendar days.
    • Go to court on the date the court sets for trial. Expect that trial will happen about two weeks after you file your answer.
    • You will have the chance to talk to the judge about why you want to stay in the home. Bring a copy of your lease to court with you.
    • You will also have the chance to negotiate with the new owner for a move-out date that will work for you.

What is “cash-for-keys”?

  • Often, the new owner wants to get possession of the house quickly. To get you to move, the owner is willing to pay you money if you move out by a specific date.
  • Often, new owners offer between $500 and $2,000 for moving within a set time – generally a month or less.
  • “Cash for keys” means you do not get the cash until you hand over the keys. This usually means you will need to pay for your own moving costs in advance.
  • You must weigh the costs and benefits of agreeing to such an offer.
  • If you agree on a price with the property owner, ask for an agreement in writing. Keep a copy for your own records.

Can I get my security deposit back?

  • If you paid all your rent and caused no damage, yes. The new owner must return your security deposit.
  • Request a walk-through and make sure that you leave the premises in good condition.
  • Take pictures of the home as proof.
  • If you can’t get the new owner to hand you a check, mail a certified letter to the owner giving an address where they can send your security deposit.
  • If your security deposit is not returned, you can sue in Small Claims Court.

What if I am a Section 8 tenant?

  • You have additional protections.
  • Call your Section 8 worker.

If you have questions, please call Legal Services Alabama Toll-Free 1-866-456-4995 or call your local Legal Services Alabama office.

AlabamaLegalHelp.org offers legal information, not legal advice. This website provides information on your rights and options. However, the site does not apply the law to your personal facts. For legal advice, you should call a lawyer. To apply for free legal services in Alabama, call the Legal Services Alabama office that is closest to where you live OR call toll-free 1-866-456-4995. You can also apply online HERE.Last Review and Update: Nov 21, 2019

The Red Door!

Veterans

VETERAN INFORMATION

Veteran Information

What is HUDVet?

HUDVet facilitates collaboration among Federal agencies and veteran-serving organizations regarding programs for veterans of the U.S. Armed Forces. Contact hudvet@hud.gov.

What Information Does HUD Provide?

  • HUDVet’s State and Local Resources directory (Excel 543 KB) assists the coordination of community-based Continuum of Care services for veterans who are homeless.
  • HUDVet’s National Resources list (PDF) provides links and contact information for many of the organizations that impact and serve veterans nationally.

What’s New?

For the latest HUDVet news, visit the HUDVet page on the HUD Exchange.

Content current as of January 13, 2020.

 


How to Improve Your Credit

Here are eight helpful do’s and don’ts to put you on a path to a better credit score.

Source: How to Improve Your Credit

Do You Need Mortgage Relief?

Mortgage Relief Options Are Available To Homeowners Affected By Coronavirus Safety Measures

Brenda RichardsonSenior ContributorReal EstateI cover residential real estate, including buying, selling and trends.

Young female reading documents, using laptop in the kitchen at home
Hardship forbearance is an option for those who are unable to make monthly mortgage payments. GETTY

Homeowners who are facing a temporary hardship due to the coronavirus and heightened safety measures such as businesses shutting down have options to postpone mortgage payments, according to the Federal Housing Finance Agency. 

The reach of the pandemic across the nation represents a stark reminder that access to paid leave and unemployment insurance is vastly unequal in the United States. In an effort to stave off foreclosures, FHFA director Mark Calabria advised mortgage servicers this week to offer forbearance options to those who might be in jeopardy of falling behind on mortgage payments.

With this option, a lender temporarily reduces or suspends mortgage payments for up to six months while borrowers get back on their feet. Interest will still accrue and be tacked back onto the loan.

Forbearance is often combined with a reinstatement or a repayment plan to pay off the missed or reduced mortgage payments when a homeowner’s financial situation has stabilized.Today In: Real Estate

Calabria said, “To meet the needs of borrowers who may be impacted by the coronavirus, last week Fannie Mae and Freddie Mac reminded mortgage servicers that hardship forbearance is an option for borrowers who are unable to make their monthly mortgage payment. For borrowers that may be experiencing hardship, I encourage you to reach out to your servicer.”

He added that Fannie Mae, Freddie Mac and the Federal Home Loan Banks continue to provide support to the secondary mortgage market, and the Uniform Mortgage Backed Securities market continues to operate at its normal level.

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On its website, Freddie Mac said it is actively tracking news and information about the virus and making decisions based on guidance from the U.S. Centers for Disease Control and Prevention and the World Health Organization.

The public government-sponsored enterprise stated: “While we understand that the impact to borrowers may be temporary, it is still a hardship, and servicers must work with impacted borrowers who are unable to make their mortgage payments to ensure they are evaluated for a forbearance plan or other appropriate assistance.”

The Federal Housing Administration also announced mortgage payment assistance available to those affected by the virus. 

According to the FHA, “As with any other event that negatively impacts a borrower’s ability to pay their monthly mortgage payment, FHA’s suite of loss mitigation options provides solutions that mortgagees should offer to distressed borrowers, including those that could be impacted by the coronavirus, to help prevent them from going into foreclosure.”

Rather than hiding from a lender, it’s wise to reach out for help. Borrowers experiencing financial difficulty should contact their mortgage servicer immediately to find out what forbearance or hardship options might be available.

The Consumer Financial Protection Bureau’s Find a Counselor tool provides a list of counseling agencies approved by the Department of Housing and Urban Development. Homeowners can also call the HOPE Hotline, open 24 hours a day, seven days a week, at 888-995-HOPE (4673). In addition, here is a list of banks offering relief to customers affected by the coronavirus.Follow me on Twitter. Brenda Richardson

I am an award-winning journalist and former real estate editor at the Chicago Tribune, where I was cited for excellence for my work in launching and editing

Three factors hindering economic mobility in the workplace

As the human capital accumulated in the first 25 years of life becomes more important in predicting lifetime earnings, the harder it gets to break intergenerational cycles of inequality.
— Read on www.brookings.edu/blog/up-front/2020/03/12/three-factors-hindering-economic-mobility-in-the-workplace/