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Risked Based Credit Replacing Subprime Loans

Like conventional lending, subprime mortgage loans have always been evaluated based on your credit score, combined loan to value and debt to income ratio, the rate was always significantly higher. Most brokers would recommend the refinance mortgages that make the most sense financially based on your present and future needs. Choose refinancing from conventional, government, second mortgage loans and credit line terms.  For home loan applicants, it has been a six-year wait, but the Federal Trade Commission and the Federal Reserve finally have come out with important consumer credit protection rules first required by Congress in 2003.

In late December, the two agencies published regulations designed to safeguard loan applicants from needless overcharges on interest rates caused by erroneous or outdated information in their national credit bureau files. The rules require mortgage lenders to alert consumers whenever derogatory credit data cause them to be charged higher rates, higher down payments or less than optimal terms on a “risk-based pricing” system. Risk-based pricing tied to credit scores is standard practice for home mortgages, credit cards, auto loans and most other financial products offered to the public.  Generally, the higher your credit score, the lower the rates and fees you’re quoted. In most cases, the lower your credit score, the higher your costs of credit.   The problem, though, is that credit bureau files sometimes contain junk entries mistaken or outdated reports of late payments, unpaid bills, charge-offs and judgments that can severely depress credit scores. This is one of the reasons the credit repair industry continues to grow.  > Read the complete Washington Post article online.

Posted in Bad Credit Mortgage, Mortgage News, Published Article, Risk Based Mortgage Lending, Subprime mortgage news.

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