Are medical bill collection accounts buried away inside millions of consumers’ credit files — even bills that were fully paid or settled years ago — functioning as a drag on the housing market?

That might sound far-fetched, yet some credit and mortgage industry experts say negative medical collection records are playing a little-recognized but significant role in depressing otherwise creditworthy loan applicants’ scores. Lower scores, in turn, are disqualifying borrowers from getting mortgages in today’s toughened underwriting climate or forcing them to pay higher interest rates, fees and down payments.

According to a 2008 study by the non-profit Commonwealth Fund, an estimated 28 million Americans were contacted by collection agencies on medical debt issues during a two-year period and 72 million reported difficulties in paying outstanding medical bills. [more]

Should being pregnant and taking maternity leave ever constitute reasons to be turned down for a home mortgage or having your loan closing postponed?
You might think not, but two new legal actions by federal fair lending regulators suggest that the mortgage industry — and even federally run financing giants Fannie Mae and Freddie Mac — may need to address the issue.
In one case, a Seattle-area physician settled a discrimination complaint with Cornerstone Mortgage Co., a national mortgage banking firm based in Houston. In the second, the Department of Housing and Urban Development accused MGIC, one of the country’s highest-volume mortgage insurers, of discrimination by underwriters against a Pennsylvania homeowner whose application allegedly was denied because she was on maternity leave. [more]

Are banks and distressed home sellers getting rooked on a massive scale in the booming short-sale
arena — leaving hundreds of millions of dollars on the table for white-collar criminals?

A comprehensive new study estimates they will lose more than $375 million this year alone when they
sell undervalued houses to tag teams consisting of real estate agents and investors. Worse yet, the trend
appears to be growing at the rate of 25 percent a year.

CoreLogic, a large real estate and mortgage data research firm headquartered in Santa Ana, Calif.,
studied 450,000 short-sale transactions across the country during the past two years, and offered these
real-life examples of how lenders are losing big bucks: [more]

What if the federal government spent years designing a tool to help consumers shop intelligently for mortgages — comparing lenders’ rates, terms and total settlement costs — but consumers ignored it or didn’t use it?

No need to speculate here; it appears to have already happened. A new survey of 1,000 American consumers suggests that the “good-faith estimate” disclosures that all homebuyers and refinancers receive at loan application to facilitate shopping are not getting the job done.

Federally mandated good-faith estimates spell out the lender’s charges, all anticipated fees for title insurance, escrow and settlement services, plus other key costs. The most recent version of the GFE, released at the beginning of last year, contains space for consumers to take one lender’s estimates and get competing quotes from as many as three others. It also requires lenders to stand behind their estimates — guaranteeing that some of them won’t increase by even a penny at closing, and others won’t increase by more than 10 percent. [more]

If you’ve been looking for a way to pay for energy improvements to your house, two little-publicized new mortgage programs could provide you the cash you need.
Both the Federal Housing Administration and mortgage investor Fannie Mae recently have launched startups in the energy conservation arena. Here’s a quick overview, with some pros and cons:
FHA’s new program is called “PowerSaver” and allows eligible owners to borrow up to $25,000 at fixed rates between 5 percent and 7 percent for as long as 20 years to finance high-efficiency windows and doors, heating and ventilating systems, solar panels, geothermal systems, insulation and duct sealing, among other retrofits.
Though officially a pilot program, HUD Secretary Shaun Donovan estimates that 30,000 PowerSaver loans will be closed in the next two years. [more]

You may have seen reports that the federal government is proposing new mortgage finance rules under which only home purchasers who can afford a minimum 20 percent down payment on a conventional loan would get a shot at the best available interest rates and terms.

That is correct, and it’s deeply sobering news for large numbers of first-time and moderate-income buyers who can’t come up with that much cash or afford to pay higher rates.

But some of the other requirements that federal agencies and the Obama administration are proposing in the same plan have gotten much less attention, yet could prove just as troublesome for consumers: [more]

From the March issue: Fixed 30-year mortgage rates in the 5 percent range? Minimum down payments below 5 percent? Jumbo-size home loans for high-cost markets at regular interest rates? Kiss them good-bye — possibly sooner than you might guess. Take a snapshot of today’s mortgage market conditions and frame it. It’s highly likely you’ll never see anything like these favorable combinations of rates and terms again. That’s the inescapable conclusion emerging from the Obama administration’s “white paper” on optional remedies for the two ailing giants of housing finance — Fannie Mae and Freddie Mac — along with events already under way in the national economy. [more]

With hundreds of thousands of homeowners having negotiated loan modifications or short sales or been foreclosed upon during the past year, the Internal Revenue Service has issued fresh guidance on how to handle canceled mortgage debt in the upcoming tax season.

It’s a huge issue, widely misunderstood by consumers, and involves potentially billions of dollars of tax liability.

When most debts are canceled by a creditor, such as unpaid balances on student loans or credit cards, the forgiven amounts are treated as ordinary, taxable income by the Internal Revenue Code. But under a special exemption adopted by Congress covering distressed home mortgages, many owners can escape the ultimate double-whammy: Getting kicked while you’re down, hit with extra taxes because your mortgage went seriously delinquent or you lost your house. [more]

Just because President Barack Obama’s latest budget proposal calls for rollbacks in mortgage interest deductions solely for high-income taxpayers, should a homeowner assume that all of his or her write-offs are secure from attack? Absolutely not. In fact, those tax benefits — from capital gains exclusions to home equity and second-home interest deductions — might be more vulnerable to broad-based cutbacks during the next two years than at any time in decades.
Here’s why: An influential, bipartisan group of lawmakers on Capitol Hill — led by a so-called “gang of six” in the Senate — is drafting a legislative framework that would essentially seek to implement much of the president’s deficit-reduction commission report released last December. [more]

Thousands of homeowners associations and condominiums around the country just sidestepped a potentially costly problem: Earlier this month, a federal agency backed off its controversial plan to make obtaining mortgages in their communities much more difficult, and to dry up a key source of revenue that associations use to pay for improvements and property maintenance. A proposal last August by the Federal Housing Finance Agency would have effectively banned the covenanted transfer fees that many homeowners associations collect when houses or condos resell. Typically, the fees range anywhere from one-quarter of 1 percent of the resale price of the house to three-quarters of a percent. The revenues are then spent on anything from community improvements — upgrading roads, bike paths, recreation facilities — to building up required capital reserves. [more]