Home Mortgage Information for the Portland, Oregon Metro Area

Some of the largest U.S. mortgage lenders are adapting to standards for home mortgages since the release of new guidelines in November 2014 from mortgage giants Fannie Mae and Freddie Mac . The new guidelines, took full effect on December 1, 2014 and resulted from an agreement in October meant to clarify when lenders would be penalized for making mistakes on mortgages they sell to Fannie and Freddie. Lenders have blamed the lack of clarity for tight credit conditions that have made it difficult for many consumers to qualify for a mortgage.

New Mortgage Rules Makes it Easier to Compare Loan Offers

Beginning October 3, 2015 applicants for most home mortgages received new forms from their lender that are intended to make it easier to review and compare loan offers. Along with the updated forms, new rules aimed at simplifying the borrowing process for consumers will take effect.

The new forms are supposed to make it easier for borrowers to compare loan offers and to see if the final loan terms differ significantly from the initial estimate. The change was required by the Dodd-Frank financial reform law, which directed the Consumer Financial Protection Bureau to combine and simplify older disclosure documents required by two federal laws.

Under the new rules, borrowers will receive a loan estimate, including information like the interest rate and monthly payment, within three business days of applying for a loan. If they apply to several lenders, the offers will be displayed in a similar format so the borrowers can compare terms like fees and interest rates. 

Borrowers can easily see how much each loan will cost over the first five years by comparing forms. The form was tested with consumer focus groups and went through several revisions to make it as easily comprehensible as possible.

Lenders must also give borrowers a disclosure, which details the final loan terms and summarizes the transaction, three business days before the closing. Borrowers can compare the disclosure with their initial loan estimate to see any changes.

The bureau says that only major changes in a loan — like a switch to an adjustable-rate loan from a fixed-rate loan, a significantly higher interest rate or the addition of prepayment penalties — should require a revised disclosure, which brings another three-day waiting period.

Oregon Mortgage Closing Costs Are Low

Oregon has some of the lowest closing costs in the country associated with purchasing a home according to a study conducted by the mortgage data provider Bankrate.com, average closing costs in Oregon in 2012 are $3,509, based on origination fees of $1,480 and title and closing costs of $2,029.

That ranked Oregon number 41 among U.S. states. That’s a big jump from 2011, when the state had the 24th-highest closing costs. Missouri had the lowest average closing costs at $3,006 and New York had the highest at $5,435. Texas ranked second and Washington state was number 44.

The totals do not include taxes, other government fees and escrow fees. Bankrate determined the rankings by requesting good faith estimates for a $200,000 mortgage loan from 10 lenders in each state for a hypothetical buyer with a 20 percent down payments and excellent credit.

How The Home Mortgage Loan Process Works

For decades, the federal government has subsidized housing — particularly owner-occupied housing. This has been especially true during a financial crisis, with Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) propping up the housing market by issuing guarantees for investors on most new mortgages.

Federal subsidies for housing essentially began in the Great Depression with, among other things, the creation of the FHA in 1934 and Fannie Mae in 1938. Fannie is a government-sponsored enterprise (GSE), and in 1968 it became a publicly traded company. It all started for a simple reason: during the depression more than a third of all the unemployed were identified, directly or indirectly, with the building trades. At the time, there seemed to be no way to reduce unemployment without stimulating housing, and much the same is true today.

The Three Government Sponsored Enterprises (GSEs):

  • Fannie Mae  Fannie Mae was established to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing. Fannie Mae created a liquid secondary mortgage market and thereby made it possible for banks and other loan originators to issue more housing loans, primarily by buying Federal Housing Administration (FHA) insured mortgages. For the first thirty years following its inception, Fannie Mae held a monopoly over the secondary mortgage market. In 1954, an amendment known as the Federal National Mortgage Association Charter Act made Fannie Mae into “mixed-ownership corporation” meaning that federal government held the preferred stock while private investors held the common stock; in 1968 it converted to a publicly held corporation, to remove its activity and debt from the federal budget.
  • Ginnie Mae  In the 1968 change, Fannie Mae’s predecessor (also called Fannie Mae) was split into the current Fannie Mae and the Government National Mortgage Association (“Ginnie Mae”). Ginnie Mae, which remained a government organization, supports FHA-insured mortgages as well as Veterans Administration (VA) and Farmers Home Administration (FmHA) insured mortgages, with the full faith and credit of the United States government.
  • Freddie Mae  In 1970, the federal government authorized Fannie Mae to purchase private mortgages, i.e. those not insured by the FHA, VA, or FmHA, and created the Federal Home Loan Mortgage Corporation (FHLMC), colloquially known as Freddie Mac, to compete with Fannie Mae and thus facilitate a more robust and efficient secondary mortgage market.

In most cases, lenders sell your mortgage loan to Fannie Mae Mae and Freddie Mac, which repackage them as securities for sale to investors. These two private shareholder-owned corporations (operating under a congressional charter) guarantee trillions in mortgages. The government does not guarantee the debt issued by Fannie and Freddie like it does with Ginnie Mae.  It does provide the companies with some special privileges, including exemption from state and local taxes. In 2008, the two institutions held or guarantee about $5.3 trillion in home-mortgage debt.

Mortgage Scandal of 2004-2006

Prior to the mortgage scandal of the 2000s, Fannie and Freddie had relatively strict guidelines for the loans they purchased but along with many lenders, dropped the ball in the mortgage mess (2004-2006) and started buying NINJA (No Income, No Job and Assets) home loans.

Many of the big names in banking schemed to create great masses of junk subprime loans and then disguise them as AAA-rated paper for sale to big private investors and institutions like state pension funds and union funds. To recap the crime: the banks lent money to firms like Countrywide, who in turn created billions in dicey loans, who then sold them back to the banks, who chopped them up and sold them to, among other things, to foreign investors and your state’s worker retirement funds.

Along the road to this shame, a great many other, sometimes smaller offenses were committed. One involved the use of the MERS the electronic registration system. By law, banks were supposed to register with county-level offices in each state every time they sold or resold a mortgage, and pay fees each time. But they didn’t, instead registering with the private deed-transfer agency MERS, allowing them to systematically, and illegally, bypass local taxes.

The Federal Housing Finance Agency oversees Fannie and Freddie. Their failure to regulate the two organizations resulted in the the collapse of Fannie and Freddie so the federal government had to take them over in 2008. This means that additional losses are shouldered by taxpayers. The government could have fully nationalized and liquidated the companies. But if it did so, the government would have been legally deemed the owner or guarantor of the debt. As part of all of this, the government lent the two entities almost $200 billion and received a right to acquire 79.9 percent of each company’s stock.

To avoid having to put the two companies on the government’s balance sheet, the Treasury Department decided instead to put the two into a legal status known as a conservatorship. Fannie Mae and Freddie Mac were placed under the supervision of their regulator. Despite being public wards, the companies have been largely run like private businesses, including paying their executives millions of dollars in compensation. In 2004 shares of both traded above $70. In April of 2013 their shares are under $1.

There was one exception, however. The government changed them from commercial entities with a goal of making money for stockholders into quasi-public service companies intended to help the housing mortgage market function. The government also expressly stated its goal was to eliminate the two companies and replace them with a new system of mortgage finance.

The federal government has agreements with both Fannie Mae and Freddie Mac that say that through 2017 they will turn over a set measure of profits to the government. After that, they will give all of their profits to the government

Your Credit Score

In the United States, a credit score is a number based on a statistical analysis of a person’s credit files, that in theory represents the creditworthiness of that person, which is the likelihood that people will pay their bills. A credit score is primarily based on credit report information, typically from one of the three major credit bureaus: Experian, TransUnion, and Equifax. Income is not considered by the major credit bureaus when calculating a credit score.

There are different methods of calculating credit scores. FICO score, the most widely known type of credit score, is a credit score developed by FICO, previously known as Fair Isaac Corporation. The credit bureaus all have their own credit scores: Equifax‘s ScorePower, Experian‘s PLUS score, and TransUnion‘s credit score. 

The generic FICO credit score ranges between 300 and 850. It is used by many mortgage lenders that use a risk-based system to determine the possibility that the borrower may default on financial obligations to the mortgage lender.

Below are the three major credit reporting companies:

Free Credit Report But No Credit Score

Americans are entitled to one free credit report within a 12-month period from each of the three credit bureaus, but are not entitled to receive a free credit score. The three credit bureaus run annualcreditreport.com, where users can get their free credit reports. Credit scores are available as an add-on feature of the report for a fee. This fee is usually around $10, as the FTC regulates this charge, and the credit bureaus are not allowed to charge an exorbitant fee for their credit score. There are many sites masquerading as this free, federally mandated site, so make sure that you enter the URL correctly. You may be pitched credit scores or other products by the credit bureaus while you’re on this site, but you won’t be required to give a credit card number to get your free reports. (If the site is demanding that you give your credit card number, you’re at the wrong site.)

Consumer Reports suggests that you review your FICO scores and credit reports several months before applying for a loan. They also recommend that you buy your reports and scores at www.myfico.com and order the $54.85 FICO Score 3-Report View. If you have a spouse, you should order separate credit reports.  Even if you’ve been married for a long time and share a credit history.

Factors That Lenders Weigh When Examining a Buyer’s Credit Report

Lending institutions — in conjunction with Fannie Mae and the Federal Home Loan Mortgage Corporation — have based loan decisions on credit scores that are provided by the credit bureaus.  Factors:

  • Level of delinquency (30, 60, 90 day late).
  • Derogatory public record (lawsuits or legal judgment) or collections files.
  • Proportion of balances to credit limits.
  • Length of time accounts have been established.
  • Too many inquiries from creditors in the last 12 months.

This can mean that even if you have perfect credit, are never late with payments, but have all your credit cards at their maximum and you keep moving them to get lower rates and not closing them, your scores could be the same as the person with minimal credit and a few small collections in the past.

The site where you can get reports entirely free is AnnualCreditReport.com — you can also call 877-322-8228. But the most logical address — FreeCreditReport.com — belongs to Experian Information Solutions Inc., one of the credit bureaus. You can indeed go to that site, get a credit report and, for an extra $1, your credit score. But unless you read the fine print, you might not know that when you enter your credit card information, you also sign up for Experian’s credit-monitoring program. That will cost you $14.95 a month. It will be deducted right from your card account, unless you cancel within a seven-day trial period.

March 2015:  TransUnion, Equifax and Experian Agree to Overhaul Credit Reporting Practices

In March 2015 the New York Times reported that the nation’s credit reporting agencies — which keep records on more than 200 million individuals and influence their ability to obtain credit — have agreed to overhaul their approach to fixing errors and their treatment of medical debts on consumers’ reports. The New York State attorney general reached settlement with the agencies, affecting consumers nationwide.

Even though consumers are entitled to dispute any inaccurate information in their credit reports, the entire process has been criticized by consumer advocates for years: The bureaus often outsource thousands of disputes daily to workers overseas who generally are told to translate the problem into a two- or three-digit code that is fed into a computer; the code and any documentation are sent to the creditor. If the creditor verifies the information, no further investigation takes place. Now, those automatic rejections will no longer be tolerated. And specially trained employees will have to review all supporting documentation submitted by consumers involving mixed credit files — in which a consumers’ file is blended with another person’s report — fraud or identity theft.

Below are some of the changes:

  • The three companies will establish a six-month waiting period before reporting medical debts on consumers’ credit reports, providing more time for consumers to resolve issues that might amount only to a delayed insurance payment or another dispute. The credit agencies will also remove medical debts from an individual’s report after the debt is paid by insurance.
  • Additionally, the credit reporting bureaus will take steps to make consumers aware that their credit reports are available free at least once a year from each of the credit agencies through the website annualcreditreport.com. The agencies will now have to include links to that website on their home pages, as well as provide another free report to consumers who experience a change in their credit reports after initiating a dispute.
  • Requiring the credit bureaus to wait 180 days to list any delinquent medical debt on credit reports is another victory for consumers.
  • The settlement also prohibits collection companies from reporting items that did not arise from a contract or an agreement to pay, including items like fines or tickets.

The settlement requires the agencies to introduce the changes, which the bureaus said would be instituted nationwide, over three years. But most changes will be carried out over the next six to 18 months, according to the Consumer Data Industry Association, a trade group that represents the credit bureaus.

Homeowners Assistance Programs: First-Time Home Buyers

Oregon Home and Community Services (OHCS) is Oregon’s “state housing finance agency.” The Department periodically issues mortgage revenue bonds to fund lower than market interest rate mortgage loans for below-median income homebuyers in Oregon.  OHCS helps low and moderate income households in Oregon buy their first home by providing below-market rate financing and cash assistance through our Residential Loan Program, also known as the “Oregon Bond Loan”. The program’s below-market rate helps eligible families increase their home purchasing power and lower their monthly house payments to be affordable.

A qualified home buyer cannot have an annualized gross household income exceeding the following income limits: $58,600 statewide; $67,400 in Benton; and $67,900 if the property being purchased is located in Clackamas, Columbia, Multnomah, Washington, or Yamhill counties (effective 2/27/04). They must be a first-time homebuyer or not have owned and occupied a primary residence during the three-year period prior to the date the note and mortgage is signed.  This requirement is waived if they are purchasing in a targeted area. A qualified homebuyer must be (or intend to be) an Oregon resident, and must agree to occupy the home being purchased as their primary residence. An Applicant may not have been discharged from a bankruptcy within the past two years or had a real estate foreclosure within the last five years prior to closing the program loan.

When you contact a mortgage broker or lender, make certain you inquire about the Oregon Homeowner Assistance Programs and make certain they are willing to participate if you are eligible.

Mortgage Resources

  • Common Mortgage Terms  From Interest.com — other useful information about mortgages is also available on this site.
  • Compare Interest Rates  Find the best mortgages at the lowest interest rates.  Search for current mortgage interest rates from lenders and brokers nationwide.
  • Consumer Finance Protection Bureau  The mission of CFPB is to make markets for consumer financial products and services work for Americans — whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.
  • Freddie Mac  Visit this site for information about home buying.  Freddie Mac is private shareholder-owned corporations operating under a congressional charter.
  • National Mortgage Settlement  In February 2012 the U.S. states reached a $25 billion deal with the nation’s biggest mortgage lenders over foreclosure abuses that occurred after the housing bubble burst. Under the agreement, five major banks — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — will reduce loans for nearly 1 million households. They will also send checks of $2,000 to about 750,000 Americans who were improperly foreclosed upon.
  • Oregon Association of Mortgage Professionals  The Oregon Association of Mortgage Professionals (OAMP) represents the mortgage industry of more than 10,000 individuals in Oregon.  They promote the mortgage industry through programs and services such as education, government affairs representation, networking events, and local chapters.
  • Oregon Foreclosure Avoidance Program  The new program began on August 4, 2013. This facilitation program brings homeowners and lenders together with a facilitator to find a mutually agreeable resolution aimed at avoiding foreclosure.
  • US Environmental Protection Agency Energy Star Program  Information about home energy.
  • US Department of Housing and Urban Development  Information for first-time home buyers.