Thursday, April 28, 2011

Research looks at how mortgage delinquencies affect scores

(Courtesy of FICO™ Banking Analytics Blog)

How much impact does a short sale have on FICO® Scores? How about a foreclosure?
Since I frequently hear these questions from clients and others, I thought I’d share new FICO research that sheds light on this very subject.


The FICO study simulated various types of mortgage delinquencies on three representative credit bureau profiles of consumers scoring 680, 720 and 780, respectively. I say “representative profiles” because we focused on consumers whose credit characteristics (e.g., utilization, delinquency history, age of file) were typical of the three score points considered. All consumers had an active currently-paid-as-agreed mortgage on file.

Results are shown below. The first chart shows the impact on the score for each stage of delinquency, and the second shows how long it takes the score to fully “recover” after the fact. (Click on charts for larger view)

All in all, we saw:

  • The magnitude of FICO® Score impact is highly dependent on the starting score.
  • There's no significant difference in score impact between short sale/deed-in-lieu/settlement and foreclosure.
  • While a score may begin to improve sooner, it could take up to 7-10 years to fully recover, assuming all other obligations are paid as agreed.
  • In general, the higher starting score, the longer it takes for the score to fully recover.
  • Even if there’s minimal difference in score impact between moderate and severe delinquencies, there may be significant difference in time required for the score to fully recover.

This study provides good benchmarks of score impact from mortgage delinquencies. However, it is important to note that research was done only on select consumer credit profiles. Given the wide range of credit profiles that exist, results may vary beyond what's in the charts above.

If you have questions about this research, I encourage you to post them here on the blog.




Sunday, April 10, 2011

Appliance Maintenance: Water Heaters

Article From HouseLogic.com

By: Douglas Trattner

Published: August 20, 2010



Keep your water heater running efficiently and reliably with this simple maintenance routine.


Depending on a homeowner's water quality, a hot water heater can be expected to last eight to 12 years, says Frank Czeronka, a licensed master plumber and Mr. Rooter franchise owner. Completing the following routine maintenance schedule, however, can greatly extend the unit's lifespan.

Here's a list of maintenance tips to keep your water heater running efficiently
and reliably:


• Always adjust the thermostat to 120 degrees to avoid the risk of scalding.

• Always maintain 2 feet of clearance around the appliance unless the manual specifically states otherwise.


• Annually, flush the heater to remove the sediment and debris in the bottom of the tank. Hook up a garden hose to the drain valve and run until the water is clear. This also makes the unit operate more quietly.


• Annually, test the temperature-pressure relief valve by quickly discharging it two or three times. Following the testing, keep an eye out for small leaks from the valve.


• Every three to five years, examine the sacrificial anode rod by loosening the hex head screw and removing it. If more than six inches of the core steel wire is exposed, replace the rod for abut $20.


• Insulate older units with a fiberglass jacket to improve efficiency, being careful to avoid contact with the flue. Newer units already are optimized for peak energy efficiency.


• When leaving town, adjust the thermostat on gas heaters to "Vacation" setting, which maintains the pilot light without heating the water.



Douglas Trattner has covered household appliances and home improvement for HGTV.com, DIYNetworks, and the Cleveland Plain Dealer. During the 10-year stewardship of his 1925 Colonial, he's upgraded almost every household appliance. After lengthy deliberation, he recently replaced an aging top-load washing machine with an energy-efficient front-load unit.