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Apache is functioning normally

Apache is functioning normally

Federal Reserve analysts have published a paper describing what they call the Twitter Financial Sentiment Index, or TFSI. The tool aims to gauge how investors and consumers feel by tracking  social media posts about finances and credit markets. The Fed stresses that the document’s conclusions are tentative and preliminary.

A financial advisor can help you build a long-term investment plan.

What Is the Twitter Financial Sentiment Index?

The TFSI is a new tool in development by a group of economists at the Federal Reserve. While preliminary and, as the authors stress, still tentative, this tool measures investor sentiment and the consumer marketplace based on information gathered from social media posts.

The research is titled More than Words: Twitter Chatter and Financial Market Sentiment, written by Federal Reserve economists Travis Adams, Andrea Ajello, Diego Silva and Francisco Vazquez-Grande. It’s part of a discussion series run by the Federal Reserve in which economists explore new ideas, so this research doesn’t necessarily reflect the positions of the Federal Reserve or Board of Governors themselves.

In this case, the economists behind the TFSI wanted to explore whether “social media activity [can] carry any meaningful signal on credit and financial markets’ sentiment.” Essentially, when people post about the market online, does this accurately reflect their opinions? And furthermore, can economists pull any useful data from what is, effectively, a massive, real-time survey?

To answer that question, they turned to Twitter. The economists built a real-time sentiment index that pulled more than four million single tweets from 2007 to April 2023, searching specifically for posts that contained words and phrases pulled from financial and market dictionaries. So, for example, their system might flag a tweet with the phrase “bonds” or “assets” to include in the index.

Using a natural language processor, which is software that analyzes text for what the author intended to communicate, the index gives each tweet in its database a positive or negative flag depending on how the post talks about the market. Then, in aggregate, the index produces an overall current sentiment of the market. If most of the recent tweets are talking about the market confidently, the TFSI registers a positive sentiment. If lots of people are tweeting about selling or hoarding cash, the TFSI registers a negative sentiment.

The authors say that this binary approach of positive and negative works better than trying to assess how positive or negative a given tweet seems. Their goal isn’t to judge the strength of an individual poster’s emotions, but rather to judge the overall emotional state of the market at large. And, they say, it appears to work.

What Exactly Does the TFSI Measure?

Among other sources of data, economists rely heavily on surveys and price trends to make predictions and policy assessments. Surveys like the famous University of Michigan Consumer Sentiment Index gather data by directly asking people about their financial situation and choices. Price trends measure the current prices in a market and compare them to historic patterns to make predictions about what will happen next. In both cases, economists effectively look for massive amounts of data from which to pull trends.

The TFSI takes a similar approach. It is, in effect, an always-on survey, in which the authors look for patterns in how people talk about their finances and market issues. As with all matters related to social media, though, the question is whether this information is reliable. When people post on Twitter, does it reflect their true position? According to the economists involved, the answer is yes.

What the TFSI Reveals

“We find,” wrote the authors of the index, “that the Twitter Financial Sentiment Index (TFSI) correlates highly with corporate bond spreads and other price- and survey-based measures of financial conditions.”

The authors also state that they “document that overnight Twitter financial sentiment
helps predict next day stock market returns. Most notably, we show that the index contains information that helps forecast changes in the U.S. monetary policy stance: a deterioration in Twitter financial sentiment the day ahead of an FOMC statement release predicts the size of restrictive monetary policy shocks. Finally, we document that sentiment worsens in response to an unexpected tightening of monetary policy.”

Among other correlations, they say, the TFSI has a few key uses.

First, it is quite adept at predicting next-day stock market returns. Strong real-time sentiment tends to correlate with gains in the next 24 hours, while a negative sentiment tends to precede losses. “This fact,” the authors write, “speaks to the ability of tweeted sentiment to reflect information that will later be included in stock prices once U.S. markets open.”

Second, and of more interest to economists, the TFSI “correlates highly with market-based measures of financial sentiment.” This includes indicators like bond and corporate bond spreads, as well as survey-based metrics like the Michigan sentiment index.

Potential Uses of the TFSI

This makes the new index a potentially useful tool for monetary policymaking. Based on how people discuss monetary policy and financial sentiment, the authors suggest that the TFSI can help “predict the size of restrictive monetary policy shocks.” In other words, it can “predict the market reaction around the FOMC statement release. We also find that the TFSI worsens in response to an unexpected tightening in the policy stance.”

Essentially, it can help the U.S. central bank measure how much the economy will slow down after it reduces the money supply (typically by raising interest rates).

Of course, there are limits to even the best tools. The TFSI is a new metric, and as such its results are still preliminary. It remains to be seen whether this will remain a valuable tool, especially once social media posters can access the TFSI itself, which could create a sort of feedback loop where index results begins to influence the index’s underlying data.

And the TFSI is a linear tool. It can signal whether people feel good or bad about the market, and the strength of that general sentiment but doesn’t provide context or lateral details such as whether they feel good about some issues and negative about others.

Still, in its early applications, it looks like the TFSI might have found a use for social media after all.

Bottom Line

Federal Reserve analysts have developed a tool for gauging investor and market sentiment around the bank’s policies and pronouncements. Called the Twitter Financial Sentiment Index, it measures the economy by listening to millions of tweets. According to the paper, the tool “helps predict the size of restrictive monetary policy surprises, while it is uninformative on the size of easing shocks,” when the FOMC eases its federal funds rate.

Investing Tips

  • A financial advisor can help you build a comprehensive investing plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Investors use a wide range of metrics and indices to make their decisions. Whether you’re buying assets that you’ll hold for years to come or looking to make a profit day trading, it’s worth familiarizing yourself with some of the most common, like the Consumer Price Index.

Photo credit: ©iStock.com/Douglas Rissing, ©iStock.com/Stockfoo, ©iStock.com/Caner CIFTCI

Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.

Source: smartasset.com

Apache is functioning normally

Apache is functioning normally

People inherit less than you might expect. In fact, most people think they’ll inherit far more than they really will.

If you do inherit money, it most likely won’t be subject to federal estate taxes. In 2023, those apply only to estates worth more than $12.92 million. But very few households have that level of wealth and most people inherit nothing at all. Here’s what the inheritance landscape looks like, according to the Federal Reserve’s most recent Survey of Consumer Finances from 2016 to 2019. If you need help with your estate plan or have received an inheritance, consider working with a financial advisor.

Why the Average Inheritance is Misleading

On average, American households inherit $46,200, according to the Federal Reserve data. But this figure is inflated by top-tier wealth and belies the fact that many households inherit no money at all.

Of those that do receive a bequest, most receive a small fraction of the average. The top 1% and 10% of households by wealth receive so much that their estates pull the average up. This creates the impression that many, if not most, households receive a comfortable nest egg. Very few actually do.

While less than a third of all households inherit any money, between 70% and 80% of households receive no inheritance at all.

Average Inheritance By Wealth Level

A consistent reality with inheritance is that almost all households who receive an inheritance expect more than they get. This may have to do with the prominence of estate taxes in the national debate, which creates the impression that inheritance and estates are a matter for ordinary Americans. Here’s a look at how much households with varying levels of wealth inherit.

Top 1%

Average inheritance: $719,000
Expected inheritance: $941,100

Measured by wealth, the top 1% of households receive overwhelmingly more than any other group measured. This is what causes such dramatically skewed data when it comes to measuring averages. This group receives more than four times as much as the next wealthiest cohort.

Next 9%

Average inheritance: $174,200
Expected inheritance: $266,600

The average inheritance for the remainder of the top 10% of households is significantly less than those at the very top but still considerable: $174,200. Then again, these households end up inheriting 35% less money than they expect to receive.

Next 40%

Average inheritance: $45,900
Expected inheritance: $60,100

On average, the next 40% of households receive an inheritance that’s closest to the national average. These households are also the most realistic in their expectations. All other cohorts expect vastly larger inheritances than they will receive. This swath of the population overestimates its inheritances by a relatively modest amount.

Bottom 50%

Average inheritance: $9,700
Expected inheritance: $29,400

A national average of $46,200 does nothing to communicate the fact that about half of all households who do receive an inheritance will get less than $10,000. In fact, this cohort expects to receive nearly three times what they will actually get.

The bottom half of households is the cohort that’s also least likely to receive any inheritance at all. With lower rates of college education and lower earnings, these households should not expect to share wealth among generations.

Do You Have to Pay Taxes on Inheritance?

Chances are that you won’t have to pay any taxes on money or property you inherit.
In 2023, the federal estate tax only applies to estates that transfer more than $12.92 million to beneficiaries. Keep in mind that it’s the responsibility of the decedent estate’s to pay this tax, not the person or entity that receives an inheritance.

The tax is only applied to property that exceeds the $12.92 million threshold. So if an estate is worth $13 million, only $800,000 would be subject to the federal estate tax in 2023.

Some states also charge their own estate taxes on top of the federal levy. However, a few states also tax those who receive inheritances. These levies are known as inheritance taxes and the following states have them:

  • Kentucky
  • Maryland
  • Nebraska
  • New Jersey
  • Pennsylvania
  • Iowa*

* Iowa is phasing out its inheritance tax by 2025

Bottom Line

While the average inheritance is $46,200, only a small percentage of households end up actually inheriting money. For households that do receive inheritances, the size of those windfalls can vary greatly for those in the top 1% of households compared to those in the bottom half.

Estate Planning Tips

  • Many people want to make sure they leave something behind for the next generation. If that’s you, make sure to avoid these five common estate planning mistakes.
  • A financial advisor with estate planning expertise can help guide you through the sometimes complicated process of building an estate plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/Georgijevic, ©iStock.com/stocknshares, ©iStock.com/eyetoeyePIX

Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.

Source: smartasset.com

Apache is functioning normally

Apache is functioning normally

Josh D’Amaro notices chipped paint as he passes by the entrance to the Pirates of the Caribbean ride.

“It bugs me, absolutely bugs me,” he says.

We are walking through Disneyland, and D’Amaro is on the hunt for burned-out lightbulbs, trash on walkways and anything else that can take away from the magic.

But this 52-year-old isn’t just any Disney employee (or “cast member,” as he would note).

D’Amaro is in charge of Disneyland and the 11 other Disney theme parks around the world, plus Disney Cruise Line, a timeshare business, 50 hotels, an adventure tour company and all the merchandise (think: toys, books, games and clothing) The Walt Disney Company produces and licenses globally.

Yet on this June afternoon, the chairman of Disney parks, experiences and products is obsessing over a paint chip on a little-used railing. Doesn’t one of the company’s top executives have better things to do with his time?

“Absolutely not,” he quickly shoots back. “That’s all part of the show.”

D’Amaro is one of the most powerful theme park executives in the world. He has to balance, among other things, keeping the magic and nostalgia of Walt Disney’s vision alive with innovating rides and attractions for a younger tech-savvy generation.

Not to mention, D’Amaro has the difficult task of juggling the conflicting goals of creating profits for shareholders and making a Disney vacation affordable — or, at least, within reach — for families that dream of such a trip.

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TARAH CHIEFFI/THE POINTS GUY

Disney parks are, in some ways, the ultimate aspirational trip for kids of all ages. Children dream of visiting, and Super Bowl champions have turned it into a winning catchphrase.

“This is a place for everyone,” D’Amaro says. “When you go walk around, you’ll see people from everywhere, from all walks of life.”

Yet prices keep climbing.

Disney experimented with a “Star Wars”-themed “hotel,” a one-of-a-kind immersive experience that ultimately failed due to its high cost (rates started at $5,000 for two nights). Now, the company is launching a $115,000 private jet tour that takes passengers to all 12 parks around the world, plus the Taj Mahal, the pyramids of Giza and the Eiffel Tower. It’s only open to 75 people.

“We have to have options for guests,” D’Amaro says. “I want to make sure there are as many choices presented to you as simply as they can be. You could stay at a value resort if you choose to, or you could stay at the Grand Floridian or the Grand Californian if you’d like to.”

That choice includes visiting during peak school breaks when prices are higher or on cheaper off-peak dates, though not every family has the flexibility or feels comfortable pulling their kids out of school to enjoy a less expensive ride on Space Mountain.

D’Amaro notes that there are now more days available at the lowest price (about $100 per person per day). Earlier this year, The Walt Disney Company also eliminated self-parking fees for Disney World hotel guests, a 4-year-old charge that angered many Disney fans. It represented the beginning of a multiyear era that removed some previous inclusions, such as the Magical Express bus and MagicBands, and saw the addition of new add-on charges like Genie+ and Lightning Lanes.

Related: Disney World making changes to simplify visits and bringing back a fan-favorite perk

It’s a balancing act, D’Amaro acknowledges. If the price is too low, lines will be unbearable, souring the experience for all. But if it is too high, the parks become inaccessible for a large share of the population.

“I’ll repeat the same thing I said before: We don’t always get it right,” he notes.

That led me to ask about Star Wars: Galactic Starcruiser, Disney’s attempt to turn a themed hotel into an immersive “Star Wars” drama with actors, battles and adventures that brought guests into the story and experience.

D’Amaro said he’s always pushing the park designers (known as Imagineers) to take risks and not be afraid to try something new.

“Raise the bar. Try things that the guests aren’t even asking for because they don’t know to ask for that,” he says. “I know not everything’s going to work. What did work, though, is we took creativity and storytelling to a completely new level, to a level that had never existed before. … It didn’t work commercially. And so, when we realized that, you just make a call and move on.”

So, what will become of the hotel after the last guests check out in September?

“No hints yet,” D’Amaro says, smiling, “but something will happen.”

SCOTT MAYEROWITZ/THE POINTS GUY

There are few people as close to Disney’s evolution as D’Amaro.

For the past 25 years, he’s been working in the parks, starting with a team at Disneyland that planned out park operations.

“On day one, I sat in a meeting with probably 14 people and I could not believe what was happening in front of me,” he recalls. “These people, cast members, were talking about the most granular details on Main Street. Where should the trash bins go? What if we moved this from here to there, which way do we think the guests are going to go? The pain and the detail and the concern that the people in that room were taking … is burned in my memory.”

He eventually rose to become president of California’s Disneyland Resort, where he opened the wildly popular Star Wars: Galaxy’s Edge land before moving on to become president of Walt Disney World Resort in Florida in 2019.

Then, in 2020, Bob Chapek, who was the chairman of parks and resorts, was promoted to CEO of the entire Walt Disney Company, opening up the opportunity for D’Amaro to become the one responsible for overseeing the entire parks and experiences empire.

Chapek’s tenure as CEO didn’t last long, and Bob Iger came out of retirement in late 2022 to once again take the helm. But given Chapek’s rise from chairman of parks to CEO, it isn’t all that surprising to learn that D’Amaro’s name has been floated as Iger’s replacement when he steps down for good. If that happens, many Disney fans will likely be pleased, as they are already familiar with D’Amaro. In fact, he’s a bit of a celebrity when he’s in the parks.

As we walked through Disneyland on a Friday afternoon, people would scream out his name: “Josh! Josh! Can I get a photo please?”

And it wasn’t just one fan. It was dozens, all within minutes, including a couple from Louisiana spending five nights of their honeymoon at the California resort.

“You’re a celebrity to me, actually,” the newly married man said. “It’s nice to meet you.”

A few paces later, a middle-aged woman getting a selfie told him, “This is a big day for a Disney adult.”

It was almost like Anna and Elsa were strolling the parks in terms of excited fans making requests for photos. (For the record, D’Amaro’s three favorite characters are Mickey, Goofy and Buzz Lightyear, while his favorite villain is Maleficent.)

JEFF GRITCHEN/MEDIANEWS GROUP/ORANGE COUNTY REGISTER/GETTY IMAGES

“I don’t love the recognition for the sake of the recognition,” he says. “I love the fact that people will come up and talk to me and tell me what they love and tell me when their family first came here and tell me what they would love to see change.”

For some politicians, Disney doesn’t warrant the same reaction. To them, Disney has become the villain in America’s fairy tale.

Around the globe, guests can stroll Main Street, U.S.A., Walt Disney’s sanitized vision of what a small town should look like — a place where a band still plays “God Bless America” in the afternoon.

Yet Disney, as a company, has thousands of employees and millions of consumers who care about modern-day issues and don’t want executives frozen in some idealized past vision of America.

Most notably, Disney has clashed with some Florida Republicans over a new law restricting classroom instruction about sexual orientation and gender identity, a measure dubbed “Don’t Say Gay” by its opponents. The company also battled California officials over when to reopen the parks amid the COVID-19 pandemic. Add to that the politics and challenges of operating parks in China during the past few years, and it’s safe to say that D’Amaro’s job of keeping sometimes conflicting groups happy isn’t easy.

D’Amaro acknowledges the political struggles but says he tells his team to just focus on what they do best.

“That is telling incredible stories, continuing to innovate and making sure that every one of these guests out here have a great time when they’re in our theme parks,” he says.

Sometimes, those debates spill over to the parks themselves.

Disney recently shut down Splash Mountain, a water ride that featured characters from the 1946 film “Song of the South,” which has been criticized for its racist themes. The ride will be reopened as Tiana’s Bayou Adventure, a ride based around Disney’s first Black princess.

Related: These are the best rides at Disneyland

While many praised the change, there were plenty of critics, some accusing Disney of being “woke.”

“I think that as guests have points of view on what we might do inside of the theme park, changing an attraction or changing a walkway, what that says to me is: People care about our product,” D’Amaro says. “What am I going to do? I’m going to listen and make sure that I do the best for all the guests that I possibly can.”

Almost on cue, a mom with an 8-year-old daughter approaches D’Amaro. Her daughter has never been on Big Thunder Mountain Railroad. They have a Lightning Lane pass to skip the line, but the girl is frightened.

“I’ll tell you what’s going to happen,” D’Amaro tells the girl. “You’re going to finish it up. You’re going to be laughing and you’re going to say: ‘I can’t believe I was worried about going on that.’ You’re going to tell all your friends, and you’re going to look cool. I would do it.”

They pose for a photo, then the mom says, “He makes this park amazing. He’s the reason why.”

The walk continues on, and the conversation shifts to hidden Mickeys (abstract circles that look like the famous mouse hidden in plain sight) and other more hush-hush aspects of the parks.

Naturally, I ask if he has ever been questioned about and revealed the locations of the park’s secret tunnels.

“Yes,” D’Amaro says. “And I don’t tell them.”

Then, we entered the land D’Amaro opened as Disneyland president. He recalls watching the first guests come into Star Wars: Galaxy’s Edge on opening day. Kids were running around, and 50-year-old men were crying.

Oga’s Cantina. SUMMER HULL/THE POINTS GUY

Before long, he hints at another park secret.

“When we opened this land and before everything was kind of sealed up and ready to go,” he says, pausing and smiling, “I had a chance to get out here and do some fun things that I think will go down — maybe — someday in history.”

Then, like the great show master that he is, D’Amaro moves the conversation on, not offering up any more details about his own contribution to the “Star Wars” universe.

SUMMER HULL/THE POINTS GUY

Much of the modern-day Disney empire developed well after Walt Disney’s death in 1966.

The first “Star Wars” movie wouldn’t hit theaters for another decade. Disney World wouldn’t even open for five additional years. Yet Walt Disney’s force, attention to detail and belief that nothing is ever truly finished are still very much felt in the parks today, especially with executives like D’Amaro focusing with Walt-like attention on the small details, like ensuring that paint isn’t chipped.

So, what would Walt think about the “Star Wars” campus?

“I think he’d be pretty proud. I think he would actually be pretty amazed at the evolution of storytelling,” D’Amaro said. “I don’t think he could have ever imagined it was this, but at its core, we’re doing the same thing he wanted to do. We could just do it so much more effectively now.”

Related reading:

Source: thepointsguy.com

Apache is functioning normally

Apache is functioning normally

The Offer

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Our Verdict

Previous best offer was 60,000 miles but the annual fee wasn’t waived. The issue with Barclays cards is getting approved. With huge bonuses on the American Airlines, Wyndham and Hawaiian it might be worth focusing on those offers. You can read these things everybody should know about Barclays cards by clicking here. We will add this new offer to our best credit card bonuses.

Hat tip to reader Diggs

Source: doctorofcredit.com

Apache is functioning normally

Apache is functioning normally

A staggering 67 percent of Californians who sold their homes in 2009 did so because they couldn’t meet their mortgage obligations, according to the California Association of Realtors’ 2009-2010 Survey of California Home Sellers.

“Tighter underwriting standards and a decline in equity continued to impact the market in 2009,” said C.A.R. President Steve Goddard, in a press release.

“Many homeowners chose to sell last year because their adjustable-rate mortgage reset at the same time home prices were experiencing an unprecedented decline, leaving them with little equity and difficulty in qualifying for a refinance.”

Difficulty meeting mortgage obligations was the top motivation to sell, followed by job loss and mortgage payment increase.

On average, homes sold for $20,958 less than the original asking price in 2009; the median difference between selling and listing price was $32,315.

The list-to-sold-price ratio was nearly four times wider between first-time sellers ($30,000 below list price) and sellers who had previously sold a home ($8,000 below list price).

First-time sellers accounted for 44 percent of all sellers in 2009, a 33 percent increase from 2008, and nearly triple the 15 percent share seen in 2007.

Financing difficulties complicated the sales process in a number of ways, with 63 percent of homes falling out of escrow prior to closing, and 70 percent of sellers citing that the “buyer could not get an acceptable mortgage.”

However, the primary reason homes fell out of escrow was because the buyer backed out, followed by buyer’s remorse, the bank/mortgage lender withdrawing funding, and home prices continuing to fall.

The good news: lots of motivated sellers…

The bad news: nobody wants to buy…

Source: thetruthaboutmortgage.com

Apache is functioning normally

Apache is functioning normally

They say the average mortgage application contains some 500 pages, which explains part of the frustration mortgage borrowers feel when going through the loan process.

But Fannie Mae and Freddie Mac want to ease that burden by finally digitalizing the mortgage experience.

Both companies announced upcoming changes that will go live in December and next spring.

Come December 10th, Fannie Mae will add both asset and employment validation to its stable of useful loan origination tools.

That means borrowers will no longer need to provide work paystubs, bank statements, or investment account statements.

Well, that’s the theory at least. We will see how it actually pans out…

‘A Dramatically Better Mortgage Experience’

Currently, borrowers are often asked to fax or e-mail these types of documents to verify income, assets, and employment.

But as with most things, it can get complicated when pages go missing, are illegible, lost, etc.

The most common complaint I hear about when attempting to get a mortgage is having to send the same document twice (or three times or more).

At the moment, Fannie Mae is already validating income electronically, and in just over a month assets and employment will get the digital treatment too.

Fannie expects these changes to result in “a dramatically better mortgage experience.”

Again, we’ll see how it turns out because technology has its own problems, but it’s certainly welcome news for both borrowers and lenders.

Greater Certainty for Lenders

While borrowers will be less burdened with paperwork demands, banks and lenders will feel more comfortable delivering loans to Fannie Mae and Freddie Mac knowing the information is being verified upfront by their own systems.

Instead of relying on some paperwork from the borrower that may or may not be valid (or current), they can run it through the automated system to reduce uncertainty and risk.

Fannie refers to this as “Day 1 Certainty,” which in a nutshell give lenders “certainty on Day 1” that they’ll be free from reps and warranties for income, assets, and employment information that is validated through Desktop Underwriter (DU).

This Day 1 Certainty will also allow lenders to forego an appraisal on certain transactions, such as rate and term refinances with lower LTV ratios.

They say this will allow lenders to focus their attention on those higher-risk appraisals instead, while also streamlining the process with loan underwriters.

Loans are often delayed by appraisals, and the costs of an appraisal has risen dramatically in recent years.

Freddie Mac is making similar updates that will roll out next spring.

They include:

• A no-cost automated appraisal alternative
• Automated borrower income verification
• Automated borrower asset verification
• Automated assessment of borrowers without credit scores

Faster, Easier Mortgages for All?

It sounds like anyone who gets a mortgage backed by Fannie or Freddie (the majority of mortgages other than FHA and portfolio) will get the rocket treatment.

Still, you’ll have tons of pesky disclosures to sign along the way, which is never fun, albeit necessary.

The end result should be lower origination costs for lenders, which may or may not get passed along to customers.

Hopefully they will – but if anything, it should keep borrower costs from rising. Additionally, the home loan process should speed up as a result of these changes.

Instead of lenders fretting about loan quality, they’ll have more confidence to push loans through and close them with less delay.

Now they just need to figure out how to let borrowers e-sign all those mortgage documents to make the process really easy. It’d be nice to ditch the printer and the fax machine entirely.

Of course, this new era of automation means it’ll be more difficult to get away with nonsense going forward. That means less fraud, but perhaps less wiggle-room too.

(photo: Sarah)

Source: thetruthaboutmortgage.com