Sunday, June 04, 2006

Mortgage rate can't go up if lending bank is bought!

DAVID MYERS: Mortgage rate can't go up if lending bank is bought

June 4, 2006

Dear David: I was lucky enough to refinance when mortgage rates bottomed out at about 5.5% last year. Now, the bank that gave me the mortgage is being purchased by another lender. Can the new lender raise my rate?

Dear Reader: The terms of your mortgage cannot be changed simply because your current lender is being purchased by another bank. About the only thing the new lender can do is require that your monthly payments be sent to a different address.

Dear David: We are interested in creating a basic living trust, so we purchased two books about estate planning to learn more. One of the books recommends that in addition to creating a trust, people should also sign a "durable power of attorney for finances" form. Is this really necessary?
Dear Reader: You're not required to sign a durable power document to create a money-saving trust, but many homeowners choose to do so for personal reasons.

Forming a simple living trust is an inexpensive way to help ensure that your home and other assets will pass quickly to your heirs instead of going through the long and costly probate proceedings that are mandated by a typical will. When you die, the successor trustee you selected can distribute your home according to your wishes.

If you also sign a durable power of attorney form, you'll give the successor trustee the additional ability to take care of any assets that you left outside the trust. The forms are available for about $5 at most business-supply stores.

Dear David: I recently applied to refinance my mortgage. Instead of giving me a FICO credit score like I have received in the past, the lender used something called a "VantageScore." What is that?

Dear Reader: A California-based company called Fair Isaac revolutionized the credit-reporting industry several years ago when it developed the FICO score, which many lenders use today when setting the interest rate to charge on everything from mortgages to credit cards.
VantageScore was developed by the nation's three largest credit bureaus. The system assigns a letter grade to each applicant's rating -- an "A" for borrowers who are in the top 901 to 990 bracket, a "B" for those in the 801 to 900 range, and so on down to "F." The higher your VantageScore, the lower your loan rate.

VantageScore was unveiled earlier this year. Though its scoring system should be easier for most consumers to understand, only time will tell whether it can replace the FICO system.

Contact DAVID MYERS at P.O. Box 2960, Culver City, CA 90231-2960.
Copyright © 2006 Detroit Free Press Inc.

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