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Accredited Home Lenders Shuts Down Much of Its Business Amid Mortgage Turmoil

SAN DIEGO (AP) -- Accredited Home Lenders Holding Co. plans to shut down most of its business to survive the troubles in the home lending industry, the company said Wednesday.

Accredited Home Lenders said it will cut its work force to 1,000 people -- from 2,600 at the end of June -- and close 65 branches. The company will immediately stop accepting applications for home loans in the U.S., though it will honor the loans it has already committed to finance.

The company will close its retail lending business, which issues home loans directly to consumers. Accredited is also scaling back much of its wholesale lending division, which issues mortgages through brokers. The company will close five of its 10 brokered loan offices and lay off about three-fifths of the unit's workers.

Accredited Home Lenders, which issued $15.77 billion in home loans last year, said shutting down most of its business is necessary to navigate the turbulence in the mortgage industry.

Stung by decaying credit quality and a newfound fear of risk on Wall Street, mortgage lenders across the industry have struggled to raise cash this year.

More than 50 lenders have gone bankrupt this year, including two of the nation's 10 biggest.

Accredited's Canadian operations are unaffected, and the company will continue to collect payments on the $8.4 billion in loans in its servicing portfolio.

Shares of Accredited Home Lenders slipped 55 cents, or 8.4 percent, to $6 in premarket trading Wednesday. The stock closed Tuesday at $6.55, down 76 percent for the year and almost 90 percent from its all-time peak last year.

Daily Real Estate News  |  August 10, 2007Builders Sweeten the Deal With Incentives

The latest survey taken by the National Association of Home Builders indicates that 56 percent of builders are now offering incentives, up from about 45 percent a year ago.

As home builders juice up their efforts to unload inventories, the most common incentives they're offering include paying two years of property taxes and insurance or several months of mortgage payments. Other popular incentives include basement and garage upgrades and the addition of pools. Plus, 15 to 20 percent off the purchase price is being given in many areas.

Builders generally try to avoid outright price markdowns, in part because it angers prior home buyers who don't want prices in their subdivisions forced down. These days, however, some builders have had to resort to them "because it's all about avoiding bankruptcy for some," says Gene Rivers, a Keller Williams associate in Tallahassee, Fla.

Getting a Good Deal

Here are some tips for getting the best deals from builders:

• Buy a finished home: Builders want these off their books.
• Get a pre-approval letter: This shows a builder that the buyer has financing already in place.
• Close quickly: Wrap up a purchase within 30 days; builders want to sell before the next bank payment is due.
• Avoid contingencies: Don't make a purchase contingent on selling a home or finding financing.

For people with poor credit, the additional money they'll pay for things like mortgages, car loans and insurance, compared with what those with solid credit pay, can be in the mid-six figures over a 30-year period. Invest it wisely, and that number could soar to more than $1 million.

Here is how poor credit costs you in more ways than you imagined:

Mortgage: One obvious place that poor credit hurts you is the interest rate you must pay when you purchase a house. The average price for a home in June 2007 was $316,200.

According to MyFico, a 30-year, $300,000 loan for someone with a credit score of between 760 and 850 carried a 6.346% APR. Someone with a credit score of between 500 and 579 would have a 10.152% APR. That would mean that a person with a good score would have a monthly payment of $1,866, while the person with the poor credit score would pay $2,666 -- or $800 a month more for the same house. That adds up to $288,000 over the 30 years of the loan.

Auto loan: Edmunds.com says that the average car loan is $24,864. According to MyFico, an auto loan for a person with good credit (defined as a score of between 720 and 850) would carry a 7.221% APR, while someone with poor credit (a score between 500 and 589) would have to pay a 14.909% APR. That works out to a difference of $88 a month, which comes to $3,168 over the three years of the loan. The average person keeps their car for 4.5 years.

That means if each person financed a new car every five years, it would cost the person with bad credit $19,008 more in car financing over 30 years than someone with good credit.

Credit cards: Let's assume, for our exercise, that both the people with good and bad credit both carry the median credit card debt of $2,200 over 30 years. If the person with good credit had an interest rate of 9% and the person with bad credit had an interest rate of 20%, the person with poor credit will pay an extra $7,260 over a 30-year period.

Lost interest: If the person with good credit took the difference and invested that money in an account that earned 8% compounded annually for 30 years, he or she would have well over $1 million saved. In fact, investing the $800 difference in the cost of the mortgage alone would be worth $1.2 million.

Insurance: All types of insurance (auto, health, homeowners) will likely cost more for a person with poor credit than one with good credit. Insurance companies know that people with poor credit make more claims than those with good credit -- and therefore are more of a risk to insure.

If your credit score is taken into account on any of your insurance rates, an individual with poor credit will pay more than a comparable individual with good credit.

Job: You may lose out on a better job due to poor credit. More and more employers pull your credit report when you apply for a job, because many see a risk in employing a person with poor credit. The same can be true with promotions. For example, people in the armed forces may not be able to get clearance for classified documents and areas due to poor credit, therefore blocking potential advancement.

Housing: Many apartment managers will run a credit check on prospective tenants. If your credit is poor, you may be denied a unit due to the risk that you may not be able to pay.

Deposits: If you have poor credit, you may need to leave a deposit -- or a larger deposit -- with certain companies than you would if you had good credit. Utility and cellular phone companies sometimes ask for deposits with people that have less-than-stellar credit.

Health: In addition to all the financial aspects where poor credit will hurt you, it could also adversely affect your health. It's not difficult to imagine that a person who has to pay a couple of hundred thousand dollars more for the same house as a neighbor down the street could have some financial stress in their life. This stress can affect a person both mentally and physically, if the poor credit is constantly a source of fighting in the house.

Poor credit is no longer a situation that can be isolated from other areas of your life. The trend is only growing stronger. Take the time to make the effort to keep your credit in good standing. It will pay off with more money in your pocket and less stress in your life.

Nearly one in five Realtors has sold a U.S. home to an international client in the past year, with the majority of those sales occurring in the Sun Belt states, according to new research by the National Association of Realtors.

The 2007 NAR Profile of International Home Buying Activity is the most comprehensive research that NAR has conducted to explore the characteristics of second-home purchases in the United States made by international clients. An international client is a foreign citizen living abroad who has legally entered the United States to purchase a home.

"In this country we have always known that housing is a good long-term investment, and many foreign buyers seem to share this view," NAR President Pat V. Combs said in a prepared statement. "This latest study shows that more and more consumers from around the world are interested in purchasing a home in the United States for themselves, as an investment, or simply to enjoy a piece of the American dream."

In 2006, most international home buyers purchased single-family homes or townhomes, and like most domestic home buyers, they financed their purchase. However, they showed stronger preferences for condos/apartments when compared to U.S. home buyers; 22 percent of international buyers purchased condos/apartments, compared with 12 percent of U.S. buyers. Twenty-eight percent of foreign buyers bought their houses with cash, compared with 8 percent of U.S. buyers. The median sales price of homes purchased by international buyers was $299,500, which is significantly higher than the U.S. median of $221,900 during the same period.

Forty-seven percent of all international buyers purchased homes exclusively for vacation, while 22 percent were motivated primarily by investment, the survey found. Nearly a third of foreign buyers cited both vacation and investment as reasons for their purchase. International homeowners spent an average of 4.2 months of the year in their U.S. property in 2006.

A third of all international buyers are from Europe, but buyers from Asia and North America (outside the United States) each represent about one-fourth of the total market. Sixteen percent of all international buyers are from Latin America. By individual country, most buyers come from Mexico (13 percent), the United Kingdom (12 percent) and Canada (11 percent).

Foreign buyers purchase homes across the United States, but 52 percent of sales in 2006 were concentrated in three states -- Florida (26 percent), California (16 percent) and Texas (10 percent). The South attracted nearly half -- 49 percent -- of international buyers last year, while 31 percent purchased homes in the West.

Nearly a third of the Realtors surveyed worked with international clients or prospects during the previous year. Realtors who actually closed sales of homes to international clients reported an average of 1.9 clients, representing 15 percent of their annual business. Most Realtors reported a rise in sales to international buyers -- 25 percent of Realtors had increasing business compared to five years ago, with another 67 percent reporting about the same level of international business; only 8 percent noted a decrease. A third of Realtors surveyed believe that foreign retirees will represent an increasingly important market for Realtors based in the United States.

"Just as many U.S. residents are looking overseas for retirement and second homes, people in other countries are considering a home in this country," Combs said. "As international boundaries of home ownership dissolve, Realtors must stand ready to serve an increasingly diverse and multicultural marketplace."