These are strange times in the mortgage business.

Bankers have long assumed that a mortgage borrower would do virtually anything necessary to stay in their home and avoid the stigma of foreclosure, including opting to withhold payment on other bills in order to stay current on their mortgage payments.  And for decades, this assumption has been correct.

Not any more.

Two big trends have emerged recently, both of which were completely unexpected by mortgage lenders:

• “Strategic Defaults”:  Faced with declining equity, home owners - many of whom are financially able to make their payments - are walking away from the properties to “start over” in a different home that has lower financial commitments and/or more potential for price appreciation
• “Credit Card Prioritization”:  TransUnion says that there’s been a 58%+ jump in the number of consumers who are current on their credit card payments but delinquent on their home mortgages.  Consumers appear to be prioritizing ready access to cash over [negative] home equity

It totally makes sense to me why a person would prioritize their credit card payments over their mortgage when the value of their home is likely far “below water”.  After all, you have to eat, and a home can’t buy food.

The question of “strategic default” is stickier.  My gut-level reaction is to condemn those who are financially able yet still choose to walk away from their obligations.  But is that reasonable?  I’m not so sure - if there are agreed-upon penalties for default (such as foreclosure and the damage it causes to one’s credit rating), and that person consciously choose to accept those penalties, then has that person violated any ethical or moral requirement?

I think a good argument could be made in either direction.  What do you think?  Your comments are welcomed, and encouraged, below - and thank you for reading http://realestate.BryanEllis.com!

As mortgage lenders tighten approval standards nationwide, the importance of a good credit score is rising. Credit scores not only make the difference between a mortgage approval and mortgage turn-down, but they also play a large role in determining your actual mortgage note rate.

In the 3-minute piece, the NBC Today Show talks about 7 ways that homebuyers ruin their credit -- often by accident. Some of the highlighted mistakes include:

• Closing open credit cards
• Making appliance buys on credit prior to closing
• Asking creditors to lower credit balances prior to closing

In general, a 740 FICO will insulate a borrower from the higher costs and/or rates associated with low credit scores. Below 740, though, every 20 points adds to the damage. Watch the video and apply what you can to your own situation. The more you know, the more you can save.

Despite the economy's improvement and prodding from Congress, banks don't seem ready to open their purse strings just yet.

Nationally, mortgage approval standards are tightening.

The data comes from a quarterly survey the Federal Reserve sends to its member banks. The Fed asks senior bank loan officers around the country whether "prime" residential mortgage guidelines had tightened in the last 3 months.

For the period July-September 2009:

• Roughly 1 in 4 banks said guidelines tightened
• Roughly 3 in 4 banks said guidelines were "basically unchanged"

Just one bank said its guidelines had loosened.

Combine the Fed's survey with recent underwriting updates from the FHA and from Fannie Mae and it becomes clear that mortgage lenders are much more cautious about their loans than they were, say, 2 years ago.

Today's borrowers face a host of hurdles including:

• Higher minimum FICO scores
• Larger downpayment requirements for purchases
• Larger equity positions for refinances
• Lower debt-to-income ratios

In other words, mortgage rates may stay low into 2010, but that won't matter to homeowners that don't meet minimum eligibility standards. With each passing quarter, that list gets smaller.

Therefore, if you're on the fence about whether now is a good time to buy a home, remember that, along with an increase in mortgage approval standards, home values are rising, too.

Acting sooner is probably better than acting later.

The new Good Faith Estimate makes its debut January 1, 2010.

Expanded from 1page to 3, the legislators responsible for the new Good Faith Estimate want it to be simpler for homeowners and home buyers to understand than the former version.

By most accounts, Congress will meet this goal.

The new Good Faith Estimate includes plain-English explanations of every fee, charge, and interest payment involved in a purchase or refinance. It also includes a section called "The Shopping Cart" in which applicants can compare lenders.

The new Good Faith Estimate is concise, too. Using a series of "Yes/No" checkboxes on Page 1, mortgage lenders specifically note:

• The interest rate on the mortgage
• Whether the interest rate can change over time
• Whether the loan carries a prepayment penalty
• The length of the rate lock

Currently, this information is spread across 3 separate forms.

Furthermore, the new Good Faith Estimate simplifies rate-and-fee comparisons, showing applicants how a lower rate can be available for a higher set of fees, and vice versa.

For all of its clarity, though, the new Good Faith Estimate still fails to address the issue of "suitability". As in, is this the right loan for the right borrower? That's something only a loan officer can do.

For suitable advice, talk with a loan officer who both listens to your needs and helps you plan for them. Great terms on an unsuitable loan are often worse than "good" terms on the right one.

Since 2007, mortgage lenders have clamped down in many areas of underwriting, but none more so than in the area of credit scoring.

Minimum FICO levels are up 120 points or more and conforming mortgage lenders now levy large fees on borrowers whose scores are below 740.

Keeping your credit scores high is a worthwhile goal, but it's not always easy to do -- especially when you don't know the ins-and-out of how the credit scoring system works.

The Wall Street Journal wrote a terrific piece on credit scoring this week. It's full of helpful, relevant tips for home buyers, homeowners, and everyone else.

Aside from covering the five basic components of a credit score -- shown at right -- the piece provides insightfukl advice on credit-related topics including:

• The difference between a "hard inquiry" and a "soft inquiry"
• Why paying for your credit report is a foolish use of funds
• Why it doesn't matter if you have an 800 FICO

The article also talks about the optimal balance a person should carry on their credit cards to get the biggest FICO boost.

Credit scores determine your mortgage rate. Therefore, do what you can to keep your scores high. Follow the tips in the Wall Street Journal article and lean on public resources like myFICO.com.

Having good credit can be a real money-saver. Month after month after month.