Mortgage Market News and Insight

For the Weekend of January 18^th, 2025

 

Hawaii’s Most Read Mortgage Publication for 17 Years

 

Volume 17 – Issue 19

Medical Collections Removed

Don’t have medical collections?  The end of this article will explain how even those that don’t have old medical bills will be affected by this new government rule.

 

The Consumer Financial Protection Bureau (CFPB), the government agency established after the 2008 financial crash, issued a decision last week that will positively impact over 15-million Americans.  The CFPB has mandated that all medical bill collections will be removed from consumer credit reports.  The CFPB estimates that over $49-Billion in medical debt is currently being reported.  Medical collections, like any other consumer debt that falls into collection status, negatively affects a consumer’s credit score.

 

The reaction to this policy change is mixed.  Consumer advocates herald the change because medical collections affect the poor and minorities at a greater rate.  Risk analysts argue that removing data that shows a lack of responsible credit utilization will only make it more difficult to accurately assess a consumer’s likelihood of timely repayment on new credit issued.

 

The hardline approach is simple:  If you don’t pay your debts, creditors should be made aware of this.  While I often follow that school of thought, medical expenses are different than other consumer liabilities and should be treated differently.  It’s one thing to go out and buy a jet ski or run up a credit card balance and stop paying – forcing the account into collections.  But medical bills are the result of situations beyond our control.  Diseases and accidents are not a choice.

 

Just a short hospital stay will easily generate a bill over $10,000.  A basic trip to the Emergency Room will cost $1,000 or more.  Even with private medical insurance, a patient’s portion of the bill could be huge.  This is where the hardline people make a good point – and one you should pay attention to, if you are ever in this situation.  If you are faced with a medical bill you can’t pay, don’t ignore it.  Talk to the medical provider and arrange a payment plan.  There’s no reason, if handled correctly, that your bill should go to collections.  Of course there will always be the exception.

 

Regardless of whether you personally have medical debt on your credit report or not, this new rule handed down by the CFPB will affect you when you want to obtain financing in the future.  When a consumer’s medical collection is removed from their credit profile, the result will be a higher credit score.  Higher credit scores will result in more consumers qualifying for credit.  The overall risk hasn’t changed, just the data used to make that credit decision.  The outcome will be higher losses for creditors.  Banks and finance companies don’t eat their losses, they pay for them through higher rates and fees they charge all of us.  This change in policy will affect you!

 

 

 

 

Inaccurate Data & Poor Reporting

Did you miss the story this week about the number of people that moved from Lahaina after the fire?  The State’s Department of Taxation released a report showing where “all” the people went after Lahaina was destroyed.  The report’s conclusion is that very few people left Maui.  The only thing more pathetic than the assumptions made in the report, is how ALL of Hawaii’s media reported on the story.

 

I spent the first half of my working life in Hawaii’s broadcast industry.  I know Hawaii is a small market where TV stations, radio stations, and the newspaper are constrained to having staff that will work for low wages.  The result is news via press release.  More often than not, when you see, hear, or read a story in the news dealing with our government, the reporter is more than likely reporting what was on the press release issued by that government agency.  There is only one exception and a bright light in our community, and that is Michael W. Perry at KSSK.  He alone is the only media figure in our state willing to challenge the government’s narrative.  Sad, because Mike jokingly refers to himself as a humble disc jockey and not some glorified news anchor.

 

Let’s get back to the silly Maui migration story.

 

The Dept. of Taxation examined and tracked the people of Lahaina by their tax filings, using their social security numbers, address, and zip code of where they are now filing their taxes.  The report found:

 

“Of the displaced residents, we can see that 1,420 relocated elsewhere within the Lahaina zip code (i.e. West Maui), and 1,058 moved elsewhere on Maui. However, some 369 displaced residents have left the County: 242 moving out of state, and 127 relocating to other Hawaiian counties.”

 

When I read that, I had to stop and think about that number.  Only 369 people left Maui?  It just didn’t make sense.  There’s been stories of people moving to mainland in droves, up and down the west coast, plus a ton of people that have moved to the 9^th island – Las Vegas.

 

The data just didn’t seem accurate.  I then decided to look at the source of the data – and that explained everything.  The entire report was based on Hawaii State tax returns.  Yes, the data they extracted was correct, but the issue was with the source of the data.  A large portion of the people that lived in Lahaina were not the best at filing taxes.  Lahaina was home to many younger people working the restaurants and other tourist related businesses.  That demographic contains a lot on “non-filers”.  Lahaina was also home to another segment of the population that never filed taxes – illegal aliens.  Unless there was a boon in business on Maui in other areas (haven’t heard of one yet), those two segments packed up and left.

 

I can’t blame the state for trying to push the narrative that the Lahaina fire victims stayed on Maui.  I’m not sure why they thought it was important or beneficial to their cause.  I can blame the news media for doing nothing more than disseminating a press release.

 

This is just another example of how poor the news product is here in Hawaii.  It reminds me of another news story from a few years ago where the reporting left me with more questions than answers.  The news report was that 3 residents of a home in Kalihi Valley on Oahu were tied up, assaulted, and robbed.  The thieves got away with a reported $180,000 in cash and jewelry.  My first reaction to this story was to wonder why 3 people living in a poorer part of the island had such a trove of riches.  The thieves obviously knew of the stash.  Not one reporter asked of the obvious connection or speculated as to how the cash and jewels came into the residents’ possession.

 

The point of this?  When you read, see, or listen to the news, don’t take what they say at face value.  Stop and ask yourself if what you just learned makes any sense.  You’ll be surprised how much won’t.

 

 

 

 

A Funny Thing Happened Going to the Bank

A little over 20 years ago I went to make a deposit at the bank.  The regular teller there, who saw me all the time, on this occasion told me she wanted to leave the bank and come to work for me.  Wow!  I didn’t expect that!

 

At that point in my career, I did everything involved with my clients’ loan applications.  Could I use the help?  Yes, but I didn’t have the time or the patience to train someone, especially one-on-one.

 

I told the teller I would be interested in exploring the option, but that if she wanted to work for me, she would need to get trained elsewhere.  Funny, I didn’t recall at first that shortly after that conversation she quit her job at the bank.

 

6 months went by when I got a call from that very teller.  I remember the words she said to me on the phone that day.

 

“I took your advice.  I quit my job at the bank and spent the last 6 months with another mortgage company.  I’ve learned what I need to.  I now want to come to work for you.”

 

 

It’s been 20 years, and I wonder what happened to her…  Just joking!  If you’ve ever been a client of this company, you’ve undoubtedly interacted with my right hand, Maura Shannon.  We just celebrated Maura’s 20^th anniversary with Hawaii Mortgage Company.  Simple to say, without Maura’s help, I couldn’t have been as successful, nor would our company have seen its growth over the years.  Don’t just take my word for it.  If you read the reviews of our company on Zilliow.com, Maura is mentioned in most of them!

 

Hey Maura, I hope you’re reading this (I know you are)!  I want to thank you for all you’ve done and continue to do.  Thank you for 20 great years!

 

 

 

 

And now the week’s economic news…….

 

Inflation Eases

The major inflation data released this week was lower than expected, which was favorable for mortgage markets.  Consumer spending also was a bit weaker than anticipated, and mortgage rates ended the week lower.

 

The Consumer Price Index (CPI) is one of the most closely watched inflation indicators released each month.  To reduce short-term volatility and get a better sense of the underlying inflation trend, investors look at core CPI, which excludes food and energy.  In December, Core CPI was 3.2% higher than a year ago, below the consensus forecast and the lowest annual rate since April 2021.

 

Although this annual rate is down significantly from a peak of 6.6% in September 2022, and from 3.9% in January of this year, it is still far above the readings around 2.0% seen early in 2021, which is the stated target level of the Fed.  The data used to report the shelter (housing) component is lagging behind what other sources indicate.  The inaccurate elevated shelter costs continue to be a primary reason why the overall inflation reading remains stubbornly elevated.  New and used car prices also posted large monthly increases, but this was likely due to continued high demand for vehicles to replace those damaged by hurricanes.

 

Another significant inflation indicator released this week, which measures costs for producers, also provided a nice surprise on the downside.  The December core Producer Price Index (PPI) was unchanged from November, well below the consensus forecast for an increase of 0.3%.  Of the two major inflation reports, investors tend to place less weight on PPI, since it reflects a smaller slice of the economy than CPI.

 

Despite higher prices and credit card rates, consumer spending has shown few signs of slowing in recent months.  In December, retail sales rose a solid 0.4% from November, a little below the consensus forecast, and were 3.9% higher than a year ago.  Strength was seen in furniture, autos, apparel, and sporting goods/hobbies.  It was another strong holiday shopping season.

 

 

 

 

Next Week

Investors will continue to look for additional guidance from Fed officials on their plans regarding future monetary policy.  For economic reports, it will be an extremely light week.  Existing Home Sales will be released on Friday.  Mortgage markets will be closed on Monday for MLK Day.

 

Until next week….