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Facebook’s data scientists conducted a massive experiment where it messed with people's feeds and proved that longer-lasting moods, like happiness or depression, can be transferred across the social network. 

The company tweaked the Newsfeed algorithms of 689,003 unwitting Facebook users, so that people were seeing an abnormally low number of either positive or negative posts. 

In a recently published study, the scientists say they found that when people saw fewer positive posts on their feeds, they produced fewer positive posts and instead wrote more negative posts. On the flip side, when scientists reduced the number of negative posts on a person's newsfeed, those individuals became more positive themselves.

"Emotional states can be transferred to others via emotional contagion, leading people to experience the same emotions without their awareness," study authors Adam Kramer, Jamie Guillory, and Jeffrey Hancock write. "We provide experimental evidence that emotional contagion occurs without direct interaction between people (exposure to a friend expressing an emotion is sufficient), and in the complete absence of nonverbal cues."

This idea is interesting in and of itself, but the AV Club's William Hughes also points out that the study highlights something that most users probably don't think about: By agreeing to the Facebook's Data Use Policy when you sign up, you're automatically giving it permission to include you in big psychological experiments like this, without your knowledge. 

Facebook says it does research like this experiment to figure out how to make the content people see on Facebook as relevant as possible. A spokesperson sent us the following comment:

"This research was conducted for a single week in 2012 and none of the data used was associated with a specific person’s Facebook account. We do research to improve our services and to make the content people see on Facebook as relevant and engaging as possible. A big part of this is understanding how people respond to different types of content, whether it’s positive or negative in tone, news from friends, or information from pages they follow. We carefully consider what research we do and have a strong internal review process. There is no unnecessary collection of people’s data in connection with these research initiatives and all data is stored securely."

(Hat-tip to Rami Ismail who tweeted the study.)

Property Tax Hikes Compound Mortgage Market's Woes

by Bonnie Sinnock

Housing counselors say they are increasingly concerned about the toll rising property taxes are taking on consumers' ability to get mortgage financing and borrowers' ability to make payments.

As it is, many loan applicants are having difficulty meeting the 43% debt-to-income limit in the Consumer Financial Protection Bureau's definition of a qualified mortgage. Higher property taxes only make it tougher. And while historical property taxes are factored into underwriting and loan terms, tax hikes that can increase the size of a monthly payment are an unknown that tends to creep up on borrowers.

"They don't go into a home thinking their property tax is going to increase," says Stephen Lewis, president and chief executive of the Mansfield, Texas, counseling agency Making Acceptable Homeowners.


Nationwide, state and local property tax collections per capita have increased each year since 2006, when they were $1,208, according to the Tax Foundation's Center for State Tax Policy, a nonpartisan research organization in Washington. By 2010 they had risen by more than $200 to $1,434.

Consumers purchasing their first home are particularly susceptible to property tax payment shock, says Lyman Stone, an economist at the center.

"I think first-time homeowners can be very surprised. It's not withheld like your income tax, or on your receipt like a sales tax. You just get a bill," he says. "So I think it can be very shocking to first-time homeowners, especially if you are in a somewhat higher tax area."

The tax burden "is a growing topic among housing counselors now that home prices are increasing and municipalities are struggling with revenue," says Douglas Robinson, a spokesman for NeighborWorks America, a Washington, D.C.-based national network of more than 240 community development and affordable housing organizations.

The 43% DTI ratio is one of the criteria loans must meet for lenders to enjoy extra protection from legal liability under the CFPB's rule requiring them to assess applicants' ability to repay mortgages. Higher taxes can help municipalities generate much-needed revenue, but they challenge borrowers' ability to get financing under the new rules, says Lewis, who has previously worked in mortgage underwriting and servicing.

"Consumers are really hitting that threshold of that 43%, and so when property values increase, or let's say the tax-assessed value increases on that property, then customers are actually exceeding that 43% threshold," he says. "That increases a level of concern about default and foreclosures for the lender that the customers are unaware of."

Defaults resulting from property tax increases could also get lenders in legal trouble, says Ari Karen, an attorney in the Bethesda, Md.-based office of law firm Offit Kurman. A borrower could later claim that failing to inform the borrower of the future risk was a deceptive act under the Truth in Lending Act, he says.

Rather than change the DTI limit or other underwriting standards, Lewis says, he would like to see counselors make more borrowers aware of the possibility that their tax bill may rise. This can be a challenge, he admits.

"Customers generally want to get more money for the house. They don't care about the educational aspect," Lewis says. "They don't necessarily care about the ramifications. It's all about, 'What can I get for the house?'"

However, those who get homeownership counseling tend to a little more open to the message, he says.

"They go into an education program if they want to be honest and transparent about their situation," he says.

Getting a national sense of property tax trends is challenging because the wide variation in how the different regional public entities in charge of them handle them, says Stone. But generally, data available to date from the Tax Foundation, and other reports of home price appreciation, suggest property taxes aren't going to stop increasing any time soon.

Whether this is increasing default risk depends on the regional taxation authorities' property tax policies, says Ben Graboske, a senior vice president in the real estate and financial services division of the Irvine, Calif.-based data provider CoreLogic. "It's absolutely the case in places like Texas and Florida," he says.

Texas' Tarrington County, for example, where the majority of Mansfield is located, had one of the higher amounts of median taxes paid in 2010, at around $3,100. The U.S. median was close to $2,000 that year.

A notable example of property tax risk has been in the federally-insured reverse mortgage market. The inability on the part of some seniors to pay taxes and insurance caused default risk to rise in the recent past, putting a dent in the FHA's finances and leading to reform in that sector.

Recent data on traditional "forward" mortgages suggests delinquencies are declining. But some have questioned whether this trend is more the product of a shift in the holders of servicing rights than an actual improvement. Also, recent data suggests an increase in loan modification activity. Property tax increases are frequently mentioned in hardship letters filed in connection with modification, says Lewis.

How credit scores impact your mortgage rate

by Sheyna Steiner

Interest paid on a mortgage can add up to hundreds of thousands of dollars over the life of the loan. The most influential determinant of your mortgage rate will be your credit score. The higher your score, the lower the interest rate. On a loan as large as a mortgage, a mere percentage point up or down can add up to a significant amount of money.

Find the best mortgage rates

Not only are credit scores more vital than ever when it comes to getting a good rate on a home loan, but they will influence whether you can even get a loan at all.

Credit is so tight and lenders are so skittish that buyers below a certain threshold, typically a FICO score of 620, have a better chance of striking oil in their bathtub than securing a mortgage. It's possible, but will require some digging.

Standards have not always been so restrictive; the industry has changed in recent years.

"It's changed twofold: First there is a minimum score that you need to have to even be considered for a mortgage regardless of compensating factors such as your income and your assets. And unless you have top-tier credit, you're not going to qualify for the best programs, terms and conditions," says Louis Spagnuolo, vice president of mortgage banking at WCS Lending in Boca Raton, Fla.

Though the tiers go up all the way to 850 on the FICO scale, a score of 740 or more should qualify for the best mortgage rates from most lenders. Depending on the lender, the mortgage rates offered to the highest and lowest credit tiers can vary as much as a full percentage point and a half, says Spagnuolo.

The Web site illustrates the variation in loan pricing across the tiers of credit. The difference in the monthly payment for a $300,000 loan between the highest and lowest scores is nearly $300, which over 30 years adds up to more than $100,000. That's money better invested in your retirement account than spent in servicing a home loan.

What lenders look for

In general, investors demand higher yields from risky investments. This applies in the mortgage lending arena. Lenders assign you a rate that matches the gamble they're taking in lending you money.

Lenders prefer borrowers with low balances, a long history of on-time payments and a mix of credit utilization -- for instance, a car loan and a couple of revolving accounts such as credit cards.

"Lenders look at several variables on the credit report: outstanding debt; the outstanding debt relative to the total available debt; the length of the credit history and the pursuit of new credit -- how many inquiries are on your report," says Matt Hackett, underwriting manager at Equity Now, a direct mortgage lender in New York.

Some types of credit may be viewed more negatively than others, particularly if there's not a healthy mix of available credit and loans on your report.

"Store cards are looked on more negatively. Lenders just don't like to see them," Hackett says.

Curtis Arnold of says that while a store card won't adversely affect your score, if a lender manually looks at your report there may be a subjective view that store cards are less desirable than a major credit card.

"The underwriting is not as strict as a major credit card so they are easier to get. They do have somewhat of a reputation of being cards with lower credit requirements," he says.

Ellie Mae: Refinances Decline Slightly in May

by Colin Robins

Ellie Mae [1] released its Origination Insight Report [2] for May, analyzing data from over 3.5 million loan applications that ran through Ellie Mae's Encompass mortgage management solution. The company found that refinances declined slightly for the month to 33 percent of all loans, down from 37 percent in the previous month.

Year-over-year, refinances declined as well from May 2013's percentage of 58 percent.

FHA loans in the month of May constituted 22 percent of all loans, with conventional loans making up 64 percent of the total amount. VA loans posted at 9 percent, with loans listed as "other" rounding out the remaining loans with 5 percent of the total share.

Ellie Mae reported that the average time to close a loan in May was 40 days, up slightly from the 39 days loans took to close in April. "VA purchase loans closed in an average of 41 days in May while carrying an average FICO score of 711 and a debt-to-income ratio of 24:39," the report said.

The average mortgage rate for a closed 30-year loan decreased to 4.53 percent, the lowest rate since November 2013. The average 30-year rate on all FHA loans in May 2014 was 4.38 percent, the lowest rate of the year thus far.

The profile of closed loans remained roughly the same—the average FICO score for successfully closed loans was 727, nearly identical to April's figure of 726. The loan-to-value ratio remained the same as it has been since the beginning of the year at 82 percent, with a debt to income ratio of 24:37.

In May 2014, 32 percent of closed loans had an average FICO score under 700, compared to 27 percent of loans in May 2013. The average credit score for denied applications was 689.

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