Pam Marron Home Lending

Underwater homes on the decline nationwide – but that’s not the whole story

HomeNews

by Ryan Smith, 08 May 2017

There were nearly 5.5 million seriously underwater properties in the US during the first quarter, according to new data from ATTOM Data Solutions. That’s an increase from Q4 of 2016 but still down by more than 1.2 million from the first quarter of last year.

Seriously underwater properties – property where the loan amount was at least 25% higher than the estimated market value – accounted for 9.7% of all US properties with a mortgage in the first quarter, according to ATTOM.

But those numbers don’t tell the whole story, according to Darren Blomquist, senior vice president at ATTOM. While negative equity is on a mostly downward trend nationwide, there are still swathes of the country where underwater property is almost the norm.

“While negative equity continued to trend steadily downward in the first quarter, it remains stubbornly high in often-overlooked pockets of the housing market,” Blomquist said. “For example, we continue to see one in five properties seriously underwater in several Rust Belt cities, along with Las Vegas and central Florida. Additionally, close to one third of homes valued below $100,000 are still seriously underwater.”

“And those underwater properties can pull down surrounding home values,” Blomquist said.

“Several of the cities with the biggest quarterly increases in underwater properties saw a corresponding increase in share of distressed sales in the first quarter, creating a drag on overall home values…” Blomquist said.

Baltimore, Md. Saw the biggest quarterly increase in underwater homes, up 26,974. It was followed by Philadelphia (up 8,919), McAllen, Texas (up 7,746), Cleveland, Ohio (up 7,631), and St. Louis, Mo. (up 6,844). All of those markets still had fewer underwater properties in the first quarter than during the same period in 2016, ATTOM said.

reprinted from Mortgage Professional America: http://www.mpamag.com/news/underwater-homes-on-the-decline-nationwide–but-thats-not-the-whole-story-66996.aspx

 

May 8, 2017 by · Leave a Comment

Pre-purchase help coming from HUD approved housing counselors to assist clients who still have credit issues with a past short sale or modification

By Pamela Marron | National Mortgage Professional Magazine | May 2017

HUD approved housing counselors are being trained to provide assistance for clients who continue to have problems with short sale and modification credit that appears as a foreclosure. The goal is to correct problems prior to a new purchase.

A collaborative initiative has begun that connects loan originators who have clients with a past short sale or a modification with HUD approved housing counselors who can make sure that common credit issues are resolved before clients sign a home purchase agreement. The goal is to provide correction to a continued problem of foreclosure credit code that incorrectly shows up on short sale and modification credit and often results in a loan denial and loss of contract. Worse yet, a foreclosure coding delays a new conventional mortgage for seven years rather than the four year wait required after a short sale. And recently, it has been found that modification credit is being affected with the same foreclosure code.

Over 1 million past short-sellers are now beyond the four year time frame and are eligible to purchase a home again. Another 950,000 will become eligible over the next three years. For those with modifications, no wait timeframe is required and over 1 million have been put in place from March 2009 to March 2017.

Correcting continued credit issues ahead of signing a contract for eligible past short-sellers is the focus of a small group of loan originators and housing counselors who are preparing this initiative. “Too many times, past short-sellers are told within the processing time and during a live contract that their short sale shows up as a foreclosure, and that they need to go get it fixed and come back.” states loan originator Pam Marron. “A service is needed for affected clients to get this credit issue permanently resolved ahead of time so that these clients are mortgage – ready.”

Fannie Mae developed a workaround in August 2014 but not all lenders know about it. There is no workaround in Freddie Mac. And though both Fannie Mae and Freddie Mac note there may be exceptions when inaccurate credit exists, lenders are reluctant to address this.

Marron cites that additional credit issues commonly grow out of the inaccurate foreclosure code for most of these clients when they either attempt to remedy the problem themselves or go to credit repair companies. A “dispute”, the most common fix, temporarily masks the short sale credit and appears to work when credit scores go up. However, when the consumer applies for a mortgage, either the underwriter, Fannie Mae or Freddie Mac automated system findings require that the dispute be taken off. The result is that credit scores plummet, a conventional mortgage denial is received and a delay to fix often occurs and can be a serious problem if a contract deadline is looming. If the consumer is in a contract, the quickest remedy is a Rapid Rescore that must be paid for by the lender. Often, the resulting credit scores are lower and the consequence is a higher interest rate.

A second problem is a more recent “date reported” when the short sale credit is reopened in order to get it corrected. The more recent date reported often falls within the four year wait timeframe causing the Fannie Mae and Freddie Mac automated systems to issue a denial due to the wait timeframe not being met.

Marron thinks this service coming from third party HUD approved housing counselors is a perfect fit. “Loan originators are driven by contract deadlines. Housing counselors are not.”

Solutions for correcting the credit issues discussed are already available but assisting those who have had a past short sale or modification is the best way to find more ways for correction. Ms. Marron and Jim McMahan, a loan originator in Georgia, will begin taking calls for consumers with a past short sale or a modification this month. The National Foundation for Credit Counseling (NFCC.org) will start this effort and utilize HUD approved housing counselors to work with affected consumers to ensure the credit issues of a past short sale will not hamper their ability to get a new conventional mortgage.

There will be a fee for the one on one counseling and a credit towards closing costs on a home purchase can be provided. Contact Pam Marron at 727-375-8986 or email pam.m.marron@gmail.com or Jim McMahan at 404-808-0945 or email jim@mcmahanmortgage.com.

Stay tuned.

May 4, 2017 by · Leave a Comment

Morning Briefing: HELOC owners face sharp payment increases in 2017

by Steve Randall
Challenging times are ahead for thousands of homeowners with HELOCs as their lines of credit reset with higher monthly payments while some may struggle to refinance.Analysis by Black Knight Financial shows that 1.5 million HELOCs will see interest-only draw periods end this year with just under $100 billion in outstanding unpaid principal balances; an average of $62,500 per HELOC.The data reveals that average borrowers whose lines of credit reset will face an additional cost of $250 per month, more than double the current average payment.

“In 2017, 19 percent of active HELOCs are facing reset,” said Ben Graboske, Black Knight Data & Analytics EVP. “This is the largest share of active HELOCs facing reset of any single year on record, although the approximate 1.5 million borrowers slated to see their HELOC payments increase this year is about 100,000 fewer borrowers than in 2016.”

Graboske explained that the lines resetting this year and early in 2018 are the last of the pre-crisis-era HELOCs that the industry has been focusing on since early 2014.

A third of those with HELOCs resetting this year will find refinancing challenging as they have less than 20 per cent equity in their homes. A fifth have less than 10 per cent and 1 in 10 are underwater.

While that is a concern, it reveals a large improvement from 2016 when 45 per cent of HELOC owners were below 20 per cent and a fifth were underwater.

For most borrowers though, recent conditions have enabled them to avoid the addition monthly cost of a reset.

“One thing that’s working in the 2007 vintage HELOCs’ favor has been the equity and interest rate environment of the last year. Rising home prices and low interest rates throughout 2016 have allowed borrowers to be much more proactive than in years past in terms of paying off or refinancing their lines to avoid increased monthly payments,” Graboske explained.

*originally published on Mortgage Professional America’s website.

May 2, 2017 by · Leave a Comment

Drill Down on Short Sale and Modification Credit

By Pam Marron | National Mortgage Professional Magazine | April 2017

Recently, a joint effort of the mortgage and the housing counseling industries to remedy continued credit problems of past short sellers who continue to receive a foreclosure credit code on their past short sale credit was investigated. While reviewing data, it was learned that this same credit code problem also affects consumers who have had a modification. The foreclosure code problem seems to be present when mortgage lates go past 120 days, a trait present in many short sales and modifications. But we were stunned when the foreclosure credit code also showed up on a consumer who had excessive mortgage lates… but no short sale, foreclosure or modification.

To prove the data found, nine cases including short sales, a modification, a Deed in Lieu and one where none of these existed were set up in the same format. A tri-merged credit report was pulled for each and a visual of the problem credit trade line was provided as well as a snapshot of the individual bureau repositories of Experian, TransUnion and Equifax.

Fannie Mae

All cases were run through the Fannie Mae Desktop Originator (DO) automated underwriting system (AUS) with the tri-merged credit report. A visual of the findings for an approval or declination and what the blended tri-merged credit in Fannie Mae looks like was provided.

The Fannie Mae workaround was used for loans that received a Desktop Originator Refer with Caution and it worked… even on the modification.

There is no workaround for Freddie Mac.

Freddie Mac

For Freddie Mac, cases were run through the Loan Prospector Advisor (LPA) first with the lender tri-merged credit report. Then, the case was run again using the credit in-file option allowed internally through Freddie Mac’s LPA. A snapshot of Freddie Mac’s tri-merged credit and the separate credit in-files was included.

Here is what was found in Freddie Mac:

  • There is no variation for foreclosure verbiage. Either “13. Recent foreclosure/signif derog appears on credit report” appears in findings, or it does not.

Other remarks are often included:

  • “64. Crdt rpt w/recent mtg delinq or review mtg credit history”
  • “YW. The Borrower has had a foreclosure within the last seven years. The mortgage file must also contain evidence of the completion of the foreclosure.”

Number of consumers at risk

Thanks to RealtyTrac (now ATTOM Data Solutions), it was learned that there were 1,978,754 short sales and deeds in lieu completed from 1/1/2010 through 12/31/2016.

The wait timeframe after a short sale or deed-in-lieu is 4 years, rather than the 7 year wait timeframe after a foreclosure.

Thus, as of Dec. 31, 2016, 1,032,211 of those with a past short sale or deed-in-lieu are past the 4 year wait timeframe and are now eligible to re-enter the housing market. Any of these clients and additionally those who had a modification or who had mortgage lates past 120 days will most likely encounter a new mortgage denial for a Fannie Mae or Freddie Mac conventional mortgage.

We haven’t even looked at the number of modifications affected yet.

How Problem Continues

A conventional mortgage denial occurs when the automated underwriting system reads credit code of a past short sale as a foreclosure. When the lender calls Freddie Mac or Fannie Mae, support tells the lender that the information is coming from one or more of the bureaus (TransUnion, Experian or Equifax). Ultimately, the consumer is told they must get the credit fixed with the bureau(s) where the foreclosure code is coming from, though Fannie Mae has a workaround for this problem.

The borrower tries to get this fixed by placing a “dispute” on the account. The “dispute” hides the actual credit from Fannie Mae and Freddie Mac automated systems and must be lifted from the credit when the consumer applies for a new mortgage. When the dispute is lifted, the problem credit comes back and most often credit scores plummet. This results in a higher rate for the consumer and the lender must pay for a Rapid Rescore, the quickest way for consumers to get a credit score change. This is a big problem when found during a contract with a deadline. Lenders that end up paying for the Rapid Rescore often do not want to assist consumers where this problem is anticipated due to the cost the lender must incur.

Another problem is the “Date Reported”, or a more recent change to an account than the initial occurrence date. The more recent date often exempts a past short seller from a new conventional mortgage when it falls within the minimum required wait timeframe. This date cannot be changed per credit reporting agencies.

Stay tuned.

April 4, 2017 by · Leave a Comment

National Real Estate Post is Off the Mark – Here are the Facts!

3/15/17

Dear National Real Estate Post;

With all due respect, you are totally off the mark in today’s video: http://thenationalrealestatepost.com/treasury-giving-away-50k-to-lower-your-mortgage/?utm_source=feedburner&utm_medium=email&tm_campaign=Feed%3A+TheNationalRealEstatePost+%28The+National+Real+Estate+Post%29

The I-Refi program in Illinois is one of three principal reduction programs throughout the United States. Florida https://www.principalreductionflhhf.org/<https://l.facebook.com/l.php?u=https%3A%2F%2Fwww.principalreductionflhhf.org%2F&h=ATO1fWZjNP8A32GMRnUmkN6naeG4Dz4BmkIbMUe5hdCx36xXo6DxrBc4BJzxt0bxbJpKEzhXkzGW7c6xnQA2pP7Zl2uG-IMYvA7oSGS_1F6HbAeNr1Dfqpl2BcLU7NyNBQs> and California https://www.treasury.gov/…/Changes-to-California%E2%80…<https://l.facebook.com/l.php?u=https%3A%2F%2Fwww.treasury.gov%2Fconnect%2Fblog%2FPages%2FChanges-to-California%25E2%2580%2599s-Principal-Reduction-Program-Attract-More-Mortgage-Servicers.aspx&h=ATMSD1J7t67l3Fj34SmuLQZ-V2HZYFvMjiXFcqgGvNBr6GqdmiiN-UhlqFmbwq4pumGNn7bXbvlGLPZs3ubEZctb_Aj4Rped9Hnn8EGX-Zcsc5vQK80Cn1IGuQmLlOziY6Y> have this program as well. There is income criteria developed not too much different than MSA income used for Home Ready, Home Possible and USDA standards for targeted areas, and an appraisal must provide proof of minimum negative equity.

HOW does I-REFI program help?

The key here is that over 5.4 MILLION homeowners who still have negative equity, are trying to stay put in their home and are current on their mortgage have NO REFINANCE OPTION. If you have a negative equity NON-Fannie Mae or NON-Freddie Mac conventional first mortgage, or a negative equity second mortgage or HELOC, THERE IS NO REFINANCE OPTION AVAILABLE! The only option for better payments for these negative equity loans is a modification from the lender that requires proof of hardship and mortgage delinquency first!

How Many Homeowners are STILL Underwater As of December 2016, there are still 5.4 million homeowners seriously underwater where combined first and second mortgage exceeds 125% per RealtyTrac, (now ATTOM Data Solutions) See chart below and article:http://www.realtytrac.com/…/2016-home-equity-and…/<http://l.facebook.com/l.php?u=http%3A%2F%2Fwww.realtytrac.com%2Fnews%2Fhome-prices-and-sales%2F2016-home-equity-and-underwater-report%2F&h=ATOc2jybWm5plCAanfVNAU490qOjH__LpF5_FqNbyRbudoXeGZM2ovtMsoPvXQ4So4A9sr6cQV9yLlU0tqIGyaT8ksz-Sq1mNYb4Q66x-zRIJdiKSNVM8mMFUnP0e27vuvQ>.

PLEASE stop assuming those with negative equity homes are deadbeats that can’t afford to make their payments. Most of the 5.4 million homeowners who are still underwater struggle while waiting for equity to return, and are paying higher interest rates from 8 to 10 years ago. Many of them have resetting interest only first and second mortgages that cannot be refinanced and these underwater homeowners pay higher payments simply because there is no option for a refinance. And a great number of them are elderly who took out funds from their home to help children years ago.

The Principal Reduction Program (with strict criteria) allows those who have managed to stay current to receive up to a $50,000 reduction that puts them into an acceptable LTV to be able to refinance and stay in their home. The goal here is to keep those in negative equity areas in their homes rather than experience another wave of short sales and foreclosures. These Hardest Hit Funds are not new. The Hardest Hit Funds of 7.6 billion allocated in 2010 were provided to 18 states who suffered the most during the housing crisis. These funds were tailored by each state to meet the needs of struggling homeowners.

As of December 2016, Florida is at the top of the list with 807,607 STILL negative equity properties with a combined loan to value over 125%. California is 2nd and Illinois is 3rd.

Q4 2016 negative equ 125 or more ATTOM Data

Also, here is the link to the Illinois I-REFI program to check out program criteria: https://www.ihda.org/…/uploads/2016/03/7-12-16_I-Refi.pdf<https://l.facebook.com/l.php?u=https%3A%2F%2Fwww.ihda.org%2Fwp-content%2Fuploads%2F2016%2F03%2F7-12-16_I-Refi.pdf&h=ATOhEN8qHEO6vJWuVPUDfDv88soW83Xuy9ADCEQdkLu08FRINTLO-4euGIrh-nBCe1kGHiKsedwW7ulaWBPd3oFHoFQ6VBNVUSw0ctfSfIccocHFR7XUvQMZvr47prm-JzM>

March 15, 2017 by · Leave a Comment

HUD Housing Counseling Federal Advisory Committee (HCFAC) to host panel entitled “Challenges in Credit Reporting Post-Crisis: An Opportunity for Housing Counselors”

As a member of the HCFAC committee which is comprised of three representatives each from the mortgage, real estate and housing counseling industries as well as three consumer advocates, I am learning more about a great resource – HUD approved counseling agencies. Panels were planned for March 14 at HUD to show different ways that HUD approved housing counselors can assist not only consumers, but also mortgage and real estate professionals. (The meeting was cancelled due to a major snowstorm and will be held at a later date.)

For years, we have grappled with a credit problem where past short-sellers who attempt to get approved for a conventional Fannie Mae or Freddie Mac mortgage are turned down because their short sale is credit coded as a foreclosure. This problem is commonly found during the mortgage process of a live contract where a deadline must be met. Often, options to get this corrected quickly are expensive or result in the borrower resorting to an FHA mortgage or a non-QM portfolio loan at a higher interest rate.

When this problem was discussed with colleagues in the housing counseling industry, it became evident that this is where a solution to this problem for all parties might be. Why? Loan originators are trained to meet contract dates and get data needed to ensure an approval. Housing counselors are trained to analyze and prepare clients for homeownership.

The credit code problem specific to short sales is not a singular issue. It starts with the realization that the short sale code is showing up as a foreclosure – something not visible until it is seen in both Fannie Mae and Freddie Mac automated underwriting systems. This doesn’t mean Fannie Mae and Freddie Mac are to blame for this problem – it’s just where it is first seen.

Unfortunately, for many affected past short-sellers they learn of this problem on their first attempt to get a new conventional mortgage when they are eligible again four years after the short sale. But too often, lenders don’t run these clients through the automated underwriting system upfront which would allow the lender to know there’s a problem right away. And consumers don’t always let the lender know they had a past short sale.

Note to all loan originators: ask your clients if they had a short sale up front! If they did, run them through your automated system immediately!

Calls for help often come in when the loan is in crisis. Lenders are instructed on how to do the Fannie Mae Desktop workaround, but if the lender is primarily a Freddie Mac lender, there is no workaround. And because of slight differences in the popular Fannie Mae Home Ready program and the Freddie Mac Home Possible loan, calls for help are increasing for how to fix this problem in Freddie Mac.

If past short-sellers know of the problematic credit code issue, they or a credit repair company attempt to get it corrected. The most common fix is to dispute the account. However, the dispute does nothing but hide the credit, offering a temporary fix that appears to work when credit scores increase. However, when the affected consumer applies for a new mortgage the dispute must be taken off of the credit. The previous credit code problem returns, credit scores plummet and if the consumer is in a contract, there is only one quick way to remedy the problem and that is with a Rapid Rescore. Per FCRA regulations, the lender must pay for the Rapid Rescore.

Another problem that occurs is that because of the dispute, the “date reported” becomes more recent then the short sale closing date because of the new investigation. This date can’t be changed per credit reporting agencies and the automated systems can deny a past short seller if this date is within the four year wait limit.

No lenders in the U.S. will do a manual underwrite to circumvent the problem, though both Fannie Mae and Freddie Mac have written criteria that allows for a manual underwrite.

Last week, it was found that the same credit code problem appears to also affect those who had a modification and are over 120 days delinquent.

It is a hunch that going over 120 days delinquent may be the key because an approval of a new loan was received for a consumer who was less than 120 days late on their mortgage prior to the short sale. Nonetheless, we are close to getting this resolved…. And the housing counseling industry will be involved in assisting in a permanent correction of this problem.

March 14, 2017 by · Leave a Comment

How Loan Professionals can Correct a known Short Sale credit coded as a Foreclosure

Loan originators are unaware that there are two solutions that can work when short sale credit is erroneously coded as a foreclosure and results in an automated denial. One solution is a workaround in Fannie Mae. (There is no workaround for Freddie Mac.) The second solution is to “Submit a Complaint” on the Consumer Financial Protection Bureau (CFPB) website.

Fannie Mae workaround

https://www.fanniemae.com/content/release_notes/du-do-release-notes-08162014.pdf

Loan professionals need to know specific directions on how to use the Fannie Mae DO/DU automated underwriting system (AUS) workaround when a Refer/Caution is received and the denial is due to a short sale coded as a foreclosure.

Loan originators, upon receiving Refer/Caution:

  • Within (1)Fannie Mae DO or DU automated underwriting system, go into (2)Edit Loan: then (3)Full 1003 and then (4)Declarations, then (5)c. In dropdown box, change to (6)Yes.
  •  Click on (7)Explanation button at bottom right.  For(9), either:

fannie mae workaround 1

On (8) Declarations Explanation page:

  •  If strictly trying to correct a FORECLOSURE code noted on findings for a short sale, enter on line c.: Confirmed CR FC Incorrect
  • If “Extenuating Circumstances” and are trying to get DU/Fannie Mae approval at 2 years after short sale, enter on line c.: Confirmed CR FC EC

fannie mae workaround 2

Submit a COMPLAINT at the Consumer Financial Protection Bureau (CFPB)

When you find out that your short sale was coded as a foreclosure, one option to correct this is to Submit a Complaint to the CFPB. Let the Consumer Financial Protection Bureau know that your short sale is being coded as a foreclosure on the Fannie Mae or Freddie Mac automated underwriting system.

Take these steps:

  • Before you finish, attach short sale approval letter(s) from your lender and your closing statement (HUD-1) showing the loan closed with you as the seller, not the lender as the seller.
  • You will receive an answer back from the CFPB within 15 days so keep an eye out for their email.

Next month: How Housing Counseling Agencies can help your clients prepare for home ownership….

February 13, 2017 by · Leave a Comment

Loan Originators: Be aware of “disputes” on credit reports and automated underwriting findings. Also on short sales, check “Date Reported”.

Do it before a contract is signed.

By Pam Marron, Jan 9, 2017 for National Mortgage Professional Magazine

Frustrated consumers looking for solutions to correct erroneous information on their credit report often turn to credit repair companies or their mortgage lender for help. A dispute is the 1st method tried but this “fix” is temporary. A requirement to delete the dispute and rerun the automated submission is usually brought to the attention of loan originators who are unaware of the existence of the dispute or where to find it… often weeks before a closing date.

When an account is put into a dispute, that credit is temporarily hidden from Fannie Mae, Freddie Mac and USDA automated underwriting systems (AUS), allowing a false AUS approval. But direction from AUS findings or a mortgage underwriter alerts us that the dispute needs to be deleted from the credit report and that the AUS must be run again. If the credit in dispute is adverse credit, the credit score goes down when the dispute is lifted and an AUS approval commonly changes to a “Refer” or “Caution”, or a loan denial.

Deleting a dispute is not a one step solution. The borrower can do the “fix” if they have 45 to 60 days to do so. But often, due to impending contract deadlines, the only option is a Rapid Rescore which can delete the dispute within 2 to 5 days. However, this is a costly remedy. Further, under FCRA guidelines, the borrower cannot pay for this Rapid Rescore cost and the loan originator or lender must pay.

There are four things a loan originator can do upfront.

  1. Disputes: check the entire credit report whether a mortgage, credit card or loan, for any dispute verbiage. Common dispute statements:
    1. DISPUTE RESOLVED – CONSUMER DISAGREES (disputes the dispute!)
    2. CONSUMER DISPUTES THIS ACCOUNT INFORMATION
    3. ACCOUNT INFORMATION DISPUTED BY CONSUMER

Go into each of the three repositories (Experian, Equifax, Trans Union) on the borrower’s credit and check which ones have dispute verbiage. These are the disputes that must be deleted. Zero balance accounts normally do not apply, but check with your lender.

If you have at least 45 days, retrieve the generic dispute form from your credit reporting agency and have your borrower follow explicit direction from your credit reporting agency on how the dispute can be deleted.

If you don’t have this time, retrieve the Rapid Rescore form from your lender and find out what is needed to delete the dispute.

  1. Run automated Fannie Mae Desktop Originator(DO)/Underwriter(DU) or Freddie Mac Loan Prospector Advisor(LPA) and USDA Government Underwriting System (GUS) upfront. Usually dispute messages are within the findings stating “there appears to be a dispute on the credit report” and direction appears for what needs to be done.
  1. Submit a Complaint to the CFPB for Short Sale Credit Code Correction

What has worked is to “Submit a Complaint” for a mortgage at the Consumer Financial Protection Bureau (CFPB) website: http://www.consumerfinance.gov/complaint/. (Visual instruction and what to attach is located at  http://housingcrisisstories.com/submit-a-complaint-cfpb/.) This is not a dispute but a request for correction to the credit.

Why this is different:

Short sale credit is often coded as a foreclosure when the late payments (still) required to get a short sale approved exceeds 120 days. Often, past short sellers have already had an experience where it was learned that their short sale was coded as a foreclosure. Many have gone to a credit repair company or have attempted a correction themselves to get the erroneous credit code changed. A placed dispute temporarily hides the credit but does not correct the code.

  1. Check “Date Reported” on credit report. Make sure the date is the same as the short sale closing date on the HUD-1 closing statement. If the borrower has previously contacted the short sale lender upon learning that their short sale was coded as a foreclosure, that new date which may also include a dispute of the account becomes the “Date Reported”, or a more recent date then the short sale closing date. If the new “Date Reported” is within four years, the wait timeframe required for a new conventional Fannie Mae or Freddie Mac mortgage, this will result in a loan denial in both Fannie Mae and Freddie Mac AUS’s. If this occurs, you will need to find a conventional lender that will do a manual underwrite.

Hunting for solutions on this now. “The valuable role that housing counselors can play in helping consumers with credit” coming soon. Stay tuned.

January 10, 2017 by · Leave a Comment

When Unpopular Policy Works

Our current administration inherited a financial crisis that this country has not experienced anything close to since the Great Depression. When the collapse occurred, it was visible by the number of unoccupied homes, and many of us knew of friends, relatives and colleagues who were affected. Initially, problems were blamed on the unscrupulous mortgage broker industry until it was learned that the banking industry had an equal amount of blame.

Almost every loan originator I know was negatively impacted by the housing crisis. They were either losing their homes or their income and in many cases, both. All of us saw the housing bubble, but complacency set in after it continued for years, not months. When the crash happened, it was fast and mammoth. It had to be dealt with and the depth of problems that housing faced during the last eight years was unprecedented. Drastic measures were necessary to be put in place immediately to stop the bleeding.

Many say that measures put in place went too far and stalled the progress of the housing market and ultimately added more cost to the entire mortgage process. Others say it could have been much worse if these safeguards were not in place, and that the inconveniences placed upon our industry need to be adapted to. But a few changes occurred that have provided end results that could be argued as good.

The Role of AMC’s and Home Prices

Many of us have concerns when we see housing prices increase quicker than normal trends again. How do we safeguard against alarmingly fast increases in home value that was the norm prior to the crash? The answer appears to be the Appraisal Management Companies, or AMC’s where all (or at least) Qualified Mortgage (QM) appraisals must go through. Appraisals are now done by third-party appraisal management companies (AMC) who lenders and realtors have no communication with until after the appraisal is completed. Even though the process can be frustrating, the value can’t be blamed on the buyers’ lender. A dispute in value can be done but it is with the appraiser through the AMC rather than the lender.

Qualified Mortgages (QM)

Due to requirements put in place by the Consumer Financial Protection Bureau (CFPB), almost all secondary market sellable mortgage products no longer have prepayment penalties, negative amortization, balloons and interest only options. Prior to the housing crash, these negative options were mostly explained to consumers as “rare to happen”, but ultimately became a main reason so many homeowners were negatively affected by the housing crash.

Consequently, a new industry of non-QM mortgage products is out there. Though a rare few have limited “skin in the game”, most of these products require 20% equity to do the deal.

I know that many in my industry have opposite views of the above. And, yes, policies can be streamlined. Frustrating to all of us is that dealing with housing issues seem to come to a standstill 6 to 12 months before every election cycle, seeming to be a topic that no political candidate wants to touch.

Please don’t say the past housing crash won’t happen again with policy changes in the new administration. Instead, those of us in the mortgage and real estate industries need to ensure that this doesn’t happen again by looking at what policies have and have not worked. More effort needs to be placed in finetuning policy that does work.

December 6, 2016 by · Leave a Comment

When Frustration Hurts the Cause

By Pam Marron | November 2016 | for National Mortgage Professional Magazine

On May 19th, 2016, I was appointed to the 1st Housing Counseling Federal Advisory Committee (HCFAC) under HUD. This committee, consisting of 12 members from the mortgage, real estate, housing counseling industries as well as consumers, was formed by HUD to find better ways for HUD counseling to assist consumers with sustainable home ownership. Our first meeting was in Washington, D.C. this week.

While in Washington, a visit to the U.S. Treasury was made to talk about a government 2nd mortgage idea that might allow a refinance for 3.2 million negative equity homeowners who have conventional 1st mortgages not covered by Fannie Mae or Freddie Mac and for negative equity 2nd mortgages and home equity lines of credit (HELOC). The idea could provide a refinance where none exists for those who are current on their mortgage and struggle to stay put in negative equity homes. Many negative equity homeowners have resetting interest only loans and most are just looking for some relief to a lower, fully amortized interest rate that allows equity to build while values return.

At the HCFAC meeting, representatives of top housing agencies that assist homeowners assembled on panels in front of us throughout the day. It was tough to contain disappointment after learning that pre-foreclosure housing counseling funds were gone from the 2017 budget. The aftermath of the housing recession was brought up in multiple conversations and I felt compelled to bring up that we can’t forget the 6.7 million homeowners who still have negative equity in their homes. I was determined to make sure that these people who were in top agencies would know “it wasn’t over yet”. The cringe on the face of a panelist after letting him know that most lenders still required negative equity homeowners to go delinquent before help is provided signaled that this probably wasn’t the first time he had heard this.

Being the bearer of bad news wasn’t what I intended to relay, especially when the direction was shifting to helping consumers purchase homes again.

But, then it turned. One of the panelists was with the National Foundation for Credit Counseling (NFCC). He talked about credit, acknowledging where we had come from and that there was still work to do.

It was then that my greatest frustration was realized:  the lack of attention to damaging current loss mitigation policy that knowingly harms credit built over a lifetime…. credit that is the benchmark of the mortgage and real estate industry and the driver of our economy.

Most homeowners trying to stay in negative equity homes refuse to go delinquent on their mortgage just to get a modification, often their only option available. Five years of trying to expose current policy of most lenders that requires mortgage delinquency first before help is offered is still unbelievable to many. Policy that destroys credit of those already in trouble, that has long term negative consequences and that is affecting a growing number of elderly homeowners can be changed. Allowing for a solution that promotes keeping credit intact with sustainable refinancing can allow responsible homeowners with negative equity to stay put in homes while values return.

Realization occurred that the best agencies who can help were in this room, and that the day before the Treasury had given good news on the forefront and provided valuable information and more contacts that might be able to help. I realized that something very valuable that will come out of getting this HCFAC committee of twelve from four different sectors of housing together. It is also clear that our task will not be easy.

There is still more to be done. The Freddie Mac automated system is turning down past short sellers, reading the short sale credit as a foreclosure, even after the four-year wait needed to get a new mortgage. The fact that loan originators must pay for rapid rescores when helping eliminate disputed accounts on credit has prompted delays on mortgage closings and has resulted in a lack of loan originators wanting to help correct this credit. Finally, patience to wait until after this contentious election is over in order to push forward on getting problems resolved has been short.

But, for the first time in years, progress feels attainable. We are going in the right direction. Stay tuned.

November 8, 2016 by · Leave a Comment

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