Pam Marron Home Lending

Fannie Mae Desktop Underwriter (DU) Vers. 9.1 Release Webinar Available!

September 19, 2013 by · Leave a Comment 

Lenders, loan officers, credit companies;

Sign up for Desktop Underwriter (DU) Version 9.1 Release Webinar dates at https://www.fanniemae.com/s/more?query=webinar+on+version+9.1

This session will provide an overview of instruction on how to confirm past consumer short sale data in Fannie Mae Desktop Originator/Underwriter automated system, scheduled for update the weekend of November 16, 2013.

FNMA Vers 9.1 training

Pasco man gets around home lending glitch

September 15, 2013 by · Leave a Comment 

8 on your side

Posted: August 28, 2013

By Shannon Behnken

PASCO COUNTY, FL -In 2010, George Albright’s Trinity home lost half its value, and he lost income. His lender agreed to allow the house to sell for less than Albright’s mortgage and write off the rest. This foreclosure alternative is supposed to help distressed homeowners get back on their feet.Albright knew the short sale would be a black mark on his credit, but he wanted to buy a home again in a few years.”The bank approved it, so I thought I’d be okay in a couple of years and get back in the market.”

One of the benefits to a short sale is that most lenders require only a two-year waiting period before you can buy again. A foreclosure, on the other hand, sticks on your credit report for seven years. But Albright, and thousands of others who have waited their two years, are finding that a computer glitch resulted in foreclosure, the “kiss of death” in lending, on their credit anyway.

“Again, I thought I did the right thing, and I’m getting linked in with other foreclosures, and I didn’t think that was fair because I thought I did the right thing, as best I could at that time.”

The problem is that credit agencies don’t have a code for “short sale” and so many just mark foreclosure. Fannie Mae is working on a fix to its computer system that would flag this problem. The new system is supposed to launch Nov. 16. In the meantime, the Federal Housing Administration is working to change its guidelines, too.

Instead of waiting three years for an FHA loan, a distressed seller can now jump back into the market after one year of good credit.

Until all of the computer fixes are in place, experts recommend obtaining a letter from your former lender to prove your short sale situation.

This is what Albright did, and now he has been approved to buy a home again.

Thanks to Senator Bill Nelson, Who Called for Correction of Short Sales Erroneously Coded as Foreclosures

September 12, 2013 by · Leave a Comment 

Senator Nelson 3              Corey Stone.CFPB

Senator Bill Nelson (FL-D)                                               Corey Stone, CFPB

Credit reports label

On May 7th, 2013, Senator Bill Nelson (D-Fl) went to the  Subcommittee on Consumer Protection, Product Safety and Insurance to get to the bottom of a major problem keeping past short sellers from re-entering the housing market.

Based upon a current Realty Trac report, up to to 2.2 million past short sellers are eligible to re-enter the housing market, past the required wait timeframe to get a new mortgage after a short sale. However, these past short sellers apply for a mortgage only to be denied through both Fannie Mae and Freddie Mac automated underwriting systems (AUS) because short sale credit shows up as a foreclosure. Why is this so detrimental? A foreclosure requires a 7 year wait to get another mortgage, while a short sale only requires a 2 year wait afterwards and with a 20% downpayment, to get a new mortgage. This delay threatens the rebound of the U.S. housing market, and will negatively affect the credit and ability of another 16 million underwater consumers who may need to short sale in the future, to go forward.

 

Below is the link and transcripted words of Senator Bill Nelson (D-FL), Senator Claire McCaskill (D-MO), Corey Stone, Assistant Director, Deposits, Cash, Collections, and Reporting Markets, Consumer Financial Protection Bureau (CFPB); Stuart K. Pratt, Consumer Data Industry Association (CDIA), Ira Rheingold, National Association of Consumer Advocates (NACA), and the National Consumer Law Center (NCLC)

WASHINGTON, D.C.—The U.S. Senate Subcommittee on Consumer Protection, Product Safety, and Insurance held a hearing on Tuesday, May 7, 2013 at 2:30 p.m. titled Credit Reports: What Accuracy and Errors Mean for Consumers.

Click on the link to load and view the webcast housed at C-Span: “Credit Reports: What Accuracy and Errors Mean for Consumers.”

This is a large video so please allow time to load.

1st, go to time of 58:46 where Senator Nelson addresses Corey Stone with the Consumer Financial Protection Bureau (CFPB):

Transcript starting at 58:46:

Senator Bill Nelson: “Ok, I want to ask you about something else. Under the Fair Credit Reporting Act, all credit files should be reported accurately. Isn’t that correct?”

Corey Stone/CFPB: “That’s correct.”

Senator Bill Nelson: “OK. And if a person goes into foreclosure, someone, indeed, that will be noted and it will affect their credit, will it not?”

Corey Stone/CFPB: “Absolutely.”

Senator Bill Nelson: “Then I would ask both of you all, as the regulator s, why are people who don’t go into foreclosure but go into a short sale which the government, this government, under law that we have passed actually encourages, and even encourages with some tax incentives, why is a short sale being coded in the credit reporting agencies the same as a foreclosure? And it’s happening in my state right now! Why?”

Corey Stone/CFPB: “Short sales is a relatively new phenomenon and it is important that it be reported accurately because Fannie and Freddie and the GSE’s and the FHA treat those differently in their underwriting system. So if they can’t distinguish between a short sale and a foreclosure, somebody whose had a short sale will be treated as if they’ve had a foreclosure. The coding of this information is coming into the 3 credit bureaus from furnishers in identical files but it’s our understanding, and this is something we’ve talked to the Consumer Data Industry Association about, and you can ask Mr. Pratt, the next witness about…”

Senator Bill Nelson: “I don’t know what you’ve just said. Why is a short sale being coded the same and you all as the regulators are allowing it to be coded the same as a foreclosure which is a completely different breed of horse.”

Corey Stone/CFPB: “Yeah. Right now, there is a special treatment for short sales that does code them differently but not in the same way that other kinds of ends of loans are coded and a technical aspect that I think Mr. Pratt will be able to shed more light on. But right now, some of the credit reporting agencies do report this information accurately from the information that they receive but not all….”

Senator Bill Nelson: “But they haven’t been (doing so) in Florida. You’re the Consumer Financial Protection Bureau. You’re supposed to be protecting consumers. You’re supposed to be seeing that fair trade is going on. Here we have a new phenomenon. We have a lot of mortgages underwater, people still want to sell their homes. You get into a state like mine where 40% of all of the mortgages in the state are underwater and you want commerce to continue. You want to get the economy to recover. And, so why then penalize the poor person, and we’ve seen this over and over in Florida… why penalize them because they’ve done something we’ve encouraged, and then they have their credit completely blown?”

Corey Stone/CFPB: “We agree with you, Senator, that foreclosures and short sales should be clearly distinguished in credit reports. We’ve become aware of this problem and we’re trying to track down exactly how to fix it, uh, and we’ll have to get back to you on it.”

Senator Bill Nelson: “Well, here’s what I’d suggest that you do. Since you’re supposed to be protecting the consumer (and so are you too, stated to the FTC spokesperson), I have just called this to the attention of your respective chairman, Ms. Ramirez and Mr. Cordray, and I would appreciate it if you all would stop this nonsense and get it coded correctly so that our people are not being penalized. Thank you very much.”

 

Then, go to 2nd piece from 2:22:51 to 2:24:52 where Senator Claire McCaskill asks Stuart Pratt with CDIA the question of Senator Bill Nelson, “Why is a short sale being coded as a foreclosure?”

 

Senator Claire McCaskill Stuart Pratt.CDIA Rheingold

Senator Claire McCaskill (D-MO)               Stuart Pratt, (CDIA)                               Ira Rheingold, NACA, NCLC

Transcript: starting at 2:22:51:

Senator Claire McCaskill: “I have a question from Senator Nelson for Mr. Pratt. Why is a short sale being coded as a foreclosure?”

Stuart Pratt/CDIA: “Well they’re not, but I think that Mr. Stone said it right. The short sale is a new. We’ve had deed-in-lieu, we’ve had foreclosures, we now have short sales. The Metro 2 Task Force, which the CDIA administers, is now looking at a new short sale code because in fact it isn’t a scoring issue in this case, it’s a Fannie and Freddie issue. Fannie and Freddie are administering some programs and they need to be able to identify short sales uniquely, different than any other loan, which is simply settled for less than the full amount. So, we have a code that is settled for less than full amount. And, generally we try to keep codes broad rather than narrow because very narrow codes generally don’t populate into the data base , they don’t become scoreable, they don’t become useable. So in this case, we probably will have to create a short sale code, because Fannie and Freddie are looking for something like a short sale code and they want to see it uniquely and differently from any other settled for less than full amount loan that’s out there in the marketplace, and that’s why…”

Senator Claire McCaskill: “so you’re saying perspectively you will code it differently but now it’s being coded the same?”

Stuart Pratt/CDIA: “Lenders are coding it as a paid for less than full amount.”

Senator Claire McCaskill: “Which is the same as a foreclosure…”

Stuart Pratt/CDIA: “Uh, no. Actually a foreclosure is yet a different coding. If a lender is coding foreclosure on it’s own, they are miscoding a short sale, which would be a data furnisher issue, which would be an issue that the CFPB could look into just as they can look into our practices with our members.”

Rheingold: “But that coding has an incredibly negative impact on the consumers’ ability to get credit. I’d also add that short sales have been around for a long time. I’ve represented homeowners for 25 years and we were doing short sales 20 years ago. So, it’s not a new phenomena. Maybe the prevalence of it, it’s been around for a long time…”

Stuart Pratt/CDIA: “I think that’s well said. The prevalence of it, and the relevance of it to certain new processes that Fannie and Freddie are trying to roll out in the marketplace.”

 

 

Fannie Mae move comes as result of congressional scrutiny initiated by Nelson

September 5, 2013 by · Leave a Comment 

WASHINGTON, D.C. – The nation’s largest home mortgage provider is expected to announce any day now that it has found a fix to the problem of computers reporting short sales as more financially harmful foreclosures in many consumers’ credit reports.

The fix stems from a congressional hearing held by U.S. Sen. Bill Nelson in May examining how the lending industry was reporting short sales with the same computer code used for foreclosures in the credit reports of an untold number of consumers. The practice tainted consumers’ credit ratings, and potentially delayed by a number of years their ability to qualify for new loans on purchases like homes or cars.

 Banks and credit bureaus have said the reporting problem was caused by an error in the standardized computer software the industry used, which had no special code to report record a short sale – a transaction that was relatively rare prior to the economic downturn in 2008.

 Now, according to Nelson’s office, an announcement is imminent that mortgage giant Fannie Mae voluntarily is changing its complex computer software to fix the controversial reporting practice.

 “Regardless of the cause, I’m glad Fannie Mae is fixing the problem,” Nelson said today.  “You can’t punish homeowners who went upside down solely because of the economic downturn and loss of value in their home.”

The Florida Democrat’s staff is scheduled to meet with representatives of the lender and consumer regulators today. With Nelson the Consumer Financial Protection Bureau has been pushing for a solution. And U.S. Sen. Claire McCaskill, a Missouri Democrat, has also been key in finding a fix to the problem.

 The CFPB oversees consumer financial products.  Nelson represents a state that has ranked among the worst in the nation for the number of homeowners who are underwater because of the late-2000’s recession and financial crisis.

Short sales coded as foreclosures hurt credit

August 29, 2013 by · Leave a Comment 

channel 8 8.26

Posted: August 26, 2013

By Shannon Behnken

PASCO COUNTY, FL – For a distressed homeowner who owes way more on a mortgage than a home is worth, a “short sale” can be a ticket out of foreclosure.

A short sale occurs when a bank allows a home to sell for less than you owe, then writes off the rest. It’s supposed to be a black mark on your credit for just two years, instead of the usual seven years for a foreclosure.

“The benefit of entering a short sale agreement is that you’ll be able to re-enter the housing market a lot quicker than having a foreclosure on your credit,” said Joe Gendelman, of National Credit Federation in Tampa.

Gendelman said he’s working with dozens of clients who went through short sales, but then found a foreclosure listed on their credit years later.

The problem is bank and credit bureaus have no special code to report a short sale, so when a new lender checks your credit, it often shows up as a foreclosure.

So thousands of Bay area homeowners who completed short sales years ago are now having trouble buying another home, or even a car.

“Forty percent of homes in the state of Florida are under water.  So, it really creates a mountain that if people need to sell for some reason, many times they would have to be forced to do a short sale,” Gendelman said.

Mortgage Giant Fannie Mae, which underwrites mortgages, says it’s in the process of changing its computer system so that short sales are flagged.

In the meantime, experts recommend you ask for a letter from the lender who approved your short sale. That way, you have proof, if you need it.

Negative Equity Declines in 2Q13, but Trouble Looms for Many Homeowners

August 29, 2013 by · Leave a Comment 

By Evan Nemeroff  AUG 29, 2013 12:40pm ET

With home values rising over the last several months, the national negative equity rate is falling. But for millions of homeowners, it could take years for them to regain equity, Zillow said.

Approximately 12.2 million homeowners with a mortgage were in negative equity at the end of the second quarter, the Seattle-based real estate information provider said in a report. This figure is down from 13 million homeowners in 1Q13 and 15.3 million a year ago.

Even if home prices go up by 4.8% in the next year, it would take a homeowner who is 20% underwater about four years to reach positive equity, assuming appreciation continues at that rate going forward.

“Widespread rising home values during the past year have helped chip away at negative equity nationwide, helping many homeowners who were only modestly underwater to come up for air. For those homeowners who are deeply underwater, though, there is still a long row to hoe,” said Stan Humphries, chief economist for Zillow.

Overall, the negative equity rate for all homeowners with a mortgage is 23.8%. More than half (57%) of homeowners in negative equity are underwater by at least 20%. Furthermore, 13.4% of underwater borrowers owe more than twice what their properties are worth.

Among the 30 largest metropolitans areas covered by Zillow that have the highest percentage of mortgaged homeowners with negative equity in the second quarter are Las Vegas (48.4%), Atlanta (44%) and Orlando (39.8%).

Over the next year, Zillow is forecasting that the negative equity rate for homeowners with a mortgage will fall to at least 20.9%, which will help free 1.9 million borrowers from being underwater. The majority of these homeowners, Zillow said, that will fall into positive equity are anticipated to come from Los Angeles, Riverside, Calif., and Atlanta.

“The frustrating slow pace of negative equity declines in the face of such robust home value appreciation is a direct result of the fact that many people in the hardest-hit markets are underwater by an enormous amount,” Humphries stated. “Because of this, negative equity will be a factor in these markets for years to come, constraining the supply of homes for sale and keeping people out of the market who might otherwise get involved.”

 

 

 

Making the Case for Imminent Default Instead of Delinquency: Allow Underwater Homeowners to Move Forward

August 19, 2013 by · Leave a Comment 

For what seems like the hundredth time, I have spoken to another underwater homeowner who is bewildered about how to move forward. Their lender, realtor or attorney is telling them that they must go delinquent in order to exit a home where the amount of mortgage due is greater than the value of the home.

To put this problem into perspective, think about this comparison.

Two homeowners live side by side. Both have comparable incomes and good credit. One owes far more than the home is worth, but does not have the funds to pay the difference between what the home can be sold for and what they owe. The other homeowner owes less and could easily sell their home for greater than the mortgage amount due. Both work for companies that are cutting back employees and both homeowners are looking to relocate in their line of work.

The homeowner with the lower loan amount and equity calls a realtor, puts their home on the market and starts sending out resumes.

The negative equity homeowner is “underwater” and worries about how to exit the home. They question what a short sale is and are often confused and worried about what to do next. They are shocked when their lender, realtor or attorney tells them they need to be delinquent on their mortgage before the lender will approve their short sale.

They worry about credit and getting into a rental, at least.  What about the lingering credit problems they hear about of past short sellers?  They don’t tell friends, family or neighbors what they are doing because they fear being judged, especially by neighbors who will be angry at the lower price they have to ask for to sell the home.

Sending out a resume is the easiest thing these underwater homeowners can do.

They stall on everything else until they have financially wiped themselves out. At the end of their finances and options, they finally give in and ask for help.  

Homeowners that strive to stay current throughout a short sale have a hard time getting short sale approval. Though guidelines for most lenders allow for Imminent Default and some allow for payments to stay current, the reason for the short sale denial is usually cited as the lack of delinquency. Homeowners must fight to convince lenders that they are not “strategically defaulting” and leaving the lender with a loss, just to exit the home with an eligible hardship. Underwater homeowners now anticipate downsizing of income and households, need for larger homes, and a multitude of other logical reasons why a move is necessary.

This is where a broad understanding and application of Imminent Default could work pro-actively. Imminent Default is the preparation of a move before a delinquency occurs, rather than the pre-defined hardship of delinquency which presumes hardship right now. Imminent Default reasons are typically the hardship occurring, or will occur shortly, and will result in a mortgage default. If lenders:

1)paid attention to *ALL eligible hardships (not just the 4D’s: death, disability, divorce and distant relocation),

2)realized that servicing fees can still be paid when homeowners are current,

3)realized there is greater bottom line net when homeowners are current,

applying Imminent Default could go a long way in building much needed positive PR between lenders and future consumers.

The same importance we have historically placed on credit, and serious attention to the destructive loss mitigation practices that lenders currently impose upon underwater homeowners who must short sale and are left with ongoing damaged credit, both need to be addressed. It is estimated that there are at least 12 million U.S. homeowners still underwater that will need to short sale to go forward soon. The economy and the housing market recovery depend on attention to both of these matters.  

*Eligible hardships for Fannie Mae and Freddie Mac loans found on Uniform Borrower Assistance Form 710, https://www.fanniemae.com/content/guide_form/710.pdf

*Eligible hardships for FHA, VA, portfolio conventional loans acceptable to Making Home Affordable: U.S. Treasury Hardship Affidavit, https://www.hmpadmin.com/portal/programs/docs/hamp_borrower/hardship_english.pdf

40 Million Mistakes: Is your credit report accurate? 60 Minutes

July 19, 2013 by · 1 Comment 

60 min sm

 Feb. 10, 2013

 

Problems Surrounding Underwater Homeowners and Short Sellers

April 13, 2013 by · Leave a Comment 

Click title to view document taken to Washington, D.C. on April 8-10th.

Problems Surrounding Underwater Homeowners and Short Sellers

Perception of Short Sellers is Half of Story

March 20, 2013 by · Leave a Comment 

Yesterday I had a conversation that hit me to the core, as so many have done over the past 2 years. I spoke with a mortgage banker in California who was calling to find out how to get the foreclosure code corrected on credit for a past short seller. I was elated, thinking here is another person in my industry that “gets it” and wants to help underwater homeowners. We dove into conversation and shared views about real estate markets in California and Florida.

I asked him about strategic defaulters as this was a topic he brought up. “How many strategic defaulters do you deal with?” I asked. His reply, “4 out of 7”.

“How do you know this, do you talk to these people?” I asked.

His reply was the pat answer of a majority of folks that I speak with. ”You can tell because they still have money and they are only late on their mortgage payment.”

That’s the definition and perception of a strategic defaulter to the majority of folks (who are not the underwater homeowners).

I have been in the mortgage business since 1985. For the last two years I have felt differently about short sellers, differently than everyone around me.

What I see is another side of the story.

For years, realtors have told me about clients who brag about how they got away with a short sale when it appears everything is status quo and good. Here’s the reality. Lenders don’t approve a short sale without a hardship.

 Every time I get a call, I have to drill for the gut of why short sellers are selling. This is not offered upfront unless it is obvious, like there is a death or a divorce. People are used to sharing their best attributes to get service, not their hardship. Oftentimes what I learn is not even known by their realtor.

I would wager a huge bet that a very large majority of underwater homeowners who approach a short sale are harder off than anyone, including the press, think. This is not meant to garnish sympathy for these folks. They don’t want it. Many cringe at the humiliating process that they see coming, being labeled as a “strategic defaulter” and dreading that their home sale may affect their neighbors’ home values. I get the call when their lender tells them they can’t give them help until they go delinquent on a mortgage payment.

Here is where the confusing blur between a true short seller and a strategic defaulter lies.

All of us have been brought up by the rule that good credit is needed to get a mortgage to “enter” and own a home. Short sellers are shocked to learn that in order to “exit” that home, they can’t just sell it unless they have the money to pay the difference. In order to sell a negative equity home, an approval must come from the bank. That approval is often tied to a verbalized implication that you must be delinquent on your mortgage in order to get the short sale approval to exit.

Why is this? Two reasons that I can see.

1.      It is an assumption that if you are behind on your mortgage payment, you must have a hardship.

2.      Servicing fees are paid to service delinquent loans

However, the idea that we are told that in order to get help, we need to do something so against what we have been taught… to pay our bills on time and keep good credit… is foreign to the majority of us. This is the reason for an overwhelming number of calls.

And I can attest that the lenders are outright telling these folks to be delinquent. I am on the 3-way calls with them and hear it.

Here’s a “strategic” default: when a homeowner purchases another home knowing they will default on the first home after that additional home closes. (Lenders already see this and guidelines require qualifying for both homes and hefty reserve requirements for both homes.)

I go back to the conversation at the beginning, with the California mortgage banker who perceived the majority of short sellers were “strategic” because they were only late on their mortgage payment. If we report those who pay the mortgage late but stay current on everything else as “strategic defaulters”, additional blame and consequences need to go both ways and placed on the lenders, who have made going delinquent on a mortgage a requirement in order to provide short sale approval. And, this is even after new FHFA short sale guidelines effective 11/1/12 that state FNMA and FHLMC mortgage holders can proceed with a short sale while being current on their mortgage and with a hardship.  

I am not going to get all “social worker” here. I am not a sucker who these folks have convinced with a bad story. If it doesn’t make sense to me, I have no problem telling them there is no way I will be able to convince an underwriter of their plight and why.  

Take another look at what you see, versus what you have read about on strategic defaults. The reason these folks are going delinquent is because this is the option they are given, other than handing over a huge pile of cash they do not have, to exit. Many of them are borrowing from others and their 401k’s to stay current on what they have. Many now have to exit, as they would also do if the home was not underwater.

Perception is only half of the story.

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