Pam Marron Home Lending

Erroneous Foreclosure Code still results in Loan Denial for Past Short Sellers in Freddie Mac Loan Prospector(LP) for Conventional Loans

October 26, 2016 by · Leave a Comment 

Loan originator is asking your assistance to share LP conventional mortgage “Caution” files of past short sellers that have passed the 4-year mark.

By Pam Marron   July 28, 2016
In August of 2014, Fannie Mae successfully implemented an automated system workaround that enabled lenders to correct conventional loan Refer/Ineligible findings when past short sale credit shows up as a foreclosure in the Desktop Underwriter or Originator. Freddie Mac’s Loan Prospector automated underwriting system never implemented a correction, and past short sale credit still results in a Loan Prospector “Caution”, or loan denial, for those trying to obtain a new conventional mortgage after a shortsale. The problem does not occur for government FHA and VA loans. Freddie Mac’s Caution findings commonly lists in the reasons for denial under Credit Risk Comments: “13. Recent foreclosure/signif derog appears on credit report”.
A Freddie Mac “Caution” denial requires a manual underwrite to overcome this error.  Lenders that will do a manual underwrite on either Freddie Mac or Fannie Mae conventional loan files are rare to find. The good news is that the credit repository(s) reporting the foreclosure is now able to be found and seen in raw data through credit reporting agencies.
This would not be of such great concern if the mortgage industry was not approaching the rollout of the new “Trended Credit Data” that will work with the Fannie Desktop automated system in Version 10.0 set to be implemented on September 24, 2016.
If there are any glitches in the DU 10.0 format, lenders will likely put their loans through the Freddie Mac Loan Prospector automated underwriting system. Because a work around was never implemented for Freddie Mac, past short sellers eligible for a new mortgage will receive an automated “Caution”, or a denial for a new mortgage.
When the problem of the “Caution” in Freddie Mac’s automated system is brought up, the response from Freddie Mac has been that their system has been corrected and problems are with individual files. This article was written to alert Freddie Mac that as more past short sellers become eligible to purchase a home again, we as lenders are experiencing the problem of the “Caution” denial of new conventional mortgages on all files that are conventional, and more often.
This is what we are finding. All files currently being entered into Loan Prospector for a conventional mortgage purchase where a past short sale exists in credit are receiving a “Caution”, even when the past short sale is past the four-year mark, the wait time required after a short sale for a new Freddie Mac conventional mortgage.
A few lenders have stated they have received an “Accept” for a past short seller on a conventional mortgage, but we have found that only loans submitted for an FHA or VA loan appear to receive an “Accept”. This is believed to be due to the fact that Total Scorecard, an additional credit mechanism found in both Fannie Mae and Freddie Mac, allows the loan to receive an Approve or Accept respectively through both systems but verification of the short sale account must be backed up with documentation proving a short sale rather than a foreclosure. Additionally, it was checked to see if the problem was due to specific credit reporting agencies. Thus far, multiple credit agency reports for the same borrower have resulted in the same denial.
Unfortunately, Freddie Mac Loan Prospector does not designate which account it is classified as a foreclosure. However, the repository(s) that reports the short sale as a foreclosure can be visually found in raw data of the three repositories, Experian, Trans Union and Equifax in the credit report. Lenders who want to specifically see this to distinguish the problem need to make sure they contact their credit reporting agency and ask for the MOP (method of payment) and a horizontal payment history grid to be available on their report. A screen shot of raw data may ultimately be needed if where the foreclosure code exists is not evident on the visual credit report.
Because of the concern that mortgage traffic will increase in Freddie Mac Loan Prospector if a problem arises in Version 10.0 of the Fannie Mae Desktop Underwriter with the introduction of Trended Data Credit, we are proactively and respectfully bringing this known problem of short sale credit that shows up as a foreclosure on conventional loans only again to Freddie Mac’s attention. If you are a loan originator or lender that encounters a “Caution” denial in the Freddie Mac Loan Prospector automated underwriting system for past short sellers trying to obtain a conventional mortgage, please contact Pam Marron at 727-375-8986 or email pam.m.marron@gmail.com.
To best prepare, make sure that you run past short seller files through both Fannie Mae Desktop Underwriter/Originator and Freddie Mac’s Loan Prospector automated underwriting systems upfront. Don’t wait until the final submission to underwriting.
Stay tuned!

The Problem with Credit Report Disputes

October 3, 2016 by · Leave a Comment 

By Pam Marron

Written for National Mortgage Professional Magazine, September 26, 2016

Many past short-sellers attempting to purchase a home are told that their short sale credit shows up as a foreclosure in the Fannie Mae and Freddie Mac automated underwriting systems. Many of these affected consumers then dispute this credit or employ a credit repair company to do so. Thus, it is not uncommon to see a credit dispute on past short sale credit.

The problem with credit disputes is that they are often a temporary fix. When a credit account is disputed, the creditor is given a 30-day timeframe to respond to the dispute. If the creditor does not respond, the disputed information is taken off the credit. However, the comment “account in dispute” appears on that credit line. Dispute comments make the affected account invisible to both Fannie Mae and Freddie Mac automated underwriting systems (AUS) causing the findings to be inaccurate. This is why underwriters require that dispute comments must be deleted from the credit report before an accurate response can be provided through the Fannie Mae or Freddie Mac automated underwriting systems.

When the dispute is lifted, the past negative credit appears again.

Your borrower can request that the dispute is deleted from their account themselves but the timeframe to get this done start to finish can take up to 50 days. Often, there is a signed purchase contract that is time sensitive. Instead of having the luxury of time, a costly Rapid Rescore must be done to get the dispute comments deleted quickly. And loan originators, YOU must pay for this Rapid Rescore.

It gets worse. On a Rapid Rescore, deleting dispute comments from a negative credit account usually results in a lower credit score.

If There is Time for Borrower to Handle Deleting Dispute Comments Directly with Creditor and Credit Bureaus

  1. Loan Originators: Check every credit report for dispute comments prior to application. If dispute comments exist, start working to delete these remarks immediately and allow for a closing date that gives enough time.
  2. Make sure your borrower has the name and account number of the disputed account creditor. Have the borrower contact the creditor directly to request deletion of dispute remarks. Depending on the dispute comments, deletion can take 24 hours to 30 days.
  3. Make sure that your borrower states and puts in writing if necessary that no other parties can provide a new dispute notice.
  4. Have your borrower contact the creditor 5 days later to insure the dispute has been taken off and have them retrieve a letter with contact information for verification purposes.
    • This letter can be used to send to the credit bureau to order a *Rapid Rescore, where corrected information is merged into a new credit report at a cost and produced within 2-5 days. The timeframe of getting this correction on a new credit report without using Rapid Rescore is 30-45 days after the creditor initiates the deletion.
  5. Once the creditor has confirmed that the dispute comments have been removed, have your borrower contact the live agent at the Dispute Department for each of the 3 credit bureaus and ask them to remove the dispute comments. Ask each credit bureau if a request to delete a dispute must be requested in writing or if this can be done over the phone. (This can vary depending on the status of the dispute.) If a letter is needed, the borrower will have retrieved this from the creditor.
    • TransUnion: 800-916-8800
    • Experian: 800-493-1058
    • Equifax: 877-322-8228
  6. Pull a new credit report 35 days after the borrower has requested that the dispute comments be deleted by the creditor. If dispute comments still show up, wait another 10 days and repull credit.
  7. When the new credit report with deleted dispute comment comes in, check the credit score, make sure the loan still fits within program guidelines and run through Fannie Mae or Freddie Mac automated underwriting system.

Retrieving the Credit Report with a 2-5 Day *Rapid Rescore Through a Credit Reporting Agency

A new credit report can commonly be updated in 2-5 business days using *Rapid Rescore. You, the loan originator will have to pay for this.

  1. Each credit reporting agency (CRA) has a link to 1) TransUnion, 2) Equifax and 3) Experian for each account on the credit report that allows you to see “which bureau” specifically has the dispute comment noted.
  2. Complete the generic form for your CRA to order the deletion of dispute remarks for only those bureaus that show the dispute through a *Rapid Rescore for each borrower connected to the dispute account and who is on the new mortgage.
  3. When the new credit report is done, follow step 7 above.

Fannie Readies Launch of ‘Trended Data’ Initiative

May 26, 2016 by · Leave a Comment 

by Brian Collins, National Mortgage News

WASHINGTON — Lenders and credit bureaus are gearing up for Fannie Mae’s June 25 launch of its “trended data” initiative, which provides a new data element to its automated underwriting process.

The program provides a snapshot of an applicant’s revolving credit payments in an attempt to better divine a borrower’s creditworthiness. The launch marks a significant change for the mortgage industry.

Read More: http://www.nationalmortgagenews.com/news/secondary/fannie-readies-launch-of-trended-data-initiative-1078111-1.html?zkPrintable=true

Foreclosure rate is likely two years away from a return to true normal, CoreLogic economist says

May 22, 2016 by · Leave a Comment 

The U.S. foreclosure rate and mortgage delinquencies have fallen to levels not seen since before the housing crash eight years ago, but that doesn’t necessarily mean that the housing market has return to normal. CoreLogic’s Chief Economist Frank Nothaft spoke with Scotsman Guide News about the improved housing market and why the foreclosure rate could take another two years to return to its traditional norm.

Completed foreclosures ticked up for the month in March, but overall the trend has been down, right?  

When you look on a year-over-year basis, and we compare our latest data from March 2015 to March 2016, the news is very good, and it has been very good for  a number of years. The total amount of foreclosure inventory — that is the percentage of mortgaged property that is some stage of  the foreclosure process — that’s dropped 23 percent from a year ago. We are now at the lowest inventory level, the lowest foreclosure rate, since November 2007 prior to the onset of the Great Recession. It is still elevated if we compare it to what the foreclosure rate was 15, 20 years ago, so we are not back to a normal foreclosure rate yet, but we have made substantial progress in the U.S.

Do you believe we’ll get back to a foreclosure rate that would be considered normal and, if so, when?

Yes, I do think we will, but I think it is probably still a couple of years away. There are still a lot of what we refer to in the industry as “the legacy books,” that is, the book of loans that originated in ’05, ‘06 and ’07, which continue to have poor performance — in other words, high default rates. The loans that have been originated since 2009 have performed… read more here

Better Details Needed for FHA Back to Work, Conv “Extenuating Circumstances”

May 6, 2015 by · Leave a Comment 

Better Details Needed for FHA Back to Work Program and Conventional “Extenuating Circumstances”

 

By Pam Marron

For past short sellers who have gone through the loss of a home and are eligible to return, criteria needed for a new mortgage is vague. The result is a partial story.

Proving “extenuating circumstances” and confining the timeline for an economic event is a struggle for loan originators and underwriters trying to comply with vague criteria. Because of so many variables, lenders deny new loans for borrowers with a short sale or foreclosure in their past even when they may be eligible to repurchase again.

We HAVE to get this right. Detailing WHY the loss of a home is the hardest thing for affected consumers to provide… not because they can’t remember, but because they relive it.

In attempting to originate the FHA “Back to Work” loans, it would seem the process is simple. The criteria for “Back to Work” is to show a 20% reduction in income sustained for 6 months minimum that resulted from a loss of employment or reduction in income, which is considered the “economic event”.

Here’s the bigger problem. Most who had an “economic event” tried to hang on, wiping out assets along the way. But, while trying to hang on, homeowners accumulated more debt to stay solvent and in most cases, to stay current on their mortgage. Then, another “economic event” hit, assets were gone and debt is so excessive that there is no choice but to short sell.

As a mortgage broker in Florida where it is common to see Boomerang Buyers (those eligible to re-enter the housing market after a short sale or foreclosure), I often hear the full story for those who have lost a home and want to re-try home ownership again. An economic event followed by a prolonged period of trying to stay put, finally ended with another event where funds were no longer available and the only choice was to short sale, occurred in a great deal of these cases.

Proof also exists to show a good number of these folks had excessive debt that pushed up debt to income ratios incredibly high prior to the sale of their underwater home.

But, it gets confusing for a new mortgage. For the FHA “Back to Work” program, HUD approved counselors are able to determine hardship and can provide those who attempt a re-purchase one year after a short sale, foreclosure or bankruptcy with a housing counseling certificate.

However, that doesn’t mean the mortgage company will approve the mortgage. Because the economic event may have occurred years ago and short sale processes took months or years, documentation such as tax returns and bank statements needed to show a lack of assets may stretch over the previous five to seven years rather than the most recent two years that lenders are accustomed to evaluating.

Mortgage companies who offer FHA “Back to Work” are reluctant to promote this almost two year old program due to few of these loans getting approved. Part of this is because loan originators don’t provide enough documentation, and the other problem is that there seems to be wide discrepancy between underwriting opinion on these files.

Varying opinion also exists for “extenuating circumstances” noted in Fannie Mae and Freddie Mac guidelines for eligibility of a new mortgage under four years. Underwriting interpretation of these guidelines vary greatly from lender to lender for the few mortgage companies who offer these loans.

For loans submitted with what seems to be an iron clad “extenuating circumstance” or proof of the 20% reduction in income for 6 months minimum for FHA’s “Back to Work” program, underwriter opinion seems to vary widely. Some underwriters think the decision to short sale was too soon, while others wonder why homeowners waited. It seems they are trying to justify the sale was “not strategic”.

The income, current credit and assets of borrowers who have gone through a short sale and are trying to re-enter the housing market is more than acceptable per current guidelines. They have to be next to perfect, and they know it. Other than knowledge of the past short sale, these are loans that any lender would want to have on their books.

Those who make policy need to talk directly with affected past short sellers. They need to come to where underwater home problems still exist and see for themselves what is really happening. This can truly help the housing industry recover.

 

 

 

 

Short Sale Code Problem and Workable Solutions

May 28, 2014 by · Leave a Comment 

 Short Sale Credit Code Problem: HOW Changing BOTH the “Root” of the Problem and “Current Short Sale Code” will Help 11.3 Million Past and Future Short Sellers

Download/read the full report below.

2.Short Sale Code Problem.Change BOTH Root and Short Sale Code.probs.workable soluts.5.12

Fannie Mae Fix out Nov.16, 2013 and Two Fixes for Erroneous Foreclosure Code on Past Short Seller Credit Working Now!

October 27, 2013 by · 8 Comments 

Fannie Mae Real fix3

Effective Nov. 16, 2013, Fannie Mae “Fix”!

FNMA Horizontal

Desktop Originator/Desktop Underwriter  Release Notes DU Version 9.1

Updated October 22, 2013

During the weekend of Nov. 16, 2013, Fannie Mae will roll out automated underwriting changes to Desktop Originator/Desktop Underwriter to allow lenders to make a correction when past short sales are erroneously coded as a foreclosure. This will allow past short sellers now eligible for a new mortgage to obtain an approval through the Fannie Mae automated underwriting system (AUS)!

Underwriting when Conflicting or Inaccurate Foreclosure Information Provided on DIL or PFS Tradeline

Fannie Mae has been made aware that there are often inconsistencies in the credit data when Deed in Lieu (DIL) and Pre-Foreclosure Sale (PFS) events occur, and in an effort to assist borrowers in obtaining a new loan in an appropriate timeframe, DU will be updated to disregard the foreclosure information on the credit report when instructed to do so by the lender on the online loan application.

Here’s how to correct the problem:

a. The past short seller needs to have proof of past short sale available (commonly received from listing realtor) and a HUD 1 closing statement to show date of the short sale (both commonly retrieved from short sale realtor or title company). Provide to lender.

b. Lender should run the Desktop Underwriter and get finding first. If Refer with Caution received (shown below), go back into 1003 loan application.

 Rfer with Caut

When DU identifies a foreclosure on a credit report tradeline that appears to be one that was subject to a DIL or PFS, the lender may instruct DU to disregard the foreclosure information on the credit report by entering “Confirmed CR DIL” or “Confirmed CR PFS” in the Explanation field for question c. in the Declarations section of the online loan application and resubmitting the loan casefile to DU. When DU sees this indication, the foreclosure information on the credit report tradeline that also has a DIL or PFS Remarks Code will not be used.

The following is a screen shot of the Desktop Originator® (DO®)/DU User Interface that shows question c., the Explanation field, and examples of how the data should be entered on the online loan application after Nov. 16, 2013:

CR: Credit

DIL: Deed in Lieu

PFS: Pre-Foreclosure Sale/Short Sale

DU fix.12.17

c. After the correction is made, lender should rerun Desktop Underwriter again.

For questions regarding the support of this field by a lender’s loan origination system, lenders should contact their technical support team, and may also contact their Fannie Mae Account Team for additional assistance.

Please Note:

    •  FHA and VA loan approvals are not commonly resulting in loan denials for past short sellers through eitherFannie Mae DU or Freddie Mac LP systems.
    • For short sales that are over 4 years ago, have your lender run through Freddie Mac LP automated underwriting system.

 

And, try these two solutions which are working right now, resulting in an approval:

checkmarkEffective NOW: “Submit a Complaint” at CFPB.gov now.

This prompts a response from your lender typically within 3 days. (A visual of the 5 steps to complete and a list of documents to have ready to attach is at http://closewithpam.com/directions-to-submit-a-complaint-to-the-consumer-financial-protection-bureau/).

CFPB Bank ltr pg 1

bank ltr pg 2

Bank Ltr pg 3

bank ltr pg 4

bank ltr pg 5

The resulting letter from your past short sale lender will have a CFPB case#.

Kelly CFPB letter

checkmark Effective NOW: Call your past short sale lender and ask for the “Executive Mortgage Complaint Escalation” phone number. Call this phone # and ask for a letter stating that your past mortgage closed as a short sale.

a. Have your HUD-1 Closing Statement and the short sale approval letter(s) for the 1st (and 2nd ) mtg. ready upon this call. Make sure to ask how long it will take to get this letter.

b.  Forward the resulting letters from CFPB and your past short sale lender to your new mortgage lender and ask them to re-pull a new credit report.

IMPORTANT: Ask your lender if they can pull credit through Kroll Factual Data or Acranet. I am having various results with different credit agencies and the greatest success has been with both of these agencies.

c. Then, have your lender rerun your loan with the new credit report through Fannie Mae Desktop Underwriting. This results in an Approve/Eligible, or an Approve/Ineligible that can be fixed with proof of the short sale date.

Letters from Lender:

Bank letter

Albright WF letter

Video: Past Short Sellers Can Be Homeowners Again!

October 16, 2013 by · Leave a Comment 

The fix is in!

 

Video: Past Short Sellers Can Be Homeowners Again!

George Albright, like many past short sellers, had a problem when he was eligible to repurchase a home. His past short sale credit was showing up as a foreclosure. George made this video to explain how he was able to get his credit corrected and buy a new home again. How many past short sellers, or those who may have to short sell, can this help? Simple instructions for past short sellers, realtors and lenders!

Click on picture above or go to http://youtu.be/ZPvzVpnwKRI

Underwater Florida Residents: Be Prepared on 10/1 at 9am for $50,000 Principal Reduction through HHF!

September 28, 2013 by · Leave a Comment 

REPEAT: Underwater Florida Residents: Be Prepared on 10/1 at 9am for $50,000 Principal Reduction through Florida’s Hardest Hit Funds! Only 25,000 applications will be processed initially!

Chris Chmura, Fox 13 WTVT   9/27/13

Fl HHF slider revised

And, on 9/23/13, this article on Hardest Hit Funds came out thanks to Beth Kassab in the Orlando Sentinel.

Hardest-Hit Fund finally helps those underwater on their homes

September 23, 2013|Beth Kassab, Local News Columnist

http://articles.orlandosentinel.com/2013-09-23/news/os-hardest-hit-housing-fund-beth-kassab-20130923_1_principal-reduction-homeowners-hardest-hit-fund

However, this is what the Florida Hardest Hit Funds application page on their website showed: NO ABILITY TO MAKE APPLICATION until Tuesday, Oct. 1 at 9am! 

Fl HHF applic website

So get ready, underwater Florida homeowners! Here’s some homework to do before Oct. 1 at 9am:

1.      Go to Principal Reduction page under Florida Hardest Hit Funds and review eligibility criteria at http://www.principalreductionflhhf.org/

Fl HHF website

HHF Prin Reduct criteria  

2.    Read Fact Sheet at http://www.principalreductionflhhf.org/rfv-77.aspx.

3.    Check your income, per eligibility.

Income level Cris Chmura

 

 

Check your family income per Florida county. If you believe that you are over 125% underwater, are current on your mortgage payment and think that your income level will fall into eligible criteria, prepare to apply for up to $50,000 in principal reduction through the Florida Hardest Hit Fund on Tuesday, October 1st at 9am.

Please make sure to review all criteria at http://www.principalreductionflhhf.org/.

Why this is so important:

Percentage still underwater in area Florida counties:

Polk 43%

Pasco 43%

Pinellas 31%

Sarasota 25%

Sumter 10%

Tampa bay still Underwater 9.28

 

 

 

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

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