Pam Marron Home Lending

For short-sellers, some good news, by Kenneth R. Harney, Washington Post

February 6, 2013 by · Leave a Comment 


Friday, Sept. 6, 2013

For short-sellers, some good news


WASHINGTON — Policy changes by two of the biggest players in the mortgage market could open doors to home purchases this fall by thousands of people who were hard hit by the housing bust and who thought they’d have to wait for years before owning again.

Fannie Mae, the federally controlled mortgage investor, has come up with a “fix” designed to help large numbers of consumers whose short sales were misidentified as foreclosures by the national credit bureaus. Under previous rules, short-sellers would have to wait for up to seven years before becoming eligible for a new mortgage to buy a house. Under the revised plan, they may be able to qualify for a mortgage in as little as two years. Homeowners who are foreclosed upon generally must still wait for up to seven years before becoming eligible again to finance a house through Fannie. Industry estimates suggest that more than 2 million short-sellers might be affected by credit bureaus’ inaccurate descriptions of their transactions.

Meanwhile, the Federal Housing Administration (FHA) has announced a new program allowing borrowers whose previous mortgage troubles were caused by “extenuating circumstances” beyond their control to obtain new mortgages in as little as a year after losing their homes instead of the current three years. They will need to show that their delinquency problem was caused by a 20 percent or greater drop in income that continued for at least six months, and that they are now “back to work,” paying their bills on time and earning enough to qualify for a new FHA-insured mortgage.

Fannie Mae’s policy change came after months of prodding by the federal Consumer Financial Protection Bureau, Sen. Bill Nelson, D-Fla., the National Consumer Reporting Association, the National Association of Realtors and Pam Marron, an outspoken Florida consumer advocate. They all sought fairer treatment of borrowers who had participated in short sales in recent years. Marron, a mortgage broker, spotted the erroneous reporting of short sales on credit reports and mounted a campaign to correct the problem.

In a short sale, the lender approves the sale of a house to a new buyer but typically receives less than the balance owed. In a foreclosure, the bank takes title to the property and seeks to recover whatever it can through a resale. Though the two types of transactions are distinct and involve significantly different losses for banks — foreclosures are far more costly on average — the nation’s major credit bureaus have no special reporting code to identify short sales. As a result, say critics, millions of people who have undertaken short sales in recent years may have their transactions coded as foreclosures on their credit bureau reports.

That matters — a lot — because Fannie Mae and other major financing sources have mandated different waiting periods for new loans to borrowers who have completed short sales compared with borrowers who were foreclosed upon — in this case, two years versus seven. Under the new policy, which takes effect Nov. 16, short-sellers who find that their transactions were miscoded on their credit reports, and are able to put 20 percent down, should alert their loan officers and provide documentation on their transaction. The loan officer should advise Fannie Mae about the credit report coding error. Fannie will then run the loan application through its revised automated underwriting system.

Freddie Mac, the other government-administered mortgage investor, continues to require a four-year waiting period for short-sellers who cannot demonstrate “extenuating circumstances” as having caused their problems. If they can do so — documenting income reductions beyond their control that wrecked their credit — they may be able to qualify for a new Freddie Mac loan in two years.

FHA’s policy change may prove to be an even more generous deal for some previous homeowners. Like Freddie Mac, FHA wants to see hard evidence of what economic events beyond the borrowers’ control — loss of a job, serious illness, or death of a wage earner, for example — led to the delinquency or loss of the house. Applicants must be able to show 12 months of solid credit behavior, participate in a housing counseling program and get through the agency’s underwriting hoops. But unlike either Fannie or Freddie, if you qualify under FHA’s revised rules, which are now in effect, and your lender approves, you might be able to buy a house with a new, low-down-payment mortgage in as little as a year.

It’s worth checking out.

Ken Harney’s email address is

(c) 2013, Washington Post Writers Group

Coming Out of a Tunnel

August 23, 2012 by · Leave a Comment 

Just received the press release from Senator Nelson’s office stating that Fannie Mae will be making a fix to their computer system to correct the erroneous foreclosure code that has resulted in a new mortgage denial for eligible past short sellers. Also read the new Fannie Mae release that will show a simple input after proof of the short sale is received, before the loan is run through Fannie Mae. It is a brilliant way to correct the problem, and allows past short sellers the ability to prove the short sale to their lender prior to running the Fannie Mae underwriting engine!

To say I am the greatest cheerleader of the Consumer Financial Protection Bureau, Senator Bill Nelson, and Fannie Mae is an understatement. This fix will make a difference for millions of past short sellers and millions more that will come after them.

There have been so many that have been along this path, and since this is my website, I am going to publicly thank them all.

To Brian Webster at the Consumer Financial Protection Bureau, who organized all of the parties working on this to come to a brilliant solution, and kept all in check to insure this was a real fix… and to Corey Stone and Richard Cordray, who showed genuine concern about the impact of this problem on consumers.

 To Senator Bill Nelson, who was impassioned about this little known code problem and took it directly to the Senate Committee on May 7th with a challenge to get it fixed in 90 days! Your tenacity to get to the bottom of this was heroic, and your staff, Counsel Stephanie Mickle and Regional Director Shahra Anderson, have been invaluable in quickly getting this handled!

Shahra Anderson…. you are an incredible regional director for Senator Nelson… if it wasn’t for you, data needed and getting the white paper to President Obama’s staff last year would not have happened.

Terry Clemens, Executive director of… the best “mentor” one could ever have … who showed me how to get to the right people from the start as we visited representatives, the CFPB, the U.S. Treasury, and then saw many great places in Washington, D.C. YOU are truly the reason this got this far. I would not have known where to start. I am eternally grateful for all that you have done.

Renee Erickson, Acranet Credit Mgr.…. the most tenacious credit fixer I have ever met! You were that at the start, and you are still helping to get this done at the end! You “got it” from the beginning and introduced me to so many, including your whole National Consumer Reporting Association group!

To my son, Jake, who patiently spent days making the Power Points for, debating with me hours on end so we could make problems into 8 quick videos…. problems too complicated but had to be shown in 90 seconds. I learned how to communicate quicker (and that’s a problem for me!:) by our lively discussion and enjoyed our time!

To Marilynn Dechant, DeChant Public Relations… who proofed my overly detailed writings into press releases and introduced me to so many folks we have engaged with for help, and who has kept me on a positive keel even when it didn’t feel that way.

To Chae DuPont, the best attorney that I know, who helped me to see sides of this problem I could not. Showed me how to qualify people for a modification and a short sale, to know it was approvable at the beginning… PRICELESS.

To Joe Gendelman, Regional Director at National Credit Federation… who patiently found the first solution of an attorney letter requesting a credit downgrade if the loan was not a foreclosure. Joe helped our first two clients two years ago and continues to help folks today.

To Christie Johnson, a realtor with Remax Advantage, who agreed to help with short sellers who want to short sale and stay current, and who just closed the first clients who did so. Christie, we are learning a new path, and I can’t thank you enough for your patience with this. You introduced me to our friends at, a great title company who has also agreed to help us make this new path for short sellers.

To all of my realtor friends and others who have put up with my incessant obsession with this problem. There is an end to this tunnel and I am coming out.

To my wonderful boss, John Kulwicki… who has not questioned when I needed to get a new vendor approved, and just did what was needed so I could keep looking for answers…. Thank You.

To my incredibly patient husband, both of my sons, and my parents…. Thank you for listening even when you did not want to.:)

And most of all… to the many, many past short sellers, and those needing to short sale but terrified of what required late mortgage payments would do to your credit and not wanting to go late in the first place… thank you for sharing your REAL stories with me. Every time a new case was looked at, another problem to be aware of came up.  Allowing that snapshot, and sharing the painful past that so many of you went through and sometimes had to go through again because we needed the information…. I know is the hardest…. Thank You.

Senator Bill Nelson Calls for Correction of Short Sales Erroneously Coded as Foreclosures

May 25, 2012 by · Leave a Comment 


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):

Senator Nelson 3              Corey Stone.CFPB

Senator Bill Nelson (FL-D)                                               Corey Stone, 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.”  



Lack of Short Sale Code in Credit Reporting System Creating Hardship for Many Consumers

February 11, 2012 by · Leave a Comment 


Mon, 2013-03-11 15:13 — Terry W. Clemans

The system used by the American credit reporting industry to report the history of consumer payments to creditors to the national credit repositories has a serious flaw, according to some members of the mortgage industry. This flaw is the lack of a specific code for short sale mortgage transactions. With the current mortgage climate of millions of short sale consumers needing properly documented accounts of their previous mortgage problem so they can re-enter the housing market, this problem is reaching epidemic proportions in some of the hardest hit regions of the country. There is speculation that this flaw could be holding back the recovery of the housing market, as many short sellers are prohibited from re-entering the housing market for a longer period of time than required by lenders.

Metro2 is the coding format used by the national credit repositories and the creditors to set the operating procedures for the data in the credit reporting system. It was created by the Consumer Data Industry Association (CDIA), a trade association dominated by the three credit repositories: TransUnion, Experian and Equifax. Anyone working with credit reports much will quickly identify most of the Metro2 codes. In looking at a tradeline for a consumers payment history shown as an “R-1” for example; the “R” stands for Revolving Accounts like credit cards, “I” for Installment, etc., and the number portion representing the last payment status. As in the “R-1” example, the “1” represents the account being paid as agreed, a “2” represents paid 30 days late and higher numbers steadily indicate later payments on up to the dreaded “9” rating, which indicates the account is in collection. While this is just a portion of the many codes in the system designed to handle all of the various scenarios possible in every aspect of lending covered by the American credit reporting system, as of today there is no specific code for a mortgage transaction via short sale.

Short sales are difficult to deal with due to the complexity of the transaction, and are reported with a foreclosure status. Historically this worked, as a short sale transaction was traditionally in conjunction with foreclosure activities. In today’s mortgage marketplace, especially in light of the Federal Housing Finance Agency’s (FHFA—the government agency regulating Fannie Mae and Freddie Mac) short sale policy statement of Nov. 1, 2012, that allows homeowners to short sale without ever being late on their mortgage, the old system of reporting short sales needs updating. Some in the industry believe this is a problem and are working on it; others seem to believe that the status quo is the best route and reporting short sales with a tie to a foreclosure is accurate. Considering the mortgage crisis we are struggling to overcome, and the numbers of consumers who were put into extraordinary circumstances, I believe that the system needs to be carefully reviewed and altered as many consumers who short sell today are much better credit risks that the pre housing crisis foreclosure consumers. It seems that others in the industry have similar beliefs.

In a May 2011 report by Steven Chaouki, a group vice president at TransUnion, titled “Life After Foreclosure and Hidden Opportunities,” he presents a hypothesis that would indicate:

1. Defaulting on a mortgage causes temporary excess liquidity. This excess liquidity masks the true risk of the consumer as he goes through the foreclosure process, and

2. Certain consumers who defaulted on a mortgage in the recent recession only did so because of the recession—they are otherwise good credit risks.

Another person who is very critical of the current system is Pam Marron of Bankers Mortgage who has spent the past 24 years originating mortgages in the Tampa, Fla. market. This is one of the regions devastated by the housing crisis and she sees this issue as “one of the greatest problems facing the housing market in its struggle to rebound.” In working with Tampa area homeowners who have been plagued with this reporting problem over the past couple years she has documented two major problems for homeowners:

1. With no short sale specific code the reporting of a foreclosure status results in a denial of a mortgage in both Fannie Mae and Freddie Mac automated underwriting systems. This stalls past short sellers from re-entering the housing market, even after the required timeframes for reentry after the short sale have passed.

2. Many lenders are still telling underwater homeowners that they must be delinquent on the mortgage to get short sale approval, contrary to the new FHFA short sale policy. This enables the continuation of the current system of reporting short sales as a foreclosure.

Since over the past couple years Pam has had to deal with more short sales in the Tampa market than mortgage originators in most other parts of the country, she has identified two solutions to the problem. One a quick term band aide type approach to help consumers right now, then the long term fix that may require government assistance to ultimately provide the correction needed on a systemwide basis.

The quick fix is to get the short sale lender to provide a letter at closing to the underwater homeowner that simply states “this mortgage closed as a short sale, not as a foreclosure. Any credit markings reflective of a foreclosure should be deleted.” This letter can be used by the mortgage credit reporting agency to correct the repository data to more accurately reflect the short sale status.

The long term fix, and the one that brings much greater challenges, is the creation of a specific short sale code added the Metro2 system so that this manual step is no longer needed. This would allow the lenders to properly track the short sellers in the automated underwriting systems. It would also set up the proper tracking to determine if the short sellers created from the housing crisis are a different credit risk than traditional foreclosures so that this category of transactions can be properly evaluated for their true credit risks. That will require system changes, analysis and those take time when talking about systems as large as those that operate the United States credit reporting industry.

One closing thought that has been provided by many mortgage originators recently on how to help the mortgage market improve, for lenders that do not follow the FHFA Short Sale policy effective Nov. 1, 2012 be held accountable for their disregard of the policy. They report to many consumers still being told that they must be delinquent on their loan to short sale. With the CFPB and Congress looking at the credit reporting industry and the mortgage market closely, it’s possible that the forces to create these changes are in place and help may soon be on the way for the estimated 16 million still underwater American homeowners.

Terry W. Clemans is executive director of the National Consumer Reporting Association (NCRA). He may be reached at (630) 539-1525 or e-mail

Link to article at National Mortgage Professional Magazine:

Where Does My Earnest Money Go?

March 28, 2010 by · Leave a Comment 

Hey, I gave my real estate agent a $5000 Earnest Money Deposit check… Where does that money go?

A basic and very obvious question that most First-Time home Buyers ask once their purchase contract gets accepted.

According to Wikipedia:

Earnest Money – an earnest payment (sometimes called earnest money or simply earnest, or alternatively a good-faith deposit) is a deposit towards the purchase of real estate or publicly tendered government contract made by a buyer or registered contractor to demonstrate that he/she is serious (earnest) about wanting to complete the purchase.

When a buyer makes an offer to buy residential real estate, he/she generally signs a contract and pays a sum acceptable to the seller by way of earnest money. The amount varies enormously, depending upon local custom and the state of the local market at the time of contract negotiations.

An Earnest Money Deposit (EMD) is simply held by a third-party escrow company according to the terms of the executed purchase contract.

For example, there may be a contingency period for appraisal, loan approval, property inspection or approval of HOA documents.

In most cases, the Earnest Money held by the escrow company is credited towards the home buyer’s down payment and/or closing costs.

*It’s important to keep in mind that the EMD may actually be cashed at the time escrow is opened, so make sure your funds are from the proper sources.

The Process:

  1. Earnest Money is submitted to an escrow company with the accepted purchase contract
  2. At the close of escrow, the EMD is credited towards the down payment and / or closing costs
  3. If there are no closing costs or down payment, the EMD is refunded back to the buyer

Who Doesn’t Get Your Earnest Money:

  • Selling Real Estate Agent – A conflict of interest
  • Sellers – Too risky
  • Buying Agent – They shouldn’t have your money in their account


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What Does Title Insurance Protect Me From?

March 28, 2010 by · Leave a Comment 

By including title insurance when purchasing property, your title insurer takes on accountability for legal expenses to defend your property title, should it ever be challenged.

Many different occurrences can come into play to warrant the need for title insurance.

The title company responsible will then take on the legal expenses to defend the property for as long as you are in possession of an interest in the property under the title.

If the defense is not successful, you will be reimbursed for any loss of value of the property.

Common Things Title Insurance Covers:
















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