Pam Marron Home Lending

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,

*Eligible hardships for FHA, VA, portfolio conventional loans acceptable to Making Home Affordable: U.S. Treasury Hardship Affidavit,

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

July 19, 2013 by · 1 Comment 

60 min sm

 Feb. 10, 2013


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.

Loan Value Group Already Helping States With Underwater Property Values!

May 21, 2011 by · 1 Comment 

LVG logo refined

Florida Needs This Program NOW!

A group in New Jersey called Loan Value Group LLC (LVG) is currently working with a number of States including the State of Arizona ( to help promote the benefits of a HARP. Since 2009, LVG’s primary role has been to contact, educate, and convert borrowers who need financial assistance with their mortgage obligations (1st or 2nd). They have helped many financial institutions promote for example: refinances, modifications, curtailments and cures. Clients include (in addition to Arizona), GMAC Mortgage, Radian Mortgage Insurance, Ocwen Financial, Ally Financial, PMI, and many others.

 HARP is a well-intentioned program, and one of the very few that are designed to help ALL constituents in a mortgage transaction (the consumer, the tax payer, the Federal Government, as well as state and local municipalities). Unfortunately, borrowers who need the most help (those with high Loan to Value ratios) are being left to fend for themselves because they are not being solicited by their current servicer. LVG has determined that the primary reasons these borrowers are being left behind (approximately 90% of all completed HARP’s to date are for loans whose LTV is less than 105%) is:

1)      Lenders are almost exclusively targeting lower LTV consumers over high LTV consumers

2)      Consumers are being told by their “current lender” that they do not qualify for a HARP, when in fact they do. This is a direct result of that lender’s decision to use more restrictive guidelines than the HARP guidelines call for.

 Borrowers however, continue to remain free to seek a HARP with any lender willing to refinance their loan. Unfortunately many borrowers lack the ability to navigate this very complicated process, which has caused most to simply give up.  What’s most depressing is the high number of borrowers who actually qualify for a HARP, but “give up” when their lender denies them. The consumers are seeking help, but the existing construct is designed to drive the borrower back to the servicer who is either not ready, or not willing to help them.

 LVG was hired by the State of Arizona to begin a targeted marketing campaign to contact, and educate a consumer as to the benefits of a HARP. If the borrower truly qualifies for a HARP (regardless of what their current lender is telling them), LVG is seamlessly able to “warm transfer” that consumer to a “State Approved Lender” whose only job is to refinance the consumer under the terms of a HARP.  This may sound simple, but the “hand-off” of an eager refinance candidate to a willing lender does not exist today in scale.  LVG is the only company offering this service free of charge to the borrower AND the state.  To date, LVG has achieved 80% contact rates, and greater than 90% conversion rates. Finally, LVG typically requires less than 60 days to launch a program enabling the State to provide borrower assistance as quickly as possible.

Why Do I Need Mortgage Insurance?

March 28, 2010 by · Leave a Comment 

Mortgage Insurance, sometimes referred to as Private Mortgage Insurance, is required by lenders on conventional home loans if the borrower is financing more than 80% Loan-To-Value.

According to Wikipedia:

Private Mortgage Insurance (PMI) is insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan.

It is insurance to offset losses in the case where a mortgagor is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property.

PMI isn’t necessarily a bad thing since it allows borrowers to purchase a property by qualifying for conventional financing with a lower down payment.

Private Mortgage Insurance (PMI) simply protects your lender against non-payment should you default on your loan. It’s important to understand that the primary and only real purpose for mortgage insurance is to protect your lender—not you. As the buyer of this coverage, you’re paying the premiums so that your lender is protected. PMI is often required by lenders due to the higher level of default risk that’s associated with low down payment loans. Consequently, its sole and only benefit to you is a lower down payment mortgage

Private Mortgage Insurance and Mortgage Protection Insurance

Private mortgage insurance and mortgage protection insurance are often confused.

Though they sound similar, they’re two totally different types of insurance products that should never be construed as substitutes for each other.

  • Mortgage protection insurance is essentially a life insurance policy designed to pay off your mortgage in the event of your death.
  • Private mortgage insurance protects your lender, allowing you to finance a home with a smaller down-payment.

Automatic Termination

Thanks to The Homeowner’s Protection Act (HPA) of 1998, borrowers have the right to request private mortgage insurance cancellation when they reach a 20 percent equity in their mortgage. What’s more, lenders are required to automatically cancel PMI coverage when a 78 percent Loan-to-Value is reached.

Some exceptions to these provisions, such as liens on property or not keeping up with payments, may require further PMI coverage.

Also, in many instances your PMI premium is often tax deductible in a similar fashion as the interest paid each year on your mortgage is tax deductible. Please, check with a tax expert to learn your tax options.


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Understanding An Amortization Schedule

March 28, 2010 by · Leave a Comment 

By committing to a mortgage loan, the borrower is entering into a financial agreement with a lender to pay back the mortgage money, with interest, over a set period of time.

The borrower’s monthly mortgage payment may change over time depending on the type of loan program, however, we’re going to address the typical 30 year fixed Principal and Interest loan program for the sake of breaking down the individual payment components for this particular article about an amortization schedule.

On each payment that is made, a certain amount of interest is taken out to pay the lender back for the opportunity to borrow the money, and the remaining balance is applied to the principal balance.

It’s common to hear industry professionals and homeowners talk about a mortgage payment being front-loaded with interest, especially if they’re referencing an amortization chart to show the numbers. Since there is more interest being paid at the beginning of a mortgage payment term the amount of money applied to interest decreases over time, while the money applied to the principal increases.

We can better understand mortgage payments by looking at a loan amortization chart, which shows the specific payments associated with a loan.

The details will include the interest and principal component of each periodic payment.

For example, let’s look at a scenario where you borrowed a $100,000 loan at 7.5% interest rate, fixed for 30 year term. To ensure full repayment of principal by the end of the 30 years, your payment would need to be $699.21 per month. In the first month, you owe $100,000, which means the interest would be calculated on the full loan amount. To calculate this, we start with $100,000 and multiply it by 7.5% interest rate. This will give you $7,500 of annual interest. However, we only need a monthly amount. So we divide by 12 months to find that the interest equals $625. Now remember, you are paying $699.21. If you only owe interest of $625, then the remainder of the payment, $74.21, will go towards the principal. Thus, your new outstanding balance is now $99,925.79.

In month #2, you make the same payment of $699.21. However, this time, you now owe $99,925.79. Therefore, you will only pay interest on $99,925.79. When running through the calculator in the same process detailed above, you will find that your interest component is $624.54. (It is decreasing!) The remaining $74.68 will be applied towards principal. (This amount is increasing!)

Each month, the same simple mathematic calculation will be made. Because the payments are remaining the same, each month the interest will continue to be reduced and the remainder going towards principal will continue to increase.

An amortization chart runs chronologically through your series of payments until you get to the final payment. The chart can also be a useful tool to determine interest paid to date, principal paid to date, or remaining principal.

Another frequent use of amortization charts is to determine how extra payments toward principal can affect and accelerate the month of final payment of the loan, as well as reduce your total interest payments.


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How Do I Calculate My Mortgage Payment Without Using A Mortgage Calculator?

March 28, 2010 by · Leave a Comment 

Calculating an exact mortgage payment without a calculator on a loan is no small task, but there are some simple rules-of-thumb you can use to get a close estimate.

With the exception of the MIT Blackjack Team, performing this type of complex math in your head often leads to frustrating rants.

When coming up with a rough estimate, it is important to understand the individual components that factor into the overall monthly mortgage payment.

Yes, the thousands of dollars you send to your lender every year may cover more than just the mortgage, but referring to one simple formula will help you gauge what the new payment will be as you’re out looking for new properties that may be in your price range.

What’s In A Mortgage Payment?

A mortgage consists of 4-6 parts:

  • Principal – the balance of the loan
  • Interest – the fee paid to borrow the mortgage money
  • Property Taxes – based on county assessed value and residence type
  • Hazard Insurance – in the case of fire or property damage (may include a separate flood policy)
  • Mortgage Insurance – more than 80% LTV on conventional loans, or with FHA financing

Most lenders use the acronym (PITI), which includes Principal, Interest, Taxes and Insurance.

And in the case where a separate Mortgage Insurance Premium is required, we add another “I” to the end of that creative series of letters.

Another monthly expense that you have to consider is the monthly dues that come with properties that have a homeowner’s association (common in condominiums and other developments). This isn’t a payment made to your lender, but you will have to qualify with that payment and it is also best practice for you to factor that in the monthly cost of your new home.

Confused yet? Don’t worry, this is slightly easier than most state bar exams.

The Mortgage Payment Cheat Sheet:

Ok, you’ve made it this far and haven’t closed your browser, so that is a good thing.

Please keep in mind, this top secret formula will by no means be exact.

Mortgage Payment Formula:

For every $1000 you borrower, your TOTAL monthly mortgage payment will be $8.

So, if you purchase a home for $250,000 with a $50,000 down payment – borrowing a total of $200,000, then a good estimated total monthly PITI payment would be roughly $1600.

But don’t forget to add your homeowners association dues to that monthly payment.

What If I Pay Taxes and Insurance Separately?

Well now we’re at the easy part. If you elect to pay taxes separate from your mortgage, the cheat sheet is reduced from $8 per $1000 down to $6 per $1000.

So there you have it. $8 for every $1000 borrowed.

Again, please keep in mind that this is not going to give you an EXACT payment. You may be purchasing a property with higher real estate taxes or your insurance premiums may be higher than average depending on the state you live in.


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Do I Have To Continue Making My Mortgage Payment If My Lender Goes Bankrupt?

March 28, 2010 by · Leave a Comment 

When mortgage lenders go out of business and are essentially taken over by the FDIC, homeowners are left wondering if they still need to make a monthly payment.

Great thought, and a very common question for many borrowers in the 2006-2010 timeframe.

The short answer is YES, you still have to continue making mortgage payments if your current lender files for bankruptcy or disappears over the weekend.

In order to give a more thorough answer to this popular topic, we’ll need to address the relationship between mortgage loans as liens and mortgage servicers who make money by handling payments.

To put this topic in perspective, 381 banks actually filed bankruptcy between 2006 and 2010 forcing them to cease their mortgage lending activities. And a common misconception borrowers have about their mortgage company is that their agreement should become obsolete once the lender files for bankruptcy or goes out of business.

Based on the way mortgage money is made, packaged and sold on the secondary market as a mortgage backed security, the promissory note (agreement) is actually spread between many investors who rely on a servicing company to collect and manage the monthly payments.

A mortgage is considered a secured asset, where the collateral is real estate.  And, the mortgage note has a separate value to investors and servicers based on the interest and servicing fees they have wrapped up in the monthly payments.

This is why many mortgage notes get sold to other servicers who pay for the rights to service your loan. So basically, even if a mortgage company is bankrupt, someone else is willing to take on the job of collecting payments.

Also, by signing a mortgage note, the borrower is committing to continue making the required payments, regardless of what happens to the mortgage company servicing your loan.


  • Your house is an asset
  • The mortgage note has a separate value to investors
  • Regardless what happens to your mortgage company, you need to make your payments

Also, it’s important to continue making your mortgage payments on time, regardless of which servicing company is sending a monthly statement.  Obviously, keep a good paper trail of those mortgage payments in case there is a mix-up between transitions.


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Shopping For A Hazard Insurance Policy

March 28, 2010 by · Leave a Comment 

When shopping for a hazard insurance policy, something called “bundling” can actually save you quite a bit of money that most people aren’t aware of.

Many of the big insurance companies price their insurance rates to attract a particular segment of the market. They usually price their hazard insurance policies to attract homeowners who need to insure not only their homes with hazard insurance, but also their cars with car insurance and lives with life insurance.

The big insurance companies want customers who will stay with them for years vs shopping around for a better deal every six months.  So, to give customers an incentive to stick with them, they offer discounts if you use the company for all three (hazard, auto, life) lines of insurance.

Companies offer “multiline discounts” to attract customers who will need more than one type of insurance. These companies offer a cheaper rate to insure both your house and car than if you insured each one separately at different companies.

The same goes if you add a second car or a life insurance policy – the discounts keep adding up.


Frequently Asked Questions:

Q. How much can you actually save when you combine insurance policies with one company?

It varies by company, but with some of the large insurance companies, it will save you up to 40%.

Q. Why are the large companies sometime so far off when it comes to price on my hazard insurance?

Large companies often give significant discounts if you have your hazard, auto and life insurance with them – and they actually *want* to be higher in price if you only have one line. People with only one line of insurance switch more often according to the statistics.


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