Pam Marron Home Lending

ForeclosureCreditFix.com now open to check if foreclosure code on past short sale or modification

September 18, 2017 by · Leave a Comment 

ForeclosureCreditFix.com now open to check if foreclosure code on past short sale or modification

By Pamela Marron | September 2017 | for National Mortgage Professional Magazine

Though the consumer pays for this service upfront, loan originators can provide a credit towards the cost at the closing of a new mortgage. Loan originators who agree to provide this credit will be promoted on the Foreclosure Credit Fix Network map at http://foreclosurecreditfix.com/network along with lenders, realtors and credit reporting agencies who want to assist these clients.

 What do nearly 3 million past short-sellers and over 5 million homeowners who have had a modification have in common? All of them may be affected by a foreclosure code that continues to be applied to mortgage credit of a past short sale or modification and results in a new conventional mortgage denial.

 HUD approved counseling agencies have launched an effort to check for a foreclosure code on mortgage credit of past short sellers and those who have had a modification and get it corrected before the consumer attempts to get a new mortgage. Though this service is for the affected consumer, it is also the resource for loan originators, lenders, realtors and credit reporting agencies to send clients to for help. Thanks to the National Foundation for Credit Counseling (NFCC.org) and member HUD approved counseling agency Navicore Solutions, affected consumers can get this problem checked out and resolved before they purchase a home again. Clients can call 1-866-702-4557 or email housing@navicoresolutions.org. When the problem is corrected and these clients are “mortgage ready”, they can be referred to loan originators, lenders and realtors.

The foreclosure code issue affects past short sellers and those with a modification who apply for a new conventional mortgage. There are three reasons why this problem is not being caught and dealt with by lenders ahead of a purchase:

  1. affected consumers have met the four-year wait timeframe required after a short sale or the two-year wait timeframe required after a modification.
  2. The foreclosure code is not visible on a tri-merged credit report.
  3. because of the 2 previous reasons, there is no urgency of lenders to run these loans through the Fannie Mae and Freddie Mac automated underwriting systems upfront.

The problem is often found during a live contract when the loan is run through both the Fannie Mae and Freddie Mac automated underwriting systems. When it is found, the consumer has four options:

  1. Re-run the loan through the Fannie Mae Desktop underwriting system using Fannie Mae’s workaround. (Freddie Mac does not have a workaround.)
  2. Change the loan to an FHA mortgage which allows for a manual underwrite.
  3. Change the loan to a portfolio conventional mortgage which is usually a higher interest rate with greater costs and more down payment required.
  4. lose the contract.

The solution can be a two-step process. The first step determines if the foreclosure code exists and could include utilizing the Fannie Mae workaround. The second step is to make sure that a more recent “date reported” of the affected account does not exist. If the automated system reads that the short sale or modification occurred within the minimum wait timeframe, this can be a reason for a denial. The “date reported” problem often occurs when a “dispute” is put on the affected account. Because the account is re-opened, the more recent “date reported” is recorded and cannot be changed.

Other pre-purchase housing and credit counseling is also available from HUD approved counselors about buying a home, renting, default, foreclosure avoidance, credit issues and reverse mortgages. Some services are free and others are on a sliding scale basis. To find counselors in your area, go to HUD Approved Housing Counseling Agencies at https://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm, click on your state and check under Counseling Services and for agencies in your area.

For more in-depth credit counseling and debt management (NOT to be confused with credit repair), go to the National Foundation for Credit Counseling (NFCC.org) agency locator at https://www.nfcc.org/locator/. All member agencies have HUD approved housing counselors with additional specialized training to deal with credit issues.

As we turn the corner on the housing crisis, lingering problems still need our attention. Thinking of those who were affected by Hurricane Harvey, the mortgage and real estate industries have an opportunity to form new, strong alliances with housing counseling agencies for specialized services that we are not equipped or trained to deal with.

Stay tuned.

 

 

 

HUD Housing Counselors Continue Assisting Negative Equity Homeowners

July 28, 2017 by · Leave a Comment 

Housing counselors continue to assist negative equity homeowners who need help staying put in homes while working on initiative to assist those having trouble reentering the housing market because of foreclosure code wrongly applied to past mortgage credit

HUD approved housing counselors can still assist homeowners struggling to stay put in negative equity homes. But a new effort will check credit of those who have had a past short sale, modification, deed in lieu or excessive mortgage late’s where foreclosure code is applied and causes a mortgage denial for past homeowners eligible for a new mortgage.

Current funding still exists to help homeowners with negative equity who are struggling to stay in their home, but not for long. National Foreclosure Mitigation Counseling funding will expire on September 30, 2017 so here’s a shout out to loan originators and realtors: Refer clients that you know are in need to HUD approved housing counselors that can be located in each state at HUD.gov.

As we turn the corner from the housing recession, problems continue to linger. In 2011, it was found that short sale credit was often coded as a foreclosure and is easily spotted where mortgage delinquency over 120 days occurs. In 2013, Senator Bill Nelson of Florida demanded that this problem be corrected and a workaround was done in the Fannie Mae automated system. But there was never a workaround done in the Freddie Mac system and due to the popularity of the Freddie Mac Home Possible program, past short-sellers with the foreclosure code issue are now being denied through the Freddie Mac Loan Product Advisor automated system. Further, all were stunned when an initiative started by the housing counseling industry for affected past short-sellers resulted in finding that the foreclosure code was also being applied to those with a modification and often a deed in lieu.

The root cause of this problem is not the Fannie Mae or Freddie Mac automated underwriting systems. Recently, a past homeowner who did not have a short sale, modification or deed in lieu but did have excessive mortgage late’s before she sold her home applied for a car loan at a credit union. She was denied the loan because her past mortgage credit showed up as a foreclosure and the loan was never run through the Fannie Mae or Freddie Mac automated systems.

The root of this problem appears to be that foreclosure code is applied to a mortgage when delinquency over 120 days occurs. The verbiage “settled for less than full balance” or that a loan is classified as a modification or deed in lieu does not appear to be superior to a payment history that is 120 days or more delinquent.

There is no specific credit code for a short sale or modification and there needs to be. And we need specific clarification to use credit code “89” for a completed deed in lieu. We need this now so that past homeowners who did the right thing and worked with their lender or a housing counselor to stay in their homes for as long as they could do not have their credit wrongly coded, causing future turmoil when they try to purchase a home again. We haven’t even scratched what this problem is doing to their other consumer credit.

Credit…. Having good credit…. Is what every American is taught about at an early age and what they strive for. Credit is what makes the economy run and better credit leads to better reward. It is frustrating that we are still dealing with a problem that the masses have known about for years, but that is adversely affecting the credit for millions and stalling many from reentering the housing market.

Last week, the offices of two Senators and three Congressman who get this problem were visited. The problem and a way that the housing counseling industry can help were shown to mortgage industry stakeholders at the HOPE NOW Fly-In. Presently, the housing counseling industry is fine tuning a process that will provide affected consumers with a correction to this problem…. before they purchase a home again. Our hope is to promote this service to loan originators and realtors and to have them refer potentially affected consumers to housing counselors who will take care of this problem before consumers purchase again. All of this is being done while we work on a bi-partisan effort with legislators to get a specific credit code for both short sales and modifications.

Stay tuned.

Join FAMP’s Gulf Coast Chapter June 20 for Lunch and Learn

June 20, 2017 by · Leave a Comment 

Lunch and Learn slider June 2017

This class is geared for all mortgage professionals who have had an issue with correcting the credit report.

Pam Marron, Loan Originator, and Theresa McCoy, CIC Credit Reporting Agency, to show how correct inaccurate foreclosure credit in short sale and loan modifications for the Gulf Coast Chapter of the Florida Association of Mortgage Professionals in this Lunch and Learn program at Chili’s, 2903 N. Dale Mabry in Tampa on June 20 from 11:30-1pm.

Register at http://planetreg.com/junelunchandlearn

Download the Case Studies from Pam Marron’s presentation (Parts 1 & 2) by clicking below:

7.-10-case-studies-4-17-17-Part-1

7.-10-case-studies-4-17-17-Part-2

These are 10 Case files where foreclosure credit code showed up on past short sales, modifications or neither. Analyzing credit and differences between what is seen on Fannie Mae and Freddie Mac automated systems.

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

May 4, 2017 by · Leave a Comment 

By Pamela Marron | National Mortgage Professional Magazine | May 2017

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

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

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

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

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

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

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

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

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

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

Stay tuned.

Morning Briefing: HELOC owners face sharp payment increases in 2017

May 2, 2017 by · Leave a Comment 

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

The data reveals that average borrowers whose lines of credit reset will face an additional cost of $250 per month, more than double the current average payment.

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

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

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

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

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

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

*originally published on Mortgage Professional America’s website.

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

March 15, 2017 by · Leave a Comment 

3/15/17

Dear National Real Estate Post;

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

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

HOW does I-REFI program help?

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

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

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

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

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

Q4 2016 negative equ 125 or more ATTOM Data

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

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

February 13, 2017 by · Leave a Comment 

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

Fannie Mae workaround

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

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

Loan originators, upon receiving Refer/Caution:

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

fannie mae workaround 1

On (8) Declarations Explanation page:

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

fannie mae workaround 2

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

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

Take these steps:

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

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

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

January 10, 2017 by · Leave a Comment 

Do it before a contract is signed.

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

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

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

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

There are four things a loan originator can do upfront.

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

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

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

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

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

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

Why this is different:

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

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

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

When Frustration Hurts the Cause

November 8, 2016 by · Leave a Comment 

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

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

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

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

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

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

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

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

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

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

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

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!

Next Page »