Pam Marron Home Lending

Credit Help

In 2011, I started helping homeowners that were two years past their short sale and had 20% down for a conventional mortgage. This was one of the program that allowed short sellers back into the housing market in the shortest period of time after a short sale. The other was on a VA mortgage. I quickly got both a VA cusotmer and a conventional customer around the same time. Both buyers had acceptable credit scores, stellar credit before the short sale and then after the short sale. This was what I was finding in 98% of past short sales…. past homeowners were doing all they could to keep their credit intact.

Short sale credit usually shows as an M-9, or a mortgage in collections. However, when I ran both of these loan application through FNMA and FHLMC automated engines, findings came back “Refer” (denial) with a foreclosure noted on the findings.

I called FNMA and FHLMC and was told that this problem had to be corrected by the creditor. I was told by all underwriters that they would not approve the mortgage until the foreclosure was deleted.

There was a 1st and 2nd mortgage on the VA loan and a 1st mortgage only on the conventional mortgage.  I submitted a request to all mortgage holders for both clients asking that the M-9 be changed to reflect a short sale versus a foreclosure, and all 3 agreed. However, in all 3 cases the credit came back the same. That is when I realized a major problem: there is no credit code for a short sale, and it was defaulting to a foreclosure.

A foreclosure prevents getting a mortgage for 3 years minimum on FHA, VA and USDA, and 7 years minimum on a conventional mortgage. If a solution was not found, short sellers would be further prolonged from getting back into a mortgage.

I found a credit resolution company called National Credit Federation who had published articles about helping short sellers. They are in Tampa, Fl., close to me. I lucked upon speaking with Joe Gendelman, who went to his management to find a solution. Because National Credit Federation is an attorney backed company, they decided to try a solution of sending a letter to the mortgage holder essentially stating that if the credit was not a foreclosure, than the credit code should be downgraded or deleted. Brilliant!

It worked! After approximately 5 weeks, all 3 mortgage holders came back with a downgrade, credit was refreshed, I reran and instantly go AUS approvals for both clients!

There is a charge for Joe’s services. And, Joe has worked with myself and national credit organizations to correct this problem, still in the works. Because of Joe’s understanding of the erroneous credit data and National Credit Federation’s solution that has worked, I recommend Joe Gendelman of National Credit Federation to help short sellers who often encounter this problem.