Pam Marron Home Lending

After SS: Correct M-9 Credit

Repairing Erroneous Short Sale Credit to Enable a Purchase After a Short Sale

Short sellers who have already incurred late pays prior to the short sale, are past the 2 year wait timeframe needed to obtain another mortgage after a shortsale, CAN downgrade the M-9 foreclosure status placed on your short sale credit in order to get a mortgage approval.

Almost all banks/lenders are posting an M-9 credit status code, the status for Foreclosure, on closed short sale credit.

  • Why is an M-9, or Foreclosure status bad? A foreclosure will require 7 years before a mortgage can be obtained.

The M-9 is read as a Foreclosure in all automated underwriting engines, and automatically provides a “Refer” or “Ineligible” finding. FNMA and FHLMC have stated that manual underwriting exceptions can be made with highest underwriting approval. However, all lender underwriters, FNMA and FHLMC want the M-9 status off the credit report, even when past short sellers are within the eligible timeframe of getting another mortgage.

 We now have a solution!

Through National Credit Federation, a letter is sent to the past short seller’s lending institution requesting a downgrade or removal of the M-9, unless the lender/bank can verify that the short sale was a foreclosure.

  •  There is a fee for this.
  • Yes, I have already had this done for clients. In all cases, the M-9 was downgraded to an M-5
  • No, it does not work when the client calls or the loan officer calls to get corrected. Why? Because there is no known credit status for a short sale, and bank/lender credit investigators reapply credit status originally placed on the short sale. 
  • Yes, I have already received automated approvals through FNMA DU for FHA, Conventional and VA loans.
  • Yes, I have closed one of these loans, another is looking for a home, and the 3rd is a veteran who I am working with now.

 If you have had a short sale and want to prepare your credit for a future mortgage, call Pam Marron, Stearns Lending, Inc. at 727-375-8986 or Joe Gendelman, National Credit Federation at 813- 425-1364.

Committed to helping my customers achieve homeownership!