Pam Marron Home Lending

Before SS: Don’t Default!

By ignoring damage that is being inflicted by a number of current practices, we are eliminating a growing sector of past homeowners that could repurchase a home, and push our economy forward.

 

 Lenders Need to Realize Distinctive Differences in Short Sellers

  • Look at the credit record of short sellers who are consistently back on track with good credit again after a short sale, classified as a “Cash Flow Manager”. Experian-Oliver Wyman provides proof.  (pgs 8-9)
  • Trans Union provided proof in 2011 Life after Foreclosure and Hidden Opportunities that these “Mortgage Only” (MO) defaulters, or “life event” defaulters, are a better credit risk than Multiple Delinquency (MD) chronic defaulters.
  • Remember that in 2008, stringent mortgage rules were put in place to prevent “Buy and Bail”, a practice of buying another home and then abandoning the previous home.
  • Understand there is a “Cash Flow Manager” Strategic Defaulter who, yes, can make the payment, but ultimately decides to sell a home on a short sale, often reluctantly, because:

1) there is no equity in home to tap into for major repairs needed

2) they do not have these funds to make repairs

3) they have funds, but elect to use for other family priorities, such as kid’s college

4) of need for a larger home

5) of divorce and a decrease in income

6) they must relocate for a job

Lender Rules Pertaining to Short Sellers that Need to be Reviewed and Revised:

  •  DO NOT REQUIRE A DEFAULTED MORTGAGE PAYMENT which ruins the chances of the homeowner purchasing again in the near future. Though not a law, it is a common policy for banks to require this.
  • Require lenders to give the correct credit status for a short sale rating, versus giving an M-9, which is the credit status for a foreclosure.
  • Consider requiring a greater down payment from short sellers, or greater PMI coverage, but reduce the timeframe before a mortgage can be given.

Video: Mr. President: Tell Banks to Stop Makiing Homeowners Default on Mortgage Payment in Order to Qualify for a Short Sale! 

 Committed to helping my customers achieve homeownership!