Housing Counselors Hone Skills for Service That Will Assist Those with Past Short Sale, Deed-in-Lieu or Modification Where Credit Shows Up as Foreclosure

By Pam Marron | National Mortgage Professional Magazine |July 2017

Step One… Loan Originators and Realtors need to ask ALL clients if they’ve had a short sale, Deed in Lieu (DIL) or loan modification in their past. If they have, run the loan through Fannie Mae and Freddie Mac automated systems first to see if foreclosure credit, a “dispute” or incorrect “Date Reported” exists.

Step Two… spread the word that HUD approved housing counselors can assist these clients to correct (not temporarily hide) erroneous credit to get affected consumers “mortgage-ready” ahead of signing a contract.

 Many of nearly 3 million consumers with a past short sale, over 5 million who have had a loan modification and an unknown number with a past DIL need urgent attention to correct a credit error known about since 2011. Affected past homeowners are now eligible to purchase a home again but are being denied new Fannie Mae and Freddie Mac conventional financing where their credit for a short sale, deed-in-lieu or modification shows up as a foreclosure and results in a new loan denial.

The initial problem is when short sale, DIL and modification credit shows up as a foreclosure, often anticipated if past late mortgage payments went over 120 days.

When the affected consumer is told their credit wrongly shows up as a foreclosure, a “dispute” is placed on the account which simply hides the credit from the Fannie Mae and Freddie Mac automated systems… and then must be deleted when the client applies for a new mortgage. (A new change to the Fannie Mae “dispute” policy will take effect on July 29, 2017.)

And, because the account was re-investigated after the short sale, DIL or modification closing date, the “Date Reported” becomes more current, causing the automated system to provide a denial because it appears that the required wait timeframe has not been met.

Loan originators often proceed with processing a new mortgage after checking the required wait timeframe against the closing date of the past short sale, DIL or modification. But sometime during the process or even as late as underwriting, the loan is run through either Fannie Mae or Freddie Mac automated systems where the problem is first seen. Many lenders are unaware of the Fannie Mae workaround (there is no workaround for Freddie Mac!) and often tell blind-sided consumers to “go get your credit fixed and come back.” With the limited supply of housing inventory, sellers are reluctant to extend closing dates for additional time needed to investigate the credit error. Many homebuyers either lose the contract due to the delay to get this fixed or change their loan type to a higher interest rate portfolio loan or an FHA loan.

It makes sense to engage the housing counseling industry into a pre-purchase solution. Loan originators are driven by contract deadlines. Non-profit housing counseling agencies work with clients on the “heavy lifting” to get issues corrected. And HUD approved housing counselors were able to verify “Economic Events” for extenuating circumstances for the past FHA “Back to Work” program.

Leading this initiative is the National Foundation for Credit Counseling (NFCC.org), a non-profit organization with HUD approved housing counselors and credit counseling services. The organization is training and testing solutions to address known fixes, with an emphasis on assisting affected consumers before they even sign a contract. The goal is to alert the real estate and mortgage industries of this service to get potential affected clients “mortgage ready” before sending them back to the real estate and mortgage professionals.

Providing this individualized service to those with a past short sale, DIL or modification who want to purchase a home again is a tremendous relief to these consumers who don’t want to relive their past nightmare again.

This pre-purchase assistance needs to be promoted to affected consumers, the mortgage and real estate industries, loan processors and credit reporting agencies. Correcting issues can be as quickly as 1 day to 60 days.

This will be an up-front fee paid service from an individual housing counselor. Loan originators who wish to assist these clients can refer them to HUD approved housing counselors who have been trained on how to get these unique credit issues corrected once and for all. Then, when the client is deemed “mortgage ready”, they can come back to the loan originator who can provide a credit back towards mortgage closing costs when these folks are ready for a new mortgage.

Everyone benefits. Stay tuned.


Americans Who Can’t Afford Their Homes Up 146 Percent

“In the wake of the financial crisis, so much capacity was taken offline,” Swonk told NBC News. “Much of the existing stock of housing is still underwater. Many of the entry level houses are in disrepair.”

Over 38 million American households can’t afford their housing, an increase of 146 percent in the past 16 years, according to a recent Harvard housing report.

Under federal guidelines, households that spend more than 30 percent of their income on housing costs are considered “cost burdened” and will have difficulty affording basic necessities like food, clothing, transportation and medical care.

But the number of Americans struggling with their housing costs has risen from almost 16 million in 2001 to 38 million in 2015, according to the Census data crunched in the report. That’s more than double.

And despite the overall economic recovery, it’s only a small improvement from 2014, going down by about 900,000 households.

When people can’t safely afford to pay their mortgages and rent, it isn’t just a problem for those with a lower income or people who bit off more house than they can chew.

Economic Trickledown

Housing unaffordability also drags down GDP, slowing down overall economic growth for everyone, said Dan McCue, senior research associate at the Joint Center for Housing Studies at Harvard University, which publishes the annual State of the Nation’s Housing report.

“It forces them to constrict spending on other items, which would reduce spending on other parts of the economy. They would buy less, save less, reduce savings,” said McCue.

“It may make it more difficult to venture out and start a new company — or, living month to month, they’re much less likely to go back to school and get additional training; and may not be in the job that makes them the most productive member of the labor market,” McCue told NBC News.

A big factor has been how wages haven’t kept pace with rising housing costs.

“For lower income groups, it’s even worse than stagnation. It’s not keeping up with inflation,” said McCue.

A Lack of Affordable Housing

Housing costs are being driven by a limited supply of move-in quality, entry-level housing, said Diane Swonk, CEO of DS Economics.

“In the wake of the financial crisis, so much capacity was taken offline,” Swonk told NBC News. “Much of the existing stock of housing is still underwater. Many of the entry level houses are in disrepair.”

And what building is happening is happening upmarket.

“Builders are less able to downscale and build smaller volumes of smaller homes,” said Swonk. “It’s restricting supply well below demand, so of course it shows up in price.”

Also factoring in is a net decline in migration from Mexico after 2009 that decreased the number of skilled construction workers, and an increase in material costs.

http://www.nbcnews.com/business/real-estate/americans-who-can-t-afford-their-homes-146-percent-n774106


Dodd-Frank: Trump says roll-back, consumers map fight back

Kevin McCoy and Roger Yu , USA TODAY Published 7:02 a.m. ET June 14, 2017 |

Newly announced Trump administration plans to weaken or eliminate many financial-industry regulations enacted after the 2008 financial crisis mark the opening shot in what consumer groups predict will be a long Washington siege.

On Tuesday, the day after the Department of the Treasury issued the most detailed blueprint yet of proposed changes to the Dodd-Frank Wall Street Reform and Consumer Protection Act, banking and other financial groups celebrated Trump’s backing of changes they’ve sought for years. The list ranged from restructuring and weakening the Consumer Financial Protection Bureau to reexamining Wall Street trading and mortgage rules.

“The Treasury Department’s report is an important first step in recognizing how a duplicative and onerous regulatory environment harms banks, the economy, and, more importantly, consumers,” said Richard Hunt, the CEO of the Consumer Bankers Association, a trade association for retail banks.

Consumer advocates argue that the proposals represent an unwarranted weakening of rules that reined in banks and Wall Street after their excesses contributed to the nation’s worst economic crisis in generations. But major changes won’t come soon, if at all, because eliminating federal laws or Washington agency rules can take years, the advocates say.

“The prospects for preventing the rollback of many of these rules are actually quite good in terms of delay, and probably not bad in terms of preventing,” said Dennis Kelleher, the president and CEO of Better Markets, a Washington, D.C.-based nonprofit group that promotes the U.S. public’s interests in financial markets. “Enacting the administration’s regulatory agenda can be as difficult as enacting its legislative agenda if there is effective opposition.”

File photo taken in 2015 shows Richard Cordray, director of the Consumer Financial Protection Bureau, at a hearing in Denver, Colorado.(Photo: Brennan Linsley, AP)

Lobbying will likely spread across multiple fronts. But perhaps nowhere are the disagreements hotter than over the Consumer Financial Protection Bureau. Echoing complaints from Congressional Republicans, the Treasury report said the CFPB’s leadership — a lone director only loosely accountable to the president and wielding authority to enforce 18 federal financial laws — has made the agency “unaccountable to the American people.”

In response, the Treasury report recommended:

Authorizing the president to remove the CFPB’s director at will, rather than only when he or she is found to have done something improper.

Considering an alternative leadership structure of an “independent, multi-member commission or board.”

Changing the agency’s funding procedure to require oversight by the U.S. Office of Management and Budget, as well as congressional review.

Switching enforcement actions to federal courts, rather than administrative proceedings handled internally at the agency.

Eliminating public access to underlying data in the agency’s consumer complaint database by restricting that material to federal and state agencies.

Stripping the agency’s supervisory authority over banking and other areas covered by other regulators.

Paul Merski, a Community Bankers of America vice president, applauded yet another proposal, one that would exempt banks with assets of $10 billion or less from complying with CFPB rules that remove some risk features from mortgage loans. That list includes an “interest-only” repayment period, balloon payments required at the end of some mortgages, loan terms longer than 30 years, and excessive upfront fees charged to consumers.

“The main reason for community bank relief is so that they can support growth and jobs,” Merski said.

The CFPB maintained an official silence on the Treasury proposals. Instead, the regulator announced that its director, Richard Cordray, would hold a Thursday public event in Raleigh, N.C. to discuss student loan servicing issues, an area of continuing concern for students who say some loan servicers have not helped the get into income-based repayment plans.

However, Alys Cohen, a staff attorney for the National Consumer Law Center, said the proposals would “kick the legs out from under the CFPB,” which reported it had provided nearly $12 billion in relief and assistance to more than 29 million consumers from its 2011 opening through the end of February 2017.

A random sampling of consumers referred by advocacy groups readily agreed.

In Minnesota, John Lukach said he filed a complaint with the CFPB after Navient, the servicer for his nearly $60,000 in private student loans, did not respond to his requests for more affordable repayment options that would cut his monthly bill. Within two days, a Navient representative contacted him to discuss available alternatives, “something that probably wouldn’t have happened” without the CFPB, Lukach said.

In Arkansas, Myra Brewer, 71, said a debt collector called her and tried to force her to repay a roughly $3,000 credit card debt the company said was owed by her late daughter. She refused, even as the company called multiple times a day for weeks, Brewer said. Ultimately, she obtained the name of the bank that had put the purported loan out for collection and then filed a complaint with the CFPB. “That got action,” she said.

In Florida, a mortgage loan originator Pamela Marron noticed that many former homeowners who’d been caught in a wave of financial crisis short sales — selling their houses for less than the mortgage total — had trouble reentering the housing market. The reason, she determined, was that the nation’s three major credit reporting agencies coded the short sales as foreclosures. That meant the consumers could not qualify for conventional, federal government-backed mortgages for seven years.

After Marron filed complaints with the CFPB, banks re-coded the consumers’ mortgage applications and started processing them. “The CFPB people were very helpful because they understood the data we were looking at,” she said.

Armed with similar consumer experiences, advocacy groups are already discussing efforts to block Washington’s efforts to weaken the CFPB.

Kelleher, the Better Markets CEO, likened the efforts to the recent consumer drive that stopped the administration from derailing an Obama-era rule that now requires financial advisers to put consumers’ interests above their own. The regulation went into partial effect last week, but enforcement isn’t set to start until January.

“Big parts of that coalition will also work against deregulation” elsewhere in the financial industry, Kelleher said.

Follow USA TODAY reporter Kevin McCoy on Twitter: @kmccoynyc

______________________________________________________________________________________________

In USA Today. Help that CFPB provided for short sale code problem noted. CFPB “Submit a Complaint” worked when other fixes did not. Directions: http://housingcrisisstories.com/submit-a-complaint-cfpb/

https://www.usatoday.com/story/money/2017/06/14/dodd-frank-trump-says-roll-back-consumers-map-fight-back/102814996/

© 2017 USA TODAY, a division of Gannett Satellite Information Network, LLC.

Dodd-Frank: Trump says roll-back, consumers map fight back

Call to weaken post-crisis financial safeguards could face long battle


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

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.