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

 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 Unpopular Policy Works

Our current administration inherited a financial crisis that this country has not experienced anything close to since the Great Depression. When the collapse occurred, it was visible by the number of unoccupied homes, and many of us knew of friends, relatives and colleagues who were affected. Initially, problems were blamed on the unscrupulous mortgage broker industry until it was learned that the banking industry had an equal amount of blame.

Almost every loan originator I know was negatively impacted by the housing crisis. They were either losing their homes or their income and in many cases, both. All of us saw the housing bubble, but complacency set in after it continued for years, not months. When the crash happened, it was fast and mammoth. It had to be dealt with and the depth of problems that housing faced during the last eight years was unprecedented. Drastic measures were necessary to be put in place immediately to stop the bleeding.

Many say that measures put in place went too far and stalled the progress of the housing market and ultimately added more cost to the entire mortgage process. Others say it could have been much worse if these safeguards were not in place, and that the inconveniences placed upon our industry need to be adapted to. But a few changes occurred that have provided end results that could be argued as good.

The Role of AMC’s and Home Prices

Many of us have concerns when we see housing prices increase quicker than normal trends again. How do we safeguard against alarmingly fast increases in home value that was the norm prior to the crash? The answer appears to be the Appraisal Management Companies, or AMC’s where all (or at least) Qualified Mortgage (QM) appraisals must go through. Appraisals are now done by third-party appraisal management companies (AMC) who lenders and realtors have no communication with until after the appraisal is completed. Even though the process can be frustrating, the value can’t be blamed on the buyers’ lender. A dispute in value can be done but it is with the appraiser through the AMC rather than the lender.

Qualified Mortgages (QM)

Due to requirements put in place by the Consumer Financial Protection Bureau (CFPB), almost all secondary market sellable mortgage products no longer have prepayment penalties, negative amortization, balloons and interest only options. Prior to the housing crash, these negative options were mostly explained to consumers as “rare to happen”, but ultimately became a main reason so many homeowners were negatively affected by the housing crash.

Consequently, a new industry of non-QM mortgage products is out there. Though a rare few have limited “skin in the game”, most of these products require 20% equity to do the deal.

I know that many in my industry have opposite views of the above. And, yes, policies can be streamlined. Frustrating to all of us is that dealing with housing issues seem to come to a standstill 6 to 12 months before every election cycle, seeming to be a topic that no political candidate wants to touch.

Please don’t say the past housing crash won’t happen again with policy changes in the new administration. Instead, those of us in the mortgage and real estate industries need to ensure that this doesn’t happen again by looking at what policies have and have not worked. More effort needs to be placed in finetuning policy that does work.


Mortgage and Real Estate industries blamed each other for the crisis.

Plea for Smart Analysis of What Works and What Doesn’t from the Mortgage and Real Estate Industries

by Pamela Marron

8 years ago, our current administration inherited a financial crisis that this country has not experienced anything close to since the Great Depression. When it occurred, it was visibly seen in the collapse of the housing market. Initially, problems were blamed on an unscrupulous mortgage broker industry until it was learned that the banking industry had an equal amount of blame.

Almost every loan originator I know was negatively impacted by the housing crisis. They were either losing their homes or their income and in many cases, both. All of us saw this coming but complacency set in after years, not months, of the housing market going up. Conversation slowly dissipated as the housing market heated up and more jumped in. But, when the crash happened, it was fast and mammoth.

Many of us are taking notice of similar signs again as we see housing values increase quicker than normal market appreciation. Flippers have become the norm and are challenged when appraised values don’t meet increased asking prices of homes. This time it can’t be blamed on the lending company. Even though the process can be frustrating, appraisals are now done by third-party appraisal management companies (AMC) who lenders and realtors have no communication with until after the appraisal is completed. Ultimately, this policy seems to have tempered an explosion of skyrocketing home values, requiring consistent data to go to an arms-length third party arbitrator who can change value when warranted.

Additionally, due to the qualified mortgage (QM) requirements put in place by the Consumer Financial Protection Bureau (CFPB), almost all sellable mortgage products no longer have prepayment penalties, negative amortization, balloons and interest only options. Prior to the housing crash, these negative options were mostly explained to consumers as “rare to happen” but ultimately became a main problem for so many homeowners who were negatively affected.

There’s still great anger at the current administration for policies put in place meant to protect the consumers and the housing market. Many say those measures went too far and stalled the progress of the housing market and ultimately added more cost to the entire mortgage process. Others say it could have been much worse if these safeguards were not put in place, and that the inconveniences placed upon our industry needs to be adapted to. Yes, policies can be streamlined. Yes, we have had to deal with unintended consequences not realized often until policy is in place. But the depth of problems that the housing industry faced during the last eight years was unprecedented. Drastic measures were necessary immediately to stop the bleeding.

I know that many in both mortgage and real estate industries have opposite views of the above. What is real is that over the last eight years, more people than ever realized had hardships never-before experienced that resulted in a downward spiral in their lives, and for their children, extended family and ultimately entire communities. To add to frustration, dealing with housing issues seemed to come to a standstill months before general elections, a topic that no political candidate wanted to touch.

Please don’t tell me this won’t happen again with this new administration. Instead, those of us in the mortgage and real estate industries need to make the time to speak to each other’s industries about what worked and what didn’t and to connect with agencies that can help when needed. Good practices need to be expanded on and policy that provides equal benefit to the mortgage industry and consumers must prevail. WE need to be the first stewards of our industries, and without prodding.

Pamela M. Marron, Florida Licensed Mortgage Broker NMLS#246438


mortgage crisis

When Frustration Hurts the Cause

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

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!


Wages Lag Home Prices; Affordability Suffers

from Mortgage News Daily, Sep 29 2016, 12:57PM

The lack of housing affordability is rising among the 414 U.S. counties tracked by ATTOM Data Solutions.  ATTOM, the new parent company of RealtyTrac, said on Thursday that 24 percent of those counties were less affordable than their historic averages in the third quarter of 2016, up from 22 percent in the second quarter and 19 percent a year earlier.  It was the highest share for this metric since the third quarter of 2009 when 47 percent of markets had fallen below their historic affordability averages.

ATTOM reports that 101 of the 414 counties had an affordability index below 100 in the third quarter of 2016, meaning that buying a median-priced home in that county was less affordable than the historic average for that county going back to the first quarter of 2005.

ATTOM’s affordability index is based on the percentage of average wages (taken from the U.S. Bureau of Labor Statistics) that is needed to make monthly house payments on a median priced home (as determined from publicly recorded sales deeds.) That payment is composed of principle, interest on a 30-year fixed rate mortgage with a 3 percent downpayment and including property taxes, and insurance.

“The improving affordability trend we noted in our second quarter report reversed course in the third quarter as home price appreciation accelerated in the majority of markets and wage growth slowed in the majority of local markets as well as nationwide, where average weekly wages declined in the first quarter of this year following 13 consecutive quarters with year-over-year increases,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “This unhealthy combination resulted in worsening affordability in 63 percent of markets despite mortgage rates that are down 45 basis points from a year ago.

 

 

Counties that were less affordable than their historic averages in Q3 included Harris County (Houston), Kings County (Brooklyn); Dallas County; Bexar County (San Antonio); and Alameda County in the San Francisco metro area.

Counties still affordable by historic standards included Los Angeles County, Cook County (Chicago); Maricopa County (Phoenix); Miami-Dade County; and Queens County, New York.

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The Problem with Credit Report Disputes

By Pam Marron

Written for National Mortgage Professional Magazine, September 26, 2016

Many past short-sellers attempting to purchase a home are told that their short sale credit shows up as a foreclosure in the Fannie Mae and Freddie Mac automated underwriting systems. Many of these affected consumers then dispute this credit or employ a credit repair company to do so. Thus, it is not uncommon to see a credit dispute on past short sale credit.

The problem with credit disputes is that they are often a temporary fix. When a credit account is disputed, the creditor is given a 30-day timeframe to respond to the dispute. If the creditor does not respond, the disputed information is taken off the credit. However, the comment “account in dispute” appears on that credit line. Dispute comments make the affected account invisible to both Fannie Mae and Freddie Mac automated underwriting systems (AUS) causing the findings to be inaccurate. This is why underwriters require that dispute comments must be deleted from the credit report before an accurate response can be provided through the Fannie Mae or Freddie Mac automated underwriting systems.

When the dispute is lifted, the past negative credit appears again.

Your borrower can request that the dispute is deleted from their account themselves but the timeframe to get this done start to finish can take up to 50 days. Often, there is a signed purchase contract that is time sensitive. Instead of having the luxury of time, a costly Rapid Rescore must be done to get the dispute comments deleted quickly. And loan originators, YOU must pay for this Rapid Rescore.

It gets worse. On a Rapid Rescore, deleting dispute comments from a negative credit account usually results in a lower credit score.

If There is Time for Borrower to Handle Deleting Dispute Comments Directly with Creditor and Credit Bureaus

  1. Loan Originators: Check every credit report for dispute comments prior to application. If dispute comments exist, start working to delete these remarks immediately and allow for a closing date that gives enough time.
  2. Make sure your borrower has the name and account number of the disputed account creditor. Have the borrower contact the creditor directly to request deletion of dispute remarks. Depending on the dispute comments, deletion can take 24 hours to 30 days.
  3. Make sure that your borrower states and puts in writing if necessary that no other parties can provide a new dispute notice.
  4. Have your borrower contact the creditor 5 days later to insure the dispute has been taken off and have them retrieve a letter with contact information for verification purposes.
    • This letter can be used to send to the credit bureau to order a *Rapid Rescore, where corrected information is merged into a new credit report at a cost and produced within 2-5 days. The timeframe of getting this correction on a new credit report without using Rapid Rescore is 30-45 days after the creditor initiates the deletion.
  5. Once the creditor has confirmed that the dispute comments have been removed, have your borrower contact the live agent at the Dispute Department for each of the 3 credit bureaus and ask them to remove the dispute comments. Ask each credit bureau if a request to delete a dispute must be requested in writing or if this can be done over the phone. (This can vary depending on the status of the dispute.) If a letter is needed, the borrower will have retrieved this from the creditor.
    • TransUnion: 800-916-8800
    • Experian: 800-493-1058
    • Equifax: 877-322-8228
  6. Pull a new credit report 35 days after the borrower has requested that the dispute comments be deleted by the creditor. If dispute comments still show up, wait another 10 days and repull credit.
  7. When the new credit report with deleted dispute comment comes in, check the credit score, make sure the loan still fits within program guidelines and run through Fannie Mae or Freddie Mac automated underwriting system.

Retrieving the Credit Report with a 2-5 Day *Rapid Rescore Through a Credit Reporting Agency

A new credit report can commonly be updated in 2-5 business days using *Rapid Rescore. You, the loan originator will have to pay for this.

  1. Each credit reporting agency (CRA) has a link to 1) TransUnion, 2) Equifax and 3) Experian for each account on the credit report that allows you to see “which bureau” specifically has the dispute comment noted.
  2. Complete the generic form for your CRA to order the deletion of dispute remarks for only those bureaus that show the dispute through a *Rapid Rescore for each borrower connected to the dispute account and who is on the new mortgage.
  3. When the new credit report is done, follow step 7 above.

Loan Delinquency Rate Up, Potential Home Sales Improve

by Phil Hall, August 22, 2016 as published on National Mortgage Professional Magazine

The week is getting off to a bit of a decent start, at least in terms of the latest housing market data.

Black Knight Financial Services’ “first look” at July’s mortgage environment has determined that the U.S. home loan delinquency rate rose 4.78 percent from June, although it is down 3.38 percent from July 2015. There were more solid numbers regarding foreclosure starts—61,300 in July, down 11.54 percent from June and down 14.27 percent from a year ago—and on the total pre-sale foreclosure inventory—1.09 percent, down 1.68 percent from the previous month and down a significant 28.36 percent from one year earlier.

However, the number of properties that are 30 or more days past due but not in foreclosure reached nearly 2.3 million, up 108,000 from June but down 70,000 from July 2015.

Separately, First American Financial Corp.’s proprietary Potential Home Sales model determined that the market for existing-home sales underperformed its potential in July by 1.3 percent or an estimated 92,000 seasonally adjusted, annualized rate (SAAR) of sales. This an improvement over June’s revised under-performance gap of 1.8 percent, or 104,000 (SAAR) sales. First American also reported that the market potential for existing-home sales grew last month by 0.15 percent compared to June, an increase of 8,000 (SAAR) sales, and increased by 5.4 percent compared to a year ago.

However, Mark Fleming, chief economist at First American, noted that a thorny problem that has bedeviled the housing recovery is showing no signs of abating.

“Low inventories still remain an issue, dropping to a 4.6-month supply, down from the 4.7-month supply seen in April and May, and from the 4.9-month supply of June 2015,” he said. “The constrained supply in this sellers’ market continues to frustrate potential homebuyers and adds further upward pressure to nominal home prices, which rose an estimated five percent year-over-year in May, according to the Case-Shiller House Price Index.”


More than 10% of Homeowners Still Underwater: Zillow

By

The share of homeowners who owe more than their house is worth remains above 10% nationwide, according to data from Zillow’s second quarter Negative Equity Report.

Zillow said Thursday that 12.1% of homeowners with a mortgage are underwater, which is down from 12.7% in the previous quarter and from 14.4% a year ago.

read more…


Erroneous Foreclosure Code Still Results in Loan Denial for Past Short Sellers in Freddie Mac Loan Prospector(LP) for Conventional Loans

Loan originator is asking your assistance to share LP conventional mortgage “Caution” files of past short sellers that have passed the 4-year mark.

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.


Democrat vs republican

Clinton vs. Trump: Different visions for housing finance

By Victor Whitman, Reprinted from the Scotsman Guide

Republicans and Democrats have approved party platforms with fundamentally different views on the role of government in housing and housing finance. As the presidential election shifts into high gear, we’ve looked at what both parties and the presidential candidates have to say about the future role of government in housing finance.

Republicans

The Republican platform makes the case for cutting regulations and the government’s role in housing. The document sharply criticizes the sweeping financial reforms under Dodd-Frank, calling the 2010 law the Democrats “legislative Godzilla” that is “crushing small and community banks and other lenders.” It also singles out the consumer watchdog agency created by Dodd-Frank, the Consumer Financial Protection Bureau (CFPB). According to the Republican platform, the CFPB is “a rogue agency” that if “not abolished, it should be subjected to congressional appropriation.”

Republicans also directly blame the government-sponsored enterprises Fannie Mae and Freddie Mac for sparking the 2008 housing crisis.

continue reading here


Payment Reductions Should Continue After HAMP Expires: Regulators

By Brian Collins, from National Mortgage News
July 25, 2016

Federal regulators warned mortgage servicers Monday that they will still expect them to offer loan modifications to distressed homeowners even after the Home Affordable Modification Program expires at year-end.

Continue reading…


Post-Foreclosure Consumers Are Ready to Rejoin Economy

From Bloomberg News, July 7, 2016

Millions of Americans lost their homes to foreclosures or short sales during the housing crisis. Fortunately for the economy, time heals most wounds — and credit reports.

The number of people joining the rolls of those knocked from homeownership peaked seven years ago, so those blotches to their histories are starting to roll off the books right about now. The resulting improvement in credit scores means more Americans will find themselves with the ability and means to once again apply for loans, and not just for home purchases.

“Improving credit scores might entice households to start borrowing more in general,” said Ralph McLaughlin, chief economist at real estate search engine Trulia. And what better time than now, when interest rates are so low.

That, combined with sustained gains in employment and bigger increases in pay, could give consumer spending, which accounts for almost 70% of the U.S. economy, an added lift over the next couple of years. The impact, though, is hard to quantify because it’s difficult to estimate how many people will once again be emboldened to borrow after experiencing such a shock, said Jacob Oubina, a senior U.S. economist at RBC Capital Markets in New York.

read more…


Pam Marron, Mortgage Professional

HUD Names New Federal Housing Advisory Committee

Written by Brian Sullivan, (202) 708-0685

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) today named 12 persons who will constitute the first-ever Housing Counseling Federal Advisory Committee (HCFAC). Established under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, this advisory panel will help HUD’s Office of Housing Counseling improve upon all the efforts to provide consumers with the knowledge they need to make informed and lasting housing decisions.

Last April, HUD solicited nominations to serve on the first-ever federal advisory committee. Those selected hail from among mortgage, real estate, consumer and housing counseling sectors. They include:

Mortgage Sector
1.    Pamela Marron New Port Richey, Florida
2.    Linda Ayres Las Vegas, Nevada
3.    José Larry Garcia El Paso, Texas
Real Estate Sector
4.    E.J. Thomas New Albany, Ohio
5.    Cassie Hicks Hattiesburg, Mississippi
6.    Alejandro Becerra Silver Springs, Maryland
Consumer Sector
7.    Afreen Alam Long Island, New York
8.    Meg Burns Arlington, Virginia
9.    Ellie Pepper New York State, Schenectady, New York
Housing Counseling Sector
10.  Judy Hunter Sacramento, California
11.  Arthur Zeman Saint Louis, Missouri
12.  Terri Redmond Hummelstown, Pennsylvania

Read brief bios of the HCFAC members.

The Housing Counseling Federal Advisory Committee will explore new opportunities to expand access to HUD housing counseling programs, develop new innovative strategies to support community-based counseling agencies, and identify methods to leverage our resources to amplify the impact of federally funded housing counseling. This panel will also develop new metrics to evaluate the health and capacity of the housing counseling industry, specifically in the context of disaster recovery and identify ways to improve the use of technology in housing counseling.

By teaching consumers basic principles of housing and money management, HUD’s network of approximately 2,000 HUD-approved housing counseling agencies help families to improve their financial situation, address their current housing needs, and pursue their housing and financial goals over time. Housing counselors increase awareness of both rights and responsibilities of homeownership and rental tenancy, addressing fundamental concepts such as anti-discrimination laws, the types of ownership and tenancy, budgeting, affordability calculations, maintenance and upkeep responsibilities, eviction and homelessness prevention, and where to get help when future housing challenges arise. Housing counselors provide support to households facing unemployment, finding and maintaining housing after returning from military deployment, or moving their families because their current housing situation is unsustainable.

There are many ways to find a HUD-approved housing counseling agency. Visit HUD’s website or call 1-800-569-4287 for our interactive telephone directory. Get the free housing counseling i-phone app from the app store (not yet available for android). Watch HUD’s video on how housing counseling can help families find (and keep) housing.


Fannie Readies Launch of ‘Trended Data’ Initiative

by Brian Collins, National Mortgage News

WASHINGTON — Lenders and credit bureaus are gearing up for Fannie Mae’s June 25 launch of its “trended data” initiative, which provides a new data element to its automated underwriting process.

The program provides a snapshot of an applicant’s revolving credit payments in an attempt to better divine a borrower’s creditworthiness. The launch marks a significant change for the mortgage industry.

Read More: http://www.nationalmortgagenews.com/news/secondary/fannie-readies-launch-of-trended-data-initiative-1078111-1.html?zkPrintable=true


Back from the Housing Brink

Back from the Brink logo

 

 

Sponsored by the Gulf Coast Chapter of the Florida Association of Mortgage Professionals, a member of the Pinellas Realtor Affiliate Business Partners Program

 

“Back from the Housing Brink” defines 3 different client types that have developed from the housing crisis and where opportunity exists for loan originators and realtors to assist these clients.

GulfCoast Chapter of the Florida Association of Mortgage Professionals wishes to thank the Pinellas REALTOR Organization for joining with us to support this program!


Pro member

nonPro member

 

Special Guest Daren Blomquist, Vice President of RealtyTrac

RT.Daren lg
Status of Distressed Homeowners and Boomerang Buyers
  • Defined, statistics, where these homeowners are at and where they are moving to in the U.S. and specifically Florida.
Assist 7.1 million Distressed Homeowners (still in underwater homes) to stay put
  • PURE HARP refinancing, shorter term
  • Hardest Hit Funds available for principal reduction through Florida
Assist 7.3 million Boomerang Buyers (had past short sale or foreclosure) eligible to re-enter housing market over next 8 years
  • wait timeframes for all mortgage types
  • Shorter wait time frame underwriting criteria for FHA “Back to Work” and conventional mortgage “Extenuating Circumstances”
Assist real estate agents to sell damaged housing by providing repair list with costs and renovation loan financing at listing upfront
  • Retrieve “feasibility report” commonly done by FHA Inspectors and useful to attract buyers and for mortgage financing. Report cost: $200-$250.
  • Provide financing option upfront for either FHA 203K (owner occupied loan) or conventional Homestyle renovation loan (owner occupied, 2nd home, investor)

Challenge to mortgage and real estate industries:
Need for refinance option of non-Fannie Mae, non-Freddie Mac 1st mortgage and 2nd mortgages and HELOCS for 7.1 million homeowners still underwater! Only option currently is modification that requires delinquency.

Realtor/Loan Originator resources:
  • Specialized lists from RealtyTrac
  • Free promotion of industry professionals who would like to assist these clients at HELP Network on *HousingCrisisStories.com

*HousingCrisisStories.com is set up to provide buyer and loan originator assistance to prepare cases for underwriting FHA “Back To Work” and where “Extenuating Circumstances” may exist for a conventional mortgage. Lenders who provide FHA Back to Work, allow Extenuating Circumstances and provide pure HARP 2 will be promoted.

Homebuyers/Homeowners resources:
  • Downpayment assistance: Hillsborough, Pinellas, Pasco, Hernando, Citrus counties, state of Florida
  • “Fix It” programs for those with no equity: Pasco County
  • Student Loan consolidation/refinance program

 


FHA: Economic Events

FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that:

  • certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control;
  • the borrower has demonstrated full recovery from the event; and,
  • the borrower has completed housing counseling.

Definitions: An Economic Event is any occurrence beyond the borrower’s control that results in Loss of Employment, Loss of Income, or a combination of both, which causes a reduction in the borrower’s Household Income of twenty (20) percent or more for a period of at least six (6) months.

Please read the FHA Back to Work – Extenuating Circumstances Mortgagee Letter 2013-26 dated August 15, 2013 for all criteria that allows exception for a new FHA mortgage as soon as one year after a short sale, foreclosure or bankruptcy, within the three year required wait period of FHA.


Past Short Sales Are Like a Bad Divorce

Helping Borrowers with Extenuating Circumstances Through the Mortgage Process

By Pam Marron April 1, 2015

Explaining a past short sale is a harder task than most think, and it re-opens a period of time that many who have had the experience don’t want to go through again. Loan originators should not be surprised when past short sellers show anger, reluctance and may even opt out of re-purchasing a home upon learning what they must do.

Part of the problem is that guidelines, especially those surrounding explanation of extenuating circumstance, are vague. And detail needed is not always easily accessible. Quietly, more than one lender has told me that documentation received is not enough to prove extenuating circumstances, which results in a new mortgage denial for those who may be eligible to re-enter the housing market. Though lenders offer the FHA “Back to Work” program, a low percentage of these loans have been approved.

Extracting and clearly defining the detail of extenuating circumstances to show how past sellers ended up with a short sale or foreclosure falls upon loan originators. So, what is the extra work and detail needed for these loans?

At HousingCrisisStories.com,  there are 3 worksheets for the borrower and loan originator to prepare a case for an underwriter.

  1. Borrower Makes Case:  extensive list of questions for the borrower to detail. Items needed are included on this list.
  2. LO: Economic Event Worksheet:  loan originator uses “Borrower Makes Case” and provided documentation to complete.
  3. LO: Reduced Income and Increased Debt Table: made to show percentage of reduced income for FHA Back to Work and increased expenses needed for Fannie Mae, Freddie Mac and USDA(medical). Also, lower table shows how “Un-anticipated Additional Debt” can be substantial, showing the REAL hardship.

Loan Originators

  1. Be attentive to your borrowers’ entire story. Question needed details.
  2. Be prepared to document income 1 year prior to the event and over multiple years. Many affected saw trouble coming and tried to prepare. However, the process of going through a short sale or foreclosure with a lender is often drawn out and some take years. During this time, assets are depleted, income fluctuates and credit becomes worse.
  3. Do not be surprised when the borrower is reluctant to detail this timeframe. Many try to forget, and having to dig up paperwork or discuss the event again can be highly emotional.
  4. Loan originators must go the extra mile to prove all remedies tried. WHY? Even when jobs were lost or incomes reduced, when rental income did not cover the mortgage payment on an underwater property, when divorce or a death occurred, a great majority of these homeowners whittled away at savings and retirement funds trying to stay afloat. For many, there is often a final problem  after the economic event where there was no choice left but to sell the home.
  5. It is very common to see an alarmingly high BACK debt to income (DTI) ratio (Reduced Income and Increased Debt Table) even when the mortgage payment is made. This worksheet is intended to show that reduction in income is not always the primary reason to sell.
  6. On short sales, retrieve the HUD-1, the final lender short sale approval letter on 1st and 2nd mortgages and proof of the wire sent from the closing of the property. Why? It is common for the date of payoff on a credit report to be a different date than the actual closing date.
  7. Borrowers that had a deficiency payment may have a “Satisfaction of Mortgage” that shows a release of lien/mortgage but “does not constitute a satisfaction of debt”, so check documents received.  Retrieve the letter to the borrower stating when the deficiency is satisfied the 1099 that often states “forgiveness of debt”. (Documents noted above can be retrieved from the title company noted on the HUD-1 or listing agent.)
  8. Preferably, run file through Fannie Mae’s automated system upfront, which specifies which account and what date causes a Refer. If the short sale shows up as a foreclosure or findings note an incorrect  disbursement, contact your [1]credit reporting agency to correct the date and repository comment.
  9. For an FHA mortgage, make sure the homeowner goes to a HUD Approved counselor at least 30 days before a contract is written or an application taken.

Bonus: the gratitude of these clients will remind you of why you are in the mortgage business.

Pam Marron (NMLS#246438) is senior loan originator with Innovative Mortgage Services Inc. (NMLS#250769) in Tampa Bay, Florida. She may be reached by phone at (727) 375-8986 or e-mail  pmarron@tampabay.rr.com. Websites: HousingCrisisStories.com, CloseWithPam.com, 8Problems.com.

[1] National Consumer Reporting Association (NCRAinc.org) is aware of the erroneous foreclosure code on short sale credit and error in dates. Go to http://www.ncrainc.org/mortgage-credit-reporting-referral-network-by-state.html to find credit reporting agencies in your state.

 


Why pay attention to underwater homeowner numbers?

In May 2013, RealtyTrac stated that 9.1 million, or 17% of U.S. mortgage holders are still underwater + 2.2 million past short sellers = 21% of mortgage market affected!


FORECLOSURE Code in Conventional Fannie Mae and Freddie Mac Loans

The first time the FORECLOSURE credit for past short sellers was seen was on new conventional Fannie Mae and Freddie Mac findings for eligible past short sellers trying to re-enter the housing market again.