You filed a Chapter 7 Bankruptcy and all debts were discharged. You selected not to reaffirm mortgage(s). You have continued paying on your mortgage(s) and now you want the payments reported on your credit report. With one exception that is not going to happen. The fact is that there is but one permanent way to get your mortgage payments reported on the credit reports and that is to refinance your mortgage, if possible. When your bankruptcy was discharged, the Promissory Note portion of the mortgage was legally eliminated. As a result, the mortgage payments can no longer be reported to the credit reporting agencies. Consumers, for obvious reasons, cannot self-report their credit history. For further information as to why the bank or mortgage company doesn’t report your payment, refer to an earlier post I wrote on this subject.
How To Get “Credit History” For Your Mortgage Payments In Order To Refinance
How can you refinance when your present mortgage servicer does not credit report your mortgage payment? There are a couple of ways to do this. The least expensive is for you to obtain proof of your mortgage payments for the past twelve (12) month and provide this to your mortgage broker. A temporary way to pull the mortgage payments onto the credit reports is via a proprietary system such as Rapid Rescore which is available only to mortgage brokers. Your mortgage payment history can be pulled onto the credit reports for the purpose of mortgage refinance by a mortgage originator in cooperation with a credit reporting service through a credit rescoring system. This is a temporary fix only; a bridge to refinancing once all other factors are in place. The only permanent way to get your credit report to reflect your mortgage payments is to refinance if and when you are eligible.
How To Qualify To Refinance After Chapter 7?
- You have been paying your mortgage(s) on time every month for at least the last 24 months - in rare circumstances 12 months.
- There there were no 30 day late payments on your First mortgage prior to, during or since filing bankruptcy.
- Your current taxable income as well as that of the past two years proves you can pay your mortgage and your debt ratio is acceptable to the lender.
- Your first mortgage is guaranteed by FHA, VA or USDA and you did not have a junior mortgage prior to filing or it is also current with no late payments or see (*) below.
- Your FHA, VA or USDA mortgage was not modifided prior to or following your bankruptcy.
- No other real estate was included in your bankruptcy or was foreclosed, short sold or surrendered such as investment property or second home.
- You have no new bad credit whatsoever and no open credit disputes.
- Your present property value is 10% greater than what you owe on your mortgage, i.e., the house can be sold to payoff the mortgage(s) in full, including the cost of sale.
- Your Conventional mortgage servicer provides a monthly mortgage statement which does not have the word bankruptcy on it and you have not filed bankruptcy in the last seven years. Seven years refers to the declarations required on the Fannie Mae/Freddie Mac Uniform Residential Loan Application.
- You have a 660 or greater middle FICO® Score. To get an idea of your score range use the FICO® Score Simulator (garbage in = garbage out).
Investor overlays are measures lenders take to manage risks. You may need to shop around as, some lenders require 36 months from the Chapter 7 Discharge. Most lenders require higher credit scores, say in the plus 680 range before considering a new loans. The higher the FICO® Score, the better the rate and the lower the cost of the rate will be offered. There is much more that can be discussed on the subject of overlays; perhaps we’ll delve more deeply into investor overlays in a future blog. Should we delve into this topic, we will also need to address the concept of underwriting discretion wherein even with no overlays, there is no guarantee financing will occur.
To bring a Discharged Note back to life, one must reaffirm the debt. Neither your attorney or I would recommend doing this; nor should you, in any case, do so without seeking the advice of your bankruptcy attorney. Keep in mind that the reaffirmation must be done prior to the Discharge and that is only your bankruptcy judge that can or will approve a mortgage reaffirmation – my understanding is that many will not.
Per the Declarations Section of the Freddie Mac/Fannie Mae Uniform Residential Loan Application (URLA) one must answer Yes or No to having declared bankruptcy in the past seven years. Should the answer be yes, a demand to produce the mortgage Reaffirmation Agreement(s) from the Chapter 7 Discharge will be issued. The exception to the Reaffirmation Agreement may be FHA, VA or USDA mortgage loans. Note in the Acknowledgement and Agreement Section of the URLA, one affirms that all Statements and Declarations are true and subject to the provisions of Title 18, United States Code, Sec. 1001, et seq.
Readers of this blog most often read Zombie Mortgage, as well.
(*) This is pursuant to the CAIVRS Authorization system which lists any information regarding default, claim, judgment, or foreclosure reported on an applicant’s past government loans or guarantees.
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