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, when 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 For 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 have been no 30 day late payments on your mortgage(s) since filing bankruptcy.
- The CAIVRS Authorization system provides a clean report regarding default on an applicant’s past Federal government loans or guarantees.
- 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.
- The taxable income used to qualify for the home loan will continue for a minimum of three years.
- You did not have a junior mortgage prior to filing or it is also current with no late payments or see (*) below.
- No other real estate was included in your bankruptcy or was foreclosed, short sold or surrendered such as investment property or second home within 4 years.
- 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(s), i.e., the house can be sold to payoff the mortgage(s), in full, including the cost of sale.
- You have minimum 700 middle FICO® Score (not FAKO scores). To get an idea of your score range use the FICO® Score Simulator (garbage in = garbage out).
- All borrowers must have established new good credit and are managing it very well.
- If the property is a Condominium, it must be FHA approved for FHA home loans or VA approved for VA home loans.
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 700 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.
Reaffirmation Is Not Necessary To Refinance
If your mortgage lender/servicer/bank insists that the mortgage must be reaffirmed, you simply need to call an experienced mortgage banker or broker. There are those who will tell you that you 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.
(*) The junior or second mortgage lien was legally stripped from the property in the bankruptcy. Note: this is a very, very rare circumstance. Another option is: the mortgage has been settled, such as via a short payoff in which case a further time-out period may be required.James Spray, CCMB, CNE, FICO Pro CO LMO 100008715 | NMLS 257365 | January 12, 2012 | Revised May 23, 2014
Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.