Free Credit/Security Freezes – All 3 Bureaus – Free Unfreezing

Thanks to a new federal law – the Economic Growth, Regulatory Relief, and Consumer Protection Act – consumers will be able to contact each of the three major credit reporting agencies and direct them to place a free freeze on the consumer’s credit file. By restricting access, a credit freeze makes it harder for identity thieves to open new accounts in consumers’ names.

Not only will it be free for consumers to freeze their credit, but they can lift that freeze for free, too. And the law requires the credit reporting agencies to do it in a hurry. If a consumer asks for a freeze online or by phone, the credit reporting agency has to put the freeze in place no later than the next business day. If the consumer wants to lift the freeze…that has to happen within an hour.

This new law is effective September 21, 2018. Click here for more.

The New York Times published good article on the subject. “Freezing Credit Will Now Be Free. Here’s Why You Should Go for It.https://nyti.ms/2Mw01rU

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | August 16, 2018 | Updated September 16, 2018

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.

New Credit After Chapter 7 Bankruptcy

bk_seal

New Credit After Chapter 7 Bankruptcy

This post is written specifically for those who’ve recently been granted a Discharge from a Chapter 7 Bankruptcy. Chapter 7 is type of bankruptcy where the debtor does not make periodic payments to a bankruptcy trustee for 3 to 5 years.

The first step is to establish new credit in a strategic manner. Of course, you must also use your new credit in a responsible manner. In some cases, it is necessary to get your credit reports corrected to establish new credit. We’ll address both steps below.

Step One

First, when establishing new credit. Ignore well-meaning advice to get a $300/500 secured credit card from just any bank that will open an account for you. Start with joining a credit union. With most credit unions, there are no fees. Also, there are no annual fees and no-cost to use many ATMs all over the USA. Take a moment and read my post on credit unions.

In searching for the credit union (CU) to be the fit, do your homework. Call or stop in and ask about secured credit cards (this will lead you to someone that can answer or can get answers to your questions).

Now that you have found your CU, open your Share (savings) account. Save $1,000.00 or more. Secure this savings against a Visa or MasterCard issued by your credit union. To build good and excellent credit scores, use no more than 20% of your credit limit. Ever. For example, on your $1,000.00 credit limit, never have more than $200.00 in use. For best results, payoff the balance monthly. Your higher credit scores get you rewarded with lower interest rates on home and auto loans, insurance, credit cards and better employment opportunities.

Most credit unions will offer an unsecured card after you have established your good credit management practices for one-year. At this time, your savings securing your card will be released and another card issued. Your credit history will follow the new account.

Next, open 2 or 3 lower limit credit card or other revolving accounts (department stores, Internet stores, gas cards, etc.). The key is to have 3 to 4 revolving accounts open and in use occasionally. Do know that credit is a use it or lose it commodity.

On selecting the credit accounts, don’t bother applying to any creditors which were listed in your bankruptcy. Perform a Google Search such as this: “secured credit card + bankruptcy”. In your screening process, avoid those with an annual fee.

After about 9-12 months of opening the accounts as above discussed and using them as above discussed, you should have actual lending scores (FICO® Scores) in the 700-720 range. These techniques have helped many clients over several decades.

Step two

Not everyone will need to take step two. All should read the info in step two.

In order to build new credit after bankruptcy, you may need to get corrections made to one or more of your three credit reports to reflect only accurate information. By accurate information what we mean is to make sure that all your bankrupted accounts reflect a zero-balance due.

Understand that a bankruptcy discharge does not remove your previous credit history from your credit reports. Time does. Seven years from the date of last activity (last use or last payment), the account will be removed from your credit report.

Keep in mind that the older a negative item on your credit report is the less it counts against your credit score. Also, the longer you have information reporting on your credit report, the better it counts for your credit history which results in a better credit score.

As a rule of thumb, by the time the case is Discharged, several months following the filing of the bankruptcy case, most creditors will have reported the accounts as included in bankruptcy. In some instances, a creditor fails to update their record with the credit reporting agencies (CRA).

So, in these instances, let’s talk about getting the incorrect items corrected. Often, the dispute process is neither quick or easy. Understand the CRAs are not your friends. Use caution with what you say or write to a CRA. For specifics on how to dispute information on your credit reports, I suggest you read my blog titled: Credit Repair/Dispute Basics.

A word on entering comments to clarify some situation or another; such comments do not do anything positive for your credit scores or your credit history. It is of no benefit to you to make comments. Everything you say can and will be used against you. This is one of those times to consider the Miranda Warning along with the idiom less is more. When and only if necessary, you may address individual items as requested by your loan officer for an underwriter. Open or unresolved disputes on your credit report(s) can keep you from gaining credit approval.

To begin correcting your reports, you need to get a copy of each of your credit reports. There are three credit reporting agencies: TransUnion, Equifax and Experian. You can get a copy of your three credit reports once a year for free via the Official Site authorized by Federal law: http://www.annualcreditreport.com. It does you no good to only review one or two reports. Review all three of them annually.

For mortgage approval (purchase or refinance), two (2) years following your Discharge, you will be eligible to apply for an FHA, VA or Rural mortgage loan. Four (4) years following your Discharge, you will be eligible to apply for a conventional mortgage loan.

Contact me below or via Quora with specific questions.

Success!

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 |April 6, 2018 | Copyright 2018

Notice: The information on this blog is opinion and information. While I have made every effort to post and 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 for your situation. This information is not legal advice and is for guidance only. You may reproduce this information in whole and not in part, providing you give full attribution to James Spray.

National Elder Abuse Resources and Colorado Financial Elder Abuse Mandatory Reporting Law

Elderly folks tend to be more trusting and less informed of the latest scams, making them the perfect target. To learn more about elder abuse, on the national level, two great resources are the National Committee for the Prevention of Elder Abuse and the National Center on Elder Abuse.

In Colorado, there is the Colorado Coalition for Elder Rights and Abuse Prevention.

As well, Colorado has a mandatory reporting law (including financial abuse) for certain categories of professionals and other workers.

Sadly, it is all too common where a family member is committing financial abuse of a parent, grandparent or other senior family member.

While it is encouraged that reporters of elder financial abuse contact local law enforcement, we’ve learned many local law enforcement agencies are unaware of the Colorado financial elder abuse law and are not trained on how to deal with it.

To report elder abuse in Colorado, the first option is to contact the Adult Protective Services (APS) intake office within the county department of human services were the at-risk adult lives. Click anywhere in this sentence for a current list of phone numbers to report elder abuse.

If reporting to the county APS office is not a viable option, contact the District Attorney’s office for the county in which the at-risk adult lives.

Image attribution

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 |August 26, 2017

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.

FICO 9 and Mortgages

 

 

stethscope strangle money _ modernfaqscom

 For this post, we are simply quoting from other media sources to help our readers understand the new FICO 9 credit scoring model. In spite of what you may have read, the FICO 9 credit scoring model will not help significantly, if at all, with home mortgages. At least not anytime soon. FICO 9 will be utilized sooner by vehicle and credit card lenders.

On August 23, 2014, The Motley Fool published Why New FICO Score Rules Could Be a ‘Game-Changer’ In Helping You Obtain a Loan stating, in part, the following: “According to FICO, the median FICO score for consumers whose only major derogatory references are unpaid medical debts is expected to increase by 25 points.

 FICO’s new more lenient model should also benefit collection agencies. Consumers with unpaid medical debts now have an incentive to settle, knowing that FICO will stop including in its calculations any record of a consumer failing to pay a bill, if the bill has been paid or settled with a collection agency.

Auto and Credit Card Lenders Will Be First to use FICO 9

 This is great news for collection agencies,” Rood said. “It provides laggards with an incentive to pay up. Before these changes, you were incentivized not to pay off your debt. The last thing you wanted to do was trigger a new ‘date of last activity’ report for an old debt, say, a debt from 2008. Again, you were just better off not paying it because older debts weighed less heavily against you on your credit report than new debt. The new scoring model will likely be implemented by credit card and auto lenders first. Mortgages typically lag in adopting new scoring models.”

Mortgage Lenders Will Be Last to use FICO 9

The New York Times in their article of August 7, 2014 titled: Credit Scores Could Rise With FICO’s New Model explained it very well. For consumers to see any benefit, however, lenders have to adopt the new scoring techniques. FICO last introduced a new model, called FICO 8, in 2008. Since then, FICO said that about half of its customers had started using that model. 

Mortgage lenders have been slower to adopt new scores, and most are using even older versions, experts said, because Fannie Mae and Freddie Mac are still using them in their own underwriting software. Fannie and Freddie did not say whether they had plans to switch to the updated FICO score that weighs medical collections less heavily. But they both said they were confident in the tools they use.”

Finally, law professor and author James Kwak, states the facts very simply: “…the financial district of the Western societies, Wall Street, and outdated software may very well be the norm not an exception.”

The Take Away

The take away on all this, according to Ted Rood of the Mortgage News Daily is that “(home and mortgage) buyers should keep paying those medical bills and avoid collections to ensure their loan approvals!” This statement was excerpted from the article titled: New Credit Score Model Would be Great for Housing! Too Bad it Won’t be Used.

Final Word

Our regular readers already know of our thoughts on FAKO credit scores and the release of FICO 9 adds yet a new dimension. Consumers purchasing their scores from the myFICO site will get real FICO scores but they are likely not going to be the scores which mortgage lenders use. So what can you do? You can write or call elected officials and ask that they help Fannie Mae and Freddie Mac catch up with the times.

More on FICO 9 from the FICO Blog.

UPDATE: 09/22/15 | GSEs Struggle to Update Credit Scoring Models

Image attribution

Financially Speaking™ James Spray, RMLOCNE, FICO Pro
CO LMO 100008715 | NMLS 257365 |September 23, 2014 | Updated September 22, 2015
 
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.

FNMA Updated Bankruptcy, Foreclosure, and Short Sale Policies

A view shows the Fannie Mae logo at its headquarters in Washington

Fannie Mae updated its policies regarding significant derogatory credit events, which in some cases allows more borrowers to reenter the housing market. These updates are reflected in the embedded chart: How long after bankruptcy or foreclosure must you wait to get a mortgage?

  1. Waiting Period for Mortgage Debt Discharged Through Bankruptcy

The borrower is now held to the bankruptcy waiting period (4 years) and not the foreclosure waiting period (7 years). This is true even if a foreclosure action is subsequently completed to reclaim the property in satisfaction of the debt. This is a significant and favorable change. From the FNMA underwriting guidelines (B3-3-07): “When both a bankruptcy and foreclosure are disclosed on the loan application, or when both appear on the credit report, the lender may apply the bankruptcy waiting period if the lender obtains the appropriate documentation to verify that the mortgage loan in question was discharged in the bankruptcy. Otherwise, the greater of the applicable bankruptcy or foreclosure waiting period must be applied.

[At this time FHA/VA/USDA require a two year waiting period following discharge and a three year period post-foreclosure.]

  1. Short Sale or Deed-in-Lieu Waiting Period

The waiting periods are being updated to establish a standard four year waiting period, with a two year waiting period permitted providing a borrower has extenuating circumstances*.

[FHA/VA/USDA require a three year waiting period following Short Sale or Deed-In-Lieu.]

  1. Mortgage Debt

As a new policy, charge-offs of mortgage accounts now require a four year waiting period following this derogatory credit (two years if the borrower can demonstrate extenuating circumstances*).

Number one became effective July 29, 2014; two and three are effective for mortgage loans with applications dated on and after August 16, 2014.

How do you know if Fannie Mae owns/owned your mortgage? Click on FNMA Loan Lookup.

Based on past experience, it will take time for the mortgage origination industry to catch up with these new policies. Further, it is likely that some will not accept these policies within their own underwriting guidelines.

*Given the reliance on automated underwriting for compliance purposes, few lenders will delve into the perceived risk of manually underwriting extenuating circumstances for fear of losing the QRM safe harbor. QRM standards were implemented on January 10, 2014. The vast majority of lenders are staying squarely inside the New Rules box, so to speak.

Reference: Fannie Mae  Selling Guide Announcement SEL-2014-10

Image Credit: Reuters/Jonathan Ernst

Financially Speaking™  James SprayMLO, CNE, FICO Pro
CO LMO 100008715 | NMLS 257365 |August 10, 2014 | Updated January 28, 2018

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.

QWR: The RESPA Letter

 

Federal Reserve Board Building

Federal Reserve Board Building

QWR: The RESPA Letter

Most reading this post are reading it for a particular reason which is to learn about writing a letter to a mortgage lender and/or servicer regarding a specific problem or situation such as requesting the mortgage servicer report your payments to the credit bureau(s). For some, it may be that your mortgage servicer or bank is reporting incorrect information or you may need specific documentation. For others, perhaps this is being read for informational purposes. In any event, we trust the reader finds this information helpful.

 Step 1. Contact your mortgage servicer for the correct address for legal correspondence. You must use the legal (registered) address of the servicer. Some servicers actually have a specific address for a Qualified Written Request (QWR). This is  a different address than where you mail the payment or from where you get the periodic statements or notices. This procedure was established per the Real Estate Settlement Procedures Act (RESPA).

 Step 2. You may utilize the following template provided by HUD for your QWR. Or you may click here to open and read the information or you may copy and paste the pertinent paragraphs (opening and closing) as show below. Focus your thoughts and keep your letter brief and specific to the topic. less-is-more - erickimphotography.com

“Attention Customer Service:

Subject: [Your loan number]

[Names on loan documents]

[Property and/or mailing address]

This is a “qualified written request” under Section 6 of the Real Estate Settlement Procedures Act (RESPA).

I am writing because:

  • Describe the issue or the question you have and/or what action you believe the lender should take.
  • Attach copies of any related written materials (as applicable).
  • Describe any conversations with customer service regarding the issue and to whom you spoke.
  • Describe any previous steps you have taken or attempts to resolve the issue.
  • List a daytime telephone number in case a customer service representative from the legal department  wishes to contact you.

Sincerely, [Your name – Printed and Signed]

I understand that under Section 6 if RESPA you are required to acknowledge my request within 20 business days and must try and resolve the issue within 30 business days.”

If you are satisfied with the resolution to your situation, you may wish to compliment the servicer by sending a note to the Consumer Financial Protection Bureau (CFPB or Bureau) via their Comment Form.

Step 3. Send your QWR via Certified Mail Return Receipt. Keep copies of your letter and any enclosures as well as your Certified Mail Receipt from the post office and the Return Receipt from your mortgage servicer proving they have received your QRM

Finally, if you are still unable to resolve the situation, there is a complaint process that may get action. We suggest this be your last and not first step as you will then have evidence which will indicate to the Bureau that the servicer is either unwilling or unable to address your situation. Mortgage Complaint Form

There’s a New Sheriff in Town?????????????????????????????????????????

The following is excerpted from the prepared remarks of Steven Antonakes, Deputy Director of the CFPB which he presented to the Mortgage Bankers Association National Mortgage Servicing Conference in Orlando, Florida on February 19, 2014.

“…My message to you today is a tough one. I don’t expect a standing ovation when I leave. But I do want you to understand our perspective. I would be remiss if I did not share it with you … if you choose to operate in this space (mortgage servicing), the fundamental rules have changed forever. It’s not just about collecting payments. It’s about recognizing that you must treat Americans who are struggling to pay their mortgages fairly before exercising your right to foreclose. We have raised the bar in favor of American consumers and we are ready, willing and able to vigorously enforce that bar.

Ultimately, these profound changes will be good for all Americans, including industry. But please understand, business as usual has ended in mortgage servicing. Groundhog Day is over. Thank you.”

Sheriff – Update

In a June 22, 2016, Press Release, the CFPB said, in part: “In 2013, the CFPB established mortgage servicing rules designed to protect consumers against many of the practices that plagued the mortgage servicing industry during and after the housing crisis.

According to the CFPB, the rules require servicers to maintain accurate records, give troubled borrowers direct and ongoing access to servicing personnel, promptly credit payments, and correct errors on request.”

In addition to sending your RESPA letter, do not hesitate to file a complaint, with the CFPB. Click here for the particular complaint link.

The Bureau’s Enforcement Power – One Example

As an example of the Bureau’s enforcement authority, RealtySouth™, a Berkshire Hathaway Affiliate, was recently fined $500,000.00 for a RESPA violation which amounted to failure to disclose their affiliated business relationship(s) to consumers. This is a typical example of the enforcement action undertaken by the Bureau as one may readily determine with an Internet search. For those who don’t recognize the name Berkshire Hathaway, it is largely owned by one of the world’s wealthiest persons. Clearly, wealth does not buy immunity from the CFPB.

Exceptions to QWR: Those transactions excluded from the QWR are limited to “(1) subordinate lien loans or (2) open-end lines of credit subject to TILA, whether secured by a first or subordinate lien.”* Further, “(a) request does not constitute a QWR if it is delivered to a servicer more than one year after either the date of transfer of servicing or the date that the mortgage servicing loan was paid in full, as applicable.”*

NOTICE: I am not an attorney nor am I providing legal advise. This post is for educational purposes only. The images are for illustration only and not meant to imply in any way an endorsement or authorization by any government agency or authority of this blog or this post.

* Jonathan Foxx, President & Managing Director Lenders Compliance Group

Image Attribution: erickimphotography.com and  CFPB

Financially Speaking™  James Spray, RMLO, CNE, FICO Pro | CO LMO 100008715 / NMLS 257365 | Rev. June 16, 2016

 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.

A Bankrupted Second Mortgage Can Foreclose

Sleeping dragon

Be aware, sleeping dragons can awaken.

The second mortgage can foreclose even after the Promissory Note was eliminated with a Chapter 7 Bankruptcy Discharge. Quite simply, the second mortgage initiates the foreclosure process under the rights of the second mortgage Trust Deed subject to the rights of the first mortgage trust deed.

By foreclosing under these circumstances, the holder of the second mortgage, following a specific legal action starting with the posting of a three day notice, may evict the residents. Should one be threatened with a three day notice to quit the property, you may wish to immediately call your attorney as this is a serious invitation to professionally negotiate a short settlement immediately.

By way of background, once the payments to the second mortgage aren’t made, the mortgage is in default. The mortgage holder has four separate options to protect its interest. First, it can do nothing and sit on its rights. Second, in Colorado, it can initiate a Public Trustee foreclosure. Third, it can file for a judicial foreclosure, although this rare in Colorado. Fourth, it may buy-out the first deed of trust and thereby perfect its position. If the junior (second) mortgage selects either the second or third option, it is most likely that the first deed of trust will also foreclose.

The Basics

A mortgage consists of two legal documents: the Promissory Note and the Deed of Trust or Trust Deed (TD). The second TD lives on, in virtually all cases, following the Chapter 7 Discharge.

Equity is returning to many real estate markets throughout the country. Among the markets enjoying substantial equity growth are several areas in Colorado, particularly along the Front Range as well as many mountain and resort counties.

Statute of Limitations

The Statute of Limitations (SOL) on a second mortgage is 15 years following the original due date; however there are exceptions and particular legal nuances which apply to this SOL. To determine how the SOL may or may not apply to a particular set of facts, you are advised to consult with legal counsel well versed with both bankruptcy and real estate law. One needs to understand that TD that has been written off continues to be a collectible debt for so long as the SOL hasn’t run the term. Written off is merely an accounting term, nothing more or less. Written off is not a ‘get out of debt free’ card.

The Short Payoff

Let’s discuss possible solutions to this situation which is becoming more common as equity returns to certain real estate market.

A short payoff occurs when a borrower cannot pay the mortgage on the property and is allowed to sell the property for less than the full amount due. This results in a loss to both the lender/servicer and the investor. All parties must agree to the mortgage being paid “short”. Providing there is a ‘make sense deal’, the lender will do this so as to avoid the expense and time of the foreclosure process. Given there are several parties involved in this decision making process, reaching consensus can take quite a lot of time – often months.

Short Payoff Settlement -Financial Negotiation

Typically the least successful negotiator is the one with an emotional involvement in the negotiation. The saying, often attributed to Abraham Lincoln, describes this situation quite well: “A person who represents himself has a fool for a client.”

This is a business transaction which may involve disclosing your income, assets, liabilities as well as proof of your ability to pay a certain amount to obtain a Release of the Trust Deed. It is suggested that by having a well prepared Comparative Market Analysis coupled with a professional Home Inspection Report to submit with your proof of ability to pay will be beneficial to reach a decision. You may expect the lender/servicer will pull a credit report in addition to thoroughly investigating your request for a short payoff settlement. They must and will investigate and verify who you say you are and your circumstances. Short Payoff Fraud is of great concern to lenders and investors alike which explains, to some degree, how difficult these negotiations can be.

Short Payoff Settlement – Hardship Negotiation

Hardship criteria include: involuntary unemployment; divorce; long-term disability; a change of employment that is more than 50 miles from the current home; a business failure; death of the primary or secondary wage earner; or a natural or man-made disaster.

I had the opportunity to assist a senior couple negotiate a hardship short payoff on a “written off” second mortgage last year. This second mortgage had been discharged in a 2011 Chapter 7 and had been “written off” a few years before the bankruptcy case was filed. The principle balance due on this second was $55,000.00; the final settlement to Release the Trust Deed was just under $7,000.00.

From the time this negotiation process began until it was successfully completed took 220 days. The hardship in this situation was long-term disability with both borrowers. We documented both of their hardships with letters from their physicians as well as photographs and x-rays documenting specific medical procedures. Finally we documented their ability to pay the negotiated short payoff by providing evidence of the gifted funds in a bank checking account.

Like us on Facebook

Image attribution

Financially Speaking™  James Spray, MLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | April 15, 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.