The 11 things your Realtor won’t tell you but should – The Washington Post

Buyers should consider that bigger houses mean bigger headaches and it’s not a good idea to think of your home as an investment.

Source: The 11 things your Realtor won’t tell you but should – The Washington Post

The 4 C’s of Credit

The following is written primarily for those wishing to obtain a mortgage. However the same dynamics apply to credit cards, vehicle loans, insurance, employment opportunities and even dating eligibility.

Character – Reputation is a key factor in obtaining new credit. Bankruptcy, foreclosure, late payments, settlements, collections, judgments, charge-offs and other derogatory events weigh how your credit character is measured. A short-cut for evaluating character is the credit score.

Capacity – Is the ability to repay the obligation provable with third party documentation? This is measured by the stability of the income, and how long the wage-earner or self-employed has generated that income.

Conditions – What is the purpose of the loan? If the purpose is to refinance for a rate or term improvement, a simple letter stating such suffices. If applying for a cash-out refinance, how are the proceeds to be used? Documentation is required to explain the perceived additional risk. In situations where Character is less than stellar, a cash-out refinance for the purpose, for example, reimburse a family member could jeopardize loan approval.

Collateral – How much equity is available to protect the investor? In a purchase or refinance, this is the percentage of Down Payment/Equity vs Appraised Value and the loan amount. The lower the loan amount to the equity, the stronger

For example, when the character and/or the credit are challenged a down payment/equity position of about thirty percent can mitigate two of the “C’s”.   The greater the collateral/equity, a lesser weight may be given to Character, Capacity.

What is your credit score? Use this credit score simulator to find out. It’s free and it will give you a good idea of what your score range is right now.

Caution – Finally, be very wary of credit repair schemes, many are designed to part you from your hard earned money. Most of these “service providers” are scams. It’s easy to see if they are running a scam. The scammers require cash up-front; this is not legal. Pursuant to the Credit Repair Organization Act (CROA), any credit repair work must be completed before a consumer may be charged for the work. For more information, see: Credit Repair Basics.

Image attribution

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 |October 19, 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 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.

CFPB Rules Establish Strong Protections for Homeowners Facing Foreclosure > Newsroom > Consumer Financial Protection Bureau

If you are having trouble making your mortgage payment and if it appears you are going to have to miss payments, do yourself a great favor and contact a HUD Certified Housing Counselor for guidance; your chances for success are greatly improved. In most cases, this service is provided at no cost for the consumer.

Source: CFPB Rules Establish Strong Protections for Homeowners Facing Foreclosure > Newsroom > Consumer Financial Protection Bureau

Servicing: When the Last Surviving Borrower Dies

» Servicing: When the Last Surviving Borrower Dies | Reverse Mortgage Magazine

Source: Servicing: When the Last Surviving Borrower Dies

Strategic Uses of Reverse Mortgages for Affluent Clients

Wonderful discussion on the benefits of utilizing the reverse mortgage as a retirement planning tool. Of note is the excellent graph which displays the growth potential of the HECM Line of Credit.

Tools for Retirement Planning

Affluent clients of financial planners can use their housing wealth a variety of ways to enhance retirement, including boosting sustainable portfolio withdrawals and delaying social security claiming. As strategic users affluent clients are quite different from many traditional users – often desperate homeowners who grabbed any remaining home equity after exhausting all their other resources. Focusing on affluent clients, this post summarizes key features of reverse mortgages and uses to increase retirement spending and reduce risks in retirement. A growing body of research on reverse mortgages in financial planning goes into depth on many of these topics.

Reverse mortgages have evolved over the years, including significant improvements after 2008’s housing crisis, resulting in enhanced consumer protections, refined federal oversight, reduced costs, and better balance among the interests of clients, lenders and Federal Housing Administration’s insurance backing. The refined design is a Home Equity Conversion Mortgage (HECM). The Federal Housing Administration (FHA) administers it following rules laid down by the…

View original post 1,820 more words

A Reverse Mortgage Should Be A Last Resort… To What?

Another excellent post, Ms.Paterson!

Beth's Reverse Mortgage Blog

So called senior advocates and those with a fiduciary responsibility often state a reverse mortgage should be a last resort.  My question is to what?

A Home Equity Loan?  To qualify for a home equity loan or a traditional loan a lender looks at a borrowers’ credit, income, assets, and ability to make payments.  Most seniors don’t qualify for a home equity loan.

Even if a senior does qualify now, if “life happens” and they have to juggle making a mortgage payment or having funds for other expenses, their stress level increases.  And if they don’t make their mortgage payments they could be facing foreclosure.

I receive calls on a regular basis from seniors who did a home equity loan or traditional loan just a few years ago and now they can’t afford the payments.  When I run the calculations more times than not I find there are not…

View original post 835 more words

Back To Work_FHA Mortgage After Bankruptcy, The New Improved Rules

 

In announcing the new rules, FHA Commissioner Carol Galante stated:

“As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost their homes to a pre-foreclosure sale, deed-in-lieu, or foreclosure. Some borrowers were forced to file for bankruptcy to discharge or restructure their debts. Because of these recent recession-related periods of financial difficulty, borrowers’ credit has been negatively affected. FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage”.

Effective August, 15, 2013, the Federal Housing Administration (FHA) is allowing borrowers who went through a bankruptcy, foreclosure, deed-in-lieu of foreclosure, or short sale to reenter the market in as little as 12 months, pursuant to a 15 page mortgagee letter titled Back to Work – Extenuating Circumstances.

The FHA insures mortgages, it does not make mortgages. The point is this: that investors, including banks, mortgage companies and credit unions make mortgages which may be insured by FHA. These investors also make overlaying rules known as underwriting guidelines to manage their risks or perceived risks. FHA cannot insist that an investor must approve any mortgage applicant.

Foreclosure

Prior to this new FHA policy, borrowers who went through the foreclosure process had to wait three years following the foreclosure sale date before getting the opportunity to qualify for an FHA loan. However with the new guideline, certain borrowers who lost their home as a result of an economic hardship may be considered eligible earlier. To be qualified under the shortened foreclosure timeline, twelve months must have lapsed since the date of title transfer to the foreclosing lender.

Recession Related Financial Event

The Back to Work program will require prospective borrowers to comprehensively document the nature of the “Economic Event” (Event).  It will be necessary to show the Event is that which resulted in derogatory credit, and that there has been a satisfactory recovery from the Event pursuant to the new guidelines. 

The Event to have caused the derogatory credit is defined as a reduction in income or loss of employment with at least one of the following:

1. A written termination notice.
2. Other publicly available documentation of the business closure.
3. Documentation of the receipt of Unemployment Income.

Further, it must be proved that the prospective borrowers had satisfactory credit prior to the Event onset and that the prospective borrowers’ derogatory credit occurred after the onset of the Event.

Additionally, the Event caused a reduction in the borrower’s household income of 20 percent or more for a period of at least six months.

Recovery from the Economic Event

1. Prospective borrowers (prospects) have reestablished satisfactory credit for at least 12 months since the end of the Event.
2. Prospects have no thirty day late housing or installment debt payments for the past 12 months.
3. Open mortgage accounts are current and have been paid on time for the past 12 months.
4. Prospects must obtain a HUD Counseling Agency certificate of participation in pre-purchase counseling. At minimum, this is a one hour of one-on-one counseling provided by HUD-approved housing counseling agencies. This counseling must be completed a minimum of 30 days but no more than six months prior to submitting a loan application to a lender.

While FHA says it has realized that, sometimes, credit events may be beyond one’s ability to control, and that credit histories don’t always reflect a person’s true ability or willingness to pay on a mortgage. We shall see if this program truly offers benefits for homeownership prior the program’s termination on September 30, 2016 or if it is a merely a program of limited utility. My hope is on the former.

Image attribution

Financially Speaking™ – James Spray, MLO, CNE, FICO Pro

CO LMO 100008715 | NMLS 257365 | September 1, 2013 | Updated September 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.

Dear Daughter: About Building and Responsibly Using Credit

Dear Daughter:

In the beginning, select and join a credit union. Use this financial institution as your primary bank. Credit Unions are unique financial institutions. As a member you are an owner, not just a customer.  Your credit union is almost everywhere you are with shared services. Most credit unions offer free checking, free debit card services, free ATM’s, no monthly service fees, low cost auto loans, low interest rate/no fee credit cards and more. Search for one near you, just click here.

Credit Unions are insured by the National Credit Union Association and backed by the Federal Government up to $250,000.00.

 Begin developing a strong relationship by being responsible with your accounts. This will help you establish a solid reputation with your primary credit union.  In many ways, this illustrates your self-respect in the financial world.

·         Balance your checkbook at least monthly; ask a credit union officer to show you how.

·         Do not rely on overdraft protection; set up shares/savings secured in case you need it.

·         Overdraft protection is there to cover math errors only; if you have to use it, pay it off immediately.

·         Do not live on credit – it is but a tool, use it wisely as such.

·         Avoid credit monitoring/score watching services – these are a waste of time and money.

Build emergency savings for emergencies; they happen. Build separate savings for play such as getaways and vacations. You can set up special savings accounts with your credit union.

Building credit requires using credit and using it wisely. Limit your use of credit by using it wisely. Don’t pay interest on disposable goods such as food, gas, clothing, entertainment or vacations.

Once you have your credit union account set up, you may wish to ask a parent or relative with good (740 FICO) to excellent credit (780 FICO) to allow you to inherit their credit reputation. This tool, properly used, can greatly enhance the ability of one with a thin or young credit file to build one’s own credit in a more expedited manner.

Image attribution

Financially Speaking™ James Spray, MLO, CNE, FICO Pro

CO LMO 100008715 | NMLS 257365 | July 8, 2013

 

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.

Zombie Seconds and Short Sales

Initially, this article was primarily written for real estate professionals engaged in short sales. Since that time, many other folks have found this information of benefit so they can learn what must be done to get a fresh start. With this in mind, let’s begin with a review of Zombie Mortgages. In the words of a Realtor_® friend who recently summarized my article to a group of Independent Realtors® thusly: These are mortgage which had a Promissory Note that was discharged (extinguished) in a Chapter 7 Bankruptcy but which remains secured by the Deed of Trust that is secured to the property. We first discussed this phenomenon in a 2010 article titled Living Underwater After Bankruptcy. The bottom line is the Debtor(s) elected to voluntarily retain and pay the first mortgage and occasionally the second mortgage while discharging the promissory note(s) in bankruptcy.

Basics

• One – Don’t blame the lawyers. They were doing their job and in the vast majority of cases they did their job very well.
• Two – The attorney has concluded their professional work for this debtor and in most, if not all, cases is no longer representing your prospective short sale client.
• Three – Don’t let selective memory regarding the minutiae of the discharged note(s) interfere with your goal of extinguishing the deed(s) of trust.
• Four – Don’t ask for or expect a mortgage reaffirmation so as to benefit the short sale. It may not be legally permissable and is unnecessary.
• Five – Be wary of engaging in the unauthorized practice of law and understand you may have to work harder and smarter.
• Six – There are situations that may require the attorney’s help, make nice. Read on to be aware.

A Zombie Second

In this situation, debtors select to pay only the first mortgage payments and make no payments on the second mortgage. In cases where the second mortgage has little or no  secured value above the first mortgage, the second mortgage holder  may make a financial decision to not to enforce the trust deed and foreclose. The result is that the property continues to be encumbered by the second mortgage deed. Short of foreclosure, the property may not be sold without obtaining a release of the Deed of Trust from the second mortgage holder.

Short Selling Zombie Seconds

There are many factors that can complicate getting a short sale accomplished. This situation is exacerbated in instances when the second mortgage was sold, assigned or otherwise is made difficult to trace. Due to the fact is that it has been many months and sometimes a few years since the debtor made a payment on the second mortgage and has no contact information. This make getting a short sale finished even more complicated than a short sale where all of the actors can be readily identified.

Finding The Zombie’s Owner

It can be an obstacle just finding the second mortgage loan number. This is often exacerbated by the fact the debtor no longer receives payment notices and/or does not recall to whom payments were made. Here are a few thoughts on where to find this information. 1] Check the tax return for the last year mortgage payments were paid, the 1098 issued by the lender will contain the loan number. If that named servicer is no longer around, do a Google search to determine the likely holder today. 2] Order an O & E from your title insurance company. Include the debtors name and social security number search in your request – the original loan number will be on the Deed of Trust along with the original lender. And you might get lucky and find a recorded assignment of the Deed of Trust if the mortgage has changed hands. 4] Go online to the Mortgage Electronic Registration System (MERS) and click the link to find the servicer.

Bankruptcy Not Closed

Oops, all in order for the short sale except you have learned the bankruptcy is still open. How can the case be open? Good question, however the reason is beside the point as you may still accomplish a short sale. What is needed at this juncture is for the Trustee to agree to a Motion To Abandon Interest of the real estate so the short sale transaction may proceed. This is where you need the attorney to help you. Your client should be prepared to pay for the legal professional time for preparation, filing and prosecution of the Motion.

Non-Consensual Judgment Liens

It is not infrequent that judgment liens will appear to be attached to the title in spite of the bankruptcy discharge. It is also not infrequent that many title insurance companies will insist the discharged judgment must be removed. TIP: It is not all that difficult to find a title insurance company which understands bankruptcy law and will insure over the phantom, impotent judgment. Contact me if you need help finding such a title company in Colorado (only).

Unless Stripped-Off – Trust Deeds Remain Attached To The Real Estate For Many Years

It has come to our attention time and time again that many believe a Chapter 7 Bankruptcy Discharge extinguishes both the Promissory Note and the Deed of Trust (TD). This is not true. In Colorado, the TD remains attached to the real estate for fifteen years after the date on which the final payment is due. To illustrate, on a typical second mortgage, the final payment is due fifteen years after the loan was originated. In the instance referenced in this blog, the TD would be extinguished thirty years after the origination date. On this, in order to be assured of the law as it pertains to your specific situation, contact a Real Estate attorney about C.R.S 38-39-201.

What If the FHA or VA Mortgage Servicer Refuses To Participate?

Unlike the lyric from Eddie Cochran’s Summertime Blues –

“Well I called my congressman|And he said, whoa|I’d like to help you son|But you’re too young to vote”

You can vote and you can call your congressman if an FHA/VA servicer refuses to participate in a legitimate short sale. I recently had occation to advise a Realtor friend to direct his client to contact the district liaison with her congressman’s office. It took just three weeks for the servicer to reverse their position and agree to engage in good faith negotiations for a short sale. An FHA or VA servicer must abide by their contractual obligation to help FHA or VA minimize losses. This means that if a short sale makes economic sense they are obligated to deal in good faith. If one refuses that’s when your client may wish to reach out for congressional help. Click here to find the appropriate congressional office.

Who Benefits?

Who does the short sale benefit? Is it the seller? Is it the lender? Is this the short sale of a property on which the lender or lenders will not foreclose, such as a unit within a type of condominium complex? Is this a short sale merely for the benefit of a real estate sale commission? What is the Tangible Net Benefit of shot sale of the short seller?

Finally, given there is limited compensation available for the zombie second there are times when the holder of this second deed of trust simply will not cooperate with a short sale. The bottom line is the potential 10% financial settlement the first mortgage holder  will pay the second mortgage to release their trust deed is not a sufficient financial incentive.

Image attribution

Financially Speaking™ James Spray, MLO, CNE, FICO Pro

CO LMO 100008715 | NMLS 257365 | July 21, 2012

 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 During and After Bankruptcy Guide

New Good Credit Required

Mortgage Refinance After Chapter 7 Discharge – Yes, two years after your discharge, it is possible to refinance providing there is at least 5% equity in the property, an excellent mortgage payment history (no 30 day late payments), provable income and reestablished credit with good FICO scores. This is applicable with only FHA, VA and USDA mortgages. Do not sign a reaffirmation agreement without the approval of your attorney. For the rest of the story, click here.

 Purchasing a Home After Chapter 7 Bankruptcy Discharge – Yes, two years after your discharge, it is possible to purchase providing you have at least 3.5% down payment, an excellent housing rental payment history (no 30 day late payments), provable income and reestablished credit with good FICO scores. To read the rest of the story, click here.

 Mortgage Refinance During Chapter 13 – Yes, after you have been in your payment plan for one year, it is possible to refinance. This is the case providing you have no 30 day late payments to either the Chapter 13 Trustees office or your bank/mortgage company, and providing there is at least 5% equity in the property. While harsh, understand there is absolutely no tolerance for either 30 day late payments or any new derogatory credit. Read the rest of the story by clicking here.

Building New Good Credit After Chapter 7 Discharge – I have written numerous blogs on what to do and not to do when rebuilding your credit following a financial catastrophe. You can subscribe to my blog for free and learn how to rebuild your credit. To help narrow your immediate search, here are a couple of good blogs on this topic: Credit Union Power  and Credit Cards After Bankruptcy.

Building New Good Credit During Chapter 13 – Your Chapter 13 Plan must first be court-approved before you can begin rebuilding credit while in your Payment Plan. Be very wise and careful in so doing, as any new bad credit after filing for bankruptcy protection is very harmful to your credit and financial recovery.

Mortgage Modification After Chapter 7 Discharge or During Chapter 13 – Your best source of information and help on this is through the Making Home Affordable Website. Again, I urge that you do not sign a reaffirmation agreement. This is an area of widespread fraud. Caution: I encourage you read this for your protection: .

Renting After Bankruptcy – Click here for tips and guides and resources you may find helpful.

National Mortgage Settlement – Was your mortgage originated before January 1, 2009? Does Wells Fargo, Bank of America, Citi, Ally/GMAC or Chase service your mortgage? If so, these are settlement details regarding such. Contact the CO Attorney Generals web site for information.

Image attribution

Financially Speaking™ James Spray, MLO, CNE, FICO Pro

CO LMO 100008715 | NMLS 257365 | June 1, 2012

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.