Tuesday, October 27, 2009

Have Great Credit? Your Loan is DENIED!

You decide to refinance your home. You owe $100,000 and your house will easily appraise for $200,000. Your credit score is 820. You make $75,000 a year. You have no bills. You think this will be a slam-dunk.

Your file is DENIED!

Why? Last year, you disputed a charge on your credit card. The dispute was valid, the account was closed, and the creditor promised to remove the dispute notation from your credit file.

But they didn't. Fannie Mae is telling your lender that they will not buy any loans that have a notation on the credit report. So your lender won't approve your loan, since they can't sell it to Fannie Mae.

Here's what's going on. Fannie Mae has a computerized underwriting program that most lenders use. This program automatically spits out any borrower with a "consumer disputed" item.

If the lender still wants to make the loan and sell it to Fannie Mae, then the lender must manually underwrite the loan and determine if the dispute is credible. The fact is, most lenders don't want to go through the expense of this process. It's simpler and cheaper to just deny the loan.

Why does Fannie Mae have this policy? It is because of phony "credit repair" companies. Seems these weasels "fix" bad credit by disputing any derogatory item on the client's credit report. It doesn't matter if the client "earned" the bad rating; they simply dispute it all.

Why? When an item in a consumer's file is"disputed" most scoring software ignores these items when computing the credit score. So these "credit fixers" tell their clients to dispute ALL negative credit, accurate or not.

Fannie Mae has figured this scam out and they are trying to protect themselves from being defrauded. Meanwhile, honest people who are simply trying to protect their credit by disputing legitimate errors are out of luck.

If this happens to you, talk to your loan agent and push the lender to manually underwrite your loan. And don't give up hope. Fannie Mae is reviewing its policy and may consider changing it.

Thursday, October 22, 2009

You Think it's Hard to Get a Loan Now?

Just wait a few weeks!

Starting December 11, Fannie Mae will require every borrower have a loan score of at least 620. And if your down payment is less than 25%, you'll need a score of at least 660. If borrowers don't meet those minimum scores, Fannie won't buy their loans. And if the lenders can't sell the loans to Fannie, they won't make the loans to the borrowers.

But Fannie's not the only agency making life tougher for borrowers. Starting November 17, the FHA will change its "streamline refinance" program to be a lot less "streamline".

This program is for homeowners who already have FHA-insured mortgages. In the past, these loans did not require credit checks or employment verification. And if the refinanced amount did not exceed the original loan amount, an appraisal was not needed.

Come mid-November, borrowers will have to verify that they have paying jobs and will have their credit scores checked. And if the new loan amount exceeds the existing balance (as opposed to the original loan amount) an appraisal will be required.

Say, for example, a couple of years ago you got an FHA insured loan for $100,000. Now you owe $80,000. If you want to refinance for an amount over $80,000, you'll need an appraisal. But remember there are closing costs involved in getting a loan. So, unless you have the cash to pay the closing costs, you'll need that appraisal to roll those costs into the new loan amount.

Tuesday, October 20, 2009

First-Time Home Buyer Credit Scams

I am always amazed at the amount of energy scammers put into developing new ways to cheat people out of their money. And the person they are cheating is YOU.

In 2008, the First-Time Home Buyer Tax Credit was passed. This allowed first-time homeowners to claim a tax credit on their federal tax return. There are specific requirements the buyer must meet in order to claim this credit. (See article for details.)

To date, the IRS has identified 167 distinct "criminal schemes," involving over 100,000 unjustified or fraudulent claims.

Why should you be concerned? First, your money is being spent trying to catch these crooks. Second, these criminals are not paying their fair share of taxes, so you have to pay more to compensate. And third, the government is considering extending this tax credit. But this extension is now in jeopardy because of these thieves.

Sunday, October 18, 2009

California Gets Tough With Loan Scammers

For months I have been harping that loan modification companies are, by and large, scams. For months I have been telling you that, if a "loan modification specialist" request fees up front, you should RUN THE OTHER WAY!

Now California has turned my rants into law. Effective October 11, 2009 through January 1, 2013, it is now illegal for anyone - real estate brokers, attorneys, so-called "short-sale specialists," anyone - from receiving any fees for negotiating or arranging a loan modification until AFTER that person fully performs each and every service as promised. Up-front fees are now illegal in California!

This new law also requires that the borrower receive a special notice telling the borrower that it is unnecessary to pay someone to help you modify your loan. Get it? Even the state is telling you that you do not need these scammers to "help" you. Plain and simple, you are better off without them.

So now, not only have you been warned against these slime buckets, one state has made their scams illegal. Wanna bet there are still those of you still who will email me asking if they should hire a "loan modification specialist?"

Thursday, October 15, 2009

Help From Fannie and Freddie to Buy Foreclosed Homes

Fannie Mae and Freddie Mac are offering financing incentives for buyers of foreclosed homes owned by Fannie and Freddie. Home buyers have until Oct. 30 to apply for Freddie Mac’s SmartBuy program, which started in July, and offers up to 3.5 percent of a home’s sale price to help cover closing costs.

To qualify, the home must be a principal residence and must be selected from Freddie Mac’s HomeSteps Web site (www.homesteps.com/homeshoppers.htm ) for its foreclosed properties. Loans must close by year’s end. The HomeSteps properties also include two-year warranties on major appliances and electrical, plumbing, and air-conditioning and heating systems.

Fannie Mae’s HomePath program (www.homepath.com ) is an ongoing program and offers more incentives than Freddie Mac’s. Through participating lenders, Fannie will offer mortgages to buyers who make a down payment of 3 percent. The buyers do not have to secure private mortgage insurance, a common practice with nearly all lenders. Home buyers also can negotiate for Fannie Mae to offer closing-cost assistance. Unlike Freddie Mac’s program, Fannie’s assistance level is not capped. Under the HomePath program, the average participating homeowner has received payments equivalent to 3.75 percent of the loan’s value.

Tuesday, October 13, 2009

And Last Place Goes To....

Wondering which bank has the worst record for loan modifications? That dubious honor goes to Bank of America!

A report issued last week by the Treasury Department shows that, of those borrowers potentially eligible to have their loans modified under the Making Home Affordable program, only 11% have been given a modification by Bank of America. That places them at the bottom of the list of major banks involved in the program.

Friday, October 9, 2009

Good News/Bad News

The good news is, the economy is getting better. The bad news is.... the economy is getting better.

Banks Making Short Sales Tougher

Banks are backing away from short sales, forcing sellers to pay extra at closing or demanding a promissory note for the amount due. One-third of borrowers owe more on their mortgages than their properties are worth, according First American CoreLogic.

When their situations were really tough, most banks preferred short sales because they were their best opportunity to get the most money back. But with an improving economy, and because the losses on many of these properties have already been written off the books, banks are increasingly reluctant to negotiate a short sale.

Today, banks demand 9.5 weeks to respond to a short-sale request, compared to 4.5 weeks a year ago, according to research firm Campbell Communications. Their reluctance is frequently stymieing sales and frustrating real estate practitioners.

Source: BusinessWeek, Christopher Palmeri (10/09/2009)

Thursday, October 1, 2009

Checking the Loan Modification Pulse

The federal Office of the Comptroller of the Currency and the Office of Thrift Supervision released their Mortgage Metric Report for second quarter 2009.

It says, in part, of the homeowners who received loan modifications in the first half 2008, 50% of them were, one year later, more than 2 months late with their payments. But those who received the biggest modifications did better than those who did not.

For example, only a third of the borrowers whose monthly payments were reduced by 20% or more were likely to be late, as opposed to 60% of the borrowers who received smaller modifications.

The report covers 60% of all loans made on US residences. To read the report in its entirely, go to http://www.occ.treas.gov/ftp/release/2009-118a.pdf