VA home loan question (Katy: tax lien, 2014, mortgage)

[ohouston1970]

Hello there

I am in a bit of a dilemma with a VA home loan application and could use any advice anyone can give me.

I am a veteran applying for a VA home mortgage (this would be my 3rd loan - and all other loans have been fully satisfied). In any case, I had a chapter 7 BK that settled in June of 2011 (3 years ago). Prior to my BK I had credit for well over 15 years with an average of 750 - 780 credit score. The reasons for the BK were medical and loss of employment. Obviously my credit took a hit due to the BK and I knew I had to wait three years to apply for another loan, which I am attempting to do now. Since the BK, my credit has been averaging 670 - 690, according to my loan officer, and my income to debt ratio is only around 20%, which is due to credit cards and a vehicle I purchased in order to reestablish my credit. My LO informs me that I am more than qualified for at least $500K, however, I only need around $350ish. This is because I get paid well and have a long work history.

The issue, however, is that when we submitted the initial loan to underwriter, it was immediately denied because of a state tax lien that was placed on my credit report AFTER the BK happened. The lien was placed in July of 2012 and my BK was settled in June of 2011. FYI, immediately after I got a letter from the state regarding the tax lien they placed, I entered into a monthly payment plan and paid it all off last month (April 2014). So the tax lien is satisfied, however, it was for state taxes that we honestly forgot to pay back in calendar year 2010. And, we honestly forgot because we had submitted an extension to pay the taxes, however, due to the BK proceedings we were going through at the time, as well as a state to state move that happened during the same time frame, we simply forgot about them. So, my LO submitted a reprocess based on the tax lien being satisfied (all three CA's are reporting it as satisfied now), but the loan was denied again because the "the loan case file has been referred due to the presence of a bankruptcy on the credit report which appears to have occurred within the last 2 years (remember the BK settled in June of 2011 (3 years ago). So my LO went back into my credit reports and did notice that 7 of the accounts that were discharged in the BK were still being reported, EVEN though they were all included and settled in the BK, and even though in the notes section of each account it clearly states that they account was included in the BK.

Right now we sent a dispute letter to the all three CA's asking them to remove anything that shows past the official BK discharge of 6/2011, as those entries are obviously wrong, however, who knows what may happen.

The dilemma I find myself in is that if underwriter were able to manually look at my case file, it will see that I can quality quite easily, however, because everything is automatically reviewed, the system fails to see the circumstances that are preventing me from getting approved. Below is what I asked my LO about the possibility of maybe going through a different lender/underwrither:

"Generally, underwriters all use the same guidelines when they’re reviewing files (Fannie Mae Selling Guidelines). The tax being cleared was to get it to hopefully pass the automated underwriting, but the manual review was kicked back because of the presence of a tax lien after a bankruptcy. So we’re stuck with automated only".

Given the above, would anyone kindly give me some advise as to what I may able to do to get us approved this summer?

I look forward to your reply.

BTW, I live in Katy, TX.

Thank you