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Tim I disagree - I am currently helping someone who went through a short sale and their score was 795 before they closed, right now their score is 791 due to the additional month of the on time payment their mortgage reported and it says "Settled for less than owed" on the trade line as well, I suspect their score took a slight dip because they also were approved for a credit card a month afterwards and it's reporting, bringing down their average trade line age. Zero damage to their score was done, and they were approved for new credit. They are purchasing using FHA financing, which permits a borrower to buy immediately after a short sale if they didn't go late on the mortgage or any other consumer debts at the time.
Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to
• take advantage of declining market conditions, and
• purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.
Borrowers are considered eligible for a new FHA-insured mortgage if
• they were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and
• the proceeds from the short sale serve as payment in full.
Tim I disagree - I am currently helping someone who went through a short sale and their score was 795 before they closed, right now their score is 791 due to the additional month of the on time payment their mortgage reported and it says "Settled for less than owed" on the trade line as well, I suspect their score took a slight dip because they also were approved for a credit card a month afterwards and it's reporting, bringing down their average trade line age. Zero damage to their score was done, and they were approved for new credit. They are purchasing using FHA financing, which permits a borrower to buy immediately after a short sale if they didn't go late on the mortgage or any other consumer debts at the time.
Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to
• take advantage of declining market conditions, and
• purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.
Borrowers are considered eligible for a new FHA-insured mortgage if
• they were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and
• the proceeds from the short sale serve as payment in full.
I knew there was a provision in the FHA loan guidelines that gave short sellers an opportunity to rebuy soon. But I thought it would be a two year wait instead of the normal 5-7 year wait. I know there are "hardship cases" But I guess the government is considering most people "hardship cases" because of the economic downturn?
Gotta love our government. In my opinion, allowing people who essentially defaulted on their loans (that's basically what a short sale is since they didn't live up to their contract) and purchase another home immediately. This really means they are taking advantage of the real estate market condition. "sell low, buy lower" Only this case, they aren't eating any of the costs.
I really don't understand the government's thinking on mortgages these days. I think all the lobbyists for the real estate industry has been hounding Congress the past several months while they work out the financial reform bill that will be passed very soon. It's funny (or rather sad), that there isn't any strong provision forcing people who have done short sales and haven't waited the standard amount of time to have bigger downpayments to protect US taxpayers.
So did your clients who short sold their home and immediately purchased another home, put down a low downpayment on their new FHA backed loan?
As for the credit report that says "settled for amount less than owed" Word of advice: Watch out in 3 months down the road. My wife's credit score was 780. She had some dumb unpaid cell phone bill (she actually returned the cell phone but the cell phone company claimed they never received it). This happened in 2004 when she was in her last year of college. Fast forward to 2008. That unpaid equipment went to collections and the bill was for $400. A minor amount. I told them I would pay $250 to settle the account for her. So within 3 months on her credit, it shows up as "legally settled for amount less than owed" like your client. Her credit score was still 760 at that time. But 3 months further down, her credit score dropped to 620 because some lenders considered that a derogatory remark.
It's taken 2 years and I finally got her credit score back from 620 to 750 now. All because of that "amount less than owed remark" I pay all her bills. And she owes no debt and her credit cards are always paid in full each month.
Yes they are putting down just 3.5% on their new home, they even came in with a somewhat comfortable amount of money when they sold their old home as well (didn't use all of their money, but didn't leave them with a ton either), didn't let their old mortgage lender take the full loss. They actually are purchasing a more expensive home as well (not bigger in size, but the new market they were relocated to has higher home prices) but surprisingly lower payment due to lower property taxes in the new state.
There have always been provisions in mortgages that allow for borrowers with "extenuating circumstances" to have more lenient guidelines apply to them, so it's not just a new way of thinking, has been that way all along. Do I agree? Doesn't really matter, not my place to judge others, I just help people qualify for mortgages.
Interesting situation with your wife's scores - so when the cell phone collection was put on her credit in 2008, she still maintained 760 scores, and only after it was "settled for less than owed" her score dropped? That seems odd the collection didn't impact her scores but the settling of the account did. FYI in the future (hopefully you don't run into it again) but you could offer a "pay for delete" which is where you pay in full (or a portion) and they agree to delete (not just report it as $0). Congrats on getting her score back up to where it was though.
I'm not negative. I expect to be treated as a valuable, non deadbeat, reliable fiscally responsible customer. I expect a good interest rate and to be treated with respect.
I expect, in this era of defaulting, foreclousure, bad credit, etc, to be treated like a valuble customer and opportunity to do solid, low risk buiness. I expect lenders to compete for my business.
Shocking? Perhaps, but I will not carry my hat in my hand, when I am the exception to the rule in today's economy and mind set.
Yes they are putting down just 3.5% on their new home, they even came in with a somewhat comfortable amount of money when they sold their old home as well (didn't use all of their money, but didn't leave them with a ton either), didn't let their old mortgage lender take the full loss. They actually are purchasing a more expensive home as well (not bigger in size, but the new market they were relocated to has higher home prices) but surprisingly lower payment due to lower property taxes in the new state.
There have always been provisions in mortgages that allow for borrowers with "extenuating circumstances" to have more lenient guidelines apply to them, so it's not just a new way of thinking, has been that way all along. Do I agree? Doesn't really matter, not my place to judge others, I just help people qualify for mortgages.
Interesting situation with your wife's scores - so when the cell phone collection was put on her credit in 2008, she still maintained 760 scores, and only after it was "settled for less than owed" her score dropped? That seems odd the collection didn't impact her scores but the settling of the account did. FYI in the future (hopefully you don't run into it again) but you could offer a "pay for delete" which is where you pay in full (or a portion) and they agree to delete (not just report it as $0). Congrats on getting her score back up to where it was though.
Wow, that's the first story I've heard where people did a short sell and re purchase another home in a short amount of time.
And you are right, I won't prejudge people (on this particular forum) since the moderators don't want us too.
But you can see the anger (or hope) when situations you just presented with your client's short sell situation. Some people get approved, while some get denied. Probably your client had a lot of negotiation skills, documented paperwork, steady income and everything worked out for them.
As for my wife's credit score for "settling for amount less than owed," What I think happened was way back in 2004 when this happen, there was a ding on credit report but by 2008, her credit score was back to normal. However, by me paying off the bad debt for amount less than owed, it "resetted" the derogatory remark to 2008 (instead of 2004). I know credit agencies aren't supposed to do this but most still do.
That's why if this every happens, I would just recommend people not pay off bad debt (if it's been 4-5 years already) because the agencies still "reset" the clock if you pay off the debt and you are screwed for a couple of years until your credit scores return.
The credit agencies were supposed to change this a few years back, but obviously many haven't. We both have Costco's Identity Guard monthly credit monitoring service and that's how we have been monitoring her scores the past 2 years. $7.50/mo for Costco Executive members is well worth it.
I will have to look into the "pay for delete" you mention in the future if this happens again. I've always had great credit scores. My wife is not the most timely person paying bills simply because she just forgets. That's why I keep separate credit files for both of us and nothing is jointly held. But I do pay all her bills for her so she doesn't need to worry about that for now.
These clients situation did take a little bit of luck and hard work in my opinion, but with enough pressure/negotiating anyone who is being forced to a distant area for work should have a shot having the same success.
Ah I gotcha aneftp - makes sense why it took a dip in 2008 after it was paid, updated the date of last activity (DOLA) which often happens... it didn't have anything to do with the notations of "settled for less than full amount" though, even if you paid the full amount it would have still updated the date of last activity to the same date in 2008, dropping the scores in the same manner. I, too, recommend that old small unpaid collections just be left alone, your wife's may have even been outside of the statute of limitations (SOL) for them to collect depending on the state it occurred in. If it was medical, there is a process called HIPAA that gets it removed 9 times out of 10 once it's paid to the original hospital/creditor.
I'm not negative. I expect to be treated as a valuable, non deadbeat, reliable fiscally responsible customer. I expect a good interest rate and to be treated with respect.
I expect, in this era of defaulting, foreclousure, bad credit, etc, to be treated like a valuble customer and opportunity to do solid, low risk buiness. I expect lenders to compete for my business.
Shocking? Perhaps, but I will not carry my hat in my hand, when I am the exception to the rule in today's economy and mind set.
Sorry, but the way it works in the new cautious world of lending post the huge housing blowout is: you have to have skin in the game. That means you need to put money down to generally even get a loan these days (not even talking about the rate you'll get...). The days of getting everything without putting any money in are largely gone now.
I'm not negative. I expect to be treated as a valuable, non deadbeat, reliable fiscally responsible customer. I expect a good interest rate and to be treated with respect.
I expect, in this era of defaulting, foreclousure, bad credit, etc, to be treated like a valuble customer and opportunity to do solid, low risk buiness. I expect lenders to compete for my business.
Shocking? Perhaps, but I will not carry my hat in my hand, when I am the exception to the rule in today's economy and mind set.
You can expect it, but you won't get it. As long as the government continues to subsidize poorly qualified borrowers, they won't miss our business in the least. I'm in the same boat as you, great credit (and I have the money for a 20% down) but no one is giving us any breaks or any particular attention while we're trying to buy (they like cash buyers). Seems to me like the "deadbeats" are getting over , especially the strategic defaulters and those that just stop payment but keep living in their minimun down, "no skin in the game" house.
It's enough to make one a tad cranky...
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