I have several conversations with borrowers and realtor partners about this very topic recently. I just received this info from one of our credit providers and thought this information was worth sharing.
CARES ACT APPLIES ONLY TO BORROWER ACCOMMODATIONS
It is important to note that the CARES Act governs how furnishers must report to the credit reporting agencies (CRAs) only in circumstances where they have reached an accommodation with the borrower. In those cases, furnishers must continue to report the account status as “current”, provided the account was not already in a delinquent status prior to the accommodation. This reporting approach-- placing borrowers in a temporary deferred payment plan or in forbearance, along with reporting an account status as “current”-- will permanently ensure that a borrower’s FICO® Score will not be impacted by late payments related to the effects of the COVID-19 pandemic.
COVID-19 REPORTING IN OTHER CIRCUMSTANCES – EFFECT OF SPECIAL COMMENT CODE “AW”
In instances where a borrower accommodation has not been granted (and therefore the data furnishing provisions of the CARES Act do not apply), the Consumer Data Industry Association (CDIA) provides guidelines that include reporting options available to furnishers for borrowers impacted by a disaster. A reporting option cited by the CDIA is to report special comment code AW (“affected by natural or declared disaster”). CDIA guidelines indicate that this code can either be reported along with an account in deferred status, or with “the Account Status that applies to the account (credit grantor’s decision)”.
It is important to understand the effect that reporting special comment code AW will have on the FICO® Score. Because comment codes such as AW are temporary, are only reflected in the credit file at all three CRAs for as long as they are being furnished and do not include sufficient information to override the “credit grantor’s decision” under CDIA guidelines to submit AW codes and apply the appropriate reporting of account status as either current or delinquent, all FICO® Score versions – going back 30 years – do not second guess and override the account status determined by furnishers. This means that if a tradeline is reported as current with special comment code AW, the score will treat that account as current. Likewise, if a tradeline is reported in delinquent status with special comment code AW, the score will treat that account as delinquent. The reporting of special comment code AW alone will not affect a consumer’s FICO® Score.
FICO has adopted this approach to special comment codes for good reason. Because there is no way to determine when a special comment code has been added to the consumer’s credit file at all three CRAs, electing to ignore delinquencies based solely on the presence of the code would mean that ALL historical delinquencies would have to be ignored, including those that occurred prior to the disaster.
For the same reason, once the period of disaster ends and a furnisher ceases reporting code AW, it will no longer be possible to identify that some of the reported missed payments on that account occurred while the consumer was impacted by a disaster. In both cases, the payment information of a tradeline would be inappropriately considered.
To summarize, only lenders are in a position to assess how their customers have been impacted by the COVID-19 pandemic, and to report all key credit data fields in a manner that best reflects each customer’s situation. The reporting of special comment code AW alone, however, should not be viewed as a way of providing consumers relief with respect to the FICO® Score. As they are reported to the CRAs, payment status, amounts past due (if any), and balance information will continue to be important and considered in the calculation of the FICO® Score.
This information has been posted to the FICO website and is the best place to get up to date information on this topic: https://www.fico.com/en/covid-19-credit-reporting-impact-US.
I'm always here to help. Feel free to contact me today should you need assistance.
I just want to let you know that there's probably mortgage help if you need it.
Let's set the record straight first—there's no such thing as "skipping" mortgage payments.
The recently announced mortgage payment relief through the CARES Act provides mortgage forbearance for those who have lost a job or are suffering financial hardship due to the coronavirus pandemic and whose loan is federally owned or backed by a federal agency.
Reach out using the contact info on your loan statement to determine what help may be available to you. It's vital that you discuss the options based on your situation. If assistance is available, be sure to get your agreement in writing.
A forbearance is not a holiday. A forbearance allows you to pause or reduce your payments for a limited time. Deferred payments may be due in full at the end of the forbearance period. Sometimes, these payments may be stretched over a short time period or perhaps added to the end of your loan term.
If you have an escrow account, deferring payments will mean you will also have to make up the shortage as part of your repayment plan.
The CARES Act intends to prevent negative impacts to your credit if you undertake a forbearance for your government backed loan. However, changes to reporting between servicers and credit agencies may not occur seamlessly. If you do pursue a forbearance, you will need to monitor your credit report to catch and report any errors.
Think it through. A forbearance is not a forgiveness. It does not eliminate payments; it only delays them. If you have emergency savings, available lines of credit or other means to pay, these may be better options to get you through these difficult times.
We cannot help you with forbearance arrangements directly, but we're here for you if you have questions or would like further guidance. Reach out if you need us.
If you're in need of mortgage assistance, it pays to know the different options so you can make the best choice for your situation.
This is the plan everyone is talking about since the passage of the CARES Act. It's an agreement with your lender to reduce or delay regular payments for a set time. When the forbearance period ends, the postponed payments will be due all at once.
This is a legal process that alters the terms of your loan. For instance, a modification could lower your monthly payments by lengthening your loan term.
This is a plan that allows you to postpone your payments for a set time then pay them at the end of your regular loan term. "Deferments" and "forbearances" are often used interchangeably, but they are different. A deferment is more beneficial for many because it eliminates the need to make up multiple payments at the end of a short postponement period. Deferments are not available from all servicers.
Payment Assistance Program
This is an arrangement that allows you to make up your postponed payments at the end of a forbearance period by spreading the cost over a period of time. Payment Assistance Programs are not available from all servicers.
Cash Out Refi or Home Equity Line of Credit (HELOC)
If you still have enough income to qualify, accessing equity in your home by refinancing or obtaining a secured credit line may be a good option for lowering your payments, consolidating other debts, and/or creating a cash cushion. A refi will be especially beneficial if current rates are lower than those on your existing financing.
If you want to discuss your options for a refinance or HELOC, please contact us directly.
To set up the other options listed here, please reach out using the contact information on your monthly loan statement. Document all calls and agreements, then check your monthly statements and credit reports to assure that changes are reported correctly.
I hope this helps you understand the available options. If you have questions, please reach out.
If you need help right now, here's something to think about.
Forbearance is when a lender agrees to let a borrower postpone payments until a later date. The payments are not eliminated. They will need to be paid at the end of the forbearance period, spread over time, or added at the end of the loan. It's important to know this is not for everyone, but only for those who have lost a job or have financial hardship due to the coronavirus pandemic.
If you are eligible and in true need, this can be a big, albeit temporary help with cash flow.
Potential ProblemsIf you're without funds for monthly payments now, what is the likelihood of being able to make up missed payments all at once in a few months? This is the worst-case scenario, but you must ask your servicer if alternatives are available.
The CARES Act intends to protect your credit if pursuing a forbearance, yet there's no guarantee that will occur without errors. It will be important to monitor both your monthly statements and credit report to assure accuracy.
This is temporary, not long-term relief. It may take a year or more beyond the end of the forbearance period before you can refinance. Saving every month for 30 years later may be far better than a little short-term relief right now.
If you still have sufficient household income to qualify, pursuing a "cash out" refinance could be a better option. You may be able to access equity to create a cash cushion from which you can consolidate other debts, make timely payments and eliminate risk to your credit.
If you have a 15-year loan now, stretching the term to 30 years can save hundreds of dollars per month. Once your income has returned to normal, you can always add extra principal to pay the loan off in 15 years without having to refinance again.
If you have no choice but to pursue forbearance, you MUST reach out using the contact info on your loan statement to arrange a formal, documented plan. Documentation will be critical to clear any credit reporting issues that may arise.
Please reach out if you have questions or if I can be of assistance in discussing options that may be best for you.
The Magic Number - What Does Your Credit Score Need to Be to Qualify for a Home Loan
Over the course of a lifetime, financial development can lead to some wonderful opportunities. A person's financial development and state of affairs is something that is particularly important when it comes to taking out a bank loan to further progress in life, and the largest loan most people will require is a mortgage for a home purchase.
Since the process of getting approved for a mortgage is heavily dependent on credit history and that three-digit credit score that reflects reliability as a borrower, you should always put forth practices to keep that number healthy and growing.
However, how much importance does a credit score hold? Does that magic, three-digit number need to be above 800 in order to get approved for a mortgage? Answer is absolutely not.
The FICO Score: The Magic Number That Counts
When you apply for a mortgage, you will have to provide certain information so they we may pull your credit report. Your credit score/history and ability to verify your income are the TWO most important factors in obtaining a home loan.
Fair, Isaac and Company is the scorekeeper of your FICO score, which ranges from 300 to 850, 850 being the highest of all scores, and 300 being the lowest.
The 600 Range: Fair And Good Credit Mortgage Options
If your credit score isn't perfect , you need not worry too much. There are many options available for those with credit scores above 620.
With a "fair" and "good" credit rating falling between 620 and 719, there are options available to get approved for a mortgage well under the perfect 800 mark. An FHA loan is a type of mortgage loan that is insured by the US Federal Housing Administration, offering an option with more flexible qualification measures. For homebuyers with a credit score above 620, this is a viable and common option.
720 To Perfect: Under 800 And Still In Great Shape
The median credit score in the United States is 723, and anything above 720 is placed with the marker of "excellent credit." Therefore, just because you may range just slightly above 720, which may feel miles away from a perfect 800, you are in GREAT shape when it comes to getting approved for a mortgage ( provided you have a verifiable income) .
Keeping an eye on your credit rating and understanding the measures that are used in determining your credit score will certainly help you maintain a good score. Of course, speaking with a mortgage professional ( like me) and receiving expert advice is always recommended.
For specified information on your particular situation, please contact me at 678-773-0651 or Kathy@KathyDelbridge.com to discuss your options for receiving a mortgage loan.
Also, you will find VALUABLE information regarding credit scores by visiting the following page that is found here on my website.
Whether it's your first time purchasing real estate or you're a seasoned professional, here are a few tips to make shopping for a new house more pleasurable.
1. Get Help
Searching through all of the available properties on the market can be mind-boggling.
Find a professional real estate agent to help guide you through the homes for sale and select one that meets your family and financial needs.
2. Start Looking Now
Finding the perfect house can take longer than you might think, especially if you're looking in a competitive market.
If you're looking at getting a good deal on a foreclosure or short sale, then these transactions can take even longer because you're likely waiting on the bank to make the final call on your purchase transaction.
Try to be patient. The more thorough you are in your search, the happier you'll be in the long term.
3. Don't Settle For The First Place You See
Searching for a house can be extremely emotional.
If you think you've found the one, then take a step back, consult your real estate agent and go over your housing checklist one last time before writing an offer.
4. Weigh The Pros And Cons
Almost any property will need a few improvements; even newly constructed houses usually need improvements like landscaping.
Sellers are more savvy now about how to make cosmetic changes to catch a buyer's eye, so look carefully.
There will still be things you want to change, so weigh the difference between the cost of those repairs and the sales price of the home.
If you really want a house even though it's going to take a lot of work, make your offer accordingly.
5. Make Sure Your Financing Is In Order
Having financing done in advance makes the process of buying homes for sale much easier because you'll know how much you can afford.
Your loan officer can also help you determine what your monthly payments will be based on how much money you borrow.
A great first step is to consult with a licensed mortgage financing specialist to go over the available programs and terms available in the area.
I'd love to consult with you on your new home purchase. I can be reached at 678-773-0651 or via email at Kathy@kathydelbridge.com
Do You Really Know the Rules On Short Sales and Obtaining a Mortgage after a Short Sale
After being the in mortgage industry for over 10 years, one of the many important lessons I have learned is to be careful in your interpretation of lending rules and guidelines. Understanding how a short sale can affect you when obtaining a mortgage after a short sale is one of those rules where you must be careful in your interpretation of the rules.
I recently had a closing with a client who would not have just had that closing had they not also taken the time to speak with me, AFTER they had been told "NO" by another lender.
This particular client had a short sale which had occurred about a year and-a-half prior to being in contact with me.
When the first lender looked at the client's credit report and saw the verbiage that the client's mortgage had been settled for less than the amount owed ( meaning they had a short sale) and since that short sale occured 1.5 years ago, this lender informed the client that they would need to wait a full 3 years after the short sale before they could obtain a loan via FHA financing.
While FHA guidelines do state that under most circumstances, a borrower is not eligible for FHA financing after a short sale, until 3 years from the date of the short sale, there ARE some extenuating circumstances and other factors that WILL allow financing before 3 years.
It is vital that borrowers with a previous short sale insure all the facts are considered before being given an automatic NO and told to wait 3 years. If you are one of these borrowers or if you are an agent working with a borrower with a previous short sale, make sure their lender has considered all the facts and reviewed their case carefully.
I am glad these buyers contacted me and even more glad that we got their home loan closed recently. They literally went from a " No, you can not buy" to a "Yes, we can get that done and close you right away". We were at the closing table within 2 weeks of them going binding on a contract for their new home.
That's one the many reasons I LOVE what I do.
Best wishes and call me if you need professional, knowledgeable and consultative advice.
Borrowers With Existing FHA Loans Get a Big Refinance Boost - Upfront and Annual MIP Being Reduced
In a press conference dated 3/6/12, President Obama announced that borrowers with existing FHA loans will receive a huge boost, due to the Upfront Fee and the Annual MIP being reduced.
This announcement should help many existing FHA borrowers save more money on their Streamline Refinance loans, compared to current MIP rates they have been receiving after the Annual MIP increased in Oct 2010 from .55% to 1.15%.
The new fees are for borrowers whose FHA loans were issued before June 1, 2009. An estimated 2 to 3 million borrowers could take advantage of the savings, which could reduce mortgage payments for the typical FHA borrower by about a thousand dollars a year, according to the administration.
Borrowers who refinance their existing FHA loans will pay an upfront insurance premium equal to 0.1% of the mortgage amount -- $100 for a $100,000 loan -- plus an annual fee of 0.55%.
To read more on this topic, please click on this link:
This is GREAT news for existing borrowers with FHA loans, who have wanted to refinance to today's lower interest rates, but their MIP payment was doubled, so it cut into their refinance savings.
In my opinion, this will be a boost. If you are a homeowner that is able to take advantage of this additional savings, get started while the rates are still low and be sure to apply your savings appropriately.
Make it a GREAT DAY!
HUD Announces Another INCREASE to Upfront Mortgage Insurance and Annual Mortgage Premium
In a Press Release dated February 27, 2012, HUD announced that they will be increasing the Upfront Mortgage Insurance Premium (UFMIP) and the Annual Mortgage Insurance Premium ( MIP).
Important dates to remember are April 1, 2012 and June 1, 2012, as these are the dates when the changes will take effect.
The Temporary Payroll Tax Cut Continuation Act of 2011 requires FHA to increase the annual MIP it collects by 0.10 percent. This change is effective for case numbers assigned on or after April 1, 2012. FHA is also exercising its statutory authority to add an additional 0.25 percent to mortgages exceeding $625,500. This change is effective for case numbers assigned on or after June 1, 2012.
The UFMIP will be increased from 1 percent to 1.75 percent of the base loan amount. This increase applies regardless of the amortization term or LTV ratio. FHA will continue to permit financing of this charge into the mortgage. This change is effective for case numbers assigned on or after April 1, 2012.
Once both of these are increased, borrowers will see an estimated payment increase as outlined below:
To read more about this press release, go to http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2012/HUDNo.12-037
If you are a homebuyer looking to purchase a home and want to insure you save money on your new loan, be sure to act now. Case numbers are not assigned until you have made an application and have a contract on a new home.
Hope you find this information helpful.
Have a GREAT day!
Your Mortgage Specialist, Kathy Delbridge
Is Metro Atlanta Seeing a Median Homes Sales Price Increase?
I received what I felt was an excellent way to start my week and what several people would consider excellent news for the housing market - at least for now.
I came into the office this morning and found in my inbox that 2 appraisals were delivered over the weekend for 2 of my buyers.
One purchase is in the $130K range in Henry County, while the other is in the $350K range in Fulton County - Buckhead area.
What was discovered during the appraisal review is that the Median Home Sales Price has increased in both of these areas by 8.6% during the past 12 months.
Could this be an anamoly or is it the start of a trend?
At this point, I am going to absorb and accept it has very good news and look forward to much more good news coming this week!
Have a great week everyone!
HUD to Make Some Very Important Announcements Soon: Most Important Is Regarding Seller Concessions
In an announcement dated, January 20, 2012, Acting Federal Housing Administration (FHA) Commissioner Carol J. Galante announced the latest in a series of steps to protect and strengthen the FHA’s Mutual Mortgage Insurance Fund, while enabling the agency to continue to fulfill its mission to provide access to homeownership for qualified borrowers.
One of the biggest announcments we will see soon is that FHA will propose to reduce the maximum allowable seller concessions from its current level to one more in line with industry norms.
Part of the reasoning is they feel that current level of 6% allowable seller concessions exposes the FHA to excess risk by creating incentives to inflate appraised value.
I tend to disagree that it creates an incentive to inflate appraised values. There have been so many guidelines put in place over the last 2-3 years that, in my opinion, has eliminated any concern over any inflated values.
While I understand that FHA/HUD need to insure we are able to maintain and keep FHA financing available for homebuyers, I feel they need to really look at the root cause of loan defaults and solve that problem.
Many homebuyers really could use the assistance of seller paid concessions. If the value is there and it is not an artificially inflated value, I say let the homebuyer get in their new home with the FHA standard 3.5% down payment and keep the additional money it would costs them to cover their settlement charges.
On smaller purchase prices, the maximum allowable seller concessions is needed in most all cases. On a $150,000 purchase price, 3% will not cover ALL closing costs and prepaid items for a borrower.
In our current economy, let's help homebuyers keep those reserves for those unexpected occasions when those funds are really needed.
You can read entire Announcement from FHA by clicking on the following link:
If you have any comments you would like to share about this post, feel free to comment.
Fannie Mae is currently offering buyers up to 3.5% in closing cost assistance through June 30, 2011.
The HomePath property buyer must meet the following qualifications to be eligible:
In a few states, a bonus promotion may be available to selling agents who close on an owner occupant property meeting the above terms & conditions.
Retail and public entities are eligible for the incentive; however pool and auction sales are not eligible.
The incentive may not be available for a property where Fannie Mae acquired the property in connection with financing under a reverse mortgage. Ask the listing agent for details
Fannie Mae reserves the right to remove any property from promotion or end the promotion at any time. Any dispute over the payment of the incentive shall be resolved by Fannie Mae in its sole discretion.
Buyers should consult their lenders for guidance on financing. Lenders and mortgage products may impose their own limitations on the use of the 3.5% incentive. For example, the lender may consider the incentive a Seller Contribution and limit the amount to 3.0%. In those instances, the remaining 0.5% will no longer be available to the buyer.
Potential Government Shutdown / Impact to Government Loans - MUST READ!
Implications of Government Shutdown
While we are still hopeful that a shutdown will be avoided (or another continuing resolution passed), it is unlikely that there will be any decision until the last minute. We understand the President is meeting with Speaker Boehner and Senate Majority Leader Reid at 1:00 p.m. EDT today.
Below is the latest information we have on the implications at the housing agencies. However, no final decisions have apparently been made. We do expect FHA & Ginnie Mae will publish FAQs if the shutdown does occur.
We have been advised that FHA Connection will be operational except that you will not be able to perform CAIVRS' checks or obtain insurance endorsements (including lender insurance). You will also not to be able to pay upfront premiums. However, we have been told that you will be able to obtain case numbers.
We recommend that clients ( this is the lender) run CAIVRS' checks immediately on all loans that you want to close in the next week or two in case the shutdown does occur. A CAIVRS' problem is likely the most immediate impediment to obtaining insurance once the loan the program is reinstated.
If a shutdown is announced, Ginnie Mae has told us that will publish FAQs and answers on the website to address program operations. We have been told that functions such as handling of principal and interest payments to investors in pools and "proceeding with pooling as pool or pool packaged are delivered" will continue. It is unlikely that Ginnie Mae will provide new commitment authority during the shutdown though no final decision has been made.
USDA has advised us that lenders will be able to close loans for which they had already received a commitment. However, lenders will not be able to get the Loan Note Guarantees for them until the shutdown is over.
During the shutdown, USDA will not issue any new commitments or Loan Note Guarantees for closed loans. Unlike FHA, USDA will not operate GUS, its automated system, during any shutdown.
VA has indicated that they will continue business as usual during the shutdown. We have asked VA if there has been any change.
We will update you on the possible shutdown as soon as we have new information.
Let's pray we do not get affected by this, but we must be prepared just in case.
TWO Very Important Dates Approaching / Affects FHA Homebuyers and certain VA eligible Military Personnel
There are two very important dates that every FHA Homebuyer must be aware of, as well as certain military personnel seeking homeownership. Here they are:
If you'd like additional information on the full details on each of these, be sure to read my two previous blog posts prior to these two posts.
I am here to help and LOVE helping new homeowner's purchase their new home!
Enjoy and make it a GREAT day!
HUD Announces INCREASE In the Annual Mortgage Insurance Premium
HUD announces in a mortgagee letter dated February 14, 2011 that they would be increasing the annual mortgage insurance premium by 25 bps ( basis points) that is collected on FHA loans.
Who does this affect and what does this really mean?
Overall, here's an estimated payment increase from where we are currently, based on the annual premiums as of October 4, 2010.
Purchase Price EST Payment Increase
Not that this has any bearing on immediate changes, but here's an example how much higher the mortgage insurance will be after 4/18/2011, compared to where they were Prior to October 4, 2010.
Purchase Price EST Payment Increase
These new changes will become effective for all FHA case #'s assigned on or after April 18, 2011.
If you know someone who is looking at purchasing a home and intends to use FHA financing for their financing, make them aware of this. With rates expected to hit 5.5% this year and this increase as well, there is NO time to delay. Even if the overall payment ends up being $50 more each month, that is $3000 over the next 5 years. That's the average costs to paint your home.
And, if you know someone who has an FHA loan that needs to be refinanced, make them aware of this before these changes occur.
HUD has actually been authorized to increase this premium up another 40 bps ( basis points). That would be almost 3 TIMES the amount of the monthly MI a client paid prior to October 4, 2010.
I am just a phone call away at 678-773-0651 and can always be reached via email at 678-773-0651.
Kathy Delbridge, CMPS®