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Removing Disputes On Credit Report

The latest hurdle in getting mortgage approval is to have all disputes on credit removed. Since a tradeline (account) dispute removes that account history from the credit scoring models, the investors have become wise to inaccurate credit scores due to disputes. Often times when a dispute is removed a credit score will go down (especially if the tradeline has a negative history, excessive balance or is recently opened). You will want to have all the disputes on your credit report removed prior to submitting a mortgage application. First, review your credit information by visiting www.annualcreditreport.com and retrieving your free reports (note – it will not give you scores for free and you can only access the information once per year, so make it count!).

Through annualcreditreport.com you can remove disputes, or you can also call the bureaus direct here:

TransUnion

312-985-2000
It has a machine greeting buy just stay on the line and you are transferred to a live person, tell them you need to speak with someone in the Special Handling Department.
Tell the representative “I need to dispute the compliance condition remarks code of “AID” (Account In Dispute) because I am no longer disputing the account”. The representative was able to take care of this over the phone and will issue a email conformation within 72 hours.
Alternatve Transunion: 800-916-8800

Equifax

404-885-8300
Answered by a representative, tell them you need to speak with someone in the Executive Customer Service department. Tell them the same phrase above. I received email conformation within 24 hours that it was removed.
Alternate Equifax: 800-203-7843

Experian

888-397-3742
You need to access your credit report from annualcreditreport.com first. You will need to 10 digit number on top of your credit report. Speak with someone in the National Customer Service Center. Tell them you want the dispute removed. They will issue a email response within 48 hours

Alternate Experian: 714-830-7000 press “3” and ask for customer service

Don’t make any selections from the automated system and just hold for a representative. Ask for “consumer affairs” and explain they you have a loan pending and you need all disputes removed. Once they indicate they will remove the disputes, ask when it will be updated for your lender to request a new report.

Additional resources if any of the above do not yield results:

Experian

  1. Call 714-830-7000
  2. Press 0 to talk to a representative.
  3. They will require the last 4 digits of your social security number and other identifying information.
  4. You will also need a 10 digit Experian report number. Advanced Credit Solutions
  5. Clients can contact us for this number. Other clients can get this number from a free Experian credit report from www.annualcreditreport.com

Trans Union

  1. Call 800-916-8800
  2. Press 3 to talk to a representative.
  3. They will require the last 4 digits of your social security number and other identifying information.

Equifax

  1. Call 800-846-5279
  2. This number is a direct line to a live operator
  3. They will require the last 4 digits of your social security number and other identifying information.
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Evolution of the Mortgage Industry

Remember when we could close loans without a paystub, bank statement or even a completed appraisal report? Mortgage companies were filled with twenty-something go-getters, resembling something off the stock exchange floor; anyone that could dial a phone could be hired to originate loans. Thankfully, those days came to a blissful end years ago. It seems that the after effects of the damage done by that period are slowly dissolving into history and what has emerged is a different looking industry.

Consider all the changes that have affected our industry during the past five years. Dodd-Frank, the CFPB, ATR, QM, NMLS licensing, and compensation requirements are just the beginning. We could spend hours discussing all of the challenges during this period, but why dwell on the past? Where would we be if not for the burst of the bubble? Right back where we were six years ago, continuing down a path of an inevitable, even greater, self-destruction. Mom always said “everything happens for a reason.”

Now what?

The mortgage headlines this last summer were of huge layoffs and multi-million dollar lawsuits from Uncle Sam: retribution for wrongdoing the country. Tens of thousands of mortgage industry participants no longer had a place in our business, the mortgage shop down the street either closed its doors, or was issued a cease and desist, and the decade-long refi boom abruptly dissipated. We were routed, a thorough “cleaning out” if you will, shaved down to the bones, and leveled to a pile of rubble. The machine was degreased, point made.

So, where does that leave us?

With a great opportunity – to rebuild, retool, and regroup, but to do it the right way by learning from our past transgressions. It’s a chance for us to look out at the horizon and see a sense of pride in our industry. It’s a chance to go back to our roots and consider the role we as Mortgage Professionals play in growing our society.

We hold an amazing responsibility in each of our communities providing what is now a growing central role in helping people achieve the dream of homeownership. We can all feel the effects of the changes above in regards to how our marketplace looks to us for assistance. Gone are the days of the professional Mortgage Loan Officer being a commodity. We are now specialists, experts in our field, and becoming increasingly relied upon by the real estate industry, home buyers and the general public to provide expertise. Let us not leave this opportunity by the wayside as we forge ahead, but remember our core responsibility as key holders of the American Dream.

The future of our industry is dependent upon the people that lead it and those who govern it, both from within and externally. Our industry’s horizon will be shaped by our perseverance and desire to build something that others can admire and respect. With a little luck it might become one of interest to highly competent newcomers that will continue to shape our industry. Our ability to attract and retain high quality, ethical, and motivated people seems to be diminishing due to the lack of perceived opportunities our industry provides.

Ask any educated, finance-focused, successful-to-be college graduate what their top 20 industries of choice are and you will not hear the mortgage industry. Graduates talk about corporate finance or financial consulting in the health care, energy, construction, communications, agriculture, banking and government sectors.

To outsiders, the mortgage industry seems to present too many barriers to entry, and aspect to which we as an industry should pay close attention. Some might say: why hire new people when there’s barely enough business to go around as it is? The simple reason is this: a service industry like ours that fails to attract high-quality talent is destined for a horizon of disappointment when we are once again represented by the boiler room call centers instead of the highly sought-after professionals that we have worked so hard to be.

Consider the requirements for entry into our business. Twenty hours of education, pass two tests and a background check and you’re in – well, almost. Next you need to find someone to train you, be willing to wait for a paycheck somewhere above minimum wage for two to three months, and manage the pressure of being told to either find business on your own or you’re out. Layer on top of that what our true role is: to help people with the most significant financial decision of their lives.

What qualifies a person to be in that role? And at what point do the barriers become too great, and yet stay high enough to keep our horizon looking the way we want it? Our industry has to maintain a fine balance to preserve the new requirements and yet still offer the realistic opportunity for newcomers to succeed.

So how do we as an industry attract new talent that is willing to overlook the challenges our industry presents and see the same horizon of opportunity? The age-old model of apprenticeships comes to mind. Take blacksmiths from the Renaissance period, for example. They taught their apprentices to craft fine horseshoes, which required a great deal of experience and understanding of how to work with the various elements, much like our industry. Using the wrong metal (selecting the wrong loan program) and you’re bound to have a bum horse. Overworking the elements (applying too much pressure to your support staff and rushing closings) and the shoe is likely to break. Spilling the molten metal on your boot (violating RESPA) will stop you from doing your work in a hurry. What a highly skilled blacksmith was back in those days is much like what a highly skilled Mortgage Loan Officer is today. We spend years learning our trade and constantly perfecting it while overcoming challenges and occasionally getting burned a little.

Perhaps the best way to learn our business is to observe it first-hand from the true professionals that remain in our industry today. We can take this opportunity to show newcomers all the wonderful opportunities our business offers, show them how to be successful and how to do the job the right way. Most of all – we can show them the difference they can make in peoples’ lives for the better, all the while building a career for themselves they wouldn’t have had working in some corporate finance job.

Steve Furlong, MBA
MN Mortgage Loan Originator, NMLS 275939

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Why no affordable new construction in the Twin Cities?

Home builders have had a tough go the last 5 years. Part of the issue now is finding the labor source to do the construction. Many small home builders tell us that their laborers are all in North Dakota working on the oil pipeline. The other difficulty is in available land for development. You would think that we have plenty of places to build new houses, but consider the infrastructure needed for a new housing development in the suburbs. It takes time and resources to create a space for a home to be built, and up until 18 months ago we had very little demand for new homes.

Most of the new construction you might be seeing around the Minneapolis/St. Paul urban areas is well in excess of $300,000 as available land is scarce inside the 494/694 loop, and the costs of removing the previous structure drive the final price up. Demand in this market is also strong, which pushes prices up as well.

If you are looking for an affordable new construction home, are you willing to expand your geographic area beyond the metro? Many new construction homes closer to $200,000 are available if geographic areas further from downtown Minneapolis/St. Paul are an option.

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Qualified Mortgage Rule Noted Effects

We are nearly a month into the Consumer Finance Protection Bureau’s (CFPB) rules for Qualified Mortgage (QM). I found a helpful guide to the new rules here: CFPB Whitepaper on ATR and QM. So far, the primary issues we are working through deal with upfront private mortgage insurance. This is required for conventional loans greater than 80% loan to value, or loans with less than a 20% down payment. Part of the QM rule says that all origination charges, including mortgage insurance, must be less than 3% of the loan amount for loans greater than $100,000. The confusion is in regards to refundable versus non-refundable mortgage insurance. The CFPB indicates that refundable doesn’t count unless it exceeds the FHA upfront amount of 1.75%. Many of our investors are requiring that we count the upfront mortgage insurance whether or not it is refundable. Before giving an example of how this can affect a home buyer, let’s review the benefit of upfront mortgage insurance.

For example, a $200,000 loan amount on a purchase price of $210,526 (5% down payment) would require mortgage insurance. On conventional loans, 5 options exist for this mortgage insurance: The buyer can pay it monthly, part monthly and part upfront, all upfront, the lender can pay it (by building it into the interest rate), or the seller can pay it through seller’s contribution (the seller isn’t actually paying it, rather it is built into the purchase price and financed). The cheapest option over time of these 5 is buyer paid upfront. Here’s why: the lowest upfront single premium amount is 1.7% of the loan amount. The cheapest monthly premium is .56% annually. Since PMI is required for 5 years, that means the annual cost x 5 is over 2.5%. So, by paying the MI upfront you recoup your money in a little over 3 years, never have to pay the monthly mortgage insurance as long as you have the loan, and don’t have to worry about getting the PMI cancelled.

Why this is important: if the 1.7% counts into the 3% maximum fees calculation, and the lender charges the customary 1% origination fee (I know some lenders advertise no origination fees – they are simply building it into the rate instead), and the underwriting and processing costs exceed .3% (which they generally would or be close to exceeding that), then the total fees would exceed 3% and the buyer would not get the advantage of having the option of doing one-time, upfront mortgage insurance. It also makes no difference if the lender or seller pay this, it still has to be counted into the 3%. Our solution to this is to move to a split premium (buyer paid part monthly, part upfront), or remove the origination fee. The mortgage and mortgage insurance industries also continue to press the CFPB for clear definition on excluding the refundable upfront premium from the calculation.

The other noticeable change has been in underwriting. Thus far, the underwriters have indicated that they will examine income documentation under a modified lens, or in other words some people that would have qualified before will no longer. The best answer for a home buyer: contact our team to review your scenario. We explore every option available to find the best solution for you and do the underwriting upfront (no pun intended!) to eliminate surprises.

 

Benefits to Home Ownership for Business Owners

For business owners, many benefits exist to owning a home near your principal business location. In addition to all the standard benefits of home ownership, business owners can help offset commercial and industrial tax levies by strengthening the residential tax base of a municipality.

When a home is sold it generally carries positive economic value (improvements are generally made by new owners, the supply of homes is decreased). Home ownership has a compounding positive economic effect on a community by improving schools, improving community safety, and providing an additional support base for community services (fire, public safety, etc.). As residential values increase, the share of tax levy burden is shifted away from commercial and industrial to the residential base.

Add in shorter commuting and now not only do you reduce the fuel and maintenance expenses for your vehicle, but you lower your carbon footprint and thus improve the environmental quality of the general area. Expand upon this for your employees by providing incentives to live near your workplace, and now you provide additional strength to the residential base.

Mortgages Unlimited, Inc – Furlong Team can show you ways in which we can partner to offer home ownership solutions for you and your employees to create a win-win for your business, your municipality, and our region.

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Conventional Mortgage 3% Down Program Going Away

During the weekend of November 16, 2013, Fannie Mae will implement Desktop Underwriter® (DU®) Version 9.1, which will include the key changes described below:

  • The maximum debt to income ratio (DTI) for most programs will be 45%. The maximum loan to value will be reduced to 95% (or 5% down required for conventional financing going forward). Those clients who had a deed-in-lieu or pre-foreclosure sale that haven’t been approvable in the past may now be eligible for new conventional financing.
  • The Furlong Team will accept new clients and purchase agreements under the 3% down program until November 15th.
  • The Maximum Allowable Debt-to-Income Ratio and Minimum Credit Score Requirements sections below have been combined. DU will not apply additional requirements of a maximum debt-to-income ratio (DTI) of 45%.
  • The LTV/CLTV/HCLTV Ratio Cap Lowered to 95% section below has been updated to include information on the timeframes in which mortgage loans exceeding the maximum LTV/CLTV/HCLTV ratio of 95%.
  • DU will continue to allow CLTV ratios of 105% when the subordinate financing is a Community Seconds® mortgage.
  • Identifying a Deed-in-Lieu of Foreclosure or Pre-foreclosure Sale can now be done manually, where DU was unable to read the credit report accurately before. This may help these clients gain approval.

Read the complete Fannie Mae DU release notes here.

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Qualified Mortgage Rule

Upcoming Changes to the Qualified Mortgage Rule

The primary impact home buyers and home owners will see from the Qualified Mortgage (QM) rule is the ability to repay provision. Here in Minnesota, we have been ahead of the national curve due to changes made to state law in 2007 and 2008. Mortgage originators have been required to document a borrower’s ability to repay a mortgage by comparing their income documentation and outstanding liabilities from the credit report and total housing expenses. However, the specific definition of “ability to repay” wasn’t provided, other than to say “reasonable.” The standards will become more strict.

Read the state law here.

Ability to Pay and DTI

The new ability to repay federal law comes with a definition stating that a borrower does not have the ability to repay a loan if their total debt to income ratio (DTI) exceeds 43%. Today, we can get loans approved with a much higher DTI, which for some borrowers does make sense and they do have a “reasonable” ability to repay the mortgage.

However, the primary impact of the new rule will limit everyone to the same DTI regardless of “reasonable” or not. Critics of “reasonable” will state that no one should have a DTI over 43% as that is too high, but they fail to consider a wide array of circumstances where the DTI is not a valid test of ability to repay.

Here are a few examples: self-employed persons, commissioned employees with less than a 2-year history of commission, non-borrowing spouses, roommates that pay rent, part-time employees, and other situations where a “compensating factor” applies but the total income picture cannot be used to qualify the borrower. When reviewing these scenarios under the “reasonable” microscope, it sometimes makes sense to approve a loan with a higher DTI, knowing that they strong ability to repay regardless of the ratio.

The current Consumer Finance Protection Bureau (CFPB as created by Dodd-Frank 2010) rule allows for a “temporary” exception to the 43% DTI rule when the loan is eligible for sale or guaranteed by either Fannie Mae or Freddie Mac. It doesn’t say how long this temporary exception applies, and most FNMA/FHLMC approvals are currently limited to 45% anyway (except HARP refinances and other applications with very strong qualifying criteria).

Read the complete QM Rule here.

Mortgage loan officers will adhere to the Qualified Mortgage rule as it gives us “safe harbor” from future liability if the loan fails to perform (or the borrower defaults, depending on how you look at it). No loan officer will want to be sued because their client could not or did not pay their mortgage payment.

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Why Use Zillow?

As a mostly-inclusive, online real estate search engine, Zillow offers users more information than most real estate web searches. Not only does it incorporate the active listings on the MLS, but also simultaneously shows pre-inventory data.

This pre-inventory is information on mortgages that are in default, or have been to foreclosure auction, and may be becoming available for sale soon. It also has a function for homeowners to list their home for sale without enlisting the services of a Realtor and gaining an audience by doing so.

Users can request information on a home directly from the listing agent in many cases and see a good amount of information on that home, the neighborhood, the other recent sales nearby, the schools, parks, amenities, transportation and property taxes.

One lesson I learned in my elementary education was to always consider the source when reviewing information. It is important to know where the information is coming from, who puts it there, and if it is accurate.

Over the years I have noticed accuracy issues with some of the data, the Zillow Zestimate tool, and foreclosure actions specifically. The last few months I have been searching for another investment property opportunity in my neighborhood, and in comparing Zillow foreclosure data with Hennepin County Sheriff’s Department data I have noticed discrepancies.

My advice – start a search with Zillow to get information, but rely on a licensed Realtor when buying or selling a home. I’m excited to see this tool grow, and the monitoring they have in place on their real estate forums is great, and the service they provide in connecting home buyers with professionals is unparalleled in our industry.

Go to Zillow’s Bloomington Page

See our reviews on Zillow here

Steve Furlong on Zillow

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New Changes to FHA Mortgagee Letter

This message was released by the U.S. Department of Housing and Urban Development covering the newest update to FHA loans.

Mortgagee Letter 2013-26

Date: August 15, 2013

To: All FHA-Approved Mortgagees

Subject: Back to Work – Extenuating Circumstances

Purpose: The purpose of this Mortgagee Letter (ML) is to:

  • Provide minimum underwriting standards and criteria for evaluating
    borrowers who have experienced an Economic Event, as defined in
    this ML, that resulted in a severe reduction in income due to a job loss
    or other circumstances resulting in reduced Household Income;
  • Describe the use of housing counseling to qualify under the provisions
    of this ML
  • Amend HUD Handbook 4155.1, Chapter 4, Section C to add an
    Economic Event to the list of examples of extenuating circumstances
    and instruct lenders to use the guidance for Back to Work –
    Extenuating Circumstances established in this ML as Chapter 6
    Section G, to underwrite an applicant with an Economic Event; and,
  • Revise HUD Handbook 4155.1, 4.A.7.e, to clarify the process for
    requesting a review of information contained in CAIVRS for
    borrowers seeking an FHA-insured mortgage in accordance with the
    provisions of this ML.

Introduction:
FHA is continuing its commitment to fully evaluate borrowers who have experienced periods of financial difficulty due to extenuating circumstances.
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.

To that end, FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that:

  • Certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control;
  • The borrower has demonstrated full recovery from the event; and,
  • The borrower has completed housing counseling.

Housing counseling is an important resource for both first-time home buyers and repeat home owners. Housing counseling enables borrowers to better understand their loan options and obligations, and assists borrowers in the creation and assessment of their household budget, accessing reliable information and resources, avoiding scams, and being better prepared for future financial shocks, among other benefits to the borrower.

Effective Date:
The guidance in this ML is effective for case numbers assigned on or after August 15, 2013 through September 30, 2016.

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Economic Event-Related Mortgage Foreclosure

FHA now allows financing approval with bankruptcy or foreclosure at least 12 months old.

The lender must verify and document that:

  • A minimum of twelve (12) months have elapsed since the date of foreclosure or deed-in-lieu
  • The foreclosure or deed-in-lieu was the result of the Economic Event.