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     | Tuesday, March 20, 2001 - 01:31 pm  I am familiar with how the maths work with this but I do have a question. When you must give your min payments on all your monthly debts it states that you shouldn't include any debts that will be paid off within the next 10 months. I have 2 credit cards that I plan to pay off and close within the next month or 2. I plan to apply for my mortgage sometime between now and then. Would I have to include these amounts with my total payments or would I keep them off since they will be paid and closed. Also I have one retail card which I want to keep, I hear having one helps your score read that hear as a matter of fact  And now that I got my score I think it may, anyway if this has a ZERO balance to I still have to account for the min payment since it is an open revolving account?? Thanks
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| | Tuesday, March 20, 2001 - 02:03 pm The 10 months rule: Generally lenders will not count payments on INSTALLMENT loans if there are no more than 10 payments. If you plan on paying off a revolving account the lender will NOT use the balance/payment if it is reflected on your credit report, which can take a few months. SOMETIMES you can provide alternate documentation, that depends on the lender and your overall loan app, and the type of loan you're applying for. Don could probably say more about the current guidelines.
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| | Wednesday, March 21, 2001 - 02:29 am What fico score do you usually need two years after chapter 7 in order to get a mortgage at the going "A" rate? How much down? The discharge anniversary is August 31 and I think I am just about done with getting everything in order. One other question, I have maximized savings in my 401k--does that count like a bank account for the lender? Or do I need to have a regular passbook account? thanks
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| | Wednesday, March 21, 2001 - 09:21 am As Don has posted, FHA doesn't require scores at all. But as I remember, you're looking above FHA limits. You might want to read my postings in the Fair Isaac section on the FNMA scoring guidelines. I have NOT found any additional info since, I don't understand it at all. We've had several readers post recently that they were declined due to lower than minimum scores. Did you get your Beacon yet?
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| | Wednesday, March 21, 2001 - 02:32 pm haven't gotten the beacon yet. back in August when I got a car, it was at 608. who knows where it is now. I'm waiting until the traffic dies down and then'll get it.
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| | Saturday, March 24, 2001 - 03:06 am In Answer to SEnators Question regardign BK's. Information is directly from FHLMC. Bull. 99-1: Changes to Single-Family Underwriting Criteria (02/01/99) TO: ALL FREDDIE MAC SELLERS AND SERVICERS We are announcing changes to our single-family underwriting criteria for evaluating Borrowers who have had a prior bankruptcy or foreclosure. We're • Shortening postbankruptcy and postforeclosure recovery periods for Borrowers who have overcome financial mismanagement and reestablished an acceptable credit reputation • Revising our criteria for documenting an acceptable credit reputation after a bankruptcy or foreclosure has occurred These changes apply only to Mortgages secured by 1- to 4-unit, primary residences and second homes, not Mortgages secured by investment properties. If your contract enables you to sell us Mortgages secured by these properties, the guidelines you use for Borrowers with prior bankruptcies, foreclosures and deeds-in-lieu of foreclosure haven't changed. In addition to changing our criteria, we're updating you with regard to addenda for energy-efficient properties. EFFECTIVE DATE These changes are effective for all loans originated on or after May 1, 1999, but you may begin using them immediately. WHY WE'RE MAKING THESE CHANGES With Loan Prospector®'s Outlook release, which we introduced last October, more loans with an older bankruptcy or foreclosure now can receive an Accept risk classification from our automated underwriting service, enabling you to sell them to us and benefit from Loan Prospector's streamlined processing. We routinely assess how enhancements to Loan Prospector apply to manual underwriting processes. We also consider your feedback, and a number of you have asked us to reevaluate our position on older [Page : 2] bankruptcies and foreclosures. With regard to prior bankruptcies and foreclosures caused by financial mismanagement, we now believe that the additional risk of shorter recovery periods is acceptable, so we're modifying our criteria. These changes don't diminish the fact that significant derogatory information in a Borrower's credit history increases the likelihood of future loan default. A prior bankruptcy, foreclosure or deed-in-lieu of foreclosure, particularly if not the result of extenuating circumstances, requires a more thorough review of a Borrower's credit reputation to ensure that it has been restored. We've made several changes to help you make sure that Borrowers have reestablished an acceptable credit reputation after experiencing such a significant, financial event. HOW THESE CHANGES AFFECT YOU Recovery Periods for Reestablishing an Acceptable Credit Reputation We've shortened our required recovery periods of 10 years for bankruptcies and seven years for foreclosures when previous problems are attributable to financial mismanagement. As noted, these changes apply only to Mortgages secured by 1- to 4-unit, primary residences and second homes. When a Borrower has a prior bankruptcy of any type other than Chapter 13, a foreclosure or a deed-in-lieu of foreclosure that resulted from financial mismanagement, you must document in the Mortgage file that the Borrower's credit reputation has been reestablished for at least four years since the • Discharge of the bankruptcy or, • Foreclosure sale or • Execution of the deed-in-lieu of foreclosure When a Borrower has a prior Chapter 13 bankruptcy that resulted from financial mismanagement, you must document in the Mortgage file that the Borrower's credit reputation has been reestablished for at least two years since the discharge of the Chapter 13 bankruptcy. If a Borrower had a bankruptcy, foreclosure or deed-in-lieu of foreclosure that occurred because of extenuating circumstances which you're able to document in the Mortgage file, then you still must determine that the Borrower has reestablished an acceptable credit reputation for a period of at least two years since the • Discharge of the bankruptcy or, • Foreclosure sale or • Execution of the deed-in-lieu of foreclosure [Page : 3] Documentation Criteria for Borrowers With Prior Bankruptcies or Foreclosures Whether a bankruptcy or foreclosure resulted from extenuating circumstances or financial mismanagement, a future default is more likely when a Borrower has experienced either event compared with a Borrower who has no significant derogatory credit in his or her history. Therefore, the steps you take to determine if a Borrower has reestablished a willingness to repay debts as agreed are especially important to mitigate the additional risk of a prior bankruptcy or foreclosure. We're modifying our criteria to help you make this difficult assessment. If you believe that a Borrower with a prior bankruptcy, foreclosure or deed-in-lieu of foreclosure now has an acceptable credit reputation, then you must document all of the following in the Mortgage file, regardless of the circumstances contributing to the bankruptcy, foreclosure or deed-in-lieu of foreclosure: • All accounts are current. • The Borrower has a minimum of three tradelines or four noncredit payment references. • Each of the Borrower's minimum payment references has been active within the most recent 24 months, and at least one has been open for the most recent 24-month period. • If the derogatory credit included tradeline credit, then the Borrower has reestablished at least one tradeline credit. • One of the payment references is housing-related. • If the Borrower has monthly rent payments that weren't reported to the credit repositories, you have documentation for the most recent 12 months that meets the requirements in Single-Family Seller/Servicer Guide (Guide) Sections 37.8(b), 37.11 and 37.20. • An underwriting analysis on Form 1077, Uniform Underwriting and Transmittal Summary, or on a separate document ties the Borrower's explanation to the other information in the Mortgage file and enables you to reasonably conclude that the Borrower has reestablished an acceptable credit reputation. In addition, if the significant derogatory information resulted from extenuating circumstances, then that analysis also leads to a reasonable conclusion that the events causing financial difficulties were beyond the Borrower's control, are not ongoing and are unlikely to recur. [Page : 4] You also must ensure that documentation in the Mortgage file evidences the following regarding the Borrower's credit history: Documentation must Show... Prior Financial Mismanagement Nonchapter 13 Bankruptcy,Foreclosure or Deed-in-lieu Of Foreclosure ...No new public records for bankruptcy, foreclosure, unpaid judgments or collections during the most recent... ...48 months ...No payments 60 days or more past due during the most recent... ...No more than two payments 30 days past due during the most recent... ...No housing payments past due during the most recent... Extenuating Circumstance Chapter 13 Bankruptcy Any Bankruptcy, foreclosure or Deed-in-lieu of Foreclosure ...No new public records for bankruptcy, foreclosure, unpaid judgments or collections during the most recent... ...24 months .. ...No payments 60 days or more past due during the most recent... ...No more than two payments 30 days past due during the most recent... ...No housing payments past due during the most recent... Credit scores and the reason codes that accompany them are useful tools to help you address the additional risk that a prior bankruptcy or foreclosure represents. Balances-to-limits is an especially strong indicator of this additional risk. If you're using credit scores in your manual underwriting, and any of the reason codes pertains to balances-to-limits, then you should consider a FICO bureau score below the Basic review range to be a strong indication that the Borrower has not reestablished an acceptable credit reputation. The table below, excerpted from Guide Section 37.6, shows Basic review ranges based on property type: When the property type is... FICO Bureau Score 1 unit over 660 2 units over 680 3-4 units over 700 If you're not using credit scores in your manual underwriting, high balances-to-limits may indicate that the Borrower hasn't reestablished an acceptable credit reputation. A pattern of high balances-to-limits may mean that the Borrower is making minimum payments on revolving accounts rather than reducing the debt, which is even more significant when the Borrower has experienced prior financial difficulties. [Page : 5] CONCLUSION Personal bankruptcy filings are at record-high levels, according to data recently released by the Administrative Office of the U.S. Courts, so it stands to reason that future loan applicants are more likely to have a prior bankruptcy, or possibly a foreclosure, in their credit history than today's applicants are. Even if current trends were to change and filings were to fall, the additional underwriting review and analysis of Borrowers with these types of significant, derogatory information on their records remains critical to your loan decision. [Page : 6] With our modified requirements for determining whether a Borrower with a prior bankruptcy, foreclosure or deed-in-lieu of foreclosure has reestablished an acceptable credit reputation, you may be able to make this difficult assessment with greater confidence. Our shorter recovery periods for Borrowers who have overcome financial mismanagement and reestablished an acceptable credit reputation should enable you to better serve those Borrowers.
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| | Saturday, March 24, 2001 - 03:13 am Answer to Ann. Installment loans with less than ten month remaining may be excluded provided that they do not pose a financial hardship on the borrower. In other words, if you make $2000 / m and have a $1000 /m car payment with l0 months remaining and an expected house payment of $700, the U/W will probably not exclude this as it is obvious that the borrower would not be able to handle both payments. With regards to Credit cards. They are not counted ONLY if they do not show a balance. A couple of exceptions, with AUS systems, if a person scores and an "Accept Plus" then we use " stated debts", meaning we accept whatever the borrower states their payment is.. "Accept Plus" is generly 750+ scores and <80% LTV
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| | Saturday, March 24, 2001 - 04:30 am "Financial mismanagement" is a nice way to say the corporation for which you worked your rear off just decided to give its president a huge wage increase with stock options and, by the way, let you go find work elsewhere. welcome to the surreal world of ch7 where you try to pay creditors and work out a deal because no money is coming in. You can't find work much less interview because of your mental condition and waking up at 4am because you worry. It becomes a vicious circle of life kicking you in the teeth. Then after your new start you can only secure high interest on a car or home. You've found work but it is only "temporary" in your mind since you know that the cycle will repeat. Now,however, there is a new game coming to town that your elected officials have created that will make you an indentured servant for the rest of your life. If you take a look at the stock market you can sense what is coming down the pike. Couple that with the bankruptcy reformation and voila--. Financial mismanagement--hah. they should give a prize in nobel economics if you survive the crazy mixed up world of ch7.
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