     Lynn Whealer (Lynnwhealer) | Monday, October 16, 2000 - 10:27 pm 
Christine -Being you are intimate with the mortgage biz, I'd like to pick your brain on the topic of late payments on mortgages.
I am aware that if your payment is due on the 1st, but you pay on the 2nd, you are technically late. However you are not "30 days" late. Am I correct in my presumption that as long as you are not truly 30 days late, then the mortgage servicer will not report to the CRA as "late". To my knowledge, there are no other late notations on a credit report other than the increments of 30-60-90-etc. My impression is that there is no generic "late" or "7 days" late data fields. Perhaps a persnickety (*sshole)servicer could report as "does not pay as agreed" ??
Now, if I have it correct that no "late" postings will show in a credit report, what about when you get a subsequent loan or re-fi? I have seen you post that payment verification records are sometimes requested by your NEW lender from you OLD lender. Let's assume the following:
(1) your payment is due on the 1st. you have NEVER been 30 days late over a 3 year period
(2) there is no late fee until the 15th of each month
(3) 6 times you have paid sometime AFTER the 1st but BEFORE the 15th )thus never having incurred a late fee).
(4) your FICO's are good, and no derogs exist anywhere on any other accounts.
Question: Are there lenders who would consider the six payments that are after the 1st to be as damaging to a new mortgage as if they had been reported as "30 days late" on the credit reports? |
| Christine Baker (Admin) | Tuesday, October 17, 2000 - 01:15 am
Lynn, I'm not sure I'm reading your post right.
The loan was never paid after the 15th, i.e. no late fees were ever paid?
That's not usually a problem.
Occasionally I had underwriters question why my clients always paid on the last day of the grace period and I'd tell them that they're just trying to get the most out of their money. Usually it was questioned only when somebody had a lot of other debt, no cash in the bank and it looked like the payments COULDN'T be made on time.
When mortgages weren't on the credit report, we had to supply itemized monthly statements, cancelled checks for the previous 12 months and/or the lender's verification. Much depends on how the loan is processed, which in turn depends on the lender/loan program requirements, and the broker preferences.
If I remember that right, the FNMA VOM (Verification of Mortgage) form had a 0-15 and 16 - 30 day column for the payment dates.
Some lenders were extremely slow to verify the mortgage because they didn't want the loan to be paid off. High rate second mortgage lenders like Beneficiary come to mind.
Mellon Bank was one of the worst when it came to VOMs, they even charged a fee for the verification. I remember some very stressful times when we couldn't close without their VOM because the borrower didn't have "alternate documentation."
Whether you use the lender's VOM, the last 12 monthly statements showing each payment date, or a payment coupon with the cancelled checks, a single late charge could cause major problems, even if only 16 days late.
It's not as bad as 30+ day late, but it's bad.
It's been a few years now since I actively processed loans, so underwriting guidelines and verification requirements could have changed.
I always thought it was strange how you could overcome several credit card or even auto lates with a strong cover letter, documented explanations, or just good sob stories. But when it came to mortgage lates, the underwriters just had a fit.
Just for cosmetic purposes, because it really can't hurt AND it's free, I always recommend people date their mortgage checks prior to the due date. The 14 day late posting could be the lender processing the payments late, and if a loan package is borderline, those cancelled checks might just get the approval.
Underwriting is part FNMA and other investors' guidelines, with credit scores and income and equity ratios, but many loans are approved or declined based on the underwriters' FEELING about the loan. |
| Christine Baker (Admin) | Tuesday, October 17, 2000 - 01:42 am
I didn't do many slam dunk loans, most of my clients were too "special" to fit into those automated underwriting guidelines at the time.
I'm sure automated underwriting is much more widely used now, how are those 15 to 30 day lates treated? |
| Lynn Whealer (Lynnwhealer) | Tuesday, October 17, 2000 - 08:24 am
Thanks, Christine! You answered ALL my questions! |
| Don Semler (Dsemler) | Tuesday, October 17, 2000 - 06:21 pm
With Automated U/W they only see what is posted on the credit reports. The 15 day lates don't show up unless a lender is reporting it as a 30.
Depending on the risk class for Freddie Mac you do not have to verify mortgage ratings that are not on the credit report.
These are generally your higher grades or lower risk loan. Loan that come back with "Caution" or "A-" will need 12 months history verified.
If people are looking to do a loan and they believe their credit is OK and they have verifiable income, run it through the automated systems. It is so much easier for everybody involved to run it through the automated systems first. If your broker/lender does not try this system first then find another broker/lender.
For those "special" clients, a good lender or broker will be able to know upfront that LP or DU will not accept these deals. Worst case, gotta do it the old fashioned way. |
| Christine Baker (Admin) | Tuesday, October 17, 2000 - 08:36 pm
Thanks, Don, you wouldn't happen to have a URL for FHLMC risk classes?
I know nothing about this is and am just a little curious about max LTVs, income ratios, etc. |
