Presentation on theme: "H OW T O I NCREASE Y OUR C LOSINGS W ORKING W ITH Brian Sacks NMLS # 225050 Office 443-501-5606 Cell 443-324-8424"— Presentation transcript:
H OW T O I NCREASE Y OUR C LOSINGS W ORKING W ITH Brian Sacks NMLS # Office Cell
What Is A Boomerang Buyer and Why Should You Care About Them?What Is A Boomerang Buyer and Why Should You Care About Them? 1 The Guidelines VA-FHA-CONVThe Guidelines VA-FHA-CONV 2 What you need to IMMEDIATELY when you meet one What you need to IMMEDIATELY when you meet one 3 WHAT YOU ARE ABOUT TO LEARN
The 3 Types of Lenders Which One Is Best For these deals?The 3 Types of Lenders Which One Is Best For these deals? 4 What is CAIVRS?What is CAIVRS? 5 Are Buyers Really Liars? Are Buyers Really Liars? 6 WHAT YOU ARE ABOUT TO LEARN
The STATISTICS WHY SHOULD YOU CARE ABOUT THESE DEALS? Boomerang buyers who lost a home to a foreclosure or short sale between 2007 and 2013 are projected to make about 10 percent of all U.S. home purchases in 2014, according to John Burns Real Estate Consulting (JBREC). The Washington area is among those regions that are expected to have even higher levels of activity involving boomerang buyers. JBREC expects boomerang buyers to make 17.5 percent of the region’s existing- and new-home purchases this year. According to JBREC, the number of boomerang buyers will increase in 2015 and 2016 as more former owners become eligible for new loans.
WHO ARE THEY? Changing Demographics of Bankruptcy Filers Over the past several years, researchers have noted key changes in the typical bankruptcy petitioner. Today, the average filer is older and married, has a high school education and makes less than $30,000 a year. Age at Bankruptcy Since the early 1990s, bankruptcy has been used with increasing frequency by older individuals. While more senior citizens are declaring bankruptcy, a decreasing percentage of filers are younger than 25. In 2007, those younger than 25 made up less than 2 percent of all filers, down from 11 percent in In the same time period, the percentage of filers age 55 or older more than doubled; those filers now account for about 20 percent of all bankruptcy petitioners. These fluctuations caused the median age of bankruptcy-seekers to increase from 38 to 45 years old. 73% of filers have a job or are self-employed 27% make more than $30,000 a year 94% graduated from high school 30% are years old
BANKRUPTCY BY THE #’s There is no more stigma to filing bankruptcy After the past economic meltdown everyone is a candidate. Many fear it will ruin their credit and the EXACT opposite is what really happens. Filing a Bankruptcy can IMPROVE your credit
THE PROBLEM TODAY -Numerous properties that are in default of their loans but have never been foreclosed on? WHY? -Properties where mortgages were included in the bankruptcy but never foreclosed on. IMPORTANT LENDERS GO BY THE DATE FORECLOSURE IS RESOLVED AND INSURED!
4 TYPES OF BANKRUPTCY CHAPTER 7- TOTAL DISCHARGE OF DEBT CHAPTER 13- DEBT REPAYMENT/RESTRUCTURE CHAPTER 12 – FAMILY FARMERS CHAPTER 11- BUSINESS REORGANIZATION
BANKRUPTCY TERMS YOU NEED TO KNOW DEBTOR- person who owes money CREDITOR- person money is owed to EXEMPT ASSETS- assets the debtor may keep TRUSTEE- court appointed person who distributes payments and sells assets DISCHARGED DEBTS- debts that no longer are required to be repaid DISMISSED BANKRUPTCY- court turned down the bankruptcy request
FORECLOSURE TERMS YOU NEED TO KNOW FORECLOSURE: the process of taking possession of a mortgaged property as a result of the mortgagor's failure to keep up mortgage payments. SHORT SALE: is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property, and the property owner cannot afford to repay the liens' full amounts and where the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency. Short sale agreements do not necessarily release borrowers from their obligations to repay any shortfalls on the loans, unless specifically agreed to between the parties.). DEED IN LIEU:is a deed instrument in which a mortgagor (i.e. the borrower) conveys all interest in a real property to the mortgagee (i.e. the lender) to satisfy a loan that is in default and avoid foreclosure proceedings. PRE- FORECLOSURE:When a property is in pre-foreclosure (NOD, LIS), the owner still has a chance to stop the foreclosure process by paying off what is owed or by selling the property. The pre-foreclosure period can last several months, so you may need to be patient when trying to contact the owner in default.
WHAT DO YOU THINK? How Long After A Foreclosure or Short Sale are you eligible for a new Mortgage? A.7 YEARS B.2 YEARS C.4 YEARS D.1 YEAR
THE 3 ITEMS EVERY UNDERWRITER MUST SEE BEFORE THEY WILL SAY YES 1.WHAT HAPPENED ? 2.WHY DID IT HAPPEN? 3.WHY WON’T IT HAPPEN AGAIN? NOW PROVE IT !
WE WILL LOOK AT THE MIDDLE SCORE USING ALL 3 SCORES ON REPORT
WHAT IS THE MINIMUM SCORES? CONVENTIONAL FHA LOANS VA LOANS MMP LOANS
FHA and VA LOANS CAIVRS- CREDIT ALERT VOICE RESPONSE SYSTEM SCREENS APPLICANTS IF YOU DEFAULTED ON ANOTHER GOVERNMENT LOAN ( SCHOOL/MTG) THERE CAN BE EXCEPTIONS !!!!
CONVENTIONAL PRE-FORECLOSURE- DEED IN LIEU- SHORT SALE MUST WAIT 4 YEARS REGARDLESS OF LTV Foreclosures must wait 7 years!
WAITING PERIODS CONVENTIONAL Derogatory EventDU Waiting PeriodLP Waiting Period Bankruptcy Ch years Bankruptcy Ch.132 years from discharge date 4 years from dismissal date 2 years from discharge date 4 years from dismissal date Multiple Bankruptcy5 years if more than one filing within the past 7 years 5 years Foreclosure7 years Deed-in-Lieu of Foreclosure and Pre-foreclosure Sale, Short Sale, and Mortgage Debt Charge off 4 years Additional requirements up to 7 years: 90% maximum LTV ratio Purchase, principal residence Limited cash-out refinance, all occupancy types
CONVENTIONAL EXCEPTIONS MORTGAGE DEBT DISCHARGED IN BANKRUPTCY If a mortgage debt was discharged in bankruptcy even if the foreclosure happens subsequently to satisfy the debt the borrower is held to the bankruptcy guidelines NOT the foreclosure guidelines.
VA LOANS Bankruptcy Must wait 2 years after discharge or 1 year if extenuating circumstances Short Sales- 2 years Foreclosure:Previous mortgage foreclosure/Deed in lieu of Foreclosure (within 2 years of application) and bankruptcy (within 2 years of application) make loan ineligible for financing. Date considered for foreclosure, is actual date property transferred from borrower’s name regardless of previous judicial proceedings including Bankruptcy. If the foreclosure was on a VA loan, the applicant may not have full entitlement available for the new loan. Ensure that the applicant’s Certificate of Eligibility reflects sufficient entitlement
FHA Pre-Foreclosure Sale/Short Sale:Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on their 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. If the borrower has previously sold a property on a short sale, and the prior loan was not delinquent, the borrower is eligible for a new FHA loan if ALL of the following requirements are met: ◦All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale. ◦All installment debt payments were made within the month due for the 12 month period preceding the short sale. ◦All payments for mortgages and installment debt were made within the month due for the 12 month period preceding the date of loan application for the new mortgage. ◦The proceeds from the short sale serve as payment in full. ◦CAIVRS reflects no claim.
FHA Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale. Borrowers who sold their property under FHA's pre-foreclosure sale program are not eligible for a new FHA-insured mortgage from the date that FHA paid the claim associated with the pre-foreclosure sale. Lenders may make exceptions to this rule for borrowers in default on their mortgage at the time of the short sale if the default was due to circumstances beyond the borrower's control (such as death of primary wage earner, long term un-insured illness, etc.), and the review of the credit report indicates satisfactory credit prior to the circumstances beyond the borrower's control that caused the default.
FHA – BACK TO WORK PROGRAM YOU COULD BE ELIGIBLE AFTER JUST 1 YEAR
FHA BACK TO WORK An Economic Event is any occurrence beyond the borrower's control that results in: A 20 percent or more reduction in a borrower’s Household Income for a minimum period of six months resulting from a Loss of Employment, Income or a combination of both. An Economic Event includes the following definitions: Onset of an Economic Event: The month of loss of employment/income. Recovery from an Economic Event: The re- establishment of satisfactory credit for a minimum of 12 months.
FHA BACK TO WORK PROGRAM For Purchase transactions with case numbers assigned on or after August 15, 2013 through September 30, 2016: FHA will allow consideration of borrowers who have experienced an Economic Event and can document that certain negative credit ratings resulted from loss of employment or significant loss of Household Income beyond the borrower’s control; and the borrower has demonstrated full recovery from the event and completed housing counseling.
Credit IssueIf credit issue is the result of a documented Economic Event Chapter 7 BankruptcyMust have been discharged 12 months prior to the loan application. Chapter 13 BankruptcyMust have been discharged prior to the loan application and all required bankruptcy payments made on-time, or a minimum of 12 months of the pay-out period under the bankruptcy has elapsed and all required bankruptcy payments were made on time. If the Chapter 13 bankruptcy was not discharged prior to the loan application, the borrower must obtain written permission to proceed with a mortgage transaction from the bankruptcy court. CAIVRSIf the CAIVRS screening indicates a claim has been paid within the last 3 years on a loan insured on the borrower’s behalf by FHA, a request for a waiver or resolution of the unresolved issue may be submitted to HUD. The file must be fully underwritten to determine all other eligibility requirements have been met prior to submitting a request for a waiver. The CAIVRS must be cleared prior to closing. Collection and Judgments Must document all collections and judgments were due to economic event. For borrowers with open collection accounts or judgments, follow FHA guidelines. Foreclosure & Deed-in- Lieu Minimum 12 months must have elapsed from the date of completion. If the previous loan was an FHA loan, 12 months must have elapsed from the date when FHA paid the initial claim to the lender. Mortgage HistoryAny open mortgage is 0x30 in last 12 months. If the mortgage was brought current through a “temporary” or “permanent” loan modification process, the payments must have been documented as being received in accordance with the modification agreement. CreditNo late housing payments or installment/revolving debt payments within the most recent 12 months (excluding medical collections); Short Sale/Pre- Foreclosure Twelve months must have elapsed since the date of sale.
THIS MUST ALWAYS BE THE FIRST STEP !
HOW TO “SPEAK” TO THESE BUYERS “IT’S EMBARASSING – DON’T WANT TO OPEN UP”
ARE BUYERS LIARS?
Your Credit Score DNA Your credit score is a number based on the information in your credit file. The higher this score, typically the easier your access to lower cost credit. 770 or higher Excellent credit 700 to 770 Good 640 to 700 Fair 580 to 640 Poor Below 580 Your access to credit of any kind is very unlikely 36
What is a credit score and how is it made up? A credit score is a numerical expression based on statistical analysis of a person’s credit file to represent the creditworthiness of that person. There are 3 main bureaus that evaluate your credit history and report your information to potential creditors – Experian, Equifax and TransUnion. Most bank lending takes all 3 credit scores provided and uses the middle credit score. Credit Scores Range from For most home loan financing you need a minimum mid credit score of 640. Your credit score is made up of 5 components: Length of credit history Payment history Amount you owe on credit Types of credit used New Credit 37
HOW TO READ A CREDIT REPORT
What you may not know about your credit Paying collection accounts that are already on your credit file will most of the time lower your credit score The quickest way for an individual to build their credit score is through the responsible use of credit accounts reporting on your credit report You do not need to carry a balance on credit cards for them to report positive on-time monthly payments – they have to report “paid on-time” whether you use that card during the month or not. The only date that matters on a credit file, with regard to debt and the weighting of debt on a credit file, is Date of Last Activity (DLA). DLA is controlled by the consumer – it is the date the consumer last made payment or a charge on an account. The statute of limitations (how long an item can remain on a credit file) is tied to this date specifically. Creditors can choose to report to specific credit bureaus or not – creditors do not have to report to the credit bureaus if they don’t want to. To report your information to the credit bureaus creditors are charged a fee. Credit cards if used properly are the strongest asset in helping you build your credit score 39
How to Improve Your Credit Score Verify accounts are being reported correctly and challenge improperly reported accounts. Pay down all credit card or revolving debt balances as close to zero as possible. If your credit report contains negative events (like collections), allocate resources to the most recently reported negative events. Negative items are a score-killer. Act quickly to discuss problems with creditors before they become delinquent accounts. Always ask for a deletion letter when negotiating payment or settlement of negative events/collection accounts. Add positive trade lines and use them responsibly. If you have a limited budget, negotiate for what credit pros call “payment for deletion,” where the creditor agrees to mark your credit report positive after receiving the money. Never close credit accounts randomly 40
WHAT TO DO IF YOU HAVE HAD A BANKRUPTCY –FORECLOSURE OR OTHER CREDIT ISSUE Case History Joe and Cheryl- not their real name had a business that they had to close. Bankruptcy in 2012 Chapter 7 Discharged in 2012 Foreclosure started but included in BK Now salaried – reestablished good credit Qualifed for a fixed rate loan of 3.99% with only 3.5% down payment
WHAT TO DO IF YOU DON’T HAVE MONEY FOR DOWNPAYMENT AND CLOSING COSTS Case History Joan not her real name has great income and only 2 bills Car payment and school loan. She qualifies for a 250,000 loan but doesn’t have the money for downpayment & Closing. She is not a veteran. SOLUTION- We were able to negotiate a contract where the seller helped with settlement and she received a grant for part of her downpayment
WHAT TO DO IF SCORES ARE NOW TOO LOW? There are programs that we have had success with that will assist borrowers raise their scores Often by points or more in 90 days THEY GUARANTEE THEIR RESULTS!
DIFFERENT TYPES OF LENDER IS ONE BETTER THAN THE OTHER? Why would one company say yes when another says no? 1.Mortgage Banker – Independent 2.Mortgage Banker –Bank Owned 3.Small Bank –Portfolio or hard money lender 4.Mortgage Broker
THE BIG MISCONCEPTION MYTH- IF I GO TO MY BANK THEY WILL GIVE ME A GOOD DEAL SINCE I AM A CUSTOMER REALITY- THE BANK OWNS A MORTGAGE COMPANY THAT IS A SEPARATE OPERATING ENTITY OR A SUBSIDIARY. THEY TEND TO BE MORE CONSERVATIVE THAN OTHERS AND THEIR OWN RULES TO THE EXISITNG GUIDELINES
WHICH ONE SHOULD YOU CHOOSE???? PORTFOLIO LENDER- - HIGHER RATES - EASIER TERMS AND QUALIFYING - MORE EXPENSIVE IN FEES MORTGAGE BANKER -INDEPENDENT VS BANK OWNED - LEND YOU THEIR FUNDS BACKED BY FHA- VA – FNMAE- FREDDIE MAC SO THEY GET THEIR FUNDS BACK TO LEND AGAIN. GOOD PROGRAMS- GOOD RATES –COMPEITITVE FEES MORTGAGE BROKER -CAN SHOP DIFFERENT LENDERS BUT MUST CHARGE A FEE OVER THE LENDERS FEE TO EARN INCOME - DON’T HAVE CONTROL OF THE PROCESS –UNDERWRITING OR SETTLEMENT DEPARTMENTS -IS NOT LENDING YOU THEIR FUNDS BUT ARE PLACING YOUR LOAN WITH THE LENDER.
GET THE SERVICE & EXPERTISE YOU AND YOUR CLIENTS DESERVE Brian Sacks NATIONALLY RENOWNED MORTGAGE EXPERT NMLS # / Phone: Fax: Visit: weekly agent training : LIKE ON FACEBOOK TheBoomerangBuyer BaltimoreMortgageLending