Equal Housing Lender
WHY the 6th and Final Step of the Home Prep Pilot is Critical to Getting Clients “Mortgage Ready”
By Pamela Marron, Loan Originator, NMLS#246438 • Aug 18, 2022
Below are 5 common issues that often prevent clients from getting a mortgage.
- Short-term credit issues that can be resolved within 6 months.
- Long-term credit issues can take up to 5 years to remedy.
- Student Loan refinance help.
- Down Payment Assistance(DPA) with the help of DownPaymentResource.com and a resource for loan originators called Down Payment Connect.
- Budgeting for a home purchase.
A pilot program called Home Prep is being developed to connect loan originators and realtors to HUD housing and credit counselors who can work with prospective homebuyers on resolving one or more of these issues and get clients “mortgage ready”.
A 6th and final step for clients who have had specific credit issues in the past will provide a safeguard so that the same issues don’t come up on a new mortgage.
Ask your client if they have had any of the issues noted below in their past and apply remedies UPFRONT before a client even starts looking for a home.
Ask the client if they had a past short sale, foreclosure, deed in lieu (DIL), modification, or bankruptcy where property was included.
During the past housing crisis, a foreclosure credit code often showed up on credit for short sales, DIL and even modifications. The foreclosure code requires a longer wait period to get a new mortgage. This incorrect credit often could not be visibly seen on a credit report but did show up in the Fannie Mae and Freddie Mac automated underwriting system (AUS) findings.
Asking clients detailed questions when specific past credit issues exist and then running their loan through AUS systems UPFRONT is CRITICAL to ensure that these past issues will not pop up during the loan process and prevent the client from getting a mortgage.
- Run loan through the Fannie Mae and Freddie Mac automated underwriting systems for FHA, VA and conventional programs, and through the Guaranteed Underwriting System (GUS) for USDA loans.
- In fact, run ALL client loans through both the Fannie Mae and Freddie Mac AUS systems UPFRONT for prospective homebuyers to insure a thorough pre-approval.
There is nothing worse than finding out that a client cannot get an AUS approval AFTER the client has signed a contract, put a deposit down, given notice to a landlord, and paid for a home inspection and appraisal. An AUS denial towards the end of a contract can be catastrophic, where the only options for a client are a government loan manual underwrite with stricter guidelines and a higher interest rate, or a non-QM loan with a higher interest rate and more down payment required.
Ask the client if they had a bankruptcy and a property was included that had a short sale, foreclosure, Deed in Lieu (DIL) or even excessive late payments.
- When a bankruptcy has a property included, the mortgage payment history ceases to show up on a credit report after the bankruptcy discharge date unless the debt is re-affirmed. Remedies to get the payment history and closing date of a short sale, foreclosure or DIL:
- Retrieve a verification of mortgage (VOM) from the past mortgage company.
- The client can request a mortgage payment history from the past mortgage company.
- Your credit reporting agency has a report that can provide this information for a fee.
Check the final date the mortgage showed as reported and closed and review the payment history to make sure the client meets derogatory credit wait timeframe for specific loan types[1].
Ask the client if they had a defaulted student loan or mortgage.
- Check the Credit Alert Interactive Voice Response (CAIVRS) system UPFRONT, a federal government database of delinquent federal debtors, to ensure client credit is clear.
Ask the client who is a veteran if they had a past short sale, foreclosure or deed in lieu.
- Pull a Certificate of Eligibility (COE) FIRST to confirm existing eligibility.
- If there is $0 eligibility:
- Contact VA at 877-827-3702 to get determination of Bonus Entitlement.
- Calculate VA Bonus Entitlement:
The calculation for basic + bonus full entitlement looks like this:
| Amount | |
|---|---|
| Basic entitlement: | $36,000 |
| Bonus entitlement: | $70,025 |
| $36,000 + $70,025 = | $ |
| Subtract amt used: - | $ |
| Remaining Entitlement: | $ |
| Multiply by 4: | $ |
| Amt. of Basis Entitlement remaining: | $ |
| (only if used $36,000 or less) | |
| Add “Bonus” amount: | $ |
| Amt. of Entitlement Available: | $ |
We are looking for up to 10 licensed mortgage loan originators to be part of this pilot. You can be new or experienced. Call Pam Marron at 727-534-3445, email pam.m.marron@gmail.com or use the form below to be considered for the pilot.
Stay tuned.
Pilot Program Inquiry
Writer Pamela Marron is a licensed Loan Originator NMLS #246438 in Florida who works for Innovative Mortgage Services, NMLS #250769 in Lutz, Fl. Articles written are strictly her opinion and are published to help loan originators, real estate professionals and mortgage clients. This is not used to solicit for business.
Pam Marron | NMLS# 246438
Tara Jerse | NMLS# 2105127
Innovative Mortgage Services, Inc. | NMLS# 250769
Equal Housing Lender
Down Payment Connect is already being used by MLOs and Realtors. Now it's available to HUD Counselors through HomePrep! Down payment assistance is quickly rising to the top need for clients wishing to purchase a home. Down Payment Connect , the back-end data provider for the parent Downpaymentresource.com , houses every down payment assistance program in the US and provides extremely detailed information laid out in a consistent format for each DPA program in their system. Throughout the last two years, Downpaymentresource.com administrators have worked with MLO’s and the HomePrep developers to add nearly all wholesale down payment assistance programs to their platform and they didn't stop there! Extensive filters that allow for selection of specific client needs such as type (ie. SFR, manufactured homes, condos, multi-family, ADU’s), uses like renovation, above AMI income levels, non-1st time homebuyers are just a few of the filters you will find along with stand alone 2nd mortgages, combined 1st and 2nd mortgages and grants. DownpaymentResource.com is also in many MLS systems across the US and provides limited directory information and a free landing page for realtors to promote that they use DPA. Both MLO’s and realtors can subscribe to Down Payment Connect to get more of the extensive directory and back-end tools. Now, through HomePrep, HUD counselors can also use the Down Payment Connect system to filter trhough DPA programs that clients are qualified for, and can even provide wholesale programs when working with an independent loan originator (often called a mortgage broker)! Through HomePrep, HUD counselors are now able to provide MLO’s and clients with the DPA programs that they have found the client is eligible for.
If you have FFEL Student Loans, Take Action Before April 30th!
Three great tools that mortgage loan originators (MLO) can use to assist clients who need help with credit, down payment assistance and student loan repayment services have been used, fine-tuned and are already in use with individual MLO’s. These tools combined with the Freddie Mac HomeCoach automated system along with budgeting help and Homebuyer Education are all integrated in the HomePrep online platform that connects MLO’s with clients who have challenges to HUD counselors that get them mortgage ready.
Pam Marron, NMLS# 246438
Innovative Mortgage Services, Inc. NMLS# 250769
