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Hello Dave,

The Obama plan for ‘loan modifications’ covers the following:

“The agencies will seek to apply these guidelines when permissible and appropriate to all loans owned or guaranteed by the federal government, including those owned or guaranteed by Ginnie Mae, the Federal Housing Administration, Treasury, the Federal Reserve, the FDIC, Veterans’ Affairs and the Department of Agriculture.” (emphasis added).

One thing I’ve noticed about Chase is that every time you call them you can get a different answer based on the person with whom you speak.

Thanks for the questions and hope this helps.

Paul

Talked with the servicer (Midland) and they won’t pay the $1,500 for a trash out and a clean up. We need to go to market and this would help us get the highest and best offers – the estate has no money what so ever. The pr is willing to do this only so things can be settled – she will get nothing for doing this.

The bank said they absolutly would not cover this even if it’s part of the HUD (closing statement). I’m frustrated – I’m trying to get them the most money and they won’t even agree to this basic need. Any ideas appreciated. 

It’s VA insured but doesn’t the bank only get about $60,000 entitlement from the VA?

Fred

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Hello Fred,

The Dept of VA approves short sales (or what the VA refers to as a ‘compromise sale’) at 88% net of the appraised value.  The VA will permit closing costs that are “reasonable and customary” to be included. 

First, submit the compromise sale to the VA and have them approve it with the property prior to the cleanup and include 3% for the seller to pay of buyer’s settlement costs (this will come out of the shorting lender’s net since the net-to-seller is zero). Then, complete the trash out and at closing list the trash out as a buyer cost.

As an aside, this is why it is important to negotiate in advance of an end buyer.

Thanks for the questions and hope this helps.

Paul

If I stop paying and notify them that I can afford the payment.  What could happen, credit wise can I repair it. Or could judgement against me or wage bank account or ect. 

What the least and most that could happen and how to deal with it. 

John

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Hello John,

If you “notify them that I can afford the payment” then they won’t be inclined to do anything for you.  The Department of Veterans Affairs (VA) offers the following workouts for borrowers who can not afford to make their payments:

Forbearance – a period of up to twelve-months where payments may remain delinquent.  If over sixty-days then it must be in writing.  This is typically combined with a repayment plan which has no limit as to the number of months for repayment.

Modification – If the loan is delinquent or in imminent danger of default, then the lender may extend the loan term and capitalize delinquent payments, taxes, and insurance.

Assumption – Loans made prior to March 1, 1988 pay be assumed by another party without the prior approval of the VA.  Loans originated after that date must have approval from the VA and the new buyer must pay a funding fee of ½ of 1% of the loan amount to the VA and a $300 processing fee (or the maximum fee permitted by state law)

Compromise Sale – This I the VA short sale program.  The lender allows the property to sell for less than the mortgage balance and claims the remaining payment from the VA.

Refinance – The VA does not require an appraisal to refinance under the Interest Rate Reduction Loan (IRRL) and closing costs may be included in the loan amount.  Since rate as of the date of this post are around 5.0% that may be a benefit.

Refunding – On rare occasion the VA buys the loan back from the lender and makes special arrangements for a workout with the veteran.

Deed in Lieu – If there are no junior liens on the property and the veteran has explored all other options above then the lender may accept a deed in lieu of foreclosure.

The worst that could happen might be that in the event of foreclosure the Dept of VA seeks a deficiency judgment and is able to garnish non-exempt funds from a bank account.  The best that could happen would be that the Dept of VA accepts one of the above workouts and in that event, everybody wins.

Thanks for the questions and hope this helps.

Paul

If the borrower is unable to sell his/her property for an amount greater than or equal to the current outstanding loan balance plus closing costs, VA may pay the difference to allow the sale to take place. Compromise sales are approved if the sales contract meets several criteria and results in a cost savings compared to a foreclosure.
 
Below are a few factors that must be considered:

• The property must be sold for fair market value.
• The closing costs must be reasonable and customary.
• The compromise sale must be less costly for the government than foreclosure.
• There must be financial hardship on the part of the seller.
• There must be no other liens, second mortgages, or judgments, unless the amount is insignificant. In situations with other liens, the seller can request that the lien holder consider releasing the lien and converting the loan to a personal loan.
• The seller must obtain a sales contract in order to be considered for the program. To protect the seller’s interest, the seller should make the sales contract contingent to the approval of VA.

Once it is determined that a homeowner may qualify for a VA compromise sale, you should contact the veterans lender and/or the VA. A majority of lenders have Loss Mitigation Departments that are authorized by VA to process VA compromise sales.

VA Servicer Loss Mitigation Program

Stevan

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Hello Stevan,

It sounds like another case of loan officer bad advice.  Whether or not you obtain a VA mortgage after paying the collections remains to be seen; one thing you should expect, however, is a lower credit score after paying the collections.  That’s why I say mortgage broker bad advice.  Let me offer some better advice.

First, the bankruptcy items can be cured through a rapid rescore. 

Second, the items that have ‘no name’ may be medical collections that limit reporting to subscribers per FACTA. 

You can obtain your own report through annualcreditreport.com or the like to determine the identity of the furnisher.  If they are valid then contact them and get a written pay for delete.  If they are not valid, then contact the bureau by phone and request an Expedited Dispute Resolution because you have a pending mortgage application.

Thanks for the questions and hope this helps.

Paul

Albert

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Hello Albert,

The answer is ‘yes’ on FHA and ‘yes’ on VA.

FHA rules per the Dept. of HUD:

Question 3 – Can a mortgagor acquire a FHA-insured mortgage while in a Chapter 13 bankruptcy?

Answer – HUD underwriting rules state that a person in Chapter 13 bankruptcy can purchase a home subject to a FHA-insured mortgage. Requirements are the applicant: must have completed one year of payments as required while under Chapter 13 and must obtain a letter from the Trustee of the court, stating the dollar amount the applicant can borrow. See HUD Handbook 4155.1.

VA rules per the Dept. of Veterans Affairs:

“If the applicant has satisfactorily made at least 12 months’ worth of the payments and the Trustee or the Bankruptcy Judge approves of the new credit, the lender may give favorable consideration.”

Thanks for the questions and hope this helps.

Paul

(source= hud.gov/offices/hsg/sfh/nsc/faqgnsrv.cfm)

(source= warms.vba.va.gov/admin26/pamphlet/pam26_7/ch04.doc)