BluefoxToday blog : George Souto (McCue Mortgage) FHA, CHFA, VA Mortgages CT.

My Post yesterday focused on the the three categories of costs that may or may not change once the New Good Faith Estimate 2010 Form is issued. These three categories are costs that Cannot Change, cost that Can Change by 10%, and costs that can Change at Settlement.

The first category of Costs that Cannot Change on the New Good Faith Estimate 2010 Form is pretty self explanatory, but the other two categories can change so in this Post I want to go into what constitutes a reason for change, and some examples of what they might be.

HUD’s Definition For Changed Circumstances

• Acts of God, war, disaster or other emergency
  
• When information particular to the borrower or transaction is found to be different or inaccurate
  
• When new information particular to the borrower or the transaction is provided
  
• Borrower requested changes
  
• Or when other circumstances that are particular to the borrower or transaction, including boundary disputes, the need for flood insurance, or environmental problem

Some Common Examples Of A Changed Circumstance:

• Adding or removing mortgage insurance
  
• Adding or removing borrowers
  
• Property under appraises
  
• Credit score changes
  
• Addition of service like an additional inspection, additional appraisal or certification
• Property uses changes - owner occupied to investment
  
• Wrong property address
  
• Property type change - SF, condo, 2-4 Family
  
• Loan amount or down payment amount change
  
• Transaction purchase changes – purchase to refinance
  
• Changing the rate or points
  
• Rate extension
  
• Loan program change
  
• Documents signed by a Power of Attorney
  
• Borrower changing from standard to extended coverage owner’s title policy
  
• Borrower does not proceed to closing quickly

If a Change of Circumstance which require a change in the costs on the original New Good Faith Estimate 2010 Form, these changes MUST be redisclosed on a new Good Faith Estimate within 3 business days of LEARNING THE NEW INFO or BORROWER REQUESTED CHANGE

 Links to the other blogs in this series:

New Good Faith Estimate

New Good Faith Estimate #2

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

The new Good Faith Estimate 2010 Form is now officially in effect.  This new form became affective on January 1, 2010, and will in many ways change the way Lenders have been doing things.  The new Good Faith Estimate 2010 Form will have both a positive and negative impact on both the Borrower and the Lender.

The positive is that the new Good Faith Estimate 2010 Form will now require ALL Lenders to use the same format.  In the past it was some times difficult for a Borrower to compare loan costs between Lenders, because the costs were disclosed and broken down differently from one Lender to another.  Now everyone will have to do it the same way and use the same form.  The new Good Faith Estimate 2010 Form also will prevent Lenders from changing certain costs that are originally listed on the new Good Faith Estimate 2010 Form, I will list these later.  The new Good Faith Estimate 2010 Form will also have an impact on the HUD-1, because now what was listed on the new Good Faith Estimate 2010 Form will have to be compared to that actual cost on the last page of the HUD-1.  These are all positive changes that the new Good Faith Estimate 2010 Form will have in my opinion.

What isn't positive about the new Good Faith Estimate 2010 Form in my opinion is that it does not break costs down like the Good Faith Estimate Form that I have right now, instead groups costs together in several places.  The new Good Faith Estimate 2010 Form will also cause Lenders to possibly not give Borrowers a Good Faith Estimate at the time that they are Pre-Approving a Borrower, because it locks them into certain things that they can't change later.  It is good that Lenders can't  just change their things, but there are situations that it might be out of their control why a cost changed and now the Lender is locked into what was originally disclosed under a different set of circumstances.  For this reason Lenders may now choose to not issue a Good Faith Estimate until they are actually putting a loan into process.  This in my opinion will make it more difficult for Borrowers to compare costs between Lenders prior to submitting a loan.

I am going to stop this post at this point, and continue it in one or two more posts this week.  What I have found over a period of time here on ActiveRain, is that if you make a blog to long, fewer people read it.  This information is too important, and will have such a big impact on Borrowers as well as everyone else in this industry, that I feel I need to present it in such a way that others will take the time to read, and not be turned off by its lenght.

So I hope that those that are reading this blog now will take the time to return and read the continuing blogs on the new Good FFaith Estimate 2010 Form.  I promise that it will not be a waste of your time to do so.

Links to the other blogs in this series:

New Good Faith Estimate 2010 Form #2

New Good Faith Estimate 2010 Form #3

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

As promised below is an overview and comparison between the present Tax Credit and the New.  The information below was just given to us by Senator Dodd's Office.

Homebuyer Tax Credit Overview:

• First‐time homebuyers (those who have not owned a principal residence in the three years prior to the purchase date of their subsequent home) are eligible for a refundable tax credit of 10 percent of the purchase price of a principal residence up to $8,000 for homes bought between January 1 and December 1, 2009.
• If the home is sold within three years, the taxpayer must pay back the credit (called "recapture").
• Income limits for the current credit are $75,000 for single filers and $150,000 for joint filers, phasing out completely after $95,000 for individuals and $170,000 for couples. Income limits are based on Modified Adjusted Gross Income (MAGI).

Extended and Expanded Homebuyer Tax Credit:

• Extends the availability of the $8,000 first‐time homebuyer credit to taxpayers who have a principal residence under a binding contract before April 30, 2010, allowing 60 days to close.
• Creates a new $6,500 credit for move‐up buyers. Move up buyers are defined as people who haveLike the credit for first‐time buyers, lived in their current home for 5 or more consecutive years during the 8 year period ending on the date of purchase of the their subsequent principal residence. this credit is available to taxpayers who have principal residences under a binding contract before April 30, 2010, allowing 60 days to close. 
• Raises the income limits for both the first time and move‐up buyer to $125,000 for single filers, $225,000 for joint filers with a $20,000 phase‐out. The $20,000 phaseout means that no credit can be claimed by those with MAGI above $145,000 for single filers, $245,000 married joint filers.
• Both the first‐time and move‐up credit are available for principal residences with a purchase price up to $800,000. Purchase price is defined as the adjusted basis of the principle residence on the date such residence is purchased.
• Includes strong anti‐fraud provisions: 
  • Gives the Internal Revenue Service math error authority which they have requested when processing IRS form 5405. This would allow the IRS to correct certain errors during credit processing, and avoid the need for a post‐refund, labor intensive audit. 
  • Requires a copy of the settlement statement (HUD‐1) which would verify the date of purchase, the residence address, and the purchase price. 
  • Introduces an explicit age limitation, allowing no one under 18 to claim the credit
  • Excludes individuals who are claimed as dependents and married individuals who purchase the home from the family of their spouse from claiming the credit
• Eliminates the recapture requirement for military personnel and members of the Foreign Service and intelligence community who are forced to sell their homes within three years as a result of an official extended duty of service. In addition, these individuals have one additional year to qualify for the credit if they served for at least 90 days outside the U.S. in 2009 or 2010. 
• Purchases made in 2010 can be claimed on the 2009 tax return. 
• The score of $10.8 billion over 10 years is paid for by a seven year delay of the worldwide allocation of interest rule until 2017, not stimulus funds. 
• Effective after the date of enactment. 
• Homebuyers who were eligible for the first‐time homebuyer tax credit pre‐WHBAA will be able to continue to claim the credit. Homebuyers who qualify for the credit under the expanded terms will only be able to claim the credit if they close on their home purchase after the date of enactment of this bill (the binding contract can be signed before enactment).

Some of this, like any new Legislation, is going to take a few days to fully understand.  As further clarification is made available I will try to provide it.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Looks like the long awaited New Tax Credit Bill will be signed into law tomorrow.  The New Tax Credit Bill was passed by the Senate earlier today, and by the House a few minutes ago.  The President has already stated that he will sign the Bill tomorrow once it hits his desk.

The New Tax Credit Bill will look a little different than the current one, but until it is passed by both the Senate and the House, and signed by the President, it is always subject to change.  As it stands right now the New Tax Credit Bill is suppose to contain the following:

• First-time homebuyers will continue at $8,000
  
• Tax credit for “move up” purchasers will be up to $6,500
  
  • Must have used previous home as a principal residence for 5 of the 8 previous years.
• Income limits increased and are the same for first-time and “move up” purchasers: $125,000 for single filers/$225,000 for joint filers
  
• Limitation on eligible home prices has been increased to $800,000
  
• Time Frame: December 1, 2009 to April 30, 2010 plus 60 day extension if binding contract is in place by April 30, 2010.
• Anti-fraud measures have been added

The two big differences between the present Tax Credit and the New Tax Credit Bill in my opinion are: 

• The New Tax Credit will be expanded to include present homeowners that have owned their home for at least 5 years.  The New Tax Credit still only applies to Primary Properties, which means that Investment Properties or Vacation Homes do not qualify for the New Tax Credit.
• Instead of the cut-off date being the Closing Date, it will now be the Date that the Buyer goes under Contract, and then having to Close 60 Days from that date.  This makes a lot more sense to me then having the Closing Date be the cut-off.

The $6,500 Tax Credit for existing Homeowners will be effective upon the New Tax Credit Bill being signed by the President.

Let's see if what we are being told is actually with ends up being signed, and we should know that some time tomorrow.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Back on June 16 of this year I wrote a blog "FHA ........ Major Condo Approval Change!!!" which covered the New FHA Condo Approval Process that was to go into affect on October 1st of this year.  Well FHA has just made it known that the New Condo Approval Process will now not go into affect until November 2nd.  This means that we have an additional month now to be able to do "Spot Condo Approvals" instead of a "Full Condo Complex Approval" on Condo Complexes that are not presently on the FHA Condo Approval List.

A quick recap of what the major changes will be to the new process are:

• FHA will now allow lenders who are "Direct Endorsement Lender" to determine project eligibility, review project documentation, and certify to compliance of Section 203(b) of the NHA and 24 CFR 203 of HUD’s regulations.
• An Environmental Study will no longer be required in most cases.
• The Right of First Refusal will not longer be an issue.
• Spot Condo Approvals will be eliminated.

I will try to keep everyone informed on any further changes or delays to the New FHA Condo Approval Process as I am made aware of them.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Thursday I began this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan The Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

As I stated Thursday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4. Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application.

Since Thursday I have covered the first 11 question on Declarations Section VII Of Loan Application, and today I will cover the next 2 questions, and continue to explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The twelfth question on Declarations Section VII Of Loan Application states:

l.  Do you intend to occupy the property as your primary residence?

This question like many of the others before it seem to be simple and straight forward, and it is if answer truthfully.  The problem here is that many Borrowers who do not intend to live in the property and use it as an investment property, will not answer this question truthfully.  The main reason for them to not answer it truthfully is that downpayment/Loan To Value requirements, and points that are automatically assigned on investment property by Fannie Mae and Freddie Mac, are much higher and stricter than they are on Owner Occupied Properties.  For example if a Borrower puts less than 20% down on a Non Owner Occupied Property they will be assessed 3.750 points, if they put more that 20% but less than 25% down 3.000 points, and 25% or more down 1.750 points.  Also if a Borrower is purchasing a Non Owner Occupied Property they will most likely need to put down a minimum of 20%, because  PMI Companies will not issue PMI on the property.

Therefore a Borrower looking to purchase a Non Owner Occupied Property will in many cases try to avoid having to come up with this much money by saying that they are going to live in the property.  Because this has become more and more of a problem, Lenders have establish some automatic red flags, below are a couple of examples of those red flags.

• The Borrower has a single family house and states that he/she is going to rent out the single family and live in the multi-family house that they are purchasing.  Not going to fly, they are not going to believe that someone would move out of a single family house, to share a house with renters, even if it is the truth.
• Borrower presently lives and works in a different State, and states that they are going to commute back and forth each day.  Here in Connecticut (it might differ in other states) if the commute is more than an hour between states, Underwriting will question it, and it will most likely not fly.  Even if the Borrowers claims that they will live near where they work during the week, but commute to the property on weekends to be with the family.  That will also most likely not fly.

I have run into this several times especially with Borrowers who presently work and live in New York. Housing in a couple of towns in the middle of Connecticut is much cheaper than it is near New York City, or in parts of Connecticut near New York.  This is very attractive to New York Investors, and the above example seem to be a reoccurring theme.

The final question on Declarations Section VII Of Loan Application is:

• m.  have you had ownership interest in a property in the last three years?

This question show always be answered truthfully because if a Borrower has owned a house in the last three years it will show up on their Credit Report.  Where it does get confusing is in the case of a foreclosure as I talked about in the third blog of this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application #3".  I am not going to repeat what I wrote in post #3 here, so if you want to review those problems please just follow the link.

This question is also very important for Borrowers that are applying for First Time Homeowner Programs, which require that the Borrower has not had an ownership interest in a property for three years.

I hope that this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan The Application"  has made all those who have taken the time to read it, more aware of issues that can come up during that loan process is the Borrower does not provide truthful and accurate information throughout the Loan Application Process.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Thursday I began this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

As I stated Thursday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4. Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application. Since

Thursday I have covered the first 9 question on Declarations Section VII Of Loan Application, and today I will cover the next 2 questions, and continue to explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The tenth question on Declarations Section VII Of Loan Application states:

• j.  Are you a U.S. Citizen?

This is a very simple question, either you are or you are not a U.S. Citizen, but even here I have had Borrowers not answer this question truthfully.  This information is not as easy to verify as the previous questions, but if an Underwriter suspects that the Borrower is not telling the truth, they will investigate.  The last time that one of my Borrowers answered this question incorrectly, it created a huge problem for everyone.  It turned out that the Borrower did not answer this question truthfully because he did not have a valid Green Card, and thought that he could get around that issue by stating that he was a Citizen.  The loan ended up being denied, the Borrower was out the money he had paid for a Home Inspection, Appraisal, Loan Application Fee, and deposit on the Sakes Contract.  The Seller waisted almost five weeks that his house was off the market, therefore, missing out on other possible Buyers.  And the Realtor, who was on both the Selling and Buying side spent a lot of time for no compensation.  Charges could have been brought against this Borrower, because he signed at the bottom of Page #4 attesting that all of the information that they have provided is the truth to the best of their knowledge, but we did not press charges.

• k.  Are you a permanent resident alien?

This question goes hand in hand with the previous question.  If the Borrower is not a U.S. Citizen, then hopefully he/she is a permanent resident alien.  But as you can see in my previous example, that is not a given.  If a Borrower is a permanent resident alien, he/she will need to provide a valid permanent resident alien card (Green Card. I don't know why they still call it a Green Card, because it is no longer green) with a valid date for at least 12 more months and their status (card) needs to have been renewed at least once.  The Non U.S. Citizen will also have to provide a Passport and Social Security Card.

I will end this series with the next blog on the final two question on the Declarations Section VII Of Loan Application.  Hopefully this series is providing some insight into areas of the Loan Process that are not as well know outside of the Lending side of the process of purchasing a house, and making everyone more aware of why these Questions Must Be Asked On The Declarations Section VII Of The Loan Application.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Thursday I began this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

As I stated Thursday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4. Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application.

Since Thursday I have covered the first 6 question on Declarations Section VII Of Loan Application, and today I will cover the next 3 questions, and continue to explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The seventh question on Declarations Section VII Of Loan Application states:

• g.  Are you obligated to pay alimony, child support, or separate maintenance?

This question is very clear and self explanatory, but unless asked Borrowers do not volunteer this information. Some even try to hide it  which is very foolish, because alimony, child support, and separate maintenance payment can significantly raise the Borrowers Debt-To-Income Ratios.  It is also relatively easy to find out if a Borrower is paying paying alimony, child support, or separate maintenance. 

First of all it is in many cases deducted right out of the Borrowers paycheck, so once they provide a copy of their paycheck, which is required with every loan these days, there it is.  Bank Statements are also required and it can pop up there, as well as on Tax Returns if they claim it as a deduction.  But there are also red flags that are raise during the course of taking a Loan Application.  One of the questions on page #1 is do you have any dependent children.  If dependent children are listed there, and the Borrower claims to be unmarried, or separated the Underwriter is going to ask for an explanation.  Another red flag is the Credit Report.  If the Borrower has a previous mortgage, even if it is paid, and it shows up on the Credit Report as a Joint Mortgage, an explanation will be asked.  If the explanation is that they were previously married, then the Underwriter is going to want to see a copy of the divorce decree, and the alimony, child support, or separate maintenance will show up there.

So to answer this question NO when it it really YES is foolish, because there is a very good chance that it will be picked up, and once they catch you not telling the truth, they are going to start questioning everything.  And if it is some how missed during the Underwriting Process, but discovered later after the loan closes, the loan could be Called.  Also they could face criminal charges for lying on the Loan Application. This is because at the bottom of Page #4 Borrowers have to sign attesting to the fact that all of the information that they have provided is the truth to the best of their knowledge.

• h.  Is any part of the downpayment borrowed?

This is important because it will not show up initially on the Credit Report, but is a future additional debt that will impact the Borrowers Debt-To-Income Ratios.  It is especially important for the Borrower to answer this question correctly if they plan on doing a Bridge Loan for the Downpayment while they are trying to sell an existing house.  In this case it will definitely be found out, because the Bank doing the Bridge Loan will contact the Bank doing the First Mortgage.  It is best to see what that additional payment will do early on to the Debt-To-Income Ratios.  By taking this additional payment into consideration early, we can avoid the loan being denied late in the process, because the Debt-To-Income Ratios are now to high, or the Borrower does not qualify for a Bridge Loan, and now does not have enough money to Close.

• i.  Are you a co-maker or endorser on a note?

This questions just like the previous question can create Debt-To-Income Issues as well, and cause problems late in the Loan Process if it some how does not show up on the Credit Report, but surfaces before or after the Loan Closes.  Not answering either of these two questions correctly because you think that it will not be discovered is a BAD idea, could raise other issues, and end up being a big waist of every ones time, as well as prove to be a very costly experience for the Borrower.

This now brings us to the last four questions on Page #4 of the Declarations Section VII Of Loan Application, and to some seemly very Innocent question.  We will begin to see tomorrow that they are not so Innocent.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Thursday I began this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

As I stated Thursday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4. Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application.

Since Thursday I have covered the first 4 question on Declarations Section VII Of Loan Application, and today I will cover the next 2 questions, and continue to explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The fifth question on Declarations Section VII Of Loan Application states:

• e. Have you directly or indirectly been obligated on any loan which resulted in foreclosure transfer of title in lieu of foreclosure or judgment?

This is another one of those questions that is not as easy to answer as it first might seem. That is because if a Bank files for foreclosure, even if a Homeowner transfers title in lieu of foreclosure, or avoids foreclosure by selling the house before the Bank forecloses on them, in all likely hood that Bank is still going to report it as a foreclosure on the Homeowners Credit Report. I have seen this several times lately, where the Homeowner sold the house before they were foreclosed on, even if it wasn't a Short Sale, and the Bank got paid in full, they still report a foreclosure on the Homeowners Credit Report.  This might seem very unfair, but that is what is happening, and as far as Automated Underwriting is concerned, if it is reported as a foreclosure, its a foreclosure.

The only hope that a Borrower has in a case like this is if they get the Bank to agree to stop reporting the NON FORECLOSURE as a foreclosure, or that their Credit Scores and Debt-To-Income Ratios are within the qualifying guidelines for a Manual Underwrite, where an Underwriter will actually look at what really happened.  If they can't meet the Manual Underwriting Guidelines, then they have to wait the same time period to purchase another house as if they really did have a foreclosure.

The sixth question on the Declarations Section VII Of Loan Application states:

• f.  Are you presently delinquent or in default on any Federal debt, or any other loan, mortgage, financialobligation bond or loan guarantee?  If "Yes" give details as described in the preceding question.

It is not good to be late on ANYTHING, but if you are going to be late on a financial obligation make sure that it is not a mortgage or Federal Debt.  The Automated Underwriting in many case will forgive recent lates on credit cards, car payments, and other similar debts, but it is not forgiving of mortgage late in the last 12 months.  Even if Automated Underwriting over looked a mortgage late in the last 12 months, the Underwriter will not, because it is unlikely that an Investor will purchase a loan that the Borrower had a mortgage late in the last 12 months.

A 30 day late payment or longer on a Federal Debt in the last 12 months is pretty much an automatic denial on FHA Mortgages.  So young Borrowers with student loans need to make sure that those student loans are paid on time.  Claiming that you did not know that the loans had gone into repayment, or that you were young and foolish is not a good excuse.

If you are planning to purchase a house in the near future, make sure that all your financial obligations are paid on time, but especially your mortgage and Federal Debts, or you could find yourself waiting several months before you can purchase that new house that you fell in love with.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Thursday I began this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

As I stated Thursday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4. Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application.

Yesterday I covered the first 2 question on Declarations Section VII Of Loan Application, and today I will cover the next 2 questions, and continue to explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The third question on Declarations Section VII Of Loan Application states:

• c.   Have you had property foreclosed upon or title or deed in lieu thereof in the last 7 years?

This question may seem easy to answer at first, but it is not as simple as it may appear.  The reason why it is not as easy as it appears is because many people who are foreclosed on consider not owning the house from the point that they were evicted from the house.  This eviction can place many times when the bank holds a Foreclosure Auction, but this not the date of the foreclosure, so technically the owners still own the house.  In fact they are considered the owners of the house up until the bank completes the foreclosure process which could be several months later.  Even the date on the "Foreclosure By Sale Committee Deed" is not the date of the foreclosure.  This date is just the date that the Foreclosure Committee (usually a committee of one) approved the foreclosure, but it is not the final date of the foreclosure. That date could be 3 to 6 months later, and it is at that point that the owners of the house have been foreclosed on and no longer own the house.

So as you can see a question that seems easy to answer is not so easy after all.  Because of the confusion that this process can create, it is important to fully investigate all foreclosures if the Borrower answers YES to this question.

FHA requires three years from the time of the foreclosure before a Borrower can qualify for an FHA Loan again, and Conventional (Fannie Mae & Freddie Mac) requires five years.  If a Borrower honestly believes that three years have past since they were foreclosed on, because that was when they were evicted form their house, and foreclosure documents are not requested in the beginning of the loan process, everyone could be in for a big surprise at the end.

The forth question on the Declarations Section VII Of Loan Application states:

• d.  Are you a party to a lawsuit?

I always thought that it would have made more sense to have this question as the sixth question after the next two questions which continue to deal with foreclosures and delinquencies on mortgages.  But higher powers then me determined that it should be placed at this point.

This question like all the others, if answered incorrectly can create major problems late in the loan process.  A Borrower can quickly go from being in great financial shape, and their Debt-To-Income Ratios falling in place, to no longer qualifying because their Debt-To-Income Ratios are now to high.  Just like foreclosures, more questions need to asked if the answer to this question is YES.

If the Borrower is the one who has brought a lawsuit against someone else, it needs to be explained, but it most likely will not create their Debt-To-Income Ratios to change.  But if they are the ones that a lawsuit is being brought against, there is a risk of an additional financial obligation that could easily put the Borrower over the qualifying Debt-To-Income Ratios for a Loan Program.  The potential risk will in a lot of cases cause a loan to be rejected, and it is something that is better explained sooner than later.

Just as I stated before about previous questions, if a Borrower answers NO to this question and it is discovered they do have a lawsuit pending against them. not only will the loan be denied, but they could face criminal charges for lying on the Loan Application.  This is because at the bottom of Page #4 Borrowers have to sign attesting to the fact that all of the information that they have provided is the truth to the best of their knowledge.

I am going to end this blog with these two questions because the next question "e.  Have you directly or indirectly been obligated on any loan which resulted in foreclosure transfer of title in lieu of foreclosure or judgment?" of the Declarations Section VII Of Loan Application will require a lengthy explanation of the problems that it can create.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com