BluefoxToday blog : Questions That Must Be Asked ............ Declarations Section VII Of Loan Application #4

Questions That Must Be Asked ............ Declarations Section VII Of Loan Application #4

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

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or souto@snet.net

Comment balloon 5 commentsGeorge Souto • August 30 2009 04:02PM

Comments

George --  this is a good educational series.  You will have to tell us how to got the form in the post .... PLEASE!

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) over 9 years ago

Hi George, after reading your post, it sounds like the underwriters don't want any business.  They are forgetting what business they are in.

If the money got paid and the house did not go into foreclosure this little real estate agent doesn't understand how they could put it on someone's credit.  I smell a law suit.

And lastly George, how did your Country get into the financial mess that they want you to believe they are in with forms like this.

Posted by Al & Peggy Cunningham, Brokers, Our Family Wants To Help Your Family! (RE/MAX West Realty Inc., Brokerage) over 9 years ago

George - Great informational series you've put together about the questions on the Declaration form  I haven't had a chance to read them all yet  and have bookmarked the seires so I can go back and review later.  Thanks for sharing this.

Posted by Donna Bigda, Greater New Haven CT Real Estate (RE/MAX Alliance) over 9 years ago

George, so, the old excuse of I was young and foolish doesn't work? Ghesh, This is a great series, you really have done an outstanding job my friend.

And boy oh boy are my friends Al & Peggy giving you a run for your money! But I was curious too, if there is no foreclosure, how do they report it as such? Very curious predicament.

Posted by Andrea Swiedler, Realtor, Southern Litchfield County CT (Berkshire Hathaway HomeServices New England Properties) over 9 years ago

Rick, I would like to take credit for being a techie, but I could not get the form to come out the way I wanted, so I re-created it with CorelDraw.

Joan like I commented to Rick I re-created it with CorelDraw.

Al and Peggy, the Underwriters hands are tied when the Borrower has Debt-To-Income Ratios that are to high for them to do a Manual Underwrite.  second the lawsuit, that would have to be against the Bank reporting it as a foreclosure, as far as that is on there, not much can be done by the other Lenders.  As far as the mess we are in, is because not everyone followed all the rules, and sub-prime loans didn't care about bankrupcies, and foreclosures, in fact with the Stated Income Loans that they did, it did not mater if you worked flipping hamburgers, if you told them you made $100,000 and had OK credit scores, they took your word for it.

Donna, have fun reading the other blogs.

Andrea, they report it as a foreclosure because they started the process, and then refuse to change how they are reporting it.  It is unfair, but in the last 6 months I have run into about 4 cases of this.  One of them showed clearly that the house sold before the foreclosure was completed, and they would not remove it from the credit report.  If we were to do the loan anyway, we would never be able to sell it, because it would not meet Fannie Mae, Freddie Mac, or FHA guidelines and investors would not touch it with a ten foot pole.  It is unfair, and I have argued that this is unfair until I am blue in the face, but that is the way it is.  People need to realize that they need to avoid even a hint of posibily being foreclosed on.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 9 years ago

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