Haplo
Joined: 20 Jan 2005
Posts: 2422
Location: Springfield, IL
|
| Posted: Fri Feb 10, 2006 3:42 pm Post subject: Fair lending and you (Brokers AND customers) |
|
|
First off, let me start off by saying that everyone should read this post. If you are a borrower it gives you something to think about, if you're a lender, it gives you an additional reason to consider all of the options available to a borrower.
Here is the loan scenario as it stands:
522 / 571 Midscores
Borrowers income is approximately $5500 and C/B is $475 SSI.
Most trade lines past due or in collection. Approximately $75,000 in unsecured late debt.
0x30 on the mortgage and car loan.
$160,000 Loan balance, $240,000 approximate value.
$42k in retirement funds.
Borrower had originally attempted to file Ch 13 6 months ago, only to find out that it had never been filed by the attorney. They now want to make things right, but find that their credit has been nearly destroyed by the last 6 months of negativity.
Now, if you're a borrower in this position you really don't feel that there is much to do. Bankruptcy looks like a pretty attractive option, especially when seemingly nobody is willing to work on the balances owed. If you're a lender looking at this scenario, you shudder. Oh, and with a quick figureing of numbers the borrower clearly states that a non-prime loan would be significantly more costly than doing the Ch 13, and that it would make no sense for them to do this.
We have a legal responsibility to our customers to make sure that they get the best loan program available for them, and that we do not deny them for a loan that would be available for them.
Believe it or not, this loan scenario was approved with an automated decision via FHA, with a quick doc requirement. After the borrower started making phone calls stating they were trying to refinance their home to get cash out, even the hardest of collection agents were willing to come down (some as low as 30%!) We all known how collections can be, and if they're brand new, good luck on getting them to budge at all, let alone a large amount. Through a combination of a loan against their retirement and the amount of equity that we were able to take out (FHA loan limits are $200,160 in our county) we were able to come within a few hundred dollars of complete payoff.
The reason that I present this to you is that not a single person that viewed this file thought there was anything that could be done. They went to several banks and looked into other higher interest options before getting referred to me. Never give up on a borrower, and if you are a borrower always make sure that you check out all of the options available, or that your loan officer has before you give up the battle. If your loan officer is unwilling or has not checked out other options that may be better for you, fire them and move on to the next one.
This loan had a number of positive factors that gave a great weight to the approval. Reserves, low ratios (for FHA), a solid credit history for 30 years with 1 extenuating circumstance, and documentation and the desire to succeed all combined to make this loan work.
So keep that in mind next time you see that low score, or are talking to your loan officer. If you have an extenuating circumstance, check it out! If you are a good credit borrower, and you get declined via the automated system, ask your broker to submit for a manual underwrite. If they can't/won't, check with someone who can! Explore every option before you count yourself out for the count.
And for those of us on the lending side, remember that it's not only our responsibility to do this for our customers, it's the law ;) |
|
