Late mortgage payments & your credit

How does being late on your mortgage affect your credit? The short answer: It depends.

When you hear about credit scores, what people are most often referring to is a FICO® score. Your FICO score is a way to summarize your credit risk at any given moment in time. The score takes into account your payment history, outstanding debt and length of credit history, among other things. Any potential lender will look at this score to determine how much of a risk you are and what interest rate you will be charged as a result of your risk level.

So, what happens to your credit score when you fall behind on your mortgage payment? That depends where you started. People with higher credit scores actually take more of a hit when they fall behind on their mortgage and when they go through foreclosure. For example, according to FICO:

Homeowner A

• Starting credit score: 680
• 90 days late: 610 (70 point drop)
• Foreclosure sale: 585 (95 point drop)

Homeowner B

• Starting credit score: 780
• 90 days late: 660 (120 point drop)
• Foreclosure sale: 630 (150 point drop)

While Homeowner B still comes out with a higher score after foreclosure, their drop in overall points is significantly greater than that of Homeowner A. This is likely because Homeowner A has some non-mortgage delinquencies or credit issues that have already lowered their score, so the effect of the mortgage delinquency isn’t as great. It also takes longer for a homeowner with a high credit score to recover their previous credit status after a delinquency or foreclosure.

When dealing with a mortgage delinquency, the options that allow you to keep your home typically have the least impact on your credit. Most loan modifications, including those offered through the federal government like Making Home Affordable, will not affect your credit score. Any negative credit impact comes from late payments that happened prior to the modification. A forbearance agreement or repayment plan can additionally tag on a negative impact to your credit score if your lender reports you as paying under a partial payment agreement.

Non-retention options such as short sale and foreclosure sale will have the biggest hit on your credit because of the level of delinquency and failure to pay on the loan as agreed. A common assumption is that a short sale is better for your credit than foreclosure. This may not actually be true.

Both will impact homeowners’ credit scores in a similar way because they typically involve significant delinquencies. Beyond that, it is difficult to say for certain how a short sale will impact your credit because there is no specific reporting code for short sales. This means that some of how your credit is affected is up to your lender’s discretion.

If you are behind on your mortgage and want to know more about your options, please call 206.694.6766 or email housingcounseling@solid-ground.org. There is no charge for Solid Ground services.

For more general information on this and related topics, attend our next free Mortgage Information & Enrollment Workshop on Wednesday, May 28th from 6-8pm at Solid Ground (1501 N 45th St, Seattle, WA 98103).

Homeowners Tip: Notice of Pre-Foreclosure Options

The Foreclosure Fairness Act went into effect in its current form in July 2012. The better-known component of this legislation is mediation, which can only be requested by an attorney or housing counselor and only after a homeowner receives a Notice of Default. The lesser-known part of the law is that homeowners have options before the Notice of Default and mediation.

If you miss payments on your mortgage, lenders can issue what is called a Notice of Pre-Foreclosure Options (NOPFO). When you are late on your mortgage payment, it can be easy to get overwhelmed with the letters and paperwork your lender sends. But if you don’t open and read everything, you may miss an important opportunity to work with your lender and buy yourself some time to avoid foreclosure. This notice can be easy to miss because you will actually not see these words on the first page. Instead the first page will say “Important Rights for Homeowners.”

The notice gives you the right to request a meeting with your lender – referred to as a “meet and confer” session – to discuss options to avoid foreclosure. Unlike mediation, a there is no neutral third party involved, and borrowers can request the meeting themselves. In addition to allowing for the meet and confer, this notice can also extend the foreclosure process by another 60 days.

Simply receiving the notice doesn’t guarantee you these rights. They are only available if you respond to the NOPFO within 30 days of the date listed on the notice. The notice will give you two ways to request the meeting, either in writing or by phone. We suggest that you respond in writing by certified mail so you have a record of it. Here’s some sample language you can use to write your own letter.

Your lender should contact you to schedule a meeting after they receive your response to the NOPFO. The best way to use this time is to submit your loan modification request beforehand so the lender has a chance to review it. This allows the meeting to focus on your specific situation, rather than just general options. Solid Ground’s housing counselors can help you prepare this packet for submission and represent you at the meet and confer session.

The meeting may result in a decision about eligibility for a loan modification or other options, or the lender may outline additional documents needed for review. If there is no agreement reached at this meeting, the lender can continue with the foreclosure process and issue a Notice of Default.

 If you have questions about this or any mortgage related issue, you can contact us at 206.694.6766 or by email at housingcounseling@solid-ground.org. Solid Ground is a HUD-approved housing counseling agency and provides mortgage counseling at no cost. Visit our Mortgage Services webpage for more information.

Tenant Tip: Financial Fitness Day!

On March 31, 2012 from 10am-2pm, the Seattle-King County Asset Building Collaborative and several community agencies – including Solid Ground – are partnering to provide a day of workshops related to finances, money management and other community resources such as job search, housing, personal budgeting and more. Financial Fitness Day will take place at the Rainier Community Center at 4600 38^th Avenue S, Seattle, WA 98118.

The event will feature a series of free workshops as well as one-on-one help with filing income taxes, credit and mortgage counseling, financial advising, and information on receiving public benefits.

This is a great resource fair for renters interested in getting a free credit report, free counseling on debt management, and credit repair tips. It can help renters understand the information that is often listed on screening reports and know what to expect when completing rental housing applications.

It will also be a useful event for homeowners seeking mortgage counseling and resources as well as anyone looking for financial tips, business startup and consumer rights information, and much more. The flyer below provides a list of participating organizations and some of the services that will be offered.

 

Foreclosure Fairness Act: Foreclosure mediation is now the law

The Foreclosure Fairness Act (HB 1362) was signed into law by Governor Christine Gregoire on April 14, 2011, creating a foreclosure mediation program in Washington State. Mediation will give struggling homeowners the opportunity to meet with their lender to discuss options before losing their home and most valuable asset. This law will truly make a difference for thousands of homeowners in our state. Foreclosure mediation programs have been shown to be extremely effective in allowing families to save their homes. The bill was sponsored by Rep. Tina Orwall (D-Normandy Park) and had overwhelming support in the legislature.

Governor Christine Gregoire signs the Foreclosure Fairness Act

Throughout the housing crisis, homeowners and housing counselors have repeatedly reported that banks and loan servicers do not answer the phone, lose homeowners’ information about loan modifications, and have different staff people from different offices talking to a homeowner. This new law will eliminate the problem of struggling homeowners being unable to get in touch with their lenders as they fight to stay in their homes.

“Approximately 45,000 families will receive notices of foreclosure this year, but we are providing new hope for many of them with a fair process and resources to help them explore every option available and keep their homes whenever possible,” said Rep. Tina Orwall.

Are you facing foreclosure? Unable to get your lender to respond? Want to know your options? Read on…

Washington State has a new law to prevent foreclosures.
As of July 22, 2011 you can now ask for a face-to-face meeting with your lender by requesting foreclosure mediation. To request a meeting with your lender, contact a housing counselor or attorney by calling 1.877.894.HOME (4663).

What is foreclosure mediation?
Foreclosure mediation is a process where a neutral, third-party mediator assists the homeowner and the lender to reach a fair, negotiated agreement.

Why request mediation?
If you have not been able to get in touch with your lender, you can now request a face-to-face meeting to discuss alternatives to foreclosure. During mediation, the lender is required to negotiate with you in good faith.

Who is eligible?
• Homeowners who are in default on their mortgage and have not yet received
   the Notice of Trustee’s Sale are eligible
• Homeowners who live in owner-occupied properties

How can I request mediation?
Foreclosure mediation must be requested by a housing counselor or an attorney on behalf of a homeowner. To find a housing counselor, call 1.877.894.HOME (4663).

How much does it cost?
The homeowner and the lender each pay a $200 fee for the mediation. The fee must be paid prior to the mediation.

Share your Story!
The foreclosure mediation law was passed because struggling homeowners shared their stories with lawmakers. Poverty Action is collecting stories from community members like YOU! Are you facing foreclosure? Having trouble with payday lenders? In danger of losing benefits like TANF or Disability Lifeline? Share your story and help lawmakers understand the issues Washingtonians are facing. For more information contact Poverty Action at 1.866.789.7726 or visit the Statewide Poverty Action Network website.

More information

• Foreclosure Fairness Act brochure 
• Foreclosure Fairness Act: Read the full text.
• Washington State Department of Commerce Website: For more information about the Foreclosure Fairness Act and/or Mediation Program.
• Washington Homeownership Information: For more information on foreclosure prevention, avoiding foreclosure rescue or loan modification scams and alternatives to foreclosure.
• Washington State Housing Finance Commission: To contact a homeownership counselor – or call 1.877.894.HOME (4663).
• Contact the statewide civil legal aid hotline for legal assistance and referrals by calling 1.800.606.4819.
• Like the Foreclosure Fairness Act Facebook page or follow the FFA Twitter account at  @WAStateFFA for information on foreclosure prevention events and updates on the Foreclosure Fairness Act Mediation Program.
• Watch this television public service announcement recorded by Washington Lieutenant Governor Brad Owen.

Tear down the wall between banks and homeowners facing foreclosure

The Foreclosure Fairness Act currently working its way through the Washington State Legislature gives homeowners facing foreclosure a valuable tool in the struggle to keep their homes. For more on the problem/solution, check out this video.

Legislators need to know that you support this bill!

Contact Statewide Poverty Action Network, call 1.866.789.7726, or email Danielle Friedman to take action to support The Foreclosure Fairness Act.

Tear down the wall!

 

Mortgage counselor Marita DeLeon knocks down the wall between lenders and homeowners.

Thanks!

 

I’m in!

I'm in! Seattle Seahawks players tap this sign on the way from locker room to practice field as a reminder of the commitment it takes to succeed.

At Solid Ground we talk a lot about the importance of advocacy. We work to get you involved in the political process. We lobby for funding and initiatives that strengthen our community by providing equal opportunities to people living on low incomes.

We’ve cajoled you online and in our newsletters. We phone bank you and blast emails to get you to sign petitions, send cards to the legislature and phone the Governor. And our Statewide Poverty Action Network has supported folks with low incomes around the state in claiming their political voice and building their power in Olympia.

As Solid Ground’s Communications Manager, I’ve personally reached out to thousands of you to engage you in the political system. And while I’ve made my share of phone calls to elected officials and written and signed many petitions, I need to own up to something here. I’ve never made the trip to Olympia to meet one-on-one with the people who represent me in the Washington State Legislature.

But this year, I’m in! And you need to be in, too.

We’ve all heard about the crisis in the state budget. You can bet that corporate interests will be well represented in the state capitol, protecting their slice of the pie.

Like the much maligned Seattle Seahawks, folks who care about the fate of working class people in our communities are huge underdogs. We really need to fully commit to the cause this year. We need to commit our hearts and souls, our phone calls, letters and visits, if we are to to protect the very fabric of our community— the ability to protect and provide for the most vulnerable among us. To keep our Hawks metaphor alive: We need to Always Compete and put it all out on the field, if we are to have any chance to succeed.

People power!

So, Monday, January 17, I am celebrating Martin Luther King Day by tapping the “I’m In” touchstone and joining hundreds of other people in Olympia to lobby the Washington State Legislature to strengthen our communities by:

• Protecting people from foreclosure by implementing a foreclosure mediation process in the state. Foreclosure mediation would give homeowners an opportunity to sit down with their lender to discuss alternatives before losing their home and most valuable asset. Twenty-three other jurisdictions — state and municipalities — have some sort of mediation process to seek foreclosure alternatives. These programs have found that 60% of people participating in mediation avoid losing their homes.
• Supporting programs that will help people with low incomes build up their assets and create opportunities to prosper.
• Ensuring access to TANF, Disability Lifeline and other programs that help people maintain their dignity.

Join Poverty Action on the Capitol for MLK Day to advocate for the issues important to you and your community.

For more information or to reserve your spot, please contact Kate.

Transportation, breakfast & lunch, & interpretation are available. Children are welcome to join.

I’m in! Are you?

Hundreds flock to Mortgage Help Day

Volunteers gather consumer stories at Mortgage Help Day

More than 200 homeowners met this past Saturday with representatives of banks and HUD-certified housing counselors to try and find solutions to their mortgage problems. Housing Counselors and bank reps tried to create work out plans to keep folks from foreclosure. At the same time, advocates provided information about other options available to homeowners facing default and highlighted the need for changes in public policy that will protect Washington homeowners from foreclosure. The meeting, dubbed “Mortgage Help Day,” was organized by Solid Ground’s Statewide Poverty Action Network and a large group of governmental entities and nonprofits. The event was held at South Seattle Community College.

Throughout the day a recurring theme was that the Federal Government’s Home Affordable plan was not working to help homeowners the way it was envisioned.

KOMO News’ coverage showcases some of the challenges homeowners are facing.

The Statewide Poverty Action Network also collected stories from frustrated homeowners to take to the Washington State legislature this coming session in an effort to get legal help for struggling homeowners. Specifically, they are promoting legislation that would create a mandatory mediation process in Washington State. This would give homeowners every opportunity to avoid foreclosure and maximize the ability for loan modifications. In 23 other states and municipalities around the country, this mediation process has helped 60 percent of participants avoid losing their homes.

Mortgage Help Day October 2

Get FREE professional help to avoid foreclosure! Meet directly with lenders and housing counselors. You can learn about the foreclosure process, help prevent future foreclosures and/or remedy the foreclosure crisis. Mortgage Help Day is Oct. 2, 2010 from 10 am to 4 pm at South Seattle Community College Brockey Conference Center (6000 16th Ave SW, Seattle 98106).

You should come if you:

Metro bus ad promoting event

• Are worried about making your next house payment
• Are currently delinquent in your mortgage
• Have received a foreclosure notice
• Are considering bankruptcy to avoid foreclosure

You should bring:

• Photo ID
• Social Security Card
• Last 2 years’ W-2 forms & tax returns
• Last 2 months’ pay stubs
• Last 2 bank statements
• All mortgage documents, including closing documents and statements

Also, if you have them:

• Layoff notice from employer
• Medical letter from doctor
• Additional Info:

Free childcare. Preregistration required for translation services. Metro Bus lines: 125 & 128.

Contact Info: For more information or to preregister for translation services, call: 206.694.6794
www.povertyaction.org

Mortgage Help Day Partner Agencies: Seattle-King County Asset-Building Coalition, Statewide Poverty Action Network, HUD, Solid Ground, Urban League of Metropolitan Seattle, Apprisen Financial Advocates, Parkview Services, American Financial Solutions, ClearPoint Credit Counseling Solutions and the City of Seattle.

Is bankruptcy the right option for you as a homeowner?

In times of financial crisis, people turn to their lenders for help, but all too often they find out their lenders are not interested in saving their homes. That’s right: the banks’ loss mitigation departments are focused on saving the lender’s bottom line, which is connected to the bottom line of their investors.

Bankruptcy might help you avoid foreclosure

Banks bundled up these Mortgage Backed Securities (MBS) and sold them to investors who are not interested in hearing their investment has gone south. Therefore, lenders are not approving loan modifications (LM) unless the modification minimizes their losses and brings value to their investment. They use a Net Present Value formula to determine the viability of the loan modification and use it as a basis for their decision. Banks are real speculators and are looking at your situation in terms of risk and return on investment. In other words, if you are unemployed and have some equity in your home, they’ll probably want you to sell your house before approving a modification. If they approve your LM they’ll expect you to be at least 2-3 months behind in your payments and, even if they approve your LM, they’ll put you on a trial period and wait three months before approving it.