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Navy Fed Refi Denial

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Anonymous
Not applicable

Navy Fed Refi Denial

Hi I am new to the board and need some advice.  We bought a foreclosure on a VA loan with NFCU for $460K.  Current appraised value around $600K.  We applied for a refi to take $75K out in order to pay down debt (pay off vehicle loan, CC, etc) and do some additions to the property.

 

NFCU denied stating :

 

1. unpaid medical collection - We have this in dispute with CRA's

2. collection accounts late - also in dispute as they were paid several years ago, but show as open, unpaid

3. Increased housing expense - true our mortgage will go up by $149/mo...but by paying off the vehicle we reduce $524/mo, CC by $200/mo, plus a couple of others so a net reduction in monthlies of nearly $1800.

 

Also, the CS they sent showed EQ Beacon 5.0 601 EX FI 567 TU FICO RISK 615.  We are on EQ's service and they show EQ 658 EX 662 TU 655 but don't list Beacon, FI V2 or FICO RISK...what gives?

 

I need advice on appealing...getting this refi will really put us in a good position financially to improve our situation.

 

Thanks in advance.

Message 1 of 12
11 REPLIES 11
Lel
Moderator Emeritus

Re: Navy Fed Refi Denial

 


@Anonymous wrote:

Hi I am new to the board and need some advice.  We bought a foreclosure on a VA loan with NFCU for $460K.  Current appraised value around $600K.  We applied for a refi to take $75K out in order to pay down debt (pay off vehicle loan, CC, etc) and do some additions to the property.

 

NFCU denied stating :

 

1. unpaid medical collection - We have this in dispute with CRA's

2. collection accounts late - also in dispute as they were paid several years ago, but show as open, unpaid

3. Increased housing expense - true our mortgage will go up by $149/mo...but by paying off the vehicle we reduce $524/mo, CC by $200/mo, plus a couple of others so a net reduction in monthlies of nearly $1800.

 

Also, the CS they sent showed EQ Beacon 5.0 601 EX FI 567 TU FICO RISK 615.  We are on EQ's service and they show EQ 658 EX 662 TU 655 but don't list Beacon, FI V2 or FICO RISK...what gives?

 

I need advice on appealing...getting this refi will really put us in a good position financially to improve our situation.

 

Thanks in advance.


 

Hello, and welcome to the Forums.  A couple comments:

 

What is the current balance on your mortgage?  Cash out refinances are more difficult to come by these days, and your ending LTV has to be below certain thresholds in order to qualify.

 

Disputes on your credit reports will almost always stop a mortgage application in its tracks.  For the collections that you mentioned in point #2, were they already on your credit report at the time that you originally purchased your home?

 

I understand your intent to pay off other debt with your cash-out refinance, but to the lender they have no way of knowing that this will actually happen.  Thus, at least at the time of application it will result in an increased DTI once the loan is funded.

 

The credit scores that you obtained from your lender are actual FICO scores.  They are all below the generally accepted threshold for mortgage loan approval, though some lenders allow for lower scores.  The scores that you got from Equifax are not FICO scores - they are the result of a different scoring formula (called the Equifax Credit Score).  Though based on similar criteria as FICO scores, these non-FICO scores are usually different from the actual FICO scorea - sometimes dramatically different - and there's no way to reliably convert a non-FICO score into an estimated FICO score.

Message 2 of 12
Anonymous
Not applicable

Re: Navy Fed Refi Denial

Actually the DTI can be handled easily by paying those debts off through Escrow.  Your DTI will be calculated as if those are paid off, as it will be a funding condition that they do get paid off.

 

Your loan to value may be tight. VA allows for a LTV of 90%. That would be $540,000 based on your estimated value of $600,000. If you are paying off the $460,000 plus another $75,000, that only leaves $5,000 for all your closing costs.

 

Do you have any documentation showing the collections as paid, so that can be reported correctly on the credit report, and possibly re-scored?

Message 3 of 12
mauve
Valued Contributor

Re: Navy Fed Refi Denial

Paid and unpaid collections are scored the same.


Starting Score: EQ 583 TU04 619 EX 592 (lender pull) 2010
Previous High Score: EQ 700 TU04 712 EX 726
Current Score: EQ 740 TU(Discover) 750 EX(AMEX) 747
Goal Score: 740+ all around


Take the myFICO Fitness Challenge
Message 4 of 12
Anonymous
Not applicable

Re: Navy Fed Refi Denial

HI guys...tahnsk for the responses...

 

The current payoff is $450K on the mortgage and the LTV should (according to the processor at NFCU) be ok as I am well below the 100% LTV for a VA refi.  Yes these collection accounts were on the origianl mortgage with NFCU so I did already explain these on the original mortgage.  It's as if they do not have access to the original file.

Message 5 of 12
Anonymous
Not applicable

Re: Navy Fed Refi Denial

Yes I have a letter from the CA stating paid in full and closed.  NFCU has this even...

Message 6 of 12
Anonymous
Not applicable

Re: Navy Fed Refi Denial


@Lel wrote:

 


@Anonymous wrote:

Hi I am new to the board and need some advice.  We bought a foreclosure on a VA loan with NFCU for $460K.  Current appraised value around $600K.  We applied for a refi to take $75K out in order to pay down debt (pay off vehicle loan, CC, etc) and do some additions to the property.

 

NFCU denied stating :

 

1. unpaid medical collection - We have this in dispute with CRA's

2. collection accounts late - also in dispute as they were paid several years ago, but show as open, unpaid

3. Increased housing expense - true our mortgage will go up by $149/mo...but by paying off the vehicle we reduce $524/mo, CC by $200/mo, plus a couple of others so a net reduction in monthlies of nearly $1800.

 

Also, the CS they sent showed EQ Beacon 5.0 601 EX FI 567 TU FICO RISK 615.  We are on EQ's service and they show EQ 658 EX 662 TU 655 but don't list Beacon, FI V2 or FICO RISK...what gives?

 

I need advice on appealing...getting this refi will really put us in a good position financially to improve our situation.

 

Thanks in advance.


 

Hello, and welcome to the Forums.  A couple comments:

 

What is the current balance on your mortgage?  Cash out refinances are more difficult to come by these days, and your ending LTV has to be below certain thresholds in order to qualify.

 

Disputes on your credit reports will almost always stop a mortgage application in its tracks.  For the collections that you mentioned in point #2, were they already on your credit report at the time that you originally purchased your home?

 

I understand your intent to pay off other debt with your cash-out refinance, but to the lender they have no way of knowing that this will actually happen.  Thus, at least at the time of application it will result in an increased DTI once the loan is funded.

 

The credit scores that you obtained from your lender are actual FICO scores.  They are all below the generally accepted threshold for mortgage loan approval, though some lenders allow for lower scores.  The scores that you got from Equifax are not FICO scores - they are the result of a different scoring formula (called the Equifax Credit Score).  Though based on similar criteria as FICO scores, these non-FICO scores are usually different from the actual FICO scorea - sometimes dramatically different - and there's no way to reliably convert a non-FICO score into an estimated FICO score.


So what good is the EQ Credit Score to me if it is so disparate from the FICO scores?

Message 7 of 12
Anonymous
Not applicable

Re: Navy Fed Refi Denial

Not exactly true. I have had several borrowers pay off collection accounts, done a rapid rescore, and their credit scores rose significantly.

Message 8 of 12
ShanetheMortgageMan
Super Contributor

Re: Navy Fed Refi Denial


@Anonymous wrote:

HI guys...tahnsk for the responses...

 

The current payoff is $450K on the mortgage and the LTV should (according to the processor at NFCU) be ok as I am well below the 100% LTV for a VA refi.  Yes these collection accounts were on the origianl mortgage with NFCU so I did already explain these on the original mortgage.  It's as if they do not have access to the original file.


Cash-out refinances are much higher risk than purchase transactions, which may explain why the risk was OK for having the collections when you purchased, but the added risk of a cash out does not go along with those collections.  You are improving your position, but you are worsening NFCU's position.

 

How long ago did you purchase the home, and what were your scores then?

 

You also asked:

So what good is the EQ Credit Score to me if it is so disparate from the FICO scores?

 

If you don't pay anything for it, or very little for it, then there is some value as you can use the "Equifax Credit Score" as a baramoter on what your actual EQ score is.  However here at myFICO.com you can get your Equifax score which uses the same scoring system as most lenders - Beacon 5.  Cost $20, but in my opinion that is a tremendous value if you are sensitive to having your credit scores checked by creditors.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 9 of 12
mauve
Valued Contributor

Re: Navy Fed Refi Denial

 

Sounds like maybe it was a closed revolving account that was counting towards utilization - or the account was deleted upon payment for no apparent reason.  Or something else changed.  It would be a fundamental change in FICO scoring if paid and unpaid collections were scored differently.

@Anonymous wrote:

Not exactly true. I have had several borrowers pay off collection accounts, done a rapid rescore, and their credit scores rose significantly.


 


Starting Score: EQ 583 TU04 619 EX 592 (lender pull) 2010
Previous High Score: EQ 700 TU04 712 EX 726
Current Score: EQ 740 TU(Discover) 750 EX(AMEX) 747
Goal Score: 740+ all around


Take the myFICO Fitness Challenge
Message 10 of 12
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