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Member
ycart
Posts: 12
Registered: ‎02-25-2009
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Short Sales and the new Hafa rules JUNE 1st 2012

I heard that in June short sales if you qualify (with no late payments on the history) will be updated with a 13 rating which may be nuetral to the credit scores.  Is it true that a 13 rating means it is nuetral and won't hurt the scores?  Please let me know I had asked about a month ago as well with no response.

Thanks

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pizzadude
Posts: 8,987
Registered: ‎01-28-2010
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Re: Short Sales and the new Hafa rules JUNE 1st 2012

 

Account status 13 indicates a Paid account/zero balance.   Account status is used in conjunction with other fields, such as comments or Payment History that would still indicate a Short Sale or paid for less than full balance, which would still carry a signifcant FICO scoring ding.

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
Member
ycart
Posts: 12
Registered: ‎02-25-2009
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Re: Short Sales and the new Hafa rules JUNE 1st 2012

Would the ding be less than what it used to be? It used to be a settled for less than full balance, so what would the difference be on the ding? Could u give an example of someone with a 780 Fico score the old way & the new 13 rating way? Or just give a more detailed explanation? Trying to help a friend decide what to do in June.
Thanks
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pizzadude
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Re: Short Sales and the new Hafa rules JUNE 1st 2012

[ Edited ]

 

Can you post a link to the article that explains the differences ?   I really can't say that it would be less, but I would have to understand the changes that were described.

 

This chart has been around for a while, it explains the approximate damage that can occur, short sales are usually on par with foreclosures.


DAMAGE POINTS:     HOW MISTAKES AFFECT FICO SCORES 


Credit mistake              If your score is  680              If your score is 780


Maxed-out card
                                      Down 10 to 30 pts.                          Down 25 to 45 pts. 
 
30-day late payment
                                        Down 60 to 80 pts.                 Down 90 to 110 pts. 
 
Debt settlement
                                      Down 45 to 65 pts.                     Down 105 to 125 pts. 
 
Foreclosure
                                      Down 85 to 105 pts.                           Down 140 to 160 pts. 
 
Bankruptcy
                                       Down 130 to 150 pts.                       Down 220 to 240 pts. 
 
Source: FICO

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
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pizzadude
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Registered: ‎01-28-2010
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Re: Short Sales and the new Hafa rules JUNE 1st 2012

 
March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
Member
ycart
Posts: 12
Registered: ‎02-25-2009
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Re: Short Sales and the new Hafa rules JUNE 1st 2012

harp supplement  here is the supplement.  The part about the update to the credit bureaus is close to the bottom of the pdf.  Please let me know what you think. and if you could give me as much detail on how this might change things I would greatly appreciate it. 

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pizzadude
Posts: 8,987
Registered: ‎01-28-2010
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Re: Short Sales and the new Hafa rules JUNE 1st 2012

[ Edited ]

I did a few google searches on HAFA, and various websites descibes the following benefits of this program:

 

  • You can get free advice from HUD-approved housing counselors and licensed real estate professionals.
  • Unlike conventional short sales, a HAFA short sale completely releases you from your mortgage debt after selling the property. This means you will no longer be responsible for the amount that falls "short" of the amount you still owe. The deficiency is guaranteed to be waived by the servicer.
  • In a HAFA short sale, your mortgage company works with you to determine an acceptable sale price.
  • HAFA has a less negative effect on your credit score than foreclosure or conventional short sales.
  • When you close, HAFA provides $3,000 in relocation assistance.

 

Posted below is what I read at the top of page 19 of the link that you posted.   I don't know how the Handbook previously instructed short sales to be reported, so I really don't know at this point how to quantify the impact to credit reporting.    Do you happen to have any information regarding what Section 11.2 Chapter IV previously stated ?

 

The requirements in Section 11.2, Chapter IV of the Handbook related to credit bureau reporting of HAFA transactions are amended as follows:

 

If the real estate is sold for less than the full balance owed and the deficiency balance is forgiven, report the following Base Segment fields as specified:

 

Account Status Code = 13 (Paid or closed account/zero balance) or 65 (Account paid in full/a foreclosure was started), as applicable.

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
Member
ycart
Posts: 12
Registered: ‎02-25-2009
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Re: Short Sales and the new Hafa rules JUNE 1st 2012

Previously short sales were updated as a settled account and dropped scores 100's of points if you had a 740 plus.  I just want to know how this new rating is better since that is what they are saying in this supplement.  It seems no one knows.  Please see if you can find anything else out about it.

Thanks

Member
ycart
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Registered: ‎02-25-2009
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Re: Short Sales and the new Hafa rules JUNE 1st 2012 - MORE INFO

11.2 Credit Bureau Reporting

 

The servicer should continue to report a “full file” status to the major credit repositories for each

loan under the HAFA program in accordance with the Fair Credit Reporting Act and the CDIA’s

Metro 2 Format credit bureau requirements. “Full file” reporting means that the servicer must

describe the exact status of each mortgage it is servicing as of the last business day of each

month. The Payment Rating code should be the code that properly identifies whether the account

is current or past due within the activity period being reported – prior to completion of the HAFA

transaction. Because CDIA’s Metro 2 format does not provide an Account Status Code allowable

value for a short sale, a short sale should be identified with the reporting of Special Comment

Code “AU”. The information below is consistent with “CDIA Mortgage and Home Equity Reporting

Guidelines in Response to Current Financial Conditions” (May 2009).

Reporting for short sales should be as follows:

Account Status Code = 13 (paid or closed/zero balance)

Payment Rating = 0, 1, 2, 3, 4, 5, or 6

Special Comment Code = AU (account paid in full for less than the full balance)

Current Balance = $0

Amount Past Due = $0

Date Closed = MMDDYYYY

Date of Last Payment = MMDDYYYY

Reporting for DILs should be as follows:

Account Status Code = 89 (deed-in-lieu of foreclosure on a defaulted loan)

Payment Rating = 0, 1, 2, 3, 4, 5, or 6

Current Balance = $0

Amount Past Due = $0

Date Closed = MMDDYYYY

Date of Last Payment = MMDDYYYY

I took this from the original Hafa rules here is the link Hafa rules

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pizzadude
Posts: 8,987
Registered: ‎01-28-2010
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Re: Short Sales and the new Hafa rules JUNE 1st 2012 - MORE INFO


ycart wrote:

11.2 Credit Bureau Reporting

 

The servicer should continue to report a “full file” status to the major credit repositories for each

loan under the HAFA program in accordance with the Fair Credit Reporting Act and the CDIA’s

Metro 2 Format credit bureau requirements. “Full file” reporting means that the servicer must

describe the exact status of each mortgage it is servicing as of the last business day of each

month. The Payment Rating code should be the code that properly identifies whether the account

is current or past due within the activity period being reported – prior to completion of the HAFA

transaction. Because CDIA’s Metro 2 format does not provide an Account Status Code allowable

value for a short sale, a short sale should be identified with the reporting of Special Comment

Code “AU”. The information below is consistent with “CDIA Mortgage and Home Equity Reporting

Guidelines in Response to Current Financial Conditions” (May 2009).

Reporting for short sales should be as follows:

Account Status Code = 13 (paid or closed/zero balance)

Payment Rating = 0, 1, 2, 3, 4, 5, or 6

Special Comment Code = AU (account paid in full for less than the full balance)

Current Balance = $0

Amount Past Due = $0

Date Closed = MMDDYYYY

Date of Last Payment = MMDDYYYY

Reporting for DILs should be as follows:

Account Status Code = 89 (deed-in-lieu of foreclosure on a defaulted loan)

Payment Rating = 0, 1, 2, 3, 4, 5, or 6

Current Balance = $0

Amount Past Due = $0

Date Closed = MMDDYYYY

Date of Last Payment = MMDDYYYY

I took this from the original Hafa rules here is the link Hafa rules


It sounds like the new rules do not dictate using the special comment code AU to indicate a short sale ~ at least this is omitted from the new instructions.    Based on that it would appear to me that if the account was never deliquent that it would not be coded with any derogatory status, since it would be given accounts status 13 and payment rating 0.

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX

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