Effect of multiple 120+ lates

[Walt_K]

I have seven negative accounts on my report.  Two credit cards went 150 days late, and my mortgage went 150 days late.  My HELOC went 120 days late.  A student loan and one credit card went 90 days late.  And one credit card went 60 days late.

All of these were between May and December of 2008.  I haven't had any late payments since that time.

The reason for the lates was that I was out of work and I didn't have an emergency fund.  Thankfully I got a job before anything was charged off or I was foreclosed on, but still a lot of damage done.  My reports are mostly clean other than that stretch when I was out of work.  I have two other 30 day late payments unrelated to that time, no reason for them, just wasn't organized and forgot to pay.

With so many negative accounts, do you think I'll be able to get a mortgage later this year, around October?  Will I need anything extra to compensate because of the late payments, e.g., greater reserves?  Assume that I won't be able to get anything removed via GW.  (I've had no success so far, but I am going to try again now that the lates are over two years old.)

Other relevant information.  I have about $120K in student loans.  No other installment loans.  I have a few hundred in CC balances that I am paying off next month.  My annual income is $250K.  I don't know if you can count bonus payments for your income as they aren't guaranteed, but if that counts, probably $285K.  Haven't decided yet whether my fiancee (hopefully my wife by the time we apply) and I will apply together or not because she has some credit issues to work on also.  If we did apply together, and assuming you count the bonus, total HHI would be $330K.     

Thanks in advance.

[Homebuyer24]

I had multiple 120 days lates on my credit report--9 or 10 credit cards back in late 2006-Sep 2007.  No mortgage lates as I did not own a home.  I was really stupid with money--I was in college, working part time, and had taken out a ton of credit cards (several store cards) and just became irresponsible.  By the time I got around to taking care of business, I was getting settlement offers from the credit cards.  I paid off 2 in full and took settlements from the others, so most were listed as settled for amount less than owe.  

Cut to 2008 when I got engaged and then in 2009 began searching for a home.  My credit score was in the 680 range when I first applied for a home loan and fluctuated in the high 670s-690s range in the 8 or 9 months it took to actually buy the house.  Nothing I could do could get me over the 700 hump and I tried to boost my score based on tips I read on this site. 

I have no credit card "debt"--I had credit cards, some with 0 and some with 100-200 balances just to show utilization of under 5%.  I had no auto debt.  My only debt was my student loans--70K.  My w-2 income is 1/5 of yours so I don't think the 120K in student loans is that big a factor.  I have SE income but was not used for my loan as the loan officer did not want to even bother with it.   I was not asked anything about the credit card lates by the UW or my loan officer.  They did not matter and my loan was actually easy to get.   

Not sure what price range you are looking at but if you are putting 20% or more down, your FICO score is going to matter less.  

[Anonymous]

You will likely need 3 full years since the last mortgage late and a minimum of 12 month (possible 24) with no lates.

120 days late on a mortgage counts as a foreclosure for qualifying for a new mortgage as far as waiting periods and such.  They also do not like to see any lates since the situation got worked out so depending on what those other lates were, they could be an issue.  Generally they want to see 3 years post forelcosure for a new loan for FHA.  I believe conventional is more.  Large reserves and low DTI can be compensating factors to override the 2 recent lates but the foreclosure waiting period is likely to be held to pretty strictly.

BTW, I am not saying the house was in foreclosure or was not.  Lenders still consider anyone who got 120 days late or more the same risk as someone who lost their home so they hold you to the same standards for qualifying.  The key with a past forelcosure or BK is proper rebuilding of credit....

[Walt_K]

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@Anonymous wrote:

You will likely need 3 full years since the last mortgage late and a minimum of 12 month (possible 24) with no lates.

120 days late on a mortgage counts as a foreclosure for qualifying for a new mortgage as far as waiting periods and such.  They also do not like to see any lates since the situation got worked out so depending on what those other lates were, they could be an issue.  Generally they want to see 3 years post forelcosure for a new loan for FHA.  I believe conventional is more.  Large reserves and low DTI can be compensating factors to override the 2 recent lates but the foreclosure waiting period is likely to be held to pretty strictly.

BTW, I am not saying the house was in foreclosure or was not.  Lenders still consider anyone who got 120 days late or more the same risk as someone who lost their home so they hold you to the same standards for qualifying.  The key with a past forelcosure or BK is proper rebuilding of credit....

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To clarify, my other lates were a couple older 30 day lates.  I have no late payments on any account since the end of 2008.  So, I'm already at 24 months with no lates.  But it seems that the limiting factor will be 3 years of on-time payments on my mortgage since I went 120 days late on that.  So, if I understand you, I will either have to wait until January 2012 or get the 120 day late removed via GW.   That's only a couple more months after my target of October, so I suppose it won't be so bad.

Thanks for the help.

[Walt_K]

As a follow-up to the 120 day late issue for the mortgage, does that also apply to the HELOC?  What I mean is, if I am able to get them to remove the 120 day late from my mortgage, would I be eligible for a new mortgage inside the 3 year mark with the 120 and 150 day lates still reporting on the HELOC, or will I have to also get the major lates on the HELOC resolved first?

Thanks.

[Anonymous]

More than likely both.  Also, banks rarely remove mortgage related lates unless they were their fault.   Good luck with it all.

[Walt_K]

An additional question.  I've read that 3 years can be sufficient to rehabilitate after a foreclosure, but that you may have to document the reason for the foreclosure.  Since 120 day late is treated as a foreclosure, does the documentation requirement apply to a 120 day late?  I'm not sure what they will want to see as far as documentation.

Thanks.

[guydiver]

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@Walt_K wrote:

An additional question.  I've read that 3 years can be sufficient to rehabilitate after a foreclosure, but that you may have to document the reason for the foreclosure.  Since 120 day late is treated as a foreclosure, does the documentation requirement apply to a 120 day late?  I'm not sure what they will want to see as far as documentation.

Thanks.

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I had a 120 day late with a RF(reposession/foreclosure) noted on my CR's from Well's Fargo, but I got it caught up completely before anything could go through. Had to pay lots of fees and such, but the 120 day with "RF" still remained.  I sent a GW letter, and they would not delete. I sent them back a somewhat angry letter about removing the RF since I paid everything and caught up immediately upon notice of reposession/foreclosure.  I didn't even consider the 120 day late that was on there. To my surprise, after back and forth...explaining my situation and my future business prospects with said bank...the RF disappeared, and it was dropped to 90 days late!  I didn't know the 120 day late was considered the same as a RF until now....so Wells Fargo evidently does seeing that they dropped the 120 day late at the same time as the RF.  YMMV. Mine just hit 6 years old from DOFD.  Hoping to get an early deletion at the end of this year.  Good luck and don't give up. You never know.

[ShanetheMortgageMan]

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@Walt_K wrote:

I have seven negative accounts on my report.  Two credit cards went 150 days late, and my mortgage went 150 days late.  My HELOC went 120 days late.  A student loan and one credit card went 90 days late.  And one credit card went 60 days late.

All of these were between May and December of 2008.  I haven't had any late payments since that time.

The reason for the lates was that I was out of work and I didn't have an emergency fund.  Thankfully I got a job before anything was charged off or I was foreclosed on, but still a lot of damage done.  My reports are mostly clean other than that stretch when I was out of work.  I have two other 30 day late payments unrelated to that time, no reason for them, just wasn't organized and forgot to pay.

With so many negative accounts, do you think I'll be able to get a mortgage later this year, around October?  Will I need anything extra to compensate because of the late payments, e.g., greater reserves?  Assume that I won't be able to get anything removed via GW.  (I've had no success so far, but I am going to try again now that the lates are over two years old.)

Other relevant information.  I have about $120K in student loans.  No other installment loans.  I have a few hundred in CC balances that I am paying off next month.  My annual income is $250K.  I don't know if you can count bonus payments for your income as they aren't guaranteed, but if that counts, probably $285K.  Haven't decided yet whether my fiancee (hopefully my wife by the time we apply) and I will apply together or not because she has some credit issues to work on also.  If we did apply together, and assuming you count the bonus, total HHI would be $330K.     

Thanks in advance.

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While any mortgage going 120 days late is considered the same as a foreclosure in the eyes of FHA, Fannie Mae makes a differentiation between a foreclosure, pre-foreclosure sale, short sale and deed-in-lieu of foreclosure.  What you had wouldn't be any of them, you just went really late on your mortgage, and from what I've discussed with our underwriters is that after 2 years of it being caught up, you could go to 80% loan-to-value on a refinance.

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2010/sel1008.pdf has the full details of that guideline.

[Walt_K]

Thank you.  I think I am going to meet with a couple lenders to discuss the situation more fully and find out what, if any, documentation they would want to see so I can get everything ready.  In any event, we certainly wouldn't be able to do 20% down for the pricerange we are considering.  At least not this year.  DC area is too expensive.  If we have to wait longer, it's not the end of the world.  Worst case scenario, we sell our current place and rent for a year or two.  We just need more space because a one bedroom with a baby is getting cramped.