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Letter of Explanation review please

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Contributor

Letter of Explanation review please

My loan officer asked for a general explanation letter for late payments from 2008-2009. Since he didn't want anything itemized this is what I came up with. Any advice would be appreciated. Thanks

 

 

To Whom It May Concern:

 

I was a naive young person when I started law school in the fall of 2007. By 2008 the legal profession experienced many layoffs and paid summer jobs were scarce. As a result, between 2008 and 2009 I was unable to secure paid legal internships and had to resort to doing volunteer work to gain much needed professional experience. Without income from a paid summer position I tried to stretch my student loans to cover my summer cost of living expenses in addition to my academic year expenses, which is not what the funds were intended to do. I was struggling to make ends meet and did not have a sophisticated understanding of the importance of good credit behavior. As a result, between 2008 and 2009 I failed to make timely payments on some of my consumer credit accounts. This damaged my credit rating.

 

In 2010, I began to really educate myself about the importance of maintaining good credit behavior.  I started to repair my credit. I used several measures to ensure that my credit rating would increase. I paid all of my bills on time, I enrolled in automatic bill pay programs, I started getting my credit report every 6 months, and I subscribed to a credit monitoring service. Since taking these steps, among others in 2010, I have not had one derogatory mark on my credit report. I have paid off any and all collection accounts in full, and did not shirk my responsibility by accepting settlement arrangements. In fact, because of my good behavior I was able to reopen accounts with two credit grantor's who had closed my accounts in 2009 -- American Express and Comenity Bank. I have also never been late on any of my student loan payments since I graduated from law school over 3 years ago.


Today, I am older, wiser, better educated about the importance of maintaining good credit behavior, and I hold a secure full-time job as an attorney. I have been in my position for the last 3 years and have a stable income that is on the rise. I believe that my credit behavior in the last 3 years is a more accurate indicator of how I will approach my responsibility as a borrower should you approve my mortgage application. My plan going forward is to continue meeting my financial obligations on time as I have done for almost 4 years now.

Message 1 of 5
4 REPLIES 4
Valued Contributor

Re: Letter of Explanation review please


@BrokeStudent2010 wrote:

My loan officer asked for a general explanation letter for late payments from 2008-2009. Since he didn't want anything itemized this is what I came up with. Any advice would be appreciated. Thanks

 

 

To Whom It May Concern:

 

I was a naive young person when I started law school in the fall of 2007. By 2008 the legal profession experienced many layoffs and paid summer jobs were scarce. As a result, between 2008 and 2009 I was unable to secure paid legal internships and had to resort to doing volunteer work to gain much needed professional experience. Without income from a paid summer position I tried to stretch my student loans to cover my summer cost of living expenses in addition to my academic year expenses, which is not what the funds were intended to do. I was struggling to make ends meet and did not have a sophisticated understanding of the importance of good credit behavior. As a result, between 2008 and 2009 I failed to make timely payments on some of my consumer credit accounts. This damaged my credit rating.

 

In 2010, I began to really educate myself about the importance of maintaining good credit behavior.  I started to repair my credit. I used several measures to ensure that my credit rating would increase. I paid all of my bills on time, I enrolled in automatic bill pay programs, I started getting my credit report every 6 months, and I subscribed to a credit monitoring service. Since taking these steps, among others in 2010, I have not had one derogatory mark on my credit report. I have paid off any and all collection accounts in full, and did not shirk my responsibility by accepting settlement arrangements. In fact, because of my good behavior I was able to reopen accounts with two credit grantor's who had closed my accounts in 2009 -- American Express and Comenity Bank. I have also never been late on any of my student loan payments since I graduated from law school over 3 years ago.


Today, I am older, wiser, better educated about the importance of maintaining good credit behavior, and I hold a secure full-time job as an attorney. I have been in my position for the last 3 years and have a stable income that is on the rise. I believe that my credit behavior in the last 3 years is a more accurate indicator of how I will approach my responsibility as a borrower should you approve my mortgage application. My plan going forward is to continue meeting my financial obligations on time as I have done for almost 4 years now.


Seems pretty wordy to me. The simpler, the better in my opinion for LOE.. my LOEs were really simple. I am suprised they didn't want itemized, I had to do LOE for every negative listing and every INQ on there. Here is one from mine.

 

"Judgment, Home Properties LP, CASE: XXXXXXXX  Illinois. $ 1771. PAID

 

When I moved out of my apartment at Courtyard’s Village in Naperville, IL, I left with

2 months left on my lease. This was due to me living in this apartment with my Mother who passed away in May 2008.

I was unaware of the penalty involved, and they sued me for the remaining balance.

I was unaware of the suit and there was a default judgment. I have since paid this judgment.

The suit was filed in October 2008 and I paid it in September 2011. I will make sure I understand contracts I sign going forward

so this type of situation will never occur."

 

Did your LO tell you how detailed they needed it to be? Usually they want the bare minimum to satisfy the underwriter.

 

-scott

Starting FICO Score: 10/10: TU 498 | EQ: 502 Current FICO Score(lender pull): 09/14: TU: 784 | EQ: 752 | EX: 784
Collections Removed: Hunter Warfield, CBE Group, Merchants Credit Guide, EOS-CCA, Enhanced Recovery, Portfolio Recovery, UCB, American Collection Company, Medical Business Bureau, Jefferson Capital, Credit Portfolio Associates, FCO, LVNV, Convergent, Armor Systems
Other Negative Entries Removed:Plains Commerce CO, HSBC CO, 2008 Judgment Santander Reposession


Positive Accounts:10/10: 0 | 07/12: 6 | Mortgage Closed 5/12, Macy's AMEX $13900, Citi/Home Depot $8500, Capital One Cash Rewards $3500, BOA $7500 Total Utilization: 3%. AAoA: 2yr, 9mth. INQS: 1 TU, 1 EQ, 3 EX
Message 2 of 5
Contributor

Re: Letter of Explanation review please

No, the LO did not say how wordy it should be. But I'll take you advice and rework it. Thanks. 

Message 3 of 5
Community Leader
Super Contributor

Re: Letter of Explanation review please

Most letters of explanations are fine, it just needs to cover what happened, why it happened, and what steps you've taken to prevent it from happening again.  It's the ones that go something like "I filed Ch 7 BK because of a hardship, I figured out how to resolve the situation and promise to pay my bills on time and that it will never happen again" that don't work.

Helping people with Mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
In Irvine, CA and lending in all 50 states

Information that is needed to determine if you qualify for a mortgage

Message 4 of 5
Super Contributor

Re: Letter of Explanation review please

simple is best

1. what happened?

2. how did you deal with it?

3. what steps have you taken to ensure that it isn't likely to happen again

 

Retired Lender
Message 5 of 5