help - denied mortgage, under contract, recent damge to credit

[Anonymous]

We had decent credit prior to feb.  680/740.  iIn feb a student loan reported 60 days later - long story, a new servicer on a loan that was in grace period did not have updated contact for my husband and kept sending bills to the wrong address.  We contacted them in dec to find out when the bills would come but they said he wasn't in their system.  Anyway, my husbands 680 has vanished and is now 585 - the student loan is reported as 6 different 60day lates, even though it is one creditor, one loan payment we make.  The loans are now current and in forebearance until the end of the year.  He has been on the job 6mths making  salary of 145K. Prior to that he was in school. We got denied from wells fargo almost immediately - within a few days after application!! - due to "layered risk" - they say, not enough time on job, the 60 day late in feb, and low score. Plus we have student loans totally about 28% of our debt/income ratio.  We are trying to apply through 2 different other lenders right now but I am scared we are now hopeless because our our denial.  I read somewhere that it is hard to get approval after an fha denial, is that true? Is there any way for us to get a mortgage and still make it to closing after this denial? We close end of May.  Someone please help.

[Anonymous]

To get approved you are going to have to get those lates removed.  It will all depend on what happened at the SL lender, and if they are willing to be helpful about it.  It is always the debtors fault if payment is not submitted to someone.  So if the loan were due, but you guys were waiting on bills that never came, unfortunately it  was still up to you guys to call until the matter was resolved.  That said, it seems the perfect case where they may remove the lates if you talk tot he right person or GW.

Without those lates removed, no one is going to give you a home loan with high DTI, low score, recent lates, and 6 months on the job.

[Anonymous]

That is really tough to hear. We have been on the phone with the aes/ fedloan servicing ppl many times. They gave my husband a retroactive forebearance and said it would wipe out any delinquency. Still the lates were reported. Foolishly we did not get in writing and now they say there is nothing they can do. The lates are reporting delinquent with a past due balance but the deferrment brought the account current. Will it help if the lates stay but the account shows current with no past due amount. Will it increase the score? And by how much? And if we are dead in the water and no one will give us a loan would we be able to try in 6mths when my husband would have been on the job for a full yr.

[Homebuyer24]

If they retroactively put you in a forebearance (still in school etc . . .) then the lates should be erased.  My only idea which is normally one you would not do when you are trying to close on a house in May is to dispute the lates on your credit reports with the credit bureaus--problem is that can take a while to get resolved, but you can try to call and try to make it happen asap.  I think overall it takes about a month on the good side.  If you need to pull the disputes, you can fax the companies and have the dispute cancelled that can take about 2 weeks.  I think you have a very good case of disputing the lates by claiming the loan is current and in forebearance and the lates should not have reported in the first place etc . . . I had a dispute that took only 10 days to get rid of when I was closing--had a CC which had charged off and I settled and it said that but also claimed there was still a balance owed (vs 0) and that was being added to my revolving credit amount.  I called BofA and they fixed this pretty fast, especially when I went on they were jeopardizing my loan with this inaccurate info etc . . . I had an issue w/ Citicards too before closing and did not dispute it but dealt w/ Citi and they were really good about fixing the inaccurate info (my balance had not updated in three months) which affected my revolving credit.  

As for the student loans, I had an issue when switching to IBR and I have to say the first line of people you talk to is hit or miss. Ask to speak to a manager or supervisor and get your situation elevated.  Explain how it is effecting your home loan and credit.

Even though your husband has only been on the job 6 months, if he has been in school for his chosen career than that shouldn't matter.  I was approved for a home loan even though I'd been working less than a year.  My previous 2 year taxes had been when I was a student and included a semester where I had to quit my job and do an internship for my degree for a semester, so my income was really low back then and it wasn't an issue.  

As for your student loans, at 28% dti that is terrible, but not unusual.  I don't know if that can be changed, but for future reference, even though his salary is high, I believe your husband should look into IBR payments to see if they lower his payment (google IBR calculator).  Plus, if he works for a non-profit private corporations or govt entity he could qualify for PSLF in 10 years (public service loan forgiveness).  There are also programs to get Perkins loans reduced separate from IBR.  So ask, even if you think you may not qualify, you may.  

As for the student loan payment, IBR will not matter and they will go by what would be the actual payment. The only time I had a builder representative say something different was when they were asking me about my credit situation and I told them my only debt was my student loan.  She asked me what my payment was (graduated payment back then--grrr I wish I knew about IBR because that would've counted towards my loan forgiveness) and I told her about the payment plan I was on and how it was a lower payment etc . . . and she asked me if I could show proof that the payment would be the same for 2 years.  Now she wasn't the broker or lender but she would be the person to input all the info etc . . . I'm not sure what proof I would need but I did have the repayment schedule they'd sent me so I said yes, I had proof.  I ended not buying a new house so it didn't matter in the end.  The other trick is sometimes you can not count student loans if they are in forbearance due to being in school.  This is a crap shoot because you'd have to prove forbearance for X amount of time but maybe your husband could take just enough credits at community college to get this.  Online classes count (make sure to not take out loans and just pay for the classes) but this is a real crap shoot. However some jobs will pay more the more college credits you get so this may make it worthwhile to see or do tuition reimbursement (my husband's does this depending on grades and program) so worth exploring).

[Homebuyer24]

Sorry, somewhat off subject but regarding IBR payment calculations, try to do the math to see if it benefits you.  If he is working and you're not right now, and you live in a community property state (like California) doing IBR and Married Filing Separately might save you  alot of money.  Legally MFS in California means 2 separate returns and the IBR payment should be on half of his income (145K) so 72.5K and that can really reduce his payments.  Or let's say he works and you don't but also have student loans, then MFS in a non community property state (like NY) would allow you to pay nothing on your student loans and he would pay based on 145K income.  This plan of MFS only works if one of you makes a lot of money and the other makes a lot less.  If you make about equal than it still may help but not as much.  

[Anonymous]

I had the same problem. AES/Suntrust bank told me there was nothing they could do, that was after three or four attempts via email, phone, supervisor's, etc... Then I called the Pennsylvania Attorney Generals office because I knew it was not my fault, my loans were not late, the company screwed up and offered me a forbearance while I was working out of town. The company AES/Suntrust told me over the phone I didn't have to do ANYTHING and just make my payment in Jul 2010. I did go to make my payment and called customer service and they told me I was in jeopardy of defaulting! **bleep**!! I paid off the last three months of payments owed and swore I would never deal with the company again over the phone. I was denied a mortgage pre-approval because of this 60 day late payment. So, what did I do, I called the Pennsylvania Attorney Generals office. Within two weeks the company, AES/Suntrust, sent me a letter telling me it was all their fault and they would remove the 60-day late payment! Try to be nice at first, but if you don't succeed call the PA Attorney General's office, it helped me.

[Anonymous]

Thank you so much for the helpful responses!! Dunkin - I sent you a private message. Would LOVE more details on trying to get lates removed by called the PA AG's office.  UPDATE - Right now we are going thru another lender. He has decided to do a rapid rescore.  AES/Fedloan servicing is sending us a letter stating that all accounts are current (they are reported as delinquent and past due 60days).  He hopes that the letter will force the rescore and we will see an increase in my husband's credit score. I did a simulator online and it says to bring all the accounts current will increase his score by 37-66 points depending on the credit bureau.  Will this help us get to u/w and ultimately get a mortgage?

[MBOhio2]

We also had the same issue with AES on my husband's student loans. Retroactive forbearance covered the one late payment (we also moved right at the time the loans came due) but they claim that has no bearing on their reporting of the 30-day lates.

[Anonymous]

The reporting stuff is a pain becuase legally/technically it is always the borrowers respnsibility to make payment on debt until they have confirmed other wise.  So, in the case of a forebearance, they often times will tell you to keep making payments until you get writeen confirmation that it has been approved and processed correctly.  Same goes with any changes.  This case is a bit different due to the change in serviver, but just like a mortgage...if the servicer changes, you are still repsonsible to pay even if you have to wade through alot of BS to get the $ to the right person.