This is one of the most pivotal times in our history, and a major opportunity for home-buying. Watch this video as I give you the top reasons for you to get into the marketplace … whether this is your first purchase, or 35th!
My company frequently works with customers to “clean up” their credit so that they can qualify for a home loan. This process typically takes about 6 months, maybe longer depending on the severity of the problem and the resources available to pay off delinquent accounts. We don’t charge anything for this because: a) it’s illegal, and b) it’s part of serving our clients and ensuring they get a loan they can live with.
We have been working with one couple on this process for about 8 months, and we were able to get them approved to buy a home. We all know that corrections/updates to credit tradelines can take somewhere between 30-90 days to be reflected on your credit report. However, this isn’t always the case. Sometimes the delinquent items continue to reported inaccurately for years. In my experience, in no instance is this more true than with government judgments and tax liens.
We’ve all heard horror stories about government inefficiencies from every department in every level of government. Whether it’s the DMV or the USPS, it’s a big undertaking and people are, after all, only human. There will be mistakes. However, the lack of accountability is an area in which I think the public sector excels.
When we re-pulled the credit to get the loan going, the client’s FICO score was just fine. However, a $257 judgment from Multnomah County, OR was still reporting as delinquent. A couple of years ago, the county instituted a temporary income tax called the ITAX, and many people wound up owing hundreds, sometimes thousands of dollars when the tax expired. Our clients were some of those people.
The client had paid a settlement with the county a couple years ago, and believed that this amount was included. Even if it wasn’t, $257 isn’t a huge deal for anyone to worry about. Until you start adding penalties and 9% interest, that is.
We decided that we would submit the loan file anyway, and given underwriting turntimes, we would be able to collect proof before every other piece of documentation had been signed off by our underwriter. What follows is the story of how that happened.
I called the county circuit court, where the judgment had been filed and processed. I was given another number to call. The person at that number couldn’t help me, because it was a “small claims” matter. She gave me the number for small claims. The nice man at small claims told me that he could accept a payment for the judgment, but has no way of knowing what the payoff amount would be. I played along hoping he could give me the number of someone who would know more about the issue. He directed me to yet another phone number, which was the “helpline” for the ITAX. I called this number. It was out of service, as it expired THE SAME YEAR THE ITAX EXPIRED, which was a few years ago. A pre-recorded message directed me to yet another number. The person I talked to at that number told me that the account had been sent to collections, and gave me the number of the collection agency they contract with.
OK, now I’m getting somewhere. I skeptically call the collection agency, and a very helpful lady answered the phone and told me what I already suspected:
They would never sue someone over $257 because it costs $100 to file the suit.
This is where her very nice qualities shined through. She took down my information, and said she would call the county courthouse to find out what was going on and get back to me. I thought to myself, “why the heck would she take the time to do all that for something she has no prayer of receiving payment on?”. However, I thanked her and moved on.
I called the county back, explaining yet another person what I had just been through, and she directed me to the one man who still deals with ITAX payment issues. She also asked to remain on the line to verify that this would be the correct way to deal with any other future ITAX related issues so that people like me would not have to waste what had become a 45 minute telephonic wild goose chase. I thanked her profusely.
The “ITAX man” picked up the phone and was very courteous and professional. However, he told me something after looking up the client in his system that absolutely floored me. He said that the client’s judgment amount was for $833! I told him they had another tax lien from a previous year that had already been paid off, as indicated on my credit report. He said he didn’t have any record of that, but that he would take my word for it because that’s what the credit report said. He said that the client would need to send his department a check for the $257, and he would send the check and the paperwork to the attorney’s office. The attorney would clear the item, then send the check in to be processed. Once the check had cleared, I would get an email with the proof of payment on county letterhead. I hesitantly asked him how long he thought this process would take. He said 5 or 6 business days.
I knew the client would pay the $257 just to get it over and done with, and feeling like I had accomplished a small victory, we called him. He told us that he had just made 5 phone calls to various county departments and that they told him that their records indicated that he didn’t owe anything, which is what we suspected all along. However, he would need to get a letter from the law firm he settled with indicating as such so that we could prove to the lender that everything was all clear. That is where we are in the process.
Now, everyone I talked to during this entire process was courteous and helpful. But here’s what I want to know:
How can a society function when it takes roughly 23 phone calls to clear up a $257 judgment that NOBODY can even determine is still active?
It would be a shame if something like this caused this client to miss out on the opportunity to buy the house of their dreams at a record low interest rate. Surely, we can do better.
I thought this information would be beneficial to know, when you are dealing with sellers on a Short Sale basis. Many consumer don’t realize the impact of a short sale on their credit. Read the attached article and commentary from our credit agency below. There are a couple KEY pieces:
1. Foreclosure – lenders won’t do another loan for 4 yrs. (Bankruptcy is now 4yrs also)
2. Short sale – if they keep payments current and their credit is relatively intact, and they do due diligence with the lender to determine how they will report the Short sale on their credit report (ie. “settled” is the best, Deed in Lieu is the same effect as a “foreclosure”) this will result is the least amount of damage to their credit rating. That also goes for a Notice of Default (NOD), even though a foreclosure process was started and the seller is able to sell the home prior to it actually going to foreclosure sale, this will be reported as “foreclosure in process” on their credit, which is treated as a “foreclosure” for credit scoring purposes.
3. Oregon is not a deficiency State. Meaning that Oregon does not pursue the seller for any deficiency. The banks just take the loss, the seller’s credit is damaged, and that’s the end of it.
4. The biggest advantage to sellers in a Short Sale is keeping payments as current as possible and getting the lender to reflect the account as “settled”. That will allow this borrower to secure another home loan sooner (maybe 2yrs), rather than if a foreclosure or NOD (4yrs) is reported on their credit.
I think this is valuable information to share with your sellers.
To Your Success,
Evergreen Ohana Group
5331 SW Macadam Ave, Suite 287
Portland, OR 97239
Office: (503) 892-2800 Ext.11
Fax: (503) 892-2803
OR ML-21,WA 510-LO-33391, WA:520-CL-50385