The Importance of Obtaining A Good Credit Score
619-620 = High Interest Rates
Here is a story about Liz and Hernando Bodia. They became victims of the system and were paying interest rates that can be branded like a highway robbery. Hernando owned a home and in 1998 became totally disabled. He had about $20,000 in equity in the home and had an un-blemished payment record.
Hernando was involved in a work-related accident and was deemed 100% disabled by the Federal Social Security Commission. During the time that he became disabled, he couldn’t make payments on his home. The lender (won’t mention names) has a stellar reputation in the mortgage industry for preying on the BC market or in street terms - financing people with less than perfect credit.
Hernando realized his situation and contacted the bank. He in his simple manner, asked if the bank could provide a program to make his payments after he receives his Social Security settlement. They could have extended the mortgage. They knew he was getting Social Security. When Hernando got his Social Security Check, he offered to make all of the back payments. He was refused because the house was already in foreclosure.
They virtually stole his home. But the worst part is the entry of foreclosure on his credit report. What a shame! Hernando subsequently married Liz and they were able to buy a home on her credit and income. The story does not end here. She recently wanted to refinance to take advantage of a better interest rate. We took the mortgage application. Her Beacon score was 619. Remember back in the articles when we talked about Beacon scores. 620 was the magic number that underwriters use to separate consumers from being conforming or non-conforming.
If your credit score is 619, you are automatically put into a sub-prime category. This means you might pay 9 ½% for a mortgage rather then 7 ½% that a good credit risk might pay. Doesn’t sound fair but let’s run the numbers.
7 ½% on $100,000 the first year is $7,500. 9 ½% on the first year is $9,500. Multiply that by 30 years and you see the real cost of what a 619 Beacon score can cost you. Anyway, Liz had an entry on her credit report that showed she was 30 days late on a mortgage payment. Now we know about electronic underwriting where the underwriter is a machine that simply is locked up in the basement of the bank building and the only thing that it can do regarding underwriting is respond to what is placed in front of it. It is not allowed to ask questions or find out the reasons for certain things.
Then we have manual underwriting. But this takes a little effort and time. God forbid that some fancy pants loan officer would actually try and help someone. Manual underwriting means that a real live person looks at a mortgage application and an accompanying credit application. When the obvious presents itself (such as a credit score within one point of becoming conforming), it would be prudent for that loan officer to ask questions or find out the reason.
In the case of the family above, it was evident that the loan officer was either out playing golf, having coffee or simply deciding whether or not to answer his voice mail (that really is everyone’s pet peeve). I want to wander for a minute regarding mortgage applications and how manual underwriting could help this family obtain a conforming mortgage.
Liz had kept all records. She was never late. She talked to the lenders representatives and was told that there was nothing that could be done. Her record showed a (30) day mortgage late and she had to pay the costs and other expenses related to this situation. Now, you tell me how an average working person can solve a situation like this. Should she hire an attorney? What could he do? How much would he charge? Well, Liz and Hernando are not folks that “fell off of the fruit truck”. They thought of an ingenious way to get the best attorneys to represent them and not pay any money. What you say? Well here is what they did. Rather than go through the aggravation of dealing with incompetents, Liz contacted the Florida Department of Banking and reported her dilemma.
Now remember, Liz was an impeccable keeper of records. She provided the Department of Banking and Finance with all records and proved her contention that she was never late. The State of Florida notified the lender in a very terse letter letting them know that they might be audited. Lo and behold, the lender sends a letter to the State of Florida and to Liz and for some unknown reason, they conveniently found the misplaced payment. Wonders will never cease, when the big boys know that you are serious. Liz got a check back for all of the charges, her credit report was made clean and she got her credit scores raised and her new mortgage followed.
There is a moral to this story. When you run into that “brick wall” because someone in the system has “power and authority” and they can only respond with “no”, use the example of Liz and Hernando. There are various different branches of government where people are paid to listen to the complaints and problems of consumers. Politicians maintain a staff to listen to problems that just might “help the cause”. These folks are paid to help you. Why not use them to intercede on your behalf. The key here is the manner in which Liz kept records. If you think that because you are upset and mad and can yell louder than the next door neighbor’s “german shepard” , think again. That gets nothing. BUT, good records are evidence of someone that is organized.
Thanks, Regis Sauger http://www.yurcredit.com Regis Sauger is a licensed Mortgage Broker in Florida, an author, lecturer on credit awareness. He have conducted seminars for underwriters, attorneys, mortgage lenders, realtors and the general public.
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