Reporting?

[WonderingToo]

What is the name of your state? OK

Not sure where to put this, hope this is the right category.

Our house in FL is currently for sale, and has been for 7 months. We had to put it on the market last year because my husband's company transferred him to OK. Had he not been transferred, he would have been laid off.

After we put the house up for sale, the market sharply declined, and we were forced to lower the price. Having bought the house in '05, we did not have much equity in it, and lowering the price would mean a short sale. Over the past 7 months we had to lower the price by 25% to keep up with the market and the appraisal value of the house.

We have a VA loan, type 6, meaning that if the house sells for less than what we owe, the VA will pay the lender the difference as long as the sales price meets 88% of the appraised value. We have an offer on the house that got approved yesterday by the lender, because it does meet that criteria. The VA wil not collect the difference they pay the lender from us, unless we would want to use the VA loan again. They suggested that instead we put that money towards a down payment on a conventional loan. The VA will not report this 'debt' to the credit bureaus, and we were told that the VA funding fee we paid upon securing the loan, functions as some sort of 'insurance' for this.

As soon as we learned the sale of our home was going to be a short sale, we contacted our bank to talk about how this would affect our credit (great standing). In every conversation we've had with them regarding the sale of our house (and there have been many), we were told that it would not be reported to the credit agencies. We were told this by people from customer service, to people in the loss mitigation dept handling our case.

Now when all is said and done, after us asking at least a dozen times, because we like to have our things in order and know what were up against, we were told yesterday they had to by law, report a 'settlement' on the loan to the creditbureaus.

Is that true and does that make sense? The bank is not losing a dime on this sale, the VA is. If anyone should be allowed to report this to the credit agencies, the VA is, because they're out money, but they have said that they will not, and even told us they don't see why the lender would. The lender proceeded to tell us that it was because although they got paid, it wasn't by us, but isn't it technically though? I mean, what if a stranger off the street or a family member decided to pay off our mortgage, would the same principle apply?

Is the lender allowed to report the shortsale to the credit bureaus, even though they got paid in full, and we are not delinquent on the loan (we've managed to make all our payments)? Is there anything we can do do keep our credit in good standing?

Thanks.

 

[Ladynred]

we were told yesterday they had to by law, report a 'settlement' on the loan to the creditbureaus.

Actually, that's not entirely true. No creditor is REQUIRED to report ANYTHING at all, it's not mandatory under the FCRA. Their only duty as a furnisher of information to the bureaus is if they DO report, it MUST be 100% accurate and verifiable.

As long as your lender gets paid the full amount that is owed on the mortgage, I don't see why they'd report as a settlement at all.

 

[WonderingToo]

Thank you.

Based on what you wrote, what are your options? The 'negotiatior' at the bank told us she was required by law to report it. They're going to report it as 'settlement - paid in full' which I know is going to mean a hit to our credit score.

I would have understood and agreed to this reporting if the bank would have forgiven us the amount owed, but they (SunTrust) are not loosing a dime on this sale.

If anyone should be allowed to report a settlement, it should be the VA, and they are not going to report it, we just lose our VA eligibility.

We've worked very hard to make the payments over the past 7 months, and were also told we HAVE to pay the April payment (closing date is in May) if we want to avoid a "30 days late' report to the CRA's.

Please, please tell me how we can prevent our lender from reporting this to the cra's? Should we ask to speak to the negotiator's supervisor?

Thanks so much!

 

[TigerD]

Per request:

I am not an expert in VA loans. I have no idea what the VA's responsibility is regarding this loan and that may be something you need to verify.

If the debt was paid in full -- I wouldn't think it mattered who paid it in full.

However, if there is a deficiency balance and you want to avoid a hit you can ask the loan officer for a a personal loan to cover it. It is possible that they will grant that option.

That said, you can't stop them from reporting the account. But you can dispute the credit report and use your VA loan paperwork as your proof. You may be able to win the point with the CRAs. LNR can better address the dispute process than I can.

DC

 

[Ladynred]

The 'negotiatior' at the bank told us she was required by law to report it.

I'd be asking that 'negotiator' to show me EXACTLY where in the FCRA it says they are legally REQUIRED to report ANYTHING

Please, please tell me how we can prevent our lender from reporting this to the cra's?

As DC said, you can't prevent them from doing it. He's also right that if they do report it that way, your best bet is to dispute it thru the credit bureaus. I don't see how, or why, they'd report it as a settlement if they are getting paid, IN FULL, really doesn't matter who signs the checks as long as they get ALL the money due them.

 

[WonderingToo]

Thank you both for your insight.

I guess we were hoping we could prevent them from reporting it the way they are stating it on the sale approval forms. We will call the lender tomorrow, and ask the question you suggested LNR, but also realize that should the answer be the same, we can go the 'dispute route.'

That said, (1) is there anything we can do in the meantime to keep this reporting from lowering our creditscore by a bunch? By the time the bank has reported it to the CRA's, the dispute's been filed and resolved, we'd probably be months down the road, and since we're renting this super tiny place in order to pay our mortgage also and not be delinquent on it, we'd like to look for another home in the near future. Our creditscore is good, the only other loan we have is a car loan (not behind on payments). Should we open a credit card account? Will on time payments in the meantime prevent our score from significantly dropping? Any other suggestions?

(2). Does the following FCRA statement apply to our situation, or am I misreading it?:
Paragraph 623 (3). Do we have to dispute the reporting of a settlement-paid in full by writing, before they even report it and are they bound by that paragraph to state it is disputed by us when they (lender) report it?

I personally think the lender is utterly confused. They have misfiled our info several times due to the - in their opinion - unusual fact that we are not delinquent on our loan, yet need a short sale. I can't tell you the amount of times we called and received 6 different answers from 6 different people within one hour, one whether or not they had received our financial/hardship statements, and where they had filed it. I wonder if they are again misinformed on this issue also.

Thanks again. I will try and keep you updated on what happens, surely with the current market conditions there will be more people who find themselves in the same boat. I hope I can count on your advice again when we're further down the road in this 'process.'

 

[Ladynred]

(1) is there anything we can do in the meantime to keep this reporting from lowering our creditscore by a bunch?

For one, keep making on-time payments, don't slip on anything. If you have no other credit lines open, getting a credit card and using it each month AND paying it OFF every month will show that everything else is steady. It's impossible to say how many point's you'd lose once they report a settlement. A lot depends on how much available credit you have, how much of that your USING, the length of your good credit history (the longer the better), and a few other things. Utilization should be kept to no more than 25% of your available credit, some even say no more than 10%.

If they report and you dispute, they are required by law to show that the tradeline IS in dispute. Failure to do so is a violation of the FCRA.