There Is Always Something New To Learn In The Lending Industry.  It does not matter how long you have been a Loan Originator there is always something new to learn.  Yesterday was one of those times for me, and I was surprised by the answer.

I have a Veteran that wants to purchase a home with a VA Loan.  This Borrower owned a house in Arizona up until a year and a half ago and had a Conventional Mortgage on it.  This Borrower needed to relocate to Connecticut because of his job, and we all know the Housing Market in Arizona has not been very good the last few year, as a result the sale of the house was a Short Sale.

Now I am very familiar with the FHA and Fannie Mae Guidelines on Short Sales, but I could not recall what they were for VA, so I went searching.  First I looked at the Program Description that we have for VA Loans, and to my surprise there was nothing there for Short Sales or Foreclosures.  I then did a search on the web and still nothing.  So I talked to my Underwriter, and surprise, surprise again, she did not know either.  So she sent an e-mail to the Underwriting Department at VA and this is the response she got back:

"If the veteran hadn't been in default during the short sale process, then there wouldn't be any timeframe where he'd have to wait to obtain a VA home loan.  Since the property was behind, he'd need to re-establish his credit over at least a 12 months time period from the date of the sale."

Thank you

 (I have deleted the name)
Team Leader (Realty)
Department of Veterans Affairs
1240 E. 9th Street
Cleveland, OH 44199

That was a surprise answer.  According to the answer we received, there are NO time limits for a Short Sale with VA as long as the Borrower was not late on his payments during the Short Sale process.  And if he was, he only needed to have a clean payment history for 12 months after the Short Sale.  That is huge for Veterans that might have fallen on hard times, but have gotten back on there feet again.

If this was a FHA Loan the wait would be 3 years, unless there were not lates during the Short Sale, but that is very unlikely in most Short Sales that I have seen.  And it would be up to a 7 year wait for a Conventional Mortgage.

Even though this Borrower could pay his mortgage in Arizona, he was required to go late buy Lender before he would be considered for a Short Sale.  But since this Borrowers Short Sale was a year and a half ago, and he has not had any late payments on anything since then, we will be able to do his loan once he finds a house.  Needless to say I have a very happy future Borrower looking for houses right now.

 

  **********************************************************************************

   Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

 
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29 Comments on There Is Always Something New To Learn In The Lending Industry

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JUN
09
444,651 Points 5 Featured Posts Localism Sponsor Outside Blog

I agree with Lenn - what stupidity drives lenders to demand that a borrower be late before considering a short sale?  Proof of hardship?  Borrowers can't help that the market has tanked.  Many borrowers have little or no savings to make up a deficiency even though they have kept their paynments up.
6:08am • #10
935,539 Points 51 Featured Posts Called Shot Master

I saw reported awhile back that one reason a lender may demand a borrower be late before considering a short sale, is that the mortgage servicing agent is payed more for servicing a troubled loan, than one that is not! 
6:20am • #11
835,421 Points 69 Featured Posts Outside Blog Called Shot Master

The banks still deny or dress up that elephant in the room....you know the one that said to be late on payments? Where do they come up with these anti-common sense procedures?
6:38am • #12

George!

No kidding, we do learn something every day. This is a great tip, thanks for sharing.

Kevin
7:18am • #13
175,528 Points 5 Featured Posts Outside Blog

VA loans have some features and quirks that no other loans have.  If you are working with a veteran, you have to at least consider this financing option.  Fortunately, I have found that when you're able to locate the person in any VA underwriting center that knows the product inside and out, you will either find a way to make the loan go, or you'll be able to go back to the veteran with a game plan for becoming eligible if certain steps are taken in the future.

I'm glad you're getting this one into the queue.  Great work, great post.
7:34am • #14
319,613 Points 10 Featured Posts Outside Blog Called Shot Master

George, this is solid new information. At the same time, Lenn #6 does point out the lynchpin of failure to connect the dots given in the majority of short sale situations, it is not short sale until the homeowner is not current. This is no consistent housing policy in place with all these government programs. Thanks to your blog we have another piece of the puzzle answered.
7:36am • #15
535,110 Points 38 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

That's great and useful information to know!

There are allot of vets!

What amasses me is the continuing attitude that after defaulting there should be no consequences. A short sale is a major default, it's taking the bank's money! For those that think it's the bank's money they are simply wrong! When the bank settles it loses stockholder's profits! Profits that belong to every one with a share or two set aside for retirement, your neighbor, your parents, your grandparents, and your 401k!

We all feel bad when someone has "hard times" and we're all paying for them. But, it's not right when the "hard time" are a lack of equity.

That said, the first thing I's ask is "are you a Vet?

Bill  
7:55am • #16

That's pretty darn interesting, George, thank you.  I haven't done a VA mortgage in several years (or any type of Forward Mortgage), but when I was doing them, I learned VA uses FHA guidelines when VA guidelines don't exist.  I thought that's what you were going to say when I started reading your post, and was pleasantly surprised.
8:09am • #17
392,481 Points 5 Featured Posts Outside Blog Attended Rain Camp

Wow, good to know.  I had a VA buyer about a year ago.  Something popped up at the last minute that almost killed the deal-- he had a VA Foreclosure about 12 YEARS prior!  Loan did go through.
9:37am • #18
119,432 Points 4 Featured Posts Outside Blog Called Shot Master

Wow is right (#18)!  I am just beginning to work with a VA buyer and this is good information to know.

 
10:30am • #19
569,044 Points 1 Featured Post Localism Sponsor Outside Blog

Hi George,  That requirement to lapse the payment schedule is scary to me.  Yikes !!!
10:58am • #20
871,221 Points 47 Featured Posts Localism Sponsor Attended Rain Camp Called Shot Master

George, this is a very timely post for me, as I have a VA Seller who is concerned about ruining his credit with a short sale. We are trying to get into HAP but he is having a hard time with the paperwork...

Sharon
11:22am • #21
514,409 Points Outside Blog Called Shot Master

That is good news. I will check on all my VA clients and see if it helps them.
11:33am • #22
1,151,440 Points 86 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

George, not many loan officers would have been as persistent about getting the answers that you did. That buyer was fortunate to have gotten just the right loan officer.
2:09pm • #23
477,484 Points 15 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master

George -- There's always something to learn with short sales. So many variables. I am happy the buyer's financing is in your hands. He must be thrilled you investigated his situation and it will all work out. 
4:35pm • #24
1,348,064 Points 41 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

George - This is good information for people who can buy with VA especially if it combines with the zero down.
4:56pm • #25
774,229 Points 16 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

George, even though you had to do some checking to find the answer, this is why I always refer my clients to a lender that I partner with...because things change rapidly, there are so many unknowns and loan officers are simply more in the know and up to date on the latest rules and reg's for different programs.
5:10pm • #26
264,257 Points 3 Featured Posts Outside Blog Attended Rain Camp

Frankly, I don’t see the problem.

You go to Seller #1 and tell him that Sell #2 thinks his asking price is too low but if Seller #1 is willing to sell and carry the financing for Seller #2, then Seller #2 is willing to be Buyer #1. You are not trying to get Seller #1 the reduce the price, you are simply acting on the offer from Seller #2.
10:19pm • #27
JUN
10
1,133,457 Points 151 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

You have the right attitude...always looking to learn and this will help you with many future clients to come.  Nice job.
3:24am • #28
440,099 Points 69 Featured Posts Outside Blog Called Shot Master

George, Glad to know this and will bookmark it for my many VA clients.
3:54pm • #29

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George Souto

Middletown, CT

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George Souto NMLS# 65149 FHA, CHFA, VA Mortgages Connecticut

Address: One Liberty Sq., PO Box 1000, New Britain, Ct, 06050

Office Phone: (860) 573-1308

Cell Phone: (860) 573-1308

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