This is just a heads up that as our lending industry changes, everything is under more scrutiny including Debt Forgiveness. Lenders are now concerned about misleading and possibly illegal practices in the industry associated with debt forgiveness programs and refinance offers.
Be careful if you or your client is offered "debt forgiveness OR settlements with the promise that any negative information will NOT be reported to the credit bureaus related to the settlement or delinquent payments, if the loan is refinanced".
Some lenders (others will follow suit) now require the following verifications for Rate/Term and Cash-Out Refinance transactions where the loan payoff amount is considerably less than the amount indicated on the credit report:
- Borrowers must explain why the balance is different (did they/you pay additional payments or principal on the loan after the date of the credit report)
- 12 month payment history that supports the explanation
- Copy of all canceled checks or bank statements supporting the on-time payment history.
This is a change that many do not know about or anticipated. I have found that if one lender starts the action, it is only a matter of time before they are all following the same guidelines.
I hope this helps you in some small, but possibly important way....
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