miguel villarreal

How much impact does a short sale have on FICO® Scores? How about a foreclosure? Since I frequently hear these questions from clients and others, I thought I’d share new FICO research that sheds light on this very subject.

The FICO study simulated various types of mortgage delinquencies on three representative credit bureau profiles of consumers scoring 680, 720 and 780, respectively. I say “representative profiles” because we focused on consumers whose credit characteristics (e.g., utilization, delinquency history, age of file) were typical of the three score points considered. All consumers had an active currently-paid-as-agreed mortgage on file.

Results are shown below. The first chart shows the impact on the score for each stage of delinquency, and the second shows how long it takes the score to fully “recover” after the fact.

All in all, we saw:

• The magnitude of FICO® Score impact is highly dependent on the starting score.
• There's no significant difference in score impact between short sale/deed-in-lieu/settlement and foreclosure.
• While a score may begin to improve sooner, it could take up to 7-10 years to fully recover, assuming all other obligations are paid as agreed.
• In general, the higher starting score, the longer it takes for the score to fully recover.
• Even if there’s minimal difference in score impact between moderate and severe delinquencies, there may be significant difference in time required for the score to fully recover.

This study provides good benchmarks of score impact from mortgage delinquencies. However, it is important to note that research was done only on select consumer credit profiles. Given the wide range of credit profiles that exist, results may vary beyond what's in the charts above.

If you have questions about this research, I encourage you to post them here on my blog.

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At REMCO ONLINE, we want you to know that you are not alone and that we can help. The following is a summary of the process, from beginning to a successful end!

Overview: Please note, if you or someone you know are experiencing a financial hardship and are currently unable to make your mortgage payments (or may be in the near future), you have options - but you must take the first step!

The Loan Modification Process step by step.

1. GO THROUGH A PRE-QUALIFICATION SCREENING PROCESS: A Home Retention Counselor will visit you or contact you to take the required information in the pre- qualification form. Note this is a free evaluation if you don’t qualify we can recommend other alternatives. The pre qualification process can take up to 48 hours depending the situation.
2. NOTIFY CLIENT IF HE QUALIFIES OR NOT FOR A LOAN MODIFICATION: In this phase the underwriter will inform the HRC that the homeowner qualifies for a loan modification or not.
3. DOCUMENT COLLECTING PHASE: in this phase a list of documents are required, you can notice in your retainer agreement there is a document check list with all the required documents for the submission of your loan modification package. Once we collect all the required document a complete package will be sent to the assigned law office for preparation and submission of a formal loan modification request. To give you a head start, the supporting documentation we will be requesting is briefly outlined below.

• Proof of income - Covering the latest 30 day period. This could include pay stubs, rental agreements, social security award letters, etc.
• Hardship letter (explain in detail what circumstances have occurred that have resulted in your current financial hardship).
• Bank Statements - Covering the last 90 days, all pages
• W-2 forms and 1099 forms - For 2008 and 2009
• Tax Returns - Federal (Not State) taxes of the last two (2) years that you have completed. (all pages please)
• Monthly Expenses - Provide all monthly household expenses, even if you are not paying them: including utilities, food, mortgage payments, insurance, dues, insurance, taxes, etc.)

4. PREPARATION AND SUBMISSION OF FORMAL LOAN MODIFICATION REQUEST: In this phase all the documents collected are reviewed by the underwriting department of the assigned law office in that state. After a full evaluation has been made to all the documents they will be summated to the lender for process and to engage in a negotiation.

5. NEGOTIATION AND NUMEROUS CONTACTS BETWEEN NEGOTIATOR, LENDER AND SERVICER: It is a well-documented fact that over 50 – 60% of all modifications done directly by homeowners, or by non-attorney backed mitigation companies; end up back in default within the first 6 months after modification. This is compared to a re-default rate of less than 5% forattorney-backed modifications. Having a reputable, experienced law firm to legally represent the best interests of each of our clients throughout the entire negotiation and mitigation process is just another of the ways REMCO ONLINE is different. It all starts with having the knowledge and skills to put together the best possible submission package, and then utilizing the experience and tenacity of a well-educated, trained legal team to represent you and aggressively negotiate to achieve a plan that meets, if not exceeds, your goals! The negotiations may involve multiple offers and counter offers – it is truly a hard-fought negotiation!

6. FINAL SETTLEMENT AND APPROVAL: Once the legal team believes they have hammered out the best possible terms they can get from your lender, the lender will prepare a written Loan Modification Agreement spelling out the exact new terms, and will forward this directly to you (the homeowner) for your final approval. No terms of your existing mortgage can be changed without your full written & notarized consent – so you always remain in full control, with the final say on everything.

As you can see from this brief overview of the process, there is a significant amount of work put into each file even before the attorney retainer fee is requested. Keep in mind we work for YOU, not your lender. OUR motivation is YOUR success story, and we look forward to assisting you in achieving great success in this matter! If you have any questions or concerns, please don’t hesitate to contact us. Please note

REMCO ONLINE is not a mortgage foreclosure consultant or repayment plans or provide legal advice. The Attorneys have their respected licenses and provide that service.