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Brian Sacks

How To Increase Your Closings Working With Buyers Who Have Had a bankruptcy/foreclosure or other credit challange. Brian Sacks NMLS # 225050 Office 443-501-5606 Cell 443-324-8424 Brian.Sacks@CaliberHomeLoans .com. The STATISTICS. WHY SHOULD YOU CARE ABOUT THESE DEALS?

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Brian Sacks

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  1. How To Increase Your Closings Working With Buyers Who Have Had a bankruptcy/foreclosure or other credit challange Brian Sacks NMLS # 225050Office 443-501-5606Cell 443-324-8424Brian.Sacks@CaliberHomeLoans .com

  2. The STATISTICS WHY SHOULD YOU CARE ABOUT THESE DEALS? There were over 27,000 Bankruptcies in Maryland just over the past 12 monthsThis is a reduction from previous 5 years ONE OUT OF EVERY 55 HOUSEHOLDS NATIONALLY

  3. WHO ARE THEY? • Changing Demographics of Bankruptcy Filers • Over the past several years, researchers have noted key changes in the typical bankruptcy petitioner. Today, the average filer is older and married, has a high school education and makes less than $30,000 a year. • Age at Bankruptcy • Since the early 1990s, bankruptcy has been used with increasing frequency by older individuals. While more senior citizens are declaring bankruptcy, a decreasing percentage of filers are younger than 25. • In 2007, those younger than 25 made up less than 2 percent of all filers, down from 11 percent in 1994. In the same time period, the percentage of filers age 55 or older more than doubled; those filers now account for about 20 percent of all bankruptcy petitioners. • These fluctuations caused the median age of bankruptcy-seekers to increase from 38 to 45 years old. 73% of filers have a job or are self-employed 27% make more than $30,000 a year 94% graduated from high school 30% are 35-44 years old

  4. WHY DO PEOPLE FILE BANKRUPTCY • Medical bills • Fighting foreclosure • Loss of job • Creditor harassment • Credit card bills ?? ?

  5. First Mention Of Bankruptcy • Deuteronomy 15:1-2 “ At the end of every seven years thou shall make a release. Every creditor shall release that which he hath lent unto his neighbor and his brother because the Lord’s release hath been proclaimed”Warning- Do Not Send This in With Your Next Credit Card Statement!

  6. WHO IS A BIGGER RISK ? Couple A Filed Bankruptcy Last Year * injured at work * delay in workers comp Had NOT mismanaged their money Credit score 620 Couple B Husband & Wife Combined Income 90,000 Perfect Employment History 10 Credit cards At 70% of credit limits • 3000 in savings • Credit Score 710

  7. BANKRUPTCY BY THE #’s There is no more stigma to filing bankruptcy After the past economic meltdown everyone is a candidate. Many fear it will ruin their credit and the EXACT opposite is what really happens. Filing a Bankruptcy can IMPROVE your credit

  8. 4 TYPES OF BANKRUPTCY CHAPTER 7- TOTAL DISCHARGE OF DEBT CHAPTER 13- DEBT REPAYMENT/RESTRUCTURE CHAPTER 12 – FAMILY FARMERS CHAPTER 11- BUSINESS REORGANIZATION

  9. TERMS YOU NEED TO KNOW DEBTOR- person who owes money CREDITOR- person money is owed to EXEMPT ASSETS- assets the debtor may keep TRUSTEE- court appointed person who distributes payments and sells assets DISCHARGED DEBTS- debts that no longer are required to be repaid DISMISSED BANKRUPTCY- court turned down the bankruptcy request

  10. WHAT DO YOU THINK? How Long Do You Have To Be Discharged From A Chapter 7 Bankruptcy Before You Are Eligible For A New Mortgage? • 7 YEARS • 2 YEARS • 4 YEARS • 1 YEAR

  11. CHAPTER 7 BANKRUPTCY

  12. WHAT DO YOU THINK? HOW LONG DO YOU HAVE TO BE DISCHARGED FROM A CHAPTER 13 BANKRUPTCY? • 7 YEARS • 2 YEARS • 1 YEAR • YOU DON’T HAVE TO BE DISCHARGED

  13. CHAPTER 13 BANKRUPTCY

  14. THE 3 ITEMS EVERY UNDERWRITER MUST SEE BEFORE THEY WILL SAY YES • WHAT HAPPENED ? • WHY DID IT HAPPEN? • WHY WON’T IT HAPPEN AGAIN? NOW PROVE IT !

  15. HOW DO WE PROVE IT?

  16. HOW DO WE PROVE IT ?

  17. HOW DO WE PROVE IT?

  18. CREDIT REPORTS 3 CREDIT REPOSITORIES EQUIFAX EXPERIAN TRANSUNION

  19. WE WILL LOOK AT THE MIDDLE SCORE USING ALL 3 SCORES ON REPORT

  20. WHAT IS THE MINIMUM SCORES? CONVENTIONAL FHA LOANS VA LOANS MMP LOANS

  21. THE 3 BIG ISSUES TO ADDRESS WHY DID IT HAPPEN? WHY WON’T IT HAPPEN AGAIN? PROVE IT? ARE YOU BACK ON TRACK(RENT TO NEW PAYMENT/RESERVES)

  22. CONSUMER CREDIT COUNSELING WHAT IS IT? WHO PAYS FOR IT? HOW DO LENDERS TREAT IT?

  23. FHA LOANS CAIVRS- CREDIT ALERT VOICE RESPONSE SYSTEM • SCREENS APPLICANTS • IF YOU DEFAULTED ON ANOTHER GOVERNMENT LOAN ( SCHOOL/MTG)THERE CAN BE EXCEPTIONS !!!!

  24. FHA DOESN’T HAVE A MINIMUM SCORE…YETTHESE ARE SET BY LENDERS !!!

  25. FHA – BACK TO WORK PROGRAM YOU COULD BE ELIGIBLE AFTER JUST 1 YEAR

  26. FHA BACK TO WORK PROGRAM • For Purchase transactions with case numbers assigned on or after August 15, 2013 through September 30, 2016: • FHA will allow consideration of borrowers who have experienced an Economic Event and can document that certain negative credit ratings resulted from loss of employment or significant loss of Household Income beyond the borrower’s control; and the borrower has demonstrated full recovery from the event and completed housing counseling.

  27. FHA BACK TO WORK • An Economic Event is any occurrence beyond the borrower's control that results in: • A 20 percent or more reduction in a borrower’s Household Income for a minimum period of six months resulting from a Loss of Employment, Income or a combination of both. An Economic Event includes the following definitions: • • Onset of an Economic Event: The month of loss of employment/income. • • Recovery from an Economic Event: The re-establishment of satisfactory credit for a minimum of 12 months.

  28. VA LOANS

  29. CONVENTIONAL With a Chapter 7 or Chapter 11 bankruptcy, a 4-year waiting period is required from the discharge or dismissal date. If extenuating circumstances are documented, the waiting is 2 years.A Chapter 13 bankruptcy requires 2 years from the discharge date or 4 years from the dismissal date (2 years if extenuating circumstances.)

  30. THIS MUST ALWAYS BE THE FIRST STEP!

  31. HOW TO “SPEAK” TO THESE BUYERS“IT’S EMBARASSING – DON’T WANT TO OPEN UP”

  32. ARE BUYERS LIARS?

  33. GIGO

  34. Your Credit Score DNA Your credit score is a number based on the information in your credit file. The higher this score, typically the easier your access to lower cost credit. 770 or higher Excellent credit 700 to 770 Good 640 to 700 Fair 580 to 640 Poor Below 580 Your access to credit of any kind is very unlikely

  35. What is a credit score and how is it made up? • A credit score is a numerical expression based on statistical analysis of a person’s credit file to represent the creditworthiness of that person. • There are 3 main bureaus that evaluate your credit history and report your information to potential creditors – Experian, Equifax and TransUnion. Most bank lending takes all 3 credit scores provided and uses the middle credit score. • Credit Scores Range from 300-850. For most home loan financing you need a minimum mid credit score of 640. • Your credit score is made up of 5 components: • Length of credit history • Payment history • Amount you owe on credit • Types of credit used • New Credit

  36. HOW TO READ A CREDIT REPORT

  37. What you may not know about your credit • Paying collection accounts that are already on your credit file will most of the time lower your credit score • The quickest way for an individual to build their credit score is through the responsible use of credit accounts reporting on your credit report • You do not need to carry a balance on credit cards for them to report positive on-time monthly payments – they have to report “paid on-time” whether you use that card during the month or not. • The only date that matters on a credit file, with regard to debt and the weighting of debt on a credit file, is Date of Last Activity (DLA). DLA is controlled by the consumer – it is the date the consumer last made payment or a charge on an account. The statute of limitations (how long an item can remain on a credit file) is tied to this date specifically. • Creditors can choose to report to specific credit bureaus or not – creditors do not have to report to the credit bureaus if they don’t want to. To report your information to the credit bureaus creditors are charged a fee. • Credit cards if used properly are the strongest asset in helping you build your credit score

  38. How to Improve Your Credit Score • Verify accounts are being reported correctly and challenge improperly reported accounts. • Pay down all credit card or revolving debt balances as close to zero as possible. • If your credit report contains negative events (like collections), allocate resources to the most recently reported negative events. • Negative items are a score-killer. Act quickly to discuss problems with creditors before they become delinquent accounts. • Always ask for a deletion letter when negotiating payment or settlement of negative events/collection accounts. • Add positive trade lines and use them responsibly. • If you have a limited budget, negotiate for what credit pros call “payment for deletion,” where the creditor agrees to mark your credit report positive after receiving the money. • Never close credit accounts randomly

  39. CASE HISTORIES

  40. WHAT TO DO IF YOU HAVE HAD A BANKRUPTCY –FORECLOSURE OR OTHER CREDIT ISSUE Case HistoryJoe and Cheryl- not their real namehad a business that they had to close.Bankruptcy in 2012 Chapter 7Discharged in 2012 Foreclosure started but included in BKNow salaried – reestablished good creditQualifed for a fixed rate loan of 3.99% with only 3.5% down payment

  41. WHAT TO DO IF YOU DON’T HAVE MONEY FOR DOWNPAYMENT AND CLOSING COSTS Case HistoryJoan not her real namehas great income and only 2 bills Car payment and school loan.She qualifies for a 250,000 loan but doesn’t have the money for downpayment & Closing. She is not a veteran.SOLUTION- We were able to negotiate a contract where the seller helped with settlement and she received a grant for part of her downpayment

  42. WHAT TO DO IF SCORES ARE NOW TOO LOW? There are programs that we have had success with that will assist borrowers raise their scores Often by 40-50 points or more in 90 days THEY GUARANTEE THEIR RESULTS!

  43. DIFFERENT TYPES OF LENDER IS ONE BETTER THAN THE OTHER?Why would one company say yes when another says no? • Mortgage Banker – Independent • Mortgage Banker –Bank Owned • Small Bank –Portfolio or hard money lender • Mortgage Broker

  44. THE BIG MISCONCEPTION MYTH- IF I GO TO MY BANK THEY WILL GIVE ME A GOOD DEAL SINCE I AM A CUSTOMERREALITY- THE BANK OWNS A MORTGAGE COMPANY THAT IS A SEPARATE OPERATING ENTITY OR A SUBSIDIARY. THEY TEND TO BE MORE CONSERVATIVE THAN OTHERS ANDTHEIR OWN RULES TO THE EXISITNG GUIDELINES

  45. WHICH ONE SHOULD YOU CHOOSE???? PORTFOLIO LENDER- - HIGHER RATES - EASIER TERMS AND QUALIFYING- MORE EXPENSIVE IN FEES MORTGAGE BANKER-INDEPENDENT VS BANK OWNED- LEND YOU THEIR FUNDS BACKED BY FHA- VA – FNMAE- FREDDIE MAC SO THEY GET THEIRFUNDS BACK TO LEND AGAIN.GOOD PROGRAMS- GOOD RATES –COMPEITITVE FEES MORTGAGE BROKER-CAN SHOP DIFFERENT LENDERS BUT MUST CHARGE A FEE OVER THE LENDERS FEE TO EARN INCOME- DON’T HAVE CONTROL OF THE PROCESS –UNDERWRITING OR SETTLEMENT DEPARTMENTS • IS NOT LENDING YOU THEIR FUNDS BUT ARE PLACING YOUR LOAN WITH THE LENDER.

  46. GET THE SERVICE & EXPERTISE YOU AND YOUR CLIENTS DESERVE Brian Sacks • NATIONALLY RENOWNED MORTGAGE EXPERT • NMLS # 225050 / 443-501-5606 • Phone: 443-324-8424Fax: 410-420-2343 brian@baltimoremortgagelending.com Visit: www.BaltimoreMortgageLending.comwww.TheBoomerangBuyer.comLIKE ON FACEBOOK The-Boomerang-Buyer BaltimoreMortgageLendingHelpingMarylandRealtors

  47. Summary • Define your challenges • Technologicalas well as personal • Set realistic expectation • Mastery is not achieved overnight • Keep your eye on the goal • Mentorship programs

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