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Jim Simms' Blog

By Jim Simms | Mortgage Broker
or Lender in Louisville, KY
  • Work Arounds (continued)

    Posted Under: Home Buying, Financing, Credit Score  |  November 23, 2011 8:24 AM  |  1,178 views  |  No comments

    Read part 1 here.

    Other very common questions that come up are regarding income.  These usually fall in one of two categories:

    1.   How do I qualify for a larger loan than my income will support?

    2.   How do I show income that I do not report on my tax return?

    It is easy to see how either path could harm the borrower.  Income to debt ratios are actually very liberal, ranging from around 41 to 50% of the borrower’s gross income.  That means if you gross $5,000 per month some loans will allow your total debt service including the new mortgage payment to be as much as $2,500.   Look at your next pay stub, how much is taken out for federal, state and local taxes?  Are there any other deductions in addition to taxes? 

    If you try to work around debt ratios you are cutting your own throat.  Are there exceptions? Absolutely; the individual that never goes anywhere, never does anything, never buys anything like clothes, food or a newspaper, doesn’t have a cell phone or cable and basically stays at home with the lights off!!  Those individuals could easily make a larger hos payment.

    How about the guy that wants to include unreported income?  My standard answer for that question is the same government that audits us is the same one that audits you.  Do you really want to put in writing on a loan application that you cheat on your taxes?  By the way, on page 4 of the standard loan application right above where the applicant signs the form is a statement representing that everything contained in the application is true. 

    Mentioning that clause in the loan application reminds me again about the biggest work around of all that I mentioned in Part 1, credit repair.  A credit report is included in every loan application, and this clause says that everything in the file is true and accurate, that includes the credit report.  Is the information on the credit report accurate if the applicant disputed negative information that was true?  Not even…    

  • Credit Repair can be a Crime

    Posted Under: Home Buying, Financing, Credit Score  |  October 14, 2011 10:41 AM  |  1,979 views  |  5 comments

    Typical credit repair in order to get a mortgage is fraud.  Any Realtor or loan officer that would send you to a credit repair company to dispute all of the negative information in your credit file is helping facilitate a serious crime.  Don’t walk, run away.   

    As you can see from reading many articles most of the industry thinks it is okay to dispute accurate information on a credit report.  It isn’t, and never trust anyone that tells you it is okay to misrepresent anything.  If they tell you to do that, what do you think they will do to you if they get a chance?

    It is my position this is the most frequently committed white collar crime in the US.   

    Don’t misunderstand, correcting a mistake is A-Okay, disputing accurate information in order to be approved for a mortgage is not, it is a crime.  It is no different than lying about income or employment. Everyone involved in the process is guilty, everyone!

    The sub-prime segment of the industry was blamed for the melt-down.  They were a scapegoat; the true root of the problem was and is fraudulent credit repair.  Even sub-prime loans had eligibility requirements. People that did not meet the eligibility requirements for conventional or sub-prime mortgages were able to get boosted up to the sub-prime level thanks to the credit repair industry.

    The same thing is happening today except now the target is to reach the FHA threshold.  So guess where the next wave of meltdown is going to be!  We are all going to pay for this crime; it is simply a matter of time!

    The Federal Trade Commission released an article yesterday that addresses this topic:

    http://www.ftc.gov/opa/2011/10/rmcn.shtm

    This is an easy problem to fix but no one wants to step up.  This illegal version of credit repair requires multiple credit reports, so require all companies that compile credit reports to flag multiple inquiries and report them to the authorities. Fine anyone caught making fraudulent claims to have accurate information removed $10,000 per account per repository.  Prosecute anyone involved in the process where financing is obtained based on the result of fraudulent credit repair including but not limited to the borrower, Realtor, loan officer and by all means credit repair “experts”.  There are many laws already on the books that prohibit this viral crime, why not enforce them?

    Step two, FHA and private mortgage insurance companies should not issue mortgage insurance where multiple inquiries are listed on a credit report without requiring an investigation.  If they would only require copies of all of the credit reports that are behind the inquiries for the previous 12 months this problem would end overnight.  Those multiple reports with dramatic changes in credit scores would make it hard to defend a criminal or civil suit.

    The content of this post is solely my opinion, I alone am responsible for its content.
    Jim Simms 

 
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