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2nd Mortgage: Settlement or Short Sale. Which Loan Officer Is Right??


Dragonfly66
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The last post in this topic was posted 2717 days ago. 

 

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I'm getting conflicting information and need some help from the mortgage experts. Here's my story:

 

I just recently completed a settlement agreement with Green Tree Servicing, who held the 2nd mortgage on my former home. It was for 35% of the amount owed. The 2nd mortgage had been charged off by Green Tree and had been reflecting a $0 balance on my credit reports and they had stopped reporting back in 2010. I knew that I would need to settle with them in order to get them to release the 2nd lien so that I could sell my house and buy a new one. I had an FHA loan on the first mortgage, so I had to sell that house in order to get another FHA loan for the house I was buying.

 

This is where the issue comes in. I was able to sell my house, but I wasn't able to close on the house I was buying. The loan officer at the mortgage company went through my credit report with me at the beginning of the process and asked me a number of questions but never brought up the issue of my 2nd mortgage not reporting any payment history. I paid Green Tree the settlement amount at the closing of the sale of my house. When the underwriter at my mortgage company saw the payment to Green Tree on the HUD-1 form, she suddenly tells the loan officer to tell me that I can't close on my home purchase unless I can show 12 months of on-time payments to Green Tree Servicing, due to some FHA guideline. This occurred on the day I was supposed to close. I explained to the loan officer that I wouldn't have 12 months of payments to Green Tree because the 2nd mortgage was included in a BK13 back in 2010 so there wouldn't be any payment history (this showed on my credit reports that the loan officer reviewed). I never completed the BK13 and had it dismissed in 2011 (the loan officer was already aware of that part also). Green Tree never pursued it after that, they just stopped reporting. I also explained to him why I had to settle with Green Tree.

 

After the settlement, I received a letter from Green Tree stating that there was no remaining balance and that they are requesting that the credit bureaus change the status to "settled in full". I consulted with a couple of other loan officers after all of this happened and I got 2 different answers regarding when I would be able to purchase a house again. One told me that I would be able to buy a house after 1 year from the date of my settlement payment, due to Green Tree reporting it as "settled in full". Another told me I would have to wait 3 years because a settlement is viewed the same as a short sale, and the reporting status didn't matter. The obvious question is: Which one is right?

 

I'm currently renting a house now and I would love to be able to buy a house next year when this lease is up. I really don't want to wait for 3 years before I can buy another house.

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when is the date of first default. You might be able to get it removed from your credit report due to it being aged.. Greentree sucks with their records on purchased debt- and they are running scared with the recent way the Feds have been on them for violations.

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when is the date of first default. You might be able to get it removed from your credit report due to it being aged.. Greentree sucks with their records on purchased debt- and they are running scared with the recent way the Feds have been on them for violations.

It would have been sometime in 2009 I believe. I know it was before I actually filed for BK 13 in 2010. I'll have to look into that. I think you make a good point. In the event I can't get it off, I still wonder which of those loan officers is correct. I feel like I should be able to buy a house after 1 year of settling that 2nd mortgage. There is nothing on my credit report that indicates a short sale, so how would the next mortgage company know?

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I believe it will be 3 years from last activity - since it settled for less (they will know) and you werent making payments then it will be viewed as a foreclosure -

Either one on its own would normally trigger the foreclosure clock

 

Was the LO that said 1 year talking about FHA or another program??

B

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I'm not sure if the LO that mentioned 1 year was talking about FHA or another program. Is it the same whether you do a conventional or FHA loan?

 

So even though Green Tree had charged it off and had it showing as a $0 balance on my credit report at the time I settled with them, it's still seen as a short sale or foreclosure now that I've paid it?

 

 

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One other question in addition to my post above. FXGuy (in his post above) reminded me that this particular account is actually rather old and is about to be obsolete. When they settled they sent me a letter saying that they would change the status on each of my credit reports to "Settled In Full", however the only change that occurred was with EQ. That was the CRA they used to report the charge off. They changed it back to show it as being included In the BK13 that I had filed several years ago (but had it dismissed). The other 2 CRA's were still reporting that same thing and were never changed. If this account is removed from my credit due to age, does it still become a factor?

 

 

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