Short Sale reporting errors in DU Underwriting software??Anyone know about this? Help?
My buyers had to do a short sale a little over 2 years ago due to job loss. Since then they have scrimped and saved and we were assured by our lender that 2 yrs after the short sale we were okay to do a conventional loan with 20% down. Credit was run and it showed a short sale. So per the lender we were good to start shopping. Wrote an offer on a short sale, got it accepted and then the lender ran the buyers through DU Underwriting. According to the lender, there is a glitch in the DU Underwriting software.
Du shows my buyer had a foreclosure. Being told it is happening to other people but neither my lender (Imortage) nor bank reporting (Wells Fargo) nor my inhouse lender know how to "fix" it.
Buyer could lose his new house that he and his wife have worked so hard to get. Anyone run into this?
Know of any fixes out there? Or is this a class action lawsuit waiting to happen?
Replies to This Discussion
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Permalink Reply by Kevin - Greenville, SC on
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Does a Foreclosure show up on their Credit Reports?
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Permalink Reply by Kristen Coppedge on
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According to Imortgage...the 1st shows settled for less than full (short sale) and the second says the same thing.
But when run through DU or LP the software interprets it as a foreclosure. Does anyone have a contact for Fannie Mae?
High up? A head of the software depart? I cant believe that this is happening and there is no fix....has to be a fix!! Others must be going through this too. I will not drop the ball on this. Will find a resolution....and share it with all of us.
Again, any help appreciated...I am on a mission.
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We can manually underwrite these... or we can do it in our "2nd chance" portfolio loan that allows borrowers to buy again just one day after SS or Foreclosure. It's California only on the portfolio loan for now, we can do conv./manual underwrite in 44 states. My email is [email protected] if you want more info.
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Run through LP and DU....both show a foreclosure...but credit report shows settled for less than full (Short Sale)
Again, anyone with a contact at Fannie Mae? Frustrated cause the lender is trying to help but is really throwing up their hands (and I think hoping we will go away) .
Any ideas greatly appreciated. Have called Wells Fargo to see if they will change their coding on the file
cause the coding is what is triggering it. So be aware that this is a Wells Fargo issue for us. Got ahold of a corporate executive with Wells Fargo and hoping they will help.
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I am really interested to know if someone got a solution for this problem. DU shows Short Sale as a foreclosure and reporting dates as an open account after 2 years of Short Sale. Who is going to fix that problem?
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Thank you for your reply. I don't think it's easy to find a lender who is interested to manually underwrite the file. My credit score is around 740. I completed my short sale September 2010. I have all the formal final approval letters and statements verifying "Settled for less than full amount". According to Fannie Mae guidelines after 2 years of Short Sale I can be qualified to buy a house with 20% down. My loan is getting denied because the DU software interprets Short Sale as a foreclosure and the reporting dates shows all different from 3 credit bureaus report. I sent letters to 3 credit bureaus and 2 banks to fix the problem and keep reporting days the same and as of September 2010. Nothing has been changed. All of them are saying that their report is accurate. The accounts are paid and closed as of September 2010, and it is a Short Sale. The balance is "0"and the debt is forgiven. "What else we can do?" I am stuck and I don't know whom to address this major issue. I will not be able to buy a house if the Fannie Mae DU keep the same reporting system.Do I have to get a lawyer or continue to higher level?
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I have been dealing with this VERY frustrating situation for 6 months now. I had/have stellar credit before and after my short sale in 2008, no foreclosure or pre-forclosure language was ever documented at the credit bureaus nor the Title, nor is anyone questioning the fact that it was a short sale and I have numerous letters for the creditor stating such. (We even negotiated and paid a large sum of money to the creditor months after the house went to a new buyer.)
In 2012 we paid for 2 full appraisals and been denied by two lenders for this same issue. The second of which knew about the issue starting out but they said that they manually underwrite and are able to portfolio many of their loans and that it was not going to be a problem. WELL... it turns out that it WAS, even though they said that the AU findings were not important.
After much research, the problem was the way Experian (and possibly Equifax) was coding this Short Sale trade line as a CODE 9. Both the AU systems Fannie's DU and Freddie's LP systems are unfortunately misinterpreting this code as a Foreclosure. After paying a rapid rescore fee to have Experian change this code, they responded saying that this was the correct code for an account that was "legally paid for less the the account balance" and they would not change it. (This was when the 2nd lender threw in the towel.)
I then contacted Fannie Mae myself, after escalating the issue as far up the pole as I could, they basically they said there was nothing they could do to help me. I WAS INFURIATED!! In 2001-2007 I had worked at Freddie Mac's Loan Prospector Department- updating, changing and enhancing the online application based on the changing requirements. I know this can be done, it just takes a bit of work. They keep saying that it is the credit bureau's fault and the credit bureau keeps saying that it is the way the AU systems are misinterpreting their reports. YOU'D THINK THAT IF THEY BOTH KNEW THERE WAS AN ISSUE, THEY WOULD FIX IT!!! But the truth is THEY DONT CARE!
My sister had a short sale in 2010 and has a much worse financial situation currently than we do and she didn't have any problems getting a loan. So I know there are different ways this can be reported but I do not have that information. now, I am wondering just how many people are having this same problem due to the fact that there are some loans passing through unscathed. Is it enough that they may possibly fix the issue?
I qualify with flying colors based on the requirements put out by Fannie and Freddie but I still cannot get a loan anywhere! Refinancing with these low rates would save me over $400 a month. My only options are to wait for the full seven years when this trade line comes off my credit, or pursue legal means to get fair treatment.
I now am working with a lawyer to remove the language being reported to/by the credit bureaus. $1200.00 (So in addition to the 2 appraisals that I have paid for, the $400 a month I am over-paying on my monthly mortgage now I have to pay $1200 to hopefully legally get this rectified.) Pretty awful if you ask me. I will update soon.
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Dear Krisina,
Here is what you have to do. Don't waste your money hiring a lawyer. Prepare letters to 3 credit bureaus and the banks with whom you completed your short sale. Be very specific in your letter and mention that the system is misinterpreting Short Sale as a foreclosure. Ask them to change the wording or the code 9 to the right code. If you want to know more details, you can email me and I will give you more directions. I did it without lawyer and I succeeded.
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I do not have your email so I will have to reply here. We already petitioned the credit bureau (Experian) to change the coding 9 and they would not; they said that the code 9 was correct for a short sale. I went through a lender and paid for a rapid rescore, and told them that DU was misinterpreting the code as a foreclosure and they said that the error was with Fannie Mae. I also called and talked to them myself and they said they would not change it. You are saying that nothing I have done so far has worked but a letter will?
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I am not sure if you are getting denied from Fannie Mae DU at the beginning of your loan process, or at the end of the final approval. If it is the only first step of DU findings, than give me your contact information and I can tell you what I did to correct that problem.
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Hi, my name is Rolando. I have exactly the same problem as Kristin. DU shows a foreclosure, Experian says 9 is the right code and blame DU. Can you please help me too?
702-358-1318
Thanks.
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