Fannie Mae’s Updated Risk Model Will Better Assess Non-Traditional Borrowers

June 28th, 2016 by

Fannie Mae’s Updated Risk Model Will Better Assess Non-Traditional Borrowers

During the weekend of September 24, 2016, Fannie Mae will implement Desktop Underwriter® (DU®) Version 10.0, which will include the changes described below.

To support our lending partners, Fannie Mae continues to make ongoing investments in our risk management tools, enabling greater confidence and efficiency in the origination process. These tools help to provide the highest probability of loan performance over time, resulting in reduced costs to service those loans. We regularly review the DU risk assessment to provide certainty and clarity that the loan meets Fannie Mae’s requirements.

The changes included in this release will apply to new loan casefiles submitted to DU on or after the implementation of DU Version 10.0. Loan casefiles created in DU Version 9.3 and resubmitted after the implementation of DU Version 10.0 will continue to be underwritten through DU Version 9.3.

The changes in this release include:

• Updated DU Risk Assessment

• Underwriting Borrowers without Traditional Credit

• Policy Changes for Borrowers with Multiple Financed Properties

• HomeReady™ Mortgage Message Updates

• Updates to Align with the Selling Guide • Retirement of DU Version 9.2

Updated DU Risk Assessment

DU Version 10.0 will include an update to the DU credit risk assessment. The updated credit risk assessment will continue to measure the likelihood of a loan becoming seriously delinquent; and is expected to have minimal to no impact on the percentage of Approve/Eligible recommendations that lenders receive today. Refer to Appendix A: Comparison of Risk Factors Evaluated by DU Versions 9.3 and 10.0 for the changes made to the risk factors with DU Version 10.0

Trended Credit Data

Credit reports currently used in mortgage lending indicate only the outstanding balance, utilization and availability of credit, and if a borrower has been on time or delinquent on existing credit accounts such as credit cards, mortgages, or student loans. DU Version 10.0 will use trended credit data in the credit risk assessment, which provides access to historical monthly data (when available) on several factors, including: balance, scheduled payment, and actual payment amount that a borrower has made on the account. Leveraging trended data in the DU risk assessment allows a smarter, more thorough analysis of the borrower’s credit history. The use of trended data is a powerful predictor of risk, and its use enhances the DU risk assessment to better support access to credit for creditworthy borrowers.

The DU Version 10.0 risk assessment will only use the trended credit data on revolving credit card accounts for the most recent 24 months’ payment history (even if more than 24 months’ worth of data is provided on the credit report). The trended credit data may be used on other types of accounts in a later version of DU.

NOTE: The use of trended credit data by DU will not impact FHA or VA loan casefiles underwritten through DU.

Underwriting Borrowers without Traditional Credit

DU Version 10.0 will include the ability to underwrite loan casefiles in which no borrowers have a credit score. This update will automate what is currently a manual process for lenders. As with all loan casefiles underwritten through DU, a three-in-file merged credit report must still be requested for all borrowers on the loan application. However, when the credit report indicates a FICO® score could not be provided for any of the borrowers due to insufficient credit, the loan casefile may be eligible to be underwritten using DU Version 10.0.

NOTE: Lenders must ensure that the credit report accurately reflects the borrower’s information, such as the name, Social Security number, and current residence address of the borrower to confirm that the lack of traditional credit was not erroneously reported because incorrect information was used to order the credit report.

Eligibility Guidelines

To ensure the overall risk assessment is appropriate for loans involving borrowers without established traditional credit, DU will apply the following additional underwriting guidelines:

• Principal residence transaction where all borrowers will occupy the property

• One-unit property (may not be a manufactured home)

• Purchase or limited cash-out refinance transaction

• Fixed-rate mortgage

• Loan amount must meet the general loan limits (may not be a high-balance mortgage loan)

• LTV, CLTV, and HCLTV ratios may be no more than 90%

• Debt-to-income ratio must be less than 40%

Loan casefiles that do not meet these guidelines will receive an “Out of Scope” recommendation.

Risk Factors Evaluated by DU

DU will consider the following factors when evaluating the overall credit risk of borrowers who lack established traditional credit histories:

• Borrower’s equity and LTV ratio

• Liquid reserves

• Debt-to-income ratio

If a loan casefile does not receive an Approve recommendation, the lender may manually underwrite and document the loan according to Fannie Mae’s nontraditional credit guidelines as specified in the Selling Guide.

Additional Documentation Requirements

DU will require the verification of at least two non-traditional credit sources for each borrower that does not have traditional credit, one of which must be housing-related. A 12 month payment history is required for each source of nontraditional credit, which must be documented in accordance with the Selling Guide.

Loan Casefiles for Borrowers with Credit Scores

With DU Version 10.0 lenders may continue to use DU to underwrite loan casefiles that include a borrower(s) with traditional credit (a credit score) and a borrower(s) without traditional credit. However, the requirement that income used in qualifying for the loan cannot come from self-employment is being removed.

There will also be a change to the requirement that the borrower(s) with the credit score must contribute more than 50% of the qualifying income. When the borrower(s) with the credit score is contributing 50% or less of the qualifying income on the loan casefile, DU will issue a message requiring the lender to document a minimum of two sources of nontraditional credit that has been active for at least 12 months for the borrower that does not have traditional credit, one of the sources being housing-related.

Read More Here…

FCRT Podcast: Jerry Ashton Author of RIP Medical Debt

June 28th, 2016 by

In this edition of the Financial Consumer Rights Talk, attorney Adam Deutsch discusses medical debt with author Jerry Ashton, a veteran, gadfly and critic of the excesses of the credit and collections industry.

Inspired by the Occupy Wall Street movement’s “Rolling Jubilee” campaign against medical debt, he came out of semi-retirement in 2014 to co-found RIP Medical Debt with the goal of removing one billion dollars in unpaid and unpayable personal medical bills from the backs of fellow Americans. Their motto states the case clearly: Abolishing medical debt.  For good.

In addition to co-authoring the book The Patient, The Doctor and The Bill Collector: An Obamacare and Medical Debt Collections Survival Guide, Jerry blogs at ­ the Huffington Post and tweets as @RIPMedicalDebt.

Article link about RIP Medical Debt:

Media CBS News link re:  RIP –

Report: Some mortgage servicers not following rules

June 24th, 2016 by
JUNE 23, 2016, 6:39 PM LAST UPDATED: THURSDAY, JUNE 23, 2016, 6:39 PM

Report: Some mortgage servicers not following rules

Some mortgage servicers are not following post-financial-crisis rules that help struggling borrowers modify loans and avoid foreclosure, the Consumer Financial Protection Bureau says in a new report.

The agency charged with protecting consumers from unfair, abusive and deceptive practices in the financial services market, said that despite new rules that took effect in early 2014, servicers continue to give struggling homeowners wrong information about their loans, or no information at all, often because of technological shortcomings. The report did not name servicers that were noncompliant.

The report released Wednesday says that the agency’s mortgage loan servicer examinations, conducted between January 2014 and April of this year, revealed that information provided to borrowers about loan modifications is sometimes late, incorrect, or deceptive due to technological breakdowns or malfunctions. In addition, consumers tend to “get the runaround” when loans are transferred to another servicer with incompatible computer systems, the report said.

Struggling New Jersey homeowners and lawyers who represent them said Thursday that loan modification attempts still are stymied by mortgage servicing miscues. The stakes can be high for homeowners, said Adam Deutsch of the Westwood law firm, Denbeaux and Denbeaux, which represents homeowners in contested foreclosures.

“A lot of our problems happen when there is a transfer,” said Deutsch, who has represented clients in several recent cases where homeowners were offered loan modification agreements that would lower their payments and help them avoid foreclosure. But before the modifications were finalized the loans were transferred to other servicers, who refused to honor the agreements.

Florence Block of Bernards, who is represented by Deutsch, refinanced a loan in 2007 and has had five different mortgage servicers since then. She is suing three of them and a trust in the Virgin Islands that owns the loan for alleged breach of a loan modification contract.

The complaint filed in January in federal court in Trenton, alleges that one servicer, which agreed to a six-month trial loan modification, did not credit more than $20,000 in payments she had made, nor did it provide her with the required notice when the loan was transferred to another servicer. According to her complaint, the current servicer has refused to provide a permanent modification, even though she has qualified for the change under an agreement with a previous servicer.


Mortgage servicers “can’t hide behind their bad computer systems or outdated technology,” CFPB Director Richard Cordray said in a statement. “Mortgage servicers and their service providers must step up and make the investments necessary to do their jobs properly and legally,” he said.

The Mortgage Bankers Association, which represents large U.S. lenders and servicers, said the report identifies issues that “can be instructive as servicers execute and refine their compliance programs.” The group also said the report’s usefulness is limited by a failure “to give much of an idea of the scale of the problems or when the problems were identified.”

Large, highly automated mortgage servicing companies such as Bank of America, Wells Fargo and Chase, which send monthly statements to borrowers, collect payments and file foreclosure actions on behalf of the entities that own the loans, have been lightning rods for criticism since the financial crisis. In New Jersey, the state judiciary took steps in late 2010 to block potentially unfair foreclosure actions amid robo-signing and other transgressions by servicers, which prolonged the state’s foreclosure crisis.

Since then, servicers have been pressured by lawmakers to take steps to help keep people in their homes, which often means modifying loan terms to reduce monthly payments, either by lowering the interest rate, reducing the principal or extending the length of the loan, or through some combination of those.

According to Hope Now, an alliance of servicers, investors, mortgage insurers, and non-profit counselors, 2,115 non-government-sponsored loan modifications were made in New Jersey in the first quarter. Since mid-2007, 140,297 such modifications have been provided in New Jersey.

Email: [email protected]

CFPB Supervisory Highlights Mortgage Servicing Special Edition (Issue 11)

June 23rd, 2016 by

In this eleventh issue of Supervisory Highlights, we share findings from recent supervisory examination observations in mortgage servicing.  To provide additional context for readers, we integrate these recent observations with observations from

previous editions of Supervisory Highlights by subject matter – loss mitigation acknowledgement notices; loss mitigation offers and related communications; loan modification denial notices; policies and procedures; and servicing transfers.  The report also discusses Supervision’s approach mortgage to servicing exams, including a description of recent changes to the mortgage servicing chapter of the CFPB Supervision and Examination Manual.


 finds loan servicer practices can lead to “wrongful foreclosures and other serious harm,” and “consumers do not choose their mortgage servicers they cannot take their business elsewhere” when injured. Also …

  • CFPB found loan servicers failed to send mortgage loss mitigation acknowledgment notices due to software malfunction
  • CFPB found loan servicers made deceptive promises not to foreclose during loss mitigation review and did so anyway
  • CFPB finds loan servicers request additional modification documents only to deny the mod before deadline to produce
  • CFPB finds that loan servicers regularly fail to convert trial modifications to permanent modifications
  • CFPB finds that servicing transfers during trial modification process often results in wrongful denial

This is a scenario the clients of Denbeaux and Denbeaux experience far too often. We have cases dealing with Ocwen, Fay, SPS, Wells Fargo, Ditech. We have sued servicing companies to get our clients the modifications they deserve.


Read the full report

NJ Homes in Preforeclosure Rising

June 16th, 2016 by

In April preforeclosures were up over March by 44.6% . This continued the trend of increasing numbers of homes in preforeclosure reported in February. The decline in preforeclosures was the trend through the end of 2015. The problem of home foreclosure in New Jersey unfortunately continues.


In New Jersey, there are currently 64,487 distressed properties that have filed for foreclosure, making for a statewide rate of 2.45 percent, according to data provided by the Calif.-based housing firm RealtyTrac. There are currently 4,244 properties in NJ that are listed in Zillow in foreclosure for sale. The number of homes listed for sale on RealtyTrac is 43,104. 

Home sales for April 2016 were down 38% compared with the previous month, and up 44%compared with a year ago. The median sales price of a non-distressed home was $279,900. The median sales price of a foreclosure home was $130,000, or 54% lower than non-distressed home sales.


In April preforeclosures were up over March by 44.6% which continued the trend  from February which was a reversal of the downward trend at the beginning of the year.

In May, the number of properties that received a foreclosure filing in NJ was 1% higher than the previous month and 13% lower than the same time last year.

For the state of New Jersey, we are seeing approximately one out of every 558 homes in foreclosure. The top five counties are Atlantic 1 in every 283, Sussex 1 in every 337, Essex 1 in every 341, Camden 1 in every 347, and Gloucester 1 in every 372.

For homeowners in preforeclosure it is recommended to set-up an appointment for a free consultation and an evaluation of your loan servicing file. If we spot errors in the file it can give you the leverage needed to get the bank to work with you, or be the basis for a complaint to be filed against the loan servicing company and the law firm that represents you.


Feds Poised to Issue Rule On Students’ Right To Sue

June 10th, 2016 by

Feds poised to issue rule on students’ right to sue

By Lydia Wheeler and Tim Devaney of the Hill

The Education Department is expected to propose a new rule next week to protect students’ right to settle their disputes with for-profit colleges in court.

A department spokesperson said a rule on the use of forced arbitration will be out in the coming days.

Public Citizen, a regulatory advocacy group, said it petitioned the department back in February to ban nonprofits and other trade schools that receive federal funds from including arbitration clauses in student contracts.

The clauses – typically buried in the fine print – often state that disputes with the school can only be resolved by a privately appointed individual or arbitrator, rather than through the court system. They also bar students from joining in on class action lawsuits against the school.

“Few students are aware that arbitration clauses are in their contracts or that these clauses preclude them from going to court or joining with other students in suits to address misconduct by their schools,” Public Citizen said in a release last week. “Even when they do know, many students feel compelled to sign, because refusing means foregoing the educational benefits they hope to receive.”

In March, the department said it was considering including a rule on forced arbitration alongside its efforts to protect student borrowers from predatory higher education institutions.

“The Department is working to ensure that no college can dodge accountability by burying ‘gotchas’ in fine print that blocks students from seeking the redress they’re due. Legal aid, veteran, consumer, and student advocacy groups have all shared with us how mandatory arbitration has harmed students across the country. We heard them and agree,” Under Secretary of Education Ted Mitchel said in a statement at the time. “Which is why we’ve incorporated ideas from non-federal negotiators to limit mandatory arbitration agreements.”

The issue has the attention of Democratic lawmakers.

In April, a group of 30 Senate Democrats, including Sens. Patty Murray (D-Wash.) and Al Franken (D-Minn.) called on the department to ban mandatory arbitration requirements as a condition for receiving federal taxpayer dollars.

“By enabling students to pursue colleges directly when they have been subjected to deceptive or abusive practices, the department would be better safeguarding the taxpayers’ investment in higher education,” the letter said.

Debt Collector Tactics: Suing Based on An Old Address

June 10th, 2016 by

Adam Deutsch Esq., attorney for the law firm of Denbeaux and Denbeaux, reflects on what he has encountered from the many people contacting the firm over recent months who have been sued by the law firm of Pressler and Pressler.

The specific tactic that has come up is using an old address to file a complaint,and get a judgment. The result is that wages are garnished without the person even knowing that they were sued.

Adam shares some thoughts on his way into Newark District Court. He was at court this day representing a client whose RESPA’s right were violated.

Foreclosure Fraud: Can it Happen Again?

June 9th, 2016 by

We’re sharing a story from sourced from in to introduce you to two additional resources to learn more about issues impacting consumer finance.

New America: Foreclosure Fraud in the Wake of the Great Recession

A discussion of foreclosure fraud in the wake of the Great Recession and how it led to new policy tools through the Dodd-Frank Wall Street Reform and Consumer Protection Act.

What happened and can it happen again?

Among the painful legacies of The Great Recession is the extent to which it wreaked havoc on the family balance sheet. As the housing bubble burst and prices declined, home equity disappeared and millions of American families experienced a precipitous decline in their assets and net worth. But those that were able to stay in their homes were able to weather the storm. Others couldn’t. Tragically, something more nefarious and preventable was also in play—foreclosure fraud. Scores of families were evicted from their homes based on false evidence by mortgage companies that had no legal right to foreclose.

In his new book, Chain of Title, David Dayen chronicles how a small group of people uncovered large-scale corporate malfeasance that undermined that financial security of families across the country when they were most economically vulnerable. It is a cautionary tale of how firms operating in the financial services marketplace can behave badly and an inspiring story of citizens fighting back.

June 7, 2016 12:15 -1:30 pm New America 740 15th St NW #900 Washington D.C. 20005 a panel discuss with participants:


David Dayen
Author, Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud

Julia Gordon
Executive Vice President, National Community Stabilization Trust

Brad Miller
Former Member of the House of Representative (D-NC) and Member of the House Financial Services Committee

Reid Cramer
Director, Asset Building Program, New America


Jury Awards Man $2.5 in Punitive Damages Against Ocwen for Willfully Violating the FCRA

June 2nd, 2016 by

Jury Awards Man $2.5 in Punitive Damages Against Ocwen for Willfully Violating the FCRA

Attorney Adam Deutsch of the law firm Denbeaux and Denbeaux talks about the award of $2.5 in punitive damages in a foreclosure case. He explains why the jury made the award, how the case developed and what homeowners in NJ can expect if they find themselves in a similar situation.

“Mr. Daugherty had a balloon note mortgage, and he had to pay an $80,000 balloon payment,” said Nolan, with the law firm of Hamilton Burgess Young and Pollard. “He wasn’t behind on his mortgage payments, yet the credit report showed he was five months behind. It said he was in foreclosure, and he wasn’t. Ocwen even acknowledged he wasn’t in foreclosure.”

The lawyers of Denbeaux and Denbeaux are trusted experts and trusted authorities in handling foreclosure cases which stem from loan servicing errors. These loan servicing error fall under federal laws and require that the case be tried in federal court. We’re experts there, too.