Posts Tagged ‘credit score’

Short sale credit coding glitch could suppress real estate recovery

Tuesday, June 18th, 2013

Roy Oppenheim’s, commentary was originally published on Yahoo Homes! and is being redistributed on South Florida Law Blog with their permission Yahoo! Contributor Network .

Jun 17, 2013 “Share your voice on Yahoo! websites.”

Credit code glitch impacts short sales by Roy Oppenheim, Oppenheim Law

Credit code glitch impacts short sales by Roy Oppenheim, Oppenheim Law

COMMENTARY |Although the real estate market is beginning to make a comeback, the mess left behind from the economic recession will undoubtedly take much longer to clean up.

Problems associated with foreclosures and short sales continue to mount as new ones continue to pop up.

The latest example: A glitch in the credit reporting system (Metro2) that can keep those who exit their homes through a short sale from qualifying to purchase a new home for much longer than they anticipated could suppress the real estate market.

The problem lies with the software program used by the credit reporting system. We have heard from clients, and have independently confirmed through research, that the system does not have a separate code that recognizes the difference between a short sale and a foreclosure in the real estate market. The coding system is used by the three major credit-reporting organizations TransUnion, Experian and Equifax.

To understand why this is a problem, it’s important to understand the differences between a short sale and a foreclosure.

In a short sale, the bank must approve the sale of a house to a new buyer at a price that is acceptable to it, the buyer and the seller. Any unpaid loan balance that isn’t covered by the proceeds from the sale can either be partially or fully forgiven. The bank plays an active role throughout the process and can negotiate with the new buyer for a higher price and higher repayment of principal from the original borrower. Banks have begun approving short sales more than in the past because they are cheaper and are less of a problem than foreclosures.
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Give Orman Credit For Trying to Change Credit Score

Thursday, February 2nd, 2012

I have to give Suze Orman credit.

One thing that’s taken a huge hit in the housing crisis is people’s credit scores. I’ve seen it with plenty of good responsible homeowners.

The reality is that most people who overextended themselves during this financial crisis did so because they had good credit scores.

In fact when I used to ask people in a seminar who had bad credit prior to the financial meltdown no one would raise their hand.

In fact it was only people who had good credit that got themselves in trouble.

The way you build your credit seems antiquated and doesn’t always reward you for being good with your money. If you try to live frugally, use only debit cards and curtail your borrowing, you should be rewarded.

Yet someone who lives beyond their means, yet pays the minimum on their cards, will in fact end up with a better credit score, even if you’re on the verge on bankruptcy.

This goes right to the root of the problem, where we preach the benefits of spending wisely, yet reward people for living on borrowed money. It’s entirely counterproductive to the financial recovery of this nation.

Orman and I agree that people should be rewarded not for how much money they borrow and repay but for how much money they spend without using credit in the first place.

Orman realizes this and is trying to do something about it.

She’s begun offering a pre-paid debit card called The Approved Card”, and she’s managed to convince at least one of the credit rating agencies (Transunion) to watch the spending habits of people using it. She hopes that TransUnion will ultimately decide to use this information to help adjust a person’s credit score.

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Roy Oppenheim on Strategic Foreclosure: Shay’s Rebellion 2.0

Thursday, May 20th, 2010

A silent rebellion has begun. This time there will be no drums or shots fired. In fact, no one will hear anything. Not even footsteps.

Homeowners have reached a tipping point of sorts: 7 million homeowners are currently underwater. They are defaulting on their mortgages. One by one they are part of Shay’s Rebellion 2.0, a rebellion being fought on the frontlines of foreclosure through strategic default.

This time however, it’s not just western Massachusetts, but a silent battalion of millions of underwater homeowners across every state that have declared a consumer rebellion. These new warriors are no longer worried about a bad credit score; instead they are concerned with their family’s economic future. They no longer trust a Congress they believe has been hijacked by a few large financial institutions. They also instinctively know their collective actions can quickly have devastating consequences to these oligarchic financial institutions.

This time, the Rebellion is a boycott caused by the banks’ own audacity, by thinking that they could take over the polity of this nation by growing too large for any President, Federal Reserve, or Congress.

Most experts suggest families are making a rational economic decision in walking away. Businesses decide to walk away from investments all the time. Oppenheim Law recognizes that families have an obligation to themselves and may feel compelled to break contracts just like any commercial real estate owner.

In fact, Time Equities, the owner of Tudor City in Manhattan, did exactly that when they walked away from billions in the largest strategic default in the history of the United States. Did we hear anyone say such conduct by these owners was immoral or unethical?
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