Ask the client if they had a past short sale, foreclosure, deed in lieu (DIL), modification, or bankruptcy where property was included.

During the past housing crisis, a foreclosure credit code often showed up on credit for short sales, DIL and even modifications. The foreclosure code requires a longer wait period to get a new mortgage. This incorrect credit often could not be visibly seen on a credit report but did show up in the Fannie Mae and Freddie Mac automated underwriting system (AUS) findings.

Asking clients detailed questions when specific past credit issues exist and then running their loan through AUS systems UPFRONT is CRITICAL to ensure that these past issues will not pop up during the loan process and prevent the client from getting a mortgage.

• Run loan through the Fannie Mae and Freddie Mac automated underwriting systems for FHA, VA and conventional programs, and through the Guaranteed Underwriting System (GUS) for USDA loans.

• In fact, run ALL client loans through both the Fannie Mae and Freddie Mac AUS systems UPFRONT for prospective homebuyers to insure a thorough pre-approval.

There is nothing worse than finding out that a client cannot get an AUS approval AFTER the client has signed a contract, put a deposit down, given notice to a landlord, and paid for a home inspection and appraisal. An AUS denial towards the end of a contract can be catastrophic, where the only options for a client are a government loan manual underwrite with stricter guidelines and a higher interest rate, or a non-QM loan with a higher interest rate and more down payment required.

Ask the client if they had a bankruptcy and a property was included that had a short sale, foreclosure, Deed in Lieu (DIL) or even excessive late payments.

• When a bankruptcy has a property included, the mortgage payment history ceases to show up on a credit report after the bankruptcy discharge date unless the debt is re-affirmed. Remedies to get the payment history and closing date of a short sale, foreclosure or DIL:

• Retrieve a verification of mortgage (VOM) from the past mortgage company.

• The client can request a mortgage payment history from the past mortgage company.

• Your credit reporting agency has a report that can provide this information for a fee.

Check the final date the mortgage showed as reported and closed and review the payment history to make sure the client meets derogatory credit wait timeframe for specific loan types^[1].

Ask the client if they had a defaulted student loan or mortgage.

• Check the Credit Alert Interactive Voice Response (CAIVRS) system UPFRONT, a federal government database of delinquent federal debtors, to ensure client credit is clear.



Ask the client who is a veteran if they had a past short sale, foreclosure or deed in lieu.

• Pull a Certificate of Eligibility (COE) FIRST to confirm existing eligibility.
• If there is $0 eligibility:
• Contact VA at 877-827-3702 to get determination of Bonus Entitlement.
• Calculate VA Bonus Entitlement:

The calculation for basic + bonus full entitlement looks like this: