![]() ![]() Debt collectors dealing with older loans where the statute of limitations has not run should consider attempting additional communications with borrowers before initiating foreclosure proceedings, to mitigate borrower surprise and to avoid increased attention from the CFPB. They should also be mindful that another issue identified by the CFPB was debt collectors’ failure to sufficiently communicate with borrowers. The prohibition applies even if the debt collector does not know that the debt is time- barred.ĭebt collectors should review the applicable statutes of limitations for jurisdictions in which they are collecting and confirm they know the age of their loans to reduce compliance risk.The FDCPA and its implementing Regulation F prohibit a debt collector from suing or threatening to sue to collect time-barred debt, and.The CFPB states that debt collectors that nonetheless attempt to do so may be in violation of the Fair Debt Collection Practices Act (“FDCPA”) and Regulation F, warning that: In the advisory guidance, the CFPB states that it is illegal to sue or threaten to sue to collect on time-barred zombie mortgages. The CFPB alleges that, over a decade later, and without any intervening communication to borrowers, debt collectors are now demanding the second mortgage balance, interest, and fees and are threatening foreclosure on borrowers that do not pay. Instead, lenders sold their second mortgage loans for a fraction of their value. According to the CFPB, many lenders did not pursue collection on the second mortgages during the financial crisis, due to declining home values, which meant that in a foreclosure no sale proceeds would remain after payment of the first mortgage. During the financial crisis, struggling borrowers paid their first mortgage loans, but failed to pay their second mortgage loans. These “piggyback” mortgages often involved a primary mortgage for 80% of a property’s value, with a second mortgage for the remaining 20%. The CFPB attributes this trend to practices that occurred in the years leading up to the 2008 financial crisis, when to make home purchases affordable, some lenders coupled first mortgage loans with second mortgage loans. The CFPB indicated that its opinion was issued in light of a series of actions by debt collectors attempting to foreclose on “silent second mortgages,” also known as “zombie mortgages,” that consumers thought were satisfied long ago and may now be unenforceable. In other cases, judicial foreclosure actions are also subject to a statute of limitations. In some cases, they create an affirmative defense for the consumer that prohibits a debt collector from suing to collect the debt. The statute of limitations for mortgage loans are typically created by state law, and vary by jurisdiction. A time-barred mortgage loan is one where the statute of limitations has expired. Given the complexity and different methods involved it is important to understand how a lender calculates rental income before you apply for a non-owner occupied mortgage.The Consumer Financial Protection Bureau (“CFPB”) recently issued advisory guidance on the enforcement of time-barred mortgage loans. If you a refinancing a property and can provide at least one year of tax returns to verify the current rents then lender usually use the income figure according to your Schedule E to qualify you for the loan. If you have at least one year of experience receiving rent or as a property manager, lenders use 75% of projected property income according to a rental appraisal or 75% of the income from a signed lease agreement, and there is no limit to the rental income added to your application. In this case you may be required to qualify for the loan based your own income as well as you monthly debt expenses, including the rent or mortgage payment on the home you live in. It also comes with cheaper private mortgage insurance (PMI). More specifically, all you need to get approved is a FICO score of at least 620. If you are buying a property and have less than one year of experience receiving rent or managing rental properties, there may be a limit to the amount of rental income that is included in your loan application. HomeReady mortgage: Although AimLoan doesn’t originate actual FHA loans, its HomeReady Mortgage program provides easy-to-meet credit requirements and as little as a 3 down payment. Calculating the income for a rental property may seem like a pretty straightforward exercise but like most things related to the mortgage process it is relatively complicated. ![]()
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