Overlays & New Mortgage

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Can you all explain this to me? My hub and I have built our credit back up. He is two years out on a BK7 with FICO, 689, 693, 687. I am 7 years out BK7 with FICO, 665, 651, 653. We would like to purchase our first home. Neither of us has ever owned. We are looking at USDA, and VA. (we already have the certificate for VA) Our year income together is 70K. Job (me) over 10 years...

The only derog I have is from 5 years ago, after the BK7 of a repossesion. My report shows charged off with a balance after the repo of 12K. Our DTI is well below the guidelines, however the one lender we tried with (Navy Federal) denial. They stated that although the scores everything looked good, the "overlay" of my repo was to much $. Unless I had over 10K as a down payment, it was bugger off... Which I don't. I thought that was the benefit of USDA/VA. besides no PMI.

Question: If the SOL on that debt is 5 years for them to collect in FL, and I have surpassed the 5 year mark, why will they not overlook the debt, since it can't be collected on anyways? Secondly, if Navy Fed, who is a great lender with everythingelse can't "get it done" then can anyone? Does any lender actaully go by USDA/VA guidelines or do they all have such tough overlays for mortgages?

Any help/insight would be greatly appreciated, or a direction to take. Other than waiting another 2 years for that repo to fall off..


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Every mortgage lender can "overlay" their own more strict requirement over the VA and/or USDA (even FHA or conventional) requirements.

The requirements for the VA is for the loan to be guaranteed. The bank requirements are frequently more restrictive. See these requirements here:Fact Sheet on VA Guaranteed Loans - Home Loan Links

However, each bank is different. USAA is fairly conservative in their requirements for a VA mortgage loan. Having said that though, having a repo after a BK is a credit killer. Most lenders would have an issue with the repo after a BK (it shows a pattern).

I'm in Fl. I have a good mortgage banker that does lots of VA loans. If you want a referral, PM me.

Otherwise you might have to do something with the repo. I'm not sure what would work besides letting it drop off entirely. Did you manage to escape a judgment? If so, that's a good thing. If not, that will last for 10 years in the public records. Check your records just to be sure. If you don't have a judgment you might try a PFD or Goodwill letter. Be careful with either of these routes though....

Edited by Denita
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Why don't you try to settle with the lender who has the repo loan? With an old outstanding balance you could potentially settle this for pennies on the dollar. If you do go this route, you'll have to have the cash ready to pay the agreed amount in full.

You might still have to wait a while before you can qualify for a mortgage. FHA may then be your best bet because the VA has always been tougher on credit issues.

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Good job cleaning up your credit.....:)

My advice to you is wait - the repossession was 2005. Next year, 2013, it is going to “age” off of your credit report.

In my previous life was a loan officer - in order for underwriting to approve a credit report with a repossession, it would have to be paid off. Reason being at some point in the future a lien could be placed on the title of the home.

Do not recommend trying to settle the repossession, because if you did there would be a record of it, posted on your credit report for another seven years....

Even though you could shop around for a mortgage. Not all lenders have the same policies and some may not even take an older repossession into consideration. (note - try not to have your credit report ran multiple times, because that will drive your credit score down).

Good Luck :)++


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