My 3 year update since CH7 Discharge.

[BxRcvor]

Hello all. Long time, no type. I thought I'd give an update as my 3 year anniversary of being discharged on Ch7 is coming up this July.

So far, things are going a little better than I thought. My FICO8 score is above 660. Not "good" yet, but we're working on it. I have a few credit cards now and I have consistently made payments on all of them. Although my total "available" credit is way less than I used to have (less than 10% of what I had, originally) and that's OK. I'm doing OK with that. I think if I reduce the amount owed on all my credit cards, it will improve. I think they don't want you to use more than 30% of your available credit on each card. We'll see.

I'm learning a lot about FICO. I did not realize that there are now FICO 9 scores which do evaluate differently than FICO 8. Unfortunately, I found that out "the hard way."

I've been advised by my homeowners insurance co. that I have to replace my roof before 03/2023 as it's approaching 20 years old. If I don't, they won't renew my policy. The roof is not in bad shape at all, but it is showing signs of wear. No leaks or anything like that, however. Just some nails poking up through the shingles and one or two soft spots. Therefore, I need to go ahead and do it. I think the greater concern with the Insurance co. is "Hurricane Wind mitigation" and worthiness, which are issues for us, here in FL.

The roofing vendors were offering financing at some decent rates. One of them, in fact, was offering me a deal on a SOLAR array as well, and was willing to finance for 1.99% APR. Sadly, I was denied by their finance co., but for the screwiest reason. Apparently, my FICO score did not meet their minimum, even for "pre-qualification" (I don't even think they did a hard pull so they might now know about the CH7). When I checked the three main bureaus, my highest score was 20 points more than what they claimed it was and within their limitations. They responded by saying. "The score we used was your FICO 9 score, not FICO 8, and it was below their minimum requirement. This was the first I'd ever heard of a FICO 9 score. I know all about it, now... been in place since 2014. The main issue being, I can't get my FICO 9 scores on Experian. They won't publish them. They are sticking with FICO8, even though it was a FICO 9 score that they published that got me denied.

Anyway, I got an offer from a Baltimore based Mortgage co. for a HECM "Reverse" mortgage. I'm old enough to qualify for one, and I have 100% equity in my house and no mortgage currently. HECM (Home Equity Conversion Mortgage) is a "Reverse Mortgage" that is sponsored by the FHA. Long Story short, because it's a "secured" loan, they were a lot more "tolerant" with my credit history. Since there had been more than 2 years since the CH7 discharge, and I have a permanent payment history thereafter, they were willing to proceed. The appraiser came and did his thing, and I got an appraisal for far more than I thought, just due to the uptick in real-estate values currently in FL. I was going to get far more of a Home Equity LOC than I'd need and I could take care of the roof, replacing the HVAC, and some other things. And the current APR was 5.1% And we got to a point in the process where we were 1-2 days away from the closing. And then, this happened.

I got a call from my Insurance agent. She advised that the Mortgage co. called her and told her she needed to increase my "Dwelling" coverage to match (or approximate) the newly appraised value of the property. Not the "replacement cost" value (where I had it), but the new appraised value. This would, then, increase my annual premium from $1722.00 to $2195.00 (i.e $435.00 increase). And that doesn't even cover the increased premium of $350.00 for the $1 million liability policy I'd have to have if I were implementing a SOLAR array (requirement of my Electric utility co).

I was furious with the Mortgage co. for not telling me in advance that they were going to call my Insurance agent. It caused me to think, quite a bit about the whole project. And, after careful consideration, I cancelled the deal with the mortgage co, and I've accepted the realization that the SOLAR project is also a "no go" at this point. It sucks, but I was just not happy with the results of that. It was just way too costly with all the fees and closing costs, etc. etc. So, now, I'm just looking for a much smaller amt. to fund the re-roofing project and, perhaps, replacing the HVAC. That's all I really need to do. The others are all luxuries... nice to haves, but aren't essential.

Therefore, I'll be looking for a financial institution that will offer me a Home Equity loan (fixed amt) but not for a whole lot of $$$. I can handle, say, a $25K loan and get it done in 10 years. But finding a lender who will make that happen and not be concerned with the credit history. I don't think I'll get an "unsecured" loan of that amt. for some time, still, due to that history and my present situation. Like I say, I only need $20-25K right now to get the roof/HVAC fixed. The rest can wait.

Any suggestions you might have as to a lender who can do that would be greatly appreciated.

Good to be with you all again.

[justbroke]

Try PenFed (Pentagon Federal Credit Union). I think they're only second to Navy Federal (NFCU). You may also want to talk to the "really big" direct lenders like Guaranteed Rate, Better, and/or Rocket Mortgage. I don't know what each does for an HEL (Home Equity Loan), but I think an HEL is the way to go. All of these lenders will have overlays so it's best to talk to someone first to understand the overlays (e.g. the seasoning of a Chapter 7).

[BxRcvor]

Try PenFed (Pentagon Federal Credit Union). I think they're Bankruptcy Forum behind Navy Federal (NFCU). You may also want to talk to the "really big" direct lenders like Guaranteed Rate, Better, and/or Rocket Mortgage. I don't know what each does for an HEL (Home Equity Loan), but I think an HEL is the way to go. All of these lenders will have overlays so it's best to talk to someone first to understand the overlays (e.g. the seasoning of a Chapter 7).

Do I have to be Military affiliated to use them (as I'm not)?

[justbroke]

Anyone can now join PenFed. I think NFCU is still restricted (military, dependent of military, family member, etc).

[BxRcvor]

Try PenFed (Pentagon Federal Credit Union). I think they're only second to Navy Federal (NFCU). You may also want to talk to the "really big" direct lenders like Guaranteed Rate, Better, and/or Rocket Mortgage. I don't know what each does for an HEL (Home Equity Loan), but I think an HEL is the way to go. All of these lenders will have overlays so it's best to talk to someone first to understand the overlays (e.g. the seasoning of a Chapter 7).

Funny you mention PenFed. Believe it or not, I saw a piece of "junk mail" from PenFed in my "US Mail Informed Delivery" email this morning. I look forward to seeing what it says.

[BxRcvor]

Funny you mention PenFed. Believe it or not, I saw a piece of "junk mail" from PenFed in my "US Mail Informed Delivery" email this morning. I look forward to seeing what it says.

Well, unfortunately, the letter I got from PenFed was a "denial" letter. But fear not. My credit score had risen enough to where I actually qualified for an unsecured installment loan from "One Main Financial." And it was enough to get my roof project done and pay off some other debt. WooHoo!

I'm also considering another opportunity. There's a company called "Point Digital Finance" based out of Palo Alto, Ca. What they offer are "Home Equity Investment" deals. The company invests in your property (right now, only residential if I understand correctly). After qualification, and after an initial appraisal of your property, you are able to borrow up to the amount they specify (based on that appraised value). Once you close, it begins a period (max 30 years) where you don't even make payments. You can't, actually. There's no mechanism for it. What happens is they make an investment offer where what they pay you is that amt. you agree on. Where they make money is on the value of the property at the time you terminate the contract, either by selling the property or paying it off, or refinancing it, etc. etc. At the time of initial closing, you and Point agree on a percentage of the property's equity (at the conclusion of the contract) that becomes Point's "share." That share (plus the amount you borrowed originally) is what is paid to Point when you terminate their contract by selling or paying it off, etc. etc. You get the rest of the proceeds as your share of the equity at the time of sale. The amount of their share fluctuates with the appraised value. If it goes up a bit, they get a bit more. If it goes down, they accept the loss (less maybe 10% to cover themselves) but they will accept the loss. You're looking at maybe 20-30% as Point's share of the resultant appraised value, plus what you borrowed originally. They also have "caps" on some of the shares in the event you decide to pay it off early. So their share becomes either that Percentage you agree to, or the cap on it, whichever is lower.

It seems like a good deal as long as one is careful and keeps good watch on what's going on. Furthermore, their threshold on "bankruptcy" filings was 2 years from the date of discharge, so I think I'm in pretty good shape there (most of the banks offering Home Equity Products was 4-5 years). And, since I'm not having to make monthly payments to the company, I can actually make them to myself! I can open a savings account and make payments to that and accumulate enough cash in that savings account such that I could, in essence, pay it out in 10 years... both their share and the principal I owed, and then be done with it, getting all my equity back. I'd actually prefer that before selling. They do put a lien on the house just to cover the investment, so they would need to cancel that lien when you pay it off (or when you close when selling). They also offer to allow you to "re-negotiate" the investment at the end of 30 years if you want more time. I won't need that much time because I'd be getting up there with Queen Elizabeth II when that period is over. I'd want to knock this out in 10 years and pay it off in cash.

Thoughts on this? Is it a good thing?

[flashoflight]

I get junk mail from all of the home equity investment places including Point. Unfortunately, they are all terrible deals equivalent to a 15% rate on a credit card. They will end up taking a disproportionate greater share of the equity relative to net cash received and take the appreciation in their favor. The losses are capped in their favor as well. The fees add up too. You need to read all of the fine print slowly and carefully. I'd stick with the traditional methods of borrowing against your house you mentioned already or do a personal loan.

[justbroke]

I looked at those investment deals, and for me it was horrible. In Florida's major cities, and the suburbs within 30 miles of a major city, are experiencing exponential growth and home prices have nearly doubled in the last 5 years. The one I looked did give me an offer, but then I realized you can't buy them out within the first 5 years.

My home increased in value by $50K just this year alone. So if I took the maximum from them, let's say $75K, I'd owe them $75K plus they'd take 40% of the appreciated value. That's horrible! Let us say that my home improves in value by $150K in the next 5 years. They would get $60K of the equity on the sale, plus the $75K. Now I would have owed them $75K, but they're taking $60K of the equity over 5 years. That comes out to about 20% interest per hear for the original $75K. Crazy!

Well, it is going bananas here in Florida. I have $250K in equity on a home I bought 2 years ago. I feel sorry for anyone trying to enter this market.

Pros: they don't report and you have no payments!
Cons: if property values in your area are going through the roof, it is probably NOT a good deal over a HELOC or HEL.

[BxRcvor]

I looked at those investment deals, and for me it was horrible. In Florida's major cities, and the suburbs within 30 miles of a major city, are experiencing exponential growth and home prices have nearly doubled in the last 5 years. The one I looked did give me an offer, but then I realized you can't buy them out within the first 5 years.

My home increased in value by $50K just this year alone. So if I took the maximum from them, let's say $75K, I'd owe them $75K plus they'd take 40% of the appreciated value. That's horrible! Let us say that my home improves in value by $150K in the next 5 years. They would get $60K of the equity on the sale, plus the $75K. Now I would have owed them $75K, but they're taking $60K of the equity over 5 years. That comes out to about 20% interest per hear for the original $75K. Crazy!

Well, it is going bananas here in Florida. I have $250K in equity on a home I bought 2 years ago. I feel sorry for anyone trying to enter this market.

Pros: they don't report and you have no payments!
Cons: if property values in your area are going through the roof, it is probably NOT a good deal over a HELOC or HEL.

I've been told by Point that I can terminate the deal within the 1st 5 years if I choose, and that their share would be capped accordingly. We'll see. My plan would be to give it ten years and then buy them out. Yes, their share would be more than what I received in a cash layout, but I'll see what we're talking in re: APRs as opposed to a conventional HEL. The problem I'm finding though (I have tried several HEL companies recently) is that most consider my CH7 an automatic disqualifer. Or that I had to be past the CH7 by 4 or more years (It would be only 3 in July). So they aren't working out. Point was only two years. Correct, they don't report and you have no payments. So what I plan to do is open a savings account and pay myself what I need to in re: Point's share plus my original principal over 10 years +/-, as if I were paying them back. Then I'll buy them out and get all my equity back.

[BxRcvor]

Just a quick update: The Point deal looks like it may just go through. I've submitted all the paperwork they require, and I received a "next to final" offering (the one before they draw up all the paperwork). I'm happy with the share percentage and I think I can handle it within my forecast period. In another week or two, they'll send a notary to my house to sign the closing docs (or I may go to a notary to sign them). At that point, I should be funded several days thereafter. The appraisal came in rather nice (better than I was anticipating) so we'll see.

They could still deny me, but it's looking a lot better now. We'll see.

[BxRcvor]

And, yet, another Update: The Point deal will apparently go through. Closing is set for later this month. I could get funded by 08/02 or thereabouts. I also seem to have gotten a good deal on the "share %" for the principal I sought (a lot less than they were advertising), which is good. I figure all I need to do is open a "Treasury Direct" account and start investing in those "Series I" bonds and I should be able to wrap this up in 10 years or less.

I'll keep you posted.

[BxRcvor]

Wish me luck. Today is "closing" day for the Point Transaction. By early next week, I should be funded electronically. I can then do the household projects I need to do as well as clean up some of the credit card debt I have. And I don't have to make payments on it. So I will pay myself. I'll open an account on "Treasury Direct" and buy some of those I-Bonds and, hopefully, make enough money to buy out the loan in 10 years. They do file a "mortgage" as the security instrument but there is no "promissory note" that specifies a monthly payment.

The final terms were better than I expected. Their "percentage" was 34.2 of the delta between the first and 2nd appraisals (the 1st adjusted down for their "coverage" thing).

We'll see.