Scratch and Dent : Lack of Compliance:
Unfortunately for mortgage providers, there are a lot of loans that end up going Scratch and Dent due to things completely out of their control. Mortgage companies have little to no control on whether borrowers will make payments on time, future job status, occupancy changes or buyer appraisal opinions. This lack of control produces unsaleable loans for our clients. Some of it comes down to cost of doing business. But as mortgage providers close more loans, there will always be some loans that are rejected by regular investors.
So it is extremely important for our clients to control what they can control in order to keep their scratch and dent loans to a minimum. Right House Capital strives to create long-term relationships. RHC wants to share what we are seeing as the 4th quarter of 2020 comes to an end. Hopefully, this information can prevent some of our customers from needing to liquidate a scratch and dent loan, investor fall-out loans, Non-QM loans, jumbo loans, re-performing loans, sub-performing loans and non-performing loans in the future.
Over the last few quarters, compliance issues have been increasing and are the most common flaws we are currently seeing. Here are the top 3 compliance issues. The first one is where VA loans violate the 210 day seasoning requirement. The second one is not completing or completing the wrong type of Home Buyer Education Certificate for first-time homebuyers. The last one is when a loan violates TRID requirements.
Summary:
Hopefully this information will increase awareness and mortgage companies can limit the risk to liquidating loans on the secondary market. With all that said, Right House Capital is here for any of your liquidation needs when it comes to all types of scratch and dent loans. For more information or if you have any problem loans in your pipeline, contact Andrew Zale at 502-365-5632.
