Posted by kcg on 1/26/13 1:15pm
Msg #452390

Odd Form in Pckg

Refi....1st & 2nd mtgs being paid off and also from HUD about 8 credit card balances.

There is a form in the package which states that by signing, BO is requesting all the above credit cards be paid off and closed.

He looks at this and says he was told that he would receive the check to pay off cc's (approx $20K) and he was certainly never told he'd have to close out every cc he had. Let's say he was outraged - he'd be left with no credit cards.

We called his LO (who happened to be on vacation)...LO says he was never aware of that stipulation and he'd be back in the office on Monday to look into it. I did call t/c who said it was in lenders closing instruction...balances paid off HUD and sign form to close accounts.

How can the lender (Chase) tell anyone that they have to close out ALL credit card accounts? This guy wasn't behind on any of his payments.

In over 2K signings, I have never seen a form like this. Has anyone else?

Reply by droman_IL on 1/26/13 1:17pm
Msg #452392

I never have for credit cards, only open lines of credit.

Reply by Linda_H/FL on 1/26/13 2:30pm
Msg #452408

"How can the lender (Chase) tell anyone that they have to close out ALL credit card accounts? This guy wasn't behind on any of his payments. "

To reduce their debt-to-income ratio and, possibly, so they qualify for the loan after all is said and done. Was probably a condition of their loan commitment and the borrowers never read it closely enough.

I've seen many of them.

Reply by Malbrough_LA on 1/26/13 7:44pm
Msg #452447

Why is it odd?

"Was probably a condition of their loan commitment and the borrowers never read it closely enough."

I concur with this. At some point consent had to be given in a legal manner. This is a fine print type situation. It makes perfect business sense from the lender's side imo.

Reply by SReis on 1/26/13 2:35pm
Msg #452410

I would refuse. Could severely impact his credit rating. n/m

Reply by GOLDGIRL/CA on 1/26/13 4:07pm
Msg #452421

Re: I would refuse. Could severely impact his credit rating.

I've seen many of these. The lender is paying off all the cc debt and giving him a mortgage contingent that he not rack up a whole lotta new debt down the road, which he has shown he's quite capable of doing, and thereby jeopardizing his ability to pay back the loan cos he's spread too thin.

It's no surprise the LO pleaded ignorant .... although it was probably an underwriting requirement. Like Linda said, it was likely some sort of debt to income ratio, and even tho borrower wasn't behind on any payments, $20,000 in cc debt is pretty huge when you're applying for a refi (depending on one's income/assets, of course).

Thing is, he may be down to zero cradit cards for a bit, but all he has to do is apply for a new one(s) after the loan funds.

Reply by Linda_H/FL on 1/26/13 5:02pm
Msg #452428

I think I'm a little confused here...what would you refuse?

If all those debts are paid off, that can only have a positive affect on his credit rating, correct? Because it sure would improve his debt to income ratio.

Not sure what you mean by you'd refuse.

Reply by HisHughness on 1/26/13 5:06pm
Msg #452429

Re: I think I'm a little confused here...what would you refuse?

Oddly, cancelling credit cards has an initial negative impact on your credit rating. One of the criteria for assessing one's rating is how much access you have to credit. Thus, cancelling credit cards has reduced your access to credit.

Our credit ratings system was designed by an Aggie.

Reply by Linda_H/FL on 1/26/13 5:11pm
Msg #452430

Okay..thanks Hugh..I seem to remember being told

something similar to that some time ago about making large paydowns on debt every so often.

Thanks.

Reply by SReis on 1/26/13 8:56pm
Msg #452452

like Hugh said plus...

Score is also based on length of credit history too. If you close out the acct they can no longer consider that credit history. If you open new acct it will be considered too new. Always been told to pay off but not close credit lines. If you have no balances on the credit cards they are not considered debt. Your debt to income ratio would only be based on the amt that has been chArged not the limits you have. Also as Hugh stated s ores are based on available credit vs credit used so if you close an acct you have taken away from your available credit and hence increased the "bad" ratio of credit to debt (assuming you have outstanding debt). I know it's confusing but what else would you expect. Lol

Reply by JimAZ on 1/26/13 9:22pm
Msg #452453

Re: I think I'm a little confused here...what would you refuse?

In 2005 when I retired I paid off all my credit card balances and closed everything except AMEX and one Visa card. Zero balance on everything. My credit score fell by almost 70 points. In 2008 I bought a motorhome and financed $50k. My credit score went up as a result of the motorhome finance. Crazy credit score world out there.

Reply by Malbrough_LA on 1/26/13 9:48pm
Msg #452455

Re: I think I'm a little confused here...what would you refuse?

My wife and I were just discussing this earlier this morning before I headed out. I've noticed when we pay off the balances in full, our credit score takes a slight hit. When we leave a balance the credit score rebounds.

I'm doing precisely what was instructed to me by my father and mother. Pay off the bill and owe no one. Yet credit companies don't seem to view things the same way. As such, I've done the math and we charged a trip to Disney a while ago when we took our two kids. (Yes, I'm a die hard Disney fan...I still miss Figment's original ride in Florida, if you're listening or reading Disney...) We wind up paying a bit more with interest, but our credit score has gone back to almost perfect.

You stated, "Crazy credit score world out there." I'll agree, but amend your statement slightly to this: "Premeditated credit score world out there."

Reply by JimAZ on 1/26/13 10:14pm
Msg #452457

Re: I think I'm a little confused here...what would you refuse?

LOL. Don't let my wife know that charging on our credit cards will help our credit score. She will take that as a challenge. Just our little secret.

Reply by Malbrough_LA on 1/26/13 10:30pm
Msg #452461

LOL! My lips are sealed! n/m

Reply by ToniK on 1/27/13 12:46am
Msg #452465

I learned that the hard way

I went from 4 credit cards down to 1 over the years. Now that the only debt I have is a car note, business credit card (low CL), and a surmounting school debt ($96k where $60k is principal). I'm finding it VERY hard to get new credit cards. I have no blemishes, hardly no inquiries for the last 2 yrs. Im hoping its my deferred student loans that making lenders wary...but when I had about $20k of CL, lenders were giving me credit limits.

Reply by CopperheadVA on 1/27/13 7:22am
Msg #452469

There is NOTHING like living debt free

I went through the Dave Ramsey program a few years ago. It requires discipline, but my husband and I paid off all our credit card and vehicle debt - it took a couple of years. Unless you have done it, you will not understand how liberating it is. And when my husband passed away last year, it was a blessing not to be saddled with all that debt as his income was suddenly gone.

I do have two credit cards, one is a Costco AMEX where I get a lovely cash-back check every year and one is a Target VISA where I get 5% off of every purchase at Target and free shipping at Target.com. I pay those cards off in full every single month and neither one of them has a yearly fee. I would never want to have 8 credit cards ever again.

Reply by jba/fl on 1/27/13 8:39am
Msg #452470

Re: There is NOTHING like living debt free

I didn't do any programs but I have always wanted the freedom to say Johnny Paycheck's line: Take this job and shove it. I've been debt free except daily expenses and low house payment, which I am really mad about due to the hurricanes of '04. But I can live with it.

I shop my credit cards and use those with great interest rates - free for 12-18 mos. - and use their money. Haven't paid any interest in 13 years.....discipline...self-discipline required. And no need to compete with the Jones'.