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39 » VISIT US ONLINE @ DSNEWS.COM THE EFFECTS OF BANKRUPTCY ON BORROWERS For some, bankruptcy may seem like the end of the world. However, according to a study from LendingTree, this may not be the case. LendingTree's findings show that, although costs to borrow go up following bankruptcy, it is not impossible to find loans and qualify for credit. Within just a few years following bankruptcy, borrowers may even be able to find "normal" rates again. According to the report, around 43 percent of those who filed for bankruptcy have a credit score of 640 or higher within just a year of filing. LendingTree found that mortgage borrowers who have declared bankruptcy with a credit score of between 720 and 739 three years after bankruptcy were offered APRs similar to that of borrowers with no history of bankruptcy. LendingTree notes that this indicates bankruptcy history can be counteracted with strong credit scores. Still, on average, a mortgage borrower who has declared bankruptcy may expect to pay $8,887 more on average than a borrower who hasn't declared bankruptcy within the first three years after bankruptcy. After five years, that number drops to $6,032, but in general, lenders, especially Fannie Mae, do not typically give loans to borrowers who have declared bankruptcy. With the exception of mortgage lenders like Fannie Mae, borrowers do not tend to have much trouble acquiring loans following bankruptcy. LendingTree's research found that very few bankruptcy filers have a harder time than those who have not filed for bankruptcy. "People may think that filing a bankruptcy would put you out of the loan market for seven to ten years, but this study shows that it is possible to rebuild your credit to a good credit quality," said Raj Patel, LendingTree's Director of Credit Restoration and Debt-Related Services and Products. "e biggest challenge in rebuilding credit is for the consumer to stick to a disciplined approach by getting access to the credit but sticking to a plan for not overusing the credit," Patel continued. "e key is to use it responsibly—keeping balances low and making payments on time, which are two of the biggest factors that impact your credit score." HOW ARE FREDDIE MAC HARP LOANS PERFORMING? According to a report by Moody's Investor Service, Freddie Mac loans refinanced under the Home Affordable Refinance Program will continue to outperform pre-crisis Freddie loans that did not enter the program, but will also continue to lag behind post-crisis Freddie loans. e Home Affordable Refinance Program (HARP) was instituted by the Federal Housing Finance Agency in March 2009, designed to assist borrowers who are current on their mortgage payments but have little to no equity in their homes, to refinance their mortgages. Moody's cites Freddie Mac data showing that "loans originated in 2005-07 that went through HARP had a 60+ day delinquency rate of just 1.14 percent, as of March 2017, well below the 6.84 percent 60+ day delinquency rate for 2005-07 loans that did not go through HARP." Moody's also found that the 60+ day delinquency rate among non-HARP borrowers with lower FICO scores who were current as of December 2014 has continued to rise in recent years. However, the 60+ day delinquency rate for lower-FICO HARP borrowers has tracked consistently with that of higher-FICO HARP borrowers, leveling off even as the rate for non- HARP borrowers has climbed. In spite of all of that, however, HARP loans still don't perform as well as post-crisis Freddie Mac loans, and Moody's expects this trend to continue. Moody's report states, "e delinquency rates for HARP loans are higher than those of non-HARP Freddie Mac loans of similar seasoning and with characteristics most representative of the HARP program." Moody's explains that the post-crisis Freddie Mac loans perform better largely due to "the GSEs' underwriting criteria being tighter than guidelines for HARP, which is a streamlined refinance product with limited re-underwriting." e report also points out that, while GSE underwriting standards have weakened since the crisis, HARP's guidelines have been scaled back even further during that time period. Moody's found that, on average, HARP borrowers' FICO scores dropped by 42 points since peaking at 745 in 2010, as compared to a loss of only 11 points for post-crisis non-HARP borrowers during the same period. Moody's report also attributes some of the differences between HARP and non- HARP delinquency rates to "an increase in the share of HARP loans backed by investment properties, which typically perform worse than owner-occupied properties." Was the homeownership rate in the first quarter of 2018, an increase from last year's reported rate of 63 percent. Source: 'Led By Strong Demand By Millennials, Homeownership Rate Rises', Trulia, Released in April 2018 STAT INSIGHT 64%

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