“Refinancing out of a Private Mortgage”

Any lender that will consider refinancing an existing mortgage will require verification of payment history. When the existing mortgage is owned or serviced by an institution, all payments are reported to the three credit bureaus. However, the likelihood of a privately owned mortgage, being reported to the credit bureaus is not likely, so we need to rely on canceled checks or money orders.

Here is the problem with this private mortgage, it was owned by the parents of our borrower and all the payments were paid in cash, a real problem. The borrower would cash his check and pay the parents in cash.

Fortunately, the parents deposited the cash into their savings account and we got 24 months of savings account statements that showed the same deposit each month. The payments were the exact amount that showed on the mortgage note. If we were not able to produce evidence of these payments for the lender, it is unlikely we could not have gotten this refinance done.

I understand that the cash economy is alive and well, but if someone will need a mortgage in the future stop paying anything in cash, use checks or money orders so that a lender can see the payment history.

image courtesy of  ponsulak/freedigitalphotos.net