Having trouble with refinance due to "MOP" code 09


LoanSafe Member
Mar 28, 2012
Good evening. I am attempting to refinance a variable rate mortgage that has been increasing for the last several years. It is not going as expected.

Many many years ago, during the recession, I defaulted on a home equity line of credit. In January of last year (about 15 months ago), I was finally able to settle with the home equity lender for a lesser amount than what was due. They updated my credit report as a result. Shortly thereafter, I tried to refinance and was told I would have to wait at least 12-months before applying since the home equity lender reported late payments through the settlement date, so I would need a clean record for at least 12 months before re-applying. Fast forward to the present. I recently applied with a new lender and things were looking good. My credit score was mid 700s, the home appraised for more than expected, I was going to save thousands by refinancing. Then suddenly, I was told there was an issue with the heloc settlement and that Freddie/Fannie are requiring a 4-year waiting period after a settlement like this. Crushed!!

Does this sound accurate? Is there any way around this? Apparently, the reason for the denial is because the lender reported a "MOP" code (manner of payment) 09. According to Fannie Mae's book of codes, this is a "Collection or Charge Off." Could the lender have reported something different? I don't see "settlement" listed as an optional code. I also don't see any other MOP that would apply, so I'm wondering if they could have left the MOP code blank? Freddie Mack is saying this is the same as a short sale, but I still own the property and am still paying my first mortgage on time. It seems like settling for less is going to end up costing me more than paying the full amount. This doesn't make sense to me. Aside from that one issue, my credit, my income, my home's value are all sufficient to refinance. Please tell me there are options for me. Thanks!

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
San Diego, California
This is a very well known problem and I personally have had a client that was able to get this code cleared. by contacting HUD (I believe or it could have been Fannie Mae directly).

If you settled the second lien, it would depend on the status it was in prior to settlement. If the loan had been charged off for longer than 4 years, we don't care if they agree to a settlement and in many cases can actually pay them off via a cash out refinance.

But ultimately that MOP Code 9 will prevent you from doing anything. If you want to chat more about it I would be happy to explain what my previous customer did to clear it: 619-379-8999 - I also of course lend in all 50 states and would be happy to help you with a new loan.