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2014 Buy Again After Bankruptcy, Short Sale, Foreclosure or Deed in Lieu

Boomerang Buyers Buy Again After Hardship

Click Here to view Buy Again series in Video Library

2014 FHA Guidelines

  • Bankruptcy – You may apply for a FHA insured loan after your bankruptcy has been discharged for TWO (2) years with a Chapter 7 Bankruptcy.  You may apply for a FHA insured loan after your bankruptcy has been discharged for ONE (1) year with a Chapter 13 Bankruptcy
  • Foreclosure - You may apply for a FHA insured loan THREE (3) years after the sale/deed transfer date.
  • Short Sale / Deed in Lieu – You may apply for a FHA insured loan THREE (3) years after the sale date of your foreclosure. FHA treats a short sale the same as a Foreclosure for now.
  • Credit must be re-established with a 640 minimum credit score

2014 VA Guidelines

  • Bankruptcy Ch 7 - You may apply for a VA guaranteed loan TWO (2) years after a chapter 7 Bankruptcy
  • Bankruptcy Ch 13 - If you have finished making all payments satisfactorily, the lender may conclude that you have reestablished satisfactory credit.
    • If you have satisfactorily made at least 12 months worth of the payments and the Trustee or the Bankruptcy Judge approves of the new credit, the lender may give favorable consideration.
  • Foreclosure - You may apply for a VA guaranteed loan TWO (2) years after a foreclosure
  • Short Sale / Deed in Lieu - You may apply for a VA guaranteed loan TWO (2) years after a short sale, unless it was a VA loan then restrictions apply
  • Credit must be re-established with a minimum 620 credit score

2014 USDA Guidelines

  • Bankruptcy - You may apply for a USDA rural loan THREE (3) years after the discharge of a Chapter 7 or 13 Bankruptcy
  • Foreclosure - You may apply for a USDA rural loan THREE (3) years after a Foreclosure
  • Short Sale / Deed in Lieu of Foreclosure - If you had big issues the deed in lieu of foreclosure will be viewed as a foreclosure and you would want to wait no less than 3 years if the score is under 640.  Over 640 your UW will make the call but typically not less than one year.

Although I have not personally processed a USDA with a short sale under 3 years, I have heard of instances when it is possible to buy again with re-established credit in as little as 18 months.In some cases there is not a waiting period.

If the credit was perfect and they had to move because of a relocation or something and had no choice but to ask for a deed in lieu of foreclosure you would be ok.

2014 Conventional (Fannie Mae) – UPDATED 7/29/2014

  • Bankruptcy – You may apply for a Conventional, Fannie Mae loan after your Chapter 7 bankruptcy has been discharged for FOUR (4) years, TWO (2) years from the discharge of a Chapter 13
  • Foreclosure - You may apply for a Conventional, Fannie Mae loan SEVEN (7) years after the sale date of your foreclosure.  Additional qualifying requirements may apply,
  • Short Sale / Deed in Lieu of Foreclosure -
    • UPDATED – Effective 7/29/2014:  Waiting period for subsequent foreclosure that was included in Bankruptcy is waived.  If mortgage is included in Bankruptcy, waiting period defaults to FOUR (4) from the discharge date.
    • UPDATED – Effective 8/16/2014:  Short Sale or Deed in Lieu of Foreclosure not included in a Bankruptcy has a new Waiting Period of FOUR (4) years from date your name is removed from title.  This replaces the ability to buy in 24 months with 20% down payment and minimum 680 credit score.
  • Currently treated the same as a foreclosure with a waiting time of SEVEN (7) years before you can buy again using a Fannie Mae conventional home loan.
    • TWO (2) Years up to Maximum 80% Loan to Value | 20% Down Payment
    • FOUR (4) Years up to Maximum 90% Loan to Value | 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.

     

  • SEVEN (7) Years above 90% Loan to Value | with less than 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.

Credit must be re-established with a minimum 620 credit score.

Fannie Mae has reduced waiting periods in cases of extenuating circumstances – The death of a primary wage earner seems to be the only one I have been able to identify up to this point.

2014 Jumbo Mortgage Guidelines

  • Bankruptcy - You may apply for a Jumbo mortgage loan once any chapter of bankruptcy has been discharged for FOUR (4) years, FIVE (5) years if multiple bankruptcy occurs on credit profile.
  • Foreclosure - You may apply for a Jumbo mortgage loan SEVEN (7) years after the sale date of your foreclosure.  Additional qualifying requirements may apply,
  • Short Sale / Deed in Lieu of Foreclosure - You may apply for a Jumbo mortgage loan:
    • FOUR (4) Years from Short Sale or Deed in Lieu of Foreclosure with Maximum 80% Loan to Value

NOTE:  If hardship is the result of an extenuating circumstance, waiting periods may be reduced.  Contact lender for details.

Preparing to Buy Again

You should begin looking at your credit at least six (6) months before you are ready to buy again.

Quite often there are things left over on your credit report that can delay your ability to qualify.

With a little head start and good advice, you can get your credit in line, qualify for financing and buy again in the lowest priced real estate market that California has seen in years and years!

We specialize in these situations so feel free to drop me an email, call or leave a question below.

562-999-1355

Scott Schang

Branch Manager at Broadview Mortgage Long Beach, California, I am passionate about educating and empowering consumers. Feel free to call, text or email me at (562) 999-1355 or ScottS@broadviewmortgage.com

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772 comments
gopher
gopher

Scott,

I live in Hendersonville NC.  I own a home worth around 450000-500000 and currently owe about 358000 on it.  My income is probably around 45000 a year but could be higher around 75000 a year if I move some money around from my businesses.  I went through a loan modification coming up on five years next month.  My current payment is around $2100 at 5.25%.   My credit has a 120 day late and foreclosure started on it that is almost five years old next month from the loan mod process, plus a KD or Derogatory from a credit card that was settled and should fall off in April or May next year at the 7 year mark.  My credit scores for the two I know are 688 Experian and 662 Transunion.  I am hopeful these should get better once the effective 120 day late foreclosure started hits five years old. More hopeful if April rolls around and the KD drops.  My questions are: Given I probably make less than the loan guidelines say I should for the amount I owe, even if I have made all payments since the mod and the house is worth far more than the remaining balance.  What are my options for refinancing here.  Am I just stuck or is there something I should qualify for somewhere with someone.  Also do you have any experience regarding what this "almost foreclosure loan mod"  will do to my credit at five years old if anything? 

Sincerely Al

Nicolemaria1981
Nicolemaria1981

Thank you, Scott! That does help! I was hoping that was the case. I was just a little confused since the short sale was about a year or so after his bk. Thank you for the clarification! I really appreciate all of your help and very happy you are able to help so many people!

Nicolemaria1981
Nicolemaria1981

Hi Scott!! With the updated conventional loan guidelines... I have a few questions. My husbands bankruptcy, which is about a year from the 4 year mark, did include a foreclosure and a home (which we were paying on and renting out/trying to sell at the time). We later short sold the rental after 8 years of not being able to sell. Since he didn't reaffirm the non foreclosure property his credit report states "included in ch 7". My question is, with the new rules, does it make a difference that the short sale was after the bankruptcy, yet included in it? On my report it states that there was a shortsale. Will it make a difference if there were no delinquencies prior to the sale?

Also, I have read a lot about writing goodwill letters to get delinquencies or accounts removed from credit reports. Do you have any advice on that? I am wondering if it matters when, in my husband's case, they foreclosure and one credit card were included in his bankruptcy. Only one of the credit reports shows delinquencies from the forclosed loan. And finally, have you heard of people having better luck at credit unions getting financed?

Thank you for all of your time and help! I greatly appreciate it!

renaissancedoc
renaissancedoc

Scott:


Thank you for your quick reply.


My deployment was covered by USERRA, but not as active duty military, rather as a member of a unit under direct Executive Branch directive (same protections, different command and control).


You are correct, I am going for a conventional mortgage. The suggestions about rolling "points" into closing are helpful, thank you. I am hoping to avoid paying points at all, but if that is not possible then I will pay and move on.


Best Regards,


MAR

renaissancedoc
renaissancedoc

Scott:

In Apr 2010, while I was deployed to Haiti following that country’s devastating earthquakes, I received a notice of intent to file foreclosure from my first mortgage lender. This was confusing as my mortgage had been paid current in Jan 2010. Despite letters and phone calls as well as continued payments, foreclosure action was served in Jul 2010. With the help of an excellent attorney, we succeeded in having the foreclosure dismissed as defective in Sep 2012, but not until much additional damage was done and my financial situation had changed due to an unrelated and subsequent disability and divorce.

As part of the foreclosure, the lenders (1st and 2nd mortgages) closed my mortgage accounts to additional payments. In 2012, the first mortgage lender even sent me a check refunding payments made since the Jan 2010 (before the foreclosure was filed). The second mortgage lender accepted and kept the payments that I made until July 2012.

The home was sold under a qualified disability HAFA sale (settled for less than owed) as part of the divorce. The HAFA sale was contracted for sale in early Sept 2012, but lender approvals were not received until Jul 2013.  The foreclosure was dismissed without prejudice by the Osceola County Court in mid-Sep 2012, after the HAFA Contract was accepted. Neither lender ever responded to any interrogatories, petitions or correspondence from my foreclosure attorney or from the Court from the time of the filing until after the dismissal. No new foreclosure action was filed after the Sept 2012 dismissal. 

The loan accounts were closed in July 2010 according to the original foreclosure petition, but my credit reports and the HAFA approval documents show that the accounts were closed as part of the HAFA sale in Jul 2013. The disability HAFA sale was completed with consent of both lenders on 30Jul2013. Now a year later I discover that both lenders are reporting to all three credit bureaus that I made no payments from Feb 2010 AND that the account was settled for less than owed after a foreclosure started. All of this despite the fact that there is no public record of a foreclosure on any of my credit reports or an independent search of public records.

Despite the fact that the original foreclosure documents precluded any mortgage payments I made to Wells Fargo/ASC or Citibank from being credited to the closed account and despite the fact that there was no foreclosure action filed or in process at the time the HAFA sale closed, the lenders refuse to correct their reports to the three credit bureaus.

Now I want to buy the house I rent. I have a very willing seller with a reasonable price. The bank is willing, but the interest rate is higher because my credit score (670) is damaged by the late payment reporting caused by the defective foreclosure and the refusal of the prior lenders to credit payments to my accounts. The new bank for this new purchase has recommended that I retain an attorney to have my credit cleared of the delinquent payment reports under the Fair Credit Reporting Act, which I have done. 


I read with interest your response to posts in May of this year and hoped that you would have suggestions for me on additional steps to correct this issue.


Also, on a separate note, where can I obtain the fabled HAFA Credit Education Classes for Returning Buyers?


Much Thanks!

MarcyCook
MarcyCook

I don't have a bankruptcy, don't have a foreclosure.  I am looking to buy my first home. I want to go with an FHA at 3.5% down payment. Are there ways to get the closing costs rolled into the mortgage?  How does that work?  And if I do that do I have to have assets and emergency savings in order to qualify?
  Credit score is 750

jenniferpuga71
jenniferpuga71

I have a question.  I have a credit score of 663.  I have a discharged bankruptcy.  It will be  year discharged in October 2014.  I had one house included in the bankruptcy and one house that was not.  I have been current on both houses for 5 years now, and recently, last October, was able to finance a truck.  No payments have been late.  I would like to buy a foreclosed house down the street, but I would like to flip the house and not hold on to it.  What are my chances of a loan, and what type of loan would you suggest.  Thankyou

Nicolemaria1981
Nicolemaria1981

Hi Scott,

My husband and I had our home foreclosed on in 2010. We had both been laid off from our jobs while expecting our first child, our lender would not work with us to modify and unfortunately we had not saved for a hard time. Definitely felt like a difficult time! We soon decided to move out of state for a career opportunity... My husband also had to file chapter 7. We have since saved up and would like to purchase a new home. Unfortunately, where we are looking the fha loan limit is pretty low... So we are assuming our only option would be a conventional loan. It has almost been 4 years since my husbands bankruptcy, his credit score is close to 700, when we look at the credit report the foreclosure is not listed. Would we be able to get approved for a conventional loan (does the bankruptcy take precedence over the foreclosure) or do we still have to wait 7 years?

martincan
martincan

Hi Scott,

I just want to make sure I understand correctly before I proceed with an FHA loan. My foreclosure will be gone from my credit report 8/2014. Does this mean I could qualify for conventional financing? If so, what is the minimum down payment?

Thanks,

MTH

lawsuit
lawsuit

Scott, I wrote you more than a year ago, but would now like some additional advice.  After a lawsuit over our primary residence that was jointly purchase with family.  We were ordered to sell the property in late 2010, after other related legal snags, we recorded a DIL on 03/29/2012.  All of the info says we can buy again in 2 years, 20% down and a 680 credit score.  We both have 30 years with the same employer and solid income, we left So Cal on a formal job Relo and are trying to buy in Las Vegas NV.  I have just begun to look for lending, and am running into what is being called an Overlay of the requirements adding a year by the big guys, Chase, Quicken, etc.  Can you give me a referral or direct me so that I do not have my credit pulled multiple times? Thanks.

stevebook
stevebook

Scott, you've been a wealth of information, and I hope you don't mind one last question.  Its been 3 years (and a day!) since my foreclosure was recorded, and so we're starting to look again.  We expect to get an FHA loan with 5% down.  Santa Cruz County has a loan limit of 625,000.  We've found a home that we'd like to make an off on, and we have a pre-approval letter in hand for a loan on a house that is at $595.  Here's the rub and the question: the house in question may be "non-traditional" in that it has a geodesic dome roof.  However, it is listed on zillow as "Traditional" construction.  Do you know if the FHA can demand more money down in this case?  I realize ultimately its up to the lender to decide whether they will lend the money, but I'm wondering how the FHA sees properties like this.  If the FHA wants us to put 20% down, then we won't even make the offer.  Thanks!

VDThom
VDThom

Our primary mortgage was written/charged off in Dec 2011, we were behind in payments. We made payments every month since Dec 2011 and as of April 2014 made a settlement with the bank. The loan of 171,000 was settled for 60,000 with a payment plan for 60 months. We missed one payment in April because the letter stated the new pmt amt would be due May 31 and for that reason the loan was transferred to a collection agency.  The collection agency is willing to honor the settlement of 60,000.

We consulted a BK attorney who advised us to let the property go and file BK since we don't intend to keep the property. The value is less than 60K and the prop needs work. The attny said we would not be responsible for the debt if filed but the property will still be in our name and we'll be held responsible until the bank forecloses.

We were told we will no longer be financially responsible for the debt, is that true? Do you recommend if we intend to purchase another home that we just give up on this situation? Do you have any thoughts on how we should move forward and whether BK is our best option? The prop taxes are behind and it will be going to Auction in Aug if we don't pay. Thanks!

jayns
jayns

Hoping you may be able to provide guidance and have a long story.

I took out a VA 1st mortgage in 2004 and then in 2008 added a second mortgage through a local credit union.  Went through a divorce house went into foreclosure (2009) but I ended up working out a modification with the 1st, but second refused to modify or work with me.  

Payments were made timely since modification. Second refused to modify and ended up suing ex wife and myself causing me to file chapter 7 (2011).  Didn't reaffirm mortgages and have paid since 2011 without showing on credit.  Sold property this week, for full payment on first and VA and a settlement that removes lien against second.  2 years after my BK was approximately Jan 2014 and went to try and obtain a new mortgage.  Since I had the previous mortgage I was told that I had to refinance it, so I chose to sell it.  Now I'm being told that I have a short sale and I am ineligible for another 3 years.  


I feel as though I am being punished twice; first for the chapter 7 (which I agree with and understand) and now for this second who pushed me into chapter 7 in the first place.  If it doesn't show on my credit as a short sale nor will there be liens against the property is there a way around this?  Thanks

gsn
gsn

We just closed on our new home. We were able to get fha financing despite the heloc settlement post ch 7. 

knurbina
knurbina

We had a Ch.7 discharged over 2 years ago but our HOA foreclosed last October. There is no mention of foreclosure on our credit report. When will we be able to try and get a VA loan. Our credit score is in the 680's.

gsn
gsn

We are buying in rhode island. We stopped paying the HELOC during settlement negotiations. I guess we are looking at waiting a year?

gsn
gsn

settlement finalized february 2014. mistake on previous post

gsn
gsn

Hi,

We had a ch 7 bankruptcy discharged in december 2011. The first mortgage and HELOC were included and never reaffirmed. Stayed current on first mortgage and settled HELOC for a lump sum to remove the lien on the house. The HELOC was charged off september 2013 settlement finalized february 2013. Can we get a mortgage on a new house and rent our current home? We are $20,000 underwater on the mortgage but qualify based on debt to income ratios to carry mortgage on our current home and a new home. Credit score is high 600's .

crna1ab
crna1ab

Hi,

Just wondering about auto loan that is showing on my credit report that I reaffirmed but the bank claims they never got the paperwork. I tried to get it corrected but it was like dealing on a deaf ear. My attorney gave me copies of the reaffirmation but the bank said it wasn't filed. Anyway I have 2 payments left on the loan and it still shows on my credit report with a high balance, due to non-reporting by the bank. Is this going to cause me problems when I go for a mortgage after my 24 months?

sunshinestate
sunshinestate

We completed a DIL in September 2013.  I am closely following my credit reports, because with our planning, we will have our 20% down on a house at the 24 month point after the DIL.  Question is on the credit reports.  My reports are showing:


Experian:  CRD--creditor received deed

Equifax;  120+ days late (comment field states creditor received deed in lieu of foreclosure

Transunion:  120+ days late


I cannot see my MOP codes to know how this is coded.  I was not in default per the bank and not in any foreclosure process at that point.


Is my report showing correctly?  How can I find out if my MOP codes are correct?  My credit score has not fallen < 700 at this time, and I have 2 car loans that I keep up to date and 2 credit cards that I use sparingly and pay off at the end of each month, so I feel confident that as long as the credit agencies are reporting as DIL and not as a foreclosure, I should be ready to re-enter the market in the last quarter of 2015.


Any direction regarding ensuring the credit report is correct?  Anything else you suggest?


Thanks!!!

ScottSchang
ScottSchang moderator

@gopher Hi Al, thanks for the question.  First of all, the "foreclosure started" comment on your credit report is not going to affect your ability to qualify.  Your credit scores sound like they are ok as well.  My experience is that DU, the automated underwriting program, is really only looking at the last 12 months for derogatory items.  It will consider past challenges, and may ask for an explanation, but from what you've stated here, I do not see a red flag that would cause me to believe that you cannot refinance, other than your "income" question.  

Qualifying to refinance is the same process regardless of whether or not you've refinanced in the past.  You would need to income qualify, and adhere to the debt to income ratios required from the loan program you apply for.

If you have not already reached out to a lender, I encourage you to do so.  I do not believe you will have any challenges as a result of the foreclosure started to loan modification comments.

Hope this helps?



ScottSchang
ScottSchang moderator

@Nicolemaria1981 If I understand correctly, it sounds like your husband filed the bankruptcy, but you did not?  If both the short sale home, and the foreclosure home were included in the bk, then your husband would meet the waiting period guidelines once the bk has been discharged for 4 years.

As far as writing letter to get delinquencies or accounts removed, that only works if the delinquency or account is reported in error.  I too have heard of attorney companies claiming to be able to bully creditors into removing derogatory credit, but I have no evidence that it will remove a credit line that is being reported accurately.

My experience with Credit Unions is that it is more difficult to get approved, since they do not sell their loans on the secondary market, and they are lending credit union member's money.

Hope this helps?

ScottSchang
ScottSchang moderator

@renaissancedoc This is certainly one of the more disturbing series of events that I've run into with almost 3,000 comments and questions on my website - I am so sorry you've had to go through all of this.

I am going to start by asking a couple of dumb questions.  When you say you were 'deployed', are you a member of the armed forces?  And second, what kind of loan are you trying to qualify for?

Let me explain my questions - When you say your interest rate is higher because of your credit score, what actually can occur is that the "cost" of the interest rate can increase, primarily if you are using Conventional (fannie mae) financing.  If you are using FHA, or VA (deployed = military?), this is not as much of an issue.

Should you be unable to raise your credit scores in time to close on your loan and buy the home you live in, the cost associated with your score can be paid as a closing cost, covered by a credit from the lender or seller - it does not necessarily have to translate into a higher interest rate.  Many lenders will roll this cost into the rate without giving you the option to have it paid through the alternative ways I've described.

I am unsure about HAFA Credit Education Classes, I am not familiar with this and have never had to require a buyer to attend a class.  Typically, the type of financing you are using to buy will either have Counseling requirements, or not.  I have only seen Counseling required in conjunction with using buyer assistance loans or grants.

It sounds to me that you have everything pretty much under control, including trying to have the erroneous information removed from your credit report.  While I am sure this has caused an enormous amount of paperwork and trouble, It sounds like everything can be explained and documented, and therefore should be able to be resolved.

Is this helpful?

ScottSchang
ScottSchang moderator

@MarcyCook Hi Marcy, on a purchase, you can't really "roll in" the costs into the loan, meaning that you cannot finance the costs, but there are certainly ways to get your down payment and costs covered in a number of different ways.

If you are in California, we specialize in many State Buyer Assistance loans and grants that can cover both closing costs and down payment.  You can also get closing costs paid through a lender credit, by taking a slightly higher interest rate, or a seller concession, which is when the seller of the home offers to pay for part, or all of your closing costs.

You do not need to have reserves, or assets to qualify for FHA financing, and your credit score is more than sufficient to qualify, you really only need a 640.

If you are trying to buy in California, you can shoot me an email at ScottS@BroadviewMortgage.com, and we can help answer your questions, and talk to you about different buyer assistance programs to help cover your costs.

If you not in California, I can refer you to a lender that I know and trust.

ScottSchang
ScottSchang moderator

@jenniferpuga71 Hi Jennifer, what you're describing would probably be a bridge loan, or a private money scenario.  You would be unable to buy using conventional financing until 4 years from the discharge date of your bankruptcy.  

Private money would probably require a minimum of 35% down payment.

Hope this helps?

ScottSchang
ScottSchang moderator

@Nicolemaria1981 this is a great question!  One that catches many by surprise once in escrow.  The foreclosure is a separate incident and would start it's own "waiting period".  Public records will be reviewed by the lender to identify what happened to the home once the mortgage was included in the bankruptcy.

Based on your story, I would believe that you could be eligible for an extenuating circumstances exception.  Freddie Mac (conventional) will allow you to buy in 36 months following a foreclosure if circumstances outside your control (layoff) resulted in a significant loss of income, which ultimately led to the financial hardship.

While Fannie Mae's definition is not as clearly defined, I do believe that it's worth fighting for.

If you have challenges finding a lender that will explore the extenuating circumstances exception, keep looking.  You may also have luck going to a local bank or credit union, as they may write their own loans and could grant the exception.

Hope this helps?

ScottSchang
ScottSchang moderator

@martincan  the reporting of a foreclosure on your credit report does not determine whether or not you are eligible for financing in the future.  

Depending on the type of loan you are applying for, there is a "waiting period" before you can apply for Conventional, FHA, VA or USDA financing.

Conventional guidelines will allow you to buy 7 years from the date your name was removed from title.  This date is determined by public records, not your credit report.  You can buy in only 2 years using VA financing, and 3 years after foreclosure if you are applying for a FHA or USDA mortgage.

Hope this helps?

ScottSchang
ScottSchang moderator

@stevebook I'm going to have to do a little more research on this - are you Pre-Approved with us?  We are a direct lender in California.  If not, what is your other lender saying?


2nd Question - is it only the roof that is geodesic, or is it a dome house?  Zillow rarely has accurate information about anything - Zillow is not meant to be accurate, it's an advertising site so they can sell leads to real estate agents.  Still, it must has said somewhere, on some public record, or some MLS listing by an agent at some time in history, in order for that information to make it's way to Zillow.


Last thing I can think of, is if you can shoot me the address (you can email to ScottS@Broadviewmortgage.com - let me do more extensive research through public records and title reports.

ScottSchang
ScottSchang moderator

@VDThom  "not financially responsible" is not the best way to phrase it in my opinion.  BK will protect you against any default judgements, or tax liability in the event that you should default on the mortgage. BK may also postpone the auction - however, you will still need to get the lien removed from the home.  Simply including the mortgage in BK will not put you in a position to buy a new home sooner, you have to get the home out of your name which will occur through foreclosure, short sale, or deed in lieu of foreclosure.

Hope this helps?

ScottSchang
ScottSchang moderator

@jayns I can completely understand why this is so frustrating and confusing.  BK only protects you against a deficiency judgement, or taxable event in the case of settling a debt for less than amount owed.

BK does not in any way, shape or form remove your responsibility for the mortgages against the home - that's where the confusion is coming in.

If the sale did not pay both loans in full, then you indeed have a short sale.  You are not being penalized more than once, because only the BK will show up on your credit, and not the subsequent short sale which would have significantly damaged your credit scores.

While it's true that you now have this short sale waiting period, it does not have to be 3 years.  VA allows you to buy again in only 24 months from a short sale, Conventional financing allows you to buy in as little as 24 months with a 20% down payment and minimum 680 credit score.  FHA financing requires a 3 year wait.

Thank you for sharing your story, this is a very, very common challenge that folks are experiencing due to a lack of accurate information about how BK works when a mortgage is involved.  You sharing your story will help others that find themselves in a similar situation.

Hope this helps?

ScottSchang
ScottSchang moderator

@knurbina  If your mortgage was included in the Ch.7, and if you were not making payments on the mortgage, then a foreclosure would not show up on your credit report.  A foreclosure is a public record and will show up when the underwriter begins the approval process.

VA allows you to buy in 2 years from a foreclosure.  The "starting date" of the 2 years is the day your name was removed from the title of the home.  Hope this helps?

ScottSchang
ScottSchang moderator

@gsn  this is a great question, thank you for asking.  This is a potentially complicated scenario because there may be a few moving parts.  You could possibly be eligible to buy using FHA financing 2 years from the discharge date if the HELOC payments were made on-time up until the date that you settled.

If the HELOC was in default when you settled, you would have to wait a minimum of 12 months (with no mortgage lates) before you could apply. 

What State are you buying in?

ScottSchang
ScottSchang moderator

@crna1ab  I would recommend making the last two payments, then dispute the reporting of the balance with the credit bureaus.  It will not negatively affect your credit with it showing included in BK, it's just not helping contribute to the on-time payment history you are trying to establish after a BK to rebuild your credit.

Your lender should ask about the auto - If the loan officer you're working with does not have much experience of working with borrowers after BK, it might not come up until later in the loan process, after it gets to an underwriter.

Simply keep all of your paperwork showing the auto was paid in full.


ScottSchang
ScottSchang moderator

@sunshinestate  The MOP codes used to be a really big challenge, however, that has more or less been removed as a hurdle when buying after a hardship.  Fannie Mae made changes to their underwriting engine to specifically address those MOP reporting errors.  

If you were in fact120 days late, the loan was in default, and the deed in lieu of foreclosure is something that is easily documented.  As long as you meet all other qualifying criteria, you should have no challenges applying in 24 months.

Hope this helps?



Nicolemaria1981
Nicolemaria1981

Thank you for the quick reply! A little disappointing but definitely helps! Are there any situations where you can get a FHA loan above the county loan limit? I read about their jumbo loan... But couldn't find any details. Thank you again!

martincan
martincan

@ScottSchang @martincan 

Thanks for the response! 

I may not be understanding correctly so please forgive me, I am not real saavy when it comes to this. 

I don't know the date my name was removed from title, I just always knew when it would fall off my credit report. Since it has passed the 7 year mark I let a broker pull my credit and the foreclosure wasn't on there anymore. Does this mean I am in the clear for Conventional financing?  The broker I have started working with hasn't said anything about a public record coming back when he pulled my credit or made any mention about anything foreclosure related. When will he check for this and how will he check for this? I just don't want any surprises and I guess I don't really understand the process. Wouldn't he have mentioned if he saw something?

ScottSchang
ScottSchang moderator

@stevebook another question about the property - is it typical for the area?  Are there other homes in the area that are similar?  The biggest challenge with unique properties is finding comparables for an appraisal - that might be what we're looking at here.

VDThom
VDThom

@ScottSchang @VDThom Thanks so much for the information and your response.  We will decide on which option would be best for us and our family and let you know how things work out.

gsn
gsn

@ScottSchang @gsn  We are buying in rhode island. We stopped paying in April 2013 while in negotiations. So would we have to wait a year from when we stopped paying or a year from final settlement? Or does the charge off date signify the year?

MarcL
MarcL

@ScottSchang @gsnGreat question.  I am in virtually same scenario.  Ch 7 discharged 1/2013, always current on first. Settled 2nd 11/13, but it was not paid since 8/2011 (same date as ch 7 filing, so current prior to filing).  So 12 month waiting period after settlement of 2nd, and 2 year wait after discharge, so eligible for FHA in 1/2015?  Question regarding the timing of the 12 month waiting period after settlement?  Settlement was offered by bank, and accepted by us, and payment made in 11/13 (and confirmed received), but we still have not got the lien release.  Does the 12 month waiting period run from the settlement date or from the Lien release date?  My lawyer says the lien release date is irrelevant and of no consequence, but I believe the waiting period would only start at lien release date.  Could you clarify?  Love this blog BTW - thanks for doing it.  Any advice on getting a Lien release after settlement was agreed to and payment was made 5 months ago.  Bank says it is "in process".  I believe they are just stalling as long as they can to keep punishing us.

sunshinestate
sunshinestate

Okay.  I was worried because I heard that 120+ days late was seen as a foreclosure, and that for
Fannie Mae, foreclosure was a 7 year wait.  So, even though it says 120+ days late, I should be okay.  How do the underwriters/DU tell the difference, or will I have to submit my executed DIL documents as proof?

Also, TU shows my DIL as 9/13, but for 10/13, 11/13 and 12/13 they are reporting at 120 days late.  Reporting stops after that.  I assume that I will have to dispute and send them my executed documents as evidence of finalization of the DIL prior to 10/13 to get 10-12/13 removed from the credit report--is that correct?  All others end reporting 9/13.  I also checked with the county and the deed exchange was reported for 8/13.

Are there any other snags that I need to be following up on?  How does a consumer actually get their MOP codes for these items?  Is there a specific code I need to worry about?  Or prefer to have?

Thanks!!!

ScottSchang
ScottSchang moderator

@Nicolemaria1981 In California, we have a HELOC program that will allow you to go over the FHA loan limit, but with Jumbo and this HELOC, you will find that the Bankruptcy waiting periods are much longer, and may even be treated as the same as the foreclosure.

I don't think there's any reason to be disappointed, I sincerely believe that you have a case for extenuating circumstances.  What State are you trying to buy in? 

ScottSchang
ScottSchang moderator

@martincan @ScottSchang it sounds to me that if your foreclosure has come off your credit report, that enough time has passed.  You can ask the broker to look up public records to verify, and if it's been longer than 3 years since the bank foreclosed, you are well past the waiting period to be eligible for FHA financing.

gsn
gsn

@ScottSchang @gsn  Thanks for the information. This has been very helpful. We will consult with a mortgage broker here in Rhode Island. 

ScottSchang
ScottSchang moderator

@gsn @ScottSchang  technically, it's a delinquent mortgage until the lien was removed.  The underwriter will ask for a 12 month Verification of Mortgage during the process, which for the 1st, will come back with no issues.  I would definitely try to get a second opinion from a lender in Rhode Island, but the way we would have to look at it (as a California direct lender) is that there is a history of delinquent payments on the 2nd mortgage, and we would need a minimum of 12 months time to pass from the date the lien was removed.

MarcL
MarcL

@ScottSchang  Thank you Scott.  As always, a clear and understandable answer.

ScottSchang
ScottSchang moderator

@MarcL @ScottSchang @gsn  thank you so much for the kind words!

Just to be clear, there is not really a "waiting period" per se when we are discussing this scenario, there is however the underwriting guideline that states that there can be no more than 1 x 30 in the past 12 months - but in your case, the delinquency went beyond 30 days, so we have to wait for 12 months to show that there were no mortgage delinquencies in that time.

As for the lien, until that lien is removed, the lender has the ability to begin foreclosure proceedings in the event of default (which you are in default on the 2nd mortgage).  The 12 months of no late payments could not start until the lien is extinguished, which is evidence of the debt being settled.

ScottSchang
ScottSchang moderator

@sunshinestate  There was a time when a 120 day reporting on your credit would indeed read as a foreclosure, but Fannie Mae has made significant changes that no longer trigger that result.

The date you need to be concerned about is the date that your name was removed from title (public records), not the date of the DIL paperwork.

Fannie actually created the ability to manually adjust foreclosures, short sales or DIL that are reporting inaccurately.

I wouldn't worry about the reporting dates on the credit report as long as it is accurately reporting the DIL and not continuing to report late payments.

Hope this helps?


Nicolemaria1981
Nicolemaria1981

Thank you Scott! Every lender I have spoken to this far seems to give us incorrect information, so I greatly appreciate your help! We are living in Georgia and looking to buy a bigger home here to accommodate our now family of five. Our foreclosure was in Florida... Not sure if that makes any difference. The fha loan limit was in the 300's and has recently dropped to the low 200's... And of course home prices are rising!

Nicolemaria1981
Nicolemaria1981

Thank you, Scott! We really appreciate your advice and help! I will definitely give him a call as it gets closer to my husbands discharge date!! I am hopeful everything will work out!! Thank you again!

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