BK vs. Foreclosure for FHA Financing

I have a client whose Chapter 7 BK was discharged in December, 2009. However, a property on which a mortgage debt was dismissed in the BK is still in the client's name TREE YEARS LATER because of attorney and court delays - through no fault of the client.

Does/should the borrower list the property under REO and explain in an "Extenuating Circumstance" letter? 

He doesn't have to now wait three years after foreclosure, does he?  He does not owe anything post-BK.
  • May 30 2013 - Plano
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Answers (4)

Thanks, George - great summary.  Perhaps the new FHFA director (pending confirmation) will consider a change.  He appears to be more liberal than DeMarco.

Many thanks.
  • May 31 2013
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This is a very common occurrence and has become very prevalent over the past 8 years. People think and Attorneys DO NOT explain this correctly, that once you file BK and it's discharged that the home is grandfathered in  and is out of their name and they are free to walk away. That couldn't be further from the truth. Ownership only passed if the Title changes hands.The BK absolves the debt, but didn't re-convey the Title. In your client's case, his waiting period starts from the Trustee Upon Sale Deed date.

Best of Luck!
  • May 31 2013
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Thanks, Tony - doesn't seem fair!  Appreciate your time.
  • May 30 2013
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I assume the property is currently in foreclosure proceedings.  I think your clients will have to wait 3 years from when the title transfers out of their name.

  • May 30 2013
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