Answers (34)
- user8004702
- Contributions:1
I live in California and short sold my house 2.5 years ago. I was unable to get approval for the short sale until I missed payments. The house was successfully short sold 2.5 years ago and part of the settlement was a stipulation where I had to pay over $10K (good faith payment) to get the approval...and I did it.
I recently went to get approval for a loan and was told that there is a new "score" instituted in Nov. of 2012 that assign's a score to the short sale. Our new loan agent stated that we cannot get a loan until we get a "reported in error letter" from our previous lender Wells Fargo. I called Wells Fargo and was told they will not change the score (9 - the highest) because I missed payments and the short sale is marked as a foreclosure for that reason. I was in negotiations with Wells on the short sale before I even missed payments and then they stated that they wouldn't approve a short sale unless I missed payments. In any case I feel that it is unjust for Wells to retain this score and stop me from getting a new loan when we legally settled our debit with them. On my credit report it shows as "settled for less than full amount". How do I proceed and get this cleared? PLEASE HELP CALI AGENTS! I've been told by my loan agent that there are many others in the same boat...what do we do? We settled our debit, we should not be further punished...
- Marc Seligman, "marclend2002"
- Contributions:7
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Jumbo or non-conforming loans are going to vary from lender to lender.
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FHA can be immediate if no payments were missed, and three years if payments were not current for the past year prior to the sale. If it was an FHA loan that was short sold, then it's three years from when FHA paid the insurance claim. Now, you can do less than three with an extenuating circumstance BUT, FHA is much stricter on what they consider extenuating.
from the FHA site:
"Exceptions: Lenders may make exceptions to this rule for borrowers in default on their mortgage at the time of the short sale if
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VA loans, it can be done immediately. An applicant of mine shared a letter direct from the VA where the VA asked lenders to consider the credit in it's entirety and not just the sale.
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The links are listed in one of my other posts in this thread are direct to the Fannie and FHA sites.Keep in mind that with all this, it's still up to the lender to make a decision.
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PS - regarding extenuating circumstances - Be prepared. Its not just a written explanation. It's going to require third party proof. e.g. - overwhelming medical bills - Be prepared to show the bills. Also try to put together a timeline that will make sense to the lender so they can understand your individual situation.
- Glenn Riser, "griser1"
- Contributions:13
Under certain circumstances such as no missed payments during shortsale and specific reasons for shortsale such as forced employment relocation, it is possible to get a loan if you meet all the qualifying requirements, immediately.
This of course is the rare exception. The general guidlines that we see under shortsale circumstances of short sale where payments are missed and hardship is not the perfect storm is 3 years under FHA and 5 years under conventional. Of course you have to meet all the requirements such as income, debt and fica scores.Remember things are always changing and evolving so it's always a good idea to create a livable budget and prepare yourself for opportunities in the future as they arise.
- Charis Brown, "CharisBrown"
- Contributions:16
- user7733277
- Contributions:1
www.makinghomesaffordable.gov has more information for military specific situations. I just thought I'd add that incase there are other military families who come across this thread.
For those military families -- I think the only way you will know if you can buy a house before the two year VA wait period is up is to do as Marc suggested and get a pre-approval done after you have gone through the short-sale process. I know that is awful to hear, but my personal opinion is that nobody really knows how it is going to affect you because the laws put in place are so new. It is really going to vary by region and lender.
One thing I can tell you is that it did NOT affect my husbands security clearance -- another concern most military families have with short sales.
- Marc Seligman, "marclend2002"
- Contributions:7
Pretty black and white (well except for the gray areas :-) )
Here are the Fannie Mae Guidelines:
https://www.fanniemae.com/content/announcement/sel1005.pdf
FHA guidelines:
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-52ml.pdf
There are also USDA loans available in designated rural areas for folks that qualify with certain income restrictions:
http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do
After that you're dealing with what banks refer to as non-conforming loans. In this situation the bank will make decisions based on their specific guidelines. That said, keep in mind that many banks will still not lend after short sales because of the risk involved.
There are a couple of things I see time and time again when people approach me in this situation. First of all, I still have yet to meet a client who had no delinquency on their mortgage history prior to the short sale. The story is always the same. That the bank refused to negotiate without the homeowner being delinquent in the first place. Then the other issue usually takes place which is the lender starts foreclosure proceedings. When that happens, and the borrower goes to purchase another home, they are now in a much different credit situation with the foreclosure proceedings on their credit report.
What you can do if the foreclosure proceedings are reported is contact the lender and go over what happened while the short sale was in progress. If they are willing to give you a letter stating that foreclosure proceedings never started then you can send copies of that letter to the three bureaus and they will update the tradeline. If the lender refuses, you can try contacting a credit repair agency. They usually know how to apply more leverage in this situation, although there will be (varied) costs involved.
When approached by borrowers in these situations, what I always offer is a pre-approval loan application. It's free and usually takes about 10 minutes. I collect the usual income and asset docs. If the borrower is putting less than 20% down then I get a letter from them explaining the circumstances surrounding the sale. It should explain what happened, why it happened and why it shouldn't happen again. If they people sold short due to market conditions, that's usually not acceptable. However, people do have extenuating circumstances (ie: loss of income, unexpected one time expenses etc) so, that's what the underwriter is looking for. Be prepared to offer third party documentation to prove your case.
- Andrew Adams, "RenovationSpecialist"
- Contributions:9406
Wetdawgs is 100% correct. There is not a 1 size fits all answer to this question. Also note that each lender can have overlays to the actual agency guidelines. The answer may vary lender to lender. Ask the lender you are working with if their guideline differs from the agency guideline and if they don't know what you are talking about, move on to another loan officer.
You don't know what you don't know applies to loan officers as well.
- wetdawgs
- Contributions:40742
Were there late payments?
Current credit scores?
Down payment (%)?
Type of loan?
- DianeBockelman
- Contributions:1
- Marc Seligman, "marclend2002"
- Contributions:7
Rate was no different for them than any other applicant with their credit score and down payment. We're even giving them $500 off of closing costs because they opened an account with us.
- leodriven
- Contributions:1
- William Sheehan, "OhioRealEstateGuys"
- Contributions:10
1) Size of down payment?
2) Source of the home loan?
3) credit/payment history since short sale?
Addressing number one, (size of the down payment) you will generally need at least 30-40% down to purchase a home within the first couple of years after going through the short sale process. Generally, banks view short sale subjects as "more of a liability" than they would a Bankruptcy due to the fact of late payments.
Addressing number two (Source of the home loan) you are going to be more likely to qualify to purchase a home through any one of the following government agencies and government sponsored loans (FHA, Freddie Mac, Fannie Mae, Ginnie Mae) than you would a traditional bank.
Obtaining a home loan from a private bank (Wells Fargo, Bank of America, or Key Bank) after going through the short sale process within the first four years is going to be counterproductive in my opinion. The reason I use the word "Counterproductive" is because the interest rate is going to be so high, you may just find yourself unable to make the mortgage payments and back in short sale process.
- user46072667
- Contributions:1
- Sandra Aslin, "SandraAslin"
- Contributions:20
The seller can avoid having a "foreclosure" on their credit report.
According to recent Fannie Mae guidelines, if you go through a short sale you can be eligible to buy a home with a Fannie Mae loan 2 years after the short sale is complete. After foreclosure, a homeowner must wait at least five years to be eligible for a Fannie Mae lo
- CharlieBaum
- Contributions:1
- Tom Osland, "user397600"
- Contributions:1
We NEVER cover a loan with only a few months out and a score bellow say 675, NEVER, I used to be an auditor and now manage the tiltle approval. As of 8/2012 policy changes monthly and is driven by politics and market forces. Allways work with a well qualified morgate broker, seldome is an agent quilified to cover most FHA reqirements. That will anger some agents.. Agents, please save it.
- Yardcards
- Contributions:11
- user341102
- Contributions:3
- Jonathan Mosca, "Jonathan Mosca"
- Contributions:96
- user5717857
- Contributions:1
second question: if we did a fha 90% after the wtg period, will pmi insure it? or will it end at that stage?
- user778592
- Contributions:1
- Michael Weissman, "Broker Attorney"
- Contributions:35
I am seeing "settled for less then full obligation" with increasing frequency and other professionals I speak with are reporting the same.
If your lender agrees to satisfy your mortgage in exchange for the net proceeds from the sale of your home and you agree to sign a new Note for less then remaining balance of your debt, then your lender is in fact forgiving a portion of your debt and will likely report the deal as "settled for less then full obligation".
When negotiating a short sale I always ask the lenders representative how the settlement will be reported to the credit bureaus - Very often the representative has no idea or furnishes misinformation, but I am finding that many lenders are including lanaguage in their final written short sale approval letter which spells out how the settlement will be reported to the credit bureaus.
- user341102
- Contributions:3
I am also looking into a "short pay-off", which the bank will take a lesser payoff with a new buyer but have me sign a note (unsecured) for some or all of the difference. This shouldn't affect my credit and I will be able to buy a new home; as long as the bank says the mortgage is paid in full.
and oh yes, I am planning on downsizing: payment and square footage.
Opinions on short pay-off?
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Presenting the argument to a lender will be a waste of your breath unless they offer the program. Not everyone that does FHA has to do FHA to guideline, they can have their own overlays and many do.
" I found one lender who had no wait period but of course there were stipulations (significant downsize criteria) "
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Most lenders that do this will also have this criteria since the guideline prohibits gaming the market to get a similar or superior house at a reduced price. Be prepared to downsize.
Search the following link for this section
4155.1 4.C.2.l
Also note that these are not a walk in the park. Although the guideline requires no hardship to be proven to repurchase, most will expect a detailed and written explanation as to why you did the short sale. They will ask as proof that your motivation is not to;
- user341102
- Contributions:3
"Deed-in-Lieu/Short Sale: No waiting Period
If the borrower was current on their mortgage and all other installment debt for the 12 months preceding the short sale, the subject property is not in the same geographical area as the short sale ad the short sale lender accepted the short sale as payment in full."
What two gov't agencies are you referring to? I'm trying to sell my home, but of course, in today's market, it's not selling. I'm even offering the FHA assumption. I've spoke with investors, but the loan balance is just too high for them to invest (which I figured as much). I don't have a lot of wiggle room as far as price goes since I've only been in the home for 2 years, and it needs a little work. I've considered short sale, but I MUST be able to purchase a new home. I refuse to waste money on a rental. I found one lender who had no wait period but of course there were stipulations (significant downsize criteria), but she switched banks so she can't offer than program anymore.
I would like to know where you found your information so that I may present it to several lenders to make my argument. I am current on ALL my debt but I just can't afford to stay in this home for much longer. I lost my job less than 6 months after buying this home. The new job is less money and more travel. And now I'm having health issues. I've held out about as long as I can. It's stressful to say the least. Not really sure how I'm keeping up.
I would appreciate any guidance anyone could offer.
Thanks
- Mark Barrett, "Mark R Barrett"
- Contributions:3
Fannie Mae guidelines are posted online and do allow for divorce and job loss as Extenuating Circumstances (FHA does not count the same)
Extenuating circumstances are nonrecurring events that are beyond the borrower's controlthat result in a sudden, significant, and prolonged reductionin income or a catastrophic increasein financial obligations.
Examples of documentation that can be used to support extenuating circumstances includedocuments that confirmthe event (suchas a copy of a divorce decree,medical reports or bills, notice of job layoff, job severance papers,etc.)
- ShirLee McGarry, "ShirLee McGarry"
- Contributions:11
There are lesser time-frames allowed if there are documented Extenuating Circumstances involved beyond the control of the borrower, such as serious illness or death of a wage earner, and the borrower has re-established good credit since the foreclosure.
PLEASE NOTE: Divorce, loss of employment, inability to sell the property and job transfer or relocation does not qualify for extenuating circumstances. All other events are known as Financial Mismanagement.
Fannie Mae - Foreclosure - 7 years
Deed-in-lie/Short Sale: 2 years with 80% LTV/4 Years with 90% LTV
FHA - Foreclosure: 3 years
Deed-in-Lieu/Short Sale: No waiting Period
If the borrower was current on their mortgage and all other installment debt for the 12 months preceding the short sale, the subject property is not in the same geographical area as the short sale ad the short sale lender accepted the short sale as payment in full.
Deed-in-Lieu/Sort Sale: 3 Years*
I* It is treated as a foreclosure if the borrower was late on the mortgage and other installment debt for the 12 months preceding and at the time of the short sale. In addition, if the borrower pursued the short sale to take advantage of the declining market or purchased at a reduced price a similar or superior property within a reasonable commuting distance.
These are the most current guidelines published by the two government agencies without credit overlays attached. These guidelines are also what Prime-Lending follows. Laws and guidelines change and new policies and packages are introduced, so check with your local lenders for current updates on federal laws.
- Mark Barrett, "Mark R Barrett"
- Contributions:3
- Dan Howitt, "Westmoore Group"
- Contributions:7
Good luck!
Dan Howitt
The Westmoore Group, LLC
- Karen Paytas, "Karen. Paytas"
- Contributions:146
Good Luck!!
How soon after a short sale can I get a mortgage loan to purchase a house?
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