Getting A Mortgage After (Pre)Foreclosure Just Got Easier

Dean,

Prior to this announcement, Fannie Mae guidelines had someone wait at least 4 years after a foreclosure, 2 years after a short sale before they would loan them money again.

So this is a change for people who have had a foreclosure that could possibly lessen the waiting period to 2 years from what had previously been 4.

Good news!

Whoa, wait a minute — that’s not what this announcement says at all!!!

What Fannie Mae has done is reduce the waiting period for those who agree to DEEDS IN LIEU OF FORECLOSURE from four years to two — THAT’S IT!

They are trying to encourage people to agree to deeds in lieu of foreclosure — not to give those they actually have to foreclose on a break.

The announcement also clarifies that Fannie Mae considers the terms “short sale” and a “preforeclosure sale” to be synonymous. The existing policy has been that you could be eligible for a loan again within two years after a preforeclosure sale. There was no official policy for a “short sale.” Now, they are saying the two years applies to short sales, too. NO CHANGE.

If you cannot pull off a short sale or agree to a deed-in-lieu, Fannie Mae will still require FIVE YEARS for borrowers who lose their homes through foreclosure to re-establish credit.

Borrowers may qualify in as soon as three years if they can document extenuating circumstances, such as the loss of a job, illness or divorce.

The minimum wait for borrowers who have filed for bankruptcy remains two to four years, depending on the type of bankruptcy filing and the borrower’s success in repaying their creditors.

See Chapter B3-5.3-07, Derogatory Credit Information, which begins on p. 419 of the current version of the Fannie Mae selling guide here:

https://www.efanniemae.com/sf/guides/ssg/sgpdf.jsp

Justin, your advice for people to start saving for a down payment is still good — many people going through foreclosure now are facing those “extenuating circumstances” like a job loss and may be eligible again within 3 years of going through foreclosure.

The other issue for those folks is rebuilding their credit. Here’s a recent study on how different events — loan mods, short sale, foreclosure, bankruptcy — may affect a borrower’s credit.

http://www.vantagescore.com/research/loanoptions/

What if you TRIED to do a Deed in Lieu but the lender said no? Heck we tried for almost a YEAR to convince them to take the house but they didn’t. The house did FINALLY go into a conventional foreclosure (notice July 2009, sherrif’s sale Sept 2009, Countrywide taking it over officialy in November 2009). This is all on “hubby’s” credit which I just pulled last week. Otherwise his credit isn’t bad — 613 score and in another month he’ll have about a 3% Debt to Income ratio with a good, long-term job. We’re looking at buying some property very soon. The initial purchase can be made on my credit alone, but the option on the surrounding land I might need his income to get the loan. How long are we looking at needing? Can we do anything about the fact taht we TRIED to do a deed in lieu and the company said no to shorten the timeframe??

I NEED CONTACT INFORMATION FOR MORTGAGE LOAN. I HAVE BANKRUPTCY AND FORECLOSURE IN 2008 AND 2009. THE HOUSE I PLAN TO BUY IS PRICED $350000.00. IHAVE 25% to put down.

Wanted to give some insider scoop. Not only is the post incorrect that it is going to get easier – but FNMA changed the guidelines again. The wait for a new loan now, after foreclosure or short sale, etc… was bumped up to 7 years in the last few weeks. The good news is that FHA is still three years (after the claim was paid if you had an FHA loan already). But for a conventional loan, no matter how much money down, your high your FICO score, reserves, etc. the answer will be no.

As an FHA, VA and Conventional Mortgage UW for over 12 years (and I am proud to say I never UW for subprime) I just want to say I find it tragic that no matter what our stimulus money was supposed to do, it has not found its way to either homeowners who are in trouble, potential homebuyers to help them get into homes, or helping any of the borrowers who deserved a fair break. Lenders now are encouraged to continue with foreclosures as they are cheaper than modifactions for them. They not only save money by not redoing your loan, but they get the difference of the losses they experience from stimulus money! Yes, Obama now states that instead of saving homeowners ~ the homes need to be foreclosed on, since that is the majority of the home sales we have seen over the last 12 months. So he has changed his tune, and we are stuck with the consequences (and so are our children, paying all this money back).

With the credit crisis no where near over, investors making it harder and harder to approve even the best qualified borrowers, I can tell you that it may only get worse as the un-employment figures don’t get better (millions of Americans have exhuausted the 99 weeks now and dont get counted anymore – it doesnt mean there are less of them -they just dont get to be part of the statistics the government boasts)…..so while the state budgets remain unbalanced and people are on work fuloughs….and on and on…it is a very critical time in our history the President changes his mind to whatever new insider politician tells him he should do.

He certainly isn’t listening to us anymore.

Sorry Donna that you received miss-information, but ANY loan – mortgage or otherwise (car, etc) where the person did not fully pay off in accordance with their contract, that is considered an inablity (or an unwillingness) to fullfill and complete your obligations and that is how lenders are looking at it. If you don’t meet your obligation it’s a problem, not matter what they tell you.

Hey Tammy,

This is Lori in Ca. Funny you should mention B of A, I was an UW there till this summer….

After I wrote the earlier comment, I was talking with other coworkers, and we agree that it will have to change again within the next 12-24 months after this “rush” of new buyers runs out and the pool of potential buyers will be greatly diminshed to only those who were previous homeowners who want to buy again. Since the dangling carrots have all disappeared, like the homebuyer tax credits, etc. and homes are not rock bottom and dirt cheap, like have been for a while now, but they are starting to creep up … it will be interesting to see what they do.

We all agree that bororwers like Donna and you, our friends, our families and ourselves, are the borrowers and buyers who will continue to fuel the mortgage industry when it does start to shrink. Then it will matter again if you have money and a good credit score, and made the right choices all your life until this horrible time in our history. Right now since they don’t “have to” loosen them up they aren’t. They are very knee jerk reactions since there are record home sales still going on, and they are getting away with it for now, but it will come around again, but not today, not till they need to.

In regards to your situation I am confused…sorry….. I have never heard of anyone reopening a foreclosure after a property has been sold at auction??? That is new to me. So I will be interested to see if anyone has help or advice for you.

Coming from Bank of America, I can tell you that if you contact a home loan center, (and they are everywhere) they should be able to tell you the status of your account etc. and what they are up to. But I have never heard of this so I am no good to you…sorry

I have never written a blog or comment on the internet in my life (this was my first one, so hope I did ok

Here’s what I’m looking to do. My house is only worth half of what I owe on it. I want to get another mortgage for another house in a different part of the country. I have cash to put down on a house. I am not happy where we are. How do I go about getting another mortgage before I let this one foreclose?

I have a question. I think I know the answer. I bought two investment properties, both are now going into foreclosure. The market was badly hit in that area. One unit is a deed in lieu, and the other is in the process. We just sold our primary and have enough to put almost 40 or 50 percent down on a primary.

Do I have any option or am I looking at renting again for the next 20 years? Any suggestions would be appreciated.