It's been asked before..3 year waiting time after Forclosure for FHA lending?

[dp1969]

I'm getting conflicting answers on the FHA loan requirements after foreclosure. Here's the info I have on our foreclosed home.
Notice of Trustee Sale letter: On the courthouse sell date September 15, 2008.
Trustee's Deed Upon Sale letter: Letter states on September 15th, 2008 the house was sold at auction. On the same form, Recorded in the Official Records of the county was dated October, 16th 2008 at 9:00am.

Now, which date is the one that we start the clock ticking on the 3 year wait? The Trustee's actual sale or the recorder Official Records date from the county? I found an article that sates:

These guidelines have changed quite a bit over the past three years (becoming more strict) and are accurate as of the date of today’s post – 2/3/2011

2011 FHA Waiting 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 / Notice of Default – 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


I really need the correct answer. Thanks everyone!

[Scooter10]

I'm getting conflicting answers on the FHA loan requirements after foreclosure. Here's the info I have on our foreclosed home.
Notice of Trustee Sale letter: On the courthouse sell date September 15, 2008.
Trustee's Deed Upon Sale letter: Letter states on September 15th, 2008 the house was sold at auction. On the same form, Recorded in the Official Records of the county was dated October, 16th 2008 at 9:00am.

Now, which date is the one that we start the clock ticking on the 3 year wait? The Trustee's actual sale or the recorder Official Records date from the county? I found an article that sates:

These guidelines have changed quite a bit over the past three years (becoming more strict) and are accurate as of the date of today’s post – 2/3/2011

2011 FHA Waiting 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 / Notice of Default – 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


I really need the correct answer. Thanks everyone!

Well..good luck getting the correct answer. Ive seen lenders us the transfer date, sale date, and in rare case the date of the bk discharge. Your only 30 days apart and at the 3 year make so I would start reaching out to your lenders and see what date they go off of. Not everyone is a BK friendly lender, so when you fine one they should know what date they go off of.

[dp1969]

Even if the date the deed is signed is the "legal" date, then is this case the recording date shouldn't matter, right? Totally unclear and I believe there will be more of these situations arising for future home buyers coming into the 3 year mark. We just lost our contract to purchase a home (even after signing docs and submitting closing costs at the title office) because the DU questioned, once again, our BK situation. They asked for the BK papers (not just the discharge) and found the house "IIB" but not showing foreclosure on our credit report. This raised the red flag and subsequently they did not fund the loan. If we are to go by the Trustee Sale, we were just shy of 3 1/2 weeks for the 3 year waiting period. Now, we have to draw up another purchase contract and submitted it to the selling agent...starting from scratch. We have been trying to purchase a short sale home since April and now we have to wait another 45 days after submitting another contract.
So...my advise to those wanting to purchase very quickly from the 3 year waiting period....CHECK YOUR TRUSTEE 'S SALE DATE AND/OR THE RECORDING DATE!

[Scooter10]

Even if the date the deed is signed is the "legal" date, then is this case the recording date shouldn't matter, right? Totally unclear and I believe there will be more of these situations arising for future home buyers coming into the 3 year mark. We just lost our contract to purchase a home (even after signing docs and submitting closing costs at the title office) because the DU questioned, once again, our BK situation. They asked for the BK papers (not just the discharge) and found the house "IIB" but not showing foreclosure on our credit report. This raised the red flag and subsequently they did not fund the loan. If we are to go by the Trustee Sale, we were just shy of 3 1/2 weeks for the 3 year waiting period. Now, we have to draw up another purchase contract and submitted it to the selling agent...starting from scratch. We have been trying to purchase a short sale home since April and now we have to wait another 45 days after submitting another contract.
So...my advise to those wanting to purchase very quickly from the 3 year waiting period....CHECK YOUR TRUSTEE 'S SALE DATE AND/OR THE RECORDING DATE!

Valid point. But wouldn't that be up to the lender and their underwriter if they are willing to do the loan and what dates are important. Just saying the lender should know that and the underwriter should be asking for full paperwork and getting all questions answered before closing. You lender may not be the best person for something like this. they reallyt have to understand and be committed to working with BK clients,

I am going thru a simular situataion where the lender is going off the discharge date *not the foreclosure date*, yes you are reading that right the discharge date. They have the ability to manually underwrite and their opinion is the borrower has no control of how long it takes the court to complete the foreclore process for a dept included in the bankruptcy therefore the date of dicharge starts the clock. It is is final underwriting now with a closure next week so we will see. Im not holding my breath but it really depends on the lender/underwriter.

[LadyInTheRed]

In California, the transfer of real property is effective upon the delivery of the executed deed to the transferee, even if the deed is recorded later.

But, Scooter is correct. What matters is what the underwriter decides. If I were trying to get a mortgage post foreclosure/BK, I would try to find a mortgage broker who has experience working with BK debtors.

[dspii]

I'm in the middle of a short sale...only to keep the foreclosure off my back, cause it would take years for BOA to take it back and I won't get a mortgage until hell freezes over. In light of my short sale, if it happens, I plan on retaining an attorney to fight for my rights at the 2 year point. My strategy is that the BK eliminated the debt and BOA has the right to reclaim their interest. We're talking about title, not the financial responsibility which was eliminated in BK. From what I understand BOA cannot report any payments, balance or deficiencies on my mortgage or they would violate the law. So if our financial obligation was eliminated, it seems like double jeopardy to be punished for the bank to reclaim their interest after our obligation was eliminated by law.

The rules state 2 years for this, 3 years for that, but they never combine the fact that if......you file for BK then short sale or foreclose. Due to the economic conditions, more and more families are in the same situation and a ruling combining the events should be due. BK protects us from creditors of the past and I believe that too many underwriters err on the safe side because of the unclear or by the book ruling.......too many good people are shut out for many years and most times due to circumstances beyond their control.

More to come in the months ahead.....I'm hoping to retain a great attorney.

[LadyInTheRed]

So if our financial obligation was eliminated, it seems like double jeopardy to be punished for the bank to reclaim their interest after our obligation was eliminated by law.

dspii,

I don't understand what you think you can sue the bank for. The BK discharged your personal liability for the debt. It did not eliminate the bank's security interest in the property. Do you think you should be able to discharge your debt, but still get to keep the house you didn't pay for? If the banks could be denied the ability to foreclose on secured debt discharged in BK, loans would be a lot more difficult to get.

I do think the banks should be forced to claim their security interest within a certain time after discharge or lose their right to do so. Or, perhaps they could be required to accept a deed in Lieu from the discharged debtor. Unless there is some existing law that could be interpreted to require something like that, suing the lender isn't going to accomplish anything. The courts can't do anything if there is no support in the existing law.

[dspii]

dspii,

I don't understand what you think you can sue the bank for. The BK discharged your personal liability for the debt. It did not eliminate the bank's security interest in the property. Do you think you should be able to discharge your debt, but still get to keep the house you didn't pay for? If the banks could be denied the ability to foreclose on secured debt discharged in BK, loans would be a lot more difficult to get.

I apologize if I mis-stated my intentions or failed to clearly state my situation, sometimes we all go off on a tangent........I'm not going to sue anyone, I hope. My double jeopardy arguement is if the debt was eliminated by law, how can I be punished and subjected to a 2 year wait if I am deficient on payments that were eliminated by my BK. The same should apply for foreclosures, I would believe. It is a legal question that has yet to be clearly answered and unfortunately too many families are shut out because interpretation of the law and rules is left to an underwriter.

In my research, BOA can no longer report my payment history as the debt was discharged in BK. In attempting to do a short sale with BOA, I was current in my payments, had a qualified hardship, moved across country for work, only for them to run me up, down, and all around the flag pole in processing my SS application. I began the process last February and in June I was told by the same bank that if I stop making payments, the process would speed up and oh yea, I needed to re-apply (3rd time) for a short sale cause BOA is a mess. So I quit making payments and they were right, the process began immediately. I have an offer submitted that was initiated last May....I hope the buyers hold on.

My legal question is not to retain the house, but if the short sale closes, I want to get another mortgage at the 2 year mark, after discharge. FHA rules says a 2 year wait, if you are deficient on your payments for a short sale or if you are current you qualify immediately. I made the payments on time and could have continued (my intention) to make the payments after I moved across country, if BOA would have played by the rules they established, but instead I had to stop making payments for them to process my application....sucks but **it happens.

So here is my issue, FHA rules do not anticipate or create a hierarchy for 2 events......a BK and then a short sale or foreclosure. Well I am trying to stay away from the FC....it's public and easy to find, hard to argue and would disqualify me for 3 years. Albeit, if the SS is successful, my goal is to retain legal counsel to argue that BOA cannot disclose if I was current on my payments. And since no FC, no title in my name, I can truthfully state on my loan application that my prior residence was sold.

FHA does require 12 months of rent or mortgage payments, no problem I can provide a combination of mortgage and rent for the 12 months prior or worst case I would have to wait until I rented for 12 months. My point is not to get something for free, only to play the ridiculous game they created and justifiably qualify for a mortgage 2 years after discharge.

I hope that clarifies my thoughts, although I do realize that it may be wishful thinking....I am a realist!

[justbroke]

This is not an argument. There is no "double" jeopardy because this is not a "legal" situation. Credit is extended as a privilege, not a right. A creditor can generally deny creditor for any reason, so long as they state the reason, and it's not based on certain classes (religion, age, sex, etc). FHA guidelines are about the best with specificity on just what you need to do to qualify for a loan.

So, aside from the 2-4 year rule for disposing of a property where you didn't pay the full amount due, there are exceptions. You can get an exception if you can PROVE that it was a hardship that caused you to fail in payments. The more your hardship reads like a "Lifetime Channel" special of the week, the more likely they will allow underwriting of the loan.

You have to remember that the empirical evidence surrounding credit defaults is pretty accurate! They "know" the circumstances that have the greatest risk of failure. One of those is that a person who "just" filed bankruptcy or lost a home due to foreclosure (or short sale/DIL), is just as bad a risk as someone with a 540 (FICO) credit score. Again, if the circumstances are those which qualify as a hardship, and there is proof that you had perfect credit prior to the hardship, it can be overlooked.

It's an unfortunate situation, and I'm stuck with this as well. Some banks that lender under FHA will allow you to short-sale/DIL at the same time you purchase a new home under FHA. So long as all the payments were made on time and your credit scores are good -- you are otherwise creditworthy. They just don't like people missing payments.

[dspii]

Thanks for the reply Justbroke....I always enjoy reading them, solid advice and knowledge. Just as a clarification, in my situation I am attempting to keep BOA from releasing any payment history on my loan that was discharged. After my short sale is complete and I apply for another mortgage, they will see that I owned a home that was sold. How would or could they find out that I was delinquent since nothing is to be updated on my credit report and its not an FHA loan. And since the debt was discharged and I no longer owe the monies, so it seems wrong by saying, "we know the courts discharged the debt and you no longer are responsible, but we don't care".

Bottom line, I was deliquent only to satisify BOA in processing my short sale. My original intent was to stay current and sell it to qualify immediately, but BOA doesn't like that idea....even with a qualified hardship. I tried to help the housing market and not contribute to the growing vacated and unkept properties, but BOA, being the monster it is, just doesn't get it. And they left me no choice but to stop making payments.......had I known, the nice guy in me would have walked from the mortgage a year ago and let them foreclose. They way the rules read, I would have saved a lot more money and had less gray hair.

My attempt at a short sale and staying current was to qualify immediately for a new mortgage, but since BOA is a butthead, now I am trying to develop a new strategy. In my research, I was thinking I had a solid arguement, which I will run by an attorney. I have studied the loan applications and paperwork for FHA and I see nowhere where I could not tell the truth and say that I failed to pay any money I owed (it was discharged). So how would the underwriter find out that my payments were not current at the time of short sale? And, how could a debt that was discharged be considered deliquent? By failing to pay, they regain their security interest....in my case, I short sold it.

[justbroke]

So how would the underwriter find out that my payments were not current at the time of short sale? And, how could a debt that was discharged be considered deliquent? By failing to pay, they regain their security interest....in my case, I short sold it.

The underwriter -- or the due diligence clerk -- will check the public record and see that you own a home. They will want to know the disposition of that home, especially when you still have an unreleased (recorded) mortgage.

A discharge of debt only released your LEGAL responsibility to pay. It does not change the fact that it is in fact... delinquent! This is especially true in the context of real (and certain personal) property. Otherwise, the lender would never be able to foreclose... because your claim would be the the debt is legally gone and since there's no debt, there's no lien. However, the lien is tied to the debt. (The lien is the mortgage or "installment contract", and the debt is the promissory note or loan.) The only thing extinguished by the discharge is the responsibility to pay it. It in no way changes the character of the actual debt itself.

It's a distinction that many people, and maybe even some attorneys, misunderstand.

For an underwriter, they are looking at a clean payment history (maybe 1 30-day late and 1 60-day late within 2 years). If you were more than 60-days late... paying off the entire Note does not matter. The fact is... you paid late. That's an indicator that you more likely to default than most other people, who are never late. Remember, most credit decisions are based on empirical data that get rolled up into a scoring model such as FICO. While they can't 100% guarantee that person A with a 850 score won't default where a person with a 600 score is likely to default... they are pretty accurate nonetheless.

If you're able to provide a viable reason, I'm sure underwriting would consider the reasons and override some of the qualifications. Remember, this is all about the new lending environment where the banks will want to be a little more careful in loaning money. Back in 2003-2008... they "gave" (loaned) money to just about anyone with a pulse and a job.

[dspii]

The underwriter -- or the due diligence clerk -- will check the public record and see that you own a home. They will want to know the disposition of that home, especially when you still have an unreleased (recorded) mortgage.

What if the mortgage is released, as in after the short sale completes and the title is no longer recorded in my name? If I am correct, only a IIB and $0 balance on the tradeline for my "prior" mortgage with no dates of settlement recorded. So how, with due diligence, would they know my prior payment history if no foreclosure exists? I "assumed" BOA is not able to legally record payments after discharge. I do have to supply 12 months worth of rent or morgage reciepts, which is no problem, I have a combination of both with no lates. Also required is 2 years prior addresses....again shouldn't be a problem, my prior address was "sold".

Sorry for hacking the thread, maybe I should start another. Cases such as mine exist everywhere and I believe based on what I have learned is that there might be hope in getting a mortgage 2 years after discharge if you short sell your house and avoid foreclosure. FHA rules do not consider events such as a BK and then a short sale. Each event (FC and SS) seperately is easily determined for the non-BK'd person by review of their credit report. My reasoning is that if the debt was discharged and the house was sold releasing me from title and not through foreclosure how can my payment history come into play on a discharged debt that should not recorded anywhere? Please remember this is assuming I can short sell my home, 2 years post discharge and good credit since BK and a down payment.

[justbroke]

I think there is hope and it's all on how much due diligence is necessary for the loan package. (Remember, that there are different levels of due diligence. Remember the "no documentation" loans from the past? They had little due diligence.) If you have pristine credit with a score above, say, 680 (or maybe even 720), with no lates in the last 24 months... the underwriter (or due diligence) may not look so hard.

They "may" still ask what the disposition was on the property.

None of this is to say that you can't get an FHA loan within the 2 years of discharge at all. It all depends on the specific circumstances and whether you can clearly articulate a convincing reason why they should relax some of the criteria.