2 yrs Post BK, still in home, want to buy another <Total Confusion>

[Northforty]

OK - here is what I've found out from my sister - who is a direct endorsement underwriter, and has been for about 15 years.

FHA is now looking at real estate loans discharged in BK as foreclosures - whether a foreclosure has actually occured or not. This means that the three year rule (three years from the foreclosure event) is what applies for qualifying for a new loan, NOT the two years from discharge rule.

If you DID NOT discharge real estate loans in the BK, then the two year rule applies.

If you DID NOT file bankruptcy, and are simply sitting on an underwater home, in order to qualify for a new FHA mortage, you must qualify with BOTH loan payments, and you must have six months PITI for both homes in the bank (over and above your down payment funds), and you must have no late payments on your existing mortgage - period.

YMMV

If this is indeed true that would be great news for alot of folks. After reading it I ran it by all three of the mortgage companies I have been working with and all responded that after speaking to their underwriters that they agree that if the home loan was included in the bankruptcy the 3 year clock starts ticking at discharge not after the deed transfer actually occurs. Now that being said it will be interesting to see if this really happens. I would imagine there has to be someone on here who is 3 years post discharge and buying a house who this happened to?

[tradinglife]

That would be good news, especially considering how long the banks are taking to foreclose. A whole lot of us are in limbo waiting to see how long before we can get a mortgage again.

[indeep59]

I think it just verify's the variance of underwriter interpretations. All FHA applications go to the Total Scorecard system and based on the results may require manual underwriting. The underwriters work for the banks, not the FHA, they just follow FHA qualification guidelines. As of recent, I cannot find any new modifications or additions to the law that says otherwise, like 3 year post BK if you included a house. Althought, we are talking about the government....insert comment here......

The core of the issue is the market demands and financial status of the home owners. Having a BK and a foreclosure 10-15 years ago was far from a common scenario that plagues our population today. Hell, they had to re-write the laws to include a short sale, because it didn't exist in the recent past. The demise of the housing market generated a new class of future homeowners, unfortunately, the rules aren't as quick to change as the financial status of the people. The new class of homeowners will likely have a BK, short sale or foreclosure in their past. To be 50% underwater or a victim or corporate cuts on a mass scale, as we have seen, is generating a large class of good people that, in many cases, is no fault of their own.......**it Happens.

The construction industry is "Made in the USA" and our economy depends on its diversity, but when the middle class "American Dream" of owning a home, building equity and financial security is gone, this sector will suffer greatly. The middle class is the heartbeat of our economy and when the assets are diminished, BK, foreclosure, short sale are all that remain to unload the vast debt we have in our "American Dream". Not sure the percentages, but it seems as though everyone at my work is walking away from their homes because their asset is now a huge liability and it makes financial sense to cut your losses.

This vast group of future homeowners is financially stable, a decent risk, but the rules of yesterday apply in todays, never seen before economy and broke middle class. Many of whom are broke because most of their assets were in their homes. Remember when real estate was a safe and secure place for our hard earned dollars to build wealth....not talking about the investors....I'm talking about the middle class.

OMG, finally a voice of reason!
I am one of those you speak of, middle class,construction worker,my "American Dream" home has turned into an albatross. Me and a lot of my coworkers are in the same boat, less work hours,declining home values, underwater,etc. I know a couple of guys that just walked,some more are behind, and some more are wondering whether they should continue to pay and stay current.

I have a home that was discharged in a Ch 7, but stayed. Had a HAMP done, but fell behind again because of lower income.
We, the middle class, are constantly under attack,taxes,anti-union sentiment, corporate greed,etc. Slowly we are being driven out of our "class" and I'm afraid the way things are going we will only have the very rich and the very poor in this country.
I fear my union pension, the only thing that will save me from a retirement of poverty, will not be there due to declining union enrollment, or any union busting movement.
God help me if it's not, my life savings was in this friggin house,invested, and when I fell behind, used up all my savings trying to catch up,before I bk'ed.

That said I do have a job with a company that has been in business for a long time, and they are determined to keep the doors open, but of course no guarantee. Hopefully they can for at least a few more years till my pension can kick in.

Debating whether to stay and try to make it here or just walk, and getting something cheaper, so this news would be really good for me and my wife to buy another home and get out from under the heavy weight of my mortgage here and getting something more in tune with my reduced income.

[Logan]

The issue I see here is an underwriter is going to want to see at least a 12 month payment history for either rent or mortgage and possibly 2 years. If you decide to stop paying your mortgage and go into foreclosure yet you live in your house without making any payments I guarantee you'll have trouble getting a loan.

Logan

[mom2three09]

OMG, finally a voice of reason!
I am one of those you speak of, middle class,construction worker,my "American Dream" home has turned into an albatross. Me and a lot of my coworkers are in the same boat, less work hours,declining home values, underwater,etc. I know a couple of guys that just walked,some more are behind, and some more are wondering whether they should continue to pay and stay current.

I have a home that was discharged in a Ch 7, but stayed. Had a HAMP done, but fell behind again because of lower income.
We, the middle class, are constantly under attack,taxes,anti-union sentiment, corporate greed,etc. Slowly we are being driven out of our "class" and I'm afraid the way things are going we will only have the very rich and the very poor in this country.
I fear my union pension, the only thing that will save me from a retirement of poverty, will not be there due to declining union enrollment, or any union busting movement.
God help me if it's not, my life savings was in this friggin house,invested, and when I fell behind, used up all my savings trying to catch up,before I bk'ed.

That said I do have a job with a company that has been in business for a long time, and they are determined to keep the doors open, but of course no guarantee. Hopefully they can for at least a few more years till my pension can kick in.

Debating whether to stay and try to make it here or just walk, and getting something cheaper, so this news would be really good for me and my wife to buy another home and get out from under the heavy weight of my mortgage here and getting something more in tune with my reduced income.

I just wanted to say that your story sounds soooo much like mine and my dh's & I totally agree with every word you wrote about the middle class being hit very hard...my dh is a union tradesman (construction) and Indiana just passed the right to work bill ...he is currently on winter lay off from his employer which he has been with for almost 9 yrs -- we still have no idea how the RTW thing is going to affect us, but I can't imagine it being a good thing The economy pushed us into filing for BK in 2009 and like you, we did not reaffirm our home but have chose to stay and pay in hopes of selling this spring and buying a home in the country ... now we have been told that we owe about $15,000 more than we can even sale our home for .... so we are stuck... we did get a loan mod last yr and have stayed current, but we're ready to get out of this house now so if something doesn't happen soon to get us into a better situation I'm not sure what we will do...So far I have not been able to confirm, with any of the mrtg professionals I have contacted, that this thing about FHA considering any property included in BK to be a foreclosure as of the date of discharge

[ItsJustMe]

If this is indeed true that would be great news for alot of folks. After reading it I ran it by all three of the mortgage companies I have been working with and all responded that after speaking to their underwriters that they agree that if the home loan was included in the bankruptcy the 3 year clock starts ticking at discharge not after the deed transfer actually occurs. Now that being said it will be interesting to see if this really happens. I would imagine there has to be someone on here who is 3 years post discharge and buying a house who this happened to?

So curious about this, too, and also curious if (assuming this info is accurate) it would apply to a short sale, too. Our discharge was 1/10 (house IIB), sold as a SS 1/11 (trying to get the thing out of our names). My understanding is that we'll need to wait for 1/14 to purchase, but I'd love to find out we can purchase 1/13. We're well on our way to having a decent downpayment by then!

[jpracer37]

How long has this been in place? This is exactly what we are going thru

[OutofTime]

So if your current and didn't reaffirm loan, its considered a foreclosure at discharge date? Doesnt seem fair because if you are able to afford both homes, I'm sol and have to wait another yr. What if I stop paying and it actually gets foreclosed on? Does the 3 yr seasoning restart based on actual foreclosure? Seems confusing.

[tobee43]

So if your current and didn't reaffirm loan, its considered a foreclosure at discharge date? Doesnt seem fair because if you are able to afford both homes, I'm sol and have to wait another yr. What if I stop paying and it actually gets foreclosed on? Does the 3 yr seasoning restart based on actual foreclosure? Seems confusing.

not only confusing, but again, how many people do you know that got a mortgage after bk within the past year? i personally don't know any. OH...yes, i did but it was owner financed. (and feb it will be 2 years).

[OutofTime]

not only confusing, but again, how many people do you know that got a mortgage after bk within the past year? i personally don't know any. OH...yes, i did but it was owner financed. (and feb it will be 2 years).

The sticky has FHA wants min 2 yrs after bk and now I see if not reaffirmed its foreclosure. I wonder if there is an FHA contact to get this clarified. I'll probably consult with a real estate attorney to get more info too.

[tobee43]

The sticky has FHA wants min 2 yrs after bk and now I see if not reaffirmed its foreclosure. I wonder if there is an FHA contact to get this clarified. I'll probably consult with a real estate attorney to get more info too.

outoftime, don't be surprised if the atty doesn't really have a clear picture either. most don't because things are changing so much and in this case there is no history to repeat itself.

what a real estate atty may be useful for is maybe getting you in touch with someone to help get a mortgage for you. they usually know many brokers and even banks/other lenders etc.

[doodlebugger]

Northforty,

We are in the same situation. We live in a house where we filed bk7 on the mortgage, did not reaffirm, and we have stayed in the house for 6 1/2 years after our bk7 was discharged. We were told the same thing over and over. I refused to take no for an answer, and found a loan officer who was willing to do some footwork to see what could be done. She finally came back with a lender who said they would approve us for a USDA guaranteed loan, but the only question was whether or not the deed was still in our name. We consulted a real estate attorney about the deed issue - because we found out it was in our name - and he said our only out was a deed-in-lieu or foreclosure. Our loan officer called us back and told us that the lender could not accept it because of the three year guideline. The next day I called three different USDA offices in my area. I finally spoke to the underwriter who told me that he would accept a deed-in-lieu, and that he was considering the three year time frame from the discharge date of our bankruptcy and no longer considering the three year start from when the foreclosure or deed-in-lieu takes place. He asked me to have our loan officer call him. She did, and he told her the same thing. The biggest issue he said we would have is finding a lender who would agree. They have their own guidelines that are called overlays that you have to pass through before you have to pass through the USDA guidelines. He sent her the guidelines in writing which are taken from the USDA origination matrix (search google for this and you will find it) which states: Any applicant with a foreclosure or pre-foreclosure activity in the previous 36 months, Chapter 7 bankruptcy discharged in the previous 36 months, Chapter 13 bankruptcy that has yet to complete repayment or has completed repayment within the previous 12 months, and/or late mortgage payments in the most recent 12 months must submit all supporting evidence along with the credit waiver regardless of credit score. The lender must document the compensating factors as well as the rationale that was applied in the course of making a decision to approve the loan in their permanent loan file.
This is what our USDA underwriter (the one who will review our file once we get a lender to approve it) sent to our loan officer to support his reasoning as to why he would allow a deed-in-lieu immediately because our bk7 is over 6 years since discharged. He gave his reasons because the government was realizing how many people were stuck waiting on a house to be foreclosed on and possession to change.....you can't force a bank to accept a deed-in-lieu, just like you can't force them to remove the deed out of your name after they foreclose. In our state, they have 15 years before the statute of limitations run out - so they can wait up to 15 years to take the deed out of your name. He did say this is a case by case situation, and he said that the biggest hurdle for us will be finding a lender to approve our situation.

I have been told that USDA and FHA have the same guidelines. Maybe you could call your local FHA representative and get an answer???? We asked some people we trusted and knew who worked in financial institutions to recommend a loan officer/mortgage specialist which is how we found ours. Good luck to you!!!

Edited to add: The real estate attorney said the reason why our names was still on the deed - because we stayed and paid. The bank was not allowed to remove our names from the deed until they foreclosed or got a deed-in-lieu.

[LadyInTheRed]

doodlebugger, have you found a lender, or are you still looking?

[doodlebugger]

We have a loan officer or mortgage specialist or mortgage broker or something to that effect and she is trying to get a response from a particular lender right now. If they turn us down, she has another lender who may consider our situation if our mid score on the credit report would be just a few points higher (and it should because we are going to pay off our credit cards and there are some items falling off). If that doesn't work, she has another lender coming on board with the USDA program, but not until the first of the year. The real answer would be no, not at this time, but that could change in the next hour or the next day, or the next week. Hopefully sooner than later!!!!

[tobee43]

doodlebugger:
Edited to add: The real estate attorney said the reason why our names was still on the deed - because we stayed and paid. The bank was not allowed to remove our names from the deed until they foreclosed or got a deed-in-lieu.

well, in our case we didn't stay and pay and it's been 4 years as i have mentioned before as well as the bank refused/refuses a DIL. our names are still on the deed, so i'm not exactly certain about that, unless it's the way it works in your state, i know it doesn't work that way where we had our property. also, in the state our property is in, it's a 20 year statue of limitations. it does seem as though the lenders at some point have to make a move. as you, and many have stated, there is so much inventory the lenders are holding that they are beginning to realize at some point they have to make a move, one would at least think would be the most logical approach. again, it's hard to say.

many say that the lenders are just waiting for property values to increase, as greedy as they are, since they got paid from the governement with the huge bail out and now they want more.

i very much hope you can find a lender that will work with you. someone somewhere needs to break the ice and get the ball rolling here. i hope.