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Ch 7 discharged - walk away and foreclose?

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MyFico_704
Regular Contributor

Ch 7 discharged - walk away and foreclose?

Just wanted clarification as I've seen some different answers on this one.

 

We're discharged from BK7, nothing reaffirmed all reporting as IIB.  Suppose we walk away or not pay but continue to live here until eviction...

 

  - when will the bank (WF) foreclose?

  - how will the foreclosure show on CR when mortgages were IIB? 

  - We've built our fico score upto high 600s.  Will the foreclosure hurt our score and what loans will we be qualified for, conventional/FHA?

 

Message 1 of 17
16 REPLIES 16
CH-7-Mission-Accomplished
Valued Contributor

Re: Ch 7 discharged - walk away and foreclose?

I don't know anything about how foreclosure works with a BK 7 discharge, so I am only throwing out a couple of thoughts.

I have read two or three times recently where people have been able to short sell their house to themselves.  This sounds like a wonderful option if you can make it happen -- if you like the place and can stay there for much less money.

 

Also some people have managed to live five years rent free waiting for the foreclosure to happen.  I would be tempted to wait it out and save up money for a new down payment for a new loan (FHA/VA in two years or four years for a conventional loan).

 

I don't know the details but you do need to be aware of how it works in terms of being able to get a future mortgage loan when you have a BK 7 discharged mortgage that is later foreclosed upon.  There are reports of people who could otherwise get a new mortgage because the required two years or four years has passed, but can't get one because the foreclosure isn't done or didn't happen until recently.

 

Pleaes try to get answers to these questions before you just walk.  You should try to make the decision that helps you best.

 

Good luck.

Message 2 of 17
pizza1
Community Leader
Super Contributor

Re: Ch 7 discharged - walk away and foreclose?

yep...the foreclosure can take awhile...I personally didn't go thru it, but Its been reported several times that you have a minimum of 6months to 5yrs , but on an average 1-2 yrs before anything happens. Id personally wait it out, save a ton of money, and be ready to have another place to go to one the eviction happens.
Message 3 of 17
Pway
Valued Contributor

Re: Ch 7 discharged - walk away and foreclose?

It all depends on the area of where the house is in.  My friend was forclosed on and he stayed in his house for about 3 years or so.  Now the house is boarded up because the bank could not resale the house.

Thank you for the wealth of knowledge I have learned from these forums. I am logging off as of November 9, 2022. I wish everyone great success.
Message 4 of 17
DaveInAZ
Senior Contributor

Re: Ch 7 discharged - walk away and foreclose?

  - when will the bank (WF) foreclose?

 

magicball.jpg

Crystal Ball says "Beats me". Depends on a lot of things - the bank (WF is known to be slow), how much underwater the mortgage is, and location. Also you need to check if your state has a jundicial or non-judicial foreclosure process. My state, AZ, is non-judicial, making the foreclosure process much faster - they don't have to go before a judge in a court, just post legl notices in newspapers and then evict you and sell at an auction for whatever they can get.

 

- how will the foreclosure show on CR when mortgages were IIB? 

Crystal Ball says that's easy - it won't show on CRs at all. CRAs report credit extended, usage of that credit, and repayment. Your mortgage debt was discharged in BK, end of story for CRs. Local county deed records for the property will show the foreclosure and that might possibly affect your ability to get a new mortgage, but won't affect your credit score at all.

 

- We've built our fico score upto high 600s.  Will the foreclosure hurt our score and what loans will we be qualified for, conventional/FHA?

Wating period for conventional mortgage is 4 years from BK discharge, not foreclosure. FHA is a bit more complicated and I have to get my behind off to work.

 

Message 5 of 17
ezdriver
Senior Contributor

Re: Ch 7 discharged - walk away and foreclose?


@DaveInAZ wrote:

  - when will the bank (WF) foreclose?

 

magicball.jpg

Crystal Ball says "Beats me". Depends on a lot of things - the bank (WF is known to be slow), how much underwater the mortgage is, and location. Also you need to check if your state has a jundicial or non-judicial foreclosure process. My state, AZ, is non-judicial, making the foreclosure process much faster - they don't have to go before a judge in a court, just post legl notices in newspapers and then evict you and sell at an auction for whatever they can get.

 

- how will the foreclosure show on CR when mortgages were IIB? 

Crystal Ball says that's easy - it won't show on CRs at all. CRAs report credit extended, usage of that credit, and repayment. Your mortgage debt was discharged in BK, end of story for CRs. Local county deed records for the property will show the foreclosure and that might possibly affect your ability to get a new mortgage, but won't affect your credit score at all.

 

- We've built our fico score upto high 600s.  Will the foreclosure hurt our score and what loans will we be qualified for, conventional/FHA?

Wating period for conventional mortgage is 4 years from BK discharge, not foreclosure. FHA is a bit more complicated and I have to get my behind off to work.

 


lol. You could have stopped with the picture as it says all there is to say!

Message 6 of 17
Anonymous
Not applicable

Re: Ch 7 discharged - walk away and foreclose?

It can take a long time.  A friend of mine who is a single mom is in her 4th year and still has no idea when this may happen.  Remember though I believe your clock on a new mortgage will not begin until after the title changes ownership. So if it takes 5 years to foreclose your 2 or 4 year start then

Message 7 of 17
DaveInAZ
Senior Contributor

Re: Ch 7 discharged - walk away and foreclose?


@Anonymous wrote:

It can take a long time.  A friend of mine who is a single mom is in her 4th year and still has no idea when this may happen.  Remember though I believe your clock on a new mortgage will not begin until after the title changes ownership. So if it takes 5 years to foreclose your 2 or 4 year start then


No, in JUly 2014 Fannie Mae, the largest quasi govt purchaser of conventional mortgages announced that the 4 year waiting period for a new mortgage starts with the discharge of CH7 BK, not any foreclosure. It's a sticky in the Mortgage Forum here on MyFico: BIG changes to Fannie Mae's policy regarding mortgages included in BK

 

FHA, with a 2 year waiting period, may still consider a foreclosure as the start of a wait period, but personally I would never do a FHA Mortgage. You can also get a conventional mortgage for as little as 5% down. The difference is for a conventional mortgage the PMI - mortgage insurance required for less than 20% down - falls off after you've paid down or home value rises to where remaining balance is less than 80% of value, whereas the PMI for an FHA mortgage never falls off.

Message 8 of 17
Anonymous
Not applicable

Re: Ch 7 discharged - walk away and foreclose?


@DaveInAZ wrote:

@Anonymous wrote:

It can take a long time.  A friend of mine who is a single mom is in her 4th year and still has no idea when this may happen.  Remember though I believe your clock on a new mortgage will not begin until after the title changes ownership. So if it takes 5 years to foreclose your 2 or 4 year start then


No, in JUly 2014 Fannie Mae, the largest quasi govt purchaser of conventional mortgages announced that the 4 year waiting period for a new mortgage starts with the discharge of CH7 BK, not any foreclosure. It's a sticky in the Mortgage Forum here on MyFico: BIG changes to Fannie Mae's policy regarding mortgages included in BK

 

FHA, with a 2 year waiting period, may still consider a foreclosure as the start of a wait period, but personally I would never do a FHA Mortgage. You can also get a conventional mortgage for as little as 5% down. The difference is for a conventional mortgage the PMI - mortgage insurance required for less than 20% down - falls off after you've paid down or home value rises to where remaining balance is less than 80% of value, whereas the PMI for an FHA mortgage never falls off.


Thats good to know.  I was just told something different by my lender.  Fortunatly I found a buyer for my house and just sold it before it had to go into forclosure.

Message 9 of 17
DaveInAZ
Senior Contributor

Re: Ch 7 discharged - walk away and foreclose?


@Anonymous wrote:

@DaveInAZ wrote:

@Anonymous wrote:

It can take a long time.  A friend of mine who is a single mom is in her 4th year and still has no idea when this may happen.  Remember though I believe your clock on a new mortgage will not begin until after the title changes ownership. So if it takes 5 years to foreclose your 2 or 4 year start then


No, in JUly 2014 Fannie Mae, the largest quasi govt purchaser of conventional mortgages announced that the 4 year waiting period for a new mortgage starts with the discharge of CH7 BK, not any foreclosure. It's a sticky in the Mortgage Forum here on MyFico: BIG changes to Fannie Mae's policy regarding mortgages included in BK

 

FHA, with a 2 year waiting period, may still consider a foreclosure as the start of a wait period, but personally I would never do a FHA Mortgage. You can also get a conventional mortgage for as little as 5% down. The difference is for a conventional mortgage the PMI - mortgage insurance required for less than 20% down - falls off after you've paid down or home value rises to where remaining balance is less than 80% of value, whereas the PMI for an FHA mortgage never falls off.


Thats good to know.  I was just told something different by my lender.  Fortunatly I found a buyer for my house and just sold it before it had to go into forclosure.


That's great news, congtratulations! Now you can really focus on that credit rebuild. Smiley Happy

Message 10 of 17
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