Credit Cards Center Credit cards from our partners
Reply
Super Contributor
Posts: 8,700
Registered: ‎09-28-2007

BIG changes to Fannie Mae's policy regarding mortgages included in BK

[ Edited ]

Fannie Mae announced, effective immediately, that when a mortgage is discharged through a bankrupcy that the bankruptcy waiting periods would apply instead of the foreclosure waiting period. 

 

The official announcement is https://www.fanniemae.com/content/announcement/sel1410.pdf which states:

 

The Selling Guide has been updated to indicate that if a mortgage debt has been discharged through bankruptcy, even if a foreclosure action is subsequently completed to reclaim the property in satisfaction of the debt, the borrower is held to the bankruptcy waiting periods and not the foreclosure waiting period. Lenders must obtain documentation to verify that the mortgage debt in question was in fact discharged as part of the bankruptcy.

 

The selling guide has been updated to say:

 

If a mortgage debt was discharged through a bankruptcy, the bankruptcy waiting periods may be applied if the lender obtains the appropriate documentation to verify that the mortgage obligation was discharged in the bankruptcy. Otherwise, the greater of the applicable bankruptcy or foreclosure waiting periods must be applied.

 

The bankruptcy guidelines are also included in that selling guide link, and state:

 

Bankruptcy (Chapter 7 or Chapter 11)

A four-year waiting period is required, measured from the discharge or dismissal date of the bankruptcy action.

Exceptions for Extenuating Circumstances

A two-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the discharge or dismissal date of the bankruptcy action.

 

Bankruptcy (Chapter 13)

A distinction is made between Chapter 13 bankruptcies that were discharged and those that were dismissed. The waiting period required for Chapter 13 bankruptcy actions is measured as follows:

  • two years from the discharge date, or

  • four years from the dismissal date.

The shorter waiting period based on the discharge date recognizes that borrowers have already met a portion of the waiting period within the time needed for the successful completion of a Chapter 13 plan and subsequent discharge. A borrower who was unable to complete the Chapter 13 plan and received a dismissal will be held to a four-year waiting period.

Exceptions for Extenuating Circumstances

A two-year waiting period is permitted after a Chapter 13 dismissal, if extenuating circumstances can be documented. There are no exceptions permitted to the two-year waiting period after a Chapter 13 discharge.

 

 

So in a nutshell, if the mortgage was discharged in a Ch 7 BK, then just a 4 year waiting period applies instead of the 7 year waiting period from the time the lender takes back the property.  This shaves 3+ years off the waiting period.   Typically in a Ch 13 BK a mortgage isn't included in the discharge (mortgage arrears often are, but not the entire mortgage), but I guess in theory it could be...  so in that rare situation just 2 years from the Ch 13 BK discharge would be permitted.

 

This does not apply to Freddie Mac, VA, or FHA mortgages (at least not at this time, and there is no indication that they will be changing their guidelines in the future).

Mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime) since 2002, based in Irvine, CA and lending in all 50 states

Information that is needed to determine if you qualify for a mortgage

Moderator Emerita
Posts: 27,204
Registered: ‎09-13-2012
0

Re: BIG changes to Fannie Mae's policy regarding mortgages included in BK

Valued Member
Posts: 29
Registered: ‎05-21-2013
0

Re: BIG changes to Fannie Mae's policy regarding mortgages included in BK

@ Shane "Lenders must obtain documentation to verify that the mortgage debt in question was in fact discharged as part of the bankruptcy.", What kind of documentation will satisfy this requirement?  Thank you

Moderator
Posts: 10,334
Registered: ‎03-06-2010
0

Re: BIG changes to Fannie Mae's policy regarding mortgages included in BK


penguin11 wrote:

@ Shane "Lenders must obtain documentation to verify that the mortgage debt in question was in fact discharged as part of the bankruptcy.", What kind of documentation will satisfy this requirement?  Thank you


Discharge and petition.

New Member
Posts: 7
Registered: ‎03-03-2013
0

Re: BIG changes to Fannie Mae's policy regarding mortgages included in BK

Shane, would this apply also to a mortgage that was included in bankruptcy for a property that was subsequently short sold?  

 

We had our Ch 7 discharged in September 2010 and included our mortgage.  We "stayed and payed" (the whole point of the BK was to try and keep our house as they wouldn't modify our loan) as long as we could.  Eventually we outgrew our home as my husband got a new job that is home office based and we didn't have room for that.  We were still extremely upside down in our house and chose to do a short sale as even though we were off the hook for the debt, our understanding was the waiting periods for a future home purchase would be from the date the deed transferred to the new owner.  This occurred in October 2012.

 

We have been hoping to be able to buy in June/July 2015 as we would like to move out of state closer to family and where it is more affordable.  With my husband's income we are over for the area for USDA Direct, but would qualify for guaranteed.  I have read mixed opinions on whether we could qualify under that program with a short sale at 32-33 months prior.  Now I am wondering if we do not qualify for USDA due to the time frame then maybe we will be able to qualify for Conventional because it will be almost 5 years since the Ch 7 discharge.

 

I am only considering the difference in the waiting period here - I know that the credit, down payment, etc. requirements will be different for Conventional.  I am not interested in FHA due to the PMI requirements, and they also require 36 months as far as I know.  

 

Thanks!

 

 

Super Contributor
Posts: 8,700
Registered: ‎09-28-2007
0

Re: BIG changes to Fannie Mae's policy regarding mortgages included in BK

The guideline change is very new.  However I confirmed with two different lenders that it'd also apply to homes whose mortgages were discharged through the BK and subsequently short sold.  I haven't closed any under that situation though.  There are also the PMI companies guidelines to consider if the down payment is less than 20%, so essentially need to get two approvals.

 

USDA has the same 3 year waiting period on a short sale that FHA does, so closing prior to the 3 year mark could only be done with an extenuating circumstance (like FHA as well).

Mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime) since 2002, based in Irvine, CA and lending in all 50 states

Information that is needed to determine if you qualify for a mortgage

New Member
Posts: 7
Registered: ‎03-03-2013
0

Re: BIG changes to Fannie Mae's policy regarding mortgages included in BK

Thank you!

Established Member
Posts: 38
Registered: ‎09-14-2012
0

Re: BIG changes to Fannie Mae's policy regarding mortgages included in BK

We were getting ready to buy a house as our 2 year wait will be up in less than a month.  Now, it looks like they are making us wait 4 years before we buy?  This totally sucks.  Houses in the Seattle area are selling for higher than the peak of 2006 and continue to rise.  We really wanted to get into a new home before the prices get totally unaffordable.

 

The mortgage brokers and banks that I've been talking to are still staying that 2 years is fine.  I guess they are out of the loop. 

FICO 715 FAKO 739
Chase Freedom 14,500
Chase Slate 6,700
US Bank 14,500
Discover 15,000
New Member
Posts: 28
Registered: ‎08-26-2014
0

Re: BIG changes to Fannie Mae's policy regarding mortgages included in BK

BK is 2 years.  Foreclosure is 3.  These is government loans (FHA, VA, USDA)  Conventional (fannie/Freddie) are 4 years Chapt 7 BK. 

 

New Member
Posts: 6
Registered: ‎09-09-2014
0

Re: BIG changes to Fannie Mae's policy regarding mortgages included in BK

[ Edited ]

That is correct. Fannie did just change he guideline regarding shortsales to four years even with 20% down from the previous 2 years

Forums posts are not provided or commissioned by FICO. Forums posts have not been reviewed, approved or otherwise endorsed by FICO. It is not FICO's responsibility to ensure all posts and/or questions are answered.

† Advertiser Disclosure: The listings that appear on myFICO are from companies from which myFICO receives compensation, which may impact how and where products appear on myFICO (including, for example, the order in which they appear). myFICO does not review or include all companies or all available products.
‡ Credit cards for FICO Score ranges: The score ranges are guidelines based on internal myFICO analysis of actual applicant approvals, and having a FICO Score in a particular range does not guarantee you will be approved for credit cards recommended in that range. These ranges were not provided by any card issuer.

* For complete information, see the terms and conditions on the credit card issuer’s website. Once you click apply for this card, you will be directed to the issuer’s website where you may review the terms and conditions of the card before applying. While myFICO always strives to present the most accurate information, we show a summary to help you choose a product, not the full legal terms - and before applying you should understand the full terms of products as stated by the issuer itself.

Copyright ©2001-2015 Fair Isaac Corporation. All rights reserved.   | Terms of Use | Privacy Policy | Sitemap

IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.