cancel
Showing results for 
Search instead for 
Did you mean: 

Ch 7 bankruptcy w/ mortgage discharge....then short sale or foreclose....3 year wait either way?

tag
Anonymous
Not applicable

Ch 7 bankruptcy w/ mortgage discharge....then short sale or foreclose....3 year wait either way?

Hi there mortgage experts:

 

I'm concerned about information I'm getting from a law firm that is closely tied to a real estate agency.  .

 

When I contacted this law firm, I had already declared chapter 7 bankruptcy and my previous horrendous mortgage was discharged as part of that proceeding.  This firm went with me to foreclosure mediation, where no deal was struck.  

 

I expressed that my goal was to rebuild my credit and be as ready as possible to secure a new mortgage two years after the discharged bankruptcy.  I understand that there is that waiting period after this discharge.  

 

They encouraged me to let them (or their real estate affiliates) attempt to short sale the property, claiming it will look better to creditors than letting that property be and having it foreclosed upon, so this process is under way.  The bank got all the required documents and agreed in principle to take short sale offers.  

 

After months of being on the market, there has been one offer of $40,000 for the home and the bank countered with $110,000.  Not even close to a deal and nobody in their right mind would give close to $110,000 for the property.  This process is moving very slow and to my inexperienced eye it is questionable if there would ever be a deal made with what the bank is looking for.

 

In the short term, this concerns me because of the expense I am incurring to hold onto this property.  I'm paying over $100 a month is vacant property insurance and have recieved a bill for water/sewage that is quite large as well as the expense of maintaining the lawn....(all at the time that I should be stashing money away for a down payment).  

 

Furthermore, and more importantly, I recently explained my situation to someone at Quicken Loans.  After I explained my situation, he said that they (and likely no bank) will give me a mortgage for 3 years after the short-sale of the property because the foreclosure process had already started.  This seems to run counter to the advice that was given to me from the law firm, who would stand to make commission off of a short sale.  From the way the guy sounded at Quicken Loans, whether the property is short sold, turned over in a deed in leiu, taken over by the municipality, or foreclosed upon by the bank, it's going to be three years until I can get a new mortgage (even thought the mortgage was discharged now over a year ago).  

 

I've gone from beginning to look at homes (as the two year waiting period from discharge is nearing an end) to now thining that I'm more than three years from being eligable for a mortgage, all the while I've been paying expenses for this old home for what seems to be no personal benefit.

 

 

I'm in Maryland, if that matters.

 

So can anybody clarify....Am I going to have to begin a whole new three year waiting period if a short sale takes place, even though the old mortgage was discharged as part of the chapter 7 proceedings?

 

Is this law firm/real estate agency taking me for a ride, after this bank did so?

 

I really can't take continuing to go to work any more when I've been doing it for so long for no personal benefit if this also appears to be more of the same in the future.

 

Can anybody advise?

Message 1 of 2
1 REPLY 1
StartingOver10
Moderator Emerita

Re: Ch 7 bankruptcy w/ mortgage discharge....then short sale or foreclose....3 year wait either way?

Your personal liability to repay the loan was removed when you were successfully discharged from Bk. However, there is still a mortgage lien on the property by the bank. In order to 'complete' the process, the mortgage lien must be removed. That is done with either 1) foreclosure, 2) Deed in Lieu, 3) Short Sale.  This is standard, it really is a two step process when you have filed Bk.

 

I don't know how long your lender takes to foreclose in Maryland.  Many of the lenders are dragging their feet on actually finishing the foreclosure. In my area of S Fl the average f/c is taking more than 2 years.  A short sale can be done in 60 to 120 days. Having said that, some lenders just aren't very cooperative with short sales, some are. IME the lenders now want more than market value for short sales (in my area).  This was not always the case.

 

The benefit of the short sale - the time frame to remove the lien is substantially reduced if the lender is cooperative.  

 

Your waiting period is 3 years from the date the deed transfers from you to the lender or to the new buyer in the case of a short sale for an FHA loan unless you can show extenuating circumstances or qualify for the FHA Back to Work programFor a conventional loan the waiting period is longer, up to 7 years from the date the deed transfers.

 

If you had already had the foreclosure first and then filed Bk, then the wait period would be 2 years from the date of discharge.

The wait period begins from the last derogatory date and the length of the waiting period depends upon which type of derog you have and what type of new mortgage you are going with: FHA, USDA, Conventional or VA. It also depends upon how much you put down on the new house.  

 

Message 2 of 2
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.