New Mortgage after Home Equity settlement

[Anonymous]

My townhouse was underwater around $40,000, Last year I did a strategic default, stopped paying the mortgage and home equity, after 3 months I got an offer to settle the home equity. I paid them $30,000 cash to settle around $70,000. I got a no deficiency judgment letter from the bank, confirmed with the county clerk it was filed and it was taken off the lien of the property. After that, I got current with the main mortgage. Currently selling my townhouse, hopefully getting back the $30,000 I paid the bank. But besides that, my question is how can I purchase a new home and get a new mortgage, I settled with that bank for the home equity almost one year ago. My mother passed away recently and left me some money, I have $150K saved and a credit score around 700, will i have a hard time getting a mortgage? I read that FHA and fannie mae mortgages have a 3 or 4 years waiting period for equity charge offs. Any info will help, thank you

[Anonymous]

Anything ? Anyone, really need help with this before wating my time applying for a mortgage with a bank

[pipeguy]

With $150k down (less closing, etc) depending on the price of the property you should be able to get a mortgage even with a recent foreclosure - you might have to use a credit union or other smaller bank that actually holds the paper rather than sells the loan but large cash down payments help open doors assuming you otherwise have the income to support the loan. I'm surprised that your scores are 700+ given a recent 90-120 day late on your mortgage and basically a foreclosure settlement - those tend to haunt you for a while and seriously ding scores for 2-4 years.

One thing you need to consider is if you are going to get a 1099-C for the $40k "write off" if so that is taxable income (might be $40k plus fees and past interest so it might be higher). Up until the end of 2015 The Mortgage Forgiveness Debt Relief Act of 2007 - extended several times through the  of 2015  - would have excluded 1099-C income - but no more.

I'm not going to judge your tactics for getting out from being underwater, but I suspect you'll pay a price as far as availability and APR for a new loan and probably the 1099-C tax obligation.  

[Anonymous]

My credit score did take a hit last year, went down to 580, but after settling and getting current it's back to 700. I didn't foreclose on the property, I just settled the home equity since the holder of the home equity thought I would foreclose, made the deal, then I got current with the main mortgage. I don't have to pay taxes on the forgiven amount since I lived in the house within the past 5 years and the original home equity loan was used to technically upgrade the house.I double checked with a tax guy too. thanks for the info, hopefully I don't have a hard time, with the saved money I also make around $125k a year so job income won't be a problem

[krielly]

I think the problem you will run into is that while you may not have technically foreclosed, a 90 day late on a mortgage is treated the same as a foreclosure for the purposes of a waiting period to obtain a new mortgage. I am 99.9% sure I read this on here recently, but I am sure others will chime in........