Why is a 120 day late considered the same as a Foreclosure even if not foreclosed

[pmac2014]

Can someone please explain to me why a 120 late is  considered the same as a foreclosure? So that means that the waiting periods are the same to purchase a new home. And does that apply even if we were able to sell our home in a tradional sale with out Wells Fargo foreclosing?  Does it mean anything that we were able to pay the loan in full with out definciencies? Our goal was to pay back  what we owed and not have a foreclosure on our record- only to find out that a 120 late is treated as a foreclosure.  I guess I just need some clarification on this. Just frustrated.

Thanks

[Peter1142]

Who said that? I'm not sure it is true... but no expert on forclosure etc rules.

[StartingOver10]

I don't know the reason why. I did find a couple of links for you though to review: http://files.consumerfinance.gov/f/201312_cfpb_foreclosure-avoidance-procedures.pdf

This is a Fannie Mae link with very detailed underwriting information on pre-foreclosures and other credit related items. Take a look at the entire link, but pay special attention to the Delinquent Mortgage section about half way down the page:

https://www.fanniemae.com/content/guide/selling/b3/5.3/09.html

[StartingOver10]

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@Peter1142 wrote:

Who said that? I'm not sure it is true... but no expert on forclosure etc rules.

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^^^It's true. DallasLoanGuy brought it up in response to the OPs question in another thread.

[Peter1142]

Interesting... I agree with TC it doesn't really make any sense.

I just browsed through that link to the DU underwriting criteria and see nothing about the 120 day late rules being the same as foreclosure... I do see that a mortgage charge-off has a waiting period, but it is less than foreclosure.

[pmac2014]

I've read several posts here stating that both 120 day late and FC are treated the same.  I think it's insane that a paid loan (even if the FC process was started) is treated the same as a complete FC where the bank takes a loss.  It's just wrong. Just my opinion.

[pmac2014]

Thanks for the links StartingOver10.  I'm going to read them now!  I have an appointment with a lender this Friday and want to go with all the information I can get.

[StartingOver10]

pmac, here is a better link for waiting periods on new mortgages with derogatory credit. I hope this helps:

https://www.fanniemae.com/content/guide/selling/b3/5.3/07.html

I believe that the OPs situation would be defined as a "Pre-foreclosure Sale". 

It is possible the OP may fit into extenuating circumstances, I don't know.

[Peter1142]

It says pre-forclosure sale is the same as a short sale, settling for less than the total due.

As I said I am no expert on these rules, just commenting on what I am reading...