FHA loan after bankruptcy with extenuating circumstances

[WeatherNLU]

I am only a little over a year post BK, but can't seem to find anyone who even does manual underwriting.  We have a very extenuating circumstance (Hurricane Katrina) and would at least like to have someone look at us and see.  Scores are already back in the mid to upper 600's, we have stable jobs with long histories and we have low DTI ratios.  The kicker is we already have the home, we re-affirmed it through the BK and would just being do a re-fi.  I wouldn't expect to get a new house at this point, but I am simply looking to re-fi the one I already have and have never been late on.

Can some of you that have had success share your broker or lenders information.  I would love to contact one of them.

Thanks!

[Split off to form a new thread; title edited to reflect the details of the post - Lel]

[chasmith]

To be clear, you are 1 year post BK7 discharge?  This isn't really manual underwriting, it is an override for special circumstances. 

What state are you in, I may have a resource for you.

[ShanetheMortgageMan]

Going through a natural disaster definitely is an extenuating circumstance... however Katrina was back in 2005.  There can always be lingering effects, but to make a case 5 years afterwards is going to be tough.  

Was your BK a Ch 13 or Ch 7?  When did you file?  What was the cause of the BK?

[WeatherNLU]

Thanks guys.....I am in Louisiana.

Yes, Katrina was in late 2005.  However, it was not until mid to late 2006 that any of us started to get the funds we needed to try to rebuild.  It was June 2006 for me.  What did us in was right before Katrina we put $30,000 down to build a new house.  They were doing prep work to pour the slab the Friday before Katrina hit.  When the mess cleared, we had a lot that we couldn't build a house on, our current home flooded with 7 feet of water and a lost $30,000 down payment.  We sold everything we had to get that $30,000 because we wanted that house so badly.  Anyway, fast forward to starting to put the home back together and replacing everything we owned with the little money we got.  Homeowners denied us, even though the levee failure is what did us in (negligence) not the rising water.  We never flood if the levees didn't fail.  As we got further and further into the process we started using credit cards and other loans to make up the difference.  By the time we got into the house in 2008 we were so far behind on bills we couldn't breathe.  I managed to keep things afloat by robbing peter to pay paul until 2009 and until there was no one left to rob. 

Right now we pay $1,425 a month for the house on a construction loan at 7%.  That's what we ended up with when the smoke cleared.  We have no problem with that.  Insurance and taxes add about $400 a month, but I pay those on my own.....they are not in the loan.  I just know that if I could get an FHA loan (which is the only thing I could get anyway) that it would probably lower the payment a couple hundred dollars a month.  We are all cash now, we don't do credit cards anymore.  We have no credit card debt, just a car and some school loans which are deferred.  Bills are no more than 40% of our gross including the mortgage and it's probably actually lower than that, I haven't calculated it lately.  Not to mention I am getting a $10K raise in February. 

Anyway, enough rambling.  We learned our lesson and we now have more insurance than we know what to do with as well as like I mentioned no credit cards.....ever.  Credit score was 652 when I did it the other day here on myFICO on EQF.  If either one of you guys could help me or at least point me in the right direction I would appreciate it.  I just want a chance, I can handle rejection if they say no!

All of this said, I shouldn't have a problem at the 2 year mark, right? That would be August 2011 from filing and November 2011 from discharge.

[WeatherNLU]

Shane....CH7.  I think I forgot to answer that one.

[ShanetheMortgageMan]

Wow, what an ordeal.  Glad you are back on your feet.  As long as you could document the $30k you put down, the delay in assistance (even though this was a well known event underwriters will still need documentation), homeowners insurance claim denial info, as well as provide an explanation regarding all of it... then I think most underwriters would agree that was extenuating circumstances.

While being conservative with credit cards may sound good in theory, after a BK lenders want to see that you have obtained new credit and have been responsible with it.  3 forms of credit, at 12 months each, is standard for proving you've re-established credit after a BK.   It sounds like you have at least 1 traditional trade line of 12 months since the BK discharge, and that would be your mortgage.  Have you had the car loan for 12 months as well?   Other than the student loans (which look great on credit, but an underwriter knows you don't make payments on deferred loans) are there any other trade lines that appear on your credit report?  If not, then the 3rd trade line would have to be a form of non-traditional credit, such as utilities, insurance (non payroll deducted), cell phone, etc.  I have a feeling you've had at least 1 of those for 12 months.

With FHA you have to pay taxes & insurance with your payment, so that may actually increase what you pay on a monthly basis but then you wouldn't have to budget separately for them.

Crazy that you haven't found anyone in New Orleans that would manually underwrite, particularly since a good portion of the city would be ripe for manually underwriting to extenuating circumstances guidelines.   And yes, worst case is you should just have to wait until the 2-year anniversary of the discharge.

[WeatherNLU]

Thanks Shane.....yeah it was quite a horrible time.  It's funny though, people ask me how I could come back here and those people obviously never lost their home before.  I love this city and when you lose something, I think it's second nature to do everything you can to get it back, but maybe that's just me!

I could prove most of it, I was able to save copies of documents showing the house we were building and the forms showing the down payment and I have most of the documents from when we got the money to start rebuilding.  The explanation letter would have to tie it all together because just getting money didn't mean anything, you still had to find stand up people to come do work on your home without ripping you off or just not showing up.

Many people have told me that, and I was considering getting a small credit card but I am just so leery of them.  They really treated us like garbage when the chips were on the table and I just don't want to go there again.  I have my mortgage, the car loan which is about 18 months old (we bought one just prior to BK because we had to have something) and the school loans.  I think those are the only things left on the credit report.  I have many other things like gas, energy, cell phone, auto insurance....so on and so forth that I pay monthly.

I guess part of my problem is not knowing where to look but I have searched out FHA mortgage brokers and no one wants to fool with it.  I don't know if I am not looking for the right people or what.  I think I may just hold my nose and continue to make sure everything looks wonderful for August 2011 when I should be able to start going through the regular process.  You obviously don't do Louisiana, huh?  Do you think rates will move much in 2011, I am thinking not but I would hate to miss these rates.  Even FHA rates are outstanding!

Thanks again for your help!

[ShanetheMortgageMan]

You don't necessarily have to seek out a mortgage broker in order to get your loan reviewed by manual underwriting, many mortgage lenders still do manual underwriting on FHA mortgages still (which is where a mortgage broker would be taking your loan to) so it may just be the mortgage brokers you've been speaking to aren't approved with any lenders who are doing manual underwrites.  We still do them, but like I said the file has to be well documented.

As far as interest rates, since they are just so low right now I can't see them getting much lower, but I also said that before and they still fell more than .25%.  As long as our economy isn't in full on recovery mode I think we'll see rates hang out no higher than in the 5's.

[chasmith]

I juste went to a NACA homebuying seminar in Baltimore.  You may very well meet their requirements, they aren't score-based but look at a lot of things that you've documented.  They do prefer to see two TLs with 12 months successful payment (e.g. credit cards) but your mortgage and car loan may satisfy that.

The finance 100%, no closing costs, 1% below market rates.  It's a lot of work to go through their process but might be worth looking in to. 

[Anonymous]

FYI ... it does seem to depend on how the FHA lenders interpret the 3 year rule and which dates to use. I got my Chpt 7 BK discharged in 03/2008 and included in it was my previous home which wasn't foreclosed on until 06/2011 (sheriff sale date). I finally found a lender that is able to consider the 3 years from the discharged date (since the property was included in the BK). Here's link to his related article/site:

[Link removed-Marinevietvet, myFICO moderator]

Hope this helps out anyone with a similar situation.