Jumped the gun with FHA mortgage application after foreclosure

[annanicole]

Hi all!

I have been reading messages on this forum and today, Christmas, I decided to join yall and share my story. I have 3 sons and my oldest asked me what I wanted for Christmas and he said wait I know, a house. Yup. A house is all I want. I lost my home to foreclosure back in January of 2009. The sale was In February of 2009. Back then I did have a loan I probably should have thought twice about before signing but my ex-husband and I were eager and concerned if we did not purchase in 2006 the prices would keep rising and we would never own. Fast forward, I am divorced now, ex left us shortly after we purchased home and I could not afford the $2400 a month on my own.

I have been working since then to get stable and have worked really hard on my credit. I got the idea in my head that maybe I should try to be a homeowner again. I have good income, credit has improved dramatically all scores over 640. SO in November 2011 I contacted a local bank and explained my financial history, my credit, and asked when the LO thought I should apply next year because all of my research told me I needed to wait 3 years. The LO felt I could apply now because she assured me they only need 2 years to past since foreclosure and since my 2nd loan was still showing on my credit as a charge off, 3 years since it was charged off.(had 80/20). I thought this was great and proceeded with application.

I got prequal'd but not pre-approved bc the banks policy was that they needed an actual property. So I was given the go ahead to start looking for a house. I immediately found a realtor and found a house that I loved within the same month. Beginning of Dec submitted all my docs and within a week they were submitted to a processor who got right on it. Everything was moving great.

I was asked for documentation on funds I will use for closing and I submitted the completed application for loan from my retirement and would provide proof of liquidation once the funds hit my bank account. Great. My file then went to UW. within 48 hours I was contacted by processor that underwriter needed me to clear 3 conditions. 1 was additional information on 2nd mortgage that was charged off with letter of explaination. second was a SSN appearing in my credit file they needed to know who it belonged too, and third was an old address showing as my current residence. So the second and third were pretty easy, SSN was my sons and old address was indeed my old address.

I had submitted a letter explaining that the 2nd mortgage was related to foreclosure. The processor kept asking for documentation showing that because they could not see looking at my CR that this loan was related to any foreclosure and they could not tell I had an 80/20 at the time. I located the foreclosure documents, and the original loans. This was still not enough because the original lender sold my loans to two different lenders so my second was not named in the foreclosure as a defendant but MERS was. I submitted another LOX stating that MERS was acting as nominee for successor of 20 loan and I was able to locate the letters of assignment.

I took a deep breath and thought, YES, I finally got them what they needed, the LO assured me that everything looked good and I just needed the right documentation for this second loan and then we would wait for short sale approval, get appraisal, and title work. The next day I got the email from my loan processor that after reviewing all of the information she received with LO and UW, they cannot continue with my loan because I do not meet FHA guidelines of 3 years since foreclosure. I was bummed for maybe a few seconds and said you know what, ok, I may not have it right now but my foreclosure was in January 2009 and the sale was February 2009 so I should meet the 3 years within the next 60 days.

I did not feel like my LO let me down or anything like that. Maybe she thought I could meet extenuating circumstances. But I immediately called my realtor and explained what happened(she was copied anyway by LO). I explained to her that I was not for certain what the date is but I knew it should be coming up. She reminded me that we have not even heard back from the seller of the short sale or her agent so she does not see this as a problem and bellieves even if I do not meet the requirements until Feb I should be ok. I then contacted my loan officer and told her we may have time on our side since the short sale has yet to be approved and I would meet the requirements within 60 days depending on what date the 3 years is calculated from.

I asked if there is anyway they could just hold the loan or I can just reapply. She said she was actual just on the phone with the realtor and we are all on the same page. She did not think that would be a problem and they could just move my information to a new loan and I could update the information like most recent paystubs, etc. I then contacted the loan processor and explained to her that I want them to hold the loan or allow me to just reapply when I meet the 3 years. She emailed me back stating they will hold on to the documentation I provided and include with new application.

I said to myself this is just a delay and not a denial. I am not sure if they will go through the formality of sending a denial letter. Does anyone have experience with this? I am hoping the processor will just hold the file or better yet I was hoping for an approval with the 3 years being the only condition. I did make it passed automated underwriting as an approval. I did have to write a LOX on the foreclosure. I think maybe my LO was going by the old rules or we miscommunicated about the timeline of the foreclosure because the second loan was charged off 3 months after the first lien holder filed the Lis Pendens which was in jan 08...or like I said maybe thought I was a candidate for extenuating circumstances...

I am also hoping that maybe the lender can hold my file based on the fact that they have yet to even get an appraisal or title work because the short sale was not approved yet. What do you think? I will keep the forum updated as I progress through this. I am so determined to get a home for me and my boys. So determined to just do this again the right way on my own. Merry Christmas!

---

Hello annanicole and welcome to myFICO.

I took the liberty of editing your post into smaller paragraphs. A single large block of words is very hard to read and some folks will go right past a post like that and this might cost you some very good advice or suggestions. I did not change any of the content.

MarineVietVet, myFICO moderator

[IOBA]

I would keep the spending to the  minimum and continue regular savings.

As the calendar moves forward, like a month ends, copy the paystubs and the bank statements.   Maybe submit them to the LO to update  your file.  Kinda keeps things in the forefront.

I hope that things continue to move forward for you.  

[JM-AM]

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@annanicole wrote:

Hi all!

I have been reading messages on this forum and today, Christmas, I decided to join yall and share my story. I have 3 sons and my oldest asked me what I wanted for Christmas and he said wait I know, a house. Yup. A house is all I want. I lost my home to foreclosure back in January of 2009. The sale was In February of 2009. Back then I did have a loan I probably should have thought twice about before signing but my ex-husband and I were eager and concerned if we did not purchase in 2006 the prices would keep rising and we would never own. Fast forward, I am divorced now, ex left us shortly after we purchased home and I could not afford the $2400 a month on my own.

I have been working since then to get stable and have worked really hard on my credit. I got the idea in my head that maybe I should try to be a homeowner again. I have good income, credit has improved dramatically all scores over 640. SO in November 2011 I contacted a local bank and explained my financial history, my credit, and asked when the LO thought I should apply next year because all of my research told me I needed to wait 3 years. The LO felt I could apply now because she assured me they only need 2 years to past since foreclosure and since my 2nd loan was still showing on my credit as a charge off, 3 years since it was charged off.(had 80/20). I thought this was great and proceeded with application.

I got prequal'd but not pre-approved bc the banks policy was that they needed an actual property. So I was given the go ahead to start looking for a house. I immediately found a realtor and found a house that I loved within the same month. Beginning of Dec submitted all my docs and within a week they were submitted to a processor who got right on it. Everything was moving great.

I was asked for documentation on funds I will use for closing and I submitted the completed application for loan from my retirement and would provide proof of liquidation once the funds hit my bank account. Great. My file then went to UW. within 48 hours I was contacted by processor that underwriter needed me to clear 3 conditions. 1 was additional information on 2nd mortgage that was charged off with letter of explaination. second was a SSN appearing in my credit file they needed to know who it belonged too, and third was an old address showing as my current residence. So the second and third were pretty easy, SSN was my sons and old address was indeed my old address.

I had submitted a letter explaining that the 2nd mortgage was related to foreclosure. The processor kept asking for documentation showing that because they could not see looking at my CR that this loan was related to any foreclosure and they could not tell I had an 80/20 at the time. I located the foreclosure documents, and the original loans. This was still not enough because the original lender sold my loans to two different lenders so my second was not named in the foreclosure as a defendant but MERS was. I submitted another LOX stating that MERS was acting as nominee for successor of 20 loan and I was able to locate the letters of assignment.

I took a deep breath and thought, YES, I finally got them what they needed, the LO assured me that everything looked good and I just needed the right documentation for this second loan and then we would wait for short sale approval, get appraisal, and title work. The next day I got the email from my loan processor that after reviewing all of the information she received with LO and UW, they cannot continue with my loan because I do not meet FHA guidelines of 3 years since foreclosure. I was bummed for maybe a few seconds and said you know what, ok, I may not have it right now but my foreclosure was in January 2009 and the sale was February 2009 so I should meet the 3 years within the next 60 days.

I did not feel like my LO let me down or anything like that. Maybe she thought I could meet extenuating circumstances. But I immediately called my realtor and explained what happened(she was copied anyway by LO). I explained to her that I was not for certain what the date is but I knew it should be coming up. She reminded me that we have not even heard back from the seller of the short sale or her agent so she does not see this as a problem and bellieves even if I do not meet the requirements until Feb I should be ok. I then contacted my loan officer and told her we may have time on our side since the short sale has yet to be approved and I would meet the requirements within 60 days depending on what date the 3 years is calculated from.

I asked if there is anyway they could just hold the loan or I can just reapply. She said she was actual just on the phone with the realtor and we are all on the same page. She did not think that would be a problem and they could just move my information to a new loan and I could update the information like most recent paystubs, etc. I then contacted the loan processor and explained to her that I want them to hold the loan or allow me to just reapply when I meet the 3 years. She emailed me back stating they will hold on to the documentation I provided and include with new application.

I said to myself this is just a delay and not a denial. I am not sure if they will go through the formality of sending a denial letter. Does anyone have experience with this? I am hoping the processor will just hold the file or better yet I was hoping for an approval with the 3 years being the only condition. I did make it passed automated underwriting as an approval. I did have to write a LOX on the foreclosure. I think maybe my LO was going by the old rules or we miscommunicated about the timeline of the foreclosure because the second loan was charged off 3 months after the first lien holder filed the Lis Pendens which was in jan 08...or like I said maybe thought I was a candidate for extenuating circumstances...

I am also hoping that maybe the lender can hold my file based on the fact that they have yet to even get an appraisal or title work because the short sale was not approved yet. What do you think? I will keep the forum updated as I progress through this. I am so determined to get a home for me and my boys. So determined to just do this again the right way on my own. Merry Christmas!

---

Hello annanicole and welcome to myFICO.

I took the liberty of editing your post into smaller paragraphs. A single large block of words is very hard to read and some folks will go right past a post like that and this might cost you some very good advice or suggestions. I did not change any of the content.

MarineVietVet, myFICO moderator

---

If all else stays the same or improves (gross income, credit scores, DTI, as a few examples) you loan should go through with no other hiccups. Credit scores may have had a ding for the INQ but just make sure it wasn't enough to disqualify you for a minimum qualifying score.

It is still possible to receieve a denial letter from the banking institution.

More then likely they will hold onto your file for future business, but the information would have to be updated. You usually go through the entire process all over once you have exceeded 30 days from original application and or a denial. 

[annanicole]

Thanks IOBA!! Thanks JM-AM!

Update, SO my bank is holding my loan application. I did not get a denial letter or anything like that. We will resubmit application once I pass the 3 years post foreclosure Feb 12 I believe.

Regarding the Short Sale I made an offer of: Listing price was $147K. I offer $145K. This was 11/24/11. On 01/12, I heard back from the negotiator(a third party) that sellers bank countered with $170K. Wow $25K was a bit much so I decided to end that pursuit. Made decision to not go short sale unless bank already approved. I found some other properties and it came down to 2 properties..get a pool but lose the schools I wanted the kids to attend(this property was exactly the same as short sale I walked from) or no pool, much bigger house, around the corner from short sale I walked away from and get the schools I wanted. I went for the later. Oh prices went up so we submitted an offer at listing for $157K....

I did consider taking that $157K and countering the short sale bank but...did not want to risk another counter offer.

Question: If the bank has already approved the short sale list price, they cannot come back with a higher price? How long should this process take?

Thanks!!

[IOBA]

The banks can do whatever they want in a short sale.

The bank in our case did a second BPO.  They did one when the house was first approved for a short sale.   Then they did another one a few weeks ago, before assigning the case to a negotiator.   

I have no clue what the BPO came in at.   Probably never will since they hold that information sacred.

My neighbor had their house listed as a bank approved short sale.   The first deal fell through - I think the neighbors cancelled it or did something to screw it up for the buyers.    So the house went back on the market, listed as an apparoved short sale for 235k.   The lender had already said they would accept nothing less than that amount for the house.   Another buyer came in and the neighbors screwed them over too.   I won't say how, but they did.   

Had the neighbors not screwed everyone invovled,  then the buyers could have had a quick close on the short sale becuase the bank had already decided that the price was x amount, no money back to the buyer.   The bank was looking for a 30 day or less close.

[annanicole]

Ok myfico folks. My latest update: Last week the realtor for the new house I put in an offer for contacted my realtor requesting proof of funds to close, bank statement specifically showing the funds. I thought this was strange and was a little uncomfortable with it but went ahead and submitted. The listing agent thought we would have heard something by weeks end but no news.

This turns out to be good news for me. Why? Last week I received two alerts from my credit score monitoring. Two new collections accounts just popped up from out of no where. One for $58 bucks from a water bill from 2007 related to the house I lost to foreclosure...go figure. The other for $2K also from 2007 related to an apartment I had that my sister lived in. She fell one month behind in rent, they sent me an eviction, I paid the rent, the late fees, and the attorney fees at that point in June 2007. Thank GOD I kept the receipt. I immediately began the dispute process.

Out of concern I contacted my loan officer to let her know what was going on and requested she pull my credit for the new application(remember I had to wait until I hit 3 years after foreclosure to apply). She did so and informed me I no longer had the score needed to get an FHA loan My Experian alone dropped significantly from 644 in Nov 2011 to 545 Jan 2012. HOW????? I contacted Experian and that new collections was the only thing they saw that changed. How is it possible one collections account can do so much damage? So my middle score is now 605. Not too happy but not given up. And I told my loan officer to not give up on me.

I faxed my receipts to all three bureaus, I disputed all that I can on negative reporting to help. Some gave me the time of day, others said Sorry there is nothing we can do. I made a significant payment on my credit card to bring it down to 9% of the available credit. I am hoping that these steps will give my score the boost it needs in time when the short sale gets approved.

[Booner72]

OH BUMMER.

have you OPTED OUT??????

If I were you, I would get on the horn to that CA and submit the receipts to THEM that it was all paid.  Did it go to collections BEFORE you paid it?  Or is this a new collection based on their premise that it was never paid?  Directly disputing may get you better and faster results.  The CRA's  always screw everything up anyway. (hopefully they don't here).

WTG hanging in here and making this happen!!!

Yes one new collection can hit that hard btw.

[annanicole]

Thanks for the info Booner72! The $58 collections. I disputed it the same day it posted as not belonging to me because I had no idea what it was. They verified within two days so it remained. I then contacted the original creditor thinking someone was using my info because the date opened was 11/11 and I do not have a bill with that company. Thats when I found out it was from the house back in 2007. I never was contacted by the CA or Original creditor requesting payment. Not fair that they can just post without attempting to collect first So I paid it(did not request something in writing for them to delete). I took it at face value that the CA rep said they would delete once paid during next reporting to the bureaus. I was told if I needed it deleted sooner to go ahead and dispute again and they will delete. Well guess what..I followed up with credit bureaus and they said it remains, the CA made no mention that I paid. So I disputed again and faxed my receipt. Since then I have not been able to get ahold of a live person at the CA so I will keep trying. The other new collections item concerning the apartment rental for $2k I did go by the leasing office and presented my receipt...the CA on my report is not the CA they work with, they have no record of me having an apartment there because they changed mgt 3 or 4 times since 2007. I will keep calling the 3 bureaus to see if I can have better luck.

I learned about opting out from the forums and did so Christmas day as a matter of fact...It seems like an APB was put out saying she's trying to own a home lets get her

My CC that I just made a payment on updates this week maybe by the 8th. My line is $4500, my balance is $2434 so I paid $2k. The Fico simulator showed the greatest potential for a good boost if I left a balance versus bringing it to $0... The transuion is the middle score and when I ordered it here, the score was 649. If I paid it down to $0 the potential was 649-669, If I left no more than $500 it ranged from 669-699 as potential boost. I realize that this is not the same score that my lender just pulled on Monday(605 TU) but I feel if I get another report from this site and it shows a good boost, then the one the lenders use should also show a boost...My LO is still preparing my file for FHA (she emailed me to confirm house address yesterday for app) so its good to know she is believing I can get this done as well.

[IOBA]

annanicole - hang in there.  

As for the water bill - they usually go after the legal owner of the house.   Soo...if it was foreclosed on, it sounds like the bank never put the utilities in their name?   But you said you paid it.  So keep following up to get it deleted.   

When one set of housemates moved out, they didn't pay their final bill, although they had told the water company to FOAD.   The new housemates put the bill in their name and THEY received a lien notice and garbage becuase the previous people didn't pay their last bill.   They were stuck paying it or risk legal action.   It was so wrong.   But the water companies don't care - they go after the property - not the people.   And that would be a sad thing to loose your house to the water company.  Kinda gives a whole new meaning to the house being under water.  

[annanicole]

Ok. So here is where I am. Both collections accounts that appeared last month were deleted and removed so they do not appear on any of the reports. I also had cap one fix how experian was reporting my CC. I had to get a new account since my original one was compromised and Experian was showing that I closed it. Which is technically true but we just changed the account number. And my student loans that were repporting negatively from Citibank from years ago were updated to remove the negative info.(only showed negative on transunion the mid score that fell below 620)

So I just received the last dispute letter from Transunion yesterday via email. On Friday 02/24/12 I received the Great news the short sale I was pursuing was approved. Received the letter from my realtor. That night my loan was staged to underwriting. Let me back up on the loan, remember the credit issues, well the second week of Feb My LO ran me through automated underwriter and I was approved but with 5% down. Ok so loan went to underwriting on Friday.

I asked how long the LO thought it would be before I know if I am approved or denied(being very humble and greatful do not want to jinx myself). She said we may get the committment to lend by 02/29 or 03/01. She was more assured than how I am relaying it but just trying to stay cool and not pop the champagne prematurely. I think they have to process fast because my contract stated a close by 03/06. The short sale letter states we have to close by 04/02.

But I am just excited. I followed all the advice from this site and just have a good feeling. So I am grateful to you all and this site. BTW I did all of that work to delete those new collections for a reason. Totally going after the 3.5% downpayment. I emailed my LO after I received the notice from transunion. I ordered the score from myfico and it is up to 677 from 649 on 02/01 but we know that is probably not the score for the mortgage. On 01/31 TU from lender was 605...I am guessing I should be between 633 and 661 just playing around with the difference in what the LO told me the score was and what I saw when I ordered the last time.

 At this time estimated funds to close is $15K. I am holding on to my money for dear life but it would be nice if the funds came in less..the house has no fridge