Bankruptcy

Credit events such as short sales, foreclosures, bankruptcies and deed-in-lieus present special challenges to former homeowners wanting to get back into homeownership after a home loss. While these former homeowners are generally in a better position financially after relieving themselves of an overleveraged home or excessive debt - there are usually some obstacles in the way of being able to purchase a home again, such as:

Credit score: All these events have some impact on the credit score. It will take some time of establishing good credit again to get yoru FICO scores back up to where you will considered for a new loan.

Down payment: Although there are a few programs that will loan at 100% of value, most lenders will want at least 3.5% of the…

Should I short sell or file bankruptcy?...I hear this one a lot. There is no right answer. A short sale and bankruptcy are solutions for two different problems, and can not replace each other. 

A short sale is a solution for when you owe more than your home is worth, lack the funds to cover the difference, but need to sell anyway. In a short sale your short sale professional negotiates debt forgiveness on the balance of the loan so that the house can sell. A short sale will do nothing to help you with your other debts.

A bankruptcy is a solution for when you have too much overall debt and can't keep up. A bankruptcy can discharge the mortgage along with your other debt, however - the house is still yours. Unless you want a foreclosure on top of…

Even after losing or short selling a home, most folks will eventually want to own another home. While re-establishing credit and meeting other lending guidelines will be necessary, there are minimum waiting periods for getting new loans after significant negative credit events. Below are the timelines for new loans for  (Fannie Mae and Freddie Mac) Conventional Conforming Mortgage Loans meeting FNMA and FHMLC  guidelines, (FHA) Federal Housing Administration Insured Loans, (VA) Veterans Administration Guaranteed Loan and  (USDA) United States Department of Agriculture Rural Development Loans. Please note that extenuating circumstances may have an impact on some of these timelines, and these basic guidelines do not serve as a substitute for a…

Many of my CT short sale clients plan to file bankruptcy or have been discharged from one. There seems to be significant confusion about what exactly happens to a house in bankruptcy and 90% of the time bankruptcy attorney's advice to upside down homeowners is "JUST LET THE HOME FORECLOSE"

While bankruptcy may alleviate your legal responsibility to the debt secured by the mortgage, it does nothing to the title of the home. Your lender does not "own" your home as a result of a bankruptcy and won't until they gain possession of it via a foreclosure or a deed in lieu. So until a foreclosure happens, YOU are still the legal owner of your property EVEN AFTER A BANKRUPTCY. If the home forecloses later - you still had a foreclosure happen to you, or if…

Fannie Mae Guidelines Update: No new mortgages for 7 YEARS after foreclosure

Fannie Mae has recently introduced new guidelines for mortgage underwriting, and is getting tougher on those who have experienced a prior foreclosure.

The time that must have elapsed after a foreclosure is up to 7 years from the previous 5. The changes highlight the importance of borrowers working with their servicers to avoid foreclosure and pursue other workout solutions, including short sales. 

Fannie Mae Waiting Period Requirements as of 10/1/2010

BANKRUPTCY Chapter 7 or 11: 4 years

BANKRUPTCY Chapter 13: 2 years from discharge date or 4 years from dismissal date

FORECLOSURE: 7 years

DEED IN LIEU OF FORECLOSURE, PREFORECLOSURE SALE, SHORT SALE:

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What happens to my house in bankruptcy?

I often hear folks touting bankruptcy as an answer to a foreclosure. This is simply not always accurate. Bankruptcy is a solution to debt issues. However, if you are hoping to save your home, filing bankruptcy will not in fact help you keep your home. A bankruptcy will only TEMPORARILY halt collection efforts from your lender, and will remove your personal responsibility to this debt. However you will inevitably have to repay the amounts owed, work out a repayment plan, modify the loan, or your home will end up in foreclosure anyway. Even once your responsibility to pay is eliminated, the lender can still collect their collateral - your home.

On the reverse side (and I actually hear more…