Dive in the Water's Fine
Fannie Mae is tightening up on foreclosure and short sale
rules.
Worsening? Yes
Fannie Mae announced changes to seasoning requirements for major derogatory credit events.
•
Effective immediately - If a mortgage debt was discharged through bankruptcy, borrower is held to the bankruptcy seasoning
requirement and not a foreclosure seasoning requirement. The lender must
obtain appropriate documentation to verify that the mortgage obligation was
discharged in the bankruptcy. FYI - Chapter 7 bankruptcy seasoning
without extenuating circumstance is 4 years. This is an improvement to
the previous 7 year wait period for a foreclosure within a bankruptcy.
EXTENUATING CIRCUMSTANCES IS HARD TO PROOVE
Docket summary (they will check what you wrote off) , proof of job loss, death certificate, proof of decline in value... about 40 pieces of paper
•
Effective with applications dated on or after August 16, 2014 - The
seasoning for a short sale without extenuating circumstance is 4 years. This
has been worsened from what was a 2 year wait period for loans with LTVs at or
below 80%, is no change for 80.1-90% LTV, and improves the waiting period for
90.1-95% LTV.
•
Effective with applications dated on or after August 16, 2014 - A charged-off
mortgage account occurs when a creditor has determined that there is little (or
no) likelihood that the mortgage debt will be collected. A charge-off is
typically reported after an account reaches a certain delinquency status, and
is identified on the credit report with a manner of payment (MOP) code of
“9.” Fannie will require a 4 year seasoning for charged-off mortgage
accounts. This is new Fannie policy.
|
Derogatory
Event
|
Waiting
Period Requirements
|
Waiting
Period with Extenuating Circumstances
Extenuating circumstances are nonrecurring events that
are beyond the borrower’s control that result in a sudden, significant, and
prolonged reduction in income or a catastrophic increase in financial
obligations. These circumstances must be documented within the loan
file.
|
|
Bankruptcy — Chapter
7 or 11
|
4
years
|
2
years
|
|
Bankruptcy — Chapter
13
|
·
2
years from discharge date (payments made as agreed)
·
4
years from dismissal
date (noncompliance with BK repayment plan)
|
·
2
years from discharge date
·
2
years from dismissal
date
|
|
Multiple
Bankruptcy Filings
|
5
years if more than one filing within the past 7 years
|
3
years from the most recent discharge or
dismissal date
|
|
7
years
|
3
years
Additional
requirements after 3 years up to 7 years:
·
Purchase,
principal residence
·
Limited
cash-out refinance, all occupancy types
|
|
|
Deed-in-Lieu
of Foreclosure, Preforeclosure Sale, or Charge-Off of Mortgage Account
|
4
years
|
2
years
|
1 When
both a bankruptcy and foreclosure are disclosed on the loan application, or
when both appear on the credit report, the lender may apply the bankruptcy
waiting period if the lender obtains the appropriate documentation to verify
that the mortgage loan in question was discharged in the bankruptcy. Otherwise,
the greater of the applicable bankruptcy or foreclosure waiting period must be
applied.
2 References
to LTV ratios include LTV, CLTV, and HCLTV ratios. The maximum LTV ratios
permitted are the lesser of the LTV ratios in this table or the maximum LTV
ratios for the transaction per the Eligibility Matrix.
