FHA and 2 year period

[newchance15]

is the 2 year waiting period from the date you file or the date you are discharged?

[justbroke]

I believe that it is 2 years from date of discharge.

[newchance15]

Thanks. that's what I figured.

[sophieanne]

Hi..just a backup note..i spoke too FHA about 1 month ago and it's DEFINATELY 2 years from the discharge date.

[magic13]

I think you are confusing Fannie Mae and FHA. The two year wait after chapter 13 discharge is for a Fannie Mae loan while a FHA loan is one year after filing with permission from the trustee if you are till active. If you are discharged from a 13 there is no wait period , you just have to find a broker who understands manual underwriting

[sophieanne]

magic13 - Hi, i called Fannie Mae who said exactly what you said but had me call FHA. They said the same thing, it's 2 years after discharge. They said you can try calling around (which I did) but the 2 year ruling seems to be the rule. Manual underwriting does not seem to be available with most banks, credit unions, etc. If you know someone, i'ld love to know. ;)

[justbroke]

I think you are confusing Fannie Mae and FHA. The two year wait after chapter 13 discharge is for a Fannie Mae loan while a FHA loan is one year after filing with permission from the trustee if you are till active. If you are discharged from a 13 there is no wait period , you just have to find a broker who understands manual underwriting

I know, this is getting confusing for sure.

There was a program, which ended September 30, 2016, called the FHA "Back to Work - Extenuating Circumstances" program. Under that program, an economic event could waive the waiting period. That program did end and the current FHA guidelines, 4155.1 4.C.2.h, require that you're either in an active Chapter 13, or the case has been discharged. I'm pretty sure that the sunset of the Back to Work program ended the wavier on 4155.1 4.C.2.h as it relates to Chapter 13s.

Even if it were still active, and as magic13 writes, overlays applied by most lenders, would have made it difficult for some discharged Chapter 13 debtors to get the waiting period, of two (2) years, waived.

I suggest that you shop the loan around but I would not expect any FHA lender to be able to circumvent the rule (4155.1 4.C.2.h).

I apologize for creating any more confusion, but things have changed after the sunset of the Back to Work program.

References:

• HUD Manual Section 4155.1 4.C.2.h Chapter 13 Bankruptcy
• HUD Back to Work - Extenuating Circumstances
  Amends HUD Handbook 4155.1, Chapter 4, Section C to add an Economic Event to the list of examples of extenuating circumstances and instruct lenders to use the guidance for Back to Work – Extenuating Circumstance established in this ML as Chapter 6 Section G, to underwrite an applicant with an Economic Event. Ended September 30, 2016
• HUD Letter 2013-26 is now in the section of the HUD documentation as "superseded in full". This indicates that the program is no longer active

Of course, I could be completely wrong, but that's how it was explained to me and how I understand the temporary program.

[magic13]

Again FHA has no wait period after a discharged chapter 13 if you use a direct lender to underwrite.. Think about if why would they let you get a mortgage while in a active chapter 13 while you are using your income to pay the court and then deny you when you no longer have that burden. Lenders like Quicken Loans(sister) require one year because they loan to package and sell and are concerned about the overlays. Find a lender who plans to keep your mortgage.and as long as you meet all other requirements they will do manual underwriting. Go to zillow and query this question and many lenders will reply and feel free to call them. The extenuating circumstances were more or less referring to Chapter 7 discharges and foreclosures that have the stated FHA requirements of two years after discharged

[justbroke]

magic13 I agree 100% that requiring two (2) years after a discharged Chapter 13 is strange, since they allow you obtain an FHA mortgage in an active (one year old) Chapter 13. I also don't disagree that any lender can underwrite any loan they want to approve, if they keep it in their portfolio and don't intend to ever package and/or sell it on the secondary market, such as FHA, Fannie Mae, and Freddie Mac.

As I suggested, the original poster may be able to shop the loan but they are already finding roadblocks from FHA lenders. sophieanne also chimed in and mentioned her recent issues with this process and contacting FHA directly. If you have a specific source, which doesn't require the original poster to do a bunch of research, please let us know. We would appreciate it because, after the Back to Work program ended, no one that I know has been able to obtain an FHA loan (not an FHA refinance) with this specific fact pattern.

Send me a PM if you have one or more actual lenders that provide FHA loans for discharged Chapter 13s with less than one year of seasoning. I'll find a way to let others know. We will all be happy!

(The Back to Work program ended recently, so we probably don't have a lot of data. We have had various debtors attempt an FHA loan after the program ended and with poor results.)

[justbroke]

It looks like Flying2BK has found a lender that approved them under FHA with one year after discharge. I would send them a private message so see what lender they used and to see if you can do the same. Flying2BK mentions that they had a FICO score of 679 and re-established credit.

If this loan actually closes, this will be the first one we've seen here since the old Back2Work program ended. I don't know if Flying2BK qualified under the (traditional) extenuating circumstances exception.

[kberly69]

I'm curious if anyone has been able to qualify before the two year period, after Back to Work ended, and since this post a couple months ago? I just PMed Flying2BK to find out more. I waited a while to file for Chapter 7, so I am past the seasoning point for my foreclosure and my mortgage scores are 695, 695, and 700. I'm only a little over 4 months out of discharge, but I am trying to get my ducks in a row for home buying, hopefully sooner than later!

[sophieanne]

UPDATE...after writing everything i wrote above i ran into a mortgage broker whose company does manual underwriting After verifying with their underwriter, I WAS able to refiance to an
FHA mortgage 5 months after discharge. Lots of paperwork but it worked out. We closed at the end of January and are now in a 15 year - 3.5% loan. If it was'f for the continued conversation on this site, I would've given up and waited the 2 years.

[kberly69]

I just send you a PM, sophieanne

[bobcat216]

So if you go FHA do you have to pay PMI? That is the part I struggle with. I can sell my current house and put down 20% but only being 6 months post BK the only option is FHA. But having to pay PMI added onto a mortgage doesn't seem like a prudent move when I could wait another 18 months and pay no PMI and not have to go FHA.

Thoughts?

[justbroke]

bobcat, that's a good question. I believe it goes to the heart of whether you want to wait. You can go FHA now and refinance into another product that does not require PMI (or PMI when under an 80% loan-to-value "LTV").

The FHA route is really for those who have a low score or other issues (recent bankruptcy, foreclosure, etc). If your scores are going to be in the high 600s within 24 months of a Chapter 7 discharge (which is not unheard of to be in the low 700s), then a conventional mortgage from the GSEs make sense (Fannie, Freddie).