House included in BK still considered foreclosed?

[Ugh07]

But yes the lender will go by the date of deed foreclosure.

Any recommendations for someone who lends in NY?

As afterbkloan said there is probably no help here for you. Its shitty. A quirk in the rules that never accounted for the outrageous amount of time it is currently taking to forclose on a house.

[zxrider]

I have to chime in here since I got some answers from another board. When a mortgage is included in BK and subsequently foreclosed FHA dictates that the seasoning requirement is 3 years from discharge. Same for a deed in lieu if discharged in BK. Now if BK didn't occur whatsoever it would be 3 years from disposition of house. (time of sale/transfer) This isn't to be confused with a disposition of house in BK. (i.e. its not the same). Now, in callling a FHA originator (loan broker) and giving him the scenario re. FHA 2 year seasoning for BK. He indicated if the mortgages were discharge in BK it would be a 2 year requirement (sans FHA BK guidelines) if it can be documented. (of course he is a salesman, but he did indicate he called a FHA U/W FWIW) My take on the matter is under subjective u/w review with letter of explanation and strong compensating factors an underwriter may approve a loan with a mortgage in BK followed by foreclosure after 2 years. I also believe that on a technical basis the requirement for a deed in lieu/foreclosure on debts included in BK is 3 years from discharge date. 3 years from foreclosure date is simply incorrect as it relates to a foreclosure incl. in BK. This only applies to folks who didn't file BK and simply have a foreclosure. My bank foreclosed 18 months after discharge and 12 months after I moved out. Common sense dictates that the bank was entitled to take the house back when the loan was discharged. This is why the seasoning timeframe DOES NOT begin when the house was foreclosed and included in a BK. But rather on the date of discharge. To say that the timeframe begins when the house was sold is to argue that two U/W guidelines apply. If you filed BK the timeframe begins from dishcharge date. Timeframes are not cast in stone either for a u/w subjective review. If you include a house in BK and apply for a FHA loan after 2 years, you have a very good shot with strong loan factors of any 3 year seasoning requirement being applicable. If you review the FHA guidelines it does not address mortgages incl. in bankruptcy that are subsequently foreclosed. An FHA U/W pointed out that the timeframe is 3 years from discharge date for a foreclosure/deed in lieu. I imagine if you wait 2+ years with restored credit score/debt ratios/explanation letter you would be strongly considered for approval.

[sharksfan]

So in other words, it's up to each individual underwriter?

[Flamingo]

Any recommendations for someone who lends in NY?

Best source for that information...your attorney who handled your BK.

[dm415]

I am in the same boat,2 years out of 7 house IIb.Mortage broker checked with underwriter and said 3 years.Not bad,I am at the 2 year mark right now.I no longer pay my 2nd,(80-20) loan payment,waiting to here on 10% settlement offer.If they dont accept I will stop paying 1st,mess with them for as long as poss,make up a story for a mod,save up alot of cash and rebuy in a year,win deal to me no matter what happens.I dont care anymore,pretty soon Ill be paying for other peoples health care,thats what I get for working 6 days a week.Piss off obama...

[Ugh07]

dm415 if you are paying on your first now and then suddenly stop and let it go into foreclosure that will restart the clock as far as getting a new loan.

[dm415]

I worked on this with a broker who ran my credit,then she talked to an underwriter and the underwriter said 3 years from discharge with a house IIb.But who really knows until I get serious about it,maybe stop paying first,save more cash,put a contract on a cheaper house,if it falls through then just get current on the first again.Chances are of I settle the second,Ill stay here.

[zxrider]

Well here we go again. I've talked to this issue many times. The FHA handbook requires a seasoning period of 3 years on a prior FHA (or any other federally guaranteed debt) beginning when the claim was paid. (i.e. property transferred title or "foreclosed") irrespective of when it was discharged in bankruptcy.
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The handbook does not address the period for a non-FHA loan IBB. Since the period for a foreclosure (not IIB) is 3 years from foreclosure date a lot of Underwriters are using the foreclosure date to begin the 3 year timetable.
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I too have been told by a FHA underwriter that if its IIB, and was not a FHA loan, the timetable begins from discharge date.
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Is this the most common understanding? Probably not. So you have to hunt around brokers/lenders prior to applying for any loan. This is just my opinion but the period should be from discharge date as the process in giving back the property is a deed-in-lieu. (after all, BK affords you no legal requirement to pay the mortgage any longer & the D/T allows the lender to foreclose immediately) . Why begin the 3 year timetable when the lender gets off their ass to foreclose is beyond me. (we all know why lenders drag it out!!! They are buried in foreclosures, shadow inventory, short staffing, etc.....)
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There is enough ambiguity in this scenario that the FHA U/W decides. But my belief is this is not the most common understanding.
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On a FHA loan I understand the difference because the claim (or insurance on the loan) isn't paid out when the loan is discharge in BK but rather when ownership transfer (i.e. foreclosure) takes place. (Hence 3 years from foreclosure) See FHA handbook 4155.1 for reference.
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Again, I believe most lenders are using foreclosure date. Its the more conservative thing for a U/W to use. And it also explains why some U/W use discharge date. (i.e. because there is nothing cast in stone on this issue on a conventional loan IIB & it is not addressed in the FHA underwriters Handbook)

[ejhamilton]

If your home is included in BK, it ultimately goes into foreclosure, though it won't show as foreclosure on your credit report. It is 3 years from foreclosure date.

FHA Guidelines

In regards to foreclosures:

"A borrower whose previous principal residence or other real property was foreclosed or has given a deed-in-lieu of foreclosure within the previous three years is generally not eligible for a new FHA-insured mortgage. However, if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the borrower and the borrower has re-established good credit since the foreclosure, the lender may grant an exception to the three-year requirement. Extenuating circumstances include serious illness or death of a wage earner, but do not include the inability to sell the house because of a job transfer or relocation to another area."

http://www.fhaoutreach.gov/FHAFAQ/

Your best option is to go to a mortgage broker who can shop hundreds of lenders to see your best option. They will tell you up front based on all of the facts what you are eligible for.

[zxrider]

If your home is included in BK, it ultimately goes into foreclosure, though it won't show as foreclosure on your credit report. It is 3 years from foreclosure date.

FHA Guidelines

In regards to foreclosures:

"A borrower whose previous principal residence or other real property was foreclosed or has given a deed-in-lieu of foreclosure within the previous three years is generally not eligible for a new FHA-insured mortgage. However, if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the borrower and the borrower has re-established good credit since the foreclosure, the lender may grant an exception to the three-year requirement. Extenuating circumstances include serious illness or death of a wage earner, but do not include the inability to sell the house because of a job transfer or relocation to another area."

http://www.fhaoutreach.gov/FHAFAQ/

Your best option is to go to a mortgage broker who can shop hundreds of lenders to see your best option. They will tell you up front based on all of the facts what you are eligible for.

Your citation (FHA Handbook 4155.1 Section 4.C.2.f) regarding foreclosure is correct. But only for foreclosures. NOT mortgages/foreclosure discharged in Bankruptcy. FHA Handbook 4155.1 Section 4 (A) Subsection 8 (b) addresses prior foreclosure on federally insured mortgages, but not on conventional loans. What you believe to be 3 years from foreclosure is only ONE interpretation since FHA guidelines are silent on this scenario.

Most U/W have never read a Deed of Trust and therefore are naive on what recourse a lender has on the property included in a bankrutpcy. Understanding basic BK law and a lenders recourse shows that when its discharged the property is basically a deed-in-lieu. A foreclosure can be done immediately. If a borrower doesn't want the property any longer its out of the borrowers control when the lender initiates/completes foreclosure. (i.e. the lender can begin foreclosure proceedings immediately after discharge) Lenders are under no law (common or in the D/T) "requiring" them to even initiate foreclosure. People in the south have sued banks to foreclose as owners could not afford or comply with city/county nuisance laws on prior abandoned homes. Simply put, it is case law that a lender is not "required" to foreclose. Many lenders have made a business decision not to forclose as there was no value in it. So.....when does the 3 year period begin for those people.?? A lender doesn't even have a duty to initiate a Notice of Sale. (final step to transferring title) As long as a a lender notices the borrower once year (via a Notice of Default) the lender isn't lawfully required to auction the house and transfer title to another entity.
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The FHA handbook requires 2 years for a bankruptcy. If the mortgage is part of a bankruptcy isn't it still 2 years? Since foreclosure is just a means of transferring tile to property why would the bankruptcy requirement of 2 years be treated differently than the actual mortgage discharge? FHA mortages that are discharged are more black/white since the claim/insurance isn't paid out until title is transferred. Which can only be done by the process of foreclosure. This is why the timetable for those foreclosed mortgages begin with the foreclosed date.
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Jurisdictionally, since the FHA handbook is silent it becomes "interpretive". For conventional loans IIB some FHA U/W utilize discharge date while others do not. Again, borrowers have no control over when a foreclosure takes place. Applying a seasoning requirement when this "action" takes place is disparate treatment and discriminatory as one person may get the same loan as another months or years sooner based on the sole fact that there loan servicing agent foreclosed quicker than the other applicants loan servicing agent. This would be in addition to undermining the FHA's rationale addressing bankruptcy. If the mortgage is part of the bankruptcy what does a 3 year requirement from title transfer have to do with the FHA rationale for accepting bankruptcies after 2 years? Isn't a mortgage discharged in Bankruptcy part of the bankruptcy?

[ejhamilton]

Your citation regarding foreclosure is correct. But only for foreclosures. NOT mortgages/foreclosure discharged in Bankruptcy. If you can find this scenario in FHA handbook 4155.1 good luck.

That's because foreclosure and bankruptcy are 2 separate issues. You can't tie them in together.

It doesn't matter if your mortgage was discharged in the bk, it is eventually foreclosed and that is the date from which the 3 years starts. I'm not sure how that can be more easily explained. And if your house was foreclosed before the bk, it's still going to be 3 years from foreclosure, unless it's been like 2 years since foreclosure, then they are going to go with 2 years from bk discharge(whichever is longer.)

In regards to bankruptcy:

"A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy. Additionally, the borrower must have re-established good credit or chosen not to incur new credit obligations. The borrower also must have demonstrated a documented ability to responsibly manage his or her financial affairs. An elapsed period of less than two years, but not less than 12 months, may be acceptable if the borrower can show that the bankruptcy was caused by extenuating circumstances beyond his or her control and has since exhibited a documented ability to manage his or her financial affairs in a responsible manner. "

[Ugh07]

ejhamilton is exactly correct. The desire for something to be true does not make it so and the bottom line is you need to wait 3 years from the sale/auction date, the BK in this case is not even relevant.

[zxrider]

I think we all can agree that some FHA underwriters are using 3 years from discharge date. (as another person here got there loan that way and I've personally been told this by an FHA underwriter) And I agree a majority, or the most prevalent understanding, is 3 years from sale (foreclosure) date. These facts in and of themselves prove that there is no common understanding of the requirements in this scenario.
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So (intellectually speaking) in the case of evaluating an FHA mortgage approval how is the evaluation of risk evaluated uniformly if you have two borrowers (A & B)with identical bankruptcy discharge dates but Borrower A has a foreclosure date 12 months sooner than the borrower B? For simplification, both borrower's move out after discharge but borrower B is too risky for loan approval than borrower A simply because his loan servicing agent was slow too foreclose.
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Both borrowers lost there house upon discharge of the mortgage. Evaluating credit is evaluating risk. There is an inherent dis-connect between when a borrower extinguishes a mortgage (BK) and when a bank takes action to claim the property. The lender (or U/W) seems to believe that whichever lender who acts quicker to forecloses makes the borrower a better credit risk.!!!!! I know U/W have production goals and sometime paid per loan generated so it easy to be cookie cutter. But it would be nice to hear a U/W thoughts that go beyond a cookie cutter perspective. (I don't mean to butt hurt anyone's feelings over the matter, just to challenge them to articulate and qualify why they do what they do.)

[zxrider]

Acknowledging you do it because your paid to do it this way is acceptable. Same with ".. I do it because I'm better at looking at guidelines, then in evaluating credit/borrower risk".

[Ugh07]

Underwriters do it this way because the Bank/Lender they chose to work for told them that they will do it that way. Do not be under the impression that each file is looked at for its relative merits. 99% of FHA files are underwritten by computer, the days of the "manual" underwrite are all but over. When an underwriter overrides an automated "refer" they put their name on that file as good, it it goes bad they will likely lose their DE and never be able to work as an FHA underwriter again. Does that make sense? It sounds crazy but if they screw up they may not only get fired but they also lose the ability to be rehired by another company EVER. So suffice to say underwriters dont often override the automated underwriting results and since those results are tuned to only accept deals with 3 years after sale/auction then that is what ends up being the de facto guideline.

Where is the thread with someone who got a loan before the 3 years was up? Id love to know who the lender was/is.