House included in BK still considered foreclosed?

[tay666]

So, let me see if I have my head wrapped around this.
(I'm not in this position, I just find this oddly fascinating)

So, lets say John Doe was discharged from BK 3 years ago and let the house go in the proceedings.

If the mortguage holder acts swiftly, gets a deed-in lue and sells the property right away, he could get an FHA loan now.

If the bank drags it's feet and doesn't complete the forclosure until last year, then John Doe still has to wait 2 more years to get an FHA loan.

And if the bank is really slow, and still hasn't processed the house.
He could get a loan now?
He doesn't have a forclosure on his record after all.

[ejhamilton]

Since all FHA loans are viewed on approved on a case by case basis(via the lender's underwriter & the FHA underwriter), and no cases are exactly the same, it is pointless to answer hypothetical questions because there are many other factors to consider besides when the house foreclosed or when the bk happened. FHA is not as easy to underwrite or understand as conventional. There are a lot more hoops to jump through with FHA, which is why it takes longer to get a loan approved through FHA.

That is why people should work with a mortgage broker so they can answer all these questions when they have all of the facts in front of them(credit score, income, personal history, debt to income ratio, payment history, bk, credit after bk, foreclosure, available credit, job stability/history, etc.)

Trying to make assumptions and generalizations about FHA would be like saying that just because you have a 765 credit score, then you can get a mortgage. We all know there are many other things they look at besides credit score.

By the way, I worked for a mortgage broker and worked with the underwriter's, and checked the databases for the best loans the borrower was eligible and each lender had their own criteria, including each FHA lender, in case anyone thinks I'm just pulling this out of my rear.

[Ugh07]

Since all FHA loans are viewed on approved on a case by case basis.

At this point in time that is the exception not the norm. Manual underwrites are all but gone from the Big lenders; B of A, Wells, Citi, Chase. Automated underwriting is followed 99% of the time.

[zxrider]

Since all FHA loans are viewed on approved on a case by case basis(via the lender's underwriter & the FHA underwriter), and no cases are exactly the same, it is pointless to answer hypothetical questions because there are many other factors to consider besides when the house foreclosed or when the bk happened. FHA is not as easy to underwrite or understand as conventional. There are a lot more hoops to jump through with FHA, which is why it takes longer to get a loan approved through FHA.

That is why people should work with a mortgage broker so they can answer all these questions when they have all of the facts in front of them(credit score, income, personal history, debt to income ratio, payment history, bk, credit after bk, foreclosure, available credit, job stability/history, etc.)

Trying to make assumptions and generalizations about FHA would be like saying that just because you have a 765 credit score, then you can get a mortgage. We all know there are many other things they look at besides credit score.

By the way, I worked for a mortgage broker and worked with the underwriter's, and checked the databases for the best loans the borrower was eligible and each lender had their own criteria, including each FHA lender, in case anyone thinks I'm just pulling this out of my rear.

To a certain extent I am in agreement with these comments. The best service is face to face with an application submitted. But the big picture requires people to be informed. For example why would I bother with the trouble of completing a loan application, getting all the doc's, setting up the broker appt. only to find out I can't get a loan because I don't have a job? Meaning, you just can't tell people "its all on case by case basis....go see a broker". I'm sorry, I'm not wasting my time and resources with a mortgage salesman if I know the underwriting guidelines can/will not be in my favor.
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There wasn't a time too long ago that if you were of a mixed race (ethnicity) you needed compensating factors (case by case bases) to get approved for a loan and therefore had to apply to know whether you would be approved or not. Those days are long gone thankfully. But there are basic criteria that aren't necessarily subjective and "case by case". Seeing a broker (mortgage salesman) would be a waste.
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I am of the belief UGH07 has it right. Between lender overlays and FHA scorecards, most decisions are automated at this time. And with fewer underwriter jobs these days any DE underwriter could not be blamed for being conservative to the guidelines or "interpretations".
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In the interim, there is an avenue I will be taking to get a straight answer on the matter. Being punitive to one borrower over another based on when a lender decided to foreclose just doesn't sit right intellectually (some would argue morally) with me. It is false economy to believe one borrower is better than another borrower simply on the basis when a dis-interested 3rd party (lender) opted to foreclose on a house whose mortgage was IIB. Wouldn't a better credit requirement in these cases be "Documented 3 year continuous history of acceptable housing/rental payment history post bankruptcy". Gets rid of the borrower who free loaded (paid no mortgage or rent) for 2 years post BK until the foreclosure took place. While giving credit to the borrower who moved out post BK, made rental payments and watch his lender wait 20 months post BK to actually take the house back.
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Anyhow, It may take a few weeks to see if can source an answer but I'll keep this board posted.

[ejhamilton]

Maybe it's just me, but considering a mortgage is a 15, 20, 30 year commitment, I don't think taking a little bit of my time getting doc's together, ten minutes to fill out an app, and meeting with someone is a big deal. If that means I'm going to get the best deal and save thousands in interest over the next 30 years, then I'll do whatever it takes.

There are a lot of things wrong with the mortgage industry, intellectually and morally speaking, and there always will be.

[zxrider]

Maybe it's just me, but considering a mortgage is a 15, 20, 30 year commitment, I don't think taking a little bit of my time getting doc's together, ten minutes to fill out an app, and meeting with someone is a big deal. If that means I'm going to get the best deal and save thousands in interest over the next 30 years, then I'll do whatever it takes.

There are a lot of things wrong with the mortgage industry, intellectually and morally speaking, and there always will be.

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Not intended to offend. But its well established in my research that their are two ways of "interpreting" what is being discussed. And coming from DE underwriters no less. Going to a broker isn't going to get the straight answer and I don't believe that great compensating factors forms the basis for accepting a lenders foreclosure timetable a borrower experienced over and identical borrower's prior lenders lengthy foreclosure timetable.
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Along with gender, race, sexual orientation how fast a lender has foreclosed on a borrower shouldn't be the basis of making a credit decision. If you read the HUD Handbook 4155.1 and 4155.2 you would understand the seasoning date has it beginnings from foreclosure date since that is the only way FHA (on a FHA mortgage) insurance is paid on a claim. (i.e. after ownership change) The claim cannot simply be paid at BK date as the D/T "allows" (with lender consent) the borrower to continue owning the house as long as the note is paid per terms. Technically though, the BK makes the loan in Default automatically as the debt is extinguished. (Its important to remember, per the D/T the lender retains the option to foreclose at time of BK if the mortgage was IIB irrespective of what the borrower wants to do.) For almost all borrowers most if not all lenders will not foreclose though for the same reasons a lender on a auto loan will not repossess. If the loan is being paid, money is being made. Taking back the collateral only cost more money and expense.
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This has nothing to do with evaluating risk and being consistent among all borrowers as it pertains to conventional loans IIB and foreclosed. Hell, even on a FHA mortgage IIB the timetable appears punitive to use the foreclosure date. I would be curious the rationale FHA uses for using this date given that the mortgage was IIB and subsequently foreclosed. On a new FHA loan what risk mitigation will not be present using discharge date of a foreclosed property IIB that will mysteriously exist using the foreclosure date? Just wondering....
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Is life fair? Hell no. But when did that become a reason to stop trying to make it a better place? I agree there are many things wrong with the mortgage industry as well as with realtors and attorney's. Should people just rollover? In some cases yes, in some no.

[ejhamilton]

My simple suggestion was not discussing what is wrong or right with FHA. My suggestion for the person who started this thread, not for you, is they are not going to get a straight answer(clearly) and should just apply and try!

Good luck on your quest to change FHA or get answers, whatever it is you are trying to do.

[monkatom]

Just to add my 2 cents. I actually called FHA and was told I needed to use the 3 year mark after foreclosure even though the debt was discharged in BK. Also below is what a lender from countrywide wrote back to me after asking this same question.

Since the Foreclosure happened after the BK you will need to wait 3 years from the Foreclosure date to be eligible for new FHA financing. I just verified with our Underwriting Support dept.

[ejhamilton]

Just to add my 2 cents. I actually called FHA and was told I needed to use the 3 year mark after foreclosure even though the debt was discharged in BK. Also below is what a lender from countrywide wrote back to me after asking this same question.

Since the Foreclosure happened after the BK you will need to wait 3 years from the Foreclosure date to be eligible for new FHA financing. I just verified with our Underwriting Support dept.

Thank you for getting that info. It's nice to get a straight answer from FHA and a lender that backs up the info on the FHA website.

[zxrider]

Thank you for getting that info. It's nice to get a straight answer from FHA and a lender that backs up the info on the FHA website.

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"Backs up the info on the FHA website". For real?? Where does it say 3 years from foreclosure date of a discharge mortgage? uuuhhhhh......no where.

[zxrider]

UGH07,
In reading up on the TOTAL Scorecard (FHA Scorecard) it will default to "refer" if certain case factors are identified. For example, foreclosure within the past 3 years. I just want to convey your comments are spot on that the scorecard will not generate an accept. However, the HUD handbook makes seasoning requirements of foreclosures an issue of subjectivity that can be mitigated against. (manually underwritten??) Does that mean its widely being done when the path of least danger/risk is just to rubber stamp "accepts". .....probably not. So in this light your comments are consistent with what I have researched to date.
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My issue is that these are interesting times. Those FHA guidelines concerning this subject were founded long before this recession and unprecedented short-sales, walk-away's, and modifications. Anyone in the industry knows that historically REO's materialized in generally the same time frame so everyone who experienced a foreclosure did so in identical timeframes. Now we have Lenders literally slow dragging this process, not to mention varied state laws imposing delays to foreclosure. This new development has now made foreclosures take place anywhere from 2 to 20 months after discharge. Five years ago, did any lender take well over a year to foreclose? So why does this guideline benefit the recipient of a quick foreclosure over that of an identical borrower that experienced a protracted foreclosure? Again, what is being gained risk assessment wise treating two borrowers disparately?

[Ugh07]

the guidelines definitely do not fit the times. Also I am sure loans are slipping through in the manner in which you speak of. I just dont personally know any lenders doing it that way and I do know that the Big Boys arent.

[ejhamilton]

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"Backs up the info on the FHA website". For real?? Where does it say 3 years from foreclosure date of a discharge mortgage? uuuhhhhh......no where.

Really?!As I have said before, but clearly you do not read anything I say thoroughly before cutting my information down with your "research,"

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/

The website above (FHA's FAQ's) is where I got my information that I have restated many times.

Once again, you keep trying to make bankruptcy and foreclosure one issue and it is not. It does not matter that the mortgage was "discharged" in a bankruptcy, foreclosure is a separate issue. They are not one in the same. Would that be easier if they actually had a rule like that? Sure! Is it fair? No!

I'm trying to give you documented information, and you keep trying to argue back with reasoning. You can't fight documented info with opinion and hearsay. You respond with "Why?" And I cannot answer that. I'm not HUD. I originally answered the OP's question with documentation I found quite easily on FHA's website and you fight back with your opinions on FHA. Hey, I agree with your opinions!

If you want to argue the information on FHA's website, then talk to FHA. I didn't write the website.

[sharksfan]

So... does my pre-qual letter for an FHA mortgage mean anything? Broker says we can't close until late 6/2010 (after my two year post BK7 mark). The house I let go in BK (FHA mortgage btw) is still in my name.

[Ugh07]

My guess would be your letter is garbage, but I wish you luck.