Foreclosure on ride-thru Mortgage discharged CH 7

[WilliamKF]

I have a 1st mortgage and 2nd HELOC on my house. Both were discharged during CH 7 BK and were ride-thru.

Now, I am trying to effect a short sale to avoid a foreclosure since I want to buy another home and do not want to have to put "Yes" to mortgage application question of whether you have been foreclosed upon in the last seven years. Now maybe this is not an issue since I am not personally liable for the mortgage, so perhaps only the property is being foreclosed upon?

Assuming that is not a way out, I have been trying to do a short sale and have a buyer ready to purchase. However, the 2nd was not able to reach terms with the 1st as both are underwater. Bottom line is 1st wishes to foreclose to strip the second and proceed with the short sale to the buyer I have and gave me a document saying they would not report as a foreclosure (can they do that?) but instead as a short sale (can they do that?) if the sale goes through and no one buys it from them at auction on court house steps.

Should I make a settlement offer to the second and pay them some money to get myself off the title so that when the foreclosure goes through I am not on title and there never have been foreclosed upon?

Or should I take some other approach?

Bottom line is when I apply for a new mortgage, I'd prefer to not have a foreclosure to explain in addition to the BK.

[debee]

Not sure the short sale will do what you hope.

Depending on what kind of financing you are looking at for a next property and depending on the specifics of your planned move, short sale is also a required disclosure. FHA, for instance, imposes a two or three year wait after short sale.

I believe you can get around that wait IF the new house is not commuting distance from the old and you can establish some extenuating circumstances and you were not in default over the preceeding 12 months.

The underwriting guidelines that address this explicitly state that they are not supporting buyers who are trying to take advantage of dropping market prices and will not lend (without the wait) when you short sale on one home and buy another within commuting distance.

Fannie is the same. Two year wait.


Might be a good idea to start researching underwriting guidelines and making some phonecalls (without running your credit) to talk to brokers to find out exactly what ducks you need and in which order in order to get financing. The more you're willing to put down and the higher interest rate you pay, the more likely you are to find something without the wait, but when factoring in those variables you might decide you are better off renting through the wait time.

There have been forum members, one in recent memory, who bought an owner-financed house without disposing of her other property at all.


As for foreclosure, anyone named on the mortgage loan/deed of trust will be named in the foreclosure proceeding and that is what becomes public record. No way off those docs besides refinance, sale, preforeclosure sale (short sale/DIL) or foreclosure.

[WilliamKF]

My new property is not within commuting distance. Also it is a jumbo and thus does not qualify for FHA lending. I am hoping to finance through Navy Federal Credit Union. I'll call them.

So it sounds like I can't get off the deed before the foreclosure occurs for the pending sale date, right?

[debee]

I think the wait for non-conforming jumbo loans is 7 years after short sale. Come back and let us know how it goes.

When the first says they will not "report" it as a foreclosure, I think they are talking about your credit report. They can't foreclose and not have that create a public record.

edit to add: I have conforming at a 2 year wait and a non-conforming at 7 years.

[WilliamKF]

NFCU says their rules are 2 years after foreclosure or short sale. This would not be a conforming loan.

[debee]

NFCU is great. They give good credit cards post-bankruptcy too.

I guess you could try to settle with the 2nd so you can proceed with the short sale. If you do it in that order, you can avoid a public foreclosure record. But there's a risk the short sale doesn't go through and you're out the money to the 2nd.

edit: although if the wait is the same, you may prefer to keep your money, stop paying the mortgage, let them foreclose & hope they do it quickly, and go rent for awhile.

[jmanford]

Regardless of what you do your loans will say included in chapert 7 bk. It wont say forclosure. I know because I had your exact circumstances. We tried to sell it but they wouldn't approve the.shortsale so they forclosed. Its been over a year now

[debee]

I just got off the phone with NFCU and the mortgage guy told me they would automatically refuse anyone within the two year period, and they would "entertain the possibility" once they pass the two year mark and the person could apply, but unless there is an extenuating circumstance, the wait time is 5-7 years.

@jmanford - the foreclosure appears in the public record. Lenders have a special system to check that. They also ask about foreclosure and/or preforeclosure on the loan app so they find out about it whether it's on the credit report or not.