Chapter 7 and Foreclosure

[muckrake]

I have a question regarding how Chapter 7 and Foreclosure work togethor. I filed for Chapter 7 in October of 2006. Chapter 7 was Discharged March 29 of 07. I had a home and we decided to include it in the bk. prior to filing we had made our payments right up to filing. The house of course went back to the bank and was resold in December of 2007. Is this considered a Foreclosure or part of the BK or both???

now that we are 2 years out of BK discharge we would like to purchase home. Both scores are around 645 according to the lender we just spoke with and Credit reports dont list Foreclosure they just list "Mortgage Company" and say "included in BK"... However the lender we just spoke with said one of the reports show the Foreclosure being settled in December of 07.. which is 9 months from discharge of Chapter 7 BK and that we cant go FHA until Jan 2011 because of this and having to wait 3 years from foreclosure..

My big question is how can this be the case since it was included in BK and that was discharged in March of 07. How can I still show a Foreclosure in December of 07. Is there anything I can do to correct this or is it correct and we simply must look for conventional financing???

Any insight would be helpful..

[justbroke]

First, it was considered surrendered or "included" in bankruptcy. This is a little different than a straight foreclosure, even though the foreclosure process is still used by the Bank to re-acquire the property.

I think that your lender got it wrong. Shop around some more. It's 2 years from discharge.

You may need to go correct your credit report, but any savvy lender would readily review your Discharge Order and see that the mortgage was included int he Bankruptcy... and not just go by the credit report.

If one of your reports is wrong, you may try to fix that, and your scores may actually go up as well. Make sure all bureaturs report your mortgages at least as IIB.

[muckrake]

thanks for the info. I am going to look at the discharge papers tonight and pull credit again to see who is listing it as foreclosure.. I am also going to call the lender back to see where they saw this information listed.

Thanks Again,
Chris

[monkatom]

I have called about 8 lenders, Hud and a few mortgage brokers. I am in the same boat in that I included house in CHP 7 and am deciding to walk away so wanted to use the 2 year BK rule for FHA loan. All three credit reports show my mortgage as IIB. In talking with everyone even though the house will show as IIB the underwriter will ask and research and see the house was foreclosed therefore the 3 year foreclosure rules apply. This was according to a Hud representative and to an FHA underwriter who is a friend as well as most lenders I spoke with. So all signs point to 3 year from foreclosure sale date. You could maybe do a private mortgage but I am hearing 35% or so down plus a high credit score. In regards to convetional it is even worse with I belive a 5 year wait from BK.

[justbroke]

Very interesting. Thanks for the post. I don't have the specific underwriting rules, but that seems logical, although it stinks.

As you wrote, the two conditions are different parameters and qualifications. The FHA counts the bankruptcy (2 years) and the foreclosure (3 years) separately. So, you have to be 3 years from foreclosure. Interesting still.

[Scooter10]

I have a question regarding how Chapter 7 and Foreclosure work togethor. I filed for Chapter 7 in October of 2006. Chapter 7 was Discharged March 29 of 07. I had a home and we decided to include it in the bk. prior to filing we had made our payments right up to filing. The house of course went back to the bank and was resold in December of 2007. Is this considered a Foreclosure or part of the BK or both???

now that we are 2 years out of BK discharge we would like to purchase home. Both scores are around 645 according to the lender we just spoke with and Credit reports dont list Foreclosure they just list "Mortgage Company" and say "included in BK"... However the lender we just spoke with said one of the reports show the Foreclosure being settled in December of 07.. which is 9 months from discharge of Chapter 7 BK and that we cant go FHA until Jan 2011 because of this and having to wait 3 years from foreclosure..

My big question is how can this be the case since it was included in BK and that was discharged in March of 07. How can I still show a Foreclosure in December of 07. Is there anything I can do to correct this or is it correct and we simply must look for conventional financing???

Any insight would be helpful..

you state "....one of the reports show Foreclosure....
Are you refering to the credit report? If so, you can get the report changed to IBB and it will not show. But like muckrake they will find the forelcose if they look for it. You may just want to keep trying until you get someone that possibly knows away around this or omits it as irrevelant.

[imoverit]

if that house was sold via a short sale, would the 2 year rule apply? Seems if the mortgage was iib and no foreclosure actually happened because technically the foreclosure was not completed then the 2 year rule would apply.. yes? no?

[justbroke]

if that house was sold via a short sale, would the 2 year rule apply? Seems if the mortgage was iib and no foreclosure actually happened because technically the foreclosure was not completed then the 2 year rule would apply.. yes? no?

As I just learned myself about this foreclosure in Bankruptcy underwriting rule, I also noticed that it read foreclosure or short sale. So, a short sale would make the waiting period 3 years as well... at least what I read.

[monkatom]

I agee everything I see for FHA says short sale same as foreclosure. I ahve heard USDA home loan may be less strict with BK and foreclosure but you have income and area restrictions.