Credit impact of Foreclosure after D/C Chapter 7??

[CCT501618]

From what I have been reading since the debt of my loan has been discharge in my chapter 7 case they will not ding my credit score again? I am currently in the foreclosure process in Maryland and actually came out of BK with pretty decent scores, and hoping to keep it that way. From what I have been told they still have to officially "foreclose" on the property but you shouldn't take another hit you your score.

Anyone confirm this or provide help? Thanks so much!!!

[neorecon]

From my understanding you are correct. If you surrendered the home / mortgage(s) in your BK then that is you only credit hit.

However, your ability to get a new mortgage will be hampered. I believe it is a period of three to four years after a foreclosure before you can qualify regardless if you have great credit. And I also believe that 'clock' doesn't start until the bank takes over the home or it is sold.

[MrsDixon]

The bank may or may not add foreclosure to the report after the BK notation.

PP is correct though, you will not be able to qualify for another loan for three years after the deed is transferred back into the banks name.

[mhman]

The bank may or may not add foreclosure to the report after the BK notation.

PP is correct though, you will not be able to qualify for another loan for three years after the deed is transferred back into the banks name.

I remember...someone here mentioned that the Clock for FHA starts from "Discharge Date" not "Deed Transfer Date"
If "Deed Transfer Date" is a decision basis, it would be disaster to those who live in California. It normally take minimum one year to be foreclosed after being discharged. (Then, FHA.....is not 3 years, but minimum 4~5 years waiting period.....Oh God!)

He contacted a FHA mortgage broker to confirm this timeframe issue.
I am very confused now. Is there any web links or info to make this sure?

Appreciated.

[HHM]

Let's back up...

YOU WILL have BOTH a foreclosure and a bankruptcy on your credit report. A foreclosure is a public record just like BK. The FHA lending guidelines are this

Chap. 7 Bankruptcy Discharge, 2 years
Foreclosure, short sale, DIL, 3 years.

In the case where you have BOTH a BK and a foreclosure, the foreclosure timeline (3 years) will be the controlling timeline.

As for credit recovery in general, even though you will have both a BK and a foreclosure, since the two events will occur roughly around the same time, they are essentially treated (for credit scoring purposes) as ONE bad event.

[MrsDixon]

What about a house that was discharged in BK, never reaffirmed but we did a pay and stay? I filed in 10/2008 and am still living here. If I stopped making payments and the lender foreclosed in a year they would put another PR on my report that says FC 5/2011?

My personal liabiltity was discharged in the BK so why would I get a fresh PR for a debt I don't owe?

[newbie2]

What about a house that was discharged in BK, never reaffirmed but we did a pay and stay? I filed in 10/2008 and am still living here. If I stopped making payments and the lender foreclosed in a year they would put another PR on my report that says FC 5/2011?

My personal liabiltity was discharged in the BK so why would I get a fresh PR for a debt I don't owe?

Yes. The foreclosure would be reported to the credit bureaus. Unfortunately they are 2 separate incidents as far as credit reporting goes.

[HHM]

What about a house that was discharged in BK, never reaffirmed but we did a pay and stay? I filed in 10/2008 and am still living here. If I stopped making payments and the lender foreclosed in a year they would put another PR on my report that says FC 5/2011?

My personal liabiltity was discharged in the BK so why would I get a fresh PR for a debt I don't owe?

Yes, you would have a new public record and the 3 year FHA clock would start running from the date of the foreclosure.

[mhman]

Let's back up...

YOU WILL have BOTH a foreclosure and a bankruptcy on your credit report. A foreclosure is a public record just like BK. The FHA lending guidelines are this

Chap. 7 Bankruptcy Discharge, 2 years
Foreclosure, short sale, DIL, 3 years.

In the case where you have BOTH a BK and a foreclosure, the foreclosure timeline (3 years) will be the controlling timeline.

As for credit recovery in general, even though you will have both a BK and a foreclosure, since the two events will occur roughly around the same time, they are essentially treated (for credit scoring purposes) as ONE bad event.

Thanks so much for the clarification.

Since my house is in California and it has not even been in NOD, my FHA clock didn't even start.

I contacted the lender once but they have a lot of foreclosures in California so they only sent a letter to me, e.g., "We will contact you to discuss about the options (short sale, mod, foreclosure, etc)".

No call & no contact from the lender more than two months.....

Considering the neighbors' foreclosure time, it would take more than 6 months or even 1 year.....

Thanks again for all your nice explanations.

[HHM]

This housing crisis may eventually end up re-writing the risk tables for mortgage lenders, who knows. Not that I think we should return the days of free money, but if we, as a country, are going to clear the glut of housing inventory in a reasonable amount of time, someone has to lend to responsible people. These 3 year, 4 year, time table are arbitrary.

If I had the means, I would set up a mortgage bank using the following criteria.

1. buyer has 5% down payment
2. Solid appraisal (even help the buyer negotiate with our appraisal).
3. 1 year job history.
4. No arbitrary timelines for BK or prior foreclosure, but an acceptable explanation.
5. 2-3 year history of on-time mortgage payments prior to the foreclosure or short sale.

I bet I could be reasonably profitable and have minimal downside risk. Now I just need to raise $10MM

Keep in mind, the only reason there are these timelines is because FHA, Fannie, Freddie etc INSURE the mortgages lent by banks. The banks are insuring against loss.

[ryan]

All these FHA and other institutional lender requirements are fine, but whether or not you can own a house can be subject to other things as well....and some are positive.

Ive bought houses in the past by assuming an owner's existing mortgage. I did not have to meet any qualifying req. at all to do so. I will probably do the same when my finances are right and the timing is right.

BTW, I totally agree with HHM, the market is at some point going to need to accommodate a new quality/type of buyer or there will be empty houses from now till doomsday. ...anyway, I will check the tin cans in my back yard to see if I have 10MM to invest.