Home Loans and Support

Chapter 7 and FHA after 3 years

Discussion in 'Mortgage Bankruptcy' started by TBinND, Jan 23, 2012.

  1. TBinND

    TBinND LoanSafe Member

    Hello - About 2.5 years ago I went through a Chapter 7 Bankruptcy and my lawyer recommended that I do not reaffirm my mortgages. I was told that after 2 years I could get a new FHA loan to buy a new house. My home was included in the bankruptcy and it shows a $0 balance on my credit report. For the last 2.5 years I have stayed current on all my payments, but now that we are looking to move, I will probably walk away from the house as it has a lot of issues that I do not have the means to fix before being sold. We are looking to move and I started shopping around for mortgage loans since it has been over 2 years and I was told some different things by different companies. So I am a bit confused. I was told that the 2 year rule is true, except when the home is included in the bankruptcy, then it falls under the 3 year foreclosure rule, this is where it gets tricky and I have been told different things. One place told me that it is 3 years from the date the house was included in the bankruptcy (discharged), but another place said that my 3 years does not start till either the home is sold, reaffirmed or the trustee take possession? Is this true? It seems like you are punished for not walking away immediately and making payments.
  2. Cat Damiano

    Cat Damiano Mortgage Wars

    Hi TBinND,


    Welcome to the forum and thank you for joining............


    It would depend on the type of loan you are trying to get approved for which may be why you are getting conflicting information.
    Last edited: Feb 14, 2012
  3. TBinND

    TBinND LoanSafe Member

    Thanks Cat

    Hi Cat - Thanks for the link. I read the article and it still does not really answer the question. If the house is included in the chapter 7 bankruptcy, when does the 3 years start? If it is 3 years from the sale of the home, than it seems like it would have been best for us to walk right after the bankruptcy, rather than pay for 2.5 years. According to my credit report the mortgages were included in the bankruptcy and have a $0 balance.

    We were looking to get a FHA loan on another house since it will be 3 years since the time of the bankruptcy in July. But we had been paying on the house the whole time, just never reaffirmed per our lawyer.

    Thanks
  4. Cat Damiano

    Cat Damiano Mortgage Wars

    TBinND,


    If the property is included in the BK the timeframe would be for the BK and the timeframe for a new FHA loan is listed right there, for a Chapter 7 BK it is two years from the discharge, so the attorney was right, however if you are walking away from the property they may be looking at it as a foreclosure.

    If it were me, I would still shop the question around with other FHA approved lenders.

    HUD FHA Lender List

    Bankruptcy – You may apply for a FHA insured loan after your bankruptcy has been discharged for TWO (2) years with a Chapter 7 Bankruptcy.


    Foreclosure - You may apply for a FHA insured loan THREE (3) years after the sale/deed transfer date.

    Short Sale / Notice of Default – You may apply for a FHA insured loan THREE (3) years after the sale date of your foreclosure. FHA treats a short sale the same as a Foreclosure for now.
    Credit must be re-established with a 640 minimum credit score

  5. calgirl67

    calgirl67 LoanSafe Member

    This is the eternal question! I also have asked numerous lenders and get conflicting information. In our case our CH 7 BK discharge was 20 months ago. Our house just foreclosed in December 2011 (last month).

    So which date is it? We are eligible for a VA loan which clearly states 2 yrs after BK discharge and 2 yrs after foreclosure.

    Most of the so called "loan experts" I speak to are completely clueless. I have even encountered some who seemed to look down their nose at me due to being a "deadbeat that had a foreclosure". Some have made statements like "so you walked away from your house and now you want another mortgage?". Obviously those idiots I hang up on. To some I say "yes that's right, and don't you want a commission on a new loan?".

    Keep us posted on what answers you uncover.
  6. morgane_edison

    morgane_edison LoanSafe Member

    I am most certain that the bankruptcy discharges all included debts. If you included your mortgage but did not reaffirm, then the mortgage is discharged and, even though one might go through a foreclosure process, the bankruptcy still takes precedence. There should be no reporting of any debts after discharge, regardless of whether they are paid or unpaid. The bankruptcy and the date of discharge takes precedence and any subsequent action on a discharged mortgage debt should be of no consequence. Any discharged debt that is reported to any reporting agency after the date of discharge, subsequent foreclosure included, should be challenged as inaccurate reporting. Your signed discharge and your schedule in the bankruptcy filing detailing included debts is all the proof you need; they cannot "double-dip"!

    I know mortgage underwriters have become very conservative. Even though the criteria for eligibility of a new mortgage "should" follow the guidelines per the link supplied by Cat (thank you), loan officers and underwriters may disregard those guidelines. Perhaps there is some accountability entity that will assist you in "enforcing" the guidelines.
  7. willystyle

    willystyle LoanSafe Member

    Chapter 7 BK

    Morgain_Edison,

    I have always felt what you stated below is correct. But I am getting a different story from underwriters who tell me that if I want to purchase a home with an FHA loan that I have to include my current first mortgage debt that is included in my chapter 7 BK due to the lender not sending out a reaffirmation agreement. Like you said you cannot double dip, Wells Fargo cannot even ask me to pay the debt but yet underwriters tell me they have to include the debt in my debt to income ration. Do you have a link to where what you are saying would be supported by Hud?



  8. morgane_edison

    morgane_edison LoanSafe Member

    Willystyle,

    Welcome to LoanSafe.

    I have double checked and triple checked this information: once a debt is discharged, it is discharged, period. Unless you reaffirm regardless of making mortgage payments or not making payments, the servicer/mortgage company cannot by law report anything further on your credit report after discharge of BK.

    The challenge is that "discretion" is used/abused by mortgage brokers and/or underwriters to stigmatize and otherwise (IMO) act with prejudice against such applicants. Therefore, my suggestion is to shop away until you find a broker that will not penalize you. Even if one was to walk away from their house after BK, the foreclosure might not become sanctioned by the court for some time. For some unknown reason, banks have stalled foreclosures all across the country; gosh, I wonder why?!

    The point is the only way for a broker to "find out" that you continued to live in the house post BK discharge is by information contained in your application regarding residence history. I am not advocating uttering mis-truths on a mortgage app. Think for yourself to find a creative solution for the issue. An example might be to find a service to receive your mail whose address does not show it as a PO Box; there are plenty out there (even in urban areas), just look. Worst and/or best case scenario is you have three years to prepare for your app post BK... so think about how you will address "residence history" when that time comes. Most residence related questions on apps go back two years.

    Best of luck!

    I am not an attorney but did stay at a Holiday Inn Express last night
  9. Corny

    Corny LoanSafe Member

    I seem to be in a very similar situation right now. I filed BK and was discharged in Dec 2010. We included the home in the BK.. I moved out but still continued to at least try and keep it cleaned up. I have built my credit back to 700ish and saved a little money and I'm ready to buy a home again. ( P.S. the reason we filed BK was my wife was diagnosed with cancer in 2007 and lost the battle in 2009) times got tough.

    So I talk to a mortgage lender who tells me that even though the house was not deeded out of my name until August of 2011, I only need to meet the 2 year requirement wait from the BK discharge. I talk to another lender that simply says the first lender is lying and does not know what he is talking about and I'm going to get a denial if I apply for a new FHA loan. Even with the "extenuating circumstances".

    The first lender told me he ran my credit and all through AUS (what ever that is) and it come back Qualified / eligible. and that there is nothing to worry about. I should go find a house and he could get me the loan.

    Does anyone know a situation similar and which lender should I be talking to?

    Thanks


    banWelwa
  10. Erik Sandstrom

    Erik Sandstrom Mortgage Expert - Call 1-800-779-4547

    Hi Corny,
    Welcome to the forum and thank you for sharing your response.

    Here are the timeframes you need to be aware about, even though Desktop Underwriting may not detect the presence of these items - Fraud Guard would and the underwriters could potentially deny your file.

    Chapter 7 BK - 2 years with FHA from the discharge date
    Foreclosure - 3 Years from the date stamped on the trustee's deed of sale

    If you included the home in the BK you would still be subject to the timeframe of the foreclosure because you included the home. Is this what your other lender is saying when he states the other lender is lying and saying you will be denied? It sounds like he may be accurate and you would need to determine when the home was sold to find out when you would be eligible to purchase another home. I can always send in a question directly to my underwriters with this exact scenario but I'm sure they will come back with that response.
  11. Corny

    Corny LoanSafe Member

    Thanks for the answer Erik. And although I would have rather heard better news, it is what it is. 2 Things, There shows no foreclosure, short sale, DIL on my credit report. Only the BK and Discharged debt. Also, what do you think about the extenuating circumstances? I'm wondering if the fact my wife being diagnosed with cancer and eventually passing away will be reason enough for a lender to consider to use his or her discretion on shortening the 3 year wait. Any input will be appreciated If you think this is a valid scenario for your underwriters to look at and consider, please feel free to present to them.

    Thanks
  12. Erik Sandstrom

    Erik Sandstrom Mortgage Expert - Call 1-800-779-4547

    We can go 2 years instead of 3 for foreclosure with extenuating circumstances and that sure sounds like an extreme one to me!
  13. Erik Sandstrom

    Erik Sandstrom Mortgage Expert - Call 1-800-779-4547

    Let's send your file into underwriting as a TBD purchase - my contact information is below, feel free to reach out to me anytime. I'm leaving the office shortly today for an appointment but will be returning tomorrow.
  14. nurseforkidz

    nurseforkidz LoanSafe Member

    So let me see if I get this straight - Our chapter 7 BK was discharge in Nov 2010. We did NOT reaffirm the mortgage. We have stayed current on our mortgage payments and still live in the house. In Nov 2013, 3 years post discharge, are we then able to walk from our current house and still be eligible for an FHA loan on a new house?

    My understanding was that since we are still making payments and still living in the house that our 3 year wait period has not started yet because we have not foreclosed on the property. We are currently considering moving out of state and were thinking we would have to rent a house until 3 years after this one is finally foreclosed, and then we could buy again.

    I'm so confused...
  15. shasta

    shasta LoanSafe Member

    I can vouch for the "discretion" part of this post. We were pre-approved with a chapter 7 from March 2010 (discharged June 2010) and when we went to make an offer on a home were told oops, sorry, you have to wait until June 2013. Even though we know it's 2 years post for FHA, we require 3. Arrgh! Does any lender really approve FHA two years out?
  16. shasta

    shasta LoanSafe Member

    nurse, just wanted to update you on our situation. Turns out the credit union we went to initially was incorrect when saying we needed to wait 3 years, FHA is definitely 2 years post discharge. Like you, we have stayed and paid and were able to secure financing with Webster Bank for a new home. We are continuing to pay on this house until we move and then will try to figure out what to do with this one. Rent until they foreclose or just let it go, not sure. Since the debt was wiped in the bankruptcy and not reaffirmed we show no mortgage on our credit reports. You DO NOT have to wait for a foreclosure or the title to change names if you are current on your mortgage now. Hope this helps.
  17. sheriffwoody

    sheriffwoody LoanSafe Member

    similar circumstances

    June 2013.
    I am in Nevada and did a Chapter 7 on my 2 properties because of hardship. Discharged 11/2010. Because of the hold on foreclosures, they did not take either property. I have not made any payments since a few months before the BK. I have maintained them and kept the HOA current. They finally sold one at auction last November, but so far it is not on my credit report. I have NOT reaffirmed the loan of the other, which is still 'in my possession'. I saved my $ (20% down) for a down payment, and I am coming up on the 3 year after discharge this November. I am hearing the same confusion - that I may have to wait until 3 years after the last property's deed is changed (foreclosed). The house they finally took 11/2012 was a FHA, the one I still have is a conventional.
    Any ideas about whether I will be able to get a loan? I am currently living in the house, do I need to set up an address somewhere else so I dont cause problems during underwriting?
    ARG! Its not my fault they wouldnt take the house.
  18. Cat Damiano

    Cat Damiano Mortgage Wars

    Welcome to the forum and thank you for joining.............

    Try contacting Erik directly and he should be able to let you know if you would be eligible for a new loan. He has helped answer members questions in regards to new loans and refinance for quite some time and is very knowledgeable.

    He can be reached here;

    Erik Sandstrom
    Office: 858-217-5756
    Mobile: 619-379-8999
    erik.sandstrom@wjbradley.com
  19. Erik Sandstrom

    Erik Sandstrom Mortgage Expert - Call 1-800-779-4547

    Hi Sherriffwoody,
    Welcome to the forum, hopefully I can provide you with a direction. I do however need additional information based on your scenario.

    Typically with a BK, homes are not re-affirmed because if you owe more than the home is worth your attorney will in most cases automatically include the home in the BK. If you continued to make payments on the home after the bankruptcy and the property does short sale or foreclose, the seasoning period before you would be able to obtain financing would start at the date the property was SS or foreclosed. If you did not continue to make payments on the mortgage after the BK you're basically showing that you want to surrender the home and the seasoning would start once the bankruptcy has been discharged.

    Please feel free to reach out to me when you have a free moment. We are a direct lender and our branch is licensed in Nevada.
  20. shasta

    shasta LoanSafe Member

    Just wanted to update my post and say we closed on our new house today. If you stay and pay you can get a new FHA loan two years post discharge. We did have to qualify for both mortgage payments but they raised the ratio so we could do so. We are planning on renting out the old house if possible. Good luck!

Share This Page

COMPANY LINKS

TESTIMONIALS

"Hello Moe, I just wanted to tell you, your website has saved my life (literally), I stumbled on your site in the middle of losing my home, I was able to network with people going through the same thing as I am. I didn't feel alone anymore, I have tried to give back and counsel those that haven't walked in my shoes yet. We hear so much about what is wrong with America, I just wanted you to know, you are whats "right" with America."

Nina Mitchell
Loansafe & MoeSeo Inc. © 2014 | LoanSafe.org is not a bank, lender, mortgage broker, law firm or affiliated with the US Government. Privacy Policy