Home Loans and Support

Waiver on Three year foreclosure wait period

Discussion in 'Stop Foreclosure and Tell Us Your Story' started by otise, Oct 12, 2012.

  1. otise

    otise LoanSafe Member

    I am in the final stage of closing on a house thru an FHA loan. I filed chapter 7 bankruptcy in Jan. 2007
    and in the fall a bank filed suit to foreclose on the property. There were several banks involved in the
    the bankruptcy and they filed claims on the property in late 07 and early 08. The banks involved did not
    reach an agreement until 2010 and in March of 2010 the master commisioner sold the property to one
    of the banks. I was under the impression that by the banks filing for foreclosure in 2007 and 2008 that
    the property was no longer ours. I have found out in an unpleasent way that the foreclosure date to begin
    the three year wait period was as of the sale or deed date, which was April 2010. I have met all the
    requirements of FHA and even have paid money down on the residence only to find out about this requirement
    on Sept. 19th. I have been working on this loan and was pre approved in march of this year, and of
    course am devastated by these turn of events. Are there any Waiver options for this per the underwriters
    decision ???
  2. Cat Damiano

    Cat Damiano Mortgage Wars

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

    The reasons for the BK7 and/or the foreclosure will have everything to do with whether or not that period can be waived if you are able to meet the requirements for extenuating circumstances;

    Extenuating circumstances which if met, reduce the required waiting periods to 2 years on a bankruptcy and 3 years on a foreclosure, for a new FHA loan. Extenuating circumstances are credible excuses for the bankruptcy or foreclosure that can be interpreted to mean that the likelihood of a recurrence is very low. The lender will be looking for an explanation that involves multiple causes for the bankruptcy or foreclosure. People lose their jobs, they get sick, they have accidents, they suffer deaths in the family, they are victimized by fraud, etc. One of these in and of itself is not likely to be viewed as an extenuating circumstance, but a combination of them might. Another note is that extenuating circumstances do not include the inability to sell the house because of a job transfer or relocation to another area.

    The lender will also look for evidence that, whatever was the cause of the past problem, is likely one that is not going to reoccur. In addition, they want the borrower to document that since the occurrence of the bankruptcy or foreclosure, the borrower’s capacity to handle financial affairs has improved. A rising credit score and an ability to make a significant down payment on a new loan are good evidence of this.

    The major hurdle facing the borrower who wants to plead extenuating circumstances is convincing the lender, but the prospect of success is much lower than it was before the financial crisis. Every aspect of loan underwriting has gotten tougher, and the ability to plead extenuating circumstances is very difficult. If you claim these types of circumstances, you will have to back up your claim in some way. They're not just going to take your word on it. Mortgage lenders must verify that extenuating circumstances actually did exist, typically through the use of certain documents:

    • Notice of job layoff
    • Job severance letter
    • Divorce decree
    • Tax returns that show a loss of income
    • Other documents that might support your claim

    Again, the goal here is to show that you suffered from events that were largely beyond your control events that reduced your income or increased your expenses (or both).


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