Is There Hope For Us In Nj?? Mortgage After Ch 7

KimNJ

LoanSafe Member
Aug 7, 2014
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Current situation:
Home value 210,000
1st Mortgage 73,000 discharged 3/2010 Ch 7
2nd Morgage 75,0000 discharged 3/2010 Ch 7
HELOC (3rd in line) 248,000 discharged 3/2010 Ch 7
Current yearly household income roughly $150,000

My husband filed Chapter 7 discharged 3/2010 due to divorce and loss of income all mortgages/HELOC included. We received a mod on 1st we are 6 months in default on 1st and 2nd and have not made a payment on HELOC since 8/2008. I declared Ch 7 discharged in 2011 secondary to debt from a previous divorce.

We originally wanted to try to settle the HELOC and bring the first and second current which we are in a position to do BUT now think the better option for our family is to make a fresh start in a house more suitable to our needs (We are a family of 5 full time and 8 part time) in a 3 bed 1 bath ranch which is in desparate need of updating and some work. He has owned the house since 1993 during his first marriage originally purchased for 85K. The constant struggle over the past 6 years and living in limbo is suffocating.

We could do a 20% cash down payment on a 290K mortgage. Our credit scores are still suffering (mid to high 500's) however we have obtained two necessary car loans since his BK which are paid on time.

Is it possible to obtain a mortgage? It is my understanding that Fannie Mae changed rules as of 8/16 do these changes apply to us?

Any information or guidance is greatly appreciated!
 

KimNJ

LoanSafe Member
Aug 7, 2014
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To clear up a few questions which may come to mind we are in New Jersey, we have received NOD on 1st and 2nd but are in stalling talks with them until we figure out if we can get a mortgage to move. We would consider "renting" this house out if it would improve our chances of getting a mortgage. Anything not to have to deal with Chase ever again!

Is the HELOC still allowed to compound interest on the discharged loan?

1st Mtg Chase
2nd Mtg PNC
HELOC WAMU/Chase just filed assignment 4/2014 but has been Chase for years
 

Moe Bedard

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Hello KimNJ,

The problem I see is that you are currently late, and in default which means that the time for these credit events to begin fixing themselves hasn't even started yet. Meaning that until you have resolution on this current mortgage and home, you most likely won't be able to begin qualifying for a new mortgage. The time period to qualify for a new home loan for all lenders starts after these events such as foreclosure or short sale are finalized.

1 Day out of foreclosure or short sale Mortgage - It is possible to obtain a mortgage 1day out of foreclosure or short sale, but you first must meet these requirements:

1. Minimum loan amount $350,000
2. Maximum loan amount $5,000,000
3. 20-30 percent Down payment minimum. (20 percent can be a gift or asset pledge as long as borrower used 10 percent of their own funds)
4. 680 minimum credit score. (lower scores on exception basis)
5. Interest only option available. (Requires 40 percent down)6. Asset depletion option available. (Assets are used to help qualify if debt to income ratio is too high) 7. Property can be second home or primary residence. (2nd home requires larger down payment)
9. Asset based program. This program requires you to have money saved in retirement, checking, savings or brokerage accounts even after the down payment of 30 percent or more. Remember, you just had a foreclosure or a short sale and the lender want's to make absolute sure that you are going to be able to make your payments.
10. Rates start in the low 4 percent range on a 5/1 ARM and is not a "hard money loan"

FHA Back to Work Program - The FHA Back to Work Program is a program started on or after August 15, 2013 that allows some people to obtain a mortgage within one year after foreclosure or bankruptcy. A couple of common guidelines include having a minimum credit score of at least 580 to 620, making a small down payment of at least 3% minimum and to verify W-2 or federal tax returns. If you can make these simple requirements, or stand up to the challenge of meeting further requirements for other housing options like condos or co-ops than you could be eligible for a mortgage through the FHA’s Back to Work Program. -

With Fannie Mae, the waiting period is 2-4 years after a chapter 7 bankruptcy, but you MUST have good credit and no current mortgage lates like you have. A two-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the discharge or dismissal date of the bankruptcy action. A seven-year waiting period is required, and is measured from the completion date of the foreclosure action as reported on the credit report or other foreclosure documents provided by the borrower.

A Foreclosure and Bankruptcy on the Same Mortgage - If a mortgage debt was discharged through a bankruptcy, the bankruptcy waiting periods may be applied if the lender obtains the appropriate documentation to verify that the mortgage obligation was discharged in the bankruptcy. Otherwise, the greater of the applicable bankruptcy or foreclosure waiting periods must be applied.

Exceptions for Extenuating Circumstances

A three-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the completion date of the foreclosure action. Additional requirements apply between three and seven years, which include:

* Maximum LTV, CLTV, or HCLTV ratios of the lesser of 90% or the maximum LTV, CLTV, or HCLTV ratios for the transaction per the Eligibility Matrix.

* The purchase of a principal residence is permitted.

* Limited cash-out refinances are permitted for all occupancy types pursuant to the eligibility requirements in effect at that time.

https://www.fanniemae.com/content/guide/selling/b3/5.3/07.html

http://www.loansafe.org/fhas-back-to-work-program-eliminates-traditional-waiting-period-after-foreclosure-and-other-hardships

http://www.loansafe.org/forum/threads/qualifying-for-a-mortgage-after-foreclosure.86407/
 

Erik Sandstrom

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Hi KimNJ,
I was actually writing a response right when Moe chimed in and took the words right out of my mouth. Right now with you being delinquent on the mortgage (even though it's included in bankruptcy) will prevent you from obtaining another mortgage. As Moe had mentioned the time clock hasn't even started ticking yet because your economic event essentially hasn't occurred yet, ie: foreclosure or short sale.

The guidelines changing tomorrow 8/16/2014 for Conventional loans will prevent you from obtaining traditional type financing for 4 years with any loan-to-value of 95% or less. Previously if you put 20% down you could obtain a new mortgage 2 years after the short sale. In your circumstance you may qualify under the extenuating circumstance guidelines due to the what happened in the past to cause this event but it definitely would be a stretch.

There are niche programs out there that will allow you to purchase a home with 30% down with no seasoning requirements as long as you have a strong portfolio like Moe mentioned above. The Asset pledge program (20% down, 10%+ pledge) is used if you have one of the following: Savings, Money Market Bank (must be a CD), stocks, bonds, mutual funds where your account allows our investor to pledge against the account. The problem we've found is that most accounts will not allow our investor to place a hold on the funds. The other direction would be to use one one of the investors accounts (CD's, checking, savings or money market account) and then of course there would be no problem with the pledge there.

What you really need to focus on is the current property at this time. You're going to be in between a rock and a hard place until the disposition of the property changes and the deed is transferred out of your/his name. Hope this helps and wishing you the best of luck with everything.
 

KimNJ

LoanSafe Member
Aug 7, 2014
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Thank you both for your responses. The current mortgages are not reporting to credit bureaus. They show discharged in bankruptcy and all stopped reporting in 2009. None were reaffirmed. The only open lines of credit on credit report are two auto loans. There was an auto loan that was discharged in the chapter 7 but was paid off but credit history doesn't reflect that.

If we continue to pay the first two mortgages and try to settle the HELOC would we have the option to refi first two? Can the bank foreclose even if we pay and stay? At this point this house will never be worth the $396000 owed on it. There has to be something we can do.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
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San Diego, California
www.loansreduced.com
No problem,
Unfortunately you won't be able to refinance because the settled second mortgage will be viewed like a short sale. Even though you included your property in BK and didn't re-affirm you still have ownership interest in the property. Once your names are removed from the deed the time clock will start ticking for when you would be eligible to refinance or purchase a new property.
 

KimNJ

LoanSafe Member
Aug 7, 2014
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Any ideas on my thread "Our 6 yr Chase nightmare"

To me it seems walking away is the best answer since settling HELOC won't help us to refinanace and be rid of Chase. If we settle we couldn't sell and get another mortgage because the heloc would be considered a short sale. I don't know what the answer is anymore. I feel like I am being consumed by this money pit. $186000 underwater is crazy!
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,101
181
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San Diego, California
www.loansreduced.com
I always recommend to evaluate all options before deciding which is the best for your family. It sounds like you're already in the midst of doing that which is what you should be doing. At the point the mortgage is not affordable you need to leave the emotional attachment aside and think of every possible angle, the positives and the negatives.

You should speak with a real estate attorney in your state and ask about the consequences of a short sale, deed-in-lieu or foreclosure. Start becoming familiar with the recourse and non-recourse laws in your state because having multiple loans can put you in jeopardy for collection activity and with a lien still reporting on your credit it will impact your ability to purchase another property. Deed-in-Lieu has shorter time periods when you can buy again than a full foreclosure, it's almost treated similar to a short sale.

What you have mentioned above is correct, you won't have the ability to refinance until you bring all loans current for at least a year and have satisfactory credit & equity for a refinance. If you would like I can e-mail you a timetable of different programs and how long the seasoning periods are, my contact information is below.