New Mortage After Bk7

hp2002grad

LoanSafe Member
Oct 17, 2010
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We are looking for options on buying a home after a BK7. We were discharged BK7 back on 02/27/2012. We decided to stay in our home and received a loan modification for trial payments beginning on February 1st 2014. We successfully gave the three trial payments and the loan mod was finalized by giving our first modification payment on June 1st 2014. Since then, we have made all on time payments.

Since the modification and all that, we have since outgrown our current home with the addition of another child. Our intention is to keep the home and rent it out as we are still a little underwater on the current home and during the loan modification they (BofA) tacked on a partial claim in the amount of 27k. Since BK7, we have steadily improved our credit scores (currently in the 680-700 range) and our income has gone up yearly (verified through W2’s and Tax returns)

I have heard of FHA back to work, and I and not sure if we would qualify (though we have proof that back in 2009 we had a cut to our finances due to reduced work hours and pay) I was referred to this site and was wondering if anyone has had luck given similar circumstances with any mortgage program.

Of note, in our credit report, BofA is not reporting payments to the mortgage as it was included in our BK7.

I appreciate any help in advance.

Hector
 
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Moe Bedard

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Hello Hector,

Yes, there is the FHA Back to Work Program. You have to prove a financial hardship that was due to an unfortunate situation such as unemployment or income reduction and a down payment of at least 3% minimum and to verify W-2 or federal tax returns.

The other 3 requirements are First you must have experienced one of the events listed above such as foreclosure, bankruptcy or a short sale (or another crunching event) and have proof that you did.

Secondly, you must demonstrate that you are financially stable since this event has occurred. Third, you must consent to attend housing counseling sessions prior to closing.

Lastly, you must prove that the financial hardship was out of your control by providing proof that your household income fell by 20% or more for a 6 month period, and that this contributed to your financial hardship.
 

Michael Naz

Michael Naz
Jan 9, 2011
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Southern California
Hello Hector,

Congratulations on the increase in family size, increase in income and getting past the debt challenges :)

The partial claim was because your loan was backed by FHA insurance and the mod you received is an FHA mod and this is a feature common to all FHA loan modifications at all servicers. The partial claim includes your past due payments since FHA loan mods never forgive past due payments.

Since you have less than 25% equity on the property you want to be renting out to then buy your new property, you will be required to show you can make both the new property's mortgage payment as well as the one you are renting out.

You should contact Bank of America 800-669-6607 and ask them to start reporting your payments to the three credit bureaus so it improves your scores even more than they are already.

We can review your financials and circumstances to see how if you can qualify for a new home purchase and what purchase price range fits your unique budget.

Please give us a call at or email in to get started.
 

hp2002grad

LoanSafe Member
Oct 17, 2010
49
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Thanks for the replies

In talking with a mortgage banker, he reviewed the terms of our loan mod and with the partial claim at the end, any attempt to refinance the loan, or make the property anything other than our primary residence, we need to come up with the full partial claim (27k) Our only option is to let the house go into foreclosure or short sell the property to get from paying the full partial claim. Anyone else experience something similar??
 

Michael Naz

Michael Naz
Jan 9, 2011
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Hp2002grad- I have reason to believe your mortgage banker is wrong.

FHA modifications do not require you to owner occupy the loan for the duration of the time you have the loan after a modification.

If you sell the property or the first mortgage is paid off then the partial claim needs to be paid, but there are no restrictions on occupying the property after the mod for any period of time.
 

pennygram

working for consumers
Sep 29, 2010
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I have personally reviewed many loan mods and have never seen where you have to reside in the property for a certain time after the loan mod is effective... get another opinion...
 

Michael Naz

Michael Naz
Jan 9, 2011
2,965
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Southern California
It could be confusing for borrowers because when you get a modification on an owner occupied property at the time of the modification, the documents will say that at the time of the modification, the borrower(s) represents that they are occupying the home said the date the borrower signs the permanent loan modification agreement.

This is common especially for FHA mods and HAMP Tier 1 mods where it's required for the borrower to attest and confirm they are living in the property when signing the document.

Nothing is ever said in the documents about the next day or next week or next month or year after signing that they must remain the occupant.

The intention is that the borrower will occupy the property after an owner occupied modification program though it's not a requirement spelled out for any period of time after signing the agreement.

Waiting for the Servicer to send back a countersigned agreement would be wise before any occupancy is changed just to be safe.

They do send out property inspectors to make sure the property is not abandoned and not rented out before the permanent modification documents are mailed out on an owner occupied loan modification.
 
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perplexing

LoanSafe Member
Oct 19, 2017
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Partial-Claim agreements often require that it be the homeowner's primary residence, even if the modification agreement does not. They're separate tools and while the modified loan terms may not be affected by moving out, the event *would* trigger full payment of the Partial-Claim, for which there is a 2nd lien. Once the homeowner leaves, the amount of the claim becomes due immediately, rather than at the maturity date or when sold.

Our own agreement reflects this, with the Manner of Payment being written as follows:

A) Time

On [30 years from original mortgage origination date] of insured mortgage or, if earlier, when the first of the following events occurs:

1) Borrow has paid in full all amounts due under the primary Note and related mortgage, deed of trust or similar Security Instruments insured by the Secretary, or

2) The maturity date of the primary Note has been accelerated, or

3) The Note and related mortgage, deed or trust or similar Security Instrument are no longer insured by the Secretary, or

4) The property is not occupied by the purchaser as his or her principal residence.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
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www.loansreduced.com
I'm going to piggy back onto this thread for it's initial topic which is obtaining a new mortgage after a Chapter 7 BK. In this case we have a borrower seeking to purchase a property after including their current home in Chapter 7 BK. Just because the house was included in bankruptcy doesn't mean that you can't obtain a new home loan, below are the guidelines:

1. Fannie Mae is the only product available for properties included in BK at this time for refinances.
2. When looking to purchase a new home you must account for the liability on the property and if you have enough equity in the home you can use rental income to help offset the liability to allow you to qualify to buy a larger home.
3. Loan Modifications - as long as the loan modification is older than 2 years you can obtain new financing no matter what the loan modification entailed as long as you remained current after the loan mod.
4. For refinancing properties included in BK, we can do that also - however we would pull the loan from bankruptcy protection and it would also start reporting on the credit.

For any other questions, feel free to post on this thread or contact us directly at 800-779-4547.