Fannie Mae Guidelines On Conventional Loans After Foreclosure

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This BLOG On Fannie Mae Guidelines On Conventional Loans After Foreclosure Was UPDATED And PUBLISHED On February 21st, 2020

What are Fannie Mae's guidelines for conventional loans after exclusion

What Are Fannie Mae Guidelines On Conventional Loans After Foreclosure  Requirements?

Fannie Mae and Freddie Mac are the two mortgage entities that regulate and set conforming standards on Conventional Mortgages.

  • Conventional Home Loans are not guaranteed by the government
  • Reason private lenders conform to Fannie Mae and Freddie Mac Standards is because in order for them to sell the loan they fund on the secondary market to Fannie/Freddie, it needs to conform to their standards
  • Fannie/Freddie will not purchase conventional loans that do not meet their mortgage guidelines
  • No lender wants to hold loans on their books

In this article, we will discuss and cover Fannie Mae Guidelines On Conventional Loans After Foreclosure.

Fannie Mae Guidelines On Conventional Loans After Foreclosure Versus Deed In Lieu/Short Sale

There are waiting periods after the following:

  • Foreclosure
  • Deed In Lieu Of Foreclosure
  • Short Sale

Fannie Mae Guidelines On Conventional Loans After Foreclosure mandate borrowers pass the mandatory waiting period. The waiting period of 7 years from the date of the sheriff’s sale and/or the date the deed of the property was transferred out of the homeowner’s name are Conforming Guidelines.

  • The waiting period clock does not start until the deed has been transferred out of the homeowner’s name
  • Many people think that the seven-year waiting period to qualify for a conventional loan starts the date that they left the property and surrendered the keys to the lender
  • However, this is not the case
  • There are times where the lender has not transferred the deed of the property in their days

This holds true even years after the homeowner has left the subject property and their waiting period did not even start.

Fannie Mae Guidelines On Conventional Loans After Foreclosure Versus Deed In Lieu/Short Sale

What are Fannie Mae's guidelines for conventional post-exclusion loans versus Lieu activity / short sale

Fannie Mae and Freddie Mac are the two mortgage giants that set the standards and guidelines on conventional loans.

  • Fannie Mae and Freddie Mac classifies foreclosures into two different categories
  • The waiting periods to qualify for a conventional loan are different between those who have a foreclosure versus deed in lieu of foreclosure
  • There is a seven-year mandatory waiting period after the sheriff’s sale date and/or the recorded date of a foreclosure
  • It needs to be reflected on public records to qualify for a conventional loan per Fannie Mae and Freddie Mac Guidelines
  • There is a four-year waiting period to qualify for a conventional loan after a deed in lieu of foreclosure
  • Waiting Period start date is the date of the sheriff’s sale and/or recorded date of the deed in lieu of foreclosure which is recorded in the county’s recorder of deeds office
  • Needs to be reflected on public records
  • There is a four year waiting period after a short sale to qualify for conventional mortgages

The four year waiting period clock starts from the date of the HUD-1 Settlement Statement which is the date the short sale home closed.

HUD Versus Fannie Mae

HUD, the United States Department of Housing and Urban Development, is the parent of the Federal Housing Administration, FHA

  • HUD sets the standards for FHA Loans
  • FHA does not separate the waiting periods to qualify for an FHA Loans between foreclosures and deed in lieu of foreclosures
  • The mandatory waiting period to qualify for an FHA Loan after foreclosure and deed in lieu of foreclosure is the same

Three-year mandatory waiting period after the date of the sheriff’s sale and/or the date where the deed of borrower’s name was transferred out of their names.

Also, with FHA Loans, there is a mandatory three year waiting period after a short sale in order to qualify.

Mortgage Part Of Bankruptcy

What does the mortgage part of bankruptcy mean?

One great news with conventional loans is borrowers can qualify for a conventional loan in four years from the discharged date of their Chapter 7 Bankruptcy if they had a mortgage part of their bankruptcy.

  • Unlike HUD, the foreclosure can be recorded after Chapter 7 Bankruptcy discharged date and that will not matter with regards to the waiting period

For example, here is a case scenario:

  • If Borrower A had their home mortgage of $300,000 part of their Chapter 7 Bankruptcy
  • And that Chapter 7 Bankruptcy was discharged on January 1, 2012, but the foreclosure was not transferred out of the homeowners’ name until January 1, 2016
  • Borrower A will qualify for a conventional loan on January 1, 2016
  • This because the mortgage was part of his Chapter 7 Bankruptcy
  • And the Chapter 7 Bankruptcy was seasoned for four years
  • Even though the foreclosure was not out of the homeowners’ name until four years later, borrower A is qualified for a conventional loan

With FHA, the 3 year waiting period after foreclosure time clock will start the date the foreclosure was transferred out of Borrower A’s name:

  • Which was January 1, 2016
  • The borrower will not qualify for an FHA Loan until 3 years from January 1, 2016, which will be January 1, 2019

Home Buyers who had a mortgage part of bankruptcy and need to qualify for a conventional loan and have been at least four years from the discharged date of your Chapter 7 Bankruptcy, please contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com.

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