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Fannie Mae Guidelines On Conventional Loans After Foreclosure

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Fannie Mae Guidelines On Conventional Loans After Foreclosure

This BLOG On Fannie Mae Guidelines On Conventional Loans After Foreclosure Was UPDATED On October 29th, 2018

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

Fannie Mae and Freddie Mac are the two mortgage entities that regulate and sets 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

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. 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 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

Fannie Mae and Freddie Mac are the two mortgage giants that sets 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 a FHA Loans between foreclosures and deed in lieu of foreclosures
  • The mandatory waiting period to qualify for a FHA Loan after a 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

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 the 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
    • Borrower will not qualify for a 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 faster response. Or email us at gcho@loancabin.com.

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