Mortgage Included In Chapter 7 Bankruptcy Lending Guidelines

Mortgage Included In Chapter 7 Bankruptcy Lending Guidelines

This BLOG On Mortgage Included In Chapter 7 Bankruptcy Lending Guidelines  Was UPDATED On October 7th, 2018

There are many folks who can no longer afford their mortgage payments on their current home and file bankruptcy and have the foreclosure part of bankruptcy.  People that file bankruptcy and have their foreclosure part of bankruptcy will one day become homeowners.

  • However, many folks who have the foreclosure part of bankruptcy are facing a major dilemma
  • The deed is still in their name and not the mortgage lender’s name
  • There are waiting period requirements after a bankruptcy and foreclosure in order for a person to be able to qualify for a residential mortgage loan

Waiting Period Requirements After Bankruptcy And Foreclosure

The minimum waiting period for someone to qualify for a residential mortgage loan after a bankruptcy is two years from the discharge date of the bankruptcy.

  • The minimum waiting period for someone to qualify for a residential mortgage loan after a foreclosure is three years
  • The waiting period start date is from the date the foreclosure is transferred out of the borrower’s name and into the mortgage lender’s name
  • When a foreclosure is part of the bankruptcy, the waiting period time clock starts the date the foreclosure is out of borrower’s name and into lender’s name
  • Just because the foreclosure is part of the bankruptcy does not transfer the deed out of the borrower’s name into the mortgage lender
  • The foreclosure part of bankruptcy will wipe out the mortgage
  • But the deed is still in their name
  • As soon as bankruptcy is finalized, consumers need to make sure that the bank has transferred the title to their name and out of homeowners
  • I have so many folks who had their foreclosure part of bankruptcy many years ago but the deed is still in their name
  • So their waiting period has not even started yet
  • These folks still need to wait three years from the date the deed is transferred out of their name
  • Many of these folks have made countless of phone calls to their lenders
  • Their lenders are not cooperating and are in no hurry in getting the deed into their name
  • Technically, homeowners own the home free and clear if mortgage was included in bankruptcy
  • This holds true because the bankruptcy wiped out mortgage loan balance

Quick Fix Of Getting Name Out Of Deed

As mentioned earlier, if homeowner has a foreclosure part of bankruptcy and are still on title,  mortgage is wiped out and they no longer owe the mortgage lender anything.

  • Lenders should be in a hurry to get the title transferred in their name
  • However, most are not
  • The often do not care about it and do know that by delaying transferring the title to their name and out of yours, this will be hurting homeowners
  • For those who have made countless of unreturned phone calls making this request
  • I suggest that you write a certified letter to their lender that if they do not transfer the title out of their name and into their name that the property will be listed and sold
  • Technically homeowners can keep all the proceeds from the sale
  • This certified letter will alert the lender that you can legally do that and you will most likely see some action
  • I have never seen a case where a homeowner do this where they kept all of the proceeds from the sale
  • But I have seen many lenders act fast in transferring the borrower’s name off title and into theirs and recording it

2018 Update On Mortgage Included In Chapter 7 Bankruptcy

Those who had a Mortgage Included In Chapter 7 Bankruptcy, may now qualify for a conventional loan four years from the date of your discharge date of Chapter 7 Bankruptcy.

  • The housing event needs to have been finalized
  • Foreclosure, deed in lieu of foreclosure, and/or short sale can be recorded at a later date past the discharged date of the Chapter 7 Bankruptcy discharged date
  • Waiting period to qualify for mortgage with a prior Mortgage Included In Chapter 7 Bankruptcy applies only for conventional and VA loans
  • This does not apply for FHA and USDA Loans
  • Mortgage Included In Chapter 7 Bankruptcy on government loans, the waiting period starts from the recorded date of the foreclosure, deed in lieu of foreclosure, or short sale date

Home Buyers who had Mortgage Included In Chapter 7 Bankruptcy and has passed the four year waiting period and need to qualify for conventional loans with a direct lender with no lender overlays on government and/or conventional loans can contact Gustan Cho Associates at Loan Cabin at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. We are available 7 days a week, evenings, weekends, and holidays.

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