Wednesday, June 29, 2011

After Foreclosure: The Bounce Back Buyers

by Bill McBride on 6/29/2011 06:01:00 PM

From Maryann Haggerty at the NY Times: The Post-Foreclosure Wait (ht Ann)

Fannie Mae, Freddie Mac and the Federal Housing Administration set guidelines for how long a borrower must wait after a “significant derogatory event.”

There are plenty of asterisks and conditions. But to generalize, the wait is longest after a foreclosure. Extenuating circumstances like a job loss, illness or divorce reduce the wait.

With such circumstances, Fannie and Freddie specify a two-year wait after a short sale, deed in lieu, or discharge or dismissal of bankruptcy, and three years after foreclosure. Without extenuating circumstances, waits can extend to four years after bankruptcy and seven years after foreclosure.

“The key is to avoid the foreclosure,” said Andrew Wilson, a spokesman for Fannie Mae. “That is what will help you be eligible for the shorter period.”

As for F.H.A.-insured loans, they are available three years after a foreclosure, assuming perfect credit afterward, and two years after a bankruptcy is discharged. After a short sale, there’s a three-year wait if the borrower is in default at the time of the sale and there are no extenuating circumstances.
Mortgage broker "Soylent Green is People" sent me this short summary last month (with many more details):
"Pre-Foreclosure" = Short Sale.

VA - immediate, providing you've got 12 months clean credit.
FHA - 3 years.
Conventional 4 years.

Foreclosure:

VA - 2 years, providing you've got 12 months clean credit AND the loan that was foreclosed was not a VA
FHA - 3 years, providing that the foreclosed loan was not an FHA mortgage
Conventional - 7 years.
Soylent Green is People thinks we will start seeing "bounce back buyers" later this year and in 2012.