Foreclosures Short Sales Guidelines Conv Fannie Mae





Foreclosures Short Sales Guidelines for Fannie Mae Conventional  Mortgage loan in Kentucky
Condition
Wait Period Only If Extenuating Circumstances Exist
Standard Wait Period for Financial Mismanagement
Chapter 7 or 11
2 years, measured from discharge or dismissal date.
4 years, measured from discharge or dismissal date.
Chapter 13
2 years, from discharge or dismissal date.
* 2 years, from discharge date
OR
4 years from the dismissal date.
*The shorter wait period for discharge date recognizes that borrower has already met a portion of wait period due to successful completion of the Chapter 13 plan. A borrower who was unable to complete the Chapter 13 plan and received a dismissal will be held to a four-year waiting period.
Multiple Bankruptcy Filings Within the Last 7 Years
3 years or greater, measured from the most recent discharge date or dismissal date,
AND
There is evidence the most recent BK filing was a result of extenuating circumstances.
5 years or greater, measured from the most recent discharge date or dismissal date.
Note: The presence of multiple bankruptcies in the borrower’s credit history is evidence of significant derogatory credit and increases the likelihood of future default. Two or more borrowers with individual bankruptcies are not cumulative, and do not constitute multiple bankruptcies. For example, if the borrower has one bankruptcy and the co-borrower has one bankruptcy this is not considered a multiple bankruptcy.
Foreclosure
3 years, measured from completion date of foreclosure action as defined for standard wait period. The following additional requirements apply between 3 and 7 years, which include:
DU Loans:
Maximum LTV, CLTV, or HCLTV limits are the lesser of 90% or the maximum LTV, CLTV, or HCLTV limits for the transaction per Eligibility Matrix or Plaza program summary.
• Purchase - Primary Residence only.
• Limited cash-out refinances – Primary, 2nd Home and Investment eligible if program and DU allow at time loan is underwritten.
7 years, measured from completion date of foreclosure action as reported on the credit report or other foreclosure documents provided by borrower.
Note: The purchase of second homes or investment properties and cash-out refinances (any occupancy type) are not permitted until a seven-year waiting period has elapsed.
Deed-in-Lieu of Foreclosure and Pre-foreclosure/ short sale
DU: 2 years — 90% maximum LTV/HCLTV
LP: 90% max LTV
2 years from completion date on owner occupied purchase or non-cashout refinance only
• 2 years — 80% maximum LTV
• 4 years — 90% maximum LTV
• 7 years — LTV max per Eligibility Matrix
*The maximum LTV ratios permitted are the lesser of the LTV ratios in the above table or the maximum LTV ratios for the transaction per the Eligibility Matrix.
Exceptions for Extenuating Circumstances
A two-year waiting period is permitted if extenuating circumstances can be documented, with maximum LTV ratios of the lesser of 90% or the maximum LTV ratios for the transaction per the Eligibility Matrix.
Note: References to LTV limits include LTV, CLTV and HCLTV limits.
Underwriter’s Written Analysis
Underwriter elects to use Extenuating Circumstances.
Must be a complete analysis fully detailing that the application has re-established an acceptable credit history.
May be documented on the Transmittal FNMA Form 1008.
Requirements for Re-Establishing Credit
Requirements for Re-establishing Credit
After a bankruptcy, foreclosure, deed-in-lieu of foreclosure, or pre-foreclosure sale, the borrower’s credit will be considered re-established if all of the following are met:
· The waiting period and the related additional requirements are met.
· The loan receives an Approve/Eligible or LP Accept and meets minimum credit score requirements.
· The borrower meets minimum trade-line requirements per program summary.
· Non-traditional credit is not acceptable for meeting re-established credit requirements after major derogatory.
Additional Requirements:
· All existing credit obligations must be current at the time of the application.
· No more than 2 x 30 day late payments on installment and/or revolving accounts in the most recent 24 months.
· No 60 day late payments on any allowed on any installment and/or revolving debt during the derogatory event waiting period.
· No past due housing payments during the derogatory event waiting period.
· No new public records for Bankruptcies, Judgments or Collections allowed during the derogatory event waiting period.





 






DU applies the following guidelines to prior bankruptcies
· If a Chapter 13 bankruptcy was discharged within the last 24 months, dismissed within the last 48 months, or filed but neither discharged nor dismissed within the last 48 months, the loan casefile will receive a Refer with Caution or Refer with Caution/IV recommendation and will be ineligible.

  • If a non-Chapter 13 bankruptcy was filed, discharged, or dismissed within the last 48 months, the loan casefile will receive a Refer with Caution or Refer with Caution/IV recommendation and will be ineligible.
  • DU will not take bankruptcy information in the public record section of the credit report into account if the bankruptcy is dated more than seven years prior to the credit report date.
  • DU will not take tradeline accounts that are reported with a bankruptcy status code or manner of payment/MOP code of “7” into account if there is at least one bankruptcy reported in a public record within seven years of the credit report date. In this scenario, DU assumes the date filed and the date discharged in the public record are more accurate than the dates in the tradeline; i.e., specific filed and discharged dates do not exist in the tradeline.
  • DU will use tradeline accounts that are reported with a bankruptcy status code or manner of payment/MOP code of “7” if there is not a bankruptcy reported in a public record within seven years of the credit report date. In this scenario, the lender will need to verify the actual filed and discharged dates to determine that the bankruptcy meets the DU bankruptcy policy.
  • DU is not able to determine if multiple filings have occurred due to the manner in which bankruptcies are reported to the credit report. DU will issue a message when it appears that there may have been multiple bankruptcy filings. This message will list each of the bankruptcies seen on the credit report, and will instruct lenders to ensure the loan casefile meets the criteria for underwriting loan casefiles with multiple bankruptcies.


DU applies the following guidelines to prior foreclosures
  • Mortgage accounts, including first liens, second liens, home improvement loans, HELOCs, and mobile home loans, will be identified as a foreclosure if there is a current status or manner of payment/MOP code of “8” (foreclosure) or “9” (collection or charge-off); or if there is a foreclosure-related Remarks Code present in the credit report data and associated to the tradeline.
  • If a foreclosure was reported within the seven-year period prior to the credit report date, the loan casefile will receive a Refer with Caution or Refer with Caution/IV and will be ineligible.
If the filed date and the satisfied date of the foreclosure are both unknown, but it appears that the foreclosure occurred within the seven-year period prior to the credit report date, the lender must confirm that the foreclosure did not occur within the most recent seven-year period.
  • Foreclosure laws vary by state and the time it takes to complete the process may vary by state. DU assumes that the date the foreclosure was reported in the tradeline is the date of the foreclosure sale or liquidation. The lender must confirm that all foreclosures are satisfied.




DU applies the following guidelines to prior deeds-in-lieu of foreclosure
  • DU will determine if a mortgage tradeline is a deed-in-lieu of foreclosure by using specific Remarks Codes that are present in the credit report data and associated to the tradeline.
o If a deed-in-lieu of foreclosure was reported within the two-year period prior to the credit report date, the loan casefile will receive a Refer with Caution or Refer with Caution/IV and will be ineligible.
o If a deed-in-lieu of foreclosure was reported more than two years before the credit report date, the existence of the deed-of-lieu foreclosure is acceptable provided the loan complies with the LTV ratio requirements that apply after two years and up to seven years following the completion date, as stated in Significant Derogatory Credit Events — Waiting Periods Matrix.


Pre-foreclosure Sales or Short Sales



Joel Lobb (NMLS#57916)
Senior  Loan Officer
502-905-3708 cell
502-813-2795 fax
kentuckyloan@gmail.com

Key Financial Mortgage Co. (NMLS #1800)*
107 South Hurstbourne Parkway*
Louisville, KY 40222*



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