Fannie Mae reduces waiting periods for borrowers with short sale, foreclosure, bankruptcy

By Huntington Beach Realtor, Scot Campbell – Source: DSNews/FannieMae

FannieMae announced they are revising the waiting periods for distressed borrowers with a derogatory credit event such as a foreclosure, bankruptcy, short sale, or deed-in-lieu of foreclosure on their credit history to obtain a new loan.

Fannie Mae headquartersThis is especially important news for the housing market because Fannie Mae guidelines are followed by the majority of lenders when originating new mortgage loans. A change by Fannie Mae often becomes the industry standard, and a change like this one will have a positive impact on market by increasing the effective damand for homes.  Here is an explanation of the changes:

For borrowers with a short sale or deed-in-lieu of foreclosure on their record: Fannie Mae’s new mandated minimum waiting period to become eligible for a new loan is four years. The time is shortened to two years if there are extenuating circumstances. According to Fannie Mae, extenuating circumstances are defined as “nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.”

If a borrower has a foreclosure on his or her credit record: the new minimum waiting period is seven years. Under extenuating circumstances, that period is shortened to three years.

For those with a bankruptcy (chapter seven or 11): the waiting period is four years (two years with extenuating circumstances).

For distressed borrowers with a chapter 13 bankruptcy, the required waiting period is now two years from the discharge date and four years from the dismissal date. If there are extenuating circumstances, the waiting time from the dismissal date is shortened to two years.

If there are multiple bankruptcy filings on a borrower’s record, the waiting period for a new loan is five years if there has been more than one filing in the previous seven years. Under extenuating circumstances, the waiting period is cut to three years from the most recent dismissal or discharge date.

Fannie Mae said in the report that it is “focused on helping lenders to provide access to mortgages for creditworthy borrowers while supporting sustainable homeownership” and that the new policy “provides opportunities for borrowers to obtain a loan to Fannie Mae’s maximum LTV (loan-to-value) sooner after the preforeclosure (short) sale or DIL.”

The new policy is effective for loans with application dates on or after August 16, 2014.

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Scot Campbell Huntington Beach Realtor For questions about buying and selling real estate in Huntington Beach and Coastal Orange County, contact Scot Campbell. He is the President of The Scot Campbell TEAM at Coldwell Banker-Campbell Realtors in Huntington Beach, CA. 

 Scot is a Previews Property Specialist,  has been a licensed for 28 years, and has brokered over 1000 homes… including just about every type of transaction imaginable.

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