Hoping to purchase a Sacramento home after completing a short sale? Fannie Mae is extending the waiting time period...

Hoping to purchase a home after completing a short sale of your prior home? -- this is important! Fannie Mae has announced some BIG changes for home buyers who want to purchase a home after a short sale. These changes take affect on August 16th, 2014 and will have a significant impact on the required wait time to purchase another home.

For the last several years, a home buyer with a past short sale could finance another property purchase using a 20%+ downpayment after just two years from the closing date of their short sale. This was great for many people, and I have worked with clients who fell into that segment...I sold their home as a short sale, and 2 years later, their financial circumstances had improved and they'd saved enough for the 20% downpayment.

After August 16th, 2014, Fannie Mae will no longer allow this, and the waiting period will be FOUR YEARS. Ouch! If you are a buyer and this applies to you -- either accelerate your home search asap, or figure out "Plan B" for your financing. You do not have to close your purchase by August 16th, however you DO have to be in contract for the home you are purchasing by that date, AND have your lender submit your loan file through the automated underwriting system. To be safe, you should probably be in contract on or before August 13th so your loan officer has time to get this done for you.

You are probably thinking, "What are the Plan B options if I'm not in contract to purchase a house in Sacramento before the cut-off?"

Well, if you have more than 20% down, then you may be able to find other lenders with "portfolio" loans (aka, loans that do not have to conform to Fannie Mae standards) that may be willing to do your loan. I know of one lender who work with buyers just months after a short sale with 30% down, however the interest rates are going to be a little higher than conventional rates, and you will probably not be able to do a 30-year fixed loan. It would be a 5 or 7 year ARM (fixed rate for the first 5 - 7 years and then adjustable after that).

Another option if you are 3 years past the anniversary of your short sale is an FHA loan. FHA loans require a minimum of 3.5% downpayment which is far less than 20% down, however these loans come with a string attached that a buyer would not have to deal with on a 20% down conventional loan: mortgage insurance. This can add costs to the transaction and to the monthly mortgage payment.

Neither one of the Plan B lending scenarios are the end of the world, however they'd either require a longer wait or more money down.

So buyers, if this describes your scenario -- do some strategic planning with your loan officer and Realtor! And do it today.

FHA Shortens the Waiting Period for new loans after Short Sale, Foreclosure, Deed-in-Lieu of Foreclosure, or Bankruptcy...

Well, I will be emailing many of my past short sale seller clients shortly. Last week, FHA issued Mortgagee Letter 2013-26, which in a nutshell, shortens the waiting period to get a new mortgage loan for folks who did a short sale, deed-in-lieu of foreclosure, foreclosure of bankruptcy. This waiting period to obtain a new FHA loan for a purchase for these folks has generally been about 3 years after a foreclosure or short sale. Now, for potential buyers who had a "defined Economic Event" can get a new FHA loan for a purchase as soon as 12 months after a short sale, deed-in-lieu of foreclosure, foreclosure, or bankruptcy. This create a huge opportunity for folks who suffered hardship during the recession.

To quote part of Mortgagee Letter 2013-26 directly:
"As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost their homes to a pre-foreclosure sale, deed-in-lieu, or foreclosure. Some borrowers were forced to file for bankruptcy to discharge or restructure their debts. Because of these recent recession-related periods of financial difficulty, borrowers’ credit has been negatively affected. FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage. 

To that end, FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that: 

• certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control;
• the borrower has demonstrated full recovery from the event; and,
• the borrower has completed housing counseling.

Housing counseling is an important resource for both first-time home buyers and repeat home owners. Housing counseling enables borrowers to better understand their loan options and obligations, and assists borrowers in the creation and assessment of their household budget, accessing reliable information and resources, avoiding scams, and being better prepared for future financial shocks, among other benefits to the borrower."

So what does this mean? A Sacramento borrower who can now qualify for an FHA loan under this Mortgagee Letter STILL must meet other standards of credit-worthiness. You must have solid income, no recent delinquent (late) payments, meet the "debt-to-income ratio" requirements, etc. BUT if you did a short sale, deed-in-lieu of foreclosure, foreclosure, or filed bankruptcy 12+ months ago you may now qualify much sooner for a new mortgage.

Some examples of "defined Economic Events" include things like loss of employment (layoff, company closed,  for you or a spouse, ex-spouse, etc), loss of household income (like in the case of a furlough, reduction of hours for you or a spouse, ex-spouse, etc.), and others.  You will need to prove you had good credit before the economic event took place, and you will need to document this.

One thing I will point out, is lenders may not be super quick to adopt the new guidelines in this Mortgagee Letter...so if you call your favorite lender right this very minute, they may not be prepared to give you a loan right away. These new guidelines were just released on August 15, 2013 -- so it may take weeks or months for lenders to start actually lending based on these guidelines. If you need a referral to a good loan officer who can help you navigate this, email me and I am happy to point you in the right direction.

Sacramento Help for Homeowners Events - Coming March 20th, 2012

Sacramento homeowners who are struggling to make their mortgage payments will have the opportunity to meet face-to-face with their mortgage companies, as well as HUD-approved housing counselors, in an effort to assist explore foreclosure-prevention options and to move toward solutions to their mortgage problems.

Help for Homeowners Community Event
Tuesday, March 20, 2012 from 1:00pm – 8:00pm
Sacramento Convention Center
1400 J Street, Hall D
Sacramento, CA 95814

Free parking is available in the Memorial Garage (entrance on 14th and H Streets). It is highly recommended that you bring with you:

-Request for Mortgage Assistance form
-IRS Form 4506T and/or last two years of tax returns
-Monthly mortgage statement
-Information about other mortgages on your home, if applicable
-Two most recent pay stubs for all household members contributing toward mortgage payment
-Unemployment benefits award letter, if applicable
-If self-employed, the most recent quarterly or year-to-date Profit and Loss Statement
-Documentation of income you receive from sources (alimony, child support, social security, etc.)
-Two most recent bank statements
-A utility bill showing homeowner name and property address

Sacramento Short Sale Information

Bank of America is conducting a "Borrower Outreach" event in Sacramento -- you MUST register in advance!

Bank of America will be holding a "borrower outreach" event this week at the Sacramento Convention Center starting Thursday, November 17th - and going through Saturday, November 19th. Hours of the event each day are from 8am - 8pm. They are encouraging their borrowers to register online and schedule an "appointment" time rather than just dropping in.

Their goal is to help Sacramento Bank of America mortgage customers who are experiencing hardships to find alternatives to foreclosure -- such as loan modification, short sales, etc.

There is a list of documents you must print from their website and bring with you:

• A "Request for Modification & Affidavit" --
• A Hardship Letter -- explains your hardship and why you are seeking assistance
• An IRS Form 4506-T -- this allows Bank of American to request your income tax information from the IRS.
  
• A Dodd-Frank Certification form -- this certifies that you have not been convicted of a financial crime in the last 10 years (among other things, be sure to read it before signing)

There are also other financial documents they want you to bring:

• Recent Utility Bill
• Copies of your 2009 and 2010 tax returns
• Copies of your most two recent bank statements for all accounts
• A summary of your monthly expenses
• Recent HOA bill (if applicable)
• Copies of your most recent two months of paystubs (or profit and loss if self-employed)
• Copies of your rental lease (if property is tenant occupied)

In order to register for your appointment time for the Sacramento Bank of America Outreach Event, visit the Bank of America Events Registration page on their website by clicking here. If they advise you to consider a short sale as an alternative to foreclosure, I am happy to provide you more information regarding the process and assist you as well.

How long after a short sale, foreclosure, or bankruptcy do you have to wait before getting approved for a new FHA mortgage loan??

I am frequently asked how long someone must wait to be able to buy a house and qualify for a mortgage loan after a short sale, foreclosure, deed in lieu of foreclosure, or bankruptcy? Over the next couple weeks I will post the current underwriting guidelines for different types of mortgage loans. Of course underwriting guidelines change from time to time, but these standards are current as of now.

I will start with FHA loan purchase requirements, since most of the buyers in Sacramento seem to be using FHA loans. FHA loans generally require a 3.5% downpayment, the property purchased must be used as a primary residence, and as of right now a buyer can make a purchase of up to $580,000 in Sacramento, Placer, El Dorado, and Yolo Counties. It is not just a loan for first time buyers...

After Foreclosure, or Deed in Lieu of Foreclosure:
-3 years from date the foreclosure was completed and transferred back to the bank.
-Less than 2 years, but not less than 12 months from the date foreclosure was completed and transferred back to the bank may be acceptable if the foreclosure was the result of "extenuating circumstances." Examples of extenuating circumstances for obtaining a new FHA loan are limited to serious documentable illness or death of a wage earner on the loan that was foreclosed. Unfortunately for the purpose of obtaining a new FHA loan to buy a home after foreclosure, circumstances like divorce or job transfer do not qualify as extenuating circumstances.

After Short Sale:
-3 years from the date the short sale closed and transferred to the new owner.
-No waiting period if the borrower had no late payments on any mortgages and consumer debts within the 12 month period preceding the short sale.

After Chapter 7 Bankruptcy:
-2 years from the date of discharge with re-established credit paid as agreed, or no new credit obligations incurred.
-Less than 2 years, but not less than 12 months from the date of discharge may be acceptable if the bankruptcy was caused by acceptable extenuating circumstances and the borrower has since exhibited a documented ability to manage financial affairs in a responsible manner.

After Chapter 13 Bankruptcy:
-1 year payout period under bankruptcy has elapsed and the borrower's payment performance has been satisfactory and all required payments are made on time.

Of course, you must speak to a loan officer in order to qualify for a new mortgage...I am happy to point you in the right direction to a great loan officer if you want to explore if you qualify after experiencing a short sale, foreclosure, deed in lieu, or bankruptcy.

If you are curious about the Conventional Loan waiting periods, click here.