FHA loan after foreclosure exceptions (credit report, refinance, property, Alaska)

[krismosch]

I'm reading that a person can get an exception to the FHA 3 year waiting period for a loan after foreclosure. HOW does one get started on this process? I see divorce is listed as an exception. Can anyone direct me?

[SmartMoney]

Divorce may be listed as an exception, but underwriters are not inclined to treat it as such without strong documentation. Example: you have a copy of a savings statement showing $10,000 and one day the ex unilaterally wiped out the account so you could not pay the mortgage. You also have to show your credit was fine before the divorce (is there a pattern of late payments and collections before the divorce)?

You have to demonstrate the sole reason for the decline of your credit was the marital split. Just because there was a divorce, does not mean extenuating circumstances. And you must show why your divorce is the exception.

[Pfhtex]

Chapter 4, Section C HUD 4155.1
4-C-12
2. Guidelines for Credit Report Review
4155.1 4.C.2.f
Previous Mortgage Foreclosure

A borrower is generally not eligible for a new FHA-insured mortgage if,
during the previous three years

 his/her previous principal residence or other real property was foreclosed, or
 he/she gave a deed-in-lieu of foreclosure.

Exception: The lender may grant an exception to the three-year requirement
if the foreclosure was the result of documented extenuating circumstances
that were beyond the control of the borrower, such as a serious illness or
death of a wage earner, and the borrower has re-established good credit since
the foreclosure.
Divorce is not considered an extenuating circumstance. An exception may,
however, be granted where a borrower’s loan was current at the time of
his/her divorce, the ex-spouse received the property, and the loan was later
foreclosed.
Note: The inability to sell the property due to a job transfer or relocation to
another area does not qualify as an extenuating circumstance.
__________________________________________________ _______________

Had the foreclosure been placed into a Chapter 7 Bankruptcy, Bankruptcy guideline of 2 years since discharge date would supercede the 3-since-foreclosure rule. Also, the FHA Back To Work program facilitates earlier re-entry into ownership, but that is specifically related to job loss.

HUD's language relative to divorce relates more to "getting burned" post-divorce, when the ex-spouse stops paying the mortgage for which the applicant is no longer responsible for, per divorce decree, but it not yet off of the mortgage.

[krismosch]

Originally Posted by SmartMoney

Divorce may be listed as an exception, but underwriters are not inclined to treat it as such without strong documentation. Example: you have a copy of a savings statement showing $10,000 and one day the ex unilaterally wiped out the account so you could not pay the mortgage. You also have to show your credit was fine before the divorce (is there a pattern of late payments and collections before the divorce)?


You have to demonstrate the sole reason for the decline of your credit was the marital split. Just because there was a divorce, does not mean extenuating circumstances. And you must show why your divorce is the exception.

The wife was a victim of domestic violence. She had to file a restraining order. That's all documented and is public record. Who would she submit this documentation to?

[krismosch]

Originally Posted by Pfhtex

Chapter 4, Section C HUD 4155.1
4-C-12
2. Guidelines for Credit Report Review
4155.1 4.C.2.f
Previous Mortgage Foreclosure

A borrower is generally not eligible for a new FHA-insured mortgage if,
during the previous three years

 his/her previous principal residence or other real property was foreclosed, or
 he/she gave a deed-in-lieu of foreclosure.

Exception: The lender may grant an exception to the three-year requirement
if the foreclosure was the result of documented extenuating circumstances
that were beyond the control of the borrower, such as a serious illness or
death of a wage earner, and the borrower has re-established good credit since
the foreclosure.
Divorce is not considered an extenuating circumstance. An exception may,
however, be granted where a borrower’s loan was current at the time of
his/her divorce, the ex-spouse received the property, and the loan was later
foreclosed.
Note: The inability to sell the property due to a job transfer or relocation to
another area does not qualify as an extenuating circumstance.
__________________________________________________ _______________

Had the foreclosure been placed into a Chapter 7 Bankruptcy, Bankruptcy guideline of 2 years since discharge date would supercede the 3-since-foreclosure rule. Also, the FHA Back To Work program facilitates earlier re-entry into ownership, but that is specifically related to job loss.

HUD's language relative to divorce relates more to "getting burned" post-divorce, when the ex-spouse stops paying the mortgage for which the applicant is no longer responsible for, per divorce decree, but it not yet off of the mortgage.

What you put in bold was basically the case. Husband was abusive. Husband received home in divorce (documented in divorce paperwork) but couldn't refinance it in his name only. Wife still on mortgage but quit claimed deeded property to ex husband. He chose to file bankruptcy instead.

[SmartMoney]

Exactly, and there's no one place where to submit your paperwork for the exception. You need to meet with a loan officer who will assist you in documenting your case to see if they can qualify you for the exception. In your case, they will look at the dates on the restraining orders and match them up to the dates in your credit report. I have to warn you, it's a very, very tough test to meet, domestic abuse or not. You will need to show why the domestic abuse was the reason for the foreclosure. (ie, if you were making excellent money and just didn't pay because you were not living there, that most likely will not pass the test). Once most see what is involved to demonstrate extenuating circumstances, they find it's easier to wait 3 years. The other issue is if FC was a VA or FHA or USDA loan? If so, the CAViRS may prevent you from moving forward until any federal claim is over 3 years old. This is a federal credit alert system about prior loans going bad and the US Government paying out a claim to a bank. There is a 3 year mandatory wait to purchase after paying any claims. I have never heard of anyone getting past this, many have tried, but I have yet to have anyone provide conclusive proof they closed before the waiting period.

[momtothree]

Instead of messing with all that, just leave her off the loan. You can get the loan in your name only but put her name on the deed. It's what we did.

[Pfhtex]

Originally Posted by krismosch

What you put in bold was basically the case. Husband was abusive. Husband received home in divorce (documented in divorce paperwork) but couldn't refinance it in his name only. Wife still on mortgage but quit claimed deeded property to ex husband. He chose to file bankruptcy instead.

It would seem that if you can prove out the timeline with items that match up to the late payment >>>Foreclosure date, with things like the date on the divorce decree, etc., I think it might work. Especially if that foreclosure ended up in a BK. Wondering if you can get any bankruptcy docs from him, but if not, we can do some Discovery re: public records, and likely find traction.

Re: leaving her off the loan, it depends on whether you need her income, and then whether you are buying in a Community Property State (AZ, CA, ID, LA, NV, NM, TX, WA, WI).

[1stimestar]

Originally Posted by momtothree

Instead of messing with all that, just leave her off the loan. You can get the loan in your name only but put her name on the deed. It's what we did.

You can't do that in all states. Here in Alaska, in order for a married person to buy a house, you both have to be in on it.

[SmartMoney]

Originally Posted by 1stimestar

You can't do that in all states. Here in Alaska, in order for a married person to buy a house, you both have to be in on it.

Government loans only. Someone could go conventional and leave their spouse off, unless AK has something in addition to being a community property state.