Tag Archives: fannie mae foreclosures

How to buy a home after a short sale……can it really be done?

Posted on December 6, 2011 by admin

The answer is yes, but it depends. If you missed payments prior to the short sale you are out of luck. It seems that the short sale itself isn’t the end of the world (according to the current lending standards). Missing payments prior to the short sale is what hurts your credit..

Dear Dr. Don,

We were forced to do a short sale with our home due to a huge salary cut. Our credit rating beforehand was great, but the mortgage holder required us to fall two months behind on our payments before they would allow the short sale. Of course, that hurt our credit score. We would like to buy again but struggle to save much beyond our rent for a down payment. Are there mortgages available after a short sale that don’t require a 20% down payment, and will we be able to get a conventional mortgage after the short sale?
- Brian Bungalow

Dear Brian,

Not all lenders require you to be past due on your payments to qualify for a short sale. Your lender did, so you have to work within that constraint. The good news is you successfully navigated the labyrinth that is a short sale, and you made it to the other side.

I’m sure you’d like a second chance at buying a home in today’s market with today’s low interest rates. Unfortunately, you must spend some time in the penalty box before lenders will once again consider you for a conventional mortgage or even a mortgage through the Federal Housing Administration, or FHA.

In general, you’ll have to wait two to four years to qualify for a conventional mortgage that meets the standards of Fannie Mae or Freddie Mac, which buy mortgages on the secondary market, pool them and sell them as mortgage-backed securities to investors on the open market.

The shorter end of the wait period is for borrowers with 20% down or who faced extenuating circumstances in the short sale of their last home. The longer end of the wait period is for borrowers who can put 10% down. In both cases, the borrower needs a traditional credit history that isn’t a “thin file,” or a limited or short credit history.

FHA loans have lower down-payment requirements — 3.5%. Borrowers who weren’t in default when they closed on the short sale can get an FHA loan right away. Borrowers who were in default have to wait three years, although lenders can make a case for extenuating circumstances.

Can’t wait out the time in the penalty box? If you’re open to some creative financing, you might be able to negotiate a lease option on a rental home you’d consider owning. What’s interesting about the lease option versus a lease-purchase agreement is the opportunity to back away if you don’t like what happens to the home’s value over time.

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Will Fannie Mae Come After Me for a Deficiency on a Short Sale?

Posted on November 30, 2011 by admin

Many people would like to know if Fannie Mae has the power to chase after homeowners with deficiencies that come from short sales. This is an important thing to learn about especially during the stressed economic times that most homeowners face today as foreclosures and sudden financial problems may happen in the blink of an eye.

Deficiency Judgement in Simple Terms

In the world of properties and real estate, a deficiency judgement is considered as the difference between the outstanding balance that is yet to be paid to the lender and the current value of the property on the market. To put in numbers, take for example a homeowner who has a debt worth $200,000 for his home. At some point during his ownership of the home, it is classified as under foreclosure or short sale. Because of this, the lender will get $150,000 from the proceeds of the sale, and the difference which is $50,000 is considered the deficiency.

Normally, in the event of a foreclosure, the borrowers are not chased after due to deficiency as some of them show proof that they actually have financial challenges at some point in time. However, lenders may chase them for deficiency judgement for many reasons. A legal court may grant the lenders a deficiency judgement that will enable them to run after the borrowers due to the loss that the lenders have encountered. The lenders may seize various assets of a borrower in order to arrive at the amount that is worth the deficiency. Lenders may ask for homeowner income, other properties, or any other assets, depending on the permission provided by the court. Despite threats and popular belief, this is rare, and Fannie Mae only pursues collection of the deficiency in rare circumstances.

Foreclosure is the Worst Thing That Can Happen to Your Home

Foreclosure is the worst thing that you can ever let your home come down to. The house will surely lose its value through foreclosure. Its market value will plunge deep and it can be difficult to build it back up once more. It is then important for any homeowner to avoid foreclosure at all costs. Foreclosure is also a big waste of time, effort, and money.

The process itself takes a very long time and can cost a lot from all the legal fees, bank fees, processing fees, and other additional costs that may be incurred. As you leave the house, it will be a big target for vandalism as well as deterioration. Those two things are big threats to the actual value of the home. Experts in real estate recommend that you do everything that is in your capacity to avoid foreclosure at any point in time.

Fannie Mae and Short Sale

Fannie Mae always recommends a short sale as a way to avoid any foreclosure. This is an opportunity for the borrower to avoid any problems with the loan, most especially with the deficiency. However, over the years, there have been a lot of people who have been classified as strategic default foreclosures. Because of this, Fannie Mae has made some changes with the policies in order to pursue judgement for these people who are not being responsible about their finances which affects lenders and the state of the real estate market.

Fannie Mae made it clear that the policies are going to be stricter and firmer in order to put the strategic defaulters in the right light. Fannie Mae is hoping that with their stricter rules, people will be discouraged to be strategic defaulters and will just try to consider short sale and other methods of settling their dues the right way.

In Fannie Mae’s new policies concerning deficiencies, homeowners may be pursued if they have the financial capability to provide for the payments that are asked of them by their mortgage company but they choose not to do so. Fannie Mae may pursue strategic default homeowners if they also have a substantial amount of assets that may equate to three monthly mortgage payments. Fannie Mae will also aim to pursue homeowners with deficiencies if they have a high amount of surplus earnings.

Not only will Fannie Mae pursue homeowners with deficiencies during short sales or foreclosure, but they may also put the homeowner on a seven-year ban from taking out another mortgage loan in the event of a foreclosure. When considering a short sale or any options available, always seek legal representation and direction. Contact us to learn more about whether a short sale is right for you. You can also find out if Fannie Mae owns your mortgage loan by going to http://www.fanniemae.com/loanlookup/

Information Courtesy of Mike Linkenauger at Short Sale Specialist Network

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