New Rules for underwriting loans for Borrower with prior Foreclosure!

Fannie Mae just announced the new rule SEL-2010-05. 

 As if there is not enough stress for a borrower to get a mortgage, yesterday FannieMae set new guidelines for a borrower with a prior foreclosure.   “In Announcement SEL-2010-05, Underwriting Borrowers with a Prior Preforeclosure Sale or Deed-in-Lieu of Foreclosure, Fannie Mae announced changes to the policies regarding the amount of time that must elapse after a borrower experiences a preforeclosure event (preforeclosure sale, short sale, and deed-in-lieu of foreclosure). The changes highlighted the importance of borrowers working with their servicers to avoid foreclosure.”

 “As a follow-up to that Announcement, Fannie Mae is now modifying the waiting period that must elapse before a borrower is eligible for a new mortgage loan after a foreclosure. The combination of the waiting period policies for foreclosures and preforeclosure events continue to favor borrowers who work with their servicers to avoid foreclosure by allowing these borrowers to be eligible for a future Fannie Mae loan in a shorter period of time”.  This Announcement describes the policy changes in detail. The changes will be reflected in the Selling Guide, B3-5.3-07, Significant Derogatory Credit Events – Waiting Periods and Reestablishing Credit, when it is updated on June 30, 2010.

Waiting Period after a Foreclosure — Currently, the waiting period that must elapse after a borrower experiences a foreclosure is seven years. However, Fannie Mae allows a shorter time period – five years – if certain additional requirements are met (e.g., minimum down payment and credit score, and occupancy requirements). These requirements are being modified to remove the five year option. Unless the foreclosure was the result of documented extenuating circumstances, which only requires a three-year waiting period (with additional requirements), all borrowers will now be required to meet a seven-year waiting period after a prior foreclosure to be eligible for a new mortgage loan eligible for sale to Fannie Mae.

Here is a chart that will help you understand the new guidelines: 

Effective Date – This policy is effective for manually underwritten mortgage loans with application dates beginning October 1, 2010.

 Summary – All Waiting Period Requirements

This chart summarizes the waiting period requirements for all significant derogatory credit events. For additional information see Selling Guide B3-5.3-07 for complete details.

(All information via FannieMae Selling Guide).  Click on the link below to find a complete copy of the Sellers Guide and please give me a call at 619.980.2738 if I can help with questions on this or any other Real Estate issue you might have!

http://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2010/sel1006.pdf