Shorter Waiting Periods for a new Mortgage after a Preforeclosure Event

happy home buyers

Fannie Mae is changing the required waiting period for a borrower to be eligible for a mortgage loan after a preforeclosure event. The waiting period commences on the completion date of the preforeclosure event, and may vary based on the maximum allowable Loan to Value numbers (LTV) of the property and occupancy of the property.

The following describes the waiting period policy changes for Deed-in-Lieu of Foreclosures, Preforeclosure Sales and Short Sales:

  • 2 years at 80% max LTV (with a 20% downpayment)
  • 4 years at 90% max LTV (with a 10% downpayment)
  • 7 years at LTV ratios per Eligibility Matrix

There are exceptions to the Waiting Periods for extenuating circumstances.  More information on Fannie Mae’s Announcement.


Bankruptcies
The multiple bankruptcy policy is being clarified to state that two or more borrowers with individual bankruptcies are not cumulative. For example, if the borrower has one bankruptcy and the co-borrower has one bankruptcy, this is not considered a multiple bankruptcy. The current waiting periods for bankruptcies remain unchanged.


The Desktop Underwriter® (DU®)
DU is the software that Fannie Mae uses to determine if a borrower qualifies for a mortgage. DU will be updated in June to reflect the deed-in-lieu of foreclosure policy changes outlined above. Because preforeclosure and short sales cannot be identified in the credit report data by DU at this time, DU will not be updated in June to include these policies. However, effective for loan applications dated on or after July 1, 2010, lenders will be required to determine during their review of the credit report if there is a preforeclosure or short sale and must manually apply the new policies to all loan casefiles underwritten through DU.

See the Selling Guide, B3-5.2-03, Accuracy of Credit Information in a Credit Report, for Fannie Mae’s current policies regarding the lender’s responsibility for reviewing the credit report.

Effective Date
This policy is effective for manually underwritten mortgage loans with application dates beginning July 1, 2010; for DU loan casefiles see above.

Source:  Fannie Mae Announcement SEL-2010-05


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