Homeowners often call me to and ask, “how do I stop foreclosure?” The first thing I usually ask is, “do you know if your loan is owned by fannie mae?” There is no one proven way to stop foreclosure. The process varies from state to state and from lender to lender. However, this is not why I ask. I ask because Fannie Mae guidelines are so different. If you are trying to purchase a home with FNMA financing, after you have been through a foreclosure, then you better read on.
When am I eligible to purchase a home after I complete a short sale?
A person is eligible to obtain credit to purchase a home two years from the completion date of the pre-foreclosure sale or short sale. There are no exceptions to the 2-year period due to extenuating circumstances.
** Source: FNMA Announcement 08-16, 6-25-08. **
What is a pre-foreclosure sale/short sale?
“A pre-foreclosure sale involves the sale of the property by the borrower to a third party for less than the amount owed to satisfy the delinquent mortgage, as agreed to by the lender, investor, and mortgage insurer”
** Source: FNMA Announcement 08-16, 6-25-08 **
There is significant difference for purposes of obtaining credit between pre-foreclosure sale and short sale. For Fannie Mae purposes, a pre-foreclosure assumes that the borrower has been delinquent in paying his or her mortgage and the lender agrees to accept a lesser amount to avoid the time and expense of a foreclosure action. A short-sale may also refer to situations in which the lender of the mortgage agrees to a payoff of a lesser amount than is actually owed, however, even on a current mortgage, to facilitate the sale of the property.
** Source: FNMA Announcement 08-16 Q&A, 8-13-08. **
If a borrower sold a home as a short sale, but was never delinquent the new loan for a primary residence, will be eligible for delivery to Fannie Mae provided that the borrower’s previous mortgage history complies with Fannie Mae’s excessive prior mortgage delinquency policy:
- the borrower does not have one or more 60, 90, 120, or 150-day delinquencies reported within the 12 months prior to the credit report date
- the borrower has not entered into any agreement with the short sale lender to repay any amounts associated with the short sale, including a deficiency judgment.
**Source: FNMA Announcement 08-16 Q&A, 8-13-08 ; FNMA Selling Guide, Part X, Chapter 3, Section 302.09. **
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