I have a question I want to pose to the Active Rain brain trust! Here is the scenario...
1. The current potential home buyer filed chapter 7 in 2009. All debts including the mortgage were discharged Sept 2009.
2. After the bankruptcy they kept making the mortgage payment and attempted to work out a loan mod in an effort to re affirm the debt. However, no agreement was reached and the debt was never re affirmed.
3. At that point they felt there was nothing else to do so they moved out of the house and found a nice place to rent. The old residence was foreclosed in 2011 and the foreclosure deed recorded in September of 2011.
4. There is no derogatory credit but also no new credit. The buyer somehow has one score of 667 from 1 credit bureau. They can provide alternate credit showing on time payment of the current rent, utilities, car insurance, etc.
So have two questions:
1. On the loan app how do they disclose the foreclosure? The foreclosure was done after they were no longer liable for the debt.
2. They have applied at one lender who told them that FHA requires they wait 3 years from the foreclosure recording date of Sept 2011. That doesn't seem right to me since the debt was not theirs anymore. It also seems they are being double penalized for the foreclosure and bankruptcy. Any insight would be helpful.
They are not set on absolutely using FHA but it did seem that might be the easiest way to go.
I am looking forward to some some helpful and brilliant insight from some of you. Thanks!