Fannie Mae Guideline Changes - Seasoning on Mortgage in Bankruptcy

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Fannie Mae Guideline Changes - Seasoning on Mortgage in Bankruptcy




     In a rare event of loosening guidelines, Fannie Mae has issued guidance on changes that will have a positive impact on people who have had a mortgage included in a bankruptcy. 



     In the past, if a mortgage was included in bankruptcy and a lender proceeded to foreclosure to recoup their losses, borrowers were held to foreclosure seasoning guidelines, meaning they could not obtain a new conventional loan until 7 years after the foreclosure event. 



     Under the new guidance, effective immediately, these borrowers will be held to bankruptcy seasoning guidelines and not foreclosure guidelines, meaning it will be possible for a borrower to get a conventional mortgage 4 years after a chapter 7 bankruptcy, even if a lender proceeds with a foreclosure on their home if the mortgage was included in the bankruptcy.  IF there were extenuating circumstances that led to the bankruptcy, the seasoning required is only 2 years from the discharge date.



Fannie Mae Bankruptcy Seasoning Guidelines



Chapter 7 Bankruptcy? 


Fannie Mae requires a 4 year wait from the discharge date to obtain new conventional financing.  2 years if extenuating circumstances can be documented.



Chapter 13 Bankruptcy? 


Fannie Mae requires a 2 year wait from a completed, discharged Chapter 13.  If the Chapter 13 is dismissed for any reason prior to completion, there is a 4 year wait.  Again, the wait is 2 years if extenuating circumstances can be proven.



Multiple Bankruptcies? 


If a borrower has multiple bankruptcies in a 7 year period, Fannie Mae requires a 5 year wait from the last dismissal/discharge date.



     This change in guideance could help many borrowers who have had a bankruptcy event within the past 5 years and lost their home as a result.  IF a mortgage was included in the bankruptcy, many of these folks could now qualify for a new conventional loan, when in the past they would have been forced to wait 7 years.



Know someone who's gone through bankruptcy in the past several years?  Forward this info, it might help them realize that it's not impossible to get a new mortgage.  Have questions on getting a mortgage after as significant credit event?  Give me a call at 484-680-4852 or  Ask an expert!




Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Ritu Desai 07/30/2014 09:29 PM
Lending / Financial
Delaware Valley Region
New Jersey & Pennsylvania -- Realtors/Loan Officers/Title Clerks/Real Estate Lawyers
Southern California Real Estate Forum
Orange County Real Estate
fannie mae guidelines
bankruptcy mortgage
bankruptcy loan
mortgage guidelines
bankruptcy seasoning

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Liz Lockhart
Riverbend Realty, Cape Girardeau, MO - Cape Girardeau, MO
GRI, Cape Girardeau Real Estate

Good information. I'm always reluctant to be the giver of information on bankruptcy, though. I would much prefer they talk to a lender (such as you) or attorney.

Jul 30, 2014 04:25 AM #4
Fred Griffin, on leave of absence from ActiveRain
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

     I'm with Kathleen (comment #2).   Under the guise of "compassion and forgiveness", this will give Fannie Mae and the Big Banks the opportunity to originate more loans and make more money for themselves.

Jul 30, 2014 04:30 AM #5
John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Bill Reddington You're right - they've got to keep volumes up somehow, couldn't exclude everyone from buying for too long.  Thanks for the comment!

Kathleen Daniels Thanks for the comment, it's always of course about the bottom line.  In this instance, though, I think it was just changing a dumb rule to make more sense - but yes, of course that opens the door for more loans.

Patricia Kennedy  I only did that after reading your post : )  Thanks for the comment!

Liz Lockhart Thank you for commenting, and yes, borrowers should always be getting things in writing from a lender, and bankruptcy attorneys should know this info as well.

Fred Griffin Licensed Real Estate Broker they are certainly worried most about the 'bottom line', but this was a guideline that really made no sense since most people with mortgage in BK include them....they were really punishing borrowers twice, now it's just dinging them once....but yes, I doubt the change would have been made if there were no more $ involved.


Jul 30, 2014 04:47 AM #6
Amanda Christiansen
Christiansen Group Realty (260)704-0843 - Fort Wayne, IN
Christiansen Group Realty

As always, thanks for sharing your fountain of knowledge with us John. Keep up the great work!

Jul 30, 2014 08:21 AM #7
John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Sure thing, Jared!  As the changes come you'll know about them, sure there will be plenty more in the coming months.

Jul 30, 2014 08:57 AM #8
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

John that is an improvement, now we will have to see if investors go along with that change or add their own overlay.

Jul 30, 2014 09:20 AM #9
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude


Thanks for the share. It certainly makes more sense (cents?). I think George raises a good point.


Jul 30, 2014 10:44 AM #10
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

John - Interesting.  I think due to the downturn, this will help folks get back on their feet faster.  Keep us posted on how the investors react to these changes.  BTW what is the difference between Chap 7 & Chapter 13?

Jul 30, 2014 12:52 PM #11
Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

John, I am glad to see an easing of guidelines. So many of these cases have been too hard on the borrowers and on situatins beyond their control.

Jul 30, 2014 01:08 PM #12
John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

George Souto Thanks for the comment!  I think many will jump on board in an effort to avoid losing business.  Volumes are too low for investors to stay overly conservative for much longer.


Jeff Dowler CRS I think it makes sense & cents!  Thanks for the comment, and if you hear of this situation you can call me for help, we go direct-to-Fannie Mae so there are 0 overlays.


Joan Whitebook   I'll email you a link but it's important to have a direct to Fannie lender in your arsenal for this reason - A Chapter 7 is basically waving the white flag and saying "I give up, please forgive this debt!" and a Chapter 13 involves restructuring debts and participating in a payoff plan for the gave me an idea for a blog post, thanks!


Debbie Reynolds I think we'll continue to see at least slight changes toward relaxed guidelines.  The pool of borrowers and buyers has not picked up, so banks are trying to figure out ways to increase volume - looser guidelines is one option.  Thank you for the comment.

Jul 30, 2014 01:29 PM #13
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

Great minds! lol

I caught wind of the FNMA change and did a post regarding the changes for Short Sales but havent read them all to see these yet.

Interesting and thanks for the post John I will go through this in depth this week

Jul 30, 2014 02:43 PM #14
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

John, may be this is something which shows the direction Fannie Mae is moving? Relaxing guidelines have not happened for a while, as far as I remember.

Jul 30, 2014 03:01 PM #15
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning John. It is about time that some of these changes were Made. Hopefully the result is more people come into the market place and buy homes again.

Jul 30, 2014 08:02 PM #16
Andrew Mooers | 207.532.6573
Northern Maine Real Estate-Aroostook County Broker

Great post and helpful. Always buyers wonder how long they glow eerie colors to an bank loan underwriter. When does the Kryptonite wear off they ask. Or assume gloom, doomed for life and only seek out the rent to own rare birds. To bag and tag, score for four walls, a roof over their heads.

Jul 30, 2014 10:01 PM #17
Wayne and Jean Marie Zuhl
Samsel & Associates - Clark, NJ
The Last Names You'll Ever Need in Real Estate

Hi John,

Thank you for educating us on these changes that impact those who've had a bankruptcy.

Jul 31, 2014 01:09 PM #18
Chandler Real Estate Liz Harris, MBA
Liz Harris Realty - Chandler, AZ

Fantastic blog post today, thanks for contributing to the Active Rain community, look forward to the next one!

Jul 31, 2014 02:00 PM #19
Mark Robinson
Geneva Financial, LLC - Beachwood, NJ
Honesty, Integrity, Service

Great news. Too many lenders were delaying the completion of foreclosure even though the house was given back in the Ch.7.

Aug 02, 2014 09:54 PM #20
Kristin Hamilton CA Realtor
Sun Lakes Realty - Banning, CA
(909) 557-6966- Specialize 55+ Communties Banning

Hi John,

This is a great post with some exciting news for buyers who had foreclosures and bankruptcies in the past. 

Aug 11, 2014 02:53 PM #21
From Virginia

Woo hoo! As someone who had a mortgage included in my Chapter 7 bankruptcy over 4 and a half years ago, I am happy these new regulations came out. The mortgage company did not actually foreclose until 2 years after my bankruptcy. So that meant in the past I would have to wait a total of 9 years before qualifying for conventional financing...that was too long.

Aug 18, 2014 08:59 AM #22
John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

I'm glad to hear the guidelines changes will benefit you!  I'm sure there are many other folks in the same position.  If you'd like help with the qualifying aspect of buying a new home I'd be happy to help.

Aug 18, 2014 09:49 AM #23
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