April 18th, 2008 2:53 PM by BILL WILBANKS
If you are even considering walking away from a home mortgage...
On March 31, 2008 Fannie Mae (FNMA) put out a new announcement to lenders to address various current items of concern and policy changes, not the least of which are their guidelines for how to address a foreclosure action in the borrower's credit history since it "is evidence of significant derogatory credit and increases the likelihood of future default."
FNMA currently requires four (4) years to elapse after a foreclosure before they will consider the borrower to have re-established credit history. This announcement increases that time period to five (5) years. They will continue to allow a lesser time period to elapse (three (3) years in lieu of the current two year requirement) for borrowers who can demonstrate documented extenuating circumstances that resulted in the foreclosure action. Underwriter will review whether it meets the seller guide definition, and will determine acceptability in all cases.
These manually underwritten loans must meet specific conditions
So if you, or anyone you know, are thinking of letting a property go into foreclosure...beware of the impact on your credit, how long it will take you to get past the issue, it's impact in trying to buy a home in the next 5 years, the minimum of 10% down requirement after 5 years, minimum credit score of 680 and above, and your inability of obtaining a cash-out mortgage, and a second home or investment property mortgage for 7 years.
That's heavy duty, folks. Please use discretion.
Bill Wilbanks /firstname.lastname@example.org