Here’s some good news for people who’ve had to give the deed on their house back to the bank because of financial problems, or who have done a short sale to avoid foreclosure: You may not have to wait the typical four or five years to re-qualify for financing to buy another home.
Instead, it could be as little as two years. In a bulletin to lenders April 14, mortgage giant Fannie Mae said it is relaxing its previous rules that prevented loan applicants who have participated in short sales or deeds in lieu of foreclosure from obtaining a new mortgage for extended periods of time. The new rules are scheduled to take effect July 1.
Homeowners who’ve done short sales – such as under the Obama administration’s new Home Affordable Foreclosure Alternatives program – will also be able to qualify for a mortgage in as little as two years. Though Fannie Mae officials declined to discuss the reasoning behind the changes, the bulletin to lenders said the company hopes to encourage troubled borrowers to work out solutions that avoid the heavy costs of foreclosure.
If borrowers can demonstrate that their mortgage problems were directly attributable to “extenuating circumstances” – such as loss of employment, medical expenses or divorce – they may be able to qualify for new loans with minimum 10 percent down payments in just two years. Housing and consumer counseling advocates welcomed Fannie’s relaxation of rules that had penalized borrowers who lost their houses following layoffs, illness and other unforeseen catastrophic financial events.
“This is a positive move,” said Marietta Rodriguez, director of homeownership and lending for NeighborWorks America, a national nonprofit network created by Congress to assist with homeowner financial counseling and community development.
“We all know that there are many people who through no fault of their own have to sell” – but were blocked from repurchasing a house for four years or longer, even though they’d rebuilt their credit, had qualifying incomes, and were fully capable of handling a mortgage responsibly.
(Source: HARNEY, KENNETH R.: The Nation’s Housing. April 25, 2010)