Mortgage Information

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Fannie Mae Single Family
2011 Selling Guide
Part B, Origination Through Closing
Subpart B3, Underwriting Borrowers
Chapter B3-5, Credit Assessment

Bankruptcy (chapter 7 or chapter 11)

A four-year waiting period is required, measured from the discharge or dismissal date of the bankruptcy action.

Exceptions for Extenuation Circumstances

A two-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the discharge or dismissal date of the bankruptcy action.

Bankruptcy (Chapter 13)

A distinction is made between Chapter 13 bankruptcies that were discharged and those that were dismissed. The waiting period required for Chapter 13 bankruptcy actions is measured as follows:

The shorter waiting period based on the discharge date recognizes that borrowers have already met a portion of the waiting period within the time needed for the successful completion of a Chapter 13 plan and subsequent discharge.

A borrower who was unable to complete the Chapter 13 plan and received a dismissal will be held to a four-year waiting period.

Exceptions for Extenuating Circumstances

A two-year waiting period is permitted after a Chapter 13 dismissal, if extenuating circumstances can be documented. There are no exceptions permitted to the two-year waiting period after a Chapter 13 discharge.

Foreclosure

A seven-year waiting period is required, and is measured from the completion date of the foreclosure action as reported on the credit report or other foreclosure documents provided by the borrower.

Exceptions for Extenuating Circumstances

A three-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the completion date of the foreclosure action. Additional requirements apply between three and seven years, which include:

Note: The purchase of second homes or investment properties and cash-out refinances (any occupancy type) are not permitted until a seven-year waiting period has elapsed.

Deed-in-Lieu of Foreclosure and Preforeclosure Sale

These transaction types are completed as alternatives to foreclosure. A deed-in-lieu of foreclosure is a transaction in which the deed to the real property is transferred back to the servicer. A preforeclosure sale or short sale is the sale of a property in lieu of a foreclosure resulting in a payoff of less than the total amount owed, which was pre-approved by the servicer.

The following waiting period requirements apply:

Waiting Period Additional Requirements
Two years 80% maximum LTV ratios*
Four years 90% maximum LTV ratios*
Seven years LTV ratios per the Eligibility Matrix

Exceptions for Extenuating Circumstances

A two-year waiting period is permitted if extenuating circumstances can be documented, with maximum LTV ratios of the lesser of 90% or the maximum LTV ratios for the transaction per the Eligibility Matrix.

*The maximum LTV ratios permitted are the lesser of the LTV ratios in this table or the maximum LTV ratios for the transaction per the Eligibility Matrix.

Summary — All Waiting Period Requirements

The following table summarizes the waiting period requirements for all significant derogatory credit events.

Derogatory Event Waiting Period Requirements Waiting Period with Extenuating Circumstances
Bankruptcy — Chapter 7 or 11 4 years 2 years
Bankruptcy — Chapter 13
  • 2 years from discharge date
  • 4 years from dismissal date
  • 2 years from discharge date
  • 2 years from dismissal date
Multiple Bankruptcy Filings 5 years if more than one filing within the past 7 years 3 years from the most recent discharge or dismissal date
Foreclosure 7 years 3 years
Additional requirements after 3 years up to 7 years:
  • 90% maximum LTV ratios*
  • Purchase, principal residence
  • Limited cash-out refinance, all occupancy types
Deed-in-Lieu of Foreclosure
and Preforeclosure Sale
  • 2 years — 80% maximum LTV ratios*
  • 4 years — 90% maximum LTV ratios*
  • 7 years — LTV ratios per the Eligibility Matrix
2 years — 90% maximum LTV ratios*

Note: References to LTV ratios include LTV, CLTV, and HCLTV ratios.

*The maximum LTV ratios permitted are the lesser of the LTV ratios in this table or the maximum LTV ratios for the transaction per the Eligibility Matrix.

Requirements for Re-establishing Credit

After a bankruptcy, foreclosure, deed-in-lieu of foreclosure, or preforeclosure sale, the borrower's credit will be considered re-established if all of the following are met:

FHA Single Family
4155.1: Mortgage Credit Analysis for Mortgage Insurance
Chapter 4: Borrower Eligibility and Credit Analysis
Section C. Borrower Credit Analysis
2: Guidelines for Credit Report Review (03/01/11)

4155.1 4.C.2.g Chapter 7 Bankruptcy

A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower from obtaining an FHA-insured mortgage if at least two years have elapsed since the date of the discharge of the bankruptcy. During this time, the borrower must have:

Note: The lender must document that the borrower's current situation indicates that the events which led to the bankruptcy are not likely to recur.

4155.1 4.C.2.h Chapter 13 Bankruptcy

A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage, provided that the lender documents that:

4155.1 4.C.2.i Consumer Credit Counseling Payment Plans

Participating in a consumer credit counseling program does not disqualify a borrower from obtaining an FHA-insured mortgage, provided the lender documents that:

4155.1 4.C.2.l Short Sales

A borrower is not eligible for a new FHA-insured mortgage if he/she pursued a short sale agreement on his/her principal residence simply to:

Borrower Current at the time of Short Sale

A borrower is considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage, all:

Borrower in Default at the time of Short Sale

A borrower in default on his/her mortgage at the time of the short sale (or pre-foreclosure sale) is not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale.

Note: A borrower who sold his/her property under FHA's pre-foreclosure sale program is not eligible for a new FHA-insured mortgage from the date that FHA paid the claim associated with the pre-foreclosure sale.

Exception: A Lender may make an exception to this rule for a borrower in default on his/her mortgage at the time of the short sale if the: