Notes and Opinions from one of Arizona's Most Trusted Loan Teams

If you think foreclosure is the answer to current financial problems, you might want to take a look at this new policy from FannieMae. FannieMae is one of the two Government Sponsored Enterprises that set the rules for non-FHA loans in the U.S. We encourage you to work diligently with your lender before taking this very drastic step.As mentioned in earlier posts, the lender does NOT want your house.

Fannie Mae is increasing the time period that must have elapsed following a foreclosure to 5 years before they will consider the borrower to have a re-established credit history. FNMA will continue to allow a lesser time period (3 years in lieu of the current 2 year requirement) for borrowers who can demonstrate documented extenuating circumstances that resulted in the foreclosure action.

• The elapsed time is determined by comparing the application date to the completion date of the foreclosure. After the required 5 year time period:

• The borrower may obtain a new mortgage to purchase a primary residence with a minimum 10% down payment and a minimum credit score of 680.

• The borrower may obtain a limited cash-out refinance pursuant to FNMA’s eligibility requirements in effect at that time.

• The borrower may not obtain a cash-out refinance or obtain a mortgage secured by a 2nd home or investment property for 7 years after the foreclosure action.

• If the foreclosure was the result of documented extenuating circumstances and the 3 year required time frame has elapsed:

  • The same requirements stated above apply with the exception of the minimum credit score of 680.

Since each mortgage company will decide for themselves what "documented extenuating circumstances" means, don't count on your particular problem to qualify for this exemption. These are very serious restrictions to your future borrowing power.  jl