New life after foreclosure?

The New York Times writes about “The Post-Foreclosure Wait.” The good news is that, “mortgage troubles won’t necessarily shut you out of the housing market forever.”

As the economy and real estate market continue to struggle, millions of Americans have lost their homes through foreclosure, short sale (when a property is sold for less than is owed) or a deed in lieu of foreclosure (when the bank takes ownership without foreclosure).

Even if you think you never want to own a home again, clean credit is important. Bad credit can make it more expensive to rent. In some fields, especially financial services, it can make it difficult to find or keep a job.

What affects recovery speed?

In a short sale where the balance is forgiven and no deficiency is recorded in public records, recovery can be quick. A foreclosure or bankruptcy can weigh you down for years.

As long as 7 years.

But if someone has gone through foreclosure and still has a mountain of debt and not enough income, bankruptcy is worth considering, said Tracy Becker, the founder of North Shore Advisory, a credit-restoration company based in Tarrytown, N.Y. Sure, it will be another hard blow to your credit rating — but your credit most likely is already “wrecked,” at least for now, she said.

OK, so you have pushed the plunger,

And what about a future mortgage? Fannie Mae, Freddie Mac and the Federal Housing Administration set guidelines for how long a borrower must wait after a “significant derogatory event.”

There are plenty of asterisks and conditions. But to generalize, the wait is longest after a foreclosure. Extenuating circumstances like a job loss, illness or divorce reduce the wait.

With such circumstances, Fannie and Freddie specify a two-year wait after a short sale, deed in lieu, or discharge or dismissal of bankruptcy, and three years after foreclosure. Without extenuating circumstances, waits can extend to four years after bankruptcy and seven years after foreclosure.

Read the full report.

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if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Stephen's Title Agency, LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-227-4724 - Fax 973-556-1628

E-mail Stephenstitle AT comcast.net - www.stephenstitle.com

“Strategic defaults” or walking away from the old homestead

Notwithstanding that they can afford to make monthly payments, there are homeowners who walk away from their homes, and leave the bank holding the bag, when the value of the home is less than mortgage amount. Well, it seems that Fannie Mae won’t be taking it on the chin without a little payback.

According to the New York Times, a recent report

“found that about 19 percent of all mortgage defaults in the second quarter of 2009 involved borrowers who could afford the loans. In the previous quarter 21 percent of the defaults were strategic.”

Meanwhile, last month Fannie Mae, the government-controlled company that sets lending standards for most mortgages, changed the penalties for borrowers who enter foreclosure with Fannie Mae-backed loans.

Previously, they would have had to wait five years before becoming eligible for a mortgage. Now they can re-enter the market in as few as two years, as long as they first attempt a “graceful exit” via a short sale or a deed in lieu of foreclosure. Freddie Mac, Fannie Mae’s smaller counterpart, maintains a similar policy.

Much has been written about short sales, but we never knew that walking away from a mortgage was called a strategic “default.”

If you have questions about what you see here,
contact Stephen M. Flatow
Stephen's Title Agency, LLC
StephensTitle@comcast.net
973-556-1628 Fax