Monday, April 26, 2010

FNMA to shorten waiting periods for some troubled borrowers to get new home loans

Good news for people who have given the deed on their house to the bank because of financial problems, or done a short sale to avoid foreclosure: You may not have to wait 4 to 5 years to requalify for financing to buy a home.

It could be as little as 2 years. FNMA issued a bulletin to lenders April 14, saying it is relaxing the previous rules that prevented loan applicants who had 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.

The fine print: To qualify for a new loan in the minimum two years, most of these borrowers will need to come up with down payments of at least 20%.

However, 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% down payments in just two years.

The main potential complication is in FNMA's credit rehabilitation requirements. To qualify for a new mortgage, FNMA expects borrowers to reestablish their credit enough to get passing grades from the company's automated underwriting system, which considers credit bureau data among other factors.

Source: Kenneth Harney, Washington Post Writers Group 4/25/2010

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