Foreclosed Home Owners may get “Second Chance”

The Federal Housing Administration is giving some former home owners another shot at home ownership. The FHA sent a letter to mortgage lenders stating that it would offer mortgage insurance to borrowers who once filed for bankruptcy, or who lost their homes through foreclosure or short sale during the recession.

Still, potential borrowers must show they can meet all other FHA requirements and that they are no longer financially constrained. Borrowers also will have to undergo housing counseling and FHA is requiring lenders to verify that at least a year has passed since the foreclosure or “economic event” that caused the foreclosure or bankruptcy.

“FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage,” according to the letter FHA sent to lenders.

Source: “FHA offers mortgage backing to the once bankrupt,” HousingWire (8/16/2013)

Calif. Bankruptcies decline faster than U.S. filings

Almost 99,000 individuals and businesses filed for bankruptcy in California during the first six months of 2012, down 22 percent from the same period in 2011, according to federal court data compiled by the American Bankruptcy Institute and Epiq Systems Inc.

California accounts for almost one in six bankruptcies filed nationwide and more than any other state. However, because of its large population, the Golden State ranks 10th in the number of bankruptcies per capita, 5.35 filings per 1,000 population.

Nationwide, individuals filed 601,184 bankruptcies during the first half of 2012, a 13 percent drop from a year earlier, and commercial enterprises filed 30,946 bankruptcies, down 22 percent, the ABI reports.

“We are on pace for perhaps the lowest total new bankruptcies since before the financial crisis in 2008,” said ABI Executive Director Samuel J. Gerdano. “With sustained low interest rates and weak consumer spending, we expect bankruptcies to stay at relatively low levels through the end of 2012.”

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“How Long Is the Wait” to Buy After Foreclosure?

A sluggish housing market has caused millions of home owners to lose their home to foreclosure, short sale, or deed in lieu of foreclosure. But once these former home owners get a better handle on their credit, how long do they have to sit on the sidelines until they can secure future financing to buy a home again?

Fannie Mae and Freddie Mac have a three-year waiting period following a foreclosure, and a two-year wait following a short sale, deed in lieu, or discharge or dismissal of bankruptcy. However, if borrowers can justify that the circumstance for the foreclosure or bankruptcy occurred because of an illness or job loss — or other “extenuating circumstance” — that may help reduce their wait. But with no such extenuating circumstances, these former home owners may have to wait longer, even up to seven years following a foreclosure or four years after bankruptcy, the article notes.

For loans insured by the Federal Housing Administration, borrowers with perfect credit afterwards also will, in general, have to wait three years after a foreclosure and two years after a bankruptcy is discharged, The New York Times notes.

Following a short sale, borrowers will have to wait three years to secure another FHA loan — however, there are plenty of exceptions. Borrowers will have to wait three years if they were in default at the time of the short sale and had no extenuating circumstances. However, if the borrowers were on time with all their payments a year prior to the short sale, they may have no wait at all and might even qualify for an FHA loan immediately.

Source: “The Post-Foreclosure Wait,” The New York Times (June 23, 2011) 

Other articles relating to the Sacramento and Placerville, California regions

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“Eliminate Second Mortgages” and avoid foreclosure?

Is there a way to dump your home equity loan while keeping your home?

Some struggling homeowners are using a little known, but increasingly popular, provision of the bankruptcy code to eliminate second mortgages and avoid foreclosure. How does that work?

Bankruptcy laws prevent homeowners from eliminating the debt of a first mortgage if they plan to stay in their home.  But second mortgages are treated differently.  Second mortgages can be declared unsecured debt when there is no equity to cover them. Remember about 40 percent of homeowners with mortgages don’t have any equity.

When that happens in a personal bankruptcy proceeding, the second mortgage is put on hold and no payments are required while the homeowner completes a repayment plan for other debts, which typically takes three to five years.  At that point, the second mortgage is eliminated.

While this strategy has gained in popularity among homeowners, mortgage bankers are not in favor of the practice, and have called it “a troubling phenomenon.”  However, there is little the mortgage industry can do, aside from seeking to change the law, which could be difficult given the current partisan lineup in Washington.

Source: Ken Calhoon, Real Estate Broker, Placerville, California

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Don’t File Bankruptcy – New Bankruptcy Laws Make Debt Settlement a Better Option

Great information in this Article,  By Emily Brenner

Have you found yourself in too much debt and feel there is no way out other than to file for bankruptcy? It may seem that there are no other answers, but please, don’t file bankruptcy! The new bankruptcy laws do not provide the kind of protection that the older laws provided, and the new bankruptcy laws make debt settlement a better option. Many people have never even heard of debt settlement, and many attorneys who specialize in bankruptcy won’t even tell you about this option, but there are definitely some good reasons to give it a try. I must reiterate – take a deep breath and don’t file bankruptcy.

So what is debt settlement? Well, for years now, the legal world has been participating in all types of settlements. A settlement is simply an agreement between two parties; there are property loss settlements between two parties when one of them destroys the property of another (as in a car crash, for example), divorce settlements between a husband and wife when the marriage ends, and so on. Well, there can also be debt settlements.

This is basically an agreement between you and your lender – your credit card company – or whoever it may be. Most banks and other lenders realize that once you start having these financial difficulties, they run the risk of never getting any money at all, so many are willing to negotiate new terms. There are even reputable professionals who specialize in taking on this burdensome task for you, and some will even serve as trustee and make the payments on your behalf each month after you send them an agreed-upon amount of money.

Debt settlements usually include a clause about not destroying your credit rating, but even if they don’t, the process doesn’t hurt your credit nearly as much as a bankruptcy. The new bankruptcy laws make debt settlement a better option for most people.

If you’re ready to eliminate up to 50% of your debt via debt settlement, here’s what to do next. By comparing the best debt relief companies in the market, you can find an honest, reliable service that best suits your financial situation. Visit for our top 3 recommendations.Article Source: