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 at:www.sierraproperties.com

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

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.