Monday, September 10, 2012

FHA Guideline Change Expected

FHA : "Ignore" Foreclosures, Bankruptcy, Short Sales? 

Major derogatory events include foreclosure, short sale, and Chapter 7 bankruptcy. Current guidelines require a mandatory waiting period of each of the following events, assuming credit has been re-established by the borrower :
  • Foreclosure : Waiting period of  3 years since sale date of foreclosure before eligible for FHA-insured financing
  • Short Sale : Must wait 3 years from consummation of short sale closing before eligible for FHA-insured financing
  • Chapter 7 Bankruptcy : Must wait 2 years from Bankruptcy discharge before eligible for FHA-insured financing
Under the FHA's expected new plan (anticipated within the next 90 days or sooner), these waiting periods will be waived in full.  Soon, FHA-insured loans may be available to home buyers who may have been recently foreclosed upon; for whom a short sale was necessary; or for whom a Chapter 7 bankruptcy was discharged yesterday.

The FHA's new waiver on foreclosures, short sales and bankruptcies would add to the national pool of home buyers, creating buy-side demand for housing and upward pressure for home values nationwide.