Foreclosures to ding borrowers’ credit longer
April 3rd, 2008, 12:01 am · 11 Comments · posted by Mathew Padilla, Reporter
Fannie Mae, the largest funder of U.S. home loans, recently announced tougher guidelines, including an expansion of how long a foreclosure will hurt someone’s credit. With foreclosures spiking — Orange County saw a record 802 foreclosures in January — this is bad news for a lot of former and current but struggling homeowners.
Here’s more from Fannie (emphasis added):
The presence of a prior foreclosure action in the borrower’s credit history is evidence of significant derogatory credit and increases the likelihood of future default. The lender should consider the presence of a foreclosure as an added risk element that represents a significantly higher level of default risk. The greater the number of such incidences and the more recently they occurred, the higher the credit risk.
We currently require four years to elapse after a foreclosure before we will consider the borrower to have a re-established credit history. With this Announcement, we are increasing that time period to five years. We will continue to allow a lesser time period to elapse (three years in lieu of the current two-year requirement) for borrowers who can demonstrate documented extenuating circumstances that resulted in the foreclosure action.
The foreclosure-related changes will affect loans submitted after June 1.
There are various other changes, including some that appear to be a loosening of guidelines, but frankly I have a hard time deciphering some of the jargon in the release. I know some experts read this blog, so feel free to comment here. Illuminate us, please.
April 3rd, 2008 at 7:31 am
Down by the sea…the beautiful sea…
this is music to my ears, let’s make it real interesting and take away the get out of jail free card all together.
anyone with morals and ethics cannot play that card anyhow, so it is a perversion of the system.
-and thanks for acknowledging us experts Matt - you are swell.
-side not THE NEW SITE IS MUCH SLOWER THAN THE OLD OC REG SITE.
April 3rd, 2008 at 8:52 am
This new guideline won’t last. After a few years, Freddie and Fannie will relax this by about 2 years stating that these foreclosures took part during an unprecedented time period in our history, and we’ll reduce the waiting period to two years with re-established, unblimished credit. They’ll do this because of pressure from our government saying that this will help kick-start a new housing recoverey. You heard it first here.
April 3rd, 2008 at 9:22 am
anyone who’s foreclosed on should have a long-lasting stain on their record, no exceptions. i don’t care what kind of ridiculous bailout the gov’t tries to come up with and stick on the rest of us citizens that a) paid our mortgage responsibilities, upside down or not b) are renters and pay our responsibilities
April 3rd, 2008 at 10:21 am
The only exception is for medical reasons well documented !
April 3rd, 2008 at 10:59 am
bpsqwerty you are always so negative. I wish you had happiness in your heart. Why do you think you are better than everyone else? Some of these people who lost their home we don’t know the real story behind them. Some weren’t very wise to buy, others were misinformed, some lost their jobs. Whatever the real reason is~ we are here for a short time why not get a second chance?
I agree with Bill once we get out of this recession the bank guidelines will loosen up a bit. Banks will start to take on riskier loans it’s part of the cycle.
April 3rd, 2008 at 11:11 am
It’s all unnecessary. All of it. Any lender anywhere can adjust a deal without refinancing. Just increase the years on the loan - to 100 years what difference does it make. People who feel indignant because they don’t stuggle for money should be okay with this. After all they have a chance to pay off their own home and the others who need a rewrite will always just be renting more or less. It’s got to be better than no payments being made at all.
April 3rd, 2008 at 3:46 pm
LOL LOL,
Once this settles banks will be so desparte to lend they will over look everything. as for me, foreclosure and BK is a very MORAL option and since our friends in DC can use the law to benefit themselves then why not the rest of us. I read the word MORAL so much its crazy. Look at what the ilk in DC is doing to our country and you call someone immoral for protecting themselves based on what the law says we can do???? Its ok for the politicicans to rape us royally on taxes and breaks for the rich and if joe schom should use the LAW as its written to help him/herself its IMMORAL????
Well I plan to proactice much immorality within about 1 year and please spare me your morality. We are going to become a third world nation soon and buschco will be safely sipping tea in Dubai. Wake up folks, the nobilty of poverty train has let the station and every man and woman for themselves in pulling into the station. This sadly I have learned from Bushco and etal.
April 3rd, 2008 at 4:40 pm
whatthe hey - you are a very cunning linguist.
Elites made trillions on the transactions that took place over the last 4 years…trillions. the money has been moved into other companies under many names and in many countries to be certain.
the resulting pile of worthless mortgage backed investments and the derivative spinoffs that can not be calculated using any financial software in the known world, is left to shell companies that were spun off by the elite or to real companies that had no idea of the game they were in (this is the majority of course).
it will take years to bottom and decades to straighten out and generations to understand…these people are way ahead of us with how the game works, the game board changes beneath your feet and only they know what the rules are today, and more importantly tomorrow.
conspiracy? whatever.
April 4th, 2008 at 12:53 pm
I read a lot of wishful thinking here. Just because you hope it will be so does not mean it will happen that way. There is no need for banks to lend money just because you want them to do so. If they fear they will not be repaid, they raise their qualifications and/or rates to guard against losses. Using financial natural selection, those who have blemished credit find it cheaper to rent than buy.
Crap, this place has really gone down hill.
Chuck Ponzi
April 4th, 2008 at 3:37 pm
Chuck, you’re right, standards and qualifications have been raised by the lenders, and rightfully so. The point is, these same lenders who are striving to strengthen the industry, will eventually relax these same standards, and entice people back into the real estate game with new types of financing products, relaxed guidelines, etc., all for the all-mighty dollar. Wall St. will start to buy this product and that product, products that are off the straight line from the 30 year fixed (standard) mortgage. Not today, not tomorrow, but sure as s–t, they’ll again be in, and they’ll be buying.