Fannie

Freddie | Agency Plus

Portfolio Access - Jumbo

FHA

USDA

VA

What is a Foreclosure?

A Foreclosure is a specific legal process in which a lender attempts to recover the balance of a loan from a client who has stopped making payments by forcing the sale of the mortgaged property.


  • Also known as: Breach, Court Sale, Deed Substitution of Trustee, Lis Pendens, Notice of Pendency, Sheriff’s Sale, Trustee Sale, Tax Lien Sale.

Identifying a Foreclosure

  • A foreclosure is evidenced by the delinquency status on the credit report, a VOM ( Verification of Mortgage ), a notice of default or a notice of sale filed against the property.


  • All FHA products also treat the following as a Foreclosure:


* Settlement on a real estate secured tradeline



  • Common verbiage on the credit report for closed Foreclosures include:


* Paid Foreclosure

* Foreclosure; Collateral used to pay balance



Agency Plus, Fannie, FHA, & Freddie: See the Installment Debt Types topic if the foreclosure is on a timeshare.


Portfolio Access - Jumbo, USDA, & VA: See the Eligibility waiting periods below if the foreclosure is on a timeshare.

Identifying Foreclosure Date when Reporting on Credit

  • When a foreclosure is reporting on the credit report, use the "date last delinquent" listed on the credit report.


  • If the loan does not qualify using that date and the client states that the foreclosure occurred prior to that, obtain documentation to verify the date the event took place.

Identifying Foreclosure Date when NOT Reporting on Credit

If the credit report does not list a foreclosure date or the property was included in a bankruptcy:


  • To verify the foreclosure, obtain one of the following:


* County records from website


* Sheriff's or Trustee's Deed the client received from the transfer



  • When determining the foreclosure date from the list of documents above, use the "Dated Date" or "Sale Date", not the "Recording Date".

Client on Title & Not on the Note

  • If a client is only on the title to the home, and not obligated to the debt, foreclosure guidelines do not apply.


  • If the home is free and clear and the foreclosure was due to unpaid property taxes, foreclosure guidelines apply.

Eligibility

  • Fannie, Agency Plus, & Portfolio Access - Jumbo: Not allowed within 7 years from today's date.


  • Freddie Only:


* Approve/Eligible: Not allowed within 7 years of the LPA findings date.


* Approve/Ineligible: Not allowed within 7 years of the application date.




  • Not allowed within 3 years from today's date.


  • Once a case number is assigned (new or transferred), seasoning is measured from the case number assignment date.

Not allowed within 3 years from today's date.







  • Not allowed within 2 years from today's date.






Foreclosure Seasoning Example

  • If the client provides documentation showing a different foreclosure completion date, use the date on the documentation.


  • All Products, Excluding Freddie & FHA: Use the date last delinquent as the start date and today's date as the end date:


* Example of Date last delinquent start date from the credit report.



  • FHA Only: Use the date of last delinquent as the start date and the case number assignment date as the end date. If the case number has not been assigned, use today's date.



  • Freddie Only:


* Approve/Eligible: Follow LPA findings.


* Approve/Ineligible: Use the date of last delinquent as the start date and the application date as the end date.

Mortgage Discharged in a BK Prior to Foreclosure

In the event a mortgage was discharged through bankruptcy, obtain the final bankruptcy order to verify the mortgage was discharged in the bankruptcy. The bankruptcy waiting period may be used if all the following are true:


  • No reaffirmation was filed after final bankruptcy.


  • Lienholder was not granted relief from stay (regardless if the foreclosure was completed prior to or after the bankruptcy)


  • The property was not abandoned from the bankruptcy case


If the mortgage was not discharged (look for filed Reaffirmation Agreement in the court records) or documentation cannot be obtained to verify the mortgage was discharged, the foreclosure waiting period must be used.

Follow standard Foreclosure guides above.

Initiated Foreclosure

No additional requirements for foreclosures initiated, but not completed.


See the Maximum Lates topic and Adverse Credit Menu for requirements and exclusions.

See the Maximum Lates topic for requirements.




No additional requirements for foreclosures initiated, but not completed.


See the Maximum Lates topic and Adverse Credit Menu for requirements and exclusions.


Redeemed Foreclosure

Follow the Initiated Foreclosure guidance in the row above.

Reverse & HECM

  • If a reverse mortgage or HECM has been foreclosed on or is in the foreclosure redemption period, follow standard guidelines.


  • If a reverse mortgage or HECM is within the Courtesy Vacancy Period, proceed with the transaction following the program guidelines.

Foreign Properties

If a foreign property has been foreclosed on, follow standard foreclosure guidelines.

Land Contracts

Land contracts taken back by the seller must follow standard foreclosure guidelines, unless documentation is provided to show the land contract was taken back because of delinquent payments

Mobile Home Foreclosure

  • If the home is classified as real estate: Treat as foreclosure. Title and county records can confirm classification status.


* If the client owns the land the home was in it is most likely a foreclosure.


  • If the home is classified as personal property: Treat as a repossession. Title and county records can confirm classification status.


* If the home was still on wheels, it is most likely a repossession.


  • If the land the mobile home was on was owned by the client and is sold at Sheriff sale, the sale of the land is treated as a foreclosure.

Manual Downgrade

Not Applicable

See the FHA Manual Downgrades topic for examples

No Manual Downgrade Requirements

If foreclosure does not report on credit report, loan may be required to be manually downgraded.


  • If the date of the foreclosure is greater than 7 years from the date credit was pulled, the loan will not be required to be manually downgraded.


See the Manual Downgrade topic for additional guidance.