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Q&A: Getting a new mortgage after a foreclosure

August 22, 2016 By Liz Weston

Dear Liz: Is it true that we can’t refinance our home until seven years after a foreclosure? We lost a rental property six years ago. Our credit scores now are in the 740 range, and we are anxious to take advantage of lower rates since our mortgage rate is 5.75%. Other than the foreclosure, our credit is perfect.

Answer: As foreclosures surged, the agencies that buy most mortgages increased the amount of time troubled borrowers had to spend in the “penalty box” before being allowed another mortgage.

Fannie Mae and Freddie Mac still have a seven-year waiting period after foreclosures. But that has been shortened to three years when borrowers can prove “extenuating circumstances,” such as a prolonged job loss or big medical expenses. Waiting times for other negative events, such as bankruptcy or short sale, have been reduced to two years with extenuating circumstances. Otherwise, it’s four years.

There are other loan programs that are even more forgiving. For example, the FHA has a three-year waiting period that can be shortened to one year if borrowers participate in its “Back to Work” program, which requires they document a significant loss of household income, that their finances have fully recovered from the event and that they’ve completed housing counseling. The Veterans Administration, meanwhile, makes loans available one to two years after foreclosure.

Filed Under: Q&A, Real Estate Tagged With: foreclosure, mortgage, q&a, real estate

Friday’s need-to-know money news

August 19, 2016 By Liz Weston

155403-425x282-Mortgage-LateToday’s top story: Bouncing back after foreclosure. Also in the news: How to piece together the perfect bank, handling the financial consequences of millennials living at home, and a parents guide to insurance for college students.

How to Bounce Back After Foreclosure
Getting through a trying time.

How to Piece Together the Perfect Bank
Ticking all the boxes.

How to Handle the Financial Consequences of Millennials Living at Home
Don’t sacrifice your retirement.

A parents guide to insurance for college students
Evaluating your insurance needs as your child goes to college.

Filed Under: Liz's Blog Tagged With: banking, banks, boomerang kids, college, foreclosure, Insurance, millennials

Monday’s need-to-know money news

August 8, 2016 By Liz Weston

Snip20160808_4Today’s top story: How not to pick a bank. Also in the news: bank accounts that foster independence for disabled people, how to pick the right college to avoid student debt, and newly updated government rules to help homeowners facing foreclosure.

How Not to Pick a Bank
Forget about the free toaster.

ABLE Accounts Help Foster Independence for Disabled People
Building financial independence.

Pick the Right College to Avoid Student Debt
Looking at college as an investment.

The Government Updated Its Rules to Help Homeowners Facing Foreclosure
What’s new from the Consumer Financial Protection Bureau.

Filed Under: Liz's Blog Tagged With: ABLE accounts, banking, colleges, financial aid, foreclosure, student debt, tips

Q&A: An offer of “help”

May 26, 2014 By Liz Weston

Dear Liz: My husband and I lost our home because of unemployment and being underwater (the value of the house was less than the mortgage). We now both are working full time and saving to buy another home. My father-in-law offered to help us by selling us a rental he owns and giving us a loan for $150,000. We also would have to get another loan of about $100,000.

In addition to paying him principal and interest, my father-in-law also wants us to pay the $900 rent he was getting for the home. Please advise us if you think this is a good arrangement. Is it fair for him to ask for the rental money too?

Answer: Of course not. He’s essentially asking you to pay for the property twice.

Most parents instinctively want to give their offspring a better deal than they would give a stranger. Your husband’s father is the exception — he’s asking you to agree to a deal that no stranger would consider.

Given this man’s inclination, you probably don’t want him as your banker or your landlord, let alone both. Keep saving your money and improving your credit scores so you can swing a home purchase on your own.

Filed Under: Q&A, Real Estate Tagged With: foreclosure, q&a, real estate

Explore other options before foreclosure

January 7, 2014 By Liz Weston

Dear Liz: Two years ago we moved to another state. Our old house hasn’t sold in that time, as the housing market there is terrible. We have it listed for $255,000 and owe $242,000. A recent appraisal came back at $190,000 to $205,000 despite the fact that it’s in good condition and only 11 years old. We were thinking we should do a mortgage release on the property to get rid of it as we just can’t keep up the mortgage payments any longer. We didn’t think a short sale would work because there’s been no interest yet on the property. Any suggestions?

Answer: What you’re calling a “mortgage release” is actually a foreclosure, and it would devastate your credit for years to come. That may turn out to be the best of bad options, but explore others first.

Perhaps there’s been no interest in your property because the asking price is too high. Talk to a real estate agent with experience in short sales about what listing price is likely to generate offers. A short sale would hurt your credit scores, although perhaps less severely than a foreclosure if you can persuade the lender not to report the deficiency balance (the difference between what you owe on the mortgage and the sale price). The advantage of a short sale is that you’d spend less time in mortgage lenders’ “penalty box” and may qualify for another loan within two years.

Filed Under: Credit & Debt, Q&A Tagged With: Credit Scores, FICO, FICO scores, foreclosure, foreclosure vs. short sale, short sale

Does mortgage servicer Ocwen owe you money?

December 19, 2013 By Liz Weston

ForeclosureMortgage servicer Ocwen was ordered today to cut clients’ loan balances by $2 billion and refund $125 million to the nearly 185,000 borrowers who have already been foreclosed.

Ocwen is the country’s largest non-bank mortgage service company according to the Consumer Financial Protection Bureau, which filed the proposed court order along with regulatory authorities in 49 states and the District of Columbia. Mortgage servicers collect payments from borrowers and forward the money to the owners of the loans. Servicers also handle loan defaults and foreclosures.

The CFPB blasted “Ocwen’s systemic misconduct at every stage of the mortgage servicing process,” saying it took advantage of homeowners by charging unauthorized fees, improperly denying loan modifications and engaging in illegal foreclosure practices.

“Deceptions and shortcuts in mortgage servicing will not be tolerated,” CFPB Director Richard Cordray said in a press release. “Ocwen took advantage of borrowers at every stage of the process. Today’s action sends a clear message that we will be vigilant about making sure that consumers are treated with the respect, dignity, and fairness they deserve.”

The settlement administrator will contact eligible homeowners with a notice letter and claim form. You’ll find the CFPB’s explainer here.

Filed Under: Liz's Blog Tagged With: foreclosure, mortgage, mortgage servicing, mortgages, Ocwen

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