Lender Guidelines Have Changed

Lenders are changing their guidelines for borrowers with walk-aways and foreclosures. There are companies today claiming that if you can't afford your house and can't sell it they can, for a fee, help you walk-away and still be able to purchase a new home within a couple of years. A walk-away is where a homeowner, who can no longer afford the home, stops making mortgage payments while still living in the home. The plan is to stay in the home as long as possible before the lender starts foreclosure proceedings and the homeowner has to hand the house keys back over to the lender.

In response to this growing trend Fannie Mae, the nation's largest purchaser of residential mortgages, is now prohibiting foreclosed borrowers from funding another mortgage for five years unless there are extenuating circumstances that can be documented. Even in those cases, the mortgage ban is for three years and, after five years, borrowers with foreclosures in their files will have a maximum LTV (Loan to Value ratio) of 90% and will need minimum FICO credit scores of 680. These changes are aimed at limiting the number of homeowners who are struggling with their current mortgage and are considering walking away from their home as an alternative to filing for bankruptcy or selling their home for a substantial loss.

If you have applied for a home loan you may recall that we are required to ask you whether you have ever experienced a foreclosure or handed over their deed in lieu of foreclosure. If the answer is 'yes' then the lender's scrutiny of the loan and all documentation for the loan is significantly increased. It is always recommended to contact your lender to see what options may exist rather than going into foreclosure.

Also, if you are looking to sell or buy a home then call me. I have excellent real estate agents who are willing to lower their fees to get your business.