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Aug 2013How soon after bankruptcy can I buy a house again?
Posted by Robert Weed / in After Bankruptcy / 101 comments
How soon after bankruptcy can I buy a house again?
Sooner than most people think. And for some, it just got even better.
That’s because of a new policy from the Federal Housing Administration, announced by FHA Commissioner Carole Galante. Under that new policy, some people can get approved to get an FHA backed mortgage as soon as one year after the bankruptcy. (Here’s that announcement, August 15, 2013, 13-26ml Or here.)
Under the new FHA policy, how soon after bankruptcy can I buy a house again?
How soon after bankruptcy can I buy a house again? FHA Commissioner Carole Galante just made it just one year for some people.
It has to be one year after the bankruptcy discharge…and if you lost your previous house, it has to be one year after the shortsale, foreclosure or deed-in-lieu. Whichever is last. (So if you file bankruptcy in July 2013, discharged November 2013, but the mortgage company doesn’t get around to foreclosing until February 2014, your waiting period starts in February 2014, not November 2013.)
There are some other rules. Here’s the big one. Your bankruptcy–and your loss of your previous house–has to be because of a six month loss of income of at least 20%. Job loss, major pay reduction, or maybe you lost of a lot of time from work for medical reasons, or something like that.
The FHA calls that an “economic event.” Before the crisis lot of people got slammed into mortgages they just couldn’t afford–that won’t get you the one year rule. That’s not an “economic event.”
Kids got too big for the old house–that won’t get you the one year rule, either.
What about marriage break up? The way I read it, eligibility depends on household income. If both spouses were on the old mortgage, and were working, and they split up, then the “household” income dropped. The way I read it, that’s an “economic event” that gets you the one year waiting period.
What else do you have to do? You need to show you had good credit before the “economic event.” Before you had that job loss or paycut, or break-up, you needed to be pretty much current on everything. If you were dragging around bad credit even before you took that paycut, you can’t get in that one year policy.
Finally, after bankruptcy, you need at least twelve months of paying everything on time. That’s twelve months of good credit, or, the way I read it, having twelve months of no credit at all. You just can’t have bad credit. (This makes your after bankruptcy credit report even more important. I’m one of only a handful of bankruptcy lawyers who works with you to check your after bankruptcy credit report. If somebody hits your credit after the bankruptcy, and disputes don’t fix it, I sue. That problem is a lot less common then it was ten years ago, when I started suing. But it still happens.)
And you also have to be counselled by a housing counselor. Springboard seems to have a useful site, here.
What if you don’t have that “economic event”–the loss of 20% or more of your income. You still have the same question. How soon after bankruptcy can I buy a house. That rule is two years after the bankruptcy discharge, two years after s shortsale or deed in lieu, three years after a foreclosure. That’s found in the FannieMae Selling Guide, look at page 486. Those rules are if there are “extenuating circumstances.” “Extenuating circumstances” don’t have to be as specific as the 20% loss of income that counts as an “economic event.” But there has to be some actual hardship–not just a strategic default. If you just decided to not pay, the rule is seven years.
On July 29, 2014, Fannie Mae cancelled the three year after foreclosure rule for people who file bankruptcy. Their announcement is here.
You have to get two years past the bankruptcy, but you do NOT have to wait until three years after they actually foreclose. But while you don’t have to wait three years, people trying to buy a house tell me they still get turned down if the house is still sitting there without a foreclosure. That’s one reason I tell people, don’t move out.
UPDATE: The one year rule isn’t working very well.
An October 22, 2014 article in the New York Times reports only 337 people nationally were approved in the first year of the program. Bank of America, Wells Fargo and Chase all said they would NOT help people under the one-year program.
UPDATE TWO: January 2015
Safa Javid at Movement Mortgage is able to help some people get FHA Back to Work mortgage loans as little as one year after your house was foreclosed–if you can documents both a severe reduction in income and then a strong income recovery.
A mortgage company in Annandale told me that they make these loans. They are called FHA Back to Work Loans.
They want very strict paperwork, both on the hardship and on the new current income. But if you meet the requirements, you can get approved.
The contact is Safa Javid, at Movement Mortgage. His contact info is here.
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Robert Weed has helped fifteen thousand people file bankruptcy in Northern Virginia. Robert Weed is a frequent panelist and speaker at the meetings of the National Association of Consumer Bankruptcy Attorneys. He is one of Northern Virginia’s most experienced personal bankruptcy lawyers. As an expert on changing consumer bankruptcy laws, Robert Weed has been interviewed on local and national TV and quoted in newspapers across the country.
Shannon Alamia
My husband and I filed bankruptcy in 2012, it will be discharged in June 2014. Our mortgage and equity loan was included. Do we still have to keep paying those loans? And what happens if we just want to stop paying and walk away? Can they but bankruptcy and foreclosed on our credit report? We want to sell our house but the market has dropped so low that we can’t sell for what we owe. We only have to two bedroom home with 2 girls that need their own rooms, we would like to get a loan for a new house but if we can’t sell our current home for what’s it’s worth, what can we do? We need answers if you can give us some advice. Thanks
Unfortunately the attorney we used is unwilling to help us any further, she did not feel comfortable with the questions we were inquiring
PS We filed Chapter 7, I forgot to mention that! Shannon
Robert Weed
Shannon:
I looked you up. It was discharged June 2012. So June 2014 will be two years.
It looks like your mortgages were with Bank of America, Countrywide originally.
The bankruptcy still protects you if you stop paying. In Virginia it usually takes about six month for them to foreclose and boot you out if you stop paying. Most other states it’s longer; I don’t know anything about Illinois.
The good news is that two years after the bankruptcy, you can get a mortgage. That’s if you did NOT own a house when you filed the bankruptcy.
But the BAD NEWS is it has to be three years after this house forecloses. You credit report should be showing bankruptcy–if you have been paying, or if you haven’t, bankruptcy should be the last thing it shows. This is where I explain how to check. https://robertweed.com/2013/08/20/the-credit-report-you-need-is-the-credit-file-disclosure/.
But if you stop paying, there will still BE A FORECLOSURE, and your eligibility to buy again runs three years from then. Some people can get approved sooner. To get in under the one year rule, you need to show a major “economic event.” I explain that here. https://robertweed.com/2013/08/30/how-soon-after-bankruptcy-can-i-buy-a-house-again/.
For most people, three years after the foreclosure.
So, you can stop paying and give up the house without doing any damage to your credit score. You can probalby live for six months or more for free in the house before you have to move. But you have to rent for three years before you can buy a house again.
Hope I answered your question.
Shannon Alamia
Is the reason it does not hurt our credit score because they can’t double dip, by putting bankruptcy and foreclosure?
Robert Weed
Shannon:
Exactly!
Shannon Alamia
Thanks so much, this information was very helpful!!
Shannon Alamia
Can you tell me this, if we get a loan for a house after June, and rent out our current home. If at some point the renters can’t afford the payment and neither can we, will the home we purchased be in jeopardy?
Roberta ferraioli
My moms house is paid off and wants to transferr the deed to my name. I went bankrupt 4 years ago. I’m just concern that it would to ok
Robert Weed
Roberta:
There’s no problem with your bankruptcy if mom give you the house four years later. The law books are full of reasons your mother shouldn’t do that.
Robert Weed
Shannon:
Good thinking. Yes there are some mortgage companies who will give you a new loan once you are two years out of the bankruptcy, if you can show you have paid the existing mortgage on time; and if you can show ti’s now rented at enough to cover the mortgage. Then later on, if you decided you did NOT want to still be a landlord, you could stop paying the mortgage, let the “rental” go to foreclosure, and the bankruptcy would still protect you (and protect your new house.)
Shannon Alamia
Another question, if both our mortgage and equity line of credit went into bankruptcy do we still have to continue paying on the equity? And do we have to include that in the selling price of the home?
Robert Weed
The home equity loan after bankruptcy is still attached to the house. So you can’t sell it unless they agree. If they agree to take less than all you owe them, that would be a “short sale.”
Whether you “have to” continue to pay depends on what you are trying to do. I often tell people to pay the first, don’t pay the second, and see how long that works. I call that nerves of steel. you can read about that here. https://robertweed.com/2010/03/25/after-bankruptcy-what-if-i-dont-pay-my-second-mortgage/
Casandra
Me and my husband are filing a joint bankruptcy because I have debt of medical bills before i was even 18 because my father did not have health insurance on me! I also have most of my debt because someone stole my identity I have filed a few different police reports about it! My husband and I wound up homeless and our vehicle we were paying on and he has a few other things on their that are medical bills from when he was a child do we qualify for the one year?
Robert Weed
Cassandra:
You sure sound like the kind of person bankruptcy can help!
Teresa
My husband and I are currently in a Chapter 13 which started November 2010 and due to end November 2015. We are paying back 100%. We did receive an interest rate reduction for our cars and a furniture bill. Our home was not in arrears and student loans have been put on hold. We would like to purchase a new home. We have received so much confusing information in the last 3 years about when or if we can purchase a home. We have received information that we could purchase while still in Chapter 13 to waiting 2 to 4 years after discharge. We have spoken to different builders and one told us to start reestablishing our credit with credit cards and that’s what we are doing.
In case you are wondering why we filed to begin with….we were late with credit cards because my husbands second job was paying irregular. It was guaranteed money but we were not the best at managing money so our attorney said ok. We were told since we are paying back 100% we can pay extra. Our real concern is…If we get credit scores up and we have not been late on mortgage in over 2 years and we have stable jobs…When can we really get another house? We currently have FHA loan but we want to use our VA eligibility like we did on our very first home….We are both veterans.
PS…we have gotten the runaround about even refinancing our current FHA ((ARM) so we stop trying..Thankfully the rate went down to 4.5 ARM for now anyway.
Robert Weed
Teresa:
Yeah, I’m confused, too. At least some people have told me, like they have told you, that you should be able to after you have made your Chapter 13 payments on time for more than two years. Now you need to be able to SELL the house you have, so I’m assuming there’s enough equity that you can sell it.
But I’m not a lender, so I can’t approve you for a loan.
Your story is another reason I HATE to put people in chapter 13.
Teresa
Mr. Weed,
Thank you so much for your response. Wish we would have found you before now….but lesson learned…not to be repeated. Maybe we can help someone else down the road and direct them to you since were are in VA also….thanks again.
Tiffany
Dear Mr. Weed,
My husband and I reluctantly had to file Chapter 7 last year and it was finally discharged on November 19th, 2013. The reason for us having to file for bankruptcy in the 1st place was due to my husband losing his higher paying job, due to the economy taking it’s turn and me getting hurt and becoming disabled. Therefore the majority of the “write offs” were medical bills. We are in the process of getting in a MUCH better place, thankfully, however we are wanting to buy our own house so we have something to show for all of my husbands and my hard work one day. Recently, we applied for a loan through Quicken Loans and were denied, we are sure this was due to our bankruptcy. We have since the bankruptcy been trying to re-establish our credit by obtaining a credit card and paying off the full balance as soon as it is due. As well as little things like magazine subscriptions and paying their bills off as soon as they come in. Etc. Etc. Etc. Today I talked to a Realtor through RealEstate One and he told me that we are doing it all wrong. He said that we should only pay down to a $10 balance each time and that will help to “boost” our credit even faster?. Also that we can not buy our own home for at least another year?. We just want to be able to buy our own home, for us and our 4 children. Isn’t there something or someway that a family of 6 in Michigan can get some kind of help to buy their 1st home WHILE trying to rebuild their credit? Some kind of government help or something? Or no? We just would like another opinion on this versus a “he said no so it’s a no” type thing.
Thank you for your help and time in advance as we really were looking forward to this and then today….that gentleman from RealEstate One just truly “broke my heart”….I guess I shouldn’t have been looking so prematurely.
-Tiffany
Robert Weed
Tiff:
You need to be discharged for at least two years to get approved for a mortgage. (That’s assuming you didn’t have a house in the bankruptcy.)
Unless, like I say here, you can show the sudden loss of income, and everything was current before that. Then it can be one year. (That’s a new policy and I don’t know anyone who has done it. All I know is what I have here on my blog.)
Cristy
Hello Mr. Weed,
I have a rather odd circumstance that I am hoping you could give me some advice on. I completed a Chapter 7 Bankruptcy in 2008. The home that I lived in was siginficantly under water due to the burst in the housing bubble, I had only owned it 2 years (it was an older home I purchased after a sudden divorce). The house was included on the bankruptcy but I continued to make payments until the money pitt of a house finally forced me to move (black mold buckling the kitchen floor, out of code electrical wiring, etc.) there was just no money left to fix it and no equity in which to borrow against to fix it. I moved out in November of 2012, notified the two mortgage companies that I was letting it revert back to them under the terms of the bankruptcy. The foreclosure sale completed in September of 2013, I guess Colorado is kind of slow on that kind of thing. My question is, how long do I need to wait from the time of the foreclosure sale before I can consider purchasing a home? I would be looking at using my VA eligibility, none of this fancy 80/20 type stuff that got me into trouble last time. I have re-established my credit to the mid 700’s and am very responsible with my money, staying debt free and never being late on my car payment or rent or anything else. I appreciate any help you could give.
Thank you!
Cristy
Robert Weed
Cristy:
For VA eligibility I think its two years after the actual foreclosure. But I’m not a lender so you should check around.
Felisha Poole
I filed Bankruptcy in 2012 when they started the foreclosure procedure on my house.The bank just foreclosed on my house and I have a move out date in April. 2014..Do I put this on my taxes for this year or next year for 2015?
Robert Weed
Felisha:
Sorry, I’m not a tax guy. I have no idea.
Eric
Hi, My wife and I filed chapter 7 in Nov. 2013, we are currently waiting for our discharge. My wife has a mortgage in her name only. The property was included in the chapter 7, and we are aware we are going to be foreclosed on. My wife and i had a child born with special needs 2 years ago which forced her to leave her job, costing us about $50k a year, I tried to keep up with bills and mortgage payment but just couldn’t at the time, my wife had numerous credit cards and a 2nd mortgage. She had great credit before she lost her job, but with only my income i couldn’t keep up so we filed chapter 7. We are going to need to buy a new house, I have never had a mortgage loan in my name, i make $70k a year and all our debt is now gone, which will enable me to save quite a bit of money. My question is how long will i have to wait to secure a loan? I should be able to put $15k down and ill obviously start rebuilding my credit before hand. Also should i leave my wife off the loan application due to the foreclosure? Any advice is appreciated! Thank You
Robert Weed
Eric, I’m a lawyer not a lender, so I don’t know whether you should leave your wife off the loan application. My guess is there’s no benefit to including her, since she has no income, but that’s only a guess.
You can get approved under currents regs two years after the discharge, but three years after the house in your name forecloses. Since the house is NOT in your name (or is it? You told me your wife was the only one on the mortgage, but are you both on the deed?)–I’m guessing the three year rule does not apply to you.
Keep in mind I’m a lawyer, not a lender. This was what I warn my clients to expect, but that does not mean you MIGHT find somebody who can do better for you than what I say here. (Let me know if you do.)
Krystal
Hi, my husband and I are currently RENTING a home that went into foreclosure and was sold to Freddie Mac in November 2013. We signed another one year lease in September 2013 with the same owner (since he owned it at the time). The attorneys office is saying that they will not honor our lease and want us out. Can they do that? I was under the impression they had to honor it.
The BIGGER issue is our Chapter 7 bankruptcy was discharged in December 2012 and we have been turned down for two homes loans in a day. The credit is good, just not enough of it. There are no places to rent in the county we live in and my husbands job prohibits him from moving out of county. Is there anything else we can do? Would we be eligible for an FHA loan? The house on the bankruptcy was foreclosed in Oct 2010 and we filed for bankruptcy because he was medically discharged from the military. That being said our finances took a huge hit and we couldn’t pay our bills. Please tell me there is another option.
Thank you for your time.
Robert Weed
Krystal:
Everything I know about whether they have to honor your lease is here. https://robertweed.com/2011/02/06/after-bankruptcy-worried-about-your-tenants/.
Don’t think you can get a mortgage sooner than two years after the discharge, so you got to get to December somehow.
Sorry, I don’t have any better ideas.
Sam
Question I have related to article….
I discharged chapter 7 in Sept 2009, Mortgage included.
FINALLY got the deed for our house out if my name in 2012 thru short sale.
The bank as no surprise showed 8 months of late payments and settled for less than owed, However only on Experian. All others showed closed due to chapter 7 in 2012.
It is now 2014, I disputed the experian report and now all my credit reports show Loan closed 2012, that it was discharged in Bk, and NO late payments.
My credit was in the 690’s prior to me winning the dispute. Hopefully has gone up being the late pays were removed.
The question now nobody can answer me is shouldn’t my waiting period now be from 2009?
I do not see how it is legal or ethical to make someone wait for almost 5 years when I have done nothing but better my situation. I rent have a car payment and a low credit card bill. That’s it.
I feel like I am being punished twice.
Can I buy now or not?
Robert Weed
Sam:
What the CREDIT report should show is Chapter 7 discharged Sept 2009. And the land records show a shortsale in 2012.
My understanding is that you can’t get a loan until two years after the discharge–that was long ago–and two years after the shortsale. You are NOT quite there yet. (Depending on when the shortsale was in 2012–you didn’t say that.)
But it’s sure OK with me if you apply–see what a LENDER tells you. This is lender policy, not bankruptcy law.
Sam
Thank you Robert. In my frustration of this topic I didn’t mention. It will be 2 years this August since short sale. One lender said absolutely not but didn’t sound sure, one us willing to run the process to see where we get but isn’t sure. The problem is nobody is willing to look into the guidelines for this situation. I have tried researching and there is no straight answers. Thank you for the insight. At worst I wait 7 more months in what has already been a frustrating process to get life and finances back in order.
Teri
I am in the same situation. I was released in May 2010. The mortgage company didn’t transfer deed until July 2013. Over three years later. I’m being told I have to wait until after July 2016. It will be over 6 years. I feel that the mortgage companies shouldn’t be able to do that. I too feel like I’m being punished while everyone else who had to file has the option to purchase a home.
Is there a time frame for the mortgage companies to do this? And who can I write to get this situation corrected. I’m ready to own my own home again.
Robert Weed
Teri:
All I know is to tell people, don’t move out. At least then you can live for free. I do not know of any way to force them to take it over. You can think about renting it so at least you are getting something.
Teri
Well I stayed there for 2 years afterwards because I didn’t want the place to go to hell but I felt wrong staying and have been gone for two years now renting elsewhere. But isn’t there a time limit on how long they can do that? Seems like I’m being punished and having to wait 6 to 7 years when everyone else that files doesn’t have to.
Robert Weed
Teri:
I understand how you felt. But if the mortgage company doesn’t feel bad leaving it empty to go to hell, you shouldn’t feel bad living there not paying them.
Is it still rentable?
Don’t know if it makes you feel any better but lots of people are like you, frustrated waiting for the mortgage company to foreclose and not able to do anything about it.
Michelle
Hi Robert,
My husband and I have been patiently(not really!) waiting to buy our first home. We have been turned down by numerous lenders because I have 3 old judgements equally about $10,000 total. My husband has none. Both of our scores are around the 620 range, which we worked hard over the last year to raise even to that point. I do have about $5000, all medical, on my report and all but 2 collections are 4 years or older. Both of us for the last 7 years have 100% on time payments shown on credit reports. My question is,,,should I file Chapter 7 and get rid of those medical collections and judgements? Will my husband be affected in any way? And, can we keep all the good credit we have now? (credit cards, 2 vehicles)
Thank you for your time!
Michelle
Robert Weed
Michelle:
You definitely SHOULD have filed bankruptcy years ago when you got those old judgments–and now you’d be getting approved. But if you file bankruptcy now you will end up wasting the good credit you’ve built up. I do not KNOW what you should do now. I really don’t.
donna
Was discharged, Chapter 7, this month, Feb2014. No home included.
Am i able to purchase a small (even one acre) plot of land, only. NO home? I want to be able to set a *Tiny Home* on the land ~ Do all the above rules apply to me, as far as waiting if it IS just land that i am attempting to purchase? Thanks ~
Robert Weed
Donna:
Good question. It shows I’m not quite as clear as I should be.
These rules are mortgage rules–under current regulations there’s a waiting period for how soon you can get a mortgage to buy a house.
Are you paying cash for the land? Then sure, any time. Are you trying to borrow money to buy the land? Then I don’t know the answer. Around where I am, Virginia suburbs of DC, land is really expensive. So that question never comes up around here.
Mary
I have $45,000 in debt about $30,000 are student loans which I know can’t be included on bankruptcy I have a $8500 repossession and the rest are misc. bills that I was considering paying off. My question is is bankruptcy a good option for me due to the fact that I can’t afford to pay off my repo ? Or should I just attempt to pay off my debt? My goal is to purchase a home fairly soon and I know with bankruptcy I’ll have to wait 2 years. I just want to know the best way to handle my debt and be able to obtain a mortgage either way the repo/bankruptcy will hinder this process I just wanted to get a professional opinion on this matter thanks
Robert Weed
Mary:
You should talk with a lender, too. But I think there’s no way you can get approved for a mortgage with a repo sitting on your credit. Unless you can just pay it off, you need to file a bankruptcy if you want to buy a house any time soon.
KIM
WE ARE OUT OF CH 13 1-1/2 YEARS NOW WE ARE TRYING TO BUY A NEW HOUSE WE HAVE OUR OLD FOR LEASE WITH PAYING THE MORTGAGE ,OTHER BILL ON TIME OUR CREDIT CARD WAS PAYED OFF TO TRY AND BRING UP THE SCORE BUT IT IS STILL THE SAME THIS MONTH OUR SCORE IS AT 597 EQU, SO CAN YOU HELP US.
Robert Weed
Kim:
No I can’t help you.
KIM
why???????????????????
Melissa
My husband and I were just married last year. My husband has “owned” his home for nearly 23 years and is completely under water. He originally bought it through a VA loan and later intentionally sold it to another mortgage company that a friend of his was working at for a VARIABLE interest rate! The home appraises for MAYBE 70,000 and between the 1st and 2nd mortgage, he owes nearly 140,000.00, not to mention the nearly 35,000.00 in credit card debt. Now my question is….I have excellent credit, never late on anything and have never owned a home. My husband is in talks and plans on filing a Chapter 13 and walking away from this house which we are paying a monthly payment equivalent to a 300,000.00 home, honestly. If he files a Chapter 13, how long would it take before we’d be able to look into getting a home loan together? My annual income is 53,000.00 and I work for the government, so guaranteed secure employment, and he has been in his job for 23 years with the city and makes nearly 83,000.00. I’m sure I’d get approved for a home loan but in order to buy the home we would want to retire and grow old in, I’d like to be able to combine our incomes and get approved for a larger amount. Would he be able to get another VA loan or since I’m a first time home-buyer, would that work to our benefit? Any advise you could give would be so much appreciated.
Robert Weed
Melissa:
Why is he doing a Chapter 13 instead of a Chapter 7? Depending on where you are he may not be income eligible, but a Chapter 7 would be a lot quicker back to good credit than a Chapter 13.
My blog says you can usually get approved for a new mortgage two years after the bankruptcy but three years after the house is out of your name. If he goes into Chapter 13 he won’t be discharged for five years, so it might be seven years before he can get a mortgage approved. (Some lenders, I’m told, will lend to somebody inside Chapter 13 whose payments are current, but that it very difficult to do.)
I am NOT saying it would be impossibly to get approved for a new mortgage while he’s in Chapter 13, but I can tell you it won’t be easy. This family needs to figure out how to get him into Chapter 7, if there’s any way.
Melissa
When we went to speak with the lawyer, she stated his income is too high and does not qualify for a Chapter 7. Trust me, that’s what we were hoping he’d be able to file. Given our current situation, do you have any other ideas on how to get out of this mess besides filing a Chapter 13? I feel like he doesn’t have many options…..
Robert Weed
Melissa:
Sorry, if you were in Northern Virginia, I’d see if I had any ideas on how to get him approved. Wherever you are, I can’t shed any light.
Dwayne Mathenay
What if this would be my first house would I have to wait two years or seven
Robert Weed
DwayneL
Two–now of course you need to carefully rebuild your credit–and have enough income to qualify for the loan.
Erica
Right before the housing market crashed I became unknowingly involved in a straw buyer mortgage fraud scheme. My name and information was used to purchase 3 properties which later began to default. I filed Chapter 7 bankruptcy, with those 3 properties included, and it was discharged in Feb 2012. I managed to keep my personal property through the bankruptcy and have been paying the mortgage on time for the last 9 years. I plan to sell the house in the near future to relocate for work. With my circumstances, how long should I expect to have to wait to qualify for a new mortgage?
Robert Weed
Erica:
Tricky. If you can sell your house that you are living in now, the ordinary rule would be two years after the bankruptcy–and two years is already up.
Your problem is those three houses you were “unknowing involved in”. Has it been three years since they foreclosed? If not, can you show that while your “name and information” were used, you were not involved with those. I have no idea what a lender would do with that.
Regina Gray
Hello, I wanted to know if my ex husband used my name to get a loan modified after our divorce and then defaulted on that loan. Now the mortgage company is coming after me for payment and I never approved the modification. Why would they allow him to get the modification and the loan was solely in my name? What kind of Lawyer would I need to try to clear this up?
Robert Weed
Regina:
First of all I’m a bankruptcy lawyer. You didn’t say whether you filed bankruptcy. If you filed bankruptcy, then they can’t come after you. If you didn’t, modification or not they are going to come after you if somebody is not paying.
Did your divorce leave him in the house with a loan in just your name? Why did you and your divorce lawyer think that was ever gonna work for long?
Second, I guess you are telling me your ex forged your name. That’s pretty serious, but it’s outside of anything I know enough to talk about.
Nate
I filed chapter 7 back in 2009 before I got married. My house was not forclosed nor was it reaffirmed. now 4 years later my wife and I want to buy a new house togather, but our back has told us my house must be reaffirmed before we can get a home loan…is there a way around this or do I have to sell or can I even sell my current house?
Robert Weed
Nate:
I don’t know where you are, but I’ve located several lenders around here (2 big banks and one small broker) who don’t have that noise about had to reaffirm. That’s not in the regs–you need to talk to a better bank.
You’re bigger problem, from what I understand, is that they are VERY reluctant to put somebody in a mortgage who already has a mortgage. Before the crisis there were way too many people who owned way too many houses and they are paranoid about that.
Can you sell your house? Well, it’s your house. If there’s equity by now you can sell it.
Summary: if you have built up equity so you can sell your house, then you can find lenders who will give you a new mortgage. You will also find some who don’t want to it since your mortgage payment history doesn’t show on your credit report, but there are ways to work around that. (Like asking for a payment history.)
If there isn’t enough equity so you can sell your house, can you rent it and PROVE that it’s cash flow positive. Otherwise, you’ll find it very difficult to buy a house when you still own one.
Stan
I have a question, I filed chapter 7 bankruptcy about 5 years ago (looking for my papers to get date) I filed on a home my ex got in our divorce and business and credit card loans that went bad but not on a home I already owned and paying mortgage on. I did not reaffirm the mortgage on my house when lender requested it but now a situation has come up that I may not be able to keep paying my mortgage. Since I did not reaffirm this mortgage even though it wasn’t listed on my bankruptcy can I walk away if necessary? Will I be liable if mortgage holder can’t get loan amount out of a sale? I have tried to sell it but with the market condition It isn’t worth what I owe still. Thank you in advance.
Robert Weed
Stan:
Leaving stuff out of the bankruptcy is LYING TO THE BANKRUPTCY COURT. You LIED TO THE COURT–by not “listing” the property you intended to keep paying. At least if that’s actually what you did.
Your chances of being prosecuted and sent to jail are very, very low. But, you are telling me you lied on sworn papers to the court.
You need to talk to a lawyer in your area and try to figure out what to do.
You are required to “list” everything in the bankruptcy–and then you can still pay what you want to pay. Maybe that’s what you did. (I hope so.)
But you need to talk to a lawyer who has your bankrutpcy papers in front of them; and then figure out what to do from there.
Stan
I think I stated it wrong or you misunderstood. I didn’t hide the fact I had the house during the bankruptcy and it was listed in my assets even though it wasn’t worth the amount owed on it. I was told by my attorney at the time I could keep my house and the judge agreed as long as I continued making payments. What I was trying to ask is that if I didn’t sign a contract to reaffirm the mortgage is it still under my bankruptcy (someone told me if I had signed a contract to reaffirm that It would no longer be covered under the bankruptcy) and what would happen if I moved in with a relative and stopped making payments now that my financial situation has turned bad, I do know it would be foreclosed on but didn’t know if I was still liable for any amount of money it didn’t bring that was short of the payoff amount. I have no money left at the end of each month.. The house is in need of serious repairs that I don’t have enough money to fix and there is no equity in it to borrow against to make the repairs.
I am sorry for any misunderstanding. I will try to make an appointment to see the attorney I used locally..
Robert Weed
Stan:
Wew–ok now what you explain is exactly right.
No you are NOT liable. The bankruptcy still protects you. That’s why your lawyer did NOT have you sign a reaffirmation.
They cannot come after you for anything, except if you stop paying they can foreclose the house. Do not sweat it. You are ok.
Stan
Thank You Sir, I have been sweating over it all. I feel somewhat better now.
Amy
Hi Robert, I just wanted a quick answer. My husband and I live in Maryland and filed for bankruptcy 13 which was discharged in December 2012. Our second mortgage we have not paid on since prior to the BK and we were told it was written off but still shows on our homeowner insurance policy. I can understand that part of it. They do not want to forgiven the debt because there is a possibly they could recover even part of the debt if the property is sold. My question to you is since we have been discharged from BK in 2012, that if we walked away from this house now, would this still be covered under the BK of 2012? How does this affect our credit report if we walked away now instead of then? Thanks, Amy
Robert Weed
Amy:
Why were you in Chapter 13? I’d need to know what the Chapter 13 said (your lawyer needs to look at it) to see if/how/what you mean by it was “written off.” I can’t add anything because I don’t know what your Chapter 13 did and how it was written.
Nancy Jacobs
Our house was not included in the bankruptcy, my husband had to retire due to his health. Our house will be sold as a short sale. I recently received an inheritance and we paid cash for a house in another state, can they attach a lien to the house we just purchased?
Robert Weed
Nancy:
I do not know what you mean when you say our house was “not included in the bankruptcy.” Does that mean you lied to the judge and did not tell them you owned a house? Does it mean you reaffirmed the house? Does it mean you did list it in the bankruptcy but then kept up the payments? There’s big difference between each of those
Virginia
I’m thinking about filing for bankruptcy. I don’t own a house or anything but I want to wipe the slate clean from bad financial decisions in the past and start over. My reason for wanting to file bankruptcy.is to purchase my first home. Any suggestions on what I should do.
Robert Weed
Virginia:
Yes, go talk to a bankruptcy lawyer. Lots of people file bankruptcy to clean up past financial mess–and can buy a house in two or three years.
Bonnie
I have a strange situation and need some help. We filed Chapter 7 bankruptcy in 2011 and I think discharged in 2012. We included our 1st mortgage but not the 2nd ($30,000). My ex-husband’s name is on the note only. He did a quit claim deed to me in 2012 when our restaurant was going under (only in his name). We got divorced in January 2012. My kids and I stayed in the residence and he moved out. I continued to pay the mortgage until September 2013. I was also paying the equity loan (2nd mortgage) missed 2 months payment then started making the payments again. We want to sell the house probably as a short sale if we have time before it forecloses. If the house forecloses I know the 1st mortgage is covered under the bankruptcy but the 2nd is not. The bank said we would receive a 1099 for the 2nd showing it as income for us the next tax year. Is it possible to keep making payments on the equity loan so we do not get the 1099 or get one for not as much? By the way, we are in Georgia.
Robert Weed
Bonnie:
Wow. You have a tangled mess, but I don’t exactly understand what you are telling me. I don’t know how you say “We included our 1st mortgage but not the 2nd ($30,000). My ex-husband’s name is on the note only.” Does that means you LIED to the court and didn’t tell them about the second mortgage? Or that you reaffirmed it? Neither of those is smart, but they are different legally. (Maybe.)
Was the second mortgage debt only in your husbands name? If YOU were never on the debt for the second mortgage, then there’s no 1099 for you at all. That’s what I hope this all means.
But you need to show all your papers to your lawyer and understand exactly what is going on here.
Tina
Hello Sir, I filed for bankruptcy back in April of 2011 and it was discharged in July 2011. At that time of discharge I did not reaffirm the loan on our mortgage with the lender but I continued to make payment till the house was sold for profit November 2013. I have reestablished good credit since my bankruptcy was discharged. My question is … Is is possible for me to buy another house this years using the FHA loan. Thanks.
Robert Weed
Tina:
Yes, I believe so. Now would be a good time to check with lenders. Two years after the July 2011 discharge is what you need and you have three. No foreclosure, so that’s not an issue. And you are NOT buying a second house, because you sold the one you had.
Ashley
Hello,
I’m hoping you may be able to help us. My husband filed chapter 7 and it was just discharged a couple of months ago. We were able to keep our vehicles (which we are making huge payments on) but we now feel like we should have just let them go in the bankruptcy. Is there anything that you can suggest that might be able to lead us down the right path? We have been told to just return them to the lenders, but what will that entail? Do you by chance know?
Robert Weed
Ashley,
You first need to check with your lawyer and be POSITIVE you did NOT reaffirm the car loan. That’s usually a bad idea, but some lawyers encourage it much more than I do.
Once you are POSITIVE, then you can do anything you want. Call and tell them to come and get it, make arrangements to drop it off, or stop paying and wait until they pick it up. Make sure you get your personal belongings out of the back seat.
Tiffany
I have a question. I filed a chapter 7 and was discharged in December 2012. I want to buy a home for the first time very soon. I read I have to wait 2 years before I can apply for a loan. I want just want to be sure, anytime after the discharge date on my paper, i can start the process to qualify for a home? I dont have to wait?
Thanks in advance.
Robert Weed
Tiffany:
Well you don’t have to wait to apply. You have to wait until they can approve you. (Not much difference really.) So you should be able to get approved in December 2014. You might want to start talking to lenders now.
jeana
Mr.Weed,
Thanks ever so much for creating a place where this can be discussed. My story is like that of many of these people, -good people with few choices and consequences we don’t like. Doesn’t the system, or the society see that if these homes could have been sold for what was owed, our situations would be different? (That’s not even what we paid.) I made a bad decision on the purchase of a property, but at the time it seemed like a wise and financially moderate choice. Turns out not so much. Don’t trust realtors of mortgage brokers anymore…and I continued to pay until the lawyer, the realtor, and the credit counselor advised me not to. I worked with the bank for three years, and then I divorced the house let it go in… do I have to say it? bankruptcy… Still a house means home and safety and security and we all need that so much more now. I must wait at least 10 months …
…still hardship is not confined to 20% of your income -when cost of living in the place are 120% of your income, How can HOA’s, water, sewer, trash,propane, road funds, and a 50 mile a day drive be so much more than ever expected and double? The mortgage at least was a set amount. if i coulda sold it I woulda
Robert Weed
Jena:
Thanks for sharing your story. I’m glad people feel safe to ask and answer tough questions about finances and life here.
Sue
Our first mortgage was modified January, 2010. We filed Chapter 7 bankruptcy in March 2010. We did not reaffirm either the 1st or 2nd mortgage. We’ve lived in the house for the last 5 years and made the payments. We are nearing the end of the 5 year modification. Our payment will jump up approx. $700 a month. We no longer meet the hardship status for the Making Home Affordable program. The loan value is about $40k more than appraisal. Is there anyway to work a deal with Ocwen Mortgage? They own both mortgages.
Robert Weed
Sue:
Don’t know. I think a lot of people are about to near the end of their modifications and won’t be able to make the payments. But I haven’t seen enough of that yet to have any guess how the banks are going to react.
One thing you should do is apply for a new loan and see if you’d be able to buy another place if Ocwen won’t work with you. That would improve your bargaining power and help you sleep. https://robertweed.com/2014/08/26/soon-bankruptcy-can-get-mortgage/
Elizabeth music
I have 15 months left in chapter 13 I smiled chapter 13 back in December 10th 2010 can I get a home loan now
Robert Weed
Elizabeth:
I have one client who got approved for an FHA mortgage loan this summer who filed bankruptcy about when you did; so yes it is possible.
Amanda Rosa
I filed bankruptcy and it was final May 2012 in Florida. In the bankruptcy I surrendered my home and walked away. Since then I bought my new home with owner financing. The 2 years waiting period is up and I tried to finance my current home with the bank and I was told that the bank still has not forelosed on my old home and it is still in my name so I cant do anything until 2-3 years after they foreclose. So if they never foreclose then I am just sitting here getting to never buy a new home????
How do I get the bank to foreclose and get the deed out of my name?
Thank you
Robert Weed
Amanda:
I don’t know any way to force them to foreclose.
But–GOOD NEWS–new regulations from Fannie Mae on July 29 say you don’t have to. https://robertweed.com/2014/08/26/soon-bankruptcy-can-get-mortgage/.
I do have to tell you I know one person, so far, who’s been approved under that, and one who is still having trouble. You might want to take the announcement to the people you applied to, and if that doesn’t work, apply again somewhere else.
Let me know.
Steve
My wife and I had a foreclosure back in 2009 (5 years ago) and have been renting since. I lost two jobs in a matter of one year due to downsizing. Medical bills, garnishments, pay day loans, etc., and now we are thinking about filing Chapter 7 bankruptcy. The ultimate goal is to re-establish credit and be able to buy another home. If we decide to file bankruptcy, how long after the bankruptcy would we need to wait to buy a home? Thanks for any information you can provide.
Robert Weed
Steve:
I’m a lawyer, not a lender. But my understanding would be two years.
Dustin
Hi Robert, my wife and I filed chapter 7 and it was discharged December 2013 and we are looking to buy our first house now. We filed because I had surgery and I was out of work for 7 months and my wife had a large amount of medical bills from a car accident. Would we be able to get FHA loan? If so any banks or credit unions we should go to that we would be more likely to get approved here in wisconsin ?
Robert Weed
Dustin:
Sounds like you are able to qualify under that one year rule. I’m a lawyer, not a lender, so I just pass on what policies are announced. But I don’t know anything about any banks in Wisconsin. You might try Quicken Loans. Some of my clients have had good results there, and they are national. I’d really appreciate it if you kept us posted on whether that works.
James
We are still in our house after filing for bankruptcy. It was discharged in Jan 2013. We would like to buy a house cash now but the bank has still not foreclosed. If we pay cash for the house. What are our option. What would happen if we did.
Robert Weed
James:
If you don’t need a mortgage and you can pay cash for a house and your bankruptcy is discharged–go for it! Bankruptcy gives you a new start–do what you want to do. (I’d think about renting out the not-yet-foreclosed one to get a little income. But I don’t know ANYTHING about rentals where you are, so check with somebody who does.)
Jane
My husband and I filed Chapter 7 in Sept 2013 (discharged Dec. 2013). We have a rental house in another state that has been continuously rented for the past 3 1/2 years. (We moved out of state and are renting it until the local market improves) The rent covers the mortgage plus a little extra.
We really want to purchase another home in our new state after our two year wait is over in Jan 2016. Will we be required to sell the rental property before we can purchase? We did not reaffirm the mortgage but have always made payments on time (before and after BK). The local market is still slow and we would really prefer to just keep it as a rental property. Do you know if there are any guidelines that cover this scenario? Thanks!
Robert Weed
Jane:
Good question. No, sorry I don’t know much.
You have to get two years past your discharge–that would be December 2015. And I’m GUESSING they will want good proof that you are NOT losing money on the rental. During the boom way too many people had way too many houses, so lenders now are very careful about that.
Besides that generality though, that’s all I know.
Ljnda Jeter
Is there a charge for asking a question? Thanks, Linda
Robert Weed
No
valerie storm
My credit was 604, I filed bankruptcy in august, paid monthly. I had to move in Nov so I missed that payment. I’m sure they will now dismiss my case. But I just found out my credit is now 863. Can I buy a house?
Robert Weed
Valerie:
I’d be surprised. You need to be at least two years out of bankruptcy in most cases. Some lenders will lend to people who are in Chapter 13, but they want to see two years of on time payments–on the mortgage and to the trustee. Also, while your bankrutpcy is pending, most courts would require you to get permission from the court.
lolita
how will or does it work for a couple that filed a 13, which will be complete in a month ( April 2016) then going right into a divorce ; one of the couple owns the house ( my name only) and the spouse is fighting for the house. I know I can afford it all on my own and don’t want to be in this situation ever again. What can i do as the owner of the house? Can the soon to be ex purchase the house from?
Robert Weed
Lolita:
You need to talk to a divorce lawyer. I really don’t know what else to say.
Ryan
Hello Robert. My wife and I filed a joint Ch.7 bankruptcy which was discharged in 2009. We included the mortgage which was an 80/20. We have continued to stay in the home and pay the 1st mortgage – no late payments. The 20 part of the loan has changed hands 3 times now and the company can’t seem to find any account information, though they have a lien on the property. There is not enough equity to cover both loans. We are now looking into our options for purchasing a new home. We contacted a broker and he informed us that the only way to get a home loan would be to stop paying and wait for the home we currently live in to go into foreclosure. After that we would need to wait 4 years to qualify for a new mortgage. is this true?
Robert Weed
Ryan:
My blog says that’s not true. That the regs say if there’s a BK, you only need to wait two years, even if the house hasn’t been foreclosed.
Now three things.
First, I’m a lawyer, not a lender. The question isn’t whether someone is allowed to approve you, but whether they actually do.
Second, I’ve heard some lenders at least want the house in bankruptcy to be listed in the BK as surrender, even if you then kept it. The Statement of Intentions in the bankruptcy was supposed to cover just what you were planning to do, then. But some people now look on it as sort of binding.
Third, most important, since you are in a confusing area, you need to SHOP. Talk to three or four or five lenders, to get one that sees it the way I do.
Evonne Shaw
I filed bankruptcy chapt.7 for change in lifestyle and unable to maintain debts. Discharge went thru in April 2016 and ultimately did this to get back on track and purchase a home if my own for 1st time. I have car loan been paying on time and lease expires 1/2017 do u think I will qualify for a home as 1st time buyer? Also did home counseling program, debt counseling. Do you think i can look at lenders closer towards the end of this year? So I can get out of a rental property…
Robert Weed
Evonne:
In my post I told you all I know. Generally it takes two years after the bankrutpcy discharge to be able to get approved for a mortgage. First time home buyers programs, at least where I am, are run by each county differently. I don’t know any general advice–but why not apply?
Norma Fraiser
Robert,
I need some advice on what to do. My ex-husband filed BK on our home, which was mine before we married but, I used his credit to refinance when married, back in 2013. I did not know he filed a Chapter 7 on my home until I called Wells Fargo about a question I had that I needed answered, His debt was discharged but, the bank will not take his name off of my house without me re assuming my own loan. I have excellent credit and have for years and have not filed BK ever Every time I check my credit report it shows the home loan with Wells Fargo is closed There has been no reporting to the credit Bureau’s that I have been making my payments every month as I always have. If it does not show on my credit report as open, I was wondering where I stand with this loan if I were to quit making payments and buy another house, which I assume I could do since the bank is not reporting that I have been paying on my home loan even though he filed BK on this house. I am the co-signer on the loan. I was wanting to move out of Illinois since my pay makes it extremely hard to keep up with the loan and because the taxes get raised every year and that makes it much harder to pay the loan. I guess you probably couldn t tell me if I could buy another home even though I was not the one who filed the bk. I just do not understand why the credit report shows the loan is closed. Any help appreciated. Nellie
Robert Weed
Norma:
While your ex-husband’s BK got him off the loan but it does NOT get the loan off the house. And it does NOT get you off the loan, assuming you are on it. (You say you are a co-signer so your probably are.)
You tell me now that the loan is showing closed on your credit report. I do NOT think you can count on that to protect you if you just move out.
So if you try to buy another house and just move out of this one, under the bankruptcy law the bank can still chase you after the house is foreclosed.
But bankruptcy and credit report law are NOT the only laws that apply here. In about half the country first mortgages are NOT allowed by state law to chase you after the foreclosure. In about half the country they can. Where I am, Virginia, they can. I don’t know where you are, and wouldn’t know the law in your state anyway.
So, his bankruptcy does not protect the house form the mortgage company and it does not protect you either. (Even if the credit report makes it look like it does.) Does some other law where you are help? I don’t know the answer to that.