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25

Jun 2010

After bankruptcy, how soon can I get approved for a new mortgage?

Posted by / in After Bankruptcy / 3 comments

Yesterday the mortgage giant Fannie Mae, now owned the the federal taxpayers, announced a new policy on qualifying for a new mortage, after you lose your house in bankruptcy, foreclosure, or short sale.

They say they want to discourage people who “just walk away” from their mortgages, particularly in states, like California, where the mortgage company cannot come after you for the money.  (Under Virginia law, they can.)

So Fannie Mae now won’t back a mortgage for someone who gave up a house in foreclosure until seven years have passed from the foreclosure date.   They call this a “Seven-Year Lockout Policy for Strategic Defaulters”

Now, there is an exception that I’m calling the loan mod/extenuating circumstances exception.  The seven year lockout does not apply to people who can show the foreclosure was caused by “extenuating circumstances.”  That’s not defined, but I think it would certainly include unemployment, divorce, and probably reduced hours or loss of bonus or commission during the recession.  If you are giving up your house, and want to buy again soon, keeping proof of that would be important.

The seven year lock out also does not apply  to people who tried to get a loan mod.   “We’re taking these steps to highlight the importance of working with your servicer,” said Terence Edwards, executive vice president.

Only a three year waiting period applies to people who tried to get a loan mod and to people who had extenuating circumstances.  (I’m not totally clear whether that means you have to do both, or if either one is enough.)

If you shortsale the house, or do a deed in lieu, the waiting period is only two years.  (This is one of the very few benefits I see in doing a shortsale. September 7, 2012 Washington Post had a good article on the big damage a shortsale does to your credit score.  You can read that here.)

Lots of people think bankruptcy is the worst thing you can do–those people are wrong.  Fannie Mae regulations require only a two year waiting period after the bankruptcy–again if the bankruptcy was caused by extenuating circumstances.   (Again, it’s important to keep a file documenting loss of income or whatever caused the problem.)

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17

Jun 2010

After bankruptcy mortgage loan modification saves house

Posted by / in After Bankruptcy / 6 comments

Got an email this morning from Bill and Brenda (not their real names) letting me know they had gotten approved for their mortgage loan modification.

They first came to talk to me about filing bankruptcy in Virginia in November 2008. They really wanted to keep their house, but at that point their income was really low.  Bill was paid by commission, and it had gotten really slow during the worst of the panic.

They couldn’t get approved for a loan modification, because the mortgage company thought couldn’t afford any house payment at all.

So, the mortgage company set a foreclosure sale date on May 15.   Bill filed bankruptcy on May 14–to take care of his credit cards and stop the foreclosure.

They applied again for a loan mod, but got no where.

A new foreclosure sale was set for October 2, after the mortgage company got permission to foreclose from his bankruptcy judge. We filed Brenda’s bankruptcy on October 1, just in time to stop them again.  (The bankruptcy also took care of her credit cards at that point, too.)

By the time the mortgage company got permission again to foreclose, Bill’s income had improved.   This time the mortgage company would consider a loan mod.

And yesterday the loan mod was approved. That was twice bankruptcies were filed within two days of scheduled foreclosures, and now they have saved the house.  Bill and Brenda’s hard work staying in touch with the mortgage company was one reason this worked.  Good timing on the bankruptcies made it possible.   Commissions getting back to normal on Bill’s job helped a lot, too.

It doesn’t always work out that well, but when it does, I’m really happy.  Bill and Brenda really are, too.

I’ve seen several clients get mortgage loan modification offers after bankruptcy when they couldn’t get one before.   This is the one I’m happiest about today.

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13

May 2010

Abusive Debt Collectors: The Lies They Tell

Posted by / in After Bankruptcy, Before Bankruptcy / No comments yet

For most people facing the prospect of filing for bankruptcy, it seems that nothing is more stressful than getting behind on your debts. Knowing that you have obligations that you simply cannot meet, bills that you cannot pay—it’s enough to make the average person feel anxious, frustrated, and even helpless. Now imagine a collector calls about one of those debts and threatens you with arrest and imprisonment if you don’t pay. That’s what happened to one of our clients just this past year.

Our client, let’s call her Mary, had gotten behind on a debt with a department store. That debt was later either assigned or sold to a debt collector called Creditors Interchange Receivable Management, LLC.  Creditors Interchange began calling Mary at home. They left several messages on her answering machine telling her that a lawsuit was being “finalized” against her for the department store debt.  In their final message, an employee of Creditors Interchange told Mary “the authorities” were coming to her home and the only thing she would get out of ignoring their messages was a trip to jail.

After weeks of sleepless nights, crying, depression, and fear, Mary’s son convinced her to call our office. She truly believed that Creditors Interchange could have sent her to jail for failing to pay a personal debt. Once we assured her that that was not possible, we started the work of getting her justice under the law.

The law we used to fight on her behalf was the Fair Debt Collection Practices Act (or FDCPA). The FDCPA is the law passed by Congress to protect consumers from abusive debt collectors such as Creditors Interchange Receivable Management, LLC. The FDCPA says generally that a debt collector cannot harass or abuse you, make false, misleading, or deceptive statements to you, or use unfair practices to collect from you.  These protections for consumers apply whether or not you owe the debt about which the debt collector is calling.

In this case, we were able to get Mary an out of court settlement she was more than happy with, and begin the process of making her whole.

No one should have to go through what Mary went through, but if you have, you do have a remedy.

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES