The SC Department of Consumer Affairs is partnering with the US Department for Treasury in promotion of their Help for Homeowners Foreclosure Prevention Event to be held at the Columbia Metropolitan Convention Center on June 28 from 1:00pm-8:00pm. At the event, distressed borrowers will be able to discuss foreclosure prevention options one-on-one with banks, credit unions and servicers on-site or with housing counselors. The attached flyer outlines the documents that homeowners should bring to this FREE event. There is no pre-registration; homeowners are encouraged to just show up to the event.
One of the biggest concerns for clients is if they filed bankruptcy, then will they be able to get credit after the case is done?
Written by Columbia SC Bankruptcy Attorney Colleen Brunson.
The answer is YES!
Some creditors like the fact that the bankruptcy has cleared most or all of the debtor’s debt. Creditors will look at many factors to consider whether they will lend to the debtor. Usually, the creditors will look to a debtor’s income and job stability. If the debtor has a long job history with the same employer, then it will help that debtor to get credit. Don’t be discouraged if you don’t have a long job history because creditors look at other factors as well. The debtor’s income and assets are a factor in whether the creditor will lend to a debtor.
Will you be able to buy a house?
The answer is YES!
Most mortgage creditors rely on Fannie Mae underwriting guidelines. See Fannie Mae Selling Guide for Single Families.
For a chapter 7, a four year waiting period is required from the date of discharge or dismissal. Obviously, a discharge will be better than a dismissal of the case. There is an exception to the four year rule: two years from the discharge or dismissal if extenuating circumstances can be documented.
For a chapter 13, the waiting period is two years from the date of discharge or four years from the dismissal date. Again, debtors are rewarded for completing their bankruptcy plan. If the case was dismissed, there is an exception to the four year waiting period. There is a two year waiting period if extenuating circumstances can be documented. There are no exceptions permitted to the two year waiting period after the chapter 13 discharge.
If there are multiple bankruptcy filings in the past seven years, then a five year waiting period is required. A three year waiting period is permitted if extenuating circumstances can be documented and the most recent bankruptcy filing must have been the result of extenuating circumstances.
If there is a foreclosure, then a seven year waiting period is required and a three year waiting period for extenuating circumstances can be documented. The purchase of second homes or investment properties are not permitted until the seven year waiting period has elapsed. If it is the principal residence, the waiting period may be shorter.
If there is a deed-in-lieu of foreclosure or short sale, then the waiting periods are two, four, or seven years based on the loan-to-value (LTV) ratio. The LTV ratio is the ratio of a loan to the value of an asset purchased. So if the house is worth $200,000 and the loan is $175,000, then the LTV ratio is 88%. The lower the LTV ratio, then the shorter to the waiting period.
So it appears that debtors will be able to buy a house within two to four years of the bankruptcy discharge. A bit longer if the case is dismissed. I tell my clients to worry about their credit after they make it through the bankruptcy. It is important to focus on completing their bankruptcy case first.
Changes in Mortgage Servicing Practices took effect on October 2, 2012
The $25 billion government settlement with the big five mortgage companies- Bank of America, Citigroup, Ally Financial, Wells Fargo and JPMorgan Chase, have instituted more than 300 changes in the way they service mortgages. The changes took effect on Tuesday, October 2nd. Here are some highlights of the critical changes:
- No more “robo-signing” – not having a real person look and sign the documents in order to start the foreclosure process.
- No more “dual tracking” – where mortgage companies were continuing with the foreclosure while also working on a loan modification with the borrower.
- Borrowers will have their own point of contact – one person that is handling the borrower’s account.
- Mortgage companies must treat foreclosure as the last option and must consider other options prior to a foreclosure.
What about Mortgage Assistance relief services?
This is a good time to talk about all those companies (mortgage assistance relief services) that claim to help you with a loan modification. DON’T PAY THEM! The Code of Federal Regulations prohibits the collection of advance payments and requires certain disclosures by those companies. See the code section below. Attorneys may be exempt from these requirements.
§ 1015.5 Prohibition on collection of advance payments and related disclosures.
It is a violation of this rule for any mortgage assistance relief service provider to:
(a) Request or receive payment of any fee or other consideration until the consumer has executed a written agreement between the consumer and the consumer’s dwelling loan holder or servicer incorporating the offer of mortgage assistance relief the provider obtained from the consumer’s dwelling loan holder or servicer;
(b) Fail to disclose, at the time the mortgage assistance relief service provider furnishes the consumer with the written agreement specified in paragraph (a) of this section, the following information: “This is an offer of mortgage assistance we obtained from your lender [or servicer]. You may accept or reject the offer. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [same amount as disclosed pursuant to §1015.4(b)(1)] for our services.” The disclosure required by this paragraph must be made in a clear and prominent manner, on a separate written page, and preceded by the heading: “IMPORTANT NOTICE: Before buying this service, consider the following information.” The heading must be in bold face font that is two point-type larger than the font size of the required disclosure; or
(c)(1) Fail to provide, at the time the mortgage assistance relief service provider furnishes the consumer with the written agreement specified in paragraph (a) of this section, a notice from the consumer’s dwelling loan holder or servicer that describes all material differences between the terms, conditions, and limitations associated with the consumer’s current mortgage loan and the terms, conditions, and limitations associated with the consumer’s mortgage loan if he or she accepts the dwelling loan holder’s or servicer’s offer, including but not limited to differences in the loan’s:
(i) Principal balance;
(ii) Contract interest rate, including the maximum rate and any adjustable rates, if applicable;
(iii) Amount and number of the consumer’s scheduled periodic payments on the loan;
(iv) Monthly amounts owed for principal, interest, taxes, and any mortgage insurance on the loan;
(v) Amount of any delinquent payments owing or outstanding;
(vi) Assessed fees or penalties; and
(2) The notice must be made in a clear and prominent manner, on a separate written page, and preceded by heading: “IMPORTANT INFORMATION FROM YOUR [name of lender or servicer] ABOUT THIS OFFER.” The heading must be in bold face font that is two-point-type larger than the font size of the required disclosure.
(d) Fail to disclose in the notice specified in paragraph (c) of this section, in cases where the offer of mortgage assistance relief the provider obtained from the consumer’s dwelling loan holder or servicer is a trial mortgage loan modification, the terms, conditions, and limitations of this offer, including but not limited to:
(1) The fact that the consumer may not qualify for a permanent mortgage loan modification; and
(2) The likely amount of the scheduled periodic payments and any arrears, payments, or fees that the consumer would owe in failing to qualify.
The bottom line.
So if they ask you for money up front, then they probably aren’t going to be able to help you. They could just take your money, then when the sale date is set, they could call you to say, “You should probably file bankruptcy to save your house.” Don’t worry though, there are places that can help you.
Look to SC HELP (South Carolina Homeownership and Employment Lending Program). This is a service that is provided by the South Carolina State Housing Finance and Development Authority and the purpose is to help you stay in your home. Best of all, you don’t have to pay them to help. So remember, beware of mortgage assistance companies that require an upfront fee to help you.
In the case that you need to discuss bankruptcy as an option to stop foreclosure, please don’t forget that I offer a free initial consultation, flexible payment terms and after hours or weekend appointments so you don’t have to miss work. Call my Columbia office today at 803-403-1955 or use the contact form on this site.