Bankruptcy and Foreclosure Seasoning
Below are the seasoning requirements for various types of loans. Foreclosures, Short Sales, Deed-in-Lieu, Preforeclosure, and Charge-Off of Mortgages are all treated the same when it comes to seasoning requirements. All are measured from the date that the title was actually transferred out of the homeowner’s name and into the bank’s name.
Chapter 7 Bankruptcy (or Ch. 11)
Fannie Mae requires the following waiting periods for a Chapter 7 or 11 bankruptcy:
- A 4 year waiting period is required and is measured from the discharge or dismissal date of the bankruptcy action.
- A 2 year waiting period is permitted if extenuating circumstances can be documented.
Chapter 13 Bankruptcy
A distinction is made between Chapter 13 bankruptcies that were discharged and those that were dismissed. The waiting period required for Chapter 13 bankruptcy actions is measured as follows:
- 2 years from the discharge date, or
- 4 years from the dismissal date
- 2 year period from the dismissal date is permitted if extenuating circumstances can be documented. There are no exceptions permitted to the two-year waiting period after a Chapter 13 discharge.
The shorter waiting period based on the discharge date recognizes that borrowers have already met a portion of the waiting period within the time needed for the successful completion of a Chapter 13 plan and subsequent discharge. A borrower who was unable to complete the Chapter 13 plan and received a dismissal will be held to a 4 year waiting period.
Multiple Bankruptcy Filings
If a single borrower has multiple bankruptcy filing the following waiting periods apply: (note: two borrowers that each have an individual filings do not count as multiple filings)
- A 5 year waiting period is required when there are multiple bankruptcy filings within the past seven years.
- A 3 year waiting period is permitted if extenuating circumstances can be documented but the most recent bankruptcy filing must have been the result of extenuating circumstances.
Short Sales / Deed-In-Lieu
A 4 year waiting period is required from the completion of the short sale.
Exceptions can be made for a 2 year waiting period if extenuating circumstances can be documented.
Foreclosure And BK On The Same Mortgage
If a mortgage was discharged through a bankruptcy then the bankruptcy period may be applied (with the property documentation); otherwise, the greater waiter period between bankruptcy and Foreclosure Waiting Periods will be applied.