Refinancing After A Short Sale
I had someone call me that was looking to refinance, they took out an 80/10/10 and value is about what they paid. After they purchased their house, they could not sell their other house in another state because of a drop in value and other foreclosures. So lender "tells" them that to do a short sale they have to miss some payments. Borrower misses "one or two payments" does a short sale and the lender forgives the balance. Assuming their credit scores are high enough, how long do they have to wait before refinancing their current home either conventional or FHA? Are the lenders going to go off the date the balance was forgiven or the date of the sale?
by vthokies August 31, 2010 12:04 AM
The short is not your problem. Their scores will not survive the mtg lates most likely and, if they do, you will have to wait 12 months from the last late.
They are also being ill advised. The lates will not qualify them for the short sale. Their income is also calculated and if they show they can afford it then they are out of luck. You should walk away from this one.
by frankenstyle August 31, 2010 8:24 AM
Actually, some lenders/servicers will not consider a short sale unless their are lates. If the loan is performing well, they won't give an inch.
There were a LOT of short sales in Virginia and elsewhere.
Eventually, lenders and regulators are going to have to come out with some guidelines to address the impact of short sales due to something other than inconvenience of equity loss.
For true losses, like job loss, moving to distant location etc.
Investor overlays will have to start addressing this eventually because many of these borrowers were good risks who hit a bump in the road they had no control over.
by Encompass mama August 31, 2010 11:43 AM
I meant the late by itself will not qualify for a short.
by frankenstyle August 31, 2010 1:21 PM
This guy moved for a job and had already bought the new house. He's calling me to refinance, I've never worked with him before, but let's just say he's 24 months out from the short sale being resolved and his scores are over 660, will he qualify for FHA or Conventional?
by vthokies August 31, 2010 1:23 PM
If they had an FHA when they did the short sale, then no to FHA. Otherwise, they would do it as a manual underwrite and it would be a case by case and depend a lot on investor overlays.
Conventional isn't clear and they don't address short sales in the U/W handbook. They may look at it as a deed in lieu but again, it is not something that has been addressed by rules yet...
You would have to get an approval in either case from DU.
by Encompass mama August 31, 2010 1:47 PM