Impacts of Short Sales and Foreclosures

Action	Requirements
Bankruptcy (All Except Chapter 13)	Conventional: 4-year time period from either the discharge or dismissal date of the bankruptcy.FHA / VA: 2-year time period from the discharge of the bankruptcy. Borrower must have re-established good credit.
Chapter 13 Bankruptcy	Conventional: The time period for Chapter 13 bankruptcy actions is measured as follows:• 2 years from the discharge date, or• 4 years from the dismissal date.FHA / VA: Acceptable with 12 month acceptable payment history of the bankruptcy and permission from the court. Credit must be re-established outside of the bankruptcy.
Exceptions for Extenuating Circumstances (see definition below) All Bankruptcy Actions	Conventional: The 2-year time period will be measured from the bankruptcy discharge or dismissal date. No exceptions are permitted to the 2-year time period after a Chapter 13 discharge.FHA / VA: Less than 2 years but not less than 12 months may be considered with extenuating circumstances.
Multiple Bankruptcy Filings	Conventional: 5-year time period from most recent dismissal or discharge date required for borrowers with more than one bankruptcy filing within the past 7 years.FHA / VA: Same guidelines as Bankruptcy above.
Exceptions for Extenuating Circumstances (see definition below) Multiple Bankruptcy Filings	Conventional: 3-year time period from the most recent discharge or dismissal date.Note: The most recent bankruptcy filing must have been the result of extenuating circumstances.FHA / VA: Same guidelines as Bankruptcy above.
Foreclosure	Conventional: 7-year time period from completion date.FHA: 3-year time period from completion date.VA: 2-year time period from the completion date. Borrower must have re-established good credit.
Exceptions for Extenuating Circumstances (see definition below) Foreclosure	Conventional: 3-year time period from completion date.Additional requirements that apply after 3 years up to 7 years following completion date: 90% maximum LTV/CLTV/HCLTV Owner occupied purchase All occupancy types for limited cash out FHA: Less than 3-year time period but not less than 2 years may be considered with documented extenuating circumstances. VA: Less than 2 years but not less than 12 months may be considered with extenuating circumstances.
Deed-in-Lieu of Foreclosure	Conventional:Time period from completion date: 2 years – 80% max LTV/CLTV/HCLTV 4 years – 90% max LTV/CLTV/HCLTV 7 years – LTV per standard guidelines FHA: 3-year time period from completion date (date deed-in-lieu executed). VA: 2-year time period from the completion date (date deed-in-lieu executed). Borrower must have re-established good credit.
Exceptions for Extenuating Circumstances (see definition below) Deed-in-Lieu of Foreclosure	Conventional: 2 years may be considered with extenuating circumstances. Maximum LTV/CLTV/HCLTV 90%.FHA: Less than 3 years but not less than 2 years may be considered with extenuating circumstances.VA: Less than 2 years but not less than 12 months may be considered with extenuating circumstances.
Time Period After Preforeclosure Sale	Conventional: Time period from completion date: 2 years – 80% max LTV/CLTV/HCLTV 4 years – 90% max LTV/CLTV/HCLTV 7 years – LTV per standard guidelines Note: A two-year waiting period is permitted if extenuating circumstances can be documented, with maximum LTV/CLTV/HCLTV ratios of the lesser of 90% or the maximum LTV ratios allowed for that loan type. FHA: 3-year time period from completion date. VA: 2-year time period from completion date. Additional Requirements: None Note: No exceptions are permitted to the 2-year time period due to extenuating circumstances.
Time Period After Short Sale	Conventional: Time period from completion date: 2 years – 80% max LTV/CLTV/HCLTV 4 years – 90% max LTV/CLTV/HCLTV 7 years – LTV/CLTV/HCLTV per standard guidelines Note: Exceptions are permitted to the 2-year time period due to extenuating circumstances. Maximum LTV/CLTV/HCLTV 90%. VA: No seasoning required as long as the following guidelines are met: The borrower’s has no lates on the previous mortgage The borrower has not entered into any agreement with the previous lender or servicer that obligates them to repay any amount associated with the short sale, including a deficiency judgment FHA: Guidance on Short Sales: Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to: take advantage of declining market conditions, and purchase, at a reduced price, a similar or superior property within a reasonable commuting distance Borrowers current at time of Short Sale: Borrowers are considered eligible for a new FHA-insured mortgage if: they were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and the proceeds from the short sale serve as payment in full. Borrowers in default at the time of Short Sale: Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale. Refinancing with Short Pay Off: FHA will insure the first mortgage where the existing note holder(s) write off the amount of indebtedness that cannot be refinanced into the new mortgage due to a decline in property value and/or a reduction in income.
Short Sale Requirements	A short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor (seller). A short sale typically is executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. When a short sale is involved, the documents listed below must be submitted to Underwriting for review along with the complete file: Short Sale agreement with the underlying lender Listing agreement OR MLS Listing Summary on the subject property Rental agreement for subject property, if applicable Earnest money agreement for the subject property 1004 Appraisal Preliminary title report Estimated HUD-1 for both buyer and seller

Information provided by Windermere Financial Services. I advise all Sellers to consult a professional Accountant and Attorney to learn more about the individual impact of Short Sales and Foreclosures.