What are the guidelines for FHA mortgage applicants with a previous foreclosure or deed-in-lieu of foreclosure?
A FHA mortgage applicants is generally NOT eligible for a new FHA-insured mortgage if the Borrower had a foreclosure or a deed-in-lieu of foreclosure in the last 3 three-year period prior to the date of case number assignment.
This three-year period begins on the date in which title transferred from the FHA mortgage applicants.
If the credit report does not indicate the date of the foreclosure or deed-in-lieu of foreclosure, the Mortgagee must obtain the Closing Disclosure, deed or other legal documents evidencing the date of property transfer.
If the foreclosure or deed-in-lieu of foreclosure was the result of a circumstance beyond the FHA mortgage applicants control, the Mortgagee must obtain an explanation of the circumstance and document that the circumstance was beyond the Borrower’s control.
The Mortgagee may grant an exception to the three-year requirement if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the FHA mortgage applicants, such as a serious illness or death of a wage earner, and the FHA mortgage applicants has re-established good credit since the foreclosure.
Divorce is not considered an extenuating circumstance, however, an exception may be granted where a FHA mortgage applicants mortgage was current at the time of the FHA mortgage applicants divorce, the ex-spouse received the property, and the mortgage was later foreclosed.
The inability to sell the property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance.