How Long Does A Foreclosure Remain On My Credit Report?

Foreclosure auction signs (Photo credit: niallkennedy)
Foreclosures are one of the worst things any family can go through. They not only turn your life upside down, they damage your credit for years to come. But as the years pass and by following the guidelines from the FHA, Fannie Mae, and Freddie Mac, you can become a homeowner again.

All the major government entities that have influence over the foreclosure rules in the U.S. wield a lot of power over banks. Though they are not direct lenders what they say is what the banks and credit lenders must do.

Many people don't even realize that the guidelines used in making their mortgage have been set down by the FHA, Fannie Mae, and Freddie Mac.

Here are the guidelines for your ability to apply for a new mortgage after foreclosure:

FHA Guidelines

Foreclosure.

• 3-year wait. 
• Reduced wait if borrower has re-established good credit and can show extenuating circumstances.

Short Sale

• No wait if not in default. 
• 3-year wait if in default at closing of short sale.
• Reduced wait if borrower has re-established good credit and can show extenuating circumstances.
• Deed in lieu of foreclosure
• Same as FHA’s foreclosure policy.

Bankruptcy

Chapter 7 (liquidation):

• 2-year wait from the discharge date of the bankruptcy.
• 1-2 year wait if borrower can show extenuating circumstances.

Chapter 13 (repayment plan):

• 1-year wait from the discharge date of the bankruptcy.Fannie Mae

Fannie Mae Guidelines

Foreclosure

• 7-year wait from the completed foreclosure sale date.
• 3-year wait if borrower can show extenuating circumstances (additional underwriting requirements apply for 4 years after 3-year waiting period).
• 7-year wait for a second home, investment opportunity, or cash-out refinancing.

Short Sale

• 2-year wait if the borrower puts 20% or more down.
• 4-year wait if the borrower puts 10-20% down.
• 7-year wait if the borrower puts less than 10% down.
• 2-year wait time if borrower can show extenuating circumstances and puts 10% or more down.

Deed in lieu of foreclosure

• Same as Fannie’s short sale policy.

Bankruptcy

Chapter 7 or Chapter 11 (reorganization, usually involving corporations or partnerships):

• 4-year wait from the discharge or dismissal date of the bankruptcy.
• 2-year wait from the discharge or dismissal date may be accepted if borrower can show extenuating circumstances.

Chapter 13:

• 2-year wait from the discharge date or 4-year wait from the dismissal date.
• 2-year wait for a dismissal if borrower can show extenuating circumstances.

Multiple bankruptcies:

• 5-year wait if the borrower has filed more than one bankruptcy petition in the past 7 years.
• 3-year wait if borrower can show extenuating circumstances.

Freddie Mac

Foreclosure

• 5-year wait from the completed foreclosure sale date.
• 3-year wait if borrower can show extenuating circumstances.

Short Sale

• 4-year wait.
• 2-year wait if borrower can show extenuating circumstances.

Deed in lieu of foreclosure

• Same as Freddie’s short sale policy.

Bankruptcy

Chapter 7 or Chapter 11:

• Same as Fannie’s bankruptcy policy.

Chapter 13:

• 2-year wait from the discharge date of the bankruptcy.
• 2-year wait from the discharge or dismissal date of the bankruptcy if borrower can show extenuating circumstances.

Multiple bankruptcies:

• Same as Fannie Mae’s policy for multiple bankruptcies.

Source: FHA Handbook, Fannie Mae Selling Guide, Freddie Mac Selling Guide

Before taking any steps to rebuild your credit make the decision to seek out professional assistance. Look to professionals, such as a bankruptcy lawyer and a CPA specializing in bankruptcy provisions, before making major financial decisions.  

For HUD-approved counselors, go to: http://www.hud.gov/offices/hsg/sfh/hcc/fc/index.cfm. 

You can also call 1-888-995-HOPE for help from the Homeownership Preservation Foundation.