Applying for USDA - No Money Down Rural Housing Loan

[doodlebugger]

I have posted several times about our complicated situation. We filed bk7 and was discharged in Feb. 2006. Dh is applying for the USDA loan by himself because I have deferred student loans and no income (still a student for another two years). We are still living in our house that was discharged in bk7. We never reaffirmed, and when we attempted a HAMP, refinance, or some other modification last year (due to income inconsistencies), the bank wouldn't work with us, told us false information, and ultimately led us to believe that we would get a mod, which was never true. They kept telling us we were months from any foreclosure proceedings, so we kept waiting, and then they filed the foreclosure paperwork in December 2011 (if memory serves me correctly). Here we are in August 2012, and the last motion they made was thrown out by the judge. We are waiting for another move, but as of today, this mortgage only shows on TU for my husband and it is just reporting as IIB. The concern is this - our mortgage specialist was giving us all the pertinent information and she felt none of this is a problem, until she asked for a copy of our deed, and then she said she was a bit concerned. She says that the deed should have been removed from our name when we didn't reaffirm. It has been 6 1/2 years since we were discharged......she mentioned that it might be possible with our name still on the deed that the house is not even theirs to foreclose on. She advised as long as they do not foreclose and report on our credit report, we will be fine for the USDA loan. I'm not quite so trusting, but I am excited at the thought that we could move out of the current home and buy something else.

 

I've heard the same song and dance here for as long as I have been here..I've read about how it will be impossible for us to get this USDA loan without having a deed in lieu, short sale, or foreclosure, and how we will have to wait three years from the date that the property is transferred back to the lender. But, we are talking about something that is going to fall off here in a few months too.....will they report the foreclosure on the credit report? How is this all possible - our mortgage specialist (has been in the mortgage industry at least 15-20 years) seems very convinced that she will have no problems getting us a rate under 4% too. We are trying to remain calm as we realize how when things are usually too good to be true, they are not true.

 

So, is there any hope? How should our deed look after 6 1/2 years past our bk7 discharge and if it's still in our name, will that stop the USDA loan cold in its track? :/ Getting nervous.....and we have just started!

[Brian B The Loan Professor]

I have posted several times about our complicated situation. We filed bk7 and was discharged in Feb. 2006. Dh is applying for the USDA loan by himself because I have deferred student loans and no income (still a student for another two years). We are still living in our house that was discharged in bk7. We never reaffirmed, and when we attempted a HAMP, refinance, or some other modification last year (due to income inconsistencies), the bank wouldn't work with us, told us false information, and ultimately led us to believe that we would get a mod, which was never true. They kept telling us we were months from any foreclosure proceedings, so we kept waiting, and then they filed the foreclosure paperwork in December 2011 (if memory serves me correctly). Here we are in August 2012, and the last motion they made was thrown out by the judge. We are waiting for another move, but as of today, this mortgage only shows on TU for my husband and it is just reporting as IIB. The concern is this - our mortgage specialist was giving us all the pertinent information and she felt none of this is a problem, until she asked for a copy of our deed, and then she said she was a bit concerned. She says that the deed should have been removed from our name when we didn't reaffirm. It has been 6 1/2 years since we were discharged......she mentioned that it might be possible with our name still on the deed that the house is not even theirs to foreclose on. She advised as long as they do not foreclose and report on our credit report, we will be fine for the USDA loan. I'm not quite so trusting, but I am excited at the thought that we could move out of the current home and buy something else.

 

I've heard the same song and dance here for as long as I have been here..I've read about how it will be impossible for us to get this USDA loan without having a deed in lieu, short sale, or foreclosure, and how we will have to wait three years from the date that the property is transferred back to the lender. But, we are talking about something that is going to fall off here in a few months too.....will they report the foreclosure on the credit report? How is this all possible - our mortgage specialist (has been in the mortgage industry at least 15-20 years) seems very convinced that she will have no problems getting us a rate under 4% too. We are trying to remain calm as we realize how when things are usually too good to be true, they are not true.

 

So, is there any hope? How should our deed look after 6 1/2 years past our bk7 discharge and if it's still in our name, will that stop the USDA loan cold in its track? :/ Getting nervous.....and we have just started!

 

I dont know how this will fly - if the home is still in your name you are not allowed to own a home and get a USDA loan. It may have been included in the BK but it was left in your name and you continued to live there - Had you moved out and shown a housing history somewhere else maybe but you didnt? I am not the final say in anything and dont want to say this person doesnt know what they are doing because I have read of stories where people were able to get USDA with foreclosure less than 3 years however I do know most banks would not touch this scenario based on what you have shared. Keep us posted as this progresses - dont get too confident and tread lightly - if it goes through somehow then great if not then you will be out a little money and will know. The downside is if it doesnt go through the seller gets sucked into this. If you havent found a home yet you may want to ask if they can Underwrite before hand so you can know for sure - this way you dont get others involved in something you aren't 100% sure about and you dont have to spend any money for appraisals or inspections. Maybe someone else will have more info?

 

B

[doodlebugger]

I have posted several times about our complicated situation. We filed bk7 and was discharged in Feb. 2006. Dh is applying for the USDA loan by himself because I have deferred student loans and no income (still a student for another two years). We are still living in our house that was discharged in bk7. We never reaffirmed, and when we attempted a HAMP, refinance, or some other modification last year (due to income inconsistencies), the bank wouldn't work with us, told us false information, and ultimately led us to believe that we would get a mod, which was never true. They kept telling us we were months from any foreclosure proceedings, so we kept waiting, and then they filed the foreclosure paperwork in December 2011 (if memory serves me correctly). Here we are in August 2012, and the last motion they made was thrown out by the judge. We are waiting for another move, but as of today, this mortgage only shows on TU for my husband and it is just reporting as IIB. The concern is this - our mortgage specialist was giving us all the pertinent information and she felt none of this is a problem, until she asked for a copy of our deed, and then she said she was a bit concerned. She says that the deed should have been removed from our name when we didn't reaffirm. It has been 6 1/2 years since we were discharged......she mentioned that it might be possible with our name still on the deed that the house is not even theirs to foreclose on. She advised as long as they do not foreclose and report on our credit report, we will be fine for the USDA loan. I'm not quite so trusting, but I am excited at the thought that we could move out of the current home and buy something else.

 

I've heard the same song and dance here for as long as I have been here..I've read about how it will be impossible for us to get this USDA loan without having a deed in lieu, short sale, or foreclosure, and how we will have to wait three years from the date that the property is transferred back to the lender. But, we are talking about something that is going to fall off here in a few months too.....will they report the foreclosure on the credit report? How is this all possible - our mortgage specialist (has been in the mortgage industry at least 15-20 years) seems very convinced that she will have no problems getting us a rate under 4% too. We are trying to remain calm as we realize how when things are usually too good to be true, they are not true.

 

So, is there any hope? How should our deed look after 6 1/2 years past our bk7 discharge and if it's still in our name, will that stop the USDA loan cold in its track? :/ Getting nervous.....and we have just started!

 

I dont know how this will fly - if the home is still in your name you are not allowed to own a home and get a USDA loan. It may have been included in the BK but it was left in your name and you continued to live there - Had you moved out and shown a housing history somewhere else maybe but you didnt? I am not the final say in anything and dont want to say this person doesnt know what they are doing because I have read of stories where people were able to get USDA with foreclosure less than 3 years however I do know most banks would not touch this scenario based on what you have shared. Keep us posted as this progresses - dont get too confident and tread lightly - if it goes through somehow then great if not then you will be out a little money and will know. The downside is if it doesnt go through the seller gets sucked into this. If you havent found a home yet you may want to ask if they can Underwrite before hand so you can know for sure - this way you dont get others involved in something you aren't 100% sure about and you dont have to spend any money for appraisals or inspections. Maybe someone else will have more info?

 

B

 

Thanks Brian. I know....I keep telling myself that there is no way this will fly, but she says she has spoken to underwriting, and would do so again today after she pulled dh's credit reports. She says that she is also going to talk to a lawyer in a title company that she knows. She said that the bank should have transferred the deed when we didn't reaffirm, and then said that she thought that it might be illegal for the bank to close when the deed is still in our name. She wants us to consult a lawyer on that issue, but she says that if her underwriter and the lawyer or another qualified person says it is okay, then we will proceed. She said to wait until we hear from her first to start looking for a house, but I am worried that we will get excited about a new house and then be told in the middle of the waiting period while the process the loan that it's not going to fly with the USDA underwriting. :/ I'm not confident at all actually. She said they no longer do "preapprovals" and that they will not send it to underwriting until we have chosen a property to buy......so, if we put a contract on a house, will we have to pay for the appraisal and home inspection BEFORE we get to find out if the loan is even going to be approved? What about the fact that the current mortgage is going to fall off our credit reports in another month or two....I guess it doesn't count for anything since the house never transferred ownership?? Ugh....this is so crazy!!! The things I wished someone had told us when we first filed bk7. Thanks for your advice.

[Brian B The Loan Professor]

When you BK they dont take ownership? Transferring it out of your name is not what happens (as far as I know - I have never heard of that happening when someone IIB's)

[jop3]

+1 to Brian's last statement. The BK doesn't transfer the deed back into your name, that can only happen through Foreclosure. I'm concerned that the loan officer is stating that it would be illegal for them to foreclose while it's your name. That doesn't even make sense. That's always how foreclosure is done. The home is in your name, then the bank goes through the legal act of foreclosure with the end result being the deed changes hands.

 

Maybe I'm misunderstanding what she's describing, but nothing about this situation sounds illegal. It's the way every other bankruptcy I've seen has worked.

[doodlebugger]

+1 to Brian's last statement. The BK doesn't transfer the deed back into your name, that can only happen through Foreclosure. I'm concerned that the loan officer is stating that it would be illegal for them to foreclose while it's your name. That doesn't even make sense. That's always how foreclosure is done. The home is in your name, then the bank goes through the legal act of foreclosure with the end result being the deed changes hands.

 

Maybe I'm misunderstanding what she's describing, but nothing about this situation sounds illegal. It's the way every other bankruptcy I've seen has worked.

 

Thanks for the advice. Unfortunately, we spoke to a real estate attorney today because the loan officer seemed to be so sure she could work around this, and he advised that the problem with our situation was that we stayed here and paid monthly payments. That kept the bank from taking possession of the deed. If we had stopped paying within a year or two after the discharge, and the bank never foreclosed, we could have had a good legal standing. Without removing us from the deed, there is no way to get the loan according to the attorney. We talked to the loan officer, and she said the lender's underwriter said that if we could get a letter from the bank stating that they made an error and should have put the deed in their name when we stopped paying (yeah I know, when you know what freezes over) we could be guaranteed financing, but I've read enough here to know that likely the USDA would stop it when it came to their underwriter. The real estate attorney says the only way out of the deed is to do a deed-in-lieu. What would that mean as far as financing? We have to wait three years from the date they sign the deed? Or just one year?

 

I'm so mad at myself for believing that it could happen....I knew better, but this lady has so much experience and came highly referred by several friends (including people with poor credit who had almost impossible situations), that I thought there might be a chance to squeak by. Obviously not....now I am kicking myself for going through all of this for nothing. We filed bk7, spent almost 7 years in the house, and now that we are ready to walk away, we are still going to be penalized another three years!!! I wish I had only known this when we filed bankruptcy because I would have had a place to go then. Now we can't find anything in our area to rent, lease, or get on land contract. I wished our attorney would have told us this when we filed bankruptcy......we would have either reaffirmed or we would have walked away from this junky house.

 

:cry2: :cry2:

[cputrwz]

Really sorry that this happened to you, I know it must really stink.

 

Unfortunately, the only way to remove your name from a deed after a bankruptcy is for the bank to foreclose on it. If you were to foreclose now, it would yes, be another 3 years before you can finance. A deed in lieu is viewed the same way as a foreclosure unfortunately. It just usually happens faster than a foreclosure and saves the bank some red tape.

 

Is it possible to sell a home that has been IIB'd? I would think as long as you can get what the payoff is on the note this could be done? I could be talking out of my flowers on this one... but I mean technically if the house is in your name, is it not possible to try and sell it? Is it upside down? Or refinance it with another bank?

[doodlebugger]

Really sorry that this happened to you, I know it must really stink.

 

Unfortunately, the only way to remove your name from a deed after a bankruptcy is for the bank to foreclose on it. If you were to foreclose now, it would yes, be another 3 years before you can finance. A deed in lieu is viewed the same way as a foreclosure unfortunately. It just usually happens faster than a foreclosure and saves the bank some red tape.

 

Is it possible to sell a home that has been IIB'd? I would think as long as you can get what the payoff is on the note this could be done? I could be talking out of my flowers on this one... but I mean technically if the house is in your name, is it not possible to try and sell it? Is it upside down? Or refinance it with another bank?

 

The loan officer says once it's in pre-foreclosure they won't consider refinancing unless the bank that owns it will do the refinance. As for selling the house, the realtor we were dealing with said that in our current market, it would unlikely sell immediately - it could take up to a year, and I don't think we have that long. We owe about 20,000 less than it last appraised for, but if it was appraised today, it would likely be way less than we owe.

 

My big question is this - if we agree to a deed-in-lieu, would we be able to get into USDA with the mitigating circumstance/extenuating circumstance thing that they list as to letting people have the USDA loans earlier than 3 years???? I wondered if that only applied to why we filed BK7 and not to why we waited so long to do the deed-in-lieu????? I talked to a USDA manager in the regional office in the last six months who told me we would likely qualify if we did deed-in-lieu, but it would still mean that while they are processing it all we would have to live somewhere temporarily unless we can convince the bank to give us 3 or 4 months to vacate??? I was thinking like a cash for keys offer to the bank, but not asking for cash, but rather to allow us to live here another couple of months while we try to get the loan processed. The loan officer said she could get us approved for a loan, but it would require 20% down and we would end up with a variable rate mortgage rate between 5 and 7%. Can't afford that. There is a house for sale by owner, and they will likely give us a couple of months to get our paperwork in order.....but after that they are going to list with a realtor, and I know the house will sell very quickly.

 

I know I am grasping at straws.....I am so mad that we waited almost 7 years.....this thing is going to fall off our report soon - will they repost it on our report after we do a deed-in-lieu??? :cry2:

[cputrwz]

No, you shouldn't get another hit to your credit since the house was included in your bankruptcy.

 

I do hope you get things sorted out.

[jop3]

Really sorry that this happened to you, I know it must really stink.

 

Unfortunately, the only way to remove your name from a deed after a bankruptcy is for the bank to foreclose on it. If you were to foreclose now, it would yes, be another 3 years before you can finance. A deed in lieu is viewed the same way as a foreclosure unfortunately. It just usually happens faster than a foreclosure and saves the bank some red tape.

 

Is it possible to sell a home that has been IIB'd? I would think as long as you can get what the payoff is on the note this could be done? I could be talking out of my flowers on this one... but I mean technically if the house is in your name, is it not possible to try and sell it? Is it upside down? Or refinance it with another bank?

 

The loan officer says once it's in pre-foreclosure they won't consider refinancing unless the bank that owns it will do the refinance. As for selling the house, the realtor we were dealing with said that in our current market, it would unlikely sell immediately - it could take up to a year, and I don't think we have that long. We owe about 20,000 less than it last appraised for, but if it was appraised today, it would likely be way less than we owe.

 

My big question is this - if we agree to a deed-in-lieu, would we be able to get into USDA with the mitigating circumstance/extenuating circumstance thing that they list as to letting people have the USDA loans earlier than 3 years???? I wondered if that only applied to why we filed BK7 and not to why we waited so long to do the deed-in-lieu????? I talked to a USDA manager in the regional office in the last six months who told me we would likely qualify if we did deed-in-lieu, but it would still mean that while they are processing it all we would have to live somewhere temporarily unless we can convince the bank to give us 3 or 4 months to vacate??? I was thinking like a cash for keys offer to the bank, but not asking for cash, but rather to allow us to live here another couple of months while we try to get the loan processed. The loan officer said she could get us approved for a loan, but it would require 20% down and we would end up with a variable rate mortgage rate between 5 and 7%. Can't afford that. There is a house for sale by owner, and they will likely give us a couple of months to get our paperwork in order.....but after that they are going to list with a realtor, and I know the house will sell very quickly.

 

I know I am grasping at straws.....I am so mad that we waited almost 7 years.....this thing is going to fall off our report soon - will they repost it on our report after we do a deed-in-lieu??? :cry2:

 

 

No, you would not be able to use "extenuating circumstances" on this one to get around the wait time. Extenuating circumstances are considered things that are out of your control, like the death of a wage earner, debilitating illness, things like that. This doesn't fall in to that category.

 

You know, it may not hit your credit report as a foreclosure, since they weren't reporting after BK (is that right?). Hard to say. That doesn't help with getting approved for a loan, though, because they ask the FC question on the loan application.

[doodlebugger]

Really sorry that this happened to you, I know it must really stink.

 

Unfortunately, the only way to remove your name from a deed after a bankruptcy is for the bank to foreclose on it. If you were to foreclose now, it would yes, be another 3 years before you can finance. A deed in lieu is viewed the same way as a foreclosure unfortunately. It just usually happens faster than a foreclosure and saves the bank some red tape.

 

Is it possible to sell a home that has been IIB'd? I would think as long as you can get what the payoff is on the note this could be done? I could be talking out of my flowers on this one... but I mean technically if the house is in your name, is it not possible to try and sell it? Is it upside down? Or refinance it with another bank?

 

The loan officer says once it's in pre-foreclosure they won't consider refinancing unless the bank that owns it will do the refinance. As for selling the house, the realtor we were dealing with said that in our current market, it would unlikely sell immediately - it could take up to a year, and I don't think we have that long. We owe about 20,000 less than it last appraised for, but if it was appraised today, it would likely be way less than we owe.

 

My big question is this - if we agree to a deed-in-lieu, would we be able to get into USDA with the mitigating circumstance/extenuating circumstance thing that they list as to letting people have the USDA loans earlier than 3 years???? I wondered if that only applied to why we filed BK7 and not to why we waited so long to do the deed-in-lieu????? I talked to a USDA manager in the regional office in the last six months who told me we would likely qualify if we did deed-in-lieu, but it would still mean that while they are processing it all we would have to live somewhere temporarily unless we can convince the bank to give us 3 or 4 months to vacate??? I was thinking like a cash for keys offer to the bank, but not asking for cash, but rather to allow us to live here another couple of months while we try to get the loan processed. The loan officer said she could get us approved for a loan, but it would require 20% down and we would end up with a variable rate mortgage rate between 5 and 7%. Can't afford that. There is a house for sale by owner, and they will likely give us a couple of months to get our paperwork in order.....but after that they are going to list with a realtor, and I know the house will sell very quickly.

 

I know I am grasping at straws.....I am so mad that we waited almost 7 years.....this thing is going to fall off our report soon - will they repost it on our report after we do a deed-in-lieu??? :cry2:

 

 

No, you would not be able to use "extenuating circumstances" on this one to get around the wait time. Extenuating circumstances are considered things that are out of your control, like the death of a wage earner, debilitating illness, things like that. This doesn't fall in to that category.

 

You know, it may not hit your credit report as a foreclosure, since they weren't reporting after BK (is that right?). Hard to say. That doesn't help with getting approved for a loan, though, because they ask the FC question on the loan application.

 

 

What is so weird is that I have had conversations with our regional USDA director for the program (after hearing the same answer from our local office) - telling him our exact situation and him telling me that it wouldn't be a problem being approved. The last email I sent to him recently (in the last week) states that the only problem with our situation is the credit - I asked him specifically about the deed on more than one occasion, and he has said it's not a problem. I responded back to him with our current mid score and his last email said that I need to have the lender call him directly because he doesn't deal with the borrowers (I think he is probably getting tired of me asking the same question, but in the same token, I am tired of getting the same answer that does not jive with everything I have read).

 

Should I call the national office and see if they tell me something different???

[jop3]

Really sorry that this happened to you, I know it must really stink.

 

Unfortunately, the only way to remove your name from a deed after a bankruptcy is for the bank to foreclose on it. If you were to foreclose now, it would yes, be another 3 years before you can finance. A deed in lieu is viewed the same way as a foreclosure unfortunately. It just usually happens faster than a foreclosure and saves the bank some red tape.

 

Is it possible to sell a home that has been IIB'd? I would think as long as you can get what the payoff is on the note this could be done? I could be talking out of my flowers on this one... but I mean technically if the house is in your name, is it not possible to try and sell it? Is it upside down? Or refinance it with another bank?

 

The loan officer says once it's in pre-foreclosure they won't consider refinancing unless the bank that owns it will do the refinance. As for selling the house, the realtor we were dealing with said that in our current market, it would unlikely sell immediately - it could take up to a year, and I don't think we have that long. We owe about 20,000 less than it last appraised for, but if it was appraised today, it would likely be way less than we owe.

 

My big question is this - if we agree to a deed-in-lieu, would we be able to get into USDA with the mitigating circumstance/extenuating circumstance thing that they list as to letting people have the USDA loans earlier than 3 years???? I wondered if that only applied to why we filed BK7 and not to why we waited so long to do the deed-in-lieu????? I talked to a USDA manager in the regional office in the last six months who told me we would likely qualify if we did deed-in-lieu, but it would still mean that while they are processing it all we would have to live somewhere temporarily unless we can convince the bank to give us 3 or 4 months to vacate??? I was thinking like a cash for keys offer to the bank, but not asking for cash, but rather to allow us to live here another couple of months while we try to get the loan processed. The loan officer said she could get us approved for a loan, but it would require 20% down and we would end up with a variable rate mortgage rate between 5 and 7%. Can't afford that. There is a house for sale by owner, and they will likely give us a couple of months to get our paperwork in order.....but after that they are going to list with a realtor, and I know the house will sell very quickly.

 

I know I am grasping at straws.....I am so mad that we waited almost 7 years.....this thing is going to fall off our report soon - will they repost it on our report after we do a deed-in-lieu??? :cry2:

 

 

No, you would not be able to use "extenuating circumstances" on this one to get around the wait time. Extenuating circumstances are considered things that are out of your control, like the death of a wage earner, debilitating illness, things like that. This doesn't fall in to that category.

 

You know, it may not hit your credit report as a foreclosure, since they weren't reporting after BK (is that right?). Hard to say. That doesn't help with getting approved for a loan, though, because they ask the FC question on the loan application.

 

 

What is so weird is that I have had conversations with our regional USDA director for the program (after hearing the same answer from our local office) - telling him our exact situation and him telling me that it wouldn't be a problem being approved. The last email I sent to him recently (in the last week) states that the only problem with our situation is the credit - I asked him specifically about the deed on more than one occasion, and he has said it's not a problem. I responded back to him with our current mid score and his last email said that I need to have the lender call him directly because he doesn't deal with the borrowers (I think he is probably getting tired of me asking the same question, but in the same token, I am tired of getting the same answer that does not jive with everything I have read).

 

Should I call the national office and see if they tell me something different???

 

Are you doing a Guaranteed loan? If so, it doesn't matter what the national office tells you, if a lender won't agree to take the risk.

[doodlebugger]

 

Are you doing a Guaranteed loan? If so, it doesn't matter what the national office tells you, if a lender won't agree to take the risk.

 

Yes. The thing is that the loan officer said the lender would agree to process our paperwork if someone at the USDA would say they would possibly make an exception. I talked to the actual USDA underwriter for our area - he would be the one to process our application. He told me that he would speak to the lender, but that since our situation was unique, he didn't have a problem if we go ahead with a deed-in-lieu, and if everything else lines up, he would put it through.......again, I'm trying not to get my hopes up. He said that the three years started from the date of discharge, not from the foreclosure/deed-in-lieu date. This is consistent with what my local office told us, and what one of the state directors of the program told us.....that it would not be a problem. The key is getting a lender to agree to it. Going to have the loan officer have their underwriter call him and see what happens from there. I am so confused about this....but will keep trying until every door is shut. Will update when I get more information.

[cputrwz]

I checked another forum for you (can give you a link if you want in PM) cause I thought I remembered someone going through the same situation there. There is another couple that is doing basically the same thing as you but it is an FHA loan and not a USDA. They have been assured that their loan should be fine as long as they do a deed in lieu and they said that nobody has thrown up any red flags about them doing a "buy and bail" or the required wait times... so maybe there is hope?

 

Let me know if you want to check out the other thread.

[doodlebugger]

I checked another forum for you (can give you a link if you want in PM) cause I thought I remembered someone going through the same situation there. There is another couple that is doing basically the same thing as you but it is an FHA loan and not a USDA. They have been assured that their loan should be fine as long as they do a deed in lieu and they said that nobody has thrown up any red flags about them doing a "buy and bail" or the required wait times... so maybe there is hope?

 

Let me know if you want to check out the other thread.

 

Absolutely - would love to read it. I was shocked when I finally got to speak to the USDA underwriter for our county and he said casually he didn't have a problem with it as long as we were more than 3 years since discharge. The big hurdle we will have is finding a lender that will agree to it. I am trying not to get my hopes up though....this has been a crazy roller coaster ride!!! Big peaks and big dips! Thought all hope was lost until I talked to him.....wouldn't he be the final authority in the end? Should the lender get something in writing from him to make this "stick"???

[doodlebugger]

This is what our loan officer sent over. She said she got it directly from the USDA underwriter that I spoke with. Verbally, he confirmed with her the same thing he confirmed with me - they will accept a deed-in-lieu, and maybe even a foreclosure, as long as the bk7 is over 36 months old. He told her that with the way things have been going recently with banks not foreclosing immediately on homes, they are making exceptions. This is the guidelines he sent over to her. He said the biggest problem will be finding a lender willing to approve the same guidelines. So, we are waiting to see what the lender says.

Here's the guidelines he sent:

Topic: Credit Worthiness/Derogatory Credit: Credit Waivers

Documentation, and then this is under a section marked Exceptions

Any applicant with a foreclosure or pre-forclosure activity in the previous 36 months, Chapter 7 bankruptcy discharged in the previous 36 months, Chapter 13 bankruptcy that has yet to complete repayment or has completed repayment within the previous 12 months, and/or late mortgage payments in the most recent 12 months must submit all supporting evidence along with the credit waiver regardless of credit score. The lender must document the compensating factors as well as the rationale that was applied in the course of make a decision to approve the loan in their permanent loan file.

 

 

Any thoughts about the interpretation of this guideline??? What do you think? Still not getting my hopes up, but my loan officer feels like there is a very good possibility that we will get an approval......but we are waiting confirmation from the lender first.

[doodlebugger]

I also found this in a handbook I found online - The applicant must have a credit history which indicates a reasonable ability and willingness to meet obligations as they become due. Later it says: The following does NOT indicate an unacceptable credit history: No credit history, a bankruptcy discharged more than 36 months prior to application date, or a satisfied judgment or foreclosure with no loss of security which was completed 12 months before the date of application. <----Does not mention deed-in-lieu, and it says foreclosure with no loss of security - what do you think that means?

 

It also says there is no established minimum credit score for eligibility. I think that is very interesting.

 

Under underwriting issues it says: Exception: Streamlined documentation is not applicable to credit files that contain any of the following adverse credit. Follow the documentation requirements noted below regarding applicants with credit scores between 639-581.

A foreclosure or pre-foreclosure activity within the past 3 years.

A bankruptcy.

Chapter 7 - Discharged within the past 3 years.

Chapter 13 - A completed debt restructuring plan within the previous 12 months prior to application or a plan that has yet to complete repayment

Late mortgage payments in the most recent 12 months.

A credit score of 640 and above, is not an automatic loan approval for a guaranteed loan. All credit must be reviewed by the underwriter and contain sufficient information for the underwriter to reach an informed decision about whether to approve the mortgage.

 

 

Would anyone care to interpret this or give your comment as to what you think all this means???? No mention of deed-in-lieu or short sale and how they handle that, or any mention of the person who is in pre-foreclosure and still has a deed in their name. This pretty much coincides with what we have been told though....just a matter of finding a lender willing to work with the same guidelines.

[RVR]

What about transferring the deed into a grantor's trust temporarily, then you could 'technically' state it is not in your name and therefore meet the USDA guidelines ? After the mortgage is funded, then you could transfer it back to quell any concerns they might have about collateralization.

 

These would be transfers, not "sales", so there wouldn't be any taxes involved, likely just the nominal recording fees, depending upon the state.

[cputrwz]

What you posted does say "a foreclosure or pre-foreclosure within the past 3 years". It may not mention a deed in lieu but they are usually treated the same way as a foreclosure. A deed in lieu is just basically making it easy on the bank because they don't have to pay for the foreclosure and its voluntary by the current deed holder.

 

Its a very grey area ... I think it will all boil down to the lender in the end. The other thing to consider is if the lender has never delt with anything like this before they may say "sure sure, we can do this" and then they may figure something out later that prevents them from doing it just because they had inexperience trying to get something like this done. You would think though that this sort of thing would become a little more main stream with all the rise of bankruptcies/foreclosures in the last few years.

 

Definately worth getting popcorn for this one.

[doodlebugger]

What about a quit claim deed thingy? Where we submit to the bank that we want our names removed and allow them to take possession? I mean, they can't get anything else from us because it was all discharged in bk7 almost 7 years ago....and that would stop the foreclosure proceeding - right? I am wondering if I could draft it up myself??

 

The biggest hurdle is getting this house out of our name asap.....

 

The mortgage specialist is still waiting to hear from the lender, but has gone out of town until Monday, so I am waiting....and waiting....and waiting. Ugh.

[doodlebugger]

What about a quit claim deed thingy? Where we submit to the bank that we want our names removed and allow them to take possession? I mean, they can't get anything else from us because it was all discharged in bk7 almost 7 years ago....and that would stop the foreclosure proceeding - right? I am wondering if I could draft it up myself??

 

The biggest hurdle is getting this house out of our name asap.....

 

The mortgage specialist is still waiting to hear from the lender, but has gone out of town until Monday, so I am waiting....and waiting....and waiting. Ugh.

 

 

What if my husband was removed from the deed through a quit claim, but I stayed on. Kind of like people do when they divorce??? Then he could claim no ownership to the house, but I would stay on for the purpose of waiting for the foreclosure to happen????

 

Any ideas??? This board has always had the most creative and innovative thinkers when it comes to big dilemmas......I need some help/advice.

[doodlebugger]

Well, since I'm not getting answers, I guess I will go see a lawyer tomorrow to see if this is possible. We are hoping to remove dh from the deed so they can go ahead and process the USDA loan paperwork......we just need to get moved out of here soon. No decent rentals....so we have to make this work somehow.

[jop3]

Removing your husband's name from the property deed doesn't remove his name from that mortgage. He's still a party to the loan at that point, but with no ownership in the property. The loan will still be foreclosed in all mortgage holder's names.

 

Unfortunately, there is nothing creative that you can do to avoid the foreclosure without it being considered fraud. I know that's an extreme word, and it's not your intention, but think about it this way... Anything you do is with the full intention to avoid disclosing any foreclosure so you can qualify for a new loan. The foreclosure will happen and you and your husband will be the parties to it. Trying to hide that from a lender would be fraud. Like I said, I know that' s not your intention, but it's important you understand how a lender sees it.

[doodlebugger]

We have no intentions of withholding the truth. We have no intention of avoiding the foreclosure. We have every intention of filling out the paperwork honestly. That is not the issue. The USDA underwriter told our loan specialist that he would approve a loan in foreclosure or pre-foreclosure as long as the deed is out of my husband's name (because the new loan will be in my husband's name). He does not have to go by the date of foreclosure, but goes by the bk7 discharge date which was February 2006. We aren't trying to hide anything - just get the deed out of his name. The loan/mortgage has been discharged almost 7 years ago, so we have no legal obligation to the loan. We are not trying to avoid the foreclosure, just trying to prolong it enough so we don't have to move out of this house, move to a rental, and then move to a new house.

 

It's all at a stand still anyways, despite the fact that the USDA will approve our loan in our current situation with the only caveat being we have to get dh's name off the deed, the lender wouldn't budge - they have a rule about the deed needing to be out of dh's name for TWO years. We are still going to talk to a lawyer about the quit claim deed thing, in the event that we can find a lender who will agree to move forward in our situation, but it's looking grim again. Off to try to find another lender who might help us.....it's all these overlay rules from the lenders that is now holding us up. I'm not giving up YET!!!

[jop3]

 

It's all at a stand still anyways, despite the fact that the USDA will approve our loan in our current situation with the only caveat being we have to get dh's name off the deed, the lender wouldn't budge - they have a rule about the deed needing to be out of dh's name for TWO years. We are still going to talk to a lawyer about the quit claim deed thing, in the event that we can find a lender who will agree to move forward in our situation, but it's looking grim again. Off to try to find another lender who might help us.....it's all these overlay rules from the lenders that is now holding us up. I'm not giving up YET!!!

 

 

This is the issue right here. It's the same thing everyone's been saying from the beginning. They are using the foreclosure date - they are just using different words to describe it. They are using the word "deed" instead of the word "foreclosure". They know that a foreclosure has to happen to remove your names from the deed, so they are using that terminology.