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Credit Rating After Bankruptcy or Foreclosure
Clients frequently asked me how bankruptcy or a mortgage foreclosure will affect their credit. rating. I usually respond by stating that one’s credit rating is not a legal issue unless there is a violation of federal credit reporting acts. Recently interviewed a new client who worked in mortgage lending. I asked the client to tell me, from his professional experience in lending, how foreclosure or bankruptcy impacts credit.
The client gave me the following guidelines which he said are typical in the lending industries. A Chapter 7 bankruptcy adversely affects credit for two years after the bankruptcy discharge. A Chapter 13 bankruptcy impacts credit for two years after the date the bankruptcy is filed. A foreclosure negatively affects credit for three years after the foreclosure complaint is filed.
If any reader who works in the lending industry has contrary opinion or information, please let me know so I can pass on that information to other readers.
posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida
February 20, 2008 in Bankruptcy Questions | Permalink
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Comments
I am a licensed FL mortgage broker and have a business on marco island, FL. i was just informed that fannie mae and freddie mac will no longer allow someone to qualify for a loan unless a foreclosure is over 5 years old. It used to be 2-3 years. This is something new that is occurring especially now that more people are going fha. Even FHA won't allow a refinance or purchase, or so i've been told, unless the foreclosure is over 5 years old.
i am actually looking to file ch.7 myself as i just had an investment property be foreclosed on and it was sold for $100 back to original lender i believe. The property was $40k upside down. I am also contemplating including my primary residence as we can no longer afford the payments of $4600/mo and it too is upside down by over $120,000.
Is this something we can discuss? i am married and don't want to include my husband in the bkcy because he is not on the notes/loans and never has been in the past 8 years. since the mortgage business is slow, i don't have many other options. my husband's credit is good and we are hoping to use his credit in the next few years to purchase another home once we are back on our fee again. please advise.
thank you.
Posted by: alicia | May 20, 2008 3:25:02 PM
