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FHA Loan Pending Foreclosure Period: Details On Settlement, Rules

We bring to you latest and exclusively consolidated details about the FHA loan pending foreclosure period.

Are you looking for all details about the FHA foreclosure waiting period? There are different laws Worldwide governing foreclosure period. Would you like to know what rules govern FHA foreclosure loans? What are basis on which foreclosure and waiting periods are calculated? Let’s check details of the FHA loan pending foreclosure period.

FHA loan pending foreclosure period:

The foreclosure period differs based on type of loan borrower had defaulted on. For conventional loans, waiting period is 7-years; 3-years for Federal Housing Administration(FHA) Loan, 2-Years for Veterans Benefits Home loan, 3-years for United States Department of Agriculture(USDA) home loan, and 1-day for Subprime loan.

Most of FHA foreclosure loans deal with 3-year waiting period. If borrower defaults on home loans, lender has right to take ownership of property and sell it to recover loan amount. Lender charges 4% to 5% of outstanding loan amount as foreclosure fee, with possibility of waiving fee on request and if approved.

FHA loan pending foreclosure period settlements:

The foreclosure procedure supports judicial and non-judicial processes. If lender files lawsuits, case follows court system. But, in most cases, lenders opt for non-judicial(or) out-of-court settlement. But, it must be noted that foreclosure waiting period will start from day lender sells house. Hence, there were several cases where lender delayed process by holding property for long period.

The earlier foreclosure waiting period ends, faster you can apply for another home loan. If borrower had filed Chapter-13 bankruptcy, his secured loans are prioritized first, which generally includes home and car loans. Hence, in such cases, borrower can apply for mortgage loan after 1-year. 

FHA loan pending foreclosure period for Chapter-7 bankruptcy:

If borrower had filed Chapter-7 bankruptcy, his unsecured loans are prioritized, including medical bills, personal loans, and credit cards. Hence, foreclosure waiting period is from few months to up to six months.

FHA can set forward loan limits to median of 115% and cannot exceed 150% of standard price of home as per Housing and Economic Recovery Act of 2008(HERA). However, FHA provisions except for 3-year waiting period due to death or serious illness of primary wage earner and in case ex-spouse fails to pay loan after divorce. 

Read More: How To Get Pre-approved For A Va Home Loan: Check Eligibility Criteria, Steps To Apply

Avoiding FHA loan pending foreclosure period:

The simplest option to avoid foreclosure is opting for reinstatement by asking mortgage company about total amount due and paying it off in full. However, other options includes:

  • Mortgage repayment plan,
  • Loan modification,
  • Deed-in-lieu of foreclosure,
  • Short sale,
  • Renting Property,
  • Filing Bankruptcy,
  • Short refinance,
  • Refinance with hard money loan, and
  • Servicemembers Civil Relief Act.

Therefore, to help defaulters, law specified cap on FAH loan limits:

FHA loan limits Most areas High-cost areas Alaska/Hawaii/Guam/Virgin Islands
Single unit $472,030 $1,089,300 $1,633,950
Duplexes $604,400 $1,394,775 $2,092,150
Triplexes $730,525 $1,685,850 $2,528,775
Four units $907,900 $2,095,200 $3,142,800

FHA loan pending foreclosure period governing rules:

The FHA foreclosure loans and waiting period are governed by:

  • National Housing Act of 1934,
  • Title II of National Housing Act,
  • Real Estate Settlement Procedures Act(RESPA),
  • Fair Housing Act,
  • Equal Credit Opportunity Act(ECOA),
  • Truth in Lending Act(TILA),
  • Home Mortgage Disclosure Act(HMDA),
  • Americans with Disabilities Act(ADA),
  • Gramm-Leach-Bliley Act,
  • Fair Credit Reporting Act,
  • Servicemembers Civil Relief Act(SCRA),
  • Consumer Financial Protection Bureau(CFPB) regulations, and
  • Dodd Frank Wall-Street Reform, and Consumer-Protection Act.

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After foreclosure waiting period, borrower should reestablish his credit scores, clear all types of outstanding amounts, should not file Bankruptcy within the FHA loan pending foreclosure period, should not have any type of late payments, should pay off all pending bills, and get removed from Credit Alert Verification Reporting System(CAIVRS ) list. Divorce/job loss/relocation is not considered an exception to waiting period.

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Also Read: How to Get an Instant Loan: The Fastest, Easiest Way to Get Money Now

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