Refinancing out of foreclosure can sometimes be done with private "non-institutional" lenders.
|| to reach a mortgage specialist "on call".
Although, most private real estate lenders prefer not to refinance foreclosures; today, a select few will still consider it on a case by case basis. Most private lenders are even less open minded to refinancing "owner occupied homes". If a home is in foreclosure; or any type of default at all, and is occupied by the homeowner, the situation becomes complicated. Private lenders are at greater risk with this type of scenario for various reasons.
Requirements for approval are much different than they were prior to the mortgage meltdown. If your home is currently in foreclosure, you will need to prove enough income to carry the new mortgage. As well, you will need to explain:
1) What caused the foreclosure; and
2) Why after the refinance, you will not go back into foreclosure.
There are federal programs to assist with foreclosure. Mortgage servicing companies tend to promote other options. Often, they will suggest, "deed in lieu of foreclosure” or a “short sale”. If you are able to refinance, and can get approved for a short sale, sometimes the foreclosing mortgage company will accept a “short pay-off” which might actually allow you to keep your home with a mortgage principal reduction.
The Home Affordable Modification Program, (HAMP), can be a homeowner's best option. HAMP supports modification of the homeowner's current mortgage; and reducing monthly payments to make it affordable for the homeowner. Sometimes not only interest rate reductions, but also principal reductions are made in order to accomplish this. Unfortunately, many modification attempts fail due to poorly prepared applications. Often the wrong or inconsistent communication between the homeowner and the mortgage servicing company result in failure. Sometimes inexperienced or overwhelmed attorneys, overloaded with modification clients, can be equally unsuccessful. Because of this, the demand for more refinance foreclosure programs continues to increase. Nevertheless, the number of private investors that will refinance a foreclosure seems to be consistently diminishing. However, on a case by case basis, refinancing to get out of foreclosurecan still be done.
FHA MORTGAGE REFINANCE WITH CURRENT OR PREVIOUS FORECLOSURE
On August 15th, 2013, FHA released Mortgagee Letter 2013-26. The subject line of this mortgagee letter is:
“Back to Work - Extenuating Circumstances”
The purpose of this Mortgagee Letter (ML) is to:
“provide minimum underwriting standards and criteria for evaluating borrowers who have experienced an Economic Event, as defined in this ML, that resulted in a severe reduction in income due to a job loss or other circumstances resulting in reduced Household Income”
This letter reduces FHA's 3 year post foreclosure waiting period and FHA's 2 year post bankruptcy waiting period; both down to 12 months, with the right set of conditions.
At some point in the future, it may be possible to obtain an FHA Refinance out of foreclosure, with the right set of circumstances. FHA wants to see 1 full year or “back to work” income and timely payments on all credit related accounts. If your mortgage company stopped accepting monthly payments from you, you might be able to begin making regular timely mortgage payments into a special account such as your attorney's escrow; and use that to qualify for a foreclosure refinance after 12 months. In this respect, it is too early to actually predict the intention of FHA in this regard. However, it might be possible. Alternatively, you might be able to use this payment history to procure financing with a private investor in the future whom might not approve you today.
FORECLOSURE REFINANCE REQUIREMENTS
Most private lenders require the following if refinancing a home currently in foreclosure.
50% equity remaining in property after refinance
No Minimum credit score required.
You may not currently be in bankruptcy.
Judgments and/or tax liens can be paid at closing.
No escrow impounds. Thus you must pay your own property taxes and homeowners insurance.