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Frank Montufar |    |
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by Frank Montufar While both the House and the Senate debate the issue of bankruptcy reform, the number of people filing reached 1.4 millions in 1999. This figure represents a 400% increase from the 330,000 that declared bankruptcy in 1980. Many people believe that most bankruptcies are triggered by misfortune, not irresponsibility; by illness, a job loss, or broken marriage. Because of this belief, it seems a sure thing that any reform will not impact the approval process of the government backed mortgages. FHA has had a standard requirement of a two year wait after filing a Chapter 7 bankruptcy, with no delinquent accounts after a filing. An elapsed period of less than 2 years, but never less than 1 year, may be acceptable if the borrower can show that the bankruptcy was caused by extenuating circumstances beyond his or her control and the events leading to the bankruptcy are not likely to recur. A good example of circumstance beyond one's control is a man, whose family was devastated by Lymes disease, applied for and was granted a mortgage just 16 months after discharge of their bankruptcy. It was determined that both husband, wife and children were free of the disease and the likelihood of a reoccurrence was slim. A borrower paying off debts under Chapter 13 of the Bankruptcy Act, a procedure for re-organization of debts, may also qualify if one year of the pay-out period has elapsed and payments made have been satisfactory. The borrower must also receive court approval to enter into a mortgage application. In essence, a borrower can still be in the bankruptcy process and still qualify for a mortgage. Recent changes in the Fannie Mae programs mandated an opposite approach to the issue of bankruptcy. If you are planning to apply for a Conventional mortgage, be aware that the waiting period has been pushed backed to 4 years from discharge of a Chapter 7 bankruptcy. America, as Sen. Daniel Patrick Moynihan said recently, is the land of the second chance. You can declare bankruptcy, pay your creditors what you can afford and then start your life again. Many people are convinced
that a bankruptcy means a home is out of the question for at least 7 years.
Not true, starting life over again could soon include buying a home, not
just renting it.
Frank Montufar is associated
with Superior Mortgage in Absecon, He specializes in all types of mortgages,
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Internet Originator
