FHA Loan After Foreclosure

Due to a failed business we filed bankruptcy before we were late for even a single mortgage payment. AFTER the discharge the lender foreclosed. Thanks to my monitoring an subsequent disputes there is not a single mention of foreclosure on our credit reports.

We are 2 years post bankruptcy and are applying for an FHA loan. The issue of foreclosure has come up (you have to be 3 years post foreclosure).

Can they use the foreclosure to deny us a loan when the lenders themselves are not allowed to mention foreclosure after the discharge because it violates the bankruptcy code?

Thanks!

Melissa

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Hi Melissa,

You are correct that the mortgage tradeline can not report a foreclosure; however, a public records entry of foreclosure is not barred from the discharge injunction.  Additionally, there was a foreclosure and page three of the Uniform Residential Loan Application (or form 1003) has a declarations section that must be answered truthfully.

You will have to wait at least three years to qualify for an FHA loan after foreclosure.  It’s actually not just a three year wait – it’s three years from the date the balance was zero.  In the situation you’ve described, the balance was zeroed out by the bankruptcy.

Read: Forget My Foreclosure

Thanks for the questions and hope this helps.

Paul