[SoCalGal]

The same applies to Freddie Mac. This guideline applies to qualifying for a new mortgage.

X, 803.02: Payment History (06/30/02) [superceded by Fannie announcement dated June 25, 2008]

The lender must review the borrower's credit report to determine the current status of each credit account (including mortgage accounts), the timeliness of payments, and the frequency, recency, and the severity of any delinquent payments. On the date of the loan application, the borrower's existing mortgage must be current (which means that no more than 45 days may have elapsed since the last paid installment date). (If the credit report does not include the mortgage payment history for the previous 12 months or longer, the lender also should review the previous mortgage payment history that was provided by the mortgage servicer.)

• Credit histories that include no late payments, collection or charged-off accounts, foreclosures, deeds-in-lieu, bankruptcies, or other public records information represent a lower credit risk.

• Credit histories that include recent late payments represent a higher credit risk than those with late payments that occurred more than 24 months ago. When there are payments that were 30, 60, or 90 days (or longer) past due, the lender must determine whether the late payments represent isolated incidences or frequent occurrences. Delinquent payments must be evaluated in the context of the borrower's overall credit history, including the number and age of accounts, credit utilization, and recent attempts to obtain new credit. For example, a credit history that includes delinquent payments along with recent inquiries and a high balances-to-limits ratio indicates a high credit risk.

• Credit histories that include foreclosures, deeds-in-lieu, and public records information (such as bankruptcies, judgments, and liens) represent a higher credit risk. The greater the number of such incidences and the more recently they occurred, the higher the credit risk.

The presence of significant derogatory credit information—bankruptcies, judgments, liens, collection accounts, foreclosures, deeds-in-lieu, or a consistent pattern of delinquent accounts—dramatically increases the likelihood of a future default and represents a high credit risk. However, this does not mean that the borrower's credit will not be acceptable; rather, it is an indication that—before making a final decision about the acceptability of the borrower's credit history—the lender needs to determine the cause and significance of the derogatory information, verify that sufficient time has elapsed (based on the type of derogatory information), and confirm that the borrower has since re-established an acceptable credit history.

The lender should request the borrower to provide a copy of appropriate documentation to establish the date of a previous foreclosure or deed-in-lieu or a copy of the applicable bankruptcy documents (to confirm the bankruptcy discharge date and identify any debts that are not satisfied by the bankruptcy). The borrower must have paid off any debts that are not satisfied by the bankruptcy, or must have an acceptable repayment schedule established for them. The lender generally does not need to include in the individual underwriting file any other documentation that it obtains to explain derogatory information in the borrower's credit file. However, if the borrower claims that the derogatory information is the result of extenuating circumstances, the lender should retain not only the documentation that supports the borrower's claim, but also a letter from the borrower explaining the relevance of the documentation.

• Extenuating circumstances are nonrecurring events that are beyond the borrower's control, and result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations. Documentation provided to support claims of extenuating circumstances should confirm the nature of the event that led to the bankruptcy or foreclosure-related action and illustrate that the borrower had no reasonable options other than to default on his or her financial obligations.

• Examples of documentation that can be used to support extenuating circumstances include documents that confirm the event (such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.) and documents that illustrate factors that contributed to the borrower's inability to resolve the problems that resulted from the event (such as a copy of insurance papers or claim settlements, property listing agreements, lease agreements, tax returns (covering the periods prior to, during, and after a loss of employment), etc.).

When the borrower's credit history includes significant derogatory information, the lender must confirm that the borrower has re-established an acceptable credit history and that sufficient time has elapsed since the date of the last derogatory information. We generally require four years [now five per Fannie announcement dated June 25, 2008] to elapse before we will consider the borrower to have a re-established credit history. We will, however, consider two years [now three per Fannie announcement dated June 25, 2008] as an acceptable interval for re-establishing a credit history when the derogatory information in the borrower's credit record resulted from documented extenuating circumstances or when the derogatory information relates to a Chapter 13 bankruptcy (regardless of the reasons that contributed to the bankruptcy). Elapsed time is measured by comparing the date of a new mortgage application to the date that (1) a Chapter 7 or 11 bankruptcy was discharged, (2) a Chapter 13 bankruptcy repayment plan was successfully completed and the bankruptcy discharged, (3) a foreclosure sale was held, (4) a deed-in-lieu was executed, or (5) an issue related to any other significant derogatory information was resolved.

When a borrower's previous credit history included a bankruptcy or foreclosure-related action, all of the accounts in the borrower's credit report must be current as of the date of the mortgage application. In addition, the borrower's credit record under the re-established credit history must include:

• a minimum of four credit references, with at least one of the references being a traditional credit reference and one of the references being housing-related. (Housing-related references should cover the period following the bankruptcy discharge, foreclosure, or deed-in-lieu and can be in the form of mortgage payments or rental payments. If rental payments were not reported to the credit repositories, the borrower must provide copies of bank statements, money orders, or canceled checks for the most recent 12-month period as a supplement to the rent verification. Three of the four credit references (including any rental housing reference) must have been active in the 24 months preceding the date of the mortgage application.);

• no more than two installments or revolving debt payments that were 30 days past due in the last 24 months;

• no installment or revolving debt payments 60 or more days past due since the discharge or completion of the bankruptcy or the completion of the foreclosure-related action;

• no housing debt payments past due since the discharge or completion of the bankruptcy or the completion of the foreclosure-related action; and

• no new public records for bankruptcies, foreclosures, deeds-in-lieu, preforeclosure sales, unpaid judgments or collections, garnishments, liens, etc., since the discharge or completion of the bankruptcy or the completion of the foreclosure-related action.

www dot tinyurl dot com/63mqop

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There's not an underwriter on the planet that would consider a short sale to be anything but a "foreclosure related action" subject to seasoning as described above.

Don't shoot me...I'm just the messenger.